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, 2003 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, 2003, there were 50,000,000 shares of the Company's $.01 par value
common stock outstanding.
PART I
FINANCIAL INFORMATION
Page
Number
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets
March 31, 2003 and
December 31, 2002 1-2
Consolidated Statements of Income
for the Three Months
Ended March 31, 2003 and 2002 3
Consolidated Statements of Cash Flows
for the Three Months Ended
March 31, 2003 and 2002 4
Notes to Consolidated Financial Statements 5-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 6-9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 10
Item 4. Controls and Procedures 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 on Form 8-K 11-13
HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
2003 2002
------------ ------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents ...................... $102,529,207 $109,397,246
Investments .................................... 47,879,504 44,464,176
Trade receivables, less allowance:
$675,000 and $650,000 .......................... 36,747,277 33,012,394
Prepaid tires .................................. 4,369,630 4,757,850
Deferred income taxes .......................... 23,096,000 21,134,000
Other current assets ........................... 5,316,104 620,344
------------ ------------
Total current assets ........................... 219,937,722 213,386,010
------------ ------------
PROPERTY AND EQUIPMENT
Land and land improvements .................... 4,842,820 4,402,820
Buildings ..................................... 12,505,953 8,532,621
Furniture and fixtures ........................ 1,300,848 1,300,848
Shop and service equipment .................... 1,652,937 1,403,633
Revenue equipment ............................. 195,461,663 175,476,971
------------ ------------
215,764,221 191,116,893
Less accumulated depreciation ................. 44,111,066 39,715,307
------------ ------------
Property and equipment, net ................... 171,653,155 151,401,586
------------ ------------
OTHER ASSETS, net ................................ 8,538,270 8,320,593
------------ ------------
$400,129,147 $373,108,189
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
1
HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
2003 2002
------------- -------------
(Unaudited)
CURRENT LIABILITIES
Accounts payable and accrued liabilities .. $ 11,399,482 $ 8,632,810
Compensation and benefits ................. 8,375,321 7,632,766
Income taxes payable ...................... 14,423,985 6,070,318
Insurance accruals ........................ 40,923,315 40,228,160
Other accruals ............................ 4,848,233 4,525,396
------------- -------------
Total current liabilities .............. 79,970,336 67,089,450
------------- -------------
DEFERRED INCOME TAXES ........................ 33,077,000 30,089,000
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Capital Stock:
Preferred, $.01 par value; authorized
5,000,000 shares; none issued ............ -- --
Common, $.01 par value; authorized
395,000,000 shares; issued and
outstanding 50,000,000 ................... 500,000 500,000
Additional paid-in capital ................. 8,603,762 8,603,762
Retained earnings .......................... 279,541,263 268,488,971
------------- -------------
288,645,025 277,592,733
Less unearned compensation ................. (1,563,214) (1,662,994)
------------- -------------
287,081,811 275,929,739
------------- -------------
$ 400,129,147 $ 373,108,189
============= =============
The accompanying notes are an integral part of these consolidated financial
statements.
2
HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended
March 31,
2003 2002
------------ ------------
OPERATING REVENUE .............................. $ 94,839,735 $ 73,270,242
------------ ------------
OPERATING EXPENSES:
Salaries, wages, and benefits ................ 32,312,307 23,274,625
Rent and purchased transportation ............ 13,953,071 14,924,660
Operations and maintenance ................... 19,310,180 11,427,919
Taxes and licenses ........................... 1,873,406 1,607,108
Insurance and claims ......................... 2,370,993 1,842,075
Communications and utilities ................. 893,845 669,994
Depreciation ................................. 5,367,543 3,900,129
Other operating expenses ..................... 2,554,772 1,923,805
(Gain) loss on disposal of fixed assets ...... (3,661) 6,616
------------ ------------
78,632,456 59,576,931
------------ ------------
Operating income ........................... 16,207,279 13,693,311
Interest income .............................. 538,617 758,109
------------ ------------
Income before income taxes ................... 16,745,896 14,451,420
Federal and state income taxes ............... 5,693,604 4,913,483
------------ ------------
Net income ................................... $ 11,052,292 $ 9,537,937
============ ============
Net income per common share:
Basic net income per share ................ $ 0.22 $ 0.19
============ ============
Basic weighted average shares outstanding .... 50,000,000 50,000,000
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
3
HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
March 31,
2003 2002
