Post Gordon ~ Thoughts, Commentary & Reflections

News from HTLD Including Ongoing Difficulty Hiring Drivers

On May 12, 2014, HTLD filed Form 10-Q, which is how the SEC requires it file quarterly reports. This report covers the first quarter of 2014, ending March 31, 2014.

On either side of the 10-Q, HTLD filed new 8-K reports, which is where 'significant' changes are reported.

Tidbits:

Gerdin Pay Raise to $500,000
Gerdin's pay was increased from $300,000 annually to $500,000. The $200,000 increase is about $100 per seat of GTI's added 2,000 seats. That's chump change to Mike Gerdin. It would help you or me out a lot--oh, well. Surprised that his pay is that low, really.

Board of Directors Re-Elected
Larry Gordon, the newest director, had less votes 'withheld' than Gerdin. Withheld votes are one way to voice displeasure. No, there's no stockholder insurrection coming any time soon.

Purchase of Lathrop Terminal
HTLD now owns the Lathrop terminal in exchange for a payment of $2.8 million. Hell, I thought just the concrete out there was that much. More money to the Gordons...

Earnings Per Share Dropped from $ .23 Per Share to $ .16
The challenge to absorb Gordon has had a BIG impact on earnings per share. Drop of 7 cents per share, down to 16 cents from 23 cents same quarter last year before acquisition. Um-m-m, haircut.

Used Truck Market Stabilized
In 2009, HTLD went to 150% declining balance depreciation of tractors to offset concerns about 2010 engines and the market for tractors with those engines. HTLD's moving back to 125% declining balance depreciation as concerns about used truck sales have eased.

Competition for Drivers
Quote: "Competition for drivers, which is always intense, has escalated due to general improvements in the demand for freight services at the same time the number of qualified drivers in the industry is decreasing. The Company has experienced increasing difficulties attracting and retaining qualified drivers. The Company continues to explore new ideas and ways to attract and retain qualified drivers. The Company hires the majority of its drivers with previous over the road experience (majority of driver positions hired require six-nine months of over-the-road experience) with safe driving records. In order to attract and retain experienced drivers who understand the importance of customer service, the Company has sought to solidify its position as an industry leader in driver compensation in the Company's operating markets. The Company offers the top or near the top compensation pay per mile to drivers in the markets in which the Company operates as well as safety pay incentives." (Bold emphasis added.)

Fuel Costs and Strategies to Reduce Usage
Quote: "Containment of fuel cost continues to be one of management's top priorities as fuel expenses is the next highest cost to the Company after salaries, wages and benefits to our drivers and other employees at approximately 30% of gross revenues. The Company continues to be challenged by increased fuel prices and anticipates that fuel prices will remain at or above current levels. Average diesel fuel prices have increased each year over the past year during the periods 2009 through 2012 and were relatively flat in 2014 compared to 2013 . Average Department of Energy ("DOE") diesel prices for 2009 through 2013 have been, $2.47 , $3.00 , $3.85 , $3.97 , and $3.92 , respectively. The average price so far in 2014 has been $3.96 with the latest price being $3.97 . Although the price of fuel has been relatively stable for the past two years, the Company continues to manage and implement fuel initiative strategies to effectively manage fuel costs. These initiatives include strategic fueling of our trucks whether it be terminal fuel or over-the-road fuel, reduction of tractor idle time, controlling out-of-route miles, controlling empty miles, trailer skirting, and increased fuel economy through the purchase of newer, more fuel efficient tractors. The Company is not able to pass through all fuel price increases through fuel surcharge agreements with customers due to tractor idling time, along with empty and out-of-route miles. The Company continues to focus on fuel surcharge pricing, truck idling hours, tractor specifications and fuel purchasing decisions in an effort to lessen the impact of higher fuel costs. At March 31, 2014 , 100% of the Company's tractor fleet is equipped with idle management controls. At March 31, 2014 , the Company’s tractor fleet had an average age of 2.6 years and the Company's trailer fleet had an average age of 4.8 years." (Bold emphasis added.)

Higher Operating Ratio (Lower Is Better)
Quote: "The Company posted an 90.8% operating ratio (operating expenses as a percentage of operating revenues) for the three months ended March 31, 2014 compared to 77.5% for the same period of 2013 and a 6.3% net margin (net income as a percentage of operating revenues) for the first quarter of 2014 compared to 14.7% in same period of 2013 . Fleet utilization and operating results for the quarter were negatively impacted by severe winter weather across the eastern half of the U.S." (Bold emphasis added.)

