Heartland Express(HTLD) - 2024 Q4 - Annual Report

Financial Performance - In 2024, the company generated operating revenues of $1.0 billion, a decrease from $1.2 billion in 2023, with a net loss of $29.7 million compared to a net income of $14.8 million in the previous year[190]. - The operating ratio for 2024 was 101.9%, significantly higher than 96.5% in 2023, indicating increased operating expenses relative to revenues[190]. - Operating income was negative at (1.9%) for 2024, compared to a positive 3.5% in 2023[202]. - Operating revenue decreased by $160.0 million (13.2%) to $1.0 billion for the year ended December 31, 2024, from $1.2 billion in 2023, primarily due to a weak freight environment[203]. - Cash flow from operating activities for 2024 was $144.3 million, representing 13.8% of operating revenues, compared to $165.3 million or 13.7% in 2023[192]. - Operating cash flow for 2024 was $144.3 million, a decrease of $21.0 million compared to $165.3 million in 2023, primarily due to a $41.2 million decrease in net income[231]. Expenses and Cost Management - Fuel expenses decreased by $35.0 million (16.5%) to $177.2 million in 2024, driven by a 10.8% decrease in average diesel prices per gallon[208]. - Salaries, wages, and benefits decreased by $47.1 million (9.9%) to $427.7 million in 2024, reflecting lower company miles and a reduction in office and shop employees[206]. - Depreciation and amortization decreased by $17.5 million (8.8%) to $181.5 million in 2024, attributed to ongoing fleet replacement strategies[209]. - Insurance and claims expense increased by $5.6 million (12.3%) to $50.9 million in 2024, due to unfavorable claim severity and frequency[212]. - Significant inflation has impacted operating expenses, particularly in driver compensation and equipment costs, with the average age of revenue equipment being in the top tier of the industry[217]. Debt and Financing - The company repaid almost $300 million of debt and capitalized leases since acquiring CFI and Smith Transport in 2022, while maintaining a relatively young fleet[188]. - The company had $184.0 million outstanding on the Term Facility and no outstanding borrowings under the Revolving Facility as of December 31, 2024[227]. - The weighted average interest rate on outstanding borrowings under the Credit Facilities was 6.0% as of December 31, 2024[227]. - Interest expense decreased by $6.6 million (27.3%) to $17.6 million in 2024, reflecting debt repayments made during the year[215]. - A 1.0% increase in the SOFR rate would result in an additional $1.8 million in annual interest expense based on current variable rate debt[249]. Investments and Acquisitions - The company has made ten acquisitions since 1986, with the most recent being CFI on August 31, 2022, aimed at expanding service offerings and market reach[195]. - The company entered into a $550.0 million unsecured credit facility, including a $100.0 million revolving line of credit and $450.0 million in term loans, to support business growth[219]. - The company anticipates net capital expenditures for revenue equipment and terminal properties in 2025 to be between $55.0 million to $65.0 million[232]. - Cash flows used in investing activities decreased to $46.5 million in 2024 from $67.9 million in 2023, mainly due to $24.7 million less net cash used for property and equipment[232]. Operational Strategy - The company aims to achieve an operating ratio in the low to mid 80s and to grow revenue profitably through both organic growth and acquisitions[186]. - The driver compensation and benefits program has been enhanced to attract and retain qualified drivers, resulting in lower turnover rates compared to industry averages[194]. - Over 96% of total miles are driven by company drivers operating revenue equipment, with tractors and trailers having estimated useful lives of 5 and 7 years respectively[242]. Tax and Valuation - The effective tax rate decreased to 19.0% in 2024 from 25.6% in 2023, primarily due to permanent differences reducing the rate[216]. - The company has not recorded a valuation allowance against deferred tax assets, believing it is more likely than not that remaining deferred tax assets will be utilized[245]. - Goodwill from acquisitions is subject to impairment testing and is influenced by the valuation estimates of other acquired long-lived assets[244]. Risk Management - The company does not currently use derivative financial instruments for risk management, although it has in the past for fuel price risk management[248]. - Management estimates accruals for self-insured auto liability and workers' compensation claims based on historical development trends and individual case evaluations[243].