Heartland Express: Staying disciplined

Make no mistake, with more than $570 million worth of business last year, terminals in eleven states, a successful expansion through the Rocky Mountains region underway, and eleven awards from major shipping companies, Heartland Express is bigger and more successful than most trucking companies. But Heartland Express has achieved all of this by staying disciplined.


"We shun debt and over-ambition. And we encourage caution and patience," says president, Mike Gerdin. This approach leaves Heartland with the cash and flexibility it needs to focus on customer - and employee - satisfaction.


Staying Disciplined Works

Since it's formation in 1978, Heartland has avoided the temptation to stretch its employees too far. "We're not a long-haul trucker," says Gerdin. "We don't compete with teams and rail and inter-modal that go back and forth across the country."


Instead, the company focuses on local and regional markets. "Our average length of haul is only 515 miles," says Gerdin. "Traditionally, you think of truckers running from Atlanta to LA. We don't. We run from Atlanta to Birmingham, Birmingham to Jacksonville, and Jacksonville back up to Chattanooga."


Sticking to the short and medium-length markets creates advantages where economics and safety are concerned. For example, the oldest tractor in the Heartland fleet is a 2005 model, and the company replaces its trucks after just 350,000 to 400,000 miles. In an industry where most trailers run for ten-twelve years, Heartland's trailers are only 3.5 years old on average.


Shorter routes mean more regular maintenance checkups. And fewer breakdowns mean better safety and on-time performance. Shorter routes also increase job satisfaction amongst the driver force. And Heartland's regional approach means its drivers are familiar with both routes and customers -and they can stay close to their homes and families.


"Our drivers are rarely more than 500 miles away from their house on a daily basis, so if there's an emergency, they're probably within a day's drive from their house at any given time," Gerdin says.


With high driver satisfaction - and top-rate pay of $0.50 a mile ($0.54 on the East Coast) - Heartland has a driver turnover rate 40 percent lower than the industry average.


Debt-Free Flexibility

Heartland's disciplined strategy is also applied to its financial policies. Take Heartland's approach to technology purchasing: Every year a new wave of gadgets and tracking systems washes through the trucking industry, promising improved efficiency. "Usually, when you're talking about new technologies that are coming out, those things are expensive," Gerdin says. "We'll wait two or three years until the price starts coming down and the quality improves over time. If the technology makes sense, that's when we'll start implementing it."


As result of this cautious approach, Heartland has been almost entirely debt-free since its inception. "We don't have budgets at Heartland Express. If you need it, you buy it. If you buy it, you use it. That's our philosophy," Gerdin says.


Gerdin explains that even after the company went public in 1986, not a single dollar of public money has been used within the company. Instead, Heartland has acquired disciplined carriers like Munson Transportation, A&M Express, and Great Coastal Express.


"With cash on hand and no debt, we can pull the trigger on acquisitions. It gives us the flexibility we need to do things in the marketplace that others may not be able to do," Gerdin says.


Small Approach, Big Success

Heartland is doing nearly $600 million in business and enjoys net profits of 87.2 million annually. The company locks up major awards annually from customers like Sears, FedEx and Wal-Mart, and, in 2006, was named by Forbes magazine as one of the "200 Best Small Companies in America" - for the sixth consecutive year. And Heartland does it all with an 80-82 operating ratio.


"At $100 million they said 'You'll never keep your 80 operating ratio when you get to $200 million'," Gerdin says. "Then they said 'You'll never do it when you get to three, or four, or five hundred million.' We're probably going to be around $600 million this year, and we're still going to have that low 80s operating ratio that we've always had."


In November, Heartland opened its first terminal west of the Rocky Mountains in Phoenix, servicing important routes between Arizona and Los Angeles. Gerdin considers the Phoenix project a success, and hints at plans for further westward expansion.


"We've got a lot of cash in the bank, and there's a huge opportunity out there," he says. "The population of the United States is moving towards the West and those are areas that we plan on growing into in the next 20 years."


Small Challenges, Big Future

Nothing's getting easier about the road truckers travel, and some significant challenges stand in the way of Heartland's growth. Higher prices at the pump are already causing headaches and government environmental restrictions are expected to grow tighter in the coming years.


"If you look at the DOT laws that are coming in and restrictions on driving, they're all trying to make things better," says Gerdin. "But they all come at a cost. Making engines burn cleaner and keeping the air clean is great, and we totally support that, but it costs money."


These challenges have already caused several weaker carriers to fold, and Gerdin expects further consolidation in the industry. But as long as America needs to move freight, well-run, strategically-planned, customer-oriented carriers like Heartland Express will thrive.


"The need for trucks is still going to be there, and the need for carriers who can provide quality services is still going to be there," Gerdin says. "And we plan on being a part of that."