UNITED STATES
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, 2006 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) 545-2728
----------------
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 [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. (See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act). Large
accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No {X}
At September 30, 2006, there were 98,251,889 shares of the Company's $.01 par
value common stock outstanding.
HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
PART I
FINANCIAL INFORMATION
Page
Number
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets
September 30, 2006 and
December 31, 2005 1-2
Consolidated Statements of Income
for the Three and Nine Months
ended September 30, 2006 and 2005 3
Consolidated Statements of Stockholders' Equity
for the Nine Months
ended September 30, 2006 4
Consolidated Statements of Cash Flows
for the Nine Months ended
September 30, 2006 and 2005 5
Notes to Consolidated Financial Statements 6-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9-15
Item 3. Quantitative and Qualitative Disclosures about Market Risk 16
Item 4. Controls and Procedures 16
PART II
OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults upon Senior Securities 16
Item 4. Submission of Matters to a Vote of
Security Holders 16
Item 5. Other Information 16-17
Item 6. Exhibits and Reports on Form 8-K 17
HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS September 30, December 31,
2006 2005
------------ ------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents .................... $ 23,066,640 $ 5,366,929
Short-term investments ....................... 298,853,453 282,255,377
Trade receivables, less
allowance of $775,000 ........................ 46,404,543 42,860,411
Prepaid tires ................................ 5,238,531 3,998,430
Other prepaid expenses ....................... 4,034,919 304,667
Deferred income taxes ........................ 28,416,000 28,721,000
------------ ------------
Total current assets ....................... 406,014,086 363,506,814
------------ ------------
PROPERTY AND EQUIPMENT
Land and land improvements ................... 11,893,135 10,643,135
Buildings .................................... 17,823,349 16,925,821
Furniture and fixtures ....................... 1,042,131 1,042,131
Shop and service equipment ................... 2,774,914 2,620,031
Revenue equipment ............................ 285,569,219 250,479,838
------------ ------------
319,102,748 281,710,956
Less accumulated depreciation ................ 85,595,291 81,204,416
------------ ------------
Property and equipment, net .................. 233,507,457 200,506,540
------------ ------------
GOODWILL ........................................ 4,814,597 4,814,597
OTHER ASSETS .................................... 5,429,898 4,679,974
------------ ------------
$649,766,038 $573,507,925
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
1
HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September30, December 31,
2006 2005
------------- -------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities ... $ 16,615,312 $ 10,572,525
Compensation and benefits .................. 15,025,171 12,629,831
Income taxes payable ....................... 10,092,332 8,064,947
Insurance accruals ......................... 55,814,578 53,631,471
Other accruals ............................. 7,244,932 7,345,499
------------ ------------
Total current liabilities ............... 104,792,325 92,244,273
------------ ------------
DEFERRED INCOME TAXES ......................... 51,873,000 48,012,000
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred, $.01 par value; authorized
5,000,000 share; none issued ............ -- --
Common, $.01 par value; authorized
395,000,000 shares; issued and
outstanding: 98,251,889 in 2006 and ..... 982,519 738,215
98,428,589 for 2005
Additional paid-in capital ................. 282,022 --
Retained earnings .......................... 491,836,172 432,952,138
------------ ------------
493,100,713 433,690,353
Less: unearned compensation ................ -- (438,701)
------------ ------------
493,100,713 433,251,652
------------ ------------
$649,766,038 $573,507,925
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
2
HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
2006 2005 2006 2005
Operating revenue ............................ $147,057,490 $136,209,698 $425,115,417 $383,738,516
------------ ------------ ------------ ------------
Operating expenses:
Salaries, wages, and benefits ............. $ 47,925,921 $ 45,028,528 $140,337,273 $131,192,465
Rent and purchased transportation ......... 6,093,688 7,462,499 19,065,664 23,004,432
Fuel ...................................... 38,971,251 33,987,533 109,721,660 88,048,039
Operations and maintenance ................ 3,324,149 4,068,029 9,629,849 10,417,495
Operating taxes and licenses .............. 2,259,227 2,249,347 6,530,121 6,505,283
