SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarter ended March 31, 2000 Commission File No. 0-15087
HEARTLAND EXPRESS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Nevada 93-0926999
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
2777 Heartland Drive, Coralville, Iowa 52241
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code (319) 545-2728
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
At March 31, 2000, there were 25,366,582 shares of the Company's $.01 par value
common stock outstanding.
PART I
FINANCIAL INFORMATION
Page
Number
Item 1. Financial statements
Consolidated balance sheets
March 31, 2000 (unaudited) and
December 31, 1999 2 - 3
Consolidated statements of income
(unaudited) for the three month
periods ended March 31, 2000 and 1999 4
Consolidated statements of cash flows
(unaudited) for the three months ended
March 31, 2000 and 1999 5
Notes to financial statements 6
Item 2. Management's discussion and analysis of
financial condition and results of
operations 7 - 10
PART II
OTHER INFORMATION
Item 1. Legal proceedings 11
Item 2. Changes in securities 11
Item 3. Defaults upon senior securities 11
Item 4. Submission of matters to a vote of 11
security holders
Item 5. Other information 11
Item 6. Exhibits and reports of Form 8-K 11 - 13
1
HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
2000 1999
------------ ------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents .................. $118,134,122 $126,211,056
Trade receivables, less allowance:
2000 and 1999 $402,812 ..................... 25,187,890 23,478,708
Prepaid tires .............................. 2,051,802 1,655,018
Investments ................................ 6,626,524 500,000
Deferred income taxes ...................... 16,281,000 15,979,000
Other current assets ....................... 2,293,160 359,472
------------ ------------
Total current assets ................ $170,574,498 $168,183,254
------------ ------------
PROPERTY AND EQUIPMENT
Land and land improvements ................. $ 3,237,875 $ 3,701,400
Buildings .................................. 8,532,621 9,740,487
Furniture and fixtures ..................... 2,604,399 2,611,166
Shop and service equipment ................. 1,463,761 1,563,485
Revenue equipment .......................... 119,735,216 121,822,991
------------ ------------
$135,573,872 $139,439,529
Less accumulated depreciation & amortization 64,236,816 66,533,949
------------ ------------
Property and equipment, net ................ $ 71,337,056 $ 72,905,580
------------ ------------
OTHER ASSETS ..................................... $ 5,192,689 $ 5,404,707
------------ ------------
$247,104,243 $246,493,541
============ ============
2
HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
MARCH 31, DECEMBER 31,
2000 1999
------------ ------------
(Unaudited)
CURRENT LIABILITIES
Accounts payable & accrued liabilities ..... $ 10,274,092 $ 10,595,662
Compensation & benefits .................... 4,584,438 4,225,023
Income taxes payable ....................... 9,682,637 4,974,341
Insurance accruals ......................... 35,114,514 34,285,500
Other ...................................... 2,202,594 2,427,464
------------ ------------
Total current liabilities ........... $ 61,858,275 $ 56,507,990
------------ ------------
DEFERRED INCOME TAXES ............................ 15,274,000 15,146,000
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Capital Stock:
Preferred, $.01 par value; authorized
5,000,000 share; none issued ........ $ -- $ --
Common, $.01 par value; authorized
395,000,000 shares; issued and outstanding
25,366,582 in 2000 and
26,460,251 in 1999 .................. 253,666 264,603
Additional paid in capital ................. 6,608,170 6,608,170
Retained earnings .......................... 163,110,132 167,966,778
------------ ------------
$169,971,968 $174,839,551
------------ ------------
$247,104,243 $246,493,541
============ ============
3
HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three months ended
March 31,
2000 1999
------------ ------------
OPERATING REVENUE ................................ $ 67,189,786 $ 63,097,105
------------ ------------
OPERATING EXPENSES:
Salaries, wages, benefits .................. $ 16,578,699 $ 14,114,982
Rent and purchased transportation .......... 20,640,115 22,765,645
Operations and maintenance ................. 9,624,698 6,585,507
Taxes and licenses ......................... 1,305,330 1,371,059
Insurance and claims ....................... 1,976,441 1,773,251
Communications and utilities ............... 704,214 651,908
Depreciation ............................... 3,867,218 4,068,078
Other operating expenses ................... 1,457,438 1,608,101
