Heartland Express Inc. Reports Operating Results (10-Q)

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Aug 07, 2009
Heartland Express Inc. (HTLD, Financial) filed Quarterly Report for the period ended 2009-06-30.

Heartland Express Inc. is a short-to-medium haul truckload carrier based near Iowa City Iowa. The Company provides nationwide transportation service to major shippers using late-model tractors and a uniform fleet of 53-foot aluminum plate dry vans. Heartland Express Inc. has a market cap of $1.43 billion; its shares were traded at around $15.73 with a P/E ratio of 23.1 and P/S ratio of 2.4. The dividend yield of Heartland Express Inc. stocks is 0.5%. Heartland Express Inc. had an annual average earning growth of 14.4% over the past 10 years. GuruFocus rated Heartland Express Inc. the business predictability rank of 5-star.

Highlight of Business Operations:

Heartland Express, Inc. is a short-to-medium haul truckload carrier. The Company

transports freight for major shippers and generally earns revenue based on the

number of miles per load delivered. The Company operated eleven regional

operating divisions that provided regional dry van truckload services from nine

regional operating centers in addition to its corporate headquarters during the

quarter ended June 30, 2009. The Company\'s eleven regional operating divisions,

not including operations at the corporate headquarters, accounted for 72.6% and

73.4% of operating revenues for the second quarter of 2009 and 2008,

respectively, and 72.9% and 73.5% of operating revenues for the six month period

ended June 30, 2009 and 2008, respectively. The Company\'s newest regional

operating center near Dallas, Texas opened in early January 2009. The Company

takes pride in the quality of the service that it provides to its customers. The

keys to maintaining a high level of service are the availability of late-model

equipment and experienced drivers.



The Company ended the second quarter of 2009 with operating revenues of $117.0

million, including fuel surcharges, net income of $17.6 million, and earnings

per share of $0.19 on average outstanding shares of 90.7 million. The Company

posted an 81.4% operating ratio (operating expenses as a percentage of operating

revenues) and a 15.1% net margin (net income as a percentage of operating

revenues). The Company ended the quarter with cash, cash equivalents, short-term

and long-term investments of $205.0 million and a debt-free balance sheet. The

Company had total assets of $543.0 million at June 30, 2009. The Company

achieved a return on assets of 12.9% and a return on equity of 20.2% for the

twelve months ended June 30, 2009, compared to the twelve months ended June 30,

2008, which were 12.5% and 19.3%, respectively. The Company\'s cash flow from

operations for the first six months of 2009 of $45.3 million represented a 3.0%

increase from the same period of 2008 mainly due to a $4.5 million increase in

net income adjusted for non-cash items offset by a decrease in cash flows from

working capital items which were attributable to trade receivable cash

collections, timing of certain accounts payable and accrued expense items, and

income tax accrual reductions. The Company\'s cash flow from operations was 19.5%

of operating revenues for the six months ended June 30, 2009 compared to 14.0%

for the same period in 2008.





Three Months Ended Six Months Ended

June 30, June 30,

2009 2008 2009 2008

- - - -

Operating revenue 100.0% 100.0% 100.0% 100.0%

- - - -

Operating expenses:

Salaries, wages, and benefits 36.7% 29.5% 37.5% 31.0%

Rent and purchased transportation 2.4 3.1 2.5 3.3

Fuel 21.4 36.8 21.4 35.4

Operations and maintenance 3.7 2.6 3.6 2.7

Operating taxes and licenses 2.1 1.4 2.0 1.5

Insurance and claims 4.0 4.3 3.5 3.4

Communications and utilities 0.8 0.6 0.8 0.6

Depreciation 11.3 6.5 10.8 6.7

Other operating expenses 2.7 2.5 2.8 2.7

Gain on disposal of property

and equipment (3.6) - (2.5) (0.2)

