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July 11, 2017 2:00 PM, EDT

Heartland Promises Quick Changes After IDC Acquisition; IDC CEO Marc Rogers Not Retained

Heartland Express Inc. will rapidly consolidate Interstate Distributor Co. after acquiring the Tacoma, Wash.-based carrier for $113 million on July 6, promising to transform the money-losing company during a conference call with industry analysts.

Heartland paid IDC owner Saltchuk Resources Inc. $94 million in cash and received $4 million in cash on IDC’s balance sheet. It also assumed about $23 million in IDC debt, which Heartland will pay off immediately.

Last year, IDC generated about $325 million in revenue but ended up with an operating loss; then it struggled into the first half of this year.

Heartland CEO Michael Gerdin told Transport Topics that Marc Rogers, CEO of IDC, was let go after the transaction was completed, but Gerdin vowed to make IDC profitable by the end of the fourth quarter.

Heartland’s operating ratio was about 86% in 2016 and typically fluctuates in the low-to-mid 80s, whereas IDC’s was at 101% in 2016 and 104% through March 2017.

“We’re not averse to giving up revenue that is not working,” Gerdin said. “And there is some revenue in here that is certainly not working when the overall company is running at 104. So, we’re going to do our best to keep as much revenue as we possibly can, but I can tell you we’re not keeping any revenue that is not making us money.”

Heartland will eliminate IDC drop-lots in locations such as Atlanta, Dallas, Memphis, Tenn., and Jacksonville, Fla., where it already owns large terminals with showers, televisions, and service bays. It also will consolidate the back offices into one unit with a single transportation management system.

“We’re going to operate this thing under the Heartland brands pretty quickly as we integrate the companies here. I don’t have an exact date on that yet, but we’ll just call it within a year; we’ll be into the Heartland brand,” Gerdin said. “It may be sooner than that. It may be less than six months. We’re just going to have to dive in here and to see what we need to do to move that along.”

Heartland expects this transition will be smoother than with Gordon Trucking Inc., in which many drivers left and Heartland failed to reap the revenue growth it anticipated from the deal.

“We have probably a little quicker path to this one than you would’ve seen on the Gordon acquisition from 2013,” said Christopher Strain, Heartland vice president of accounting and controller. “So, we have a few things that we are focused on immediately, and we’ll start working on it right away.”

To retain drivers, Heartland announced it is offering a $1,000 bonus to remain with their new employer, an effort Gerdin prioritized as “one of the first things that we’re going to tackle.”

Heartland and Interstate Distributor rank Nos. 52 and 75, respectively, on the Transport Topics Top 100 list of the largest North American for-hire carriers. Their 2016 combined results equal about $938 million in revenue — placing it between Forward Air Corp. and KLLM Transport Services, Nos. 37 and 38, respectively, on the for-hire TT100.