Gains from equipment sales allowed truckload carrier Heartland Express to return to profitability in the second quarter.
Heartland (NASDAQ: HTLD) reported net income of $10.6 million, or 14 cents per share, for the period. That compared to a net loss of 14 cents per share in the year-ago quarter. However, the turnaround was entirely tied to a $22-million year-over-year increase on gains from equipment sales (a 22-cent-per-share tailwind at a normalized tax rate).
The North Liberty, Iowa-based company culled its fleet size by strategically disposing underutilized equipment.
“We expect to continue to dispose of excess trailers within our fleet as used equipment market conditions improve,” the company said in a news release.
Revenue totaled $184 million in the quarter, a 13% y/y decline. Excluding fuel surcharges, revenue was down 18% y/y.
Heartland does not host a quarterly call, nor does it provide operating metrics for utilization and pricing.
The company reported an 88.3% adjusted operating ratio (inverse of operating margin). However, the OR was closer to 103% without the outsized gains.
“The improved financial results delivered reflect stronger freight volumes and improved customer pricing resulting from ongoing industry capacity reductions along with reduced operating costs and strategic disposals of under-utilized assets,” said CEO Mike Gerdin.
Operating cash flows totaled $36 million in the first half of the year. Heartland reduced net debt by $33 million in the period to $73 million. It ended the quarter with $89 million available on an untapped revolving credit facility and was in compliance with financial covenants.
An average tractor age of 2.3 years was down from 2.6 years in the year-ago quarter.
Shares of HTLD were down 1.6% at 12:42 p.m. EDT on Friday compared to the S&P 500, which was up 0.4%.
Why it matters? The story shows how impactful gains on asset sales can be on a truckload carrier’s financial results.
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