Heartland Express(HTLD) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section presents the unaudited consolidated financial statements and management's analysis of financial condition and results of operations Item 1. Financial Statements This section presents the unaudited consolidated financial statements and notes, reflecting increased net losses and decreased operating revenues Consolidated Balance Sheets This table presents the consolidated balance sheets, highlighting changes in assets, liabilities, and equity | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | Percentage Change | | :--- | :--- | :--- | :--- | :--- | | Total Assets | $1,299,372 | $1,334,192 | $(34,820) | -2.61% | | Total Liabilities | $512,635 | $511,593 | $1,042 | 0.20% | | Total Stockholders' Equity | $786,737 | $822,599 | $(35,862) | -4.36% | | Cash and cash equivalents | $22,879 | $12,812 | $10,067 | 78.57% | | Property and equipment, net | $728,677 | $764,407 | $(35,730) | -4.67% | Consolidated Statements of Comprehensive Income (Loss) This table presents the consolidated statements of comprehensive income (loss), showing significant declines in operating revenue and increased net losses | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Percentage Change | | :--- | :--- | :--- | :--- | :--- | | Operating Revenue | $210,387 | $274,754 | $(64,367) | -23.43% | | Operating (loss) income | $(12,419) | $264 | $(12,683) | -4804.92% | | Net loss | $(10,855) | $(3,478) | $(7,377) | -212.12% | | Basic Net loss per share | $(0.14) | $(0.04) | $(0.10) | -250.00% | | Diluted Net loss per share | $(0.14) | $(0.04) | $(0.10) | -250.00% | | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Percentage Change | | :--- | :--- | :--- | :--- | :--- | | Operating Revenue | $429,807 | $545,074 | $(115,267) | -21.15% | | Operating (loss) income | $(27,317) | $(14,120) | $(13,197) | -93.46% | | Net loss | $(24,728) | $(18,586) | $(6,142) | -33.05% | | Basic Net loss per share | $(0.32) | $(0.24) | $(0.08) | -33.33% | | Diluted Net loss per share | $(0.32) | $(0.24) | $(0.08) | -33.33% | Consolidated Statements of Stockholders' Equity This table details changes in stockholders' equity, including net loss, stock repurchases, and dividends | Metric | December 31, 2024 (in thousands) | June 30, 2025 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Total Stockholders' Equity | $822,599 | $786,737 | $(35,862) | | Net loss (6 months) | N/A | $(24,728) | N/A | | Repurchases of common stock (6 months) | N/A | $(8,931) | N/A | | Dividends on common stock (6 months) | N/A | $(3,124) | N/A | Consolidated Statements of Cash Flows This table presents the consolidated statements of cash flows, showing changes in operating, investing, and financing activities | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Percentage Change | | :--- | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $46,842 | $70,966 | $(24,124) | -33.99% | | Net cash used in investing activities | $(17,318) | $(2,631) | $(14,687) | -558.99% | | Net cash used in financing activities | $(19,233) | $(72,379) | $53,146 | -73.43% | | Net increase (decrease) in cash, cash equivalents and restricted cash | $10,291 | $(4,044) | $14,335 | -354.47% | | Purchases of property and equipment | $(57,350) | $(15,244) | $(42,106) | -276.21% | | Repayments of finance leases and debt | $(6,949) | $(63,358) | $56,409 | -89.03% | Notes to Consolidated Financial Statements This section provides detailed notes accompanying the consolidated financial statements, explaining accounting policies and specific financial items Note 1. Basis of Presentation and New Accounting Pronouncements The company provides truckload and transportation services, with interim financial statements prepared under GAAP, and is evaluating a new FASB update - Heartland Express, Inc. and its subsidiaries provide nationwide asset-based dry van truckload service, cross-border freight, and other transportation services[19] - The unaudited consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and Form 10-Q instructions[20] - FASB Update 2023-09, 'Income Taxes (Topic 740): Improvements to Income Tax Disclosures,' effective for annual periods beginning after December 15, 2024, is being evaluated for impact, with no material impact expected[21] Note 2. Use of Estimates Financial statement preparation involves management estimates and assumptions, with no significant changes in critical accounting policies during the period - Management makes estimates and assumptions in preparing consolidated financial