Iowa-based Heartland Express notes 13.2% rise in operating revenue for second quarter, even though net income dropped

Heartland Express
Heartland Express reported a net income of $19.2 million for the second quarter, a drop of $3.2 million from the same time period 2019. The company attributes the loss to April’s weak freight environment. (Courtesy: Heartland Express)

NORTH LIBERTY, Iowa — Heartland Express Inc. ended the second quarter of 2020 with operating revenues of $160.9 million, compared to $142.1 million in the second quarter of 2019, an increase of $18.8 million, or 13.2%, according to a July 16 statement issued by the company.

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Operating revenues for the quarter included fuel surcharge revenues of $14.0 million, compared to $18.1 million in the same period of 2019, a $4.1 million decrease, the report noted. Operating revenues increased 18.4%, excluding the impact of fuel surcharge revenues, and increased sequentially during the last five quarters.

Heartland’s net income was $19.2 million, compared to $22.4 million in the second quarter of 2019, a decrease of $3.2 million, primarily attributable to a very weak April freight environment and $3.2 million less gains on sale, tax effected. Basic earnings per share were $0.24 during the quarter. Operating income for the three-month period ending June 30 decreased $4 million primarily due to lower gains on sale of revenue equipment. The company posted an operating ratio of 84.5%, non-GAAP adjusted operating ratio of 83.0%, and a 11.9% net margin (net income as a percentage of operating revenues) in the second quarter of 2020 compared to 79.6%, 76.6%, and 15.7%, respectively, in the second quarter of 2019.

“Our operating results for the three and six months ended June 30, 2020, showed strength in terms of profit and overall operating efficiency during these volatile and challenging times,” noted Mike Gerdin, Heartland’s CEO. “We continue to be most proud of our drivers and our team of employees that support them and our loyal customers each day.”

For the six-month period ending June 30, the company reported a net income of $32.4 million with basic earnings per share of 40 cents; operating revenue of $327.2 million (an increase of 16.2% over 2019); operating income of $42.3 million; and an operating ratio of 87.1% (85.6% non-GAAP adjusted operating ratio).

“From a financial perspective, we were able to capitalize on our fifth consecutive quarter of growth in revenue before fuel surcharges and strong cost controls to deliver an operating ratio of 84.5% and a non-GAAP adjusted operating ratio of 83.0% despite lower gains on sale of revenue equipment, and ongoing progress needed to apply our cost structure to the Millis Transfer business,” Gerdin said.

“From a market perspective, the quarter started off with weak freight demand in April and then strengthened each month during the quarter,” he continued. “This trend has continued through the first two weeks of July. We continue to be very pleased with the Millis Transfer acquisition, as revenue retention has been favorable, and we still have significant additional operating efficiencies to pursue.”

As of June 30, Heartland recorded $82.5 million in cash balances, with no borrowings under the company’s unsecured line of credit. The company had $88.5 million in available borrowing capacity on the line of credit on June 30, after consideration of $11.5 million outstanding letters of credit. In addition to the current borrowing base of $100 million, the Company has the ability to increase the available borrowing base by an additional $100 million, subject to normal credit and lender approvals. The company continues to comply with associated financial covenants, and ended the quarter with total assets of $930.5 million and stockholders’ equity of $702.6 million.

The average age of Heartland’s tractor fleet was 2.1 years as of June 30 compared to 1.5 years at the end of the second quarter of 2019, and the average age of company’s trailer fleet was 3.7 years compared to 3.2 years in 2019. The company anticipates a total of $60 to $70 million in net capital expenditures for the remainder of calendar year 2020, and expects to record gains on sale of revenue equipment of $8 to $9 million, the report says.

“We have once again proven that Heartland Express can generate and preserve cash from operations and make disciplined operating decisions to navigate the ups and downs that are inherent in our industry,” Gerdin said.

“We believe Heartland Express is well positioned to navigate a volatile freight market, changing customer needs and relationships, and an uncertain economic landscape in the months ahead,” he concluded. “We thank the truck drivers of America for keeping the flow of critical goods and the economy moving during these challenging times.”

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