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Just thought you might want to know... The increase in operating ratio to 90.8% from 77.5% before acquisition is a biggee along with reduction in net margin down to 6.3% from 14.7%--more than half, a huge reduction--as HTLD struggles to digest Gordon. Earnings per share also down almost a third, 16 cents from 23 cents last year is a gut punch.

Gerdin's 60% pay increase (like increasing you from 30 cents a mile to 50 cents a mile) of $200,000 is a symbolic statement to stockholders by the Board of Directors that despite short term operating challenges, the Board remains fully behind Gerdin.

In truck driver lingo the investors are being told to take the haircut and just suck it up. Although the stock has been moving slightly down and sideways for a couple weeks, it is still way, way up from November 11, 2013, date of acquisition announcement.

 

Comparing Covenant's (CVTI) 2014 Quarterly Report with HTLD's

I thought it might be interesting to compare another listed company's 2014 quarterly report with HTLD's. HTLD's, by the way, is available here: http://secfilings.nasdaq.com/filing...ESS+INC&FormType=10-Q&RcvdDate=5/12/2014&pdf=

This morning, before some shovel work I'm doing to extend the grassy pull-off apron beyond the pavement so that folks who inevitably break down on the hill will have a little more room over from the fog line, I was reading some of NoCoCraig's Farm2Fleet thread (http://www.thetruckersreport.com/tr...-trucking-company-here/219051-farm2fleet.html). I like him. No braggadocio. He and his wife bought a 2009 Volvo 780; they get their own loads and will sit rather than take cheap freight.

Good for them, I say. I'm rooting for their success.

Farm2Fleet has a relationship with Covenant (CVTI) so after looking over the sparse Farm2Fleet website, I looked up CVTI and at the same time remembered double yellow's excellent: http://www.thetruckersreport.com/tr...956-doubleyellows-covenant-thrival-guide.html

When I saw that Southern Refrigerated Transport's a division of Covenant, I remembered this thread: http://www.thetruckersreport.com/tr...refrigerated-transport-driver-dies-truck.html Then I was hooked. I had to read over CVTI's 10-K and mentally compare it with HTLD (Heartland Express). That SRT thread, by the way, was about SRT's failure to assist the family to retrieve the body of a driver who died on the road in an SRT truck.

It's warm out today, so after working the shovel on the edge of the highway for a while I came in to cool off some. I thought about how listed companies have to be truthful and correct as a matter of law on their SEC reports, unlike recruiters and cheerleaders who can say most anything they like, true or not, like:

When it's not true. So here we go...


Written Monday, Memorial Day, May 26, 2014 at home, six miles north of Spencer, Indiana. The girls (3 golden comet chickens) laid 3 brown eggs yesterday, 1 so far today. They like fresh grass clippings--including weeds and clover. So far my two dogs, Tika and Freddy, haven't managed to lay an egg yet. I don't think they're trying hard enough. All rights reserved.

 

CVTI vs HTLD First Quarter Plus Some ODFL (Old Dominion Freight Lines) to Boot

Who's Profitable, Who's Not
A couple things struck me right away. First, while HTLD remains profitable as it adjusts to absorbing 2,000 GTI trucks, it's running $5 million south of where it was last year without Gordon. CVTI runs in the negative and has cut almost 7% of its power units since last year. ODFL, on the other hand, increased revenue over 15% and increased net income about $5 million.

So HTLD and ODFL are profitable; CVTI is not.

Driver Retention and Recruitment
Both HTLD and CVTI warn their stockholders and investors. CVTI says,

(Hey!! Make a note of that, will you? Modifications to reduce HOS actually INCREASE driver pay... and you've got some one-dimensional OTR drivers kicking and screaming against a better life! Keep in mind, this is what CVTI says--HTLD said about the same--when they have to be truthful.)

Since ODFL already pays their drivers really well, there's no need to warn potential investors and stockholders. Doesn't have to warn 'em, so doesn't.

Well, sure. ODFL's driver turn over is probably less than 7% and both CVTI and HTLD probably have close to 99% turn over of new drivers every six months and 100% of all drivers every year, despite HTLD's claim that both HTLD and Gordon have a slew of multi-year drivers, which no doubt they do.

What's that mean? For one thing, it probably means there's a sharp cost to the OTR industry practice of churning drivers...

Who woulda thunk, eh?

To be continued...


Written Memorial Day, Monday, May 26, 2014 in town, Spencer, Indiana. All rights reserved.

 

CVTI vs HTLD First Quarter Plus Some ODFL (Old Dominion Freight Lines) to Boot

How about debt?? Where do these three stand concerning outstanding debt??

Answer: All three have debt, but it's not the same.