statements, which may differ from actual results[22] - No significant changes in estimates and assumptions related to critical accounting policies occurred during the three and six months ended June 30, 2025[22] Note 3. Segment Information The company operates as a single reportable segment, providing truckload services across North America, managed on a combined basis - The Company has one reportable segment, consistent with authoritative accounting guidance[23] - Services include asset-based dry van truckload, temperature-controlled transportation, and Mexico logistics services[23] - The Chief Operating Decision Maker (CODM) oversees and manages all transportation services on a combined basis[23] Note 4. Revenue Recognition Revenue is recognized over time, with total revenues, fuel surcharge, and other revenues significantly decreasing in 2025 compared to 2024 - Revenue is recognized over time as control of promised services is transferred to customers, reflecting expected consideration[24] - The average length of haul is under 400 loaded miles per trip, generally less than two days of continuous transit time[25] Revenue by Type (Three Months Ended June 30) | Revenue Type | Three Months Ended June 30, 2025 (in millions) | Three Months Ended June 30, 2024 (in millions) | Change (in millions) | Percentage Change | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $210.4 | $274.8 | $(64.4) | -23.4% | | Fuel surcharge revenues | $24.5 | $36.8 | $(12.3) | -33.4% | | Accessorial, brokerage and other revenues | $14.7 | $20.0 | $(5.3) | -26.5% | Revenue by Type (Six Months Ended June 30) | Revenue Type | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | Change (in millions) | Percentage Change | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $429.8 | $545.1 | $(115.3) | -21.1% | | Fuel surcharge revenues | $50.8 | $73.0 | $(22.2) | -30.4% | | Accessorial, brokerage and other revenues | $30.6 | $40.1 | $(9.5) | -23.7% | Note 5. Cash and Cash Equivalents Cash equivalents are highly liquid investments, with restricted and designated cash totaling $13.7 million at June 30, 2025 - Cash equivalents are short-term, highly liquid investments with original maturities of three months or less[28] Restricted and Designated Cash and Investments | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | Change (in millions) | | :--- | :--- | :--- | :--- | | Restricted and designated cash and investments | $13.7 | $13.5 | $0.2 | - Restricted funds represent deposits for self-insurance and designated funds are earmarked for specific purposes[28] Note 6. Prepaid Tires, Property, Equipment, and Depreciation Property and equipment are reported at cost, with new tires capitalized and depreciation methods varying by asset type and specific salvage values - Property and equipment are reported at cost, net of accumulated depreciation[29] - New tires are capitalized as 'Prepaid tires' and amortized over two years[29] - Depreciation for new tractors uses the declining balance method, while other assets use the straight-line method, with salvage values of $15,000 for new tractors and $4,000 for new trailers[29] Note 7. Other Intangibles, Net and Goodwill Goodwill remained constant at $322.6 million, while finite-lived intangibles are amortized, with expenses of $1.3 million and $2.5 million for the periods - Goodwill remained constant at $322.6 million at June 30, 2025 and December 31, 2024[32] - Other intangibles, net, totaled $91.0 million at June 30, 2025, including $31.6 million of indefinite-lived trade name assets and $59.4 million of net finite-lived intangible assets[30] Amortization Expense | Metric | Three Months Ended June 30, 2025 (in millions) | Three Months Ended June 30, 2024 (in millions) | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Amortization expense | $1.3 | $1.3 | $2.5 | $2.5 | Note 8. (Loss) Earnings per Share Basic and diluted loss per share increased for both periods ended June 30, 2025, reflecting higher net losses Loss per Share (Three Months Ended June 30) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Basic loss per share | $(0.14) | $(0.04) | | Diluted loss per share | $(0.14) | $(0.04) | Loss per Share (Six Months Ended June 30) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Basic loss per share | $(0.32) | $(0.24) | | Diluted loss per share | $(0.32) | $(0.24) | Note 9. Equity The company's stock repurchase program has 5.0 million shares remaining, with 1.0 million shares repurchased for $8.9 million in H1 2025, and quarterly dividends of $0.02 per share declared - The