SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarter ended June 30, 1995 Commission File No. 0-15087
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HEARTLAND EXPRESS, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Nevada 93-0926999
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
2777 Heartland Drive, Coralville, Iowa 52241
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(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code (319) 645-2728
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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, 1995, there were 13,016,600 shares of the Company's
$.10 par value common stock outstanding.
PART I
FINANCIAL INFORMATION
PAGE
NUMBER
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Item 1. Financial statements
Consolidated balance sheets
June 30, 1995 (unaudited) and
December 31, 1994.................................. 2-3
Consolidated statements of income
(unaudited) for the three and six
month periods ended June 30, 1995 and 1994......... 4
Consolidated statements of cash flows
(unaudited) for the six months ended
June 30, 1995 and 1994............................. 5
Notes to financial statements........................ 6-7
Item 2. Management's discussion and analysis of
financial condition and results of
operations......................................... 8-9
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
security holders.............................. 10
Item 5. Other information............................. 10
Item 6. Exhibits and reports of Form 8-K.............. 10
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HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
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JUNE 30, DECEMBER 31,
1995 1994
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(UNAUDITED) *(NOTE 1)
CURRENT ASSETS
Cash and cash equivalents $ 32,711,491 $ 10,218,484
Trade receivables, less allowance
of $402,812 and $402,812 respectively 15,081,431 17,443,434
Prepaid tires 2,527,645 2,244,185
Municipal bonds 2,944,039 2,856,558
Deferred income taxes 11,909,000 10,933,000
Other current assets 1,647,212 693,252
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Total current asset $ 66,820,818 $ 44,388,913
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PROPERTY AND EQUIPMENT
Land and land improvements $ 2,463,010 $ 2,463,010
Buildings 7,098,843 7,098,843
Furniture and fixtures 1,656,094 3,319,817
Shop and service equipment 1,072,709 1,586,635
Revenue equipment 104,851,251 119,195,666
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$ 117,141,907 $ 133,663,971
Less accumulated depreciation & amortization 35,757,626 42,848,820
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Property and equipment, net $ 81,384,281 $ 90,815,151
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OTHER ASSETS $ 1,161,070 $ 1,188,534
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$ 149,366,169 $ 136,392,598
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*Note: See Note 1 of "Notes to Financial Statements" for information
regarding the December 31, 1994 balance sheet.
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HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
JUNE 30, DECEMBER 31,
1995 1994
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(UNAUDITED) *(NOTE 1)
CURRENT LIABILITIES
Current maturities of long-term debt $ 652,089 $ 450,531
Accounts payable & accrued liabilities 6,408,332 5,687,651
Compensation & benefits 4,998,154 4,569,622
Income taxes payable 2,754,000 2,865,902
Insurance accruals
Liability claims 20,746,888 19,623,257
Workers' compensation accrual 6,398,007 6,039,846
Other 2,171,357 2,356,150
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Total current liabilities $ 44,128,827 $ 41,592,959
LONG-TERM DEBT $ 278,704 $ 705,437
DEFERRED INCOME TAXES $ 17,095,000 $ 16,044,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Capital Stock:
Preferred, $.10 par value; authorized
5,000,000 share; none issued $ -- $ --
Common, $.10 par value; authorized
35,000,000 shares; issued and outstanding
13,016,600 shares 1,301,660 1,301,660
Additional paid-in capital 5,606,510 5,606,510
Retained earnings 80,955,468 71,142,032
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$ 87,863,638 $ 78,050,202
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$ 149,366,169 $ 136,392,598
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*Note: See Note 1 of "Notes to Financial Statements" for information
regarding the December 31, 1994 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,
1995 1994 1995 1994
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Operating revenue $ 46,973,780 $ 59,303,216 $ 94,556,903 $120,684,235
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Operating expenses:
Salaries, wages, benefits $ 10,028,816 $ 14,316,942 $ 21,776,419 $ 30,121,842
Rent and purchased transportation 15,228,795 15,363,719 28,798,875 30,102,362
Operations and maintenance 5,095,201 9,143,602 10,960,605 18,533,164
Taxes and licenses 1,200,796 1,869,384 2,507,602 5,703,580
Insurance and claims 2,274,998 3,862,029 4,561,795 6,997,945
Communications and utilities 444,140 647,105 1,090,990 1,420,468
Depreciation 4,012,392 5,116,528 8,191,679 10,894,275
Other operating expenses 750,863 1,861,382 1,725,388 4,030,064
(Gain) on sale of fixed assets (2,281) (68,619) (22,112) (224,772)
Merger consumation and integration costs -- -- -- 1,978,600
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$ 39,033,720 $ 52,112,072 $ 79,591,241 $109,557,528
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Operating income $ 7,940,060 $ 7,191,144 $ 14,965,662 $ 11,126,707
Interest income 373,362 59,353 654,999 255,101
Interest (expense) (22,617) (452,874) (47,798) (1,715,019)
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Income before income taxe $ 8,290,805 $ 6,797,623 $ 15,572,863 $ 9,666,789
Federal and state income taxes 3,065,028 2,513,854 5,759,428 4,152,380
Deferred income tax charge for change
in tax status -- -- -- 2,925,600
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Total income tax expense $ 3,065,028 $ 2,513,854 $ 5,759,428 $ 7,077,980
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Net income $ 5,225,777 $ 4,283,769 $ 9,813,435 $ 2,588,809
Pro forma adjustment to reflect income tax
provision as if the combined company
was a "C" corporation for the entire period $ -- $ -- $ -- $ (3,304,126)
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Pro forma income tax expense $ -- $ -- $ -- $ 3,773,854
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Pro forma net income $ -- $ -- $ -- $ 5,892,935
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Earnings per share:
Outstanding shares 13,016,600
Net income $ 0.40 $ 0.33 $ 0.75 $ 0.20
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Pro forma net income $ -- $ -- $ -- $ 0.45
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See Notes to Financial Statements.