------------- -------------
OPERATING ACTIVITIES
Net income ................................. $ 11,052,292 $ 9,537,937
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ............ 5,372,544 3,900,129
Deferred income taxes .................... 1,026,000 (130,000)
Unearned compensation .................... 99,780 33,260
Gain (loss) on disposal of fixed assets .. (3,661) 6,616
Changes in certain working capital items:
Trade receivables ...................... (3,734,883) (893,266)
Other current assets ................... (4,695,760) (2,024,867)
Prepaid tires .......................... 388,220 518,550
Accounts payable and accrued liabilities 2,907,384 2,553,222
Accrued income taxes ................... 8,353,667 4,926,963
------------- -------------
Net cash provided by operating activities .. 20,765,583 18,428,544
------------- -------------
INVESTING ACTIVITIES
Proceeds from sale of property and equipment 22,956 5,633
Capital additions .......................... (24,018,572) (7,924,987)
Net purchases of municipal bonds ........... (3,415,328) (1,686,781)
Increase in other assets .................. (222,678) (147,548)
------------- -------------
Net cash used in investing activities ...... (27,633,622) (9,753,683)
------------- -------------
Net increase (decrease) in cash and cash
equivalents ............................. (6,868,039) 8,674,861
CASH AND CASH EQUIVALENTS
Beginning of year .......................... 109,397,246 120,794,142
------------- -------------
End of quarter ............................. $ 102,529,207 $ 129,469,003
============= =============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid (received) during the period for:
Income taxes ............................ $ (3,686,063) $ 116,520
Noncash investing activities:
Book value of revenue equipment traded .. 1,401,919 2,478,132
The accompany notes are an integral part of these consolidated financial
statements.
4
HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited financial statements of Heartland Express, Inc.
(the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and 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
normal, recurring adjustments considered necessary for a fair presentation have
been included. The financial statements should be read in conjunction with the
audited financial statements for the year ended December 31, 2002 included in
the Annual Report on Form 10-K of the Company filed with the Securities and
Exchange Commission. Interim results of operations are not necessarily
indicative of the results to be expected for the full year or any other interim
periods. There were no changes to the Company's significant accounting policies
during the quarter.
Note 2. Contingencies
The Company is involved in certain legal proceedings arising in the normal
course of business. In the opinion of management, the Company's potential
exposure under pending legal proceedings is adequately provided for in the
accompanying consolidated financial statements.
On June 21, 2002 a driver for the Company was involved in a multiple (5)
fatality accident in Knoxville, TN. Three lawsuits have been filed in U.S.
District Court for the Eastern District of TN Northern Division of Knoxville,
TN. The combined relief sought in the cases is approximately $54.5 million for
compensatory damages and $215 million for punitive damages. No other action
including governmental is contemplated. No material developments have occurred
during the first quarter of 2003.
Note 3. Segment Information
The Company has nine operating divisions; however, it has determined that
it has one reportable segment. All of the divisions are managed based on similar
economic characteristics. Each of the regional operating divisions provides
short to medium-haul truckload carrier services of general commodities to a
similar class of customers. In addition, each division exhibits similar
financial performance, including average revenue per mile and operating ratio.
As a result of the foregoing, the Company has determined that it is appropriate
to aggregate its operating divisions into one reportable segment consistent with
the guidance in SFAS No. 131. Accordingly, the Company has not presented
separate financial information for each of its operating divisions as the
Company's consolidated financial statements present its one reportable segment.
5
Note 4. Recapitalization and Stock Split
On January 28, 2002, the Board of Directors approved an approximate three
for two stock split, effected in the form of a 57.68826 percent stock dividend.
The stock split occurred on February 19, 2002, to stockholders of record on the
close of business on February 8, 2002. The number of common shares issued and
outstanding and all per share amounts have been adjusted to reflect the stock
split for all periods presented.
On March 7, 2002, the principal stockholder awarded 90,750 shares of his
common stock to key employees of the Company. The shares will vest to them over
a five-year period subject to restrictions on transferability and to forfeiture
in the event of termination of employment. Any forfeited shares will be returned
to the principal stockholder. The fair market value of these shares was treated
as a contribution of capital and is being amortized over the five year vesting
period.