HTLD $62 Million
HTLD (Heartland) has traditionally been debt-free until it used a five-year, $250 million revolver loan from Wells Fargo to acquire GTI, which had $150 million in debt:

The balance on the revolver at the end of the quarter was $62 million and Gerdin claimed he would pay it off within a year or so. It's been six months and he's on track to pay it off.

CVTI $168 Million
Is it a surprise that CVTI's debt structure is complicated and murky? It has a $95 million revolver with JPMorgan Chase where the amount available depends on varying percentages of 1) receivables, 2) liquidation value of revenue equipment and 3) 'eligible real estate'.

When you need a lot of money to operate on, AND you're losing a lot of money, the bank wants your first born. AND you pay more. Here's an sample of CVTI-speak. Note that CVTI claims available borrowing capacity of $29.9 million:

Did you get that?? No?? Neither did I!!


ODFL $372.1 Million Long Term and $60 Million Letters of Credit
ODFL uses pretty straight forward language to describe it's debt. Two unsecured notes, $180.7 million and $191.4 million maturing from 2015 to 2021, an unused $200 million revolver with Wells Fargo, and $60 million in letters of credit leaving $140 million available (unused). Apparently the letters of credit reduce the available in the $200 million revolver:

In summary:
HTLD has $62 million used of a $250 million revolver, no other long term debt.
CVTI has available borrowing capacity of $29 million and $168 million long term debt.
ODFL has $140 million available on a $200 million revolver and $372.1 million long term debt maturing through 2021.

Unprofitable CVTI had $161 million first quarter 2014 revenue;
Profitable HTLD had $224.5 million same period revenue;
Profitable ODFL had $620.3 million same period revenue.

Looks bleak for CVTI, good for HTLD and ODFL.

ODFL, with $620.3 million revenue in the first quarter, absolutely dwarfs HTLD and CVTI.

Precautionary note: Trucking companies typically report operating revenue as a single number and may not list freight revenue separately. CVTI, to their credit, does separate freight revenue ($126.2 million) from fuel surcharge ($34.7 million), for example. With that caveat...

To be continued...


Written Tuesday, May 27, 2014. All rights reserved.

 

Puts You to Sleep, Eh?

Yeah, I know. Here's the point: These three comparisons should show you already that while going down the road in their almost identical, shiny trucks you would have no way of knowing that HTLD and ODFL are profitable, but unequal, power houses while CVTI is an almost puny sick sister.

ODFL is Godzilla-like, a behemoth; HTLD is rather diminutive in comparison to ODFL, yet still somewhat of a giant in comparison to CVTI.

CVTI is just pretty lame. (In my opinion. More to come.)

You SHOULD want to know something about the financial stability or lack of it of the company you MIGHT want to work for...

Enough said.

For now.

Later!!

 

CVTI vs HTLD First Quarter 2014 Plus Some ODFL to Boot

Let's Compare Revenue to Debt
CVTI's first quarter 2014 revenue ($161 million) is exceeded by long term debt ($168 million) by $7 million.

HTLD's revenue ($224.5 million) for the first quarter exceeds its long term debt ($62 million) by 3.6 times, $162.5 million. That is, HTLD's excess over debt in the first quarter more than equals CVTI's $161 million revenue!

ODFL's first quarter revenue ($620.3 million) exceeds its long term debt ($372.1 million plus $60 million letters of credit) by $188.2 million. The excess of ODFL's first quarter revenue over its long term debt ($188.2 mil) is $20 mil more than CVTI's operating revenue in the same quarter as well!!

Um-m-m. Do you see a pattern here?

Did I mention that ODFL is profitable, up $5 million in the first quarter and gaining? HTLD is profitable but down $5 million in the first quarter while trying to absorb Gordon. Mere coincidence, but I like it.


Written Wednesday, May 28, 2014 at home, six miles north of Spencer, Indiana. All rights reserved.

 

Fort Wayne~Janesville~Prairie du Chien

"Not going to happen," I said.

"How about $650, we'd really like to get this covered," countered the Broker's Assistant, raising his first offer of $600.

I declined. He whined. Told him he was bringing me to tears.

"How about $675?" Broker's Assistant asked.

"Keep reaching," I said.

"$700, all I can go is $700, we're losing on this but we'd like to get it covered. Can you get there today?"

"I can get there today but let me get off and look this over, okay?" He says, okay.

I called Dispatcher Paula who had no idea (nor did my boss), what I was doing. Was pretty sure our 'regular' broker wouldn't have a load for us.

"Are we interested in $700 from Fort Wayne to Janesville? It's two hours and change from there to Prairie du Chien... "

After some discussion, she decided we were. I called Broker's Assistant back.