stock repurchase program has 5.0 million shares remaining authorized for repurchase as of June 30, 2025[35] Stock Repurchases (Six Months Ended June 30) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Shares repurchased | 1.0 million | 0.6 million | | Value of repurchases | $8.9 million | $7.3 million | Dividends Declared | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Dividends declared | $1.6 million | $1.6 million | $3.1 million | $3.2 million | | Dividends per share | $0.02 | $0.02 | $0.04 | $0.04 | Note 10. Stock-Based Compensation The 2021 Restricted Stock Award Plan has 0.3 million shares available, with compensation expense of $0.5 million for Q2 2025 and $1.1 million for H1 2025 - The 2021 Restricted Stock Award Plan has 0.3 million shares remaining available for grants at June 30, 2025[37] Stock-Based Compensation Expense | Metric | Three Months Ended June 30, 2025 (in millions) | Three Months Ended June 30, 2024 (in millions) | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Compensation expense | $0.5 | $0.4 | $1.1 | $0.7 | - Unrecognized compensation expense was $0.4 million at June 30, 2025, to be recognized over a weighted average period of 1.2 years[38] Note 11. Long-Term Debt The company has a $550.0 million unsecured credit facility, with $179.8 million outstanding on the term loan at a 6.0% weighted average interest rate - 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) in conjunction with the CFI acquisition[42] - Outstanding borrowings on the Term Facility were $179.8 million at June 30, 2025, with no outstanding borrowings under the Revolving Facility[50] - The weighted average interest rate on outstanding borrowings under the Credit Facilities was 6.0% at June 30, 2025, and the Company was in compliance with all financial covenants[48][50] Note 12. Lease Obligations The company holds operating lease right-of-use assets of $4.5 million and finance lease liabilities of $9.2 million at June 30, 2025 Lease Assets and Liabilities | Lease Category | June 30, 2025 (in thousands) | | :--- | :--- | | Operating Lease Right of Use Assets | $4,479 | | Finance Lease Liabilities (Present Value) | $9,216 | Future Minimum Lease Payments | Future Minimum Lease Payments (in thousands) | Operating | Finance | | :--- | :--- | :--- | | Total minimum lease payments | $4,629 | $9,401 | | Less: future payment amount for interest | $150 | $185 | | Present value of minimum lease payments | $4,479 | $9,216 | Note 13. Income Taxes The effective tax benefit rate increased to 28.5% for Q2 2025 and 25.2% for H1 2025, with gross unrecognized tax benefits decreasing to $4.2 million Effective Tax Benefit Rate | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Effective tax benefit rate | 28.5% | 13.5% | 25.2% | 20.4% | - The increase in the effective tax benefit rate is primarily due to a larger reduction in accrued liabilities from statutes of limitation expiring and favorable provision to actual adjustments[55] Gross Unrecognized Tax Benefits | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :--- | :--- | :--- | | Gross unrecognized tax benefits | $4.2 | $5.2 | Note 14. Commitments and Contingencies The company faces routine litigation and has $37.3 million in estimated purchase commitments for equipment extending into 2026 - The Company is a party to ordinary, routine litigation and administrative proceedings incidental to its business, with potential exposure adequately provided for[59] - Total estimated purchase commitments for tractors and trailer equipment as of June 30, 2025, was $37.3 million, extending into 2026[59] Note 15. Subsequent Events The U.S. enacted the One Big Beautiful Bill Act (OBBBA) in July 2025, with its impact currently being analyzed for financial statements - In July 2025, the U.S. enacted comprehensive tax legislation, the One Big Beautiful Bill Act (OBBBA)[60] - The impact of the OBBBA is being analyzed and will be included in the financial statement period in which it was signed into law[60] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The company faced a challenging freight environment in H1 2025, resulting in decreased revenue and increased net losses, despite cost management efforts - The company posted a 106.4% operating ratio (106.5% non-GAAP adjusted) for the six months ended June 30, 2025, compared to 102.6% (102.5% non-GAAP adjusted) for the same period of 2024[73][75] - Net loss for the six months ended June 30, 2025, was $24.7 million, compared to $18.6 million in the first six months of 2024[73] - Operating revenues