OREANDA-NEWS. Heartland Express, Inc. (Nasdaq:HTLD) announced today financial results for the three and six months ended June 30, 2016.

Three months ended June 30, 2016 highlights included:

  • Net Income of $16.4 million, Earnings per Share of $0.20, and Operating Revenue of $160.8 million, 
  • Net Income increased 13.8% sequentially to 1st quarter of 2016, 
  • Operating Ratio of 84.8% and 83.2% Non-GAAP Adjusted Operating Ratio(1).

Six months ended June 30, 2016 highlights included:

  • Net Income of $30.7 million, Earnings per Share of $0.37, and Operating Revenue of $323.6 million,
  • Cash generated from operations was $77.9 million,
  • Cash balance of $77.6 million, a $44.4 million increase since December 31, 2015,
  • Operating Ratio of 86.2% and 84.8% Non-GAAP Adjusted Operating Ratio(1).

Heartland Express Chief Executive Officer Michael Gerdin, commented on the quarterly operating results and ongoing initiatives of the Company, "Throughout the first half of 2016 we continued to experience downward pressure on freight rates due to the softness in freight volumes resulting from the available capacity in the industry. Typically, freight volumes improve during the second quarter as compared to the first three months of the year but that has not been our experience during 2016 as freight volumes didn't improve until mid-June.  During this time, our commitment and dedication to on-time service for our customers has helped carry us through the current freight rate pressures. We remain committed and focused to returning our operating ratio to the low 80’s and we've now delivered four consecutive quarters of improvement, excluding gains on disposals of property and equipment, which tend to be volatile based on timing of fleet upgrades. Further, we were able to generate another quarter of solid cash flows from operations, which allowed us to increase our cash reserves and pay for capital expenditures while remaining debt free.  This foundation of financial discipline allows us to maintain a fleet of tractors and trailers equipped with the latest technology available in the industry."

Financial Results

Heartland Express ended the second quarter of 2016 with net income of $16.4 million, compared to $23.3 million in the second quarter of 2015.  Basic earnings per share were $0.20 during the quarter compared to $0.27 earnings per share in the second quarter of 2015.  Operating revenues were $160.8 million, compared to $191.7 million in the second quarter of 2015.  Operating revenues for the quarter included fuel surcharge revenues of $15.3 million compared to $25.7 million in the same period of 2015, a $10.4 million decrease.  Operating revenues decreased 12.4% excluding the impact of fuel surcharge revenues primarily due to lower miles driven due to softer freight volumes in the second quarter compared to the same period in 2015.  Operating income for the three-month period decreased $5.2 million as a result of lower gains on disposal of property and equipment from lower trade volumes.  The Company posted an adjusted operating ratio(1) of 83.2% and a 10.2% net margin (net income as a percentage of operating revenues) in the second quarter of 2016 compared to 78.5% and 12.2%, respectively in the second quarter of 2015. 

For the six month period ended June 30, 2016, the Company recorded net income of $30.7 million, compared to $40.9 million in the same period of 2015.  Basic earnings per share were $0.37 compared to $0.47 earnings per share in the same period of 2015.  Operating revenues were $323.6 million, compared to $379.2 million in the same period of 2015.  Operating revenues included fuel surcharge revenues of $28.4 million compared to $51.8 million in the same period of 2015, a $23.4 million decrease.  Operating revenues decreased 9.9% excluding the impact of fuel surcharge revenues.  Operating income for the six-month period decreased $14.0 million as a result of lower gains on disposal of property and equipment from lower trade volumes.  The Company posted an adjusted operating ratio(1) of 84.8% and a 9.5% net margin (net income as a percentage of operating revenues) in the six months ended June 30, 2016 compared to 80.5% and 10.8%, respectively in 2015. 

Balance Sheet, Liquidity, and Capital Expenditures

At June 30, 2016, the Company had $77.6 million in cash balances and no borrowings under the Company's unsecured line of credit.  The Company had $194.5 million in available borrowing capacity on the line of credit at June 30, 2016 after consideration of outstanding letters of credit.  The Company continues to be in compliance with associated financial covenants. The Company ended the quarter with total assets of $742.1 million and stockholders' equity of $483.3 million. 

Net cash flows from operations for the first six months of 2016 were $77.9 million.  The primary use of cash during the six month period ended June 30, 2016 was $15.6 million for equipment purchases, $14.7 million for stock repurchases and $3.3 million for dividends.  The average age of the Company's tractor fleet was 1.5 years as of June 30, 2016 compared to 1.7 years at June 30, 2015.  The average age of the Company's trailer fleet was 4.7 years at June 30, 2016 compared to 4.5 years at June 30, 2015. The Company currently anticipates a total of approximately $40 to $50 million in net capital expenditures for the calendar year 2016.  The Company ended the past twelve months with a return on total assets of 8.5% and a 13.1% return on equity.

The Company continues its commitment to stockholders through the payment of cash dividends and repurchase of common stock.  Dividends of $0.02 per share were declared and paid during the first and second quarters of 2016.  The Company has now paid cumulative cash dividends of $460.8 million, including three special dividends, ($2.00 in 2007, $1.00 in 2010, and $1.00 in 2012) over the past fifty-two consecutive quarters.  During the six months ended June 30, 2016, 0.9 million shares of our common stock were repurchased for $14.7 million reducing outstanding shares at June 30, 2016 to 83.3 million shares.  The Company has repurchased 4.7 million shares of our common stock for $88.7 million since August 2015 and a total of 10.7 million shares of common stock for approximately $169.2 million over the past five years. 

HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(unaudited)
 
    Three Months Ended
June 30,		   Six Months Ended
June 30,
    2016   2015   2016   2015
OPERATING REVENUE   $ 160,791     $ 191,684     $ 323,577     $ 379,207  
                 
OPERATING EXPENSES:                
Salaries, wages, and benefits   $ 61,524     $ 70,904     $ 126,990     $ 141,900  
Rent and purchased transportation   6,181     9,211     12,881     18,537  
Fuel   24,394     34,196     45,588     68,452  
Operations and maintenance   6,969     8,379     13,607     16,512  
Operating taxes and licenses   3,943     4,378     7,834     9,192  
Insurance and claims   4,979     3,469     13,072     10,113  
Communications and utilities   1,060     1,453     2,265     2,996  
Depreciation and amortization   25,847     26,876     51,552     52,850  
Other operating expenses   5,898     6,747     10,831     14,505  
Gain on disposal of property and equipment   (4,511 )   (9,668 )   (5,800 )   (19,849 )
                 
    136,284     155,945     278,820     315,208  
                 
Operating income   24,507     35,739     44,757     63,999  
                 
Interest income   109     61     184     93  
                 
Interest expense   —     —     —     (19 )
                 
Income before income taxes   24,616     35,800     44,941     64,073  
                 
Federal and state income taxes   8,248     12,484     14,196     23,145  
                 
Net income   $ 16,368     $ 23,316     $ 30,745     $ 40,928  
                 
Earnings per share                
Basic   $ 0.20     $ 0.27     $ 0.37     $ 0.47  
Diluted   $ 0.20     $ 0.27     $ 0.37     $ 0.47  
                 
Weighted average shares outstanding                
Basic   83,248     87,814     83,308     87,802  
Diluted   83,319     87,967     83,390     87,966  
                 
Dividends declared per share   $ 0.02     $ 0.02     $ 0.04     $ 0.04  
HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
 
    June 30,   December 31,
ASSETS   2016   2015
CURRENT ASSETS        
Cash and cash equivalents   $ 77,607     $ 33,232  
Trade receivables, net   57,009     61,009  
Prepaid tires   8,793     9,584  
Other current assets   11,468     8,316  
Income tax receivable   7,773     7,641  
Deferred income taxes, net   —     16,662  
Total current assets   162,650     136,444  
         
PROPERTY AND EQUIPMENT   676,170     671,946  
Less accumulated depreciation   225,482     197,948  
    450,688     473,998  
GOODWILL   100,212     100,212  
OTHER INTANGIBLES, NET   13,051     14,013  
DEFERRED INCOME TAXES, NET   4,222     —  
OTHER ASSETS   11,266     11,363  
    $ 742,089     $ 736,030  
LIABILITIES AND STOCKHOLDERS' EQUITY        
CURRENT LIABILITIES        
Accounts payable and accrued liabilities   $ 21,535     $ 7,516  
Compensation and benefits   25,667     24,636  
Insurance accruals   22,330     21,573  
Other accruals   13,040     12,443  
Total current liabilities   82,572     66,168  
LONG-TERM LIABILITIES        
Income taxes payable   12,433     16,228  
Deferred income taxes, net   94,337     112,118  
Insurance accruals less current portion   61,420     59,435  
Other long-term liabilities   8,000     12,153  
Total long-term liabilities   176,190     199,934  
COMMITMENTS AND CONTINGENCIES        
STOCKHOLDERS' EQUITY        
Capital stock, common, $.01 par value; authorized 395,000 shares; issued 90,689 in
2016 and 2015; outstanding 83,279 in 2016 and 84,115 in 2015, respectively		   907     907  
Additional paid-in capital   3,378     4,126  
Retained earnings   603,361     575,948  
Treasury stock, at cost; 7,410 in 2016 and 6,574 in 2015, respectively   (124,319 )   (111,053 )
    483,327     469,928  
    $ 742,089     $ 736,030  
 

(1)

GAAP to Non-GAAP Reconciliation Schedule:        
Operating income, operating ratio, and adjusted operating ratio reconciliation (a)
(In thousands)        
(unaudited)            
             
    Three Months Ended
June 30,		   Six Months Ended
June 30,
    2016   2015   2016   2015
                 
Operating revenue   $ 160,791     $ 191,684     $ 323,577     $ 379,207  
Less: Fuel surcharge revenue   15,341     25,705     28,434     51,809  
Operating revenue, excluding fuel surcharge revenue   145,450     165,979     295,143     327,398  
                 
Operating expenses   136,284     155,945     278,820     315,208  
Less: Fuel surcharge revenue   15,341     25,705     28,434     51,809  
Adjusted operating expenses   120,943     130,240     250,386     263,399  
                 
Operating income   $ 24,507     $ 35,739     $ 44,757     $ 63,999  
Operating ratio   84.8 %   81.4 %   86.2 %   83.1 %
Adjusted operating ratio   83.2 %   78.5 %   84.8 %   80.5 %
                         

(a) Adjusted operating ratio as reported in this press release is based upon total operating expenses, net of fuel surcharge, as a percentage of operating revenue excluding fuel surcharge revenue.