Heartland Express(HTLD) - 2020 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements The consolidated financial statements reflect the Millis Transfer acquisition's impact on revenue and profitability Consolidated Balance Sheets Total assets grew to $913.3 million due to increased equipment, while cash decreased and liabilities rose slightly Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $64,183 | $76,684 | | Total current assets | $149,260 | $151,814 | | Property and equipment, net | $545,716 | $526,287 | | Goodwill | $168,295 | $168,295 | | Total Assets | $913,291 | $898,931 | | Liabilities & Equity | | | | Total current liabilities | $71,719 | $63,407 | | Total long-term liabilities | $156,884 | $150,865 | | Total Liabilities | $228,603 | $214,272 | | Total Stockholders' Equity | $684,688 | $684,659 | Consolidated Statements of Comprehensive Income Revenue increased to $166.3 million post-acquisition, but net income and EPS declined from the prior year Q1 2020 vs. Q1 2019 Performance (in thousands, except per share data) | Metric | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Operating Revenue | $166,318 | $139,536 | | Operating Income | $17,326 | $20,843 | | Net Income | $13,238 | $17,318 | | Diluted EPS | $0.16 | $0.21 | | Dividends Declared per Share | $0.02 | $0.02 | Consolidated Statements of Stockholders' Equity Stockholders' equity remained stable as net income was offset by dividends and significant stock repurchases - Key equity changes in Q1 2020 included +$13.2 million in net income, offset by -$1.6 million in dividends and -$12.3 million in stock repurchases[19] Consolidated Statements of Cash Flows Operating cash flow increased, but higher investing and financing outflows led to a net decrease in cash Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $40,057 | $35,769 | | Net cash used in investing activities | ($39,632) | ($20,452) | | Net cash used in financing activities | ($14,145) | ($1,747) | | Net (decrease) increase in cash | ($13,720) | $13,570 | Notes to Consolidated Financial Statements Notes clarify the acquisition's impact, single-segment structure, debt-free status, and higher tax rate - The Q1 2020 results include the Millis Transfer acquisition, which was not in the Q1 2019 results[25] - The company operates as a single reportable segment in truckload services[30] - The company had zero outstanding debt as of March 31, 2020, with $89.7 million available credit[48] - The effective tax rate rose to 25.2% from 21.2% year-over-year due to less favorable tax adjustments[49] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes a revenue increase and profit decrease to the Millis acquisition and lower equipment gains Overview The company operates as a short-haul carrier, navigating a volatile freight market post-acquisition - The company is a short-to-medium haul truckload carrier, with loads predominately 500 miles or less[62] - Freight demand softened in early 2020 but increased in March due to the COVID-19 pandemic[63] - The August 2019 acquisition of Millis Transfer added dry van capacity and a driver training school[66] Results of Operations Revenue grew 19.2% post-acquisition, but a deteriorating operating ratio led to a 23.6% net income decline - The operating ratio deteriorated to 89.6% in Q1 2020 from 85.1% in Q1 2019[76] - The decrease in net income was primarily due to lower gains on the sale of revenue equipment in Q1 2020[76][89] - Operating revenue increased by $26.8 million (19.2%) due to higher total miles from the Millis Transfer addition[77] - Salaries, wages, and benefits increased by $16.5 million (30.6%) due to the expanded workforce from the acquisition[81] Liquidity and Capital Resources The company maintains strong liquidity with no debt, positive operating cash flow, and significant share repurchases - As of March 31, 2020, the company had $64.2 million in cash, no outstanding debt, and $89.7 million available borrowing capacity[91] - Cash flow from operating activities was $40.1 million for Q1 2020, up from $35.8 million in Q1 2019[94] - The company repurchased 0.7 million shares for $12.3 million during Q1 2020[96][97] - The company expects to spend approximately $85 to $95 million in net capital expenditures during the remainder of 2020[95] Quantitative and Qualitative Disclosures about Market Risk Primary market risks stem from fuel and tire commodity prices, with no derivative hedging instruments in use - The company is exposed to commodity price risk from fuel and tires, as fuel surcharges do not fully offset cost increases[104] - A hypothetical $1.00 increase in fuel price per gallon would decrease pre-tax income by approximately $7.2 million[104] - A 10% increase in tire prices would increase tire purchase expense by $1.3 million[104] Controls and Procedures Management confirmed the effectiveness of disclosure controls and procedures with no material changes during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2020[106] - No material changes in internal control over financial reporting occurred during the quarter[108] PART II - OTHER INFORMATION Legal Proceedings The company is involved in routine litigation that is not expected to have a material financial impact - The company is involved in routine litigation primarily involving claims for personal injury, property damage, and cargo[111] - Management believes the resolution of open claims is not likely to have a materially adverse effect on its financial statements[111] Risk Factors The COVID-19 pandemic presents significant, uncertain risks to operations, demand, and financial condition - The COVID-19 pandemic could have a materially adverse effect on the company's financial condition and results of operations[113] - Risks include government containment measures, personnel absences, and significant economic and demand uncertainty[113][114][115] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 710,376 shares for $12.3 million in Q1 2020 under its ongoing buyback program Share Repurchases for Quarter Ended March 31, 2020 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | February 2020 | 64,000 | $17.85 | | March 2020 | 646,376 | $17.23 | | Total | 710,376 | - | - As of March 31, 2020, 6,187,085 shares may yet be purchased under the company's share repurchase plan[118] Defaults upon Senior Securities The company reported no defaults upon senior securities - None[119] Mine Safety Disclosures This item is not applicable to the company - Not applicable[120] Other Information The company reported no other information for this item - None[121] Exhibits This section lists all exhibits filed with the Form 10-Q, including certifications and corporate documents - A list of exhibits filed with the report is provided, including CEO and CFO certifications and XBRL data files[122]