decreased by $115.3 million (21.1%) to $429.8 million for the six months ended June 30, 2025, primarily due to fewer drivers and a weak freight environment[73][93] Overview Heartland Express expanded services with the CFI acquisition, now facing a weak freight market, leading to fleet reductions and cost optimization efforts - With the acquisition of CFI in August 2022, the company expanded its services to include cross-border freight to and from Mexico[64] - The freight demand began to soften in H2 2022 and remained weak throughout 2023 and 2024, with material improvements not expected until potentially later in 2025[66] - The company is strategically reducing underperforming lanes of freight and its overall fleet size to better align with current freight demand and reduce operating costs[66] - Driver pay per mile and as a percentage of revenue increased in 2023, 2024, and H1 2025 due to non-productive time payments in a slower freight environment[68] Average Age of Fleet | Metric | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Average age of tractor fleet | 2.6 years | 2.6 years | | Average age of trailer fleet | 7.5 years | 6.9 years | Results of Operations The operating ratio worsened to 106.4% in H1 2025, with net loss increasing significantly due to decreased revenue and higher operating costs - The Heartland Express brand was profitable in H1 2025, but Millis Transfer, Smith Transport, and CFI experienced under-utilized assets, operating cost growth, and driver retention challenges, leading to a lack of profitability[92] Operating Performance (Six Months Ended June 30) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Operating ratio | 106.4% | 102.6% | | Adjusted operating ratio | 106.5% | 102.5% | | Net loss | $(24.7) million | $(18.6) million | Three Months Ended June 30, 2025 Compared With the Three Months Ended June 30, 2024 Q2 2025 net loss increased to $10.9 million, with operating revenue decreasing by 23.4% and the operating ratio worsening to 105.9% Financial Performance (Three Months Ended June 30) | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | Change (in millions) | Percentage Change | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(10.9) | $(3.5) | $(7.4) | -211.4% | | Operating ratio | 105.9% | 99.9% | 6.0 pp | 6.0% | | Operating revenue | $210.4 | $274.8 | $(64.4) | -23.4% | | Salaries, wages, and benefits | $87.2 | $110.1 | $(22.9) | -20.8% | | Fuel expense | $33.7 | $47.0 | $(13.3) | -28.3% | | Insurance and claims expense | $14.2 | $13.0 | $1.2 | 9.2% | | Depreciation and amortization | $41.5 | $46.1 | $(4.6) | -10.0% | | Gain on disposal of property and equipment | $2.8 | $1.1 | $1.7 | 154.5% | | Interest expense | $3.0 | $4.6 | $(1.6) | -34.8% | - Average DOE diesel fuel prices decreased by 7.9% for the three months ended June 30, 2025, compared to 2024[71][83] - The increase in insurance and claims expense is due to claim severity, frequency, and general unfavorable accident claim trends within the trucking industry[86] Six Months Ended June 30, 2025 Compared With the Six Months Ended June 30, 2024 H1 2025 net loss increased to $24.7 million, with operating revenue decreasing by 21.1% and the operating ratio at 106.4% Financial Performance (Six Months Ended June 30) | Metric | H1 2025 (in millions) | H1 2024 (in millions) | Change (in millions) | Percentage Change | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(24.7) | $(18.6) | $(6.1) | -32.8% | | Operating ratio | 106.4% | 102.6% | 3.8 pp | 3.7% | | Operating revenue | $429.8 | $545.1 | $(115.3) | -21.1% | | Salaries, wages, and benefits | $180.4 | $222.8 | $(42.4) | -19.0% | | Fuel expense | $71.6 | $94.3 | $(22.7) | -24.1% | | Insurance and claims expense | $26.1 | $27.6 | $(1.5) | -5.4% | | Depreciation and amortization | $83.1 | $92.6 | $(9.5) | -10.3% | | Gain on disposal of property and equipment | $4.6 | $1.0 | $3.6 | 360.0% | | Interest expense | $6.1 | $9.9 | $(3.8) | -38.4% | - Average DOE diesel fuel prices decreased by 8.1% for the six months ended June 30, 2025, compared to 2024[94][98] - The decrease in insurance and claims expense is due to favorable claim severity and frequency comparing the two periods[101] Liquidity and Capital Resources Liquidity is driven by operating cash flow and equipment sales, with $550.0 million credit facility available, and $35-45 million in net capital expenditures expected for 2025 - Primary sources of liquidity are cash flow from operating activities and proceeds from sales of used equipment[108] - The company has a $550.0 million unsecured