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 September 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 September 30, 1996, there were 30,000,000 shares of the Company's $.10
par value common stock outstanding.
PART I
FINANCIAL INFORMATION
Page
Number
Item 1. Financial statements
Consolidated balance sheets
September 30, 1996 (unaudited) and
December 31, 1995 2-3
Consolidated statements of income
(unaudited) for the three and nine month
periods ended September 30, 1996 and 1995 4
Consolidated statements of cash flows
(unaudited) for the nine months ended
September 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
September 30, DECEMBER 31,
1996 1995
------------- -------------
(Unaudited) *(Note 1)
CURRENT ASSETS
Cash and cash equivalents $ 78,227,891 $ 46,162,143
Trade receivables, less allowance
of $402,812 in each period 17,135,400 18,035,002
Prepaid tires 1,475,956 2,322,826
Municipal bonds 3,225,000 4,519,461
Deferred income taxes 12,131,000 11,377,000
Other current assets 1,500,357 481,761
------------- -------------
Total current assets $ 113,695,604 $ 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 1,704,282 1,656,094
Shop and service equipment 1,109,337 1,092,107
Revenue equipment 94,566,933 97,642,433
------------- -------------
$ 106,668,177 $ 110,153,059
Less accumulated depreciation &
amortization 38,317,318 36,459,541
------------- -------------
Property and equipment, net $ 68,350,859 $ 73,693,518
------------- -------------
OTHER ASSETS $ 1,571,345 $ 1,554,660
------------- -------------
$ 183,617,808 $ 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
September 30, DECEMBER 31,
1996 1995
------------- -------------
(Unaudited) *(Note 1)
CURRENT LIABILITIES
Current maturities of long-term debt $ 0 $ 705,437
Accounts payable & accrued liabilities 12,235,200 7,388,330
Compensation & benefits 3,736,321 3,349,995
Income taxes payable 2,497,426 1,678,814
Insurance accruals 28,421,469 26,684,440
Other, 2,507,225 2,310,679
------------- -------------
Total current liabilities $ 49,397,641 $ 42,117,695
DEFERRED INCOME TAXES 16,834,000 17,393,000
------------- -------------
$ 66,231,641 $ 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 30,000,000 shares 3,000,000 2,000,000
Additional paid in capital 5,609,124 5,609,124
Retained earnings 108,777,043 91,026,552
------------- -------------
$ 117,386,167 $ 98,635,676
------------- -------------
$ 183,617,808 $ 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 Nine months ended
September 30, September 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
OPERATING REVENUE $ 58,177,937 $ 47,527,998 $ 171,924,603 $ 142,084,902
------------- ------------- ------------- -------------
OPERATING EXPENSES:
Salaries, wages, benefits $ 10,129,576 $ 9,403,056 $ 30,186,733 $ 31,179,475
Rent and purchased transportation 23,924,344 16,633,973 70,935,912 45,432,847
Operations and maintenance 5,231,531 4,826,811 16,216,874 15,787,416
Taxes and licenses 1,379,260 1,227,778 4,141,414 3,735,381
Insurance and claims 2,614,319 1,857,006 7,695,224 6,418,802
Communications and utilities 512,504 586,286 1,544,271 1,900,818
Depreciation 3,235,931 3,629,116 10,240,622 11,597,253
Other operating expenses 1,389,160 837,719 3,304,521 2,563,105
(Gain) on sale of fixed assets 0 (5,022) (189,041) (27,134)
------------- ------------- ------------- -------------
$ 48,416,625 $ 38,996,723 $ 144,076,530 $ 118,587,963
------------- ------------- ------------- -------------
Operating income $ 9,761,312 $ 8,531,275 $ 27,848,073 $ 23,496,939
Interest income 703,161 458,571 1,945,973 1,113,570
Interest expense (4,865) (19,995) (30,943) (67,793)
------------- ------------- ------------- -------------
Income before income taxes $ 10,459,608 $ 8,969,851 $ 29,763,103 $ 24,542,716
Federal and state income taxes(Note 2) 3,870,265 3,323,647 11,012,612 9,083,075
------------- ------------- ------------- -------------
Net income $ 6,589,343 $ 5,646,204 $ 18,750,491 $ 15,459,641
============= ============= ============= =============
Earnings per common share:
Net income $ 0.22 $ 0.19 $ 0.63 $ 0.52
============= ============= ============= =============
Weighted average shares outstanding 30,000,000 30,039,210 30,000,000 30,039,210
============= ============= ============= =============
-4-
HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
Nine months ended
September 30,
1996 1995
------------- -------------
OPERATING ACTIVITIES
Net income $ 18,750,491 $ 15,459,641
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 10,529,284 11,932,573
Deferred income taxes (1,313,000) 19,000
Gain on sale of fixed assets (189,041) (27,134)
Changes in certain working capital items:
Trade receivables 899,602 1,376,076
Other current assets (1,177,021) (274,258)
Prepaid expenses 1,257,340 1,621,296
Accounts payable and accrued expenses 4,207,000 1,550,898
Accrued income taxes 818,612 (44,902)
------------- -------------
Net cash provided by operating activities $ 33,783,267 $ 31,613,190
------------- -------------
INVESTING ACTIVITIES
Proceeds from sale of prop. and equipment 393,513 47,805
Purchase of property and equipment (2,683,371) 44,248
Redemption of municipal bonds 1,294,461 (5,890,760)
Other (16,685) 27,464
------------- -------------
Net cash (used in) investment activities $ (1,012,082) $ (5,771,243)
------------- -------------
FINANCING ACTIVITIES
Principal payments on long-term notes $ (705,437) $ (346,178)
------------- -------------
Net cash (used in) financing activities $ (705,437) $ (346,178)
------------- -------------
Net increase in cash and cash equivalents $ 32,065,748 $ 25,495,769
CASH AND CASH EQUIVALENTS
Beginning of year 46,162,143 10,218,484
------------- -------------
End of quarter $ 78,227,891 $ 35,714,253
============= =============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 30,943 $ 67,793
Income taxes 11,507,001 9,082,222
Noncash investing activities:
Book value of revenue equipment traded $ 5,585,217 $ 19,911,625
-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 nine month periods
ended September 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 nine month periods ended September 30, 1996
are based on the Company's estimated effective tax rates. The rate for the
three and nine month periods ended September 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 nine months ended September 30, 1996 compared with the same periods in
1995, and the changes in financial condition through the third quarter of
1996.