(Gain) on sale of fixed assets ............. (1,493,478) --
------------ ------------
$ 54,660,675 $ 52,938,531
------------ ------------
Operating income .................... $ 12,529,111 $ 10,158,574
Interest income ............................ 1,322,885 1,479,028
------------ ------------
Income before income taxes ................. $ 13,851,996 $ 11,637,602
Federal and state income taxes (Note 2) .... 4,709,679 4,073,277
------------ ------------
Net income ................................. $ 9,142,317 $ 7,564,325
============ ============
Earnings per common share:
Basic earnings per share ................ $ 0.35 $ 0.25
============ ============
Basic weighted average shares outstanding .. 26,063,646 30,000,000
============ ============
4
HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW
(Unaudited)
Three months ended
March 31,
2000 1999
------------- -------------
OPERATING ACTIVITIES
Net income ............................... $ 9,142,317 $ 7,564,325
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization .......... 4,141,329 4,342,188
Deferred income taxes .................. (174,000) 147,000
Gain on sale of fixed assets ........... (1,493,478) --
Changes in certain working capital items:
Trade receivables .................... (1,709,182) (950,818)
Other current assets ................. (1,933,688) (2,066,077)
Prepaid expenses ..................... (355,984) (318,057)
Accounts payable and accrued expenses 1,890,567 840,263
Accrued income taxes ................. 4,708,296 3,721,205
------------- -------------
Net cash provided by operating activities $ 14,216,177 $ 13,280,029
------------- -------------
INVESTING ACTIVITIES
Proceeds from sale of prop. and equipment 2,121,520 --
Purchase of property and equipment ....... (4,295,696) (1,585,790)
Purchase of municpal bonds ............... (6,126,524) --
Other .................................... 17,489 (37,095)
------------- -------------
Net cash (used) in investment activities . $ (8,283,211) $ (1,622,885)
------------- -------------
FINANCING ACTIVITIES
Repurchase of common stock ............... $ (14,009,900) $ --
------------- -------------
Net increase (decrease) in cash and
cash equivalents ......................... $ (8,076,934) $ 11,657,144
CASH AND CASH EQUIVALENTS
Beginning of year ........................ 126,211,056 143,434,594
------------- -------------
End of quarter ........................... $ 118,134,122 $ 155,091,738
============= =============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes ...................... $ 175,383 $ 205,072
Noncash investing activities:
Book value of revenue
equipment traded .................. $ 2,138,161 $ 650,538
5
HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring and certain nonrecurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three month
period ended March 31, 2000 are not necessarily indicative of the results that
may be expected for the year ended December 31, 2000. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Heartland Express, Inc. and Subsidiaries ("Heartland" or the "Company")
annual report on Form 10-K for the year ended December 31, 1999.
Note 2. Income Taxes
Income taxes for the three month period ended March 31, 2000 are based on
the Company's estimated effective tax rates. The rate for the three months ended
March 31, 2000 and 1999 was 34% and 35%, respectfully.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following is a discussion of the results of operations of the quarter
ended March 31, 2000 compared with the same period in 1999, and the changes in
financial condition through the first quarter of 2000.
Results of Operations:
Operating revenue increased $4.1 million (6.5%), to $67.2 million in the
first quarter of 1999 from $63.1 million in the first quarter of 1999. The
revenue increase was primarily attributable to increased freight rates and fuel
surcharges resulting from high diesel prices.
Salaries, wages, and benefits increased $2.5 million (17.5%), to $16.6
million in the first quarter of 2000 from $14.1 million in the first quarter of
1999. As a percentage of revenue, salaries, wages and benefits increased to
24.7% in 2000 from 22.4% in 1999. These increases were a result of increased
reliance on employee drivers and a corresponding decrease in miles driven by
independent contractors. In addition, the Company increased employee driver pay
in November, 1999 and March, 2000. The increase in employee driver miles was
attributable to internal growth in the company tractor fleet. During the first
quarter of 2000, employee drivers accounted for 55% and independent contractors
45% of the total fleet miles, compared with 48% and 52%, respectively, in the
first quarter of 1999.