Insurance and claims ...................... 2,620,921 5,015,569 11,543,703 11,817,266
Communications and utilities .............. 912,515 969,344 2,807,947 2,596,260
Depreciation .............................. 12,446,339 9,819,033 33,805,611 27,260,730
Other operating expenses .................. 4,757,332 4,238,892 13,113,338 12,479,904
Gain on disposal of property
and equipment ........................... (4,788,227) (1,961,024) (17,571,767) (2,262,665)
------------ ------------ ------------ ------------
114,523,116 110,877,750 328,983,399 311,059,209
------------ ------------ ------------ ------------
Operating income ...................... 32,534,374 25,331,948 96,132,018 72,679,307
Interest income ........................... 3,141,022 1,865,656 8,553,942 5,252,948
------------ ------------ ------------ ------------
Income before income taxes ............. 35,675,396 27,197,604 104,685,960 77,932,255
Income taxes .............................. 12,664,766 9,655,150 37,163,518 27,665,951
------------ ------------ ------------ ------------
Net income ............................ $ 23,010,630 $ 17,542,454 $ 67,522,442 $ 50,266,304
============ ============ ============ ============
Earnings per share .................... $ 0.23 $ 0.18 $ 0.69 $ 0.51
============ ============ ============ ============
Weighted average shares outstanding ....... 98,330,636 98,428,737 98,395,579 99,360,028
============ ============ ============ ============
Dividends declared per share ............... $ 0.020 $ 0.015 $ 0.055 $ 0.045
============ ============ ============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
3
HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Capital Additional Unearned
Stock, Paid-In Retained Compen-
Common Capital Earnings sation Total
--------- --------- ------------ ----------- -------------
Balance, December 31, 2005 ................... $ 738,215 $ -- $432,952,138 $ (438,701) $433,251,652
Net income ................................... -- -- 67,522,442 -- 67,522,442
Dividends on common stock,
$0.055 per share ........................... -- -- (5,410,039) -- (5,410,039)
Stock split .................................. 246,071 -- (246,071) -- --
Stock repurchase ............................. (1,767) (2,543,597) -- (2,545,364)
Reclassification of unearned compensation .... -- -- (438,701) 438,701 --
Amortization of share based compensation ..... -- 282,022 -- -- 282,022
--------- --------- ------------ ----------- -----------
Balance, September 30, 2006 .................. $ 982,519 $ 282,022 $491,836,172 $ -- $493,100,713
========= ========= ============ =========== ============
The accompanying notes are an integral part of these consolidated financial
statements.
4
HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
2006 2005
------------ -----------
OPERATING ACTIVITIES
Net income .................................. $ 67,522,442 $ 50,266,304
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization ............ 33,820,614 27,275,733
Deferred income taxes .................... 4,166,000 (4,583,000)
Amortization of share based compensation . 282,022 272,713
Gain on disposal of property and equipment (17,571,767) (2,262,665)
Changes in certain working capital items:
Trade receivables ..................... (3,544,132) (7,880,375)
Prepaid expenses ...................... (4,802,241) (2,121,122)
Accounts payable, accrued liabilities,
and accrued expenses................. 6,224,368 10,870,748
Accrued income taxes .................. 2,027,385 949,416
------------ ------------
Net cash provided by operating activities ... 88,124,691 72,787,752
------------ ------------
INVESTING ACTIVITIES
Proceeds from sale of property and equipment 1,841,998 754,386
Purchases of property and equipment,
net of trades ............................ (47,439,440) (28,572,507)
Net purchases of municipal bonds ............ (16,598,076) (16,126,894)
Change in other assets ...................... (764,927) 106,466
------------ ------------
Net cash used in investing activities ....... (62,960,445) (43,838,549)
------------ ------------
FINANCING ACTIVITIES
Cash dividend ............................... (4,919,171) (4,483,987)
Stock repurchase ............................ (2,545,364) (22,419,150)
------------ ------------
Net cash used in financing activities ....... (7,464,535) (26,903,137)
------------ ------------
Net increase in cash and cash equivalents ... 17,699,711 2,046,066
CASH AND CASH EQUIVALENTS
Beginning of period ......................... 5,366,929 1,610,543
------------ ------------
End of period ............................... $ 23,066,640 $ 3,656,609
============ ============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes, net ........................ $ 30,970,133 $ 31,299,435
Noncash investing activities:
Fair value of revenue equipment traded ... $ 43,166,700 $ 25,505,925
The accompanying notes are an integral part of these consolidated financial
statements.