Note 5. Acquisition
On June 1, 2002, the Company acquired the business and trucking assets of
Great Coastal Express, Inc. ("Great Coastal"), a privately-held truckload
carrier. Great Coastal had gross revenues of approximately $70.0 million in 2001
and operated approximately 500 company tractors, 125 owner-operators, and 1,650
trailers at the date of the acquisition. The acquired assets were recorded at
their estimated fair values as of the acquisition date in accordance with
Financial Accounting Standards Board statement number 141 (SFAS 141), "Business
Combinations". Goodwill has been recorded in "Other Assets, net" for the amount,
which the purchase price exceeded the fair value of the assets acquired. The
acquisition has been accounted for in the Company's results of operations since
the acquisition date. The pro forma effect of the acquisition on the Company's
results of operation is immaterial.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward Looking Statements
Except for certain historical information contained herein, this Quarterly
Report on Form 10-Q contains forward-looking statements that involve risks,
assumptions and uncertainties which are difficult to predict. All statements,
other than statements of historical fact, are statements that could be deemed
forward-looking statements, including any projections of earnings, revenues, or
other financial items; any statements of plans, strategies, and objectives of
management for future operations; any statements concerning proposed new
strategies or developments; any statements regarding future economic conditions
or performance; any statements of belief and any statement of assumptions
underlying any of the foregoing. Words such as "believe," "may," "could,"
"expects," "anticipates," and "likely," and variations of these words or similar
expressions, are intended to identify such forward-looking statements. The
Company's actual results could differ materially from those discussed in the
section entitled "Factors That May Affect Future Results," included in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" set forth in the Company's Annual report on Form 10-K, which is by
this reference incorporated herein. The Company does not assume, and
specifically disclaims, any obligation to update any forward-looking statements
contained in this Quarterly report.
6
Results of Operations:
The following table sets forth the percentage relationship of expense items
to operating revenue for the periods indicated.
Three months Ended
March 31,
2003 2002
-------- --------
Operating revenue 100.0% 100.0%
-------- --------
Operating expenses:
Salaries, wages, and benefits 34.1% 31.8%
Rent and purchased transportation 14.7 20.4
Operations and maintenance 20.3 15.6
Taxes and licenses 2.0 2.2
Insurance and claims 2.5 2.5
Communications and utilities 0.9 0.9
Depreciation 5.7 5.3
Other operating 2.7 2.6
expenses
(Gain) loss on disposal of fixed assets (0.0) (0.0)
-------- --------
Total operating expenses 82.9% 81.3%
-------- --------
Operating income 17.1% 18.7%
Interest income 0.6 1.0
-------- --------
Income before income taxes 17.7% 19.7%
Federal and state income taxes 6.0 6.7
-------- --------
Net income 11.7% 13.0%
======== ========
The following is a discussion of the results of operations of the quarter
ended March 31, 2003 compared with the same period in 2002, and the changes in
financial condition through the first quarter of 2003.
Operating revenue increased $21.6 million (29.4%), to $94.9 million in the
first quarter of 2003 from $73.3 million in the first quarter of 2002. The
increase in revenue resulted from additional business from existing customers
and the growth of our customer base. Operating revenue was also positively
impacted by fuel surcharges assessed to customers and the June 1, 2002
acquisition of Great Coastal Express. Fuel surcharge revenue increased to $4.3
million in the first quarter of 2003 from $0.3 million in the first quarter of
2002 due to higher average fuel prices. The acquisition of Great Coastal Express
contributed approximately $9.8 million to first quarter 2003 revenues. Operating
revenue for the first quarter of 2003 increased 24.1% before fuel surcharge.
Salaries, wages, and benefits increased $9.0 million (38.8%), to $32.3
million in the first quarter of 2003 from $23.3 million in the first quarter of
2002. As a percentage of revenue, salaries, wages and benefits increased to
34.1% in 2003 from 31.8% in 2002. These increases were primarily the result of
increased reliance on employee drivers and decrease in the percentage of miles
driven by independent contractors. The increase in employee driver miles was
attributable to internal growth of the company owned tractor fleet and to the
June 1, 2002 acquisition of Great Coastal Express. During the first quarter of
2003, employee drivers accounted for 79% and independent contractors 21% of the
total fleet miles, compared with 70% and 30%, respectively, in the first quarter
of 2002. In addition, the Company incurred increased health insurance and
workers' compensation costs due to the increased frequency and severity of
claims, and due to increased reliance on employee drivers.