Rent and purchased transportation decreased $2.1 million (9.3%), to $20.6
million in the first quarter of 2000 from $22.8 million in the first quarter of
1999. As a percentage of revenue, rent and purchased transportation decreased to
30.7% in the first quarter of 2000 from 36.1% in the first quarter of 1999. This
reflects the Company's decreased reliance upon independent contractors. In
addition, an increased industry demand for independent contractors has negated
the Company's previous competitive advantage.
6
Operations and maintenance increased $3.0 million (46.1%) to $9.6 million
in the first quarter of 2000 from $6.6 million in the first quarter of 1999. As
a percentage of revenue, operations and maintenance increased to 14.3% in the
first quarter of 2000 from 10.4% during the first quarter of 1999. This increase
is attributable to an increase in fuel prices and increased reliance on the
Company owned fleet. The fuel cost per gallon steadily increased after the first
quarter of 1999 with heavy increase experienced in the fourth quarter of 1999
and first quarter of 2000.
Taxes and licenses decreased $0.1 million (4.8%), to $1.3 million in the
first quarter of 2000 from $1.4 million in the first quarter of 1999. As a
percentage of revenue, taxes and licenses decreased to 1.9% in the first quarter
of 2000 from 2.2% in the first quarter of 1999. These decreases resulted from
increased fleet utilization and efficient management of these costs.
Insurance and claims increased $0.2 million (11.5%), to $2.0 million in the
first quarter of 2000 from $1.8 million in the first quarter of 1999. As a
percentage of revenue, insurance and claims increased to 2.9% in the first
quarter of 2000 from 2.8% in the first quarter of 1999. Insurance and claims
expense will vary as a percentage of operating revenue from period to period
based on the frequency and severity of claims incurred in a given period as well
as changes in claims development trends.
Communications and utilities increased $0.1 million (8.0%), to $0.7 million
in 2000 from $0.6 million in 1999. As a percentage of revenue, communications
and utilities remained constant at 1.0% in 2000 and in 1999.
Depreciation decreased $0.2 million (4.9%) to $3.9 million during the first
quarter of 2000 from $4.1 million in the first quarter of 1999. As a percentage
of revenue, depreciation decreased to 5.8% of revenue during the first quarter
of 2000 from 6.4% during the first quarter of 1999. The decrease resulted from
the increase in the number of trailers in the Company's fleet becoming fully
depreciated.
Other operating expenses decreased $0.1 million (9.4%) to $1.5 million
during the first quarter of 2000 from $1.6 million during the first quarter
1999. As a percentage of revenue, other operating expenses decreased to 2.2% in
the first quarter of 2000 from 2.5% in the first quarter of 1999. Other
operating expenses consists primarily of pallet cost, driver recruiting expense,
goodwill, and administrative costs.
Interest income decreased $0.2 (10.6%) to $1.3 million in the first quarter
of 2000 from $1.5 million in the first quarter of 1999. Interest income earned
is primarily exempt from federal taxes and therefore earned at a lower rate. The
decrease is attributable to the repurchase of 4.6 million shares of the
Compan's common stock for $59.1 million in the fourth quarter of 1999 and first
quarter of 2000.
The Company's effective tax rate was 34.0% for the three month period ended
March 31, 2000 and 35.0% in 1999.
As a result of the foregoing, the Company's operating ratio (operating
expenses as a percentage of operating revenue) was 81.4% during the first
quarter of 2000 compared with 83.9% during the first quarter of 1999. Net income
increased $1.6 million (20.9%), to $9.2 million during the first quarter of 2000
from $7.6 million during the first quarter of 1999. The Compan's operating
ratio and net income for the first quarter of 2000 were positively impacted by a
$1.5 million gain recognized on the sale of two properties.
Liquidity and Capital Resources
The growth of the Company's business has required significant investments
in new revenue equipment. Historically the Company has been debt-free, financing
revenue equipment through cash flow from operations. The Company also obtains
tractor capacity by utilizing independent contractors, who provide a tractor and
bear all associated operating and financing expenses.
