Dive Brief:
- The age of Heartland Express trailers increased from 3.4 years at the end of 2021 to 6.3 years at the end of 2022, the company recently reported in its annual financial results.
- The change resulted through company’s 2022 acquisition of Smith Transport and Contract Freighters assets from TFI International, but it’s looking to replace the aging equipment to bring down long-term maintenance costs.
- “We anticipate continued disposition of older tractors and trailers in the Smith Transport and CFI fleets throughout 2023 and beyond,” Heartland said.
Dive Insight:
Heartland Express moved to position itself as a top-tier TL carrier with its CFI acquisition, thereby putting pressure on its replacement schedule and the company’s finances.
The acquisition meant Heartland ended the year with long-term debt — only the fifth time since its founding in 1978. Debt and financing lease obligations were $413 million as of Dec. 31, though it’s already moved to rid the borrowing from its balance sheet.
“We have already paid down $81.5 million during the back half of 2022 following these acquisitions, and we have plans to aggressively pay down the acquisition-related debt and return to a debt-free balance sheet in the years ahead,” Heartland CEO Mike Gerdin said in the earnings announcement.
The industry showed pent-up demand last year for trailers, particularly when it hit a monthly record of nearly 57,000 units in December 2022. Backlogs are at their highest level in nearly two years, FTR Freight & Analytics noted.
“The surge in orders is unlikely to be sustained going forward, and we have already seen strong moderation in Class 8 orders,” FTR CEO and Chief Intelligence Officer Jonathan Starks said in a monthly report.
Other carriers are also seeing their equipment age, further pushing demand on OEMs to deliver.
Heartland previously noted that the larger deal with TFI International would add approximately 8,000 trailers that were seven years old on average. Prior to that, the company had approximately 9,800 trailers with an average age of 4.6 years.
“While we are excited by the recent and significant growth in our organization, we are also mindful that in the periods immediately following acquisitions we face additional operating headwinds,” Gerdin said in the earnings announcement. “We expect continued opportunities to further improve our consolidated operations, and we believe Heartland Express is still well positioned for the years ahead.”
