<PAGE>
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, 1995 Commission File No. 0-15087
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HEARTLAND EXPRESS, INC.
- - - - - --------------------------------------------------------------------------------
(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
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At March 31, 1995, there were 13,016,600 shares of the Company's $.10 par value
common stock outstanding.
<PAGE>
PART I
FINANCIAL INFORMATION
Page
Number
Item 1. Financial statements
Consolidated balance sheets
March 31, 1995 (unaudited) and
December 31, 1994 2-3
Consolidated statements of income
(unaudited) for the three month
periods ended March 31, 1995 and 1994 4
Consolidated statements of cash flows
(unaudited) for the three months ended
March 31, 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 10
security holders
Item 5. Other information 10
Item 6. Exhibits and reports of Form 8-K 10
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<PAGE>
HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
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MARCH 31, DECEMBER 31,
1995 1994
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(unaudited) *(Note 1)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 20,726,244 $ 10,218,484
Trade receivables, less allowance of
$402,812 and $402,812 respectively 18,877,638 17,443,434
Prepaid tires 2,428,824 2,244,185
Municipal bonds 2,922,887 2,856,558
Deferred income taxes 11,412,000 10,933,000
Other current assets 1,618,958 693,252
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Total current assets $ 57,986,551 $ 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 1,150,971 1,586,635
Revenue equipment 111,975,563 119,195,666
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$ 124,344,481 $ 133,663,971
Less accumulated depreciation &
amortization 38,306,561 42,848,820
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Property and equipment, net $ 86,037,920 $ 90,815,151
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OTHER ASSETS $ 1,161,070 $ 1,188,534
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$ 145,185,541 $ 136,392,598
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<FN>
*Note: See Note 1 of "Notes to Financial Statements" for information
regarding the December 31,1994 balance sheet.
</TABLE>
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<PAGE>
HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
MARCH 31, DECEMBER 31,
1995 1994
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(unaudited) *(Note 1)
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt $ 440,690 $ 450,531
Accounts payable & accrued liabilities 6,930,494 5,687,651
Compensation & benefits 4,868,757 4,569,622
Income taxes payable 3,701,000 2,865,902
Insurance accruals
Liability claims 19,741,794 19,623,257
Workers' compensation accrual 6,337,427 6,039,846
Other 2,219,035 2,356,150
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Total current liabilities $ 44,239,197 $ 41,592,959
LONG-TERM DEBT $ 608,484 $ 705,437
DEFERRED INCOME TAXES $ 17,700,000 $ 16,044,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Capital Stock:
Preferred, $.10 par value; authorized
5,000,000 share; none issued $ -- $ --
Common, $.10 par value; authorized
35,000,000 shares; issued and
outstanding 13,016,600 shares 1,301,660 1,301,660
Additional paid-in capital 5,606,510 5,606,510
Retained earnings 75,729,690 71,142,032
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$ 82,637,860 $ 78,050,202
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$ 145,185,541 $ 136,392,598
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<FN>
*Note: See Note 1 of "Notes to Financial Statements" for information regarding
the December 31, 1994 balance
</TABLE>
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<PAGE>
HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
1995 1994
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<S> <C> <C>
Operating revenue $ 47,583,123 $ 61,381,019
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Operating expenses:
Salaries, wages, benefits $ 11,747,603 $ 15,804,900
Rent and purchased transportation 13,570,080 14,738,643
Operations and maintenance 5,865,404 11,365,389
Taxes and licenses 1,306,806 1,858,369
Insurance and claims 2,286,797 3,135,916
Communications and utilities 646,850 773,363
Depreciation 4,179,287 5,777,747
Other operating expenses 974,525 2,168,682
(Gain) on sale of fixed assets (19,831) (156,153)
Merger consummation and integration -- 1,978,600
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$ 40,557,521 $ 57,445,456
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Operating income $ 7,025,602 $ 3,935,563
Interest income 281,637 195,748
Interest expense (25,181) (1,262,145)
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Income before income taxes $ 7,282,058 $ 2,869,166
Federal and state income taxes 2,694,400 1,638,526
Deferred income tax charge for change
in tax status -- 2,925,600
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Total income tax expense $ 2,694,400 $ 4,564,126
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Net income (loss) $ 4,587,658 $ (1,694,960)
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---------------- ----------------
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 $ -- $ 1,260,000
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---------------- ----------------
Pro forma net income $ -- $ 1,609,166
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Earnings per share:
Outstanding shares 13,016,600
Net income (loss) $ 0.35 $ (0.13)
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---------------- ----------------
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Pro forma net income $ -- $ 0.12
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</TABLE>
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<PAGE>
HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
1995 1994
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<S> <C> <C>
OPERATING ACTIVITIES
Net income(loss) $ 4,587,658 $ (1,694,960)
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 4,179,287 5,787,781
Deferred income taxes 1,177,000 2,138,600
Gain on sale of fixed assets (19,831) (156,153)
Changes in certain working capital
items:
Trade receivables (1,434,204) (2,146,599)
Other current assets (1,562,068) 601,230
Prepaid expenses 1,103,660 (1,380,806)
Accounts payable and accrued expense 1,867,266 4,321,544
Accrued income taxes 835,098 2,246,000
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Net cash provided by operating
activities $ 10,733,866 $ 9,716,637
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INVESTING ACTIVITIES
Proceeds from sale of prop. and equip. $ 22,963 $ 1,496,062
Purchase of property and equipment (103,410) (4,110,600)
Purchase of municipal bonds (66,329) (22,633)
Redemption of municipal bonds 0 4,114,615
Other 27,464 0
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Net cash provided by (used in)
investment activities $ (119,312) $ 1,477,444
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FINANCING ACTIVITIES
Net (repayments) borrowings on
revolving credit $ 0 $ (243,169)
Proceeds from long-term notes payable 0 588,664
Principal payments on long-term notes (106,794) (6,496,751)
--------------- ---------------
Net cash (used in) financing
activities $ (106,794) $ (6,151,256)
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Net increase in cash and cash
equivalents $ 10,507,760 $ 5,042,825
CASH AND CASH EQUIVALENTS
Beginning of year 10,218,484 9,391,651
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End of quarter $ 20,726,244 $ 14,434,476
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 25,181 $ 1,283,368
Income taxes 660,820 164,720
Noncash investing activities:
Book value of revenue equipment
traded $ 6,635,985 $ 270,099
See Notes to Financial Statements.
