Attached files
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| 8-K - 8-K - HEARTLAND EXPRESS INC | earningsrelease8k2017q2.htm |
Exhibit 99.1
August 2, 2017 For Immediate Release
Press Release
Heartland Express, Inc. Reports Revenues and Earnings for the Second Quarter of 2017
NORTH LIBERTY, IOWA - August 2, 2017 - Heartland Express, Inc. (Nasdaq: HTLD) announced today financial results for the three and six months ended June 30, 2017.
Three months ended June 30, 2017:
• | Net Income of $14.6 million, Earnings per Share of $0.18, and Operating Revenue of $130 million, |
• | Operating Ratio of 83.6% and 81.4% Non-GAAP Adjusted Operating Ratio(1), |
Six months ended June 30, 2017:
• | Net Income of $28.7 million, Earnings per Share of $0.34, and Operating Revenue of $260 million, |
• | Operating Ratio of 84.3% and 82.3% Non-GAAP Adjusted Operating Ratio(1), |
• | Cash balance of $171.3 million, a $42.8 million increase since December 31, 2016, |
• | Total Stockholders Equity of $531.3 million and Total Assets of $751.1 million. |
Heartland Express Chief Executive Officer Michael Gerdin, commented on the quarterly operating results and ongoing initiatives of the Company, "We are pleased with the results achieved for the quarter, which were the result of our continued focus on efficient operations as evidenced by delivering an operating ratio that is the best in the industry among our peers. Over the years we have completed several acquisitions and each one comes with unique opportunities which must be navigated in order to return to our goal of achieving a low-80's operating ratio excluding the impacts of gains on sale of equipment. This quarter, we achieved our best operating ratio posted over the past two years and achieved our goal of operating in the low 80's without gains during the last month of the quarter. We now look forward to the new opportunities with our recent acquisition of Interstate Distributor Co. (IDC). This is our second largest acquisition in our thirty-nine-year history and our second large acquisition in less than four years. Our long-term strategy of efficient operations and generating cash from our operations allowed us to complete the IDC acquisition with existing cash reserves. We believe that we maintain adequate cash on hand to fully fund our expected operating and capital needs. We expect to continue to own and operate a fleet of revenue producing equipment that is relatively young in average age and updated with the latest technology, which we believe leads to lower operating costs. We remain committed to on-time and just-in-time service for our loyal customers and taking care of our professional drivers. Further, we look forward to uniting both the operations and cultures of Heartland and IDC over the next few years. I am extremely pleased with the execution of our team to deliver our financial results while also completing the necessary diligence and analysis to finalize our most recent acquisition following the quarter end."
On July 6, 2017, Heartland Express acquired 100% of IDC's outstanding stock from Saltchuk Resources, Inc. for cash. The enterprise value of the transaction was approximately $113 million. The transaction was funded through $94 million of existing cash, plus assumption of approximately $23 million of IDC's debt, and acquisition of $4 million in cash on IDC’s balance sheet. The Company expects to pay off all of IDC’s debt in the third quarter. We believe that this acquisition provides an experienced base of professional and safe drivers, a terminal network that aligns well with our existing operations, additional traffic density in the West, and a diverse customer base that can benefit from our existing network of operations in the East.
Financial Results
Heartland Express ended the second quarter of 2017 with net income of $14.6 million, compared to $16.4 million in the second quarter of 2016. Basic earnings per share were $0.18 during the quarter compared
to $0.20 earnings per share in the second quarter of 2016. Operating revenues were $130 million, compared to $160.8 million in the second quarter of 2016. Operating revenues for the quarter included fuel surcharge revenues of $14.7 million compared to $15.3 million in the same period of 2016, a $0.6 million decrease. Operating revenues decreased 21.0% excluding the impact of fuel surcharge revenues(1), primarily due to lower miles driven during the second quarter compared to the same period in 2016. Operating income for the three-month period decreased $3.2 million primarily due to lower miles driven. The Company posted an operating ratio of 83.6%, adjusted operating ratio(1) of 81.4%, and a 11.3% net margin (net income as a percentage of operating revenues) in the second quarter of 2017 compared to 84.8%, 83.2%, and 10.2%, respectively in the second quarter of 2016.
For the six month period ended June 30, 2017, the Company recorded net income of $28.7 million, compared to $30.7 million in the same period of 2016. Basic earnings per share were $0.34 compared to $0.37 earnings per share in the same period of 2016. Operating revenues were $260 million, compared to $323.6 million in the same period of 2016. Operating revenues included fuel surcharge revenues of $29.6 million compared to $28.4 million in the same period of 2016, a $1.2 million increase. Operating revenues decreased 22.1% excluding the impact of fuel surcharge revenues(1). Operating income for the six-month period decreased $4.1 million primarily due to lower miles driven. The Company posted an operating ratio of 84.3%, adjusted operating ratio(1) of 82.3% and a 11.0% net margin (net income as a percentage of operating revenues) in the six months ended June 30, 2017 compared to 86.2%, 84.8%, and 9.5%, respectively in 2016.
