CORRECTION -- Heartland Express, Inc. Reports Record Results for the Second Quarter of 2022

Heartland Express, Inc.

NORTH LIBERTY, Iowa, July 25, 2022 (GLOBE NEWSWIRE) -- In a release issued under the same headline earlier today by Heartland Express, Inc. (Nasdaq: HTLD), please note that in the CONDENSED CONSOLIDATED BALANCE SHEETS table, the amounts for the December 31, 2021 GOODWILL AND OTHER INTANGIBLES, NET and total assets were incorrect. The corrected release follows:

Heartland Express, Inc. (Nasdaq: HTLD) announced today financial results for the three and six months ended June 30, 2022.

Three months ended June 30, 2022:

• Net Income of $76.9 million,

• Basic Earnings per Share of $0.97,

• Operating Income of $105.1 million,

• Operating Ratio of 44.1% and 78.9% Non-GAAP Adjusted Operating Ratio⁽¹⁾,

• Total Assets of $1.1 billion,

• Stockholders' Equity of $817.9 million,

• Operating Revenue of $187.8 million,

• Monetized a terminal property, resulting in a $73.2 million gain ($0.68 basic earnings per share),

• Cash Balance of $171.9 million.
  

Six months ended June 30, 2022:

• Net Income of $93.7 million, and Basic Earnings per Share of $1.19,

• Operating Revenue of $339.1 million,

• Operating Income of $127.5 million,

• Operating Ratio of 62.4% and 80.5% Non-GAAP Adjusted Operating Ratio⁽¹⁾.

Heartland Express Chief Executive Officer Mike Gerdin commented on the quarterly operating results and ongoing initiatives of the Company, "Our operating results for the three and six months ended June 30, 2022 delivered all-time company records in total assets and stockholders' equity. In addition, we completed the acquisition of Smith Transport on May 31, 2022, a well-run company built on a foundation of safe and professional drivers that further expands our family of operating brands. The operations of Smith Transport were immediately accretive to consolidated earnings in June 2022, the first month of operations with Heartland Express. The second quarter was also positively impacted by the sale of a terminal property that generated a $73.2 million gain on sale of the terminal asset. We have an extensive network of terminals and are continually reviewing opportunities for the acquisition or disposition of terminals in response to the real estate market and operational needs. The Millis Transfer success story continued during the 2^nd quarter. Millis Transfer achieved their best quarter of operating results with a sub 80's operating ratio in the second quarter of 2022. Millis Transfer started with an operating ratio in the mid-90’s immediately following our acquisition in 2019 and has improved significantly to have achieved a sub-80's operating ratio in less than three years."

"Freight demand in the second quarter of 2022 softened sequentially to the first quarter of 2022. While the current levels are down compared against the unprecedented levels experienced in the later months of 2021, we continue to have significantly more opportunities to haul freight than we are able to cover with our existing fleet and available drivers. Given what we have experienced and based on feedback from our strong group of customers, we expect volatile freight demand throughout 2022 but at volumes that will continue to exceed our available capacity. Hiring and retention challenges continue to exist for our consolidated company and for the entire industry. We remain committed to ongoing investments in our drivers, to ensure they receive a rewarding level of compensation along with the tools to have a safe and successful career at Heartland Express, Millis Transfer, and Smith Transport.”

Mr. Gerdin continued, "At the end of the quarter we had $171.9 million in cash, and debt and financing lease obligations of $45.7 million. We have historically deployed our cash reserves to capitalize on the best strategic opportunity, whether it be for regular and special dividends, repurchasing shares of our common stock, ongoing capital investment, paying down debt acquired in an acquisition, or for future acquisition opportunities. We continue to explore and analyze the best strategic opportunities available for our company and our stockholders. We are extremely proud of our drivers and employees and what we have accomplished. We believe we continue to be well positioned for the future with a great team, three well known and profitable operating brands, efficient operations, and a strong balance sheet.”

Financial Results

Heartland Express ended the second quarter of 2022 with operating revenues of $187.8 million, compared to $154.1 million in the second quarter of 2021, an increase of $33.7 million. Operating revenues for the quarter included fuel surcharge revenues of $36.4 million, compared to $19.1 million in the same period of 2021. Operating income for the three-month period ended June 30, 2022 was $105.1 million, an increase of $77.7 million (284.1%) as compared to the same period of the prior year. Net income was $76.9 million, compared to $20.7 million in the second quarter of 2021, an increase of 270.8%. Basic earnings per share were $0.97 during the quarter as compared to $0.26 during the same period of 2021. The Company posted an operating ratio of 44.1%, non-GAAP adjusted operating ratio⁽¹⁾ of 78.9%, and a 40.9% net margin (net income as a percentage of operating revenues) in the second quarter of 2022 compared to 82.3%, 79.7%, and 13.5%, respectively, in the second quarter of 2021.