7
Rent and purchased transportation decreased $1.0 million (6.5%), to $13.9
million in the first quarter of 2003 from $14.9 million in the first quarter of
2002. As a percentage of revenue, rent and purchased transportation decreased to
14.7% in the first quarter of 2003 from 20.4% in the first quarter of 2002. This
reflects the Company's decreased reliance upon independent contractors. During
the 2003 period, the Company reimbursed independent contractors for the higher
cost of fuel based on fuel surcharges collected from customers. Rent and
purchased transportation, before fuel surcharge, decreased 12.2% over the same
period in 2002.
Operations and maintenance increased $7.9 million (69.0%) to $19.3 million
in the first quarter of 2003 from $11.4 million in the first quarter of 2002. As
a percentage of revenue, operations and maintenance increased to 20.4% in the
first quarter of 2003 from 15.6% during the first quarter of 2002. The increase
in operations and maintenance is primarily attributable to increased fuel costs
due to increased reliance on company-owned tractors and record high fuel prices
experienced in the first quarter of 2003.
Taxes and licenses increased $0.3 million (16.6%), to $1.9 million in the
first quarter of 2003 from $1.6 million in the first quarter of 2002. As a
percentage of revenue, taxes and licenses decreased to 2.0% in 2003 from 2.2%
during the first quarter of 2002.
Insurance and claims increased $0.6 million (28.7%), to $2.4 million in the
first quarter of 2003 from $1.8 million in the first quarter of 2002. As a
percentage of revenue, insurance and claims remained constant at 2.5% for both
compared periods. 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 $0.2 million (33.4%), to $0.9
million in 2003 from $0.7 million in 2002. As a percentage of revenue,
communications and utilities remained constant at 0.9% for both compared
periods. Communications expense increased due to fleet growth and the
implementation of satellite communications with independent contractors.
Depreciation increased $1.5 million (37.6%) to $5.4 million during the
first quarter of 2003 from $3.9 million in the first quarter of 2002. As a
percentage of revenue, depreciation increased to 5.7% in 2003 from 5.3% during
the first quarter of 2002. Depreciation increased because of the growth of our
company owned tractor and trailer fleet.
Other operating expenses increased $0.6 million (32.8%) to $2.5 million
during the first quarter of 2003 from $1.9 million during the first quarter
2002. As a percentage of revenue, other operating expenses increased to 2.7% in
the first quarter of 2003 from 2.6% in the first quarter of 2002. Other
operating expenses consist primarily of costs incurred for freight handling,
highway tolls, driver recruiting expenses, and administrative costs.
Interest income decreased $0.2 (29.0%) to $0.5 million in the first quarter
of 2003 from $0.7 million in the first quarter of 2002. Interest income earned
is primarily exempt from federal taxes and therefore earned at a lower pre-tax
rate. Interest earned has been negatively impacted by Federal Reserve Bank
reductions in short-term interest rates.
The Company's effective tax rate was 34.0% for both compared three month
periods. Income taxes have been provided at the statutory federal and state
rates, adjusted for certain permanent differences between financial statement
and income tax reporting.
As a result of the foregoing, the Company's operating ratio (operating
expenses as a percentage of operating revenue) was 82.9% during the first
quarter of 2003 compared with 81.3% during the first quarter of 2002. Net income
increased $1.5 million (15.9%), to $11.0 million during the first quarter of
2003 from $9.5 million during the first quarter of 2002.
8
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, funding
revenue equipment purchases with cash flow provided by operations. The Company
also obtains tractor capacity by utilizing independent contractors, who provide
a tractor and bear all associated operating and financing expenses. The
Company's primary source of liquidity for the three months ended March 31, 2003,
was net cash provided by operating activities of $20.8 million compared to $18.4
million in the corresponding 2002 period.
Capital expenditures for property and equipment, primarily revenue
equipment net of trade-ins, totaled $24.0 million for the first three months of
2003 compared to $7.9 million for the same period in 2002. In addition, the
Company purchased terminal locations in Columbus, Ohio and Olive Branch,
Mississippi during the first quarter of 2003.
Management believes the Company has adequate liquidity to meet its current
and projected needs. The Company will continue to have significant capital
requirements over the long term which are expected to be funded by cash flow
provided by operations and from cash, cash equivalents, and investments on hand.