"We're interested but you'll have to sweeten it," I told him.

"$701," he replied.

"Right direction, keep ratcheting up and I'll tell you when to stop," I said.

"I can't, I can't go any higher. We're losing money. I'll let you talk to the broker," he whines.

The broker comes on sounding aggressively like I'm taking food off his kids plate. Says load's only paying him $650 so he's losing money but he'd like to get it covered today, needed it picked up yesterday. Can I get there right away?

"Not my problem," I say. "You'll just have to lose a little more of your ... "

"What do you need to take the load?" he demands, same as his assistant kept asking.

I don't want to lose it so I say $750 which is really too cheap if it were my truck.

"I'll meet you half way," the Broker says. "$725."


Written May 28, 2014 from the Wal-Mart SuperCenter in Janesville, WI. All rights reserved.

 

Janesville, Wisconsin

Twenty per cent of the historic buildings in the entire State of Wisconsin can be found here in Janesville, Wisconsin, a city of over 60,000 in the southeastern corner of the state. Abraham Lincoln slept two nights in one of them. See: http://en.wikipedia.org/wiki/Janesville,_Wisconsin

By surface streets my odometer moved up only two miles to get here from Wal-Mart and still two hours until Receiving opens up. After we're done I've got a 2-1/2 hour drive to Prairie du Chien to make my important pick up.

Dare I risk say, it shouldn't be a problem? Um-m-m, better not. This is trucking, after all. I'm planning on swinging through the shop in Illinois on the way back.

It was pretty much the usual slog through Chicago, right through the downtown local loop (I-94) with a pretty close-up view of the skyline. A toll-clerk gave me the 'heads up' on how to get around the next toll, $8 and I was getting tired of dishing out first, $29.60 on my debit and then cash $4, then again $4... got so, so lost in the weeds with 11-ton limits and barely big enough pavement for two pickups to pass each other going by that I was ALMOST glad to pay the last $5 cash.

The load came off Trulos, a free load board and the broker claims to be the largest, independent freight brokerage in the US with 18,000 loads a week...


Written Thursday, May 29, 2014 awaiting delivery in Janesville, Wisconsin. All rights reserved.

 

Daily Triage

I think about all the myriad things you DON'T have to think about once you climb up into your two-door, two-seat closet-with-small-bed-behind-seat that stands on 22.5 inch wheels and rubber!!

My life at home is a daily triage of 'what should I work on next' that never ends. In fact, whatever part of the property I'm on, there's an open project so if what I'm doing takes me out back, I work on something there for a while. Ditto the garage or anywhere else. Just never ends.

When I called Yard Boss about the load I'd just had us book, I wanted to know if he was in a good mood. "Feeling like slapping anyone upside the head this morning?" When I first started I found a load from Rockville, IN to here, right here, Janesville, that paid $750. He didn't want me to mention it.

"Let them do their job, Vic. Otherwise they'll push that over on me, too. This was THEIR run. I still don't know why they passed it over to me."

I did as told until yesterday. Yard Boss has a typical glumness that goes with trucking but I really feel he's got my back, well probably until I screw something up. Told him what I'd done and he wasn't at all upset. A good thing.

My next problem was whether my car would start. I tend to buy things in two's, three's or more. So there's a '97 Mercury Sable on my car hauler that needs a new starter. The problem with buying same this or that is the same whatchamacallits go out on all of them--about the same time, too.

Now this one's barely cranking. (Also a '97 Mercury Sable. Had six Mazda MPV's over time, too.) Jumped the car at the yard with the tractor to get home Tuesday after a run up to the Warehouse (not our warehouse, but doesn't matter). Yesterday, even with two fresh batteries hooked together with jumper cables it wouldn't start. And I had this run to do. Right away...

Earlier in the morning (triage) I paid a salvage yard $40 by debit card over the phone to hold a starter for me, guaranteed good. Was very, very tempted to run over there in the F350 and pick it up before starting this Fort Wayne~Janesville, thought better not.

All sorts of things didn't get moved over from the car into the F350 that normally go with me. But I got the chickens fresh water, the dogs enough $50-for-40-pound-bag Blue-brand pebbles in their feeder and they have an automatic waterer that's hose-fed from a potable water hose. Forgot more chicken pellets for the girls. Well, there's plenty on the ground including the bowl. They'll be hungry when I get back.

Once in the truck REAL LIFE fades away and recedes.

On the road again. Life turns simple, yet sometimes stressful. Again.


Written Thursday, May 29, 2014, still early here in Janesville, WI. All rights reserved.