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HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
Six months ended
June 30,
1995 1994
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OPERATING ACTIVITIES
Net Income $ 9,813,435 $ 2,588,809
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 8,191,679 10,904,275
Deferred income taxes 75,000 2,010,600
Gain on sale of fixed assets (22,112) (224,772)
Changes in certain working capital items:
Trade receivables 2,362,003 (87,777)
Other current assets (953,960) 1,418,469
Prepaid expenses 1,118,500 (841,093)
Accounts payable and accrued expenses 2,442,646 6,018,675
Accrued income taxes (111,902) 262,000
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Net cash provided by operating activies $ 22,915,289 $ 22,049,186
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INVESTING ACTIVITIES
Proceeds from sale of prop. and equip. $ 27,058 $ 1,804,640
Purchase of property and equipment (164,148) (7,198,758)
Purchase of municipal bonds (87,481) (22,633)
Redemption of municipal bonds -- 15,007,378
Other 27,464 --
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Net cash provided by (used in) investment activities $ (197,107) $ 9,590,627
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FINANCING ACTIVITIES
Net (repayments) borrowings on revolving credit agreements $ -- $ (718,430)
Proceeds from long-term notes payable -- 14,205,565
Principal payments on long-term notes (225,175) (53,859,528)
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Net cash (used in) financing activities $ (225,175) $ (40,372,393)
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Net increase (decrease) in cash and cash equivalents $ 22,493,007 $ (8,732,580)
CASH AND CASH EQUIVALENTS
Beginning of year 10,218,484 9,391,651
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End of quarter $ 32,711,491 $ 659,071
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 47,798 $ 1,791,960
Income taxes 1,127,986 4,836,518
Noncash investing activities:
Book value of revenue equipment traded $ 13,217,673 $ 1,363,485
See Notes to Financial Statements.
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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, 1995 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1995.
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, 1994.
NOTE 2. HEARTLAND/MUNSON MERGER
Effective March 21, 1994, Heartland consummated a merger with
Munson Transportation, Inc. and two affiliated companies
(collectively, "Munson"). Former Munson stockholders received
approximately 4% of the Company's outstanding stock in the
transaction, which was a merger accounted for as a pooling of
interests. Merger consummation and integration costs of $3.5
million associated with the merger of Munson and the cost of
closing duplicate facilities were incurred in 1994. These
nonrecurring expenses consisted primarily of changes in reserve
estimates for liability and workers' compensation claims,
conforming accounting policies, accounting and legal expenses,
severance pay, and writing down the value of the Monmouth, Illinois
terminal. During the first six months of 1994, $1.9 million of
this nonrecurring charge was recorded and accordingly, decreased
net income for the six-month period ended June 30, 1994 by
approximately $1.3 million ($0.11 per share).
The Company continued Munson's separate operations throughout much
of 1994, and in December relocated all administrative and
operational functions to Heartland's headquarters. The Company
retained Munson's Monmouth, Illinois maintenance and repair
facility until April, 1995 when it was then relocated to
Heartland's headquarters.
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Under the accounting rules applicable to transactions qualifying as
a pooling of interest, the Company restated prior years' financial
statements as if Heartland and Munson had been operated on a
combined basis for all periods presented. Therefore, all financial
information concerning the Company presented in this report
reflects the combined operations of both companies.