The Company ended the quarter with $150.4 million in cash, cash equivalents, and
investments and no debt. Based on the Company's strong financial position,
management believes outside financing could be obtained, if necessary, to fund
capital expenditures.
Factors That May Affect Future Results
The Company's future results may be affected by a number of factors over
which the Company has little or no control. Fuel prices, insurance and claims
costs, liability claims, interest rates, the availability of qualified drivers,
fluctuations in the resale value of revenue equipment, economic and customer
business cycles and shipping demands are economic factors over which the Company
has little or no control. Significant increases or rapid fluctuations in fuel
prices, interest rates or insurance and claims costs, to the extent not offset
by increases in freight rates, and the resale value of revenue equipment could
reduce the Company's profitability. Weakness in the general economy, including a
weakness in consumer demand for goods and services, could adversely affect the
Company's customers and the Company's growth and revenues, if customers reduce
their demand for transportation services. Customers encountering adverse
economic conditions represent a greater potential for loss, and the Company may
be required to increase its reserve for bad debt losses. Weakness in customer
demand for the Company's services or in the general rate environment may also
restrain the Company's ability to increase rates or obtain fuel surcharges.
Inflation and Fuel Cost
Most of the Company's operating expenses are inflation-sensitive, with
inflation generally producing increased costs of operations. During the past
three years, the most significant effects of inflation have been on revenue
equipment prices and the compensation paid to the drivers. Innovations in
equipment technology and comfort have resulted in higher tractor prices, and
there has been an industry-wide increase in wages paid to attract and retain
qualified drivers. The Company historically has limited the effects of inflation
through increases in freight rates and certain cost control efforts. In addition
to inflation, fluctuations in fuel prices can affect profitability. Most of the
Company's contracts with customers contain fuel surcharge provisions. Although
the Company historically has been able to pass through most long-term increases
in fuel prices and operating taxes to customers in the form of surcharges and
higher rates, shorter-term increases are not fully recovered. Competitive
conditions in the transportation industry, such as lower demand for
transportation services, could affect the Company's ability to obtain rate
increases or fuel surcharges.
9
Seasonality
The nature of the Company's primary traffic (appliances, automotive parts,
paper products, retail goods, and packages foodstuffs) causes it to be
distributed with relative uniformity throughout the year. However, seasonal
variations during and after the winter holiday season have historically resulted
in reduced shipments by several industries served. In addition, the Company's
operating expenses historically have been higher during the winter months due to
increased operating costs in colder weather and higher fuel consumption due to
increased engine idling.
New Accounting Standards
In June 2001, FASB issued SFAS No. 143 "Accounting for Asset Retirement
Obligations." SFAS No. 143 addresses accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. This statement is effective for fiscal years beginning
after June 15, 2002. The Company adopted this statement effective January 1,
2003. The adoption of this SFAS did not have a material impact on its
Consolidated Financial Statements.
In April 2002, FASB issued SFAS No. 145 "Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
SFAS No. 145 rescinds previous accounting guidance, with required all gains and
losses from the extinguishments of debt be classified as an extraordinary item.
Under SFAS No. 145 classification of debt extinguishments depends on the facts
and circumstances of the transaction. The Company adopted this statement
effective January 1, 2003. The adoption of this SFAS did not have a material
impact upon its Consolidated Financial Statements as the Company has no debt.
In July 2002, FASB issued SFAS No. 146 "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS No. 146 addresses financial accounting
and reporting for the costs associated with exit or disposal activities and
nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (Including Certain
Costs Incurred in a Restructuring)." This statement is effective for exit or
disposal activities initiated after December 31, 2002. The Company adopted this
statement effective January 1, 2003; however, the Company has had no
transactions to which this statement would be applicable during the first
quarter of 2003.
In December 2002, FASB issued SFAS No. 148 "Accounting for Stock-Based
Compensation - Transition and Disclosure" which requires certain pro form
disclosures. This statement also amended the transition provisions of SFAS No.
123. The Company adopted SFAS No. 123 as amended by SFAS No. 148 effective
January 1, 2003; however, the Company has had no transactions to which this
statement would be applicable during the first quarter of 2003.