</TABLE>
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<PAGE>
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, 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 quarter of 1994, $1.9 million of this nonrecurring
charge was recorded and accordingly, increased the net loss for the quarter 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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<PAGE>
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 interim period ended March 31, 1995 are based on the
Company's estimated effective tax rates. The rate for the quarters ended March
31, 1995 and 1994 was 37% and 57%, respectively. The first quarter, 1994
effective tax rate 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 quarter 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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<PAGE>
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 first quarter
of 1995 compared with the first quarter of 1994 and the changes in financial
condition through the first quarter of 1995.
Results of Operations:
Operating revenue decreased 22.5% to $47.6 million in the first quarter of 1995
from $61.4 million in the first quarter of 1994. This decrease is attributable
to the Company's decision to eliminate unprofitable temperature-controlled,
flatbed, and brokerage operations. The Company also discontinued selective
traffic lanes that did not meet the Company's operating strategy. The operating
ratio (operating expenses as a percentage of operating revenue) for the first
quarter of 1995 was 85.2% compared with 93.6% for the first quarter of 1994.
Net income for the first quarter of 1995 was $4.6 million compared with a net
loss of $1.7 million for the first quarter of 1994. The first quarter of 1994
was adversely effected by nonrecurring charges resulting from the merger with
Munson Transportation.
Salaries, wages, and benefits decreased to 24.7% of revenue in the first quarter
of 1995 from 25.7% in the first 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 reduction in the miles driven by company
drivers, and (iii) a 47.2% 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 August 1994 increase in the rate per mile
paid to company drivers.
Rent and purchased transportation increased to 28.5% of revenue in the first
quarter of 1995 from 24.0% in the first quarter of 1994. This increase is a
result of corresponding increase in the percentage of miles being driven by
independent contractors. The Company also increased the base mileage rate being
paid to independent contractors in January, 1995.
Operations and maintenance expenses decreased to 12.3% of revenues in the first
quarter of 1995 from 18.5% reported in the first 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. These expenses are also impacted by the increased
reliance on independent contractors, who pay their own maintenance, repair and
fuel costs.
Other operating expenses decreased to 2.1% of revenue in the first quarter of
1995 from 3.5% in the first quarter of 1994. This
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<PAGE>
decrease was primarily a result of eliminating service to customers requiring
pallets and the consolidation of facilities.
Nonrecurring merger and consummation costs of $1.9 million accounted for 3.2% of
revenue in the first quarter of 1994. See Note 1 of the Notes to Financial
Statements for the discussion of this one-time charge.
Interest expense decreased to .1% of revenue in the first quarter of 1995 from
2.1% of revenue in the first quarter of 1994, as a result of the reduction of
debt and capital lease obligations. The Company's long-term debt was $1.0
million at March 31, 1995, compared with $51.4 million at March 31, 1994.
The Company's effective tax rate was 37.0% in the first quarter of 1995,
compared with 57.1% in the first quarter of 1994. See Note 3 of Notes to
Financial Statements for the discussion of the 1994 effective 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 $10.7 million in the first quarter of
1995 and $9.7 million for the first quarter of 1994. Working capital at March
31, 1995 was $13.7 million compared with $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 $1.0 million at
March 31, 1995 from $56.9 million at December 31, 1993.
The Company expects to finance future growth in its company-owned fleet
primarily through cash flow operations.
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<PAGE>
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
-----------------------
JOHN P. COSAERT
Vice-President
Finance and Treasurer
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 20,726,244
<SECURITIES> 2,922,887
<RECEIVABLES> 19,280,450
<ALLOWANCES> 402,812
<INVENTORY> 0
<CURRENT-ASSETS> 57,986,551
<PP&E> 124,344,481
<DEPRECIATION> 38,306,561
<TOTAL-ASSETS> 145,185,541
<CURRENT-LIABILITIES> 44,239,197
<BONDS> 608,484
<COMMON> 1,301,660
0
0
<OTHER-SE> 81,336,200
<TOTAL-LIABILITY-AND-EQUITY> 145,185,541
<SALES> 0
<TOTAL-REVENUES> 47,583,123
<CGS> 0
<TOTAL-COSTS> 40,557,521
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,181
<INCOME-PRETAX> 7,282,058
<INCOME-TAX> 2,694,400
<INCOME-CONTINUING> 4,587,658
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,587,658
<EPS-PRIMARY> $.35
<EPS-DILUTED> $.35
</TABLE>
