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, 1997 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 March 31, 1997, 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
March 31, 1997 (unaudited) and
December 31, 1996 2-3
Consolidated statements of income
(unaudited) for the three month
periods ended March 31, 1997 and 1996 4
Consolidated statements of cash flows
(unaudited) for the three months ended
March 31, 1997 and 1996 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
------
March 31, DECEMBER 31,
1997 1996
-------------- --------------
(Unaudited) *(Note 1)
CURRENT ASSETS
Cash and cash equivalents $ 69,591,233 $ 59,593,468
Trade receivables, less allowance
of $402,812 in each period 19,026,305 15,696,591
Prepaid tires 817,222 1,213,210
Municipal bonds 28,294,912 31,461,259
Deferred income taxes 14,728,300 13,057,000
Other current assets 2,108,716 395,594
-------------- --------------
Total current assets $ 134,566,688 $ 121,417,122
-------------- --------------
PROPERTY AND EQUIPMENT
Land and land improvements $ 2,506,010 $ 2,401,010
Buildings 7,837,703 6,886,615
Furniture and fixtures 2,132,836 2,125,847
Shop and service equipment 1,236,521 1,245,337
Revenue equipment 97,652,981 97,433,211
-------------- --------------
$ 111,366,051 $ 110,092,020
Less accumulated depreciation & amortization 45,053,700 41,697,199
-------------- --------------
Property and equipment, net $ 66,312,351 $ 68,394,821
-------------- --------------
OTHER ASSETS $ 1,634,577 $ 1,692,279
-------------- --------------
$ 202,513,616 $ 191,504,222
============== ==============
*Note: See Note 1 of "Notes to Financial Statements" for information
regarding the December 31, 1996 balance sheet.
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HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, DECEMBER 31,
1997 1996
-------------- --------------
(Unaudited) *(Note 1)
CURRENT LIABILITIES
Accounts payable & accrued liabilities $ 10,361,053 $ 11,384,188
Compensation & benefits 3,995,586 3,878,002
Income taxes payable 8,118,087 3,913,871
Insurance accruals 31,405,506 30,085,809
Other 2,388,946 2,310,185
-------------- --------------
Total current liabilities $ 56,269,178 $ 51,572,055
DEFERRED INCOME TAXES 15,950,000 16,266,000
-------------- --------------
$ 72,219,178 $ 67,838,055
-------------- --------------
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 3,000,000
Additional paid in capital 3,908,170 3,908,170
Retained earnings 123,386,268 116,757,997
-------------- --------------
$ 130,294,438 $ 123,666,167
-------------- --------------
$ 202,513,616 $ 191,504,222
============== ==============
*Note: See Note 1 of "Notes to Financial Statements" for information
regarding the December 31, 1996 balance sheet.
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HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three months ended
March 31,
1997 1996
-------------- --------------
OPERATING REVENUE $ 59,887,300 $ 54,363,092
-------------- --------------
OPERATING EXPENSES:
Salaries, wages, benefits $ 10,904,279 $ 10,306,288
Rent and purchased transportation 23,854,048 21,725,286
Operations and maintenance 6,184,116 5,426,063
Taxes and licenses 1,341,751 1,311,771
Insurance and claims 2,861,619 2,354,234
Communications and utilities 635,948 516,541
Depreciation 3,302,138 3,463,551
Other operating expenses 1,162,403 968,640
(Gain) on sale of fixed assets (800) (189,041)
-------------- --------------
$ 50,245,502 $ 45,883,333
-------------- --------------
Operating income $ 9,641,798 $ 8,479,759
Interest income 879,045 631,671
Interest expense 0 (15,158)
-------------- --------------
Income before income taxes $ 10,520,843 $ 9,096,272
Federal and state income taxes(Note 2) 3,892,572 3,365,619
-------------- --------------
Net income $ 6,628,271 $ 5,730,653
============== ==============
Earnings per common share:
Net income $ 0.22 $ 0.19
============== ==============
Weighted average shares outstanding 30,000,000 30,000,000
============== ==============
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HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
Three months ended
March 31,
1997 1996
-------------- --------------
OPERATING ACTIVITIES
Net income $ 6,628,271 $ 5,730,653
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 3,365,316 3,559,752
Deferred income taxes (1,987,300) (700,000)
Gain on sale of fixed assets (800) (189,041)
Changes in certain working capital items:
Trade receivables (3,329,714) 138,216
Other current assets (1,713,122) (1,390,568)
Prepaid expenses 348,007 652,037
Accounts payable and accrued expenses 2,210,170 2,315,915
Accrued income taxes 4,204,216 3,969,651
-------------- --------------
Net cash provided by operating activities $ 9,725,044 $ 14,086,615
-------------- --------------
INVESTING ACTIVITIES
Proceeds from sale of prop. and equipment 801 393,513
Purchase of property and equipment (2,952,129) (2,829)
Redemption (purchase) of municipal bonds 3,166,347 (3,225,408)
Other 57,702 (20,026)
-------------- --------------
Net cash (used) in investment activities $ 272,721 $ (2,854,750)
-------------- --------------
FINANCING ACTIVITIES
Principal payments on long-term notes $ 0 $ (134,320)
-------------- --------------
Net cash (used in) financing activities $ 0 $ (134,320)
-------------- --------------
Net increase in cash and cash equivalents $ 9,997,765 $ 11,097,545
CASH AND CASH EQUIVALENTS
Beginning of year 59,593,468 46,162,143
-------------- --------------
End of quarter $ 69,591,233 $ 57,259,688
============== ==============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 0 $ 15,158
Income taxes 1,675,656 95,967
Noncash investing activities:
Book value of revenue equipment traded $ 0 $ 2,677,133
-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, 1997 are not necessarily indicative of the results that may be expected
for the year ended December 31, 1997. 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, 1996.