credit facility, with $179.8 million outstanding on the Term Facility and $88.3 million available on the Revolving Facility at June 30, 2025[108][115][117] Net Cash Provided by Operating Activities | Metric | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | Change (in millions) | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $46.8 | $71.0 | $(24.2) | - Expected net capital expenditures for 2025 are approximately $35 to $45 million, with $12 to $17 million in gains on disposal of property and equipment[119] - The company intends to continue paying down debt, maintaining regular quarterly dividends, and funding ongoing capital expenditure needs[118] - The stock repurchase program has 5.0 million shares remaining authorized for repurchase as of June 30, 2025, with no expiration date[123] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company faces market risks from interest rate changes and commodity price fluctuations, with specific sensitivities to SOFR, fuel, and tire prices - The Company is exposed to market risk changes in interest rates (on outstanding borrowings) and commodity prices (primarily fuel and rubber)[126] - A 1.0% increase in the SOFR rate would decrease income before income taxes by approximately $1.8 million annually, based on current variable-rate debt[127] - A $1.00 increase in the average price of fuel per gallon, year over year, would decrease income before income taxes by approximately $14.4 million in 2025[128] - A 10% increase in the price of tires would increase tire purchase expense by $2.2 million, decreasing income before income taxes[128] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes in internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of June 30, 2025[130] - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[132] PART II - OTHER INFORMATION This section provides other information, including legal proceedings, risk factors, equity security sales, and exhibits Item 1. Legal Proceedings The company is involved in routine litigation, primarily for personal injury and property damage, with insurance covering liabilities beyond self-insured retentions - The Company is a party to ordinary, routine litigation and administrative proceedings incidental to its business[135] - These proceedings primarily involve claims for personal injury, property damage, cargo, and workers' compensation[135] - The Company maintains insurance to cover liabilities arising from the transportation of freight for amounts in excess of certain self-insured retentions[135] Item 1A. Risk Factors The company's business is subject to various risks and uncertainties, detailed in its 2024 Annual Report on Form 10-K and Q1 2025 Form 10-Q - Risks and uncertainties associated with the business are discussed in the Company's 2024 Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the quarter ended March 31, 2025[136] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In Q2 2025, the company repurchased 1.0 million shares for $8.93 per share, with 5,020,150 shares remaining authorized for repurchase Share Repurchases (May 2025) | Period | Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced plans or programs | Maximum number of shares that may yet be purchased under the plans or programs | | :--- | :--- | :--- | :--- | :--- | | May 1, 2025 - May 31, 2025 | 1,000,000 | $8.93 | 1,000,000 | 5,020,150 | - The share repurchase plan has no expiration date and remains in effect until authorized shares are repurchased or authorization is terminated[138] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported - No defaults upon senior securities were reported[139] Item 4. Mine Safety Disclosures This item is not applicable to the company's operations - This item is not applicable[140] Item 5. Other Information No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement in Q2 2025 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the second quarter of 2025[141] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including certifications, corporate documents, and XBRL data files - Exhibits include certifications (31.1, 31.2, 32.1, 32.2), Articles of Incorporation (3.1), Amended and Restated Bylaws (3.2), and XBRL interactive data files (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[142] Signatures The report was signed on August 7, 2025, by Christopher A. Strain, Vice President of Finance and Chief Financial Officer - The report was signed on August 7, 2025[147] - Signed by Christopher A. Strain, Vice President of Finance and Chief Financial Officer[147]