7
The Company expects to finance future growth in its company-owned fleet
through cash flow from operations and cash equivalents currently on hand. Based
on the Company's strong financial position (current ratio of 2.8 and no debt),
management foresees no barrier to obtaining outside financing, if necessary, to
continue with its growth plans.
During the three months ended March 31, 2000, the Company generated net
cash flow from operations of $14.2 million. Net cash used in investing and
financing activities included $4.3 million for capital expenditures, primarily
revenue equipment and $14.0 million for the repurchase of 1,093,669 shares of
the Company's outstanding common stock.
Working capital at March 31, 2000 was $108.7 million, including $124.8
million in cash, cash equivalents, and investments. These investments generated
$1.3 million in interest income (primarily tax-exempt) during the three months
ended March 31, 2000. The Company's policy is to purchase only investment
quality, highly liquid investments.
Forward Looking Information
Statements by the Company in reports to its stockholders and public
filings, as well as oral public statements by Company representatives may
contain certain forward looking information that is subject to certain risks and
uncertainties that could cause actual results to differ materially from those
projected. Without limitation, these risks and uncertainties include economic
recessions or downturns in customer's business cycles, excessive increase in
capacity within truckload markets, decreased demand for transportation services
offered by the Company, rapid inflation and fuel price increases, increases in
interest rates, and the availability and compensation of qualified drivers and
owner operators. Readers should review and consider the various disclosures made
by the Company in its reports to stockholders and periodic reports on form 10-K
and 10-Q.
8
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in securities
Not applicable
Item 3. Defaults upon senior securities
Not applicable
Item 4. Submission of matters to a vote of security holders
Not applicable
Item 5. Other information
Not applicable
Item 6. Exhibits and reports on Form 8-K
A Form 8-K was filed on February 28, 2000, pertaining
to the repurchase of 1,093,669 shares of the
Company's outstanding common stock.
Page of Method of
Exhibit No. Document Filing
3.1 Articles of Incorporation Incorporated by
Reference to the
Company's registration
statement on Form S-1,
Registration No.33-
8165, effective
November 5, 1986.
3.2 Bylaws Incorporated by
Reference to the
Company's registration
statement on form S-1,
Registration No. 33-
8165, effective
November 5, 1986.
3.3 Certificate of Amendment Incorporated by
To Articles of Incorporation Reference to the
Company's form
10-QA, for the
quarter ended June
30, 1997, dated
March 26, 1998.
9
4.1 Articles of Incorporation Incorporated by
Reference to the
Company's registration
statement on form S-1,
Registration No. 33-
8165, effective
November 5, 1986.
4.3 Certificate of Amendment Incorporated by
to Articles of Incorporation Reference to the
Company's form
10-QA, for the
quarter ended June
30, 1997, dated
March 26, 1998.
9.1 Voting Trust Agreement dated Incorporated by
June 6, 1997 among the Gerdin Reference to the
Educational Trusts and Larry Company's Form 10-K
Crouse voting trustee. For the year ended
December 31, 1997.
Commission file no.
0-15087.
10.1 Business Property Lease Incorporated by
between Russell A. Gerdin Reference to the
as Lessor and the Company Company's Form 10-K
as Lessee, regarding the for the year ended
Company's headquarters at December 31, 1996.
2777 Heartland Drive, Commission file no.
Coralville, Iowa 52241 0-15087, dated
March 27, 1997.
10.2 Form of Independent Incorporated by
Contractor Operating Reference to the
Agreement between the Company's Form 10-K
Company and its for the year ended
independent contractor December 31, 1993.
providers of tractors Commission file no.
0-15087.
10.3 Description of Key Incorporated by
Management Deferred Reference to the
Incentive Compensation Company's Form 10-K
Arrangement for the year ended
December 31, 1993.
Commission file no.
0-15087.
10
21 Subsidiaries of the Incorporated by
Registrant Reference to the
Company's Form 10-K
for the year ended
December 31, 1993.
Commission file no.
0-15087.
27 Financial Data Schedule Filed herewith.
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
HEARTLAND EXPRESS, INC.
BY: /s/ John P. Cosaert_____
JOHN P. COSAERT
Vice-President
Finance and Treasurer
12