In November 2002, FASB issued Interpretation No. 45 "Guarantor's Accounting
and Disclosure Requirements for Guarantees, including Indirect Guarantees of
Indebtedness of Others" which requires the guarantor to recognize at inception
of a guarantee, a liability for the fair value of the obligation undertaken in
issuing a guarantee. The Company has not guaranteed the indebtedness or
obligations of others. Therefore, the adoption of this Interpretation will not
have a material impact upon its Consolidated Financial Statements.
In January 2003, FASB issued Interpretation No. 46 "Consolidation of
Variable Interest Entities" which addresses the consolidation and disclosures of
these entities by business enterprises. As the Company does not have any
interests in such types of entities the adoption of this Interpretation will not
have a material impact upon its Consolidated Financial Statements.
10
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company purchases only high quality, liquid investments. Primarily all
investments as of March 31, 2003 have an original maturity of twelve months or
less. The Company holds all investments to maturity and therefore, is exposed to
minimal market risk related to its cash equivalents.
The Company has no debt outstanding as of March 31, 2003 and therefore, has
no market risk related to debt.
As of March 31, 2003, the Company has no derivative financial instruments
to reduce its exposure to fuel price fluctuations.
Item 4. Controls and Procedures
Evaluation of Disclosure Control and Procedures
Under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, we evaluated
the effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-14(c) under the Exchange Act) within 90 days
prior to the filing date of this report. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective in timely alerting them to the material
information relating to us required to be included in our periodic SEC filings.
Changes in Internal Controls
There were no significant changes made in our internal controls during the
period covered by this report or, to our knowledge, in other factors that could
significantly affect these controls subsequent to the date of their evaluation.
11
PART II
OTHER INFORMATION
Item 1. Legal Proceedings On June 21, 2002 a driver for the Company was involved
in a multiple (5) fatality accident in Knoxville, TN. Three lawsuits have
been filed in U.S. District Court for the Eastern District of TN Northern
Division of Knoxville, TN. The Combined relief sought in the cases is
approximately $54.5 million for compensatory damages and $215 million for
punitive damages. No other action including governmental is contemplated.
No material developments have occurred during the first quarter of 2003.
Additionally, the Company is a party to ordinary, routine litigation and
administrative proceedings incidental to its business. None of the claims
would materially impact net income or financial position. These proceedings
primarily involve claims for personal injury and property damage incurred
in connection with the transportation of freight. The Company maintains
insurance to cover liabilities arising from the transportation of freight
for amounts in excess of self-insured retentions.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit
99 Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 (b) No reports on Form 8-K were
filed during the current period.
No other information is required to be filed under Part II of the form.
12
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.
Date: May 14, 2003 BY: /s/ John P. Cosaert
John P. Cosaert
Executive Vice President-Finance,
Chief Financial Officer and Treasurer
(principal accounting and
financial officer)
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SECTION 302 CERTIFICATION
I, Russell A. Gerdin, President and Chief Executive Officer of Heartland
Express, Inc. , certify that:
1. I have reviewed this quarterly report on Form 10-Q of Heartland Express,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 14, 2003 /s/ Russell A. Gerdin
Russell A. Gerdin
President and Chief Executive Officer
(principal executive officer)
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SECTION 302 CERTIFICATION
I, John P. Cosaert, Executive Vice President-Finance, Chief Financial
Officer and Treasurer of Heartland Express, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Heartland Express,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared.
(b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date:
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weakness in internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 14, 2003 /s/ John P. Cosaert
John P. Cosaert
Executive Vice President-Finance,
Chief Financial Officer and Treasurer
(principal accounting and financial officer)
15
Exhibit 99
Quarterly Certification Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a)
and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of
the undersigned officers of Heartland Express, Inc. (the "Company"), does hereby
certify, to such officer's knowledge, that:
The quarterly report on Form 10-Q for the quarter ended March 31, 2003 of
the Company fully complies with the requirements of Section 13 (a) or 15(d) of
the Securities Exchange Act of 1934 and information contained in the Form 10-Q
fairly presents, in all material respects, the financial condition and results
of operations of the Company.
Dated: May 14, 2003 By: /s/ Russell A. Gerdin
Russell A. Gerdin
Chairman, President and
Chief Executive Officer
Dated: May 14, 2003 By: /s/ John P. Cosaert
John P. Cosaert
Executive Vice President
and Chief Financial Officer
16