Balance Sheet, Liquidity, and Capital Expenditures
At June 30, 2017, the Company had $171.3 million in cash balances and no borrowings under the Company's unsecured line of credit. The Company had $171.3 million in available borrowing capacity on the line of credit at June 30, 2017 after consideration of $3.7 million outstanding letters of credit. The Company continues to be in compliance with associated financial covenants. The Company ended the quarter with total assets of $751.1 million and stockholders' equity of $531.3 million.
Net cash flows from operations for the first six months of 2017 were $50.8 million, 19.6% of operating revenue. The primary use of net cash generated from operations during the six month period ended June 30, 2017 was $1.3 million for net equipment transactions and $3.3 million for dividends. The average age of the Company's tractor fleet was 1.9 years as of June 30, 2017 compared to 1.5 years at June 30, 2016. The average age of the Company's trailer fleet was 4.3 years at June 30, 2017 compared to 4.7 years at June 30, 2016. The Company currently anticipates a total of approximately $40 to $50 million in net capital expenditures for the calendar year. The Company ended the past twelve months with a return on total assets of 7.3% and a 10.6% return on equity.
The Company continues its commitment to stockholders through the payment of cash dividends and repurchase of common stock. A dividend of $0.02 per share was declared and paid during the second quarter of 2017. The Company has now paid cumulative cash dividends of $467.4 million, including three special dividends, ($2.00 in 2007, $1.00 in 2010, and $1.00 in 2012) over the past fifty-six consecutive quarters. During the three months ended June 30, 2017, the Company did not purchase any shares of our common stock. Our outstanding shares at June 30, 2017 were 83.3 million shares. A total of 6.2 million shares of common stock have been repurchased for approximately $109.9 million over the past five years. The Company has the ability to repurchase an additional 3.3 million shares under the current authorization.
Other Information
We continued to deliver award-winning service and safety to our customers. We were proud to receive the FedEx Express "Platinum Award for 99.97% On-Time Service" and "Core Carrier of the Year" awards during the second quarter. We have now received the distinguished “Carrier of the Year” award for FedEx Express
ten times in the last eleven years and seven years in a row. Over the last year, we improved our on-time service rate to 99.97%, on over 16,000 shipments during the year.
Operating revenue excluding fuel surcharge revenue and adjusted operating ratio are non-GAAP financial measures and are not intended to replace financial measures calculated in accordance with GAAP. These non-GAAP financial measures supplement our GAAP results. We believe that using these measures affords a more consistent basis for comparing our results of operations from period to period. The information required by Item 10(e) of Regulation S-K under the Securities Act of 1933 and the Securities Exchange Act of 1934 and Regulation G under the Securities Exchange Act of 1934, including a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP, is included in the table at the end of this press release.
This press release may contain statements that might be considered as forward-looking statements or predictions of future operations. Such statements are based on management's belief or interpretation of information currently available. These statements and assumptions involve certain risks and uncertainties. Actual events may differ from these expectations as specified from time to time in filings with the Securities and Exchange Commission.
Contact: Heartland Express, Inc.
Mike Gerdin, Chief Executive Officer
John Cosaert, Chief Financial Officer
319-626-3600
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, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
OPERATING REVENUE | $ | 129,616 | $ | 160,791 | $ | 259,518 | $ | 323,577 | ||||||||
OPERATING EXPENSES: | ||||||||||||||||
Salaries, wages, and benefits | $ | 48,642 | $ | 61,524 | $ | 97,621 | $ | 126,990 | ||||||||
Rent and purchased transportation | 1,820 | 6,181 | 4,682 | 12,881 | ||||||||||||
Fuel | 21,289 | 24,394 | 43,991 | 45,588 | ||||||||||||
Operations and maintenance | 6,961 | 6,969 | 12,830 | 13,607 | ||||||||||||
