Heartland Express(HTLD)2022-11-09 22:00Financial Performance - Operating revenues for the first nine months of 2022 were $613.1 million, a 33.5% increase from $459.1 million in the same period of 2021[94]. - Net income for the first nine months of 2022 was $118.1 million, compared to $58.9 million in the same period of 2021, resulting in a basic net income per share of $1.50[94]. - Operating revenue increased by $154.0 million (33.5%) to $613.1 million for the nine months ended September 30, 2022, compared to $459.1 million in the same period of 2021[118]. - Net income for the nine months ended September 30, 2022, was $118.1 million, representing a 100.4% increase from $58.9 million in the same period of 2021[117]. - Net income for the three months ended September 30, 2022, was $24.4 million, a slight decrease of 0.2% from $24.5 million in the same period of 2021[100]. Operational Efficiency - The operating ratio improved to 73.5% for the nine months ended September 30, 2022, down from 82.8% for the same period in 2021[94]. - Adjusted operating ratio was 83.7% for the three months ended September 30, 2022, compared to 74.5% in the prior year, indicating a decline in operational efficiency[100]. - Operating expenses as a percentage of total operating revenue decreased from 78.2% in 2021 to 87.3% in 2022, reflecting increased costs associated with recent acquisitions[98]. Acquisitions and Growth Strategy - The company completed two strategic acquisitions, Smith Transport and CFI, in 2022 to enhance operational scale and service offerings[85][89]. - The company acquired CFI and Smith Transport in 2022, which contributed to the increase in operating revenues and expenses[99]. - Future growth is expected to depend on economic conditions, customer demand, and the ability to attract and retain experienced drivers[89]. Fuel and Expenses - Average diesel fuel prices increased by 53.5% year-over-year, reaching $5.15 per gallon in Q3 2022 compared to $3.36 in Q3 2021[93]. - Fuel expenses rose by $51.0 million (68.6%) to $125.2 million due to higher average diesel prices (57.0%) and increased fuel consumption[123]. - Fuel expenses rose by $28.1 million (111.4%) to $53.4 million for the three months ended September 30, 2022, driven by higher diesel prices and increased miles driven[106]. - Fuel surcharge revenue increased by $27.9 million (141.9%) to $47.5 million for the three months ended September 30, 2022, due to higher average diesel fuel prices[101]. Labor Costs - Salaries, wages, and benefits increased by $34.7 million (55.3%) to $97.4 million for the three months ended September 30, 2022, primarily due to acquisitions and increased driver wage rates[104]. - Salaries, wages, and benefits increased by $31.5 million (16.5%) to $221.9 million, primarily due to the increase in the number of drivers and higher wage rates[120]. Cash Flow and Assets - Cash flow from operating activities for the first nine months of 2022 was $112.6 million, representing 18.4% of operating revenues[94]. - The company ended Q3 2022 with total assets of $1.7 billion and achieved a return on assets of 11.8%[94]. - Cash flow from operating activities was $112.6 million, representing 18.4% of operating revenues, compared to $95.7 million (20.8% of operating revenues) in the same period of 2021[135]. Tax and Interest Expenses - The effective tax rate decreased to 25.9% for the three months ended September 30, 2022, down from 26.9% in the prior year, due to a reduction in tax accruals for uncertain tax positions[115]. - The effective tax rate increased to 26.5% for the nine months ended September 30, 2022, compared to 25.8% in the same period of 2021[129]. - Interest expense increased by $2.3 million in the three months ended September 30, 2022, resulting from financing associated with the Smith Transport acquisition[114]. - Interest expense increased by $2.5 million due to financing assumed through the Smith Transport acquisition and the credit facility related to the CFI acquisition[128]. Commodity Price Risk - Commodity price risk is primarily related to fuel and rubber purchases[144]. - A $1.00 increase in average fuel price per gallon would decrease income before income taxes by approximately $14.0 million in 2022[144]. - A 10% increase in tire prices would increase tire purchase expenses by $2.9 million, resulting in a corresponding decrease in income before income taxes[144]. - Fuel surcharge agreements help limit exposure to commodity price risk but do not fully offset fuel cost increases[144]. - The company cannot pass through 100% of tire price increases due to timing and severity of increases[144]. - The company has historically minimized tire price increases through bulk purchases[144]. Equipment and Commitments - The average age of the tractor fleet increased to 2.1 years as of September 30, 2022, compared to 1.7 years a year earlier, influenced by recent acquisitions[93]. - Total estimated purchase commitments for tractors and trailer equipment as of September 30, 2022, were $68.5 million, extending through the remainder of 2022 and into 2023[134]. - 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 its acquisitions[130]. Gains and Disposals - Gains on the disposal of property and equipment increased by $65.5 million to $92.8 million, primarily due to a $73.2 million gain on the sale of a terminal property[127].