For the six months ended June 30, 2022, Heartland Express delivered operating revenues of $339.1 million, compared to $306.5 million in the same period of 2021, an increase of $32.6 million. Operating revenues for the period included fuel surcharge revenues of $60.3 million, compared to $35.9 million in the same period of 2021. Operating income for the six-month period ended June 30, 2022 was $127.5 million, an increase of $81.8 million (179.3%) as compared to the same period of the prior year. Net income was $93.7 million, compared to $34.5 million in the same period of the prior year, an increase of 171.7%. Basic earnings per share were $1.19 during the six-month period as compared to $0.43 during the same period of 2021. The Company posted an operating ratio of 62.4%, non-GAAP adjusted operating ratio⁽¹⁾ of 80.5%, and a 27.6% net margin (net income as a percentage of operating revenues) for the six months ended June 30, 2022 compared to 85.1%, 83.1%, and 11.2%, respectively, in the same period of the prior year.

Balance Sheet, Liquidity, and Capital Expenditures

As of June 30, 2022, the Company had $171.9 million in cash balances, an increase of $14.1 million (8.9%), since December 31, 2021. Debt and financing lease obligations of $45.7 million at June 30, 2022 were assumed as part of the Smith Transport acquisition. There were no borrowings under the Company's unsecured line of credit at June 30, 2022. The Company had $14.9 million in available borrowing capacity on the line of credit as of June 30, 2022 after consideration of $10.1 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 $1.1 billion and stockholders' equity of $817.9 million, both all-time records.

Net cash flows from operations for the first six months of 2022 were $58.5 million, 17.3% of operating revenue. The primary use of cash was $122.0 million for the acquisition of Smith Transport, partially offset by a cash inflow of $79.2 million for net terminal and revenue equipment activity during the six-month period ended June 30, 2022.

The average age of the Company's consolidated tractor fleet was 1.9 years as of June 30, 2022 compared to 1.8 years on June 30, 2021. The average age of the Company's consolidated trailer fleet was 4.6 years as of June 30, 2022 compared to 3.6 years on June 30, 2021. The Company currently anticipates a total of approximately $65 to $75 million of net capital expenditures for revenue equipment and ongoing terminal projects over the remainder of 2022, but is contingent upon the current market challenges of pricing and availability.
            
The Company continues its commitment to stockholders through the payment of cash dividends. A regular dividend of $0.02 per share was declared during the second quarter of 2022 and paid on July 7, 2022. The Company has now paid cumulative cash dividends of $539.4 million, including four special dividends, ($2.00 in 2007, $1.00 in 2010, $1.00 in 2012, and $0.50 in 2021) over the past seventy-six consecutive quarters since 2003. Our outstanding shares at June 30, 2022 were 78.9 million. A total of 4.7 million shares of common stock have been repurchased for $82.8 million over the past five years. The Company has the ability to repurchase an additional 6.6 million shares under the current authorization which would result in 72.3 million outstanding shares if fully executed.

Other Information

Operating revenue excluding fuel surcharge revenue, adjusted operating income, 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 within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Such statements may be identified by their use of terms or phrases such as “seek,” “expects,” “estimates,” “anticipates,” “projects,” “believes,” “hopes,” “plans,” “goals,” “intends,” “may,” “might,” “likely,” “will,” “should,” “would,” “could,” “potential,” “predict,” “continue,” “strategy,” “future,” “outlook,” and similar terms and phrases. In this press release, the statements relating to freight supply and demand, the market for drivers, our ability to react to changing market conditions, operational improvements, progress toward our goals, deployment of cash reserves, future capital expenditures, future terminal acquisitions and dispositions, and future stock repurchases are forward-looking statements. Such statements are based on management's belief or interpretation of information currently available. These statements and assumptions involve certain risks and uncertainties, and undue reliance should not be placed on such statements. Actual events may differ materially from those set forth in, contemplated by, or underlying such statements as a result of numerous factors, including, without limitation, those specified in the Company's Annual Report on Form 10-K for the year ended December 31, 2021. The Company assumes no obligation to update any forward-looking statements, which speak as of their respective dates.

Contact: Heartland Express, Inc. (319-645-7060) Mike Gerdin, Chief Executive Officer Chris Strain, Chief Financial Officer

