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 June 30, 1996 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) 645-2728
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 June 30, 1996, there were 20,000,000 shares of the Company's $.10 par
value common stock outstanding.
PART I
FINANCIAL INFORMATION
Page
Number
Item 1. Financial statements
Consolidated balance sheets
June 30, 1996 (unaudited) and
December 31, 1995 2-3
Consolidated statements of income
(unaudited) for the three and six month
periods ended June 30, 1996 and 1995 4
Consolidated statements of cash flows
(unaudited) for the six months ended
June 30, 1996 and 1995 5
Notes to financial statements 6
Item 2. Management's discussion and analysis of
financial condition and results of
operations 7-9
PART II
OTHER INFORMATION
Item 1. Legal proceedings 10
Item 2. Changes in securities 10
Item 3. Defaults upon senior securities 10
Item 4. Submission of matters to a vote of 10
security holders
Item 5. Other information 10
Item 6. Exhibits and reports on Form 8-K 10-11
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HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
--------
JUNE 30, DECEMBER 31,
1996 1995
--------------- ---------------
(Unaudited) *(Note 1)
CURRENT ASSETS
Cash and cash equivalents $ 68,612,096 $ 46,162,143
Trade receivables, less allowance,,
of $402,812 in each period 17,739,419 18,035,002
Prepaid tires 1,966,999 2,322,826
Municipal bonds 2,000,000 4,519,461
Deferred income taxes 12,227,300 11,377,000
Other current assets 1,353,505 481,761
--------------- ---------------
Total current assets $ 103,899,319 $ 82,898,193
--------------- ---------------
PROPERTY AND EQUIPMENT
Land and land improvements $ 2,401,010 $ 2,463,010
Buildings 6,886,615 7,299,415
Furniture and fixtures 1,696,302 1,656,094
Shop and service equipment 1,117,626 1,092,107
Revenue equipment 93,718,711 97,642,433
--------------- ---------------
$ 105,820,264 $ 110,153,059
Less accumulated depreciation
& amortization 35,002,112 36,459,541
--------------- ---------------
Property and equipment, net $ 70,818,152 $ 73,693,518
--------------- ---------------
OTHER ASSETS $ 1,561,764 $ 1,554,660
--------------- ---------------
$ 176,279,235 $ 158,146,371
=============== ===============
*Note: See Note 1 of "Notes to Financial Statements" for information
regarding the December 31, 1995 balance sheet.
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HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
JUNE 30, DECEMBER 31,
1996 1995
--------------- ---------------
(Unaudited) *(Note 1)
CURRENT LIABILITIES,
Current maturities of long-term debt $ 278,704 $ 705,437
Accounts payable & accrued liabilities 10,656,809 7,388,330
Compensation & benefits 3,524,251 3,349,995
Income taxes payable 2,785,454 1,678,814
Insurance accruals 28,367,444 26,684,440
Other 2,865,749 2,310,679
--------------- ---------------
Total current liabilities $ 48,478,411 $ 42,117,695
DEFERRED INCOME TAXES 17,004,000 17,393,000
--------------- ---------------
$ 65,482,411 $ 59,510,695
--------------- ---------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Capital Stock:
Preferred, $.10 par value; authorized
5,000,000 share; none issued $ -- $ --
Common, $.10 par value; authorized
35,000,000 shares; issued and
outstanding 20,000,000 shares 2,000,000 2,000,000
Additional paid in capital 5,609,124 5,609,124
Retained earnings 103,187,700 91,026,552
--------------- ---------------
$ 110,796,824 $ 98,635,676
--------------- ---------------
$ 176,279,235 $ 158,146,371
=============== ===============
*Note: See Note 1 of "Notes to Financial Statements" for information
regarding the December 31, 1995 balance sheet.
