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Acquisitions | 12 Months Ended
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Dec. 31, 2022
Business Combinations [Abstract] |
Business Combination Disclosure | Acquisitions On May 31, 2022, Heartland Express, Inc. of Iowa (the “Buyer”) and Heartland Express, Inc., as guarantor, entered into a Stock Purchase Agreement with Smith Transport. Smith Transport is a truckload carrier headquartered in Roaring Spring, Pennsylvania, providing asset-based dry van truckload transportation services, including local, regional, and dedicated services. Pursuant to the Smith Stock Purchase Agreement, the Buyer acquired all of Smith Transport’s outstanding equity (the “Smith Transaction”) under an Internal Revenue Code Section 338(h)(10) election. The Buyer's purchase price of $169.4 million includes total cash consideration and assumed indebtedness of Smith Transport subject to purchase accounting adjustments including final valuation of intangibles. Gross cash paid in the Smith Transaction was $140.6 million. Net cash paid was $122.0 million after consideration of $18.6 million of Smith Transport cash on the date of acquisition. Gross cash paid was funded out of the Company’s available cash. The Smith Transaction included the assumption of $46.8 million of Smith Transport's indebtedness, including finance leases, of which $40.3 million of the debt was outstanding at December 31, 2022. The Smith Stock Purchase Agreement contains customary representations, warranties, covenants, escrow, and indemnification provisions. The results of the Smith Transport acquired business have been included in the consolidated financial statements since the date of acquisition and represented 12.3% of consolidated total assets as of December 31, 2022, and represented 13.3% of operating revenue for the twelve months ended December 31, 2022. The following unaudited pro forma consolidated results of operations for the years ended December 31, 2021 and 2022 assume that the acquisition of Smith Transport occurred as of January 1, 2021.
| Year ended |  | Year ended
| December 31, 2021 |  | December 31, 2022
| (in thousands)
Operating revenue | $810,459 |  | $1,060,718
Net income | $96,466 |  | $140,647
These pro forma amounts do not purport to be indicative of the results that would have actually been obtained if the acquisition had occurred at the beginning of the periods presented or that may be obtained in the future. The allocation of the Smith Transport purchase price is detailed in the table below. The final purchase price allocation remains subject to other purchase accounting adjustments which may be identified, such as the final valuation of intangible assets, and therefore may differ materially from that reflected below. The goodwill recognized represents expected synergies from combining the operations of the Company with Smith Transport, as well as other intangible assets that did not meet the criteria for separate recognition. Goodwill and intangible assets recognized in the transaction are deductible for tax purposes. During the three months ended December 31, 2022, the Smith Transport goodwill asset decreased by $1.8 million as a result of further valuation analysis of the intangible assets. The assets and liabilities associated with Smith Transport were recorded at their fair values as of the acquisition date and the amounts are as follows:
| (in thousands)
Trade and other accounts receivable | $ | 32,300 |
Other current assets | 6,238 |
Property and equipment | 68,196 |
Operating lease right of use assets | 26,661 |
Other non-current assets | 4,079 |
Intangible assets | 29,902 |
Goodwill | 40,297 |
Total assets | 207,673 |
Accounts payable and accrued expenses | (7,917) |
Insurance accruals | (4,263) |
Long-term debt | (11,424) |
Finance lease liabilities | (35,359) |
Operating lease liabilities | (26,661) |
Net cash paid | $ | 122,049 |
On August 31, 2022, Buyer and Heartland Express, Inc., as guarantor, entered into a Stock Purchase Agreement to acquire Contract Freighters (CFI), and related entities, from a subsidiary of TFI International, Inc. (TFI). CFI is a truckload carrier headquartered in Joplin, Missouri, providing asset-based dry van and temperature-controlled truckload transportation services, and asset-light logistics services in Mexico. Pursuant to the CFI Stock Purchase Agreement, the Buyer acquired outstanding equity of CFI and related entities (the “CFI Transaction”). The Buyer's purchase price of $560.6 million includes total cash consideration and bank financing obtained for the purchase of CFI and to facilitate negotiated terms of the CFI Stock Purchase Agreement. These terms included the funding to eliminate risk associated with pre-acquisition accident and workers compensation claims, cash on hand at closing, and net working capital, subject to purchase accounting adjustments including final valuation of intangibles. The adjusted purchase price consideration was $558.6 million as a result of net adjustments for cash on hand, net working capital and valuation of pre-acquisition accident and workers compensation claims of $2.0 million. Gross cash paid in transaction was $560.6 million. Net cash paid was $553.8 million after consideration of $6.8 million of CFI cash on the date of acquisition. Gross cash paid was funded out of the Company’s available cash and bank financing obtained to facilitate the transaction. The CFI Stock Purchase Agreement contains customary representations, warranties, covenants, escrow, and indemnification provisions. The results of the CFI acquired business have been included in the consolidated financial statements since the date of acquisition and represented 43.0% of consolidated total assets as of December 31, 2022, and represented 21.6% of operating revenue for the twelve months ended December 31, 2022. The following unaudited pro forma consolidated results of operations for the year ended December 31, 2021 and 2022 assume that the acquisition of CFI occurred as of January 1, 2021.
|  | Year ended |  | Year ended
|  | December 31, 2021 |  | December 31, 2022
|  | (in thousands) |  | (in thousands)
Operating Revenue |  | $1,152,412 |  | $1,394,552
Net Income |  | $83,219 |  | $174,684
These pro forma amounts do not purport to be indicative of the results that would have actually been obtained if the acquisition had occurred at the beginning of the periods presented or that may be obtained in the future. The allocation of the purchase price is detailed in the table below. The final purchase price allocation remains subject to other purchase accounting adjustments which may be identified, such as the final valuation of intangible assets, working capital adjustments, and income taxes, and therefore may differ materially from that reflected below. The goodwill recognized represents expected synergies from combining the operations of the Company with CFI, as well as other intangible assets that did not meet the criteria for separate recognition. Goodwill and intangible assets recognized in the transaction are deductible for tax purposes. During the three months ended December 31, 2022, the CFI goodwill asset increased by $5.7 million as a result of further valuation analysis, primarily associated with adjusted insurance reserves and deferred taxes net of the purchase price consideration adjustment for cash on hand, net working capital and valuation of pre-acquisition accident and workers compensation claims. The assets and liabilities associated with CFI were recorded at their fair values as of the acquisition date and the amounts are as follows:
| (in thousands)
Trade and other accounts receivable | $ | 74,740 |
Other current assets | 13,054 |
Property and equipment | 461,147 |
Other non-current assets | 306 |
Deferred income taxes | 2,018 |
Intangible assets | 55,097 |
Goodwill | 112,083 |
Total assets | 718,445 |
Accounts payable and accrued expenses | (47,819) |
Insurance accruals | (1,621) |
Income taxes payable | (765) |
Deferred income taxes | (116,506) |
Purchase consideration net of cash on hand | 551,734 |
Purchase adjustment receivable from seller | 2,069 |
Net cash paid | $ | 553,803 |
Acquisition related expenses of $2.3 million related to both the Smith Transport and CFI acquisitions are included in the consolidated statement of comprehensive income for the twelve months ended December 31, 2022.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
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