Results of Operations:
Operating revenue increased 22.4% to $58.2 million in the third quarter of
1996 from $47.5 million in the third quarter of 1995. Operating revenue
for the nine months ended September 30, 1996, (the "1996 Period") increased
21.0% to $171.9 million from $142.1 million for the nine months ended
September 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 17.4% of revenue in the third
quarter of 1996 from 19.8% in the third quarter of 1995 and to 17.6% of
revenue in the 1996 Period from 21.9% of revenue in the 1995 Period. For
both the quarter and nine months, the decrease was attributable to a
reduction in the miles driven by company drivers and a corresponding
increase in miles driven by independent contractors. Accordingly, company
driver wages as a percentage of revenue decreased to 11.1% from 13.8% for
the compared quarters and decreased to 11.3% from 14.8% for the compared
nine month periods. During the third quarter of 1996, company drivers
accounted for 39% and independent contractors 61% of the total fleet miles,
compared with 48% and 52%, respectively, in the third quarter of 1995.
During the first nine months of 1996 company drivers accounted for 39% and
independent contractors 61% of the total fleet miles, compared with 53% and
47% respectively in the first nine months of 1995.
Rent and purchased transportation increased to 41.1% of revenue during the
third quarter of 1996 from 35.0% in the third quarter of 1995 and to 41.3%
of revenue during the 1996 Period from 32.0% during the 1995 Period. The
increase in both the quarter and nine 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 9.0% of revenue in the
third quarter of 1996 from 10.2% in the third quarter of 1995 and
to 9.4% of revenue during the 1996 Period from 11.1% during the 1995
Period. For both the quarter and nine months, the decrease was
attributable to 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). Additionally the decrease was
partially offset by the nationwide increase in fuel prices.
Taxes and licences and communications and utilities decreased slightly as a
percentage of sales in both the third quarter and first nine months of 1996
versus the same periods in 1995 because the Company does not cover all of
such costs for independent contractors, which have grown as a percentage of
the Company's fleet. Insurance and claims increased as a percentage of
sales for the third quarter of 1996 versus 1995 but, were the same for 1996
and 1995 Periods. The increase for the compared quarters was the result of
an increase in the frequency of accidents.
Depreciation decreased to 5.6% of revenue during the third quarter of 1996
from 7.6% reported in the third quarter of 1995 and to 6.0% of revenue
during the 1996 Period from 8.2% during the 1995 Period. For both the
quarter and nine 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 was paid off in the third quarter of
1996.
The Company's effective tax rate was 37.0% for the nine month periods ended
September 30, 1996 and 1995.
As a result of the foregoing, the Company's operating ratio (operating
expenses as a percentage of operating revenue) was 83.2% during the third
quarter of 1996 compared with 82.1% during the third quarter of 1995 and
83.8 % during the Period compared with 83.5% during the 1995 Period. Net
income increased 16.7% to $6.6 million during the third quarter of 1996
from $5.6 million during the third quarter of 1995, and 21.3% to $18.8
million
-8-
during the 1996 Period from $15.5 million during the 1995 Period. The
increase in the operating ratio for the third quarter of 1996 was
attributable primarily to the increase in independent contractors.
Liquidity and Capital Resources
The growth of the Company's business has required significant investments
on 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
the business. Net cash flow provided by operating activities was $33.8
million during the first nine months of 1996 and $31.6 million for the
first nine months of 1995.
Working capital at September 30, 1996 was $64.3 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 nine months
of 1996. At September 30, 1996, the Company had $81.5 million in cash,
cash equivalents, and municipal bonds, and such investments generated $1.9
million in interest income (primarily tax exempt) during the nine months
ended September 30, 1996.
The Company paid off all debt 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
An 8-K was filed on September 26, 1996 to disclose
a three for two stock split effective in the form
of a stock dividend.
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 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
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-