Note 2. Income Taxes
Income taxes for the three month period ended March 31, 1997 are based on
the Company's estimated effective tax rates. The rate for the three
eriods ended March 31, 1997 and 1996 was 37%.
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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, 1997 compared with the same period in 1996, and the changes
in financial condition through the first quarter of 1997.
Results of Operations:
Operating revenue increased 10.2% to $59.9 million in the first quarter of
1997 from $54.4 million in the first quarter of 1996. The revenue increase
was attributable primarily to increased business from existing customers.
Salaries, wages, and benefits increased to $10.9 million in the first
quarter of 1997 from $10.3 in the first quarter of 1996. As a percentage
of revenue, salaries, wages and benefits decreased to 18.2% in the first
quarter of 1997 from 19.0% in the first quarter of 1996. The cost increase
was the result of the increase in the Company driver mileage pay rate
effective January 1, 1997.
Rent and purchased transportation increased to $23.8 million during the
first quarter of 1997 from $21.7 million during the first quarter of 1996.
As a percentage of revenue, rent and purchased transportation decreased to
39.8% in the first quarter of 1997 from 40.0% in the first quarter of 1996.
The cost increase was attributable to the January 1, 1997 increase in the
independent contractor mileage pay rate and also as a result of fuel
surcharges paid to independent contractors.
Operations and maintenance increased to $6.2 million in the first quarter
of 1997 from $5.4 million in the first quarter of 1996. As a percentage of
revenue, operations and maintenance increased to 10.3% of revenue in the
first quarter of 1997 from 10.0% during the first quarter of 1996. For
quarter, the increase was primarily attributable to higher fuel prices and
an increase in the number of miles driven by the Company drivers.
Taxes and licences were unchanged at $1.3 million in the first quarter of
1997 and the first quarter of 1996. As a percentage of revenue taxes and
licences decreased to 2.2% in the first quarter of 1997 from 2.4% in the
first quarter of 1996. This reflects Heartlands commitment to managing
this area and rotating the available plates and permits.
-7-
Insurance and claims increased to $2.9 million in the first quarter of 1997
from $2.4 million in the first quarter of 1996. As a percentage of
revenue, insurance and claims increased to 4.8% in the first quarter of
1997 from 4.3% in the first quarter of 1996. 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.
Depreciation decreased to $3.3 million during the first quarter of 1997
from $3.5 million reported in the first quarter of 1996. As a percentage
of revenue, depreciation decreased to 5.5% of revenue during the first
quarter of 1997 from 6.4% during the first quarter of 1996. 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.
Other operating expenses increased to $1.2 million during the first quarter
of 1997 from $1.0 million during the first quarter of 1996. As a
percentage of revenue, other operating expenses increased to 1.9% in the
first quarter of 1997 from 1.8% in the first quarter of 1996. This was
primarily caused by the increases in advertising for new professional
drivers.
The Company's effective tax rate was 37.0% for the three month periods
ended March 31, 1997 and 1996.
As a result of the foregoing, the Company's operating ratio (operating
expenses as a percentage of operating revenue) was 83.9% during the first
quarter of 1997 compared with 84.4% during the first quarter of 1996. Net
income increased 15.7% to $6.6 million during the first quarter of 1997
from $5.7 million during the first quarter of 1996. The decrease in the
operating ratio for the first quarter of 1997 was attributable to
managements emphasis on controlling costs.
-8-
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 $9.7
million during the first three months of 1997 and $14.1 million for the
first three months of 1996.
Working capital at March 31, 1997 was $78.3 million compared with $69.8
million at December 31, 1996. This increase is primarily due to increases
in cash, cash equivalents, and municipal bonds during the first three
months of 1997. At March 31, 1997, the Company had $97.9 million in cash,
cash equivalents, and municipal bonds, and such investments generated $0.9
million in interest income (primarily tax exempt) during the three months
ended March 31, 1997.
-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, 1996.
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
Executive Vice-President
Finance and Treasurer
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