- - - -

Total operating expenses 81.4% 87.3% 82.4% 87.0%

- - - -

Operating income 18.6% 12.7% 17.6% 13.0%

Interest income 0.5 1.4 0.6 1.6

- - - -

Income before income taxes 19.0% 14.1% 18.2% 14.6%

Federal and state income taxes 4.0 3.6 4.5 4.4

- - - -

Net income 15.1% 10.5% 13.7% 10.2%

= = = =



Fuel decreased $35.4 million (58.5%), to $25.1 million for the three months

ended June 30, 2009 from $60.5 million for the same period of 2008. The decrease

is the result of decreased fuel prices, decreased miles driven, and an increase

in fuel economy as result of newer tractor fleet as well as our idle reduction

initiatives. The Company\'s fuel cost per mile per company-owned tractor mile

decreased 51.0% in second quarter of 2009 compared to 2008. Fuel cost per mile,

net of fuel surcharge, decreased 33.1% in the second quarter of 2009 compared to

2008. The Company\'s second quarter fuel cost per gallon, $2.10 per gallon,

decreased by 50.1% in 2009 compared to the same period of 2008, $4.21 per

gallon. Fuel expense during the quarter ended June 30, 2009 was net of the

benefit of the Company\'s fuel hedging efforts based on gains of $0.6 million for

settlements received on fuel derivative contracts.



Fuel decreased $61.4 million (55.3%), to $49.6 million for the six months ended

June 30, 2009 from $111.0 million for the same period of 2008. The decrease is

the net result of decreased fuel prices ($45.5 million) and a decrease in miles

driven and idle reduction initiatives ($15.9 million). The Company\'s fuel cost

per company-owned tractor mile decreased 47.8% in first six months of 2009

compared to the same period of 2008. Fuel cost per mile, net of fuel surcharge,

decreased 34.1% in the first six months of 2009 compared to the same period of

2008. The Company\'s fuel cost per gallon for the first six months of 2009, $2.04

per gallon, decreased by 46.3% in 2009 compared to the same period of 2008,



Volatile fuel prices will continue to impact us significantly. Based on the

Company\'s historical experience, the Company is not able to pass through to

customers 100% of fuel price increases. For the quarter ended June 30, 2009 and

2008, fuel expense, net of fuel surcharge revenue and fuel stabilization paid to

owner operators along with favorable fuel hedge settlements, was $13.4 million

and $23.7 million or 15.2% and 22.2%, respectively, of the Company\'s total net

operating expenses, net of fuel surcharge. For the six months ended June 30,

2009 and 2008, fuel expense, net of fuel surcharge revenue and fuel

stabilization paid to owner operators along with favorable fuel hedge

settlements, was $27.0 million and $47.8 million or 15.5% and 22.7%,

respectively, of the Company\'s total net operating expenses, net of fuel

surcharge. A significant increase in fuel costs, or a shortage of diesel fuel,

could materially and adversely affect our results of operations. In February

2007, the Board of Directors authorized the Company to begin hedging activities

related to projected future purchases of diesel fuel to reduce its exposure to

diesel fuel price fluctuations. During the quarter ended March 31, 2009, the

Company contracted with an unrelated third party to hedge forecasted future cash

flows related to fuel purchases for the quarter ended June 30, 2009. The hedge

of forecasted future cash flow was transacted through the use of certain swap

contracts. The Company has implemented the provisions of SFAS No. 133 and SFAS

No. 161, and has designated such hedges as cash flow hedges. The cash flow

hedging strategy was implemented mainly to reduce the Company\'s exposure to

significant upward movements in diesel fuel prices related to fuel consumed by

empty and out-of-route miles and truck engine idling time, which is not

recoverable through fuel surcharge agreements. The contracted hedge expired on

June 30, 2009 and favorably impacted fuel expense $0.6 million for the quarter

ended June 30, 2009. There were no open hedging contracts at June 30, 2009.



Read the The complete ReportHTLD is in the portfolios of Richard Aster Jr of Meridian Fund, Ruane Cunniff of Ruane & Cunniff & Goldfarb Inc.