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October 27, 2017 2:45 PM, EDT

Heartland Express Profits Drop 37% After Added Expenses From IDC Acquisition

Revenue Grows 22%, But Carrier Incurs $8 Million Extra in Other Expenses
TT File Photo

Heartland Express Inc. announced weaker-than-expected earnings in the third quarter on Oct. 27 as higher expenses related to Interstate Distributor Co. dragged results down despite higher revenue.

The North Liberty, Iowa carrier generated $7.9 million in profits or 9 cents per share, missing the Bloomberg News consensus analyst $14-million or 16-cent forecast.

Heartland ranks No. 52 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.

Last year, Heartland’s profits were $12.5 million or 15 cents.

On the other hand, revenue jumped 22% to $182.1 million, although it too fell short of the $202 million forecast.

The difference between the forecast and the results were directly tied to the “other” operating expenses due to the IDC acquisition on July 6, jumping from $824,000 a year ago to $8 million in the third quarter. Excluding those expenses, Heartland would’ve beat the forecasts.

“Immediately after the acquisition we began integrating IDC operations and operating facilities into the legacy Heartland footprint. By the end of the quarter we had completed a full system integration with IDC that included operations, maintenance and back office systems,” Heartland CEO Michael Gerdin said. “This was a massive undertaking in one quarter and we were focused with a targeted approach due to IDC’s year-to-date 2017 operating ratio of 105% prior to the acquisition. We have been diligently working on eliminating unnecessary costs post-acquisition and will continue to evaluate all aspects of the legacy IDC business to return them to profitability at some point in the fourth quarter.”

He also acknowledged the hurricanes in Texas and Florida affected their operations, although no dollar figure was provided.

Heartland’s operating ratio, a metric that Gerdin has publicly stated is the one of the most important on the income statement, deteriorated 620 basis points to 92.9% due to IDC’s 105% ratio.

“We look forward to expected operational improvements as we navigate the months ahead and progress towards our goal of returning to an operating ratio in the low-80’s,” Gerdin said.