Revenue and earnings both increased for Heartland Express in the third quarter, and the company is upgrading its fleet and expanding its regional operations.


The North Liberty, Iowa, carrier reports that operating revenues for the quarter increased 15.9% to $169.9 million from $146.6 million in the third quarter of 2007. Net income increased 9.2% to $18.7 million from $17.1 million in the 2007 period. Earnings per share were $0.19 compared to $0.18 for the third quarter of 2007. Operating income for the quarter was favorably impacted approximately $2.4 million or $0.02 per share due to increased gains on disposal of property and equipment.

For the first nine months of the year, operating revenues increased 10.1% to $483.6 from $439.1 million during the same period in 2007. Net income decreased 15.0% to $50.6 million for the nine month period ended September 30, 2008 from $59.5 million in the 2007 period. Earnings per share were $0.53 in 2008 compared to $0.61 in 2007 for the nine month period.

Operating income for the nine months was negatively impacted approximately $7.9 million or $0.05 per share due to increased fuel costs, net of fuel surcharge revenue passed through to customers and approximately $6.7 million or $0.05 per share due to a reduction in gains on sales of property and equipment. Net income for the nine month period was positively impacted approximately $2.9 million by a reduction of income tax expense due to FIN 48 adjustments or $0.03 per share.

The company experienced a 46.5% increase in average fuel costs per gallon in the third quarter of 2008 compared to the third quarter of 2007. The average cost of fuel during the quarter was $4.03 compared to $2.75 in the third quarter of 2007. The company experienced a 50.2% increase in average fuel costs per gallon in the nine month period compared to the same nine month period of 2007. The average cost of fuel during the nine month period ended September 30, 2008 was $3.86 compared to $2.57 in the nine month period of 2007. Heartland continues to stress its fuel cost controlling initiatives. Such initiatives include taking advantage of bulk purchases where it is cost effective to do so when compared to over-the-road purchases, reductions in tractor idle time, and controlling out-of-route non-billable miles. All of the company's terminal locations have fueling capabilities.

For the quarter, Heartland Express posted an operating ratio (operating expenses as a percentage of operating revenues) of 83.2% and an 11% net margin (net income as a percentage of operating revenues) compared to 81.9% and 11.7% for the same period of 2007. The company reported an operating ratio of 85.7% and a 10.5% net margin for the first nine months of 2008, compared to 80.4% and 13.6% for the same period of 2007.

The company ended the third quarter with cash, cash equivalents, short-term and long-term investments of $249 million, a $54.1 million increase from the $194.9 million reported on Dec. 31, 2007. The company's balance sheet continues to be debt-free.

Heartland began a tractor fleet upgrade in the third quarter. The upgrade is expected to include the purchase of approximately 1,600 International ProStar tractors. Delivery of tractors began during the third quarter of 2008 and will continue through 2009. The company took delivery of 197 new tractors in the third quarter of 2008 and expects to take delivery of 378 new tractors in the fourth quarter of 2008. The company also took delivery of 248 new Wabash trailers during the third quarter of 2008 and will purchase an additional 152 new trailers in the fourth quarter of 2008. Management believes the company has adequate liquidity to meet these capital requirements through cash generated from operations and existing cash and cash equivalents.

Heartland also purchased a terminal location in Dallas during the quarter. This terminal will not only strengthen the company's presence in the Southwest but will also complement the company's recent expansion to the western United States. The office and shop facility is situated on approximately 7 acres of land, and an adjacent five acre tract of land was acquired for future expansion. Property renovations are under way and operations are scheduled to begin in the fourth quarter of this year. The opening of this facility will mark the beginning of the company's 10th regional operation.

On October 14, Forbes magazine named Heartland Express one of the "Best 200 Small Companies in America." The company has been recognized 17 times during its 22 years as a public company, and has made the list the past seven consecutive years.