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HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
--------------- --------------- --------------- ---------------
OPERATING REVENUE $ 59,383,574 $ 46,973,780 $ 113,746,666 $ 94,556,903
--------------- --------------- --------------- ---------------
OPERATING EXPENSES:
Salaries, wages, benefits $ 9,750,869 $ 10,028,816 $ 20,057,157 $ 21,776,419
Rent and purchased transportation 25,286,282 15,228,795 47,011,568 28,798,875
Operations and maintenance 5,559,281 5,095,201 10,985,343 10,960,605
Taxes and licenses 1,450,383 1,200,796 2,762,154 2,507,602
Insurance and claims 2,726,671 2,274,998 5,080,905 4,561,795
Communications and utilities 515,226 555,913 1,031,767 1,314,532
Depreciation 3,541,140 3,900,619 7,004,691 7,968,137
Other operating expenses 946,721 750,863 1,915,361 1,725,388
(Gain) on sale of fixed assets 0 (2,281) (189,041) (22,112)
--------------- --------------- --------------- ---------------
$ 49,776,573 $ 39,033,720 $ 95,659,905 $ 79,591,241
--------------- --------------- --------------- ---------------
Operating income $ 9,607,001 $ 7,940,060 $ 18,086,761 $ 14,965,662
Interest income 611,141 373,362 1,242,812 654,999
Interest expense (10,920) (22,617) (26,078) (47,798)
--------------- --------------- --------------- ---------------
Income before income taxes $ 10,207,222 $ 8,290,805 $ 19,303,495 $ 15,572,863
Federal and state income taxes(Note 2) 3,776,728 3,065,028 7,142,347 5,759,428
--------------- --------------- --------------- ---------------
Net income $ 6,430,494 $ 5,225,777 $ 12,161,148 $ 9,813,435
=============== =============== =============== ===============
Earnings per common share:
Net income $ 0.32 $ 0.26 $ 0.61 $ 0.49
=============== =============== =============== ===============
Weighted average shares outstanding 20,000,000 20,026,140 20,000,000 20,026,140
=============== =============== =============== ==============
-4-
HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
Six months ended
June 30,
1996 1995
-------------- --------------
OPERATING ACTIVITIES
Net income $ 12,161,148 $ 9,813,435
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 7,197,151 8,191,679
Deferred income taxes (1,239,300) 75,000
Gain on sale of fixed assets, (189,041) (22,112)
Changes in certain working capital items:
Trade receivables 295,583 2,362,003
Other current assets (1,030,169) (953,960)
Prepaid expenses 766,297 1,118,500
Accounts payable and accrued expenses 3,752,300 2,442,646
Accrued income taxes 1,106,640 (111,902)
-------------- --------------
Net cash provided by operating activities $ 22,820,609 $ 22,915,289
INVESTING ACTIVITIES -------------- --------------
Proceeds from sale of prop. and equipment 393,513 27,508
Purchase of property and equipment (2,849,793) (164,148)
Redemption (purchase) of municipal bonds 2,519,461 (87,481)
Other (7,104) 280,604
-------------- --------------
Net cash provided by investment activities $ 56,077 $ 56,483
-------------- --------------
FINANCING ACTIVITIES
Principal payments on long-term notes $ (426,733) $ (225,175)
-------------- --------------
Net cash (used in) financing activities $ (426,733) $ (225,175)
-------------- --------------
Net increase in cash and cash equivalents $ 22,449,953 $ 22,746,597
CASH AND CASH EQUIVALENTS
Beginning of year 46,162,143 9,964,894
-------------- --------------
End of quarter $ 68,612,096 $ 32,711,491
============== ==============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 26,078 $ 47,798
Income taxes 7,275,699 5,800,851
Noncash investing activities:
Book value of revenue equipment traded $ 5,585,217 $ 13,217,673
-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 and six month periods ended
June 30, 1996 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1996. 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, 1995.
Note 2. Income Taxes
Income taxes for the three and six month periods ended June 30, 1996 are
based on the Company's estimated effective tax rates. The rate for the
three and six month periods ended June 30, 1996 and 1995 was 37%.
-6-
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
and six months ended June 30, 1996 compared with the same periods in 1995,
and the changes in financial condition through the second quarter of 1996.
Results of Operations:
Operating revenue increased 26.4% to $59.3 million in the second quarter of
1996 from $46.9 million in the second quarter of 1995. Operating revenue
for the six months ended June 30, 1996, (the "1996 Period") increased 20.3%
to $113.7 million from $94.5 million for the six months ended June 30, 1995
(the "1995 Period"). In both periods, the revenue increase was attributable
primarily to increased business from existing customers.
Salaries, wages, and benefits decreased to 16.4% of revenue in the second
quarter of 1996 from 21.3% in the second quarter of 1995 and to 17.6% of
revenue in the 1996 Period from 23.0% of revenue in the 1995 Period. For
both the quarter and six months, the decrease was attributable to (i) a
reduction in the miles driven by company drivers and a corresponding
increase in miles driven by independent contractors, and (ii) a reduction in
health and workers' compensation claims due to fewer and less severe claims.
During the second quarter of 1996, company drivers accounted for 38% and
independent contractors 62% of the total fleet miles, compared with 53% and
47%, respectively, in the second quarter of 1995. During the first six
months of 1996 company drivers accounted for 40% and independent contractors
60% of the total fleet miles, compared with 55% and 45%, respectively, in the
first six months of 1995.