NOTE 3. INCOME TAXES
Income taxes for the three and six month periods ended June 30,
1995 are based on the Company's estimated effective tax rates. The
rate for the quarters ended June 30, 1995 and 1994 was 37%. The
rate for the six months ended June 30, 1995 and 1994 was 37% and
43%, respectively. The effective tax rate for the six month period
ended June 30, 1994 was impacted by Munson's losses incurred prior
to the merger on March 21, 1994 which cannot be deducted and
certain merger related expenses, primarily professional fees which
are not deductible.
The Company recorded a $2.9 million one-time charge during the
first quarter of 1994 to recognize a deferred income tax obligation
representing temporary differences in the basis of assets and
liabilities for financial reporting and tax purposes. The Company
was required to record the charge following the merger of Munson,
which had previously been a "S" corporation, and as such had not
recorded such obligations.
The pro forma income tax expense presented for the first six months
of 1994 reflects the estimated amount of income tax expense that
would have been recorded if the combined company was a "C"
corporation for the entire period.
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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
second quarter of 1995 compared with the second quarter of 1994 and
the changes in financial condition through the second quarter of
1995.
RESULTS OF OPERATIONS:
Operating revenue decreased 20.8% to $46.9 million in the second
quarter of 1995 from $59.3 million in the second quarter of 1994.
Operating revenue for the six months ended June 30, 1995 decreased
21.6% to $94.5 million from $120.6 million for the six months ended
June 30, 1994. This decrease is attributable to the Company's
decision to eliminate unprofitable flatbed, brokerage, and
temperature-controlled operations. The Company also discontinued
selective traffic lanes that did not meet the Company's operating
strategy. In addition, revenues were impacted by a decrease in
customer demand due to overall softness in the economy.The operating
ratio (operating expenses as a percentage of operating revenue) for
the second quarter of 1995 was 83.1% compared with 87.9% for the second
quarter of 1994. The operating ratio for the first six months of 1995
was 84.2% compared with 90.8% for the first six months of 1994. Net
income for the second quarter of 1995 was $5.2 million compared with
$4.2 million for the second quarter of 1994. Net income for the first
six months of 1995 was $9.8 million compared with $2.5 million for the
six months ended June 30, 1994. The operating ratio and net income for
the six months ended June 30, 1994 was adversely affected by nonrecurring
charges resulting from the merger with Munson Transportation.
Salaries, wages, and benefits decreased to 21.3% of revenue in the
second quarter of 1995 from 24.1% in the second quarter of 1994.
This decrease was attributable to (i) a substantial reduction in
the number of non-driver personnel due to the consolidation of
facilities, (ii) a 33.3% reduction in the miles driven by company
drivers, and (iii) a 69.8% reduction in health and workers'
compensation claims due to fewer and less severe claims. The
decrease in total company driver payroll was partially offset by an
approximate 12.0% increase in the rate per mile paid to company
drivers.
Operations and maintenance expenses decreased to 10.8% of revenues
in the second quarter of 1995 from 15.4% reported in the second
quarter of 1994. This reduction is the result of lower repair and
maintenance costs and better fuel efficiency attributable to the
replacement of older model revenue equipment with new tractors and
trailers. The decrease is also attributable to efficiencies
attained from the consolidation of our maintenance facilities.
Other operating expenses decreased to 1.6% of revenue in the second
quarter of 1995 from 3.1% in the second quarter of 1994. This
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decrease was primarily a result of eliminating service to customers
requiring pallets and from efficiencies gained from the
consolidation of facilities.
Nonrecurring merger and consummation costs of $1.9 million
accounted for 1.6% of revenue in the first six months of 1994. See
Note 1 of the Notes to Financial Statements for the discussion of
this one-time charge.
Interest expense decreased to approximately $47,000 during the six
month period ended June 30, 1995 compared with $1.7 million for the
first six months of 1994 as a result of the reduction of debt and
capital lease obligations. The Company's long-term debt was
approximately $930,000 at June 30, 1995 compared with $17.2 million
at June 30, 1994.
The Company's effective tax rate was 37.0% for the three and six
month periods ended June 30, 1995. See Note 3 of Notes to
Financial Statements for the discussion of the 1994 effective tax
rate and the $2.9 million one-time deferred tax charge recorded in
the first quarter of 1994.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flows provided by operations was $22.9 million during the
first six months of 1995 and $22.0 million for the first six months
of 1994. Working capital at June 30, 1995 was $22.7 million
compared with $13.7 million at March 31, 1995 and $2.9 million at
December 31, 1994.
Since the March 21, 1994 merger with Munson Transportation, the
Company has improved its financial position by reducing long-term
debt to approximately $930,000 at June 30, 1995 from $51.0 million
at March 31, 1994.
The Company expects to finance future growth in its company-owned
fleet primarily through cash flow from operations and with trade
allowances received from traded revenue equipment.
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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
None
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
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JOHN P. COSAERT
Vice-President
Finance and Treasurer
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