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,
			2022				2021				2022				2021
OPERATING REVENUE		$	187,821			$	154,128			$	339,097			$	306,530
OPERATING EXPENSES:
Salaries, wages, and benefits		$	65,869			$	62,931			$	124,506			$	127,713
Rent and purchased transportation			3,127				1,009				3,874				1,973
Fuel			42,046				24,804				71,758				48,961
Operations and maintenance			6,066				5,670				11,146				11,358
Operating taxes and licenses			3,352				3,413				6,562				7,034
Insurance and claims			6,339				4,678				11,905				10,117
Communications and utilities			1,126				967				2,204				2,193
Depreciation and amortization			24,309				25,956				47,620				52,882
Other operating expenses			12,244				5,204				18,042				10,756
Gain on disposal of property and equipment			(81,712	)			(7,855	)			(85,970	)			(12,088	)
			82,766				126,777				211,647				260,899
Operating income			105,055				27,351				127,450				45,631
Interest income			260				175				406				312
Interest expense			(174	)			—				(174	)			—
Income before income taxes			105,141				27,526				127,682				45,943
Federal and state income taxes			28,235				6,784				34,001				11,466
Net income		$	76,906			$	20,742			$	93,681			$	34,477
Earnings per share
Basic		$	0.97			$	0.26			$	1.19			$	0.43
Diluted		$	0.97			$	0.26			$	1.19			$	0.43
Weighted average shares outstanding
Basic			78,934				79,906				78,931				80,028
Diluted			78,959				79,957				78,956				80,081
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			2022				2021
CURRENT ASSETS
Cash and cash equivalents		$	171,879			$	157,742
Trade receivables, net			95,712				52,812
Prepaid tires			8,570				9,168
Other current assets			19,955				9,406
Income taxes receivable			—				4,095
Total current assets			296,116				233,223
PROPERTY AND EQUIPMENT			749,751				710,760
Less accumulated depreciation			238,944				222,845
			510,807				487,915
GOODWILL AND OTHER INTANGIBLES, NET			258,030				190,650
OTHER ASSETS			19,454				16,754
OPERATING LEASE RIGHT OF USE ASSETS			28,796				—
		$	1,113,203			$	928,542
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities		$	28,804			$	20,538
Compensation and benefits			27,778				21,411
Insurance accruals			15,859				15,677
Long-term debt - current portion			2,304				—
Operating lease liabilities - current portion			14,318				—
Finance lease liabilities - current portion			7,544				—
Income taxes payable			13,335				—
Other accruals			16,410				13,968
Total current liabilities			126,352				71,594
LONG-TERM LIABILITIES
Income taxes payable			6,461				5,491
Long-term debt less current portion			8,623				—
Operating lease liabilities less current portion			14,478				—
Finance lease liabilities less current portion			27,199				—
Deferred income taxes, net			77,262				89,971
Insurance accruals less current portion			34,926				34,384
Total long-term liabilities			168,949				129,846
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Capital stock, common, $.01 par value; authorized 395,000 shares; issued 90,689 in 2022 and 2021; outstanding 78,936 and 78,923 in 2022 and 2021, respectively			907				907
Additional paid-in capital			4,191				4,141
Retained earnings			1,014,898				924,375
Treasury stock, at cost; 11,753 and 11,766 in 2022 and 2021, respectively			(202,094	)			(202,321	)
			817,902				727,102
		$	1,113,203			$	928,542

(1)

GAAP to Non-GAAP Reconciliation Schedule:
Operating revenue excluding fuel surcharge revenue, adjusted operating income, and adjusted operating ratio reconciliation (a)
		Three Months Ended June 30,								Six Months Ended June 30,
			2022				2021				2022				2021
		(Unaudited, in thousands)								(Unaudited, in thousands)
Operating revenue		$	187,821			$	154,128			$	339,097			$	306,530
Less: Fuel surcharge revenue			36,377				19,132				60,346				35,916
Operating revenue, excluding fuel surcharge revenue			151,444				134,996				278,751				270,614
Operating expenses			82,766				126,777				211,647				260,899
Less: Fuel surcharge revenue			36,377				19,132				60,346				35,916
Less: Gain on sale of a terminal property			(73,175	)			—				(73,175	)			—
Adjusted operating expenses			119,564				107,645				224,476				224,983
Operating income			105,055				27,351				127,450				45,631
Adjusted operating income			31,880				27,351				54,275				45,631
Operating ratio			44.1	%			82.3	%			62.4	%			85.1	%
Adjusted operating ratio			78.9	%			79.7	%			80.5	%			83.1	%

(a) Operating revenue excluding fuel surcharge revenue, as reported in this press release is based upon operating revenue minus fuel surcharge revenue. Adjusted operating income as reported in this press release is based upon operating revenue excluding fuel surcharge revenue, less operating expenses, net of fuel surcharge revenue and the gain on sale of a terminal property. Adjusted operating ratio as reported in this press release is based upon operating expenses, net of fuel surcharge revenue and the gain on sale of terminal property, as a percentage of operating revenue excluding fuel surcharge revenue. We believe that operating revenue excluding fuel surcharge revenue, adjusted operating income, and adjusted operating ratio are more representative of our underlying operations by excluding the volatility of fuel prices, which we cannot control. Operating revenue excluding fuel surcharge revenue, adjusted operating income, and adjusted operating ratio are not substitutes for operating revenue, operating income, or operating ratio measured in accordance with GAAP. There are limitations to using non-GAAP financial measures. Although we believe that operating revenue excluding fuel surcharge revenue, adjusted operating income, and adjusted operating ratio improve comparability in analyzing our period-to-period performance, they could limit comparability to other companies in our industry if those companies define such measures differently. Because of these limitations, operating revenue excluding fuel surcharge revenue, adjusted operating income, and adjusted operating ratio should not be considered measures of income generated by our business or discretionary cash available to us to invest in the growth of our business. Management compensates for these limitations by primarily relying on GAAP results and using non-GAAP financial measures on a supplemental basis.