Rent and purchased transportation expenses increased to 42.6% of revenue
during the second quarter of 1996 from 32.4% in the second quarter of 1995
and to 41.3% of revenue during the 1996 Period from 30.5% during the 1995
Period. The increase in both the quarter and six months was attributable to
an increase in miles driven by independent contractors as a result of
independent contractors comprising a greater percentage of the Company's
fleet.
-7-
Operations and maintenance decreased to 9.4% of revenue in the second
quarter of 1996 from 10.9% in the second quarter of 1995 and to 9.7% of
revenue during the 1996 Period form 11.6% during the 1995 Period. For both
the quarter and six months, the decrease was attributable to (i) reduced
reliance on company-owned tractors as a percentage of the Company's fleet
and corresponding increase in a percentage of tractors provided by
independent contractors (who pay their own repair, maintenance, fuel, and
other costs); and (ii) better fuel mileage and fewer repairs as the average
age of company-owned tractors dropped to 13 months at June 30, 1996, from 17
months at June 30, 1995. These savings more than offset higher fuel prices
during the 1996 period.
Taxes and licenses, insurance and claims, and communications and utilities
all decreased slightly in both the second quarter and the first six months
of 1996 versus the same periods in 1995 because the Company does not cover
all of such costs for independant contractors, which have grown as a
percentage of the Company's fleet. Insurance and claims also decreased
because management negotiated a lower liability insurance premium, and the
Company has experienced fewer accidents per million miles as contractors
have increased as a percentage of the fleet.
Depreciation decreased to 6.0% of revenue during the second quarter of 1996
from 8.3% reported in the second quarter of 1995 and to 6.2% of revenue
during the 1996 Period from 8.4% during the 1995 Period. For both the
quarter and six months, depreciation decreased because of reduced reliance
on company-owned tractors as a percentage of the Company's fleet and a
corresponding increase in the percentage of the fleet being supplied
by independent contractors.
Interest expense was immaterial in all periods. The remaining capitalized
lease assumed in the Munson merger has a principal amount of approximately
$279,000 at June 30, 1996 and is scheduled to be paid off in the next three
months.
The Company's effective tax rate was 37.0% for the six month periods
ended June 30, 1996 and 1995.
-8-
As a result of the foregoing, the Company's operating ratio (operating
expenses as a percentage of operating revenue) was 83.8% during the second
quarter of 1996 compared with 83.1% during the second quarter of 1995 and
84.1% during the 1996 Period compared with 84.2% during the 1995 Period.
Net income increased 23.1% to $6.4 million during the second quarter of 1996
from $5.2 million during the second quarter of 1995, and 23.9% to $12.2
million during the 1996 Period from $9.8 million during the 1995 Period. The
increase in the operating ratio for the second quarter of 1996 was
attributable primarily to the increase in independant contractors.
Liquidity and Capital Resources
The growth of the Company's business has required significant investments in
new revenue equipment. The Company's primary source of liquidity is funds
provided by operations. Management expects to finance future growth in
company-owned revenue equipment primarily through cash flow from operations
and revenue equipment trade allowances.
The Company's primary sources of cash flow from operations are net income
increased by depreciation. The Company's principal use of cash in
operations is to finance receivables and expenses associated with growth in
business. Net cash flow provided by operating activities was $23.3 million
during the first six months of 1996 and $22.9 million for the first six
months of 1995.
Working capital at June 30, 1996 was $55.4 million compared with $40.8
million at December 31, 1995. This increase is primarily due to increases
in cash, cash equivalents, and municipal bonds during the first six months
of 1996. At June 30, 1996, the Company had $70.6 million in cash, cash
equivalents, and municipal bonds, and such investments generated $1.2
million in interest income (primarily tax exempt) during the six months
ended June 30, 1996.
The Company had approximately $279,000 in current maturities of long-term
debt and no other long-term debt at June 30, 1996. This amount is scheduled
to be paid off before September 30, 1996.
-9-
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
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.
-10-
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.
4.2 Bylaws Incorporated by
Reference to the
Company's registration
statement on Form S-1,
Registration No. 33-
8165, effective
November 5, 1986.
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, 1995.
2777 Heartland Drive,
Coralville, Iowa 52241
10.2 Form of Independant Incorporated by
Contractor Operating reference to the
Agreement between the Company's Form 10-K
Company and its for the year ended
independant contractor December 31, 1993.
providers of tractors
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.
-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-