Operating taxes and licenses | 3,143 | 3,943 | 6,435 | 7,834 | ||||||||||||
Insurance and claims | 3,581 | 4,979 | 7,361 | 13,072 | ||||||||||||
Communications and utilities | 1,038 | 1,060 | 2,136 | 2,265 | ||||||||||||
Depreciation and amortization | 22,604 | 25,847 | 45,534 | 51,552 | ||||||||||||
Other operating expenses | 5,524 | 5,898 | 10,627 | 10,831 | ||||||||||||
Gain on disposal of property and equipment | (6,299 | ) | (4,511 | ) | (12,375 | ) | (5,800 | ) | ||||||||
108,303 | 136,284 | 218,842 | 278,820 | |||||||||||||
Operating income | 21,313 | 24,507 | 40,676 | 44,757 | ||||||||||||
Interest income | 424 | 109 | 713 | 184 | ||||||||||||
Income before income taxes | 21,737 | 24,616 | 41,389 | 44,941 | ||||||||||||
Federal and state income taxes | 7,121 | 8,248 | 12,736 | 14,196 | ||||||||||||
Net income | $ | 14,616 | $ | 16,368 | $ | 28,653 | $ | 30,745 | ||||||||
Earnings per share | ||||||||||||||||
Basic | $ | 0.18 | $ | 0.20 | $ | 0.34 | $ | 0.37 | ||||||||
Diluted | $ | 0.18 | $ | 0.20 | $ | 0.34 | $ | 0.37 | ||||||||
Weighted average shares outstanding | ||||||||||||||||
Basic | 83,294 | 83,248 | 83,293 | 83,308 | ||||||||||||
Diluted | 83,338 | 83,319 | 83,337 | 83,390 | ||||||||||||
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 | 2017 | 2016 | ||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 171,292 | $ | 128,507 | ||||
Trade receivables, net | 43,844 | 46,844 | ||||||
Prepaid tires | 9,586 | 8,181 | ||||||
Other current assets | 24,736 | 13,841 | ||||||
Income tax receivable | 2,983 | 4,738 | ||||||
Total current assets | 252,441 | 202,111 | ||||||
PROPERTY AND EQUIPMENT | 620,204 | 659,053 | ||||||
Less accumulated depreciation | 246,399 | 251,405 | ||||||
373,805 | 407,648 | |||||||
GOODWILL | 100,212 | 100,212 | ||||||
OTHER INTANGIBLES, NET | 11,128 | 12,090 | ||||||
DEFERRED INCOME TAXES, NET | 1,355 | 3,785 | ||||||
OTHER ASSETS | 12,199 | 12,382 | ||||||
$ | 751,140 | $ | 738,228 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable and accrued liabilities | $ | 10,040 | $ | 12,355 | ||||
Compensation and benefits | 22,346 | 23,320 | ||||||
Insurance accruals | 17,890 | 19,132 | ||||||
Other accruals | 12,038 | 10,727 | ||||||
Total current liabilities | 62,314 | 65,534 | ||||||
LONG-TERM LIABILITIES | ||||||||
Income taxes payable | 7,725 | 11,954 | ||||||
Deferred income taxes, net | 93,416 | 94,657 | ||||||
Insurance accruals less current portion | 56,377 | 60,257 | ||||||
Total long-term liabilities | 157,518 | 166,868 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
STOCKHOLDERS' EQUITY | ||||||||
Capital stock, common, $.01 par value; authorized 395,000 shares; issued 90,689 in 2017 and 2016; outstanding 83,297 in 2017 and 83,287 in 2016, respectively | 907 | 907 | ||||||
Additional paid-in capital | 3,452 | 3,433 | ||||||
Retained earnings | 650,987 | 625,668 | ||||||
Treasury stock, at cost; 7,392 in 2017 and 7,402 in 2016, respectively | (124,038 | ) | (124,182 | ) | ||||
531,308 | 505,826 | |||||||
$ | 751,140 | $ | 738,228 | |||||
(1)
GAAP to Non-GAAP Reconciliation Schedule: | ||||||||||||||||
Operating revenue, operating revenue excluding fuel surcharge revenue, operating income, operating ratio, and adjusted operating ratio reconciliation (a) | ||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(Unaudited, in thousands) | (Unaudited, in thousands) | |||||||||||||||
Operating revenue | $ | 129,616 | $ | 160,791 | $ | 259,518 | $ | 323,577 | ||||||||
Less: Fuel surcharge revenue | 14,743 | 15,341 | 29,624 | 28,434 | ||||||||||||
Operating revenue, excluding fuel surcharge revenue | 114,873 | 145,450 | 229,894 | 295,143 | ||||||||||||
Operating expenses | 108,303 | 136,284 | 218,842 | 278,820 | ||||||||||||
Less: Fuel surcharge revenue | 14,743 | 15,341 | 29,624 | 28,434 | ||||||||||||
Adjusted operating expenses | 93,560 | 120,943 | 189,218 | 250,386 | ||||||||||||
Operating income | $ | 21,313 | $ | 24,507 | $ | 40,676 | $ | 44,757 | ||||||||
Operating ratio | 83.6 | % | 84.8 | % | 84.3 | % | 86.2 | % | ||||||||
Adjusted operating ratio | 81.4 | % | 83.2 | % | 82.3 | % | 84.8 | % | ||||||||
(a) Operating revenue excluding fuel surcharge revenue and adjusted operating ratio as reported in this press release are based upon operating expenses, net of fuel surcharge revenue, as a percentage of operating revenue excluding fuel surcharge revenue.