5
HEARTLAND EXPRESS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements of Heartland
Express, Inc. and subsidiaries (the "Company") have been prepared in accordance
with U.S. generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and 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 normal, recurring adjustments considered
necessary for a fair presentation have been included. The financial statements
should be read in conjunction with the audited consolidated financial statements
for the year ended December 31, 2005 included in the Annual Report on Form 10-K
of the Company filed with the Securities and Exchange Commission. Interim
results of operations are not necessarily indicative of the results to be
expected for the full year or any other interim periods. There were no changes
to the Company's significant accounting policies during the quarter.
Note 2. Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Note 3. Segment Information
The Company has ten operating divisions; however, it has determined that it
has one reportable segment. All of the divisions are managed based on similar
economic characteristics. Each of the regional operating divisions provides
short-to medium-haul truckload carrier services of general commodities to a
similar class of customers. In addition, each division exhibits similar
financial performance, including average revenue per mile and operating ratio.
As a result of the foregoing, the Company has determined that it is appropriate
to aggregate its operating divisions into one reportable segment, consistent
with the guidance in SFAS No. 131. Accordingly, the Company has not presented
separate financial information for each of its operating divisions as the
Company's consolidated financial statements present its one reportable segment.
Note 4. Cash and Cash Equivalents
Cash equivalents are short-term, highly liquid investments with
insignificant interest rate risk and original maturities of three months or
less. Restricted and designated cash and short-term investments totaling $5.4
million at September 30, 2006 and $4.7 million at December 31, 2005 are included
in other assets. The restricted funds represent those required for
self-insurance purposes and designated funds represent those earmarked for a
specific purpose not for general business use.
Note 5. Short-term Investments
The Company investments are primarily in the form of tax free municipal
bonds with interest reset provisions or short-term municipal bonds. The
investments typically have a put option of 28 or 35 days. At the reset date the
Company has the option to roll the investment over or sell. The Company receives
the par value of the investment on the reset date if sold. The cost approximates
fair value due to the nature of the investment.
6
Therefore, accumulated other comprehensive income (loss) has not been recognized
as a separate component of stockholders' equity. Investment income received is
generally exempt from federal income taxes.
Note 6. Property, Equipment, and Depreciation
Property and equipment are stated at cost, while maintenance and repairs
are charged to operations as incurred.
Effective July 1, 2005, gains from the trade of revenue equipment are being
recognized in operating income in compliance with Statement of Financial
Accounting Standards ("SFAS") No. 153, "Accounting for Non-monetary
Transactions". Prior to July 1, 2005, gains from the trade-in of revenue
equipment were deferred and presented as a reduction of the depreciable basis of
new revenue equipment. Operating income for the three months ended September 30,
2006 and 2005 were favorably impacted by $3.6 million and $1.9 million,
respectively, from gains on the trade-in of revenue equipment, net of the
associated increase in depreciation expense as a result of the higher
depreciable basis of traded revenue equipment acquired since July 1, 2005.
Operating income for the nine months ended September 30, 2006 and 2005 were
favorably impacted by $14.9 million and $1.9 million, respectively, from gains
on the trade-in of revenue equipment, net of the associated increase in
depreciation expense. SFAS No. 153 was adopted prospectively July 1, 2005, thus
trade-ins that occurred prior to July 1, 2005 did not impact operating income.
Note 7. Stock Split
On April 20, 2006, the Board of Directors approved a four-for-three stock
split, affected in the form of a 33 percent stock dividend. The stock split
occurred on May 15, 2006, to shareholders of record as of May 5, 2006. This
stock split increased the number of outstanding shares to 98.4 million from 73.8
million. The number of common shares issued and outstanding and all per share
amounts have been adjusted to reflect the stock split for all periods presented.
Note 8. Stock Repurchase
In September 2001, the Board of Directors approved a repurchase of up to
5.0 million shares of Heartland Express, Inc. common stock. During the three
month period ended September 30, 2006, the Company purchased 176,700 shares for
approximately $2.5 million at approximately $14.41 per share and the shares were
retired. The cost of such shares purchased and retired in excess of their par
value were charged to retained earnings.
Note 9. Earnings Per Share:
Earnings per share are based upon the weighted average common shares
outstanding during each period. Heartland Express has no common stock
equivalents; therefore, diluted earnings per share are equal to basic earnings
per share.
Note 10. Share Based Compensation
On March 7, 2002, the Company CEO transferred 181,500 of his own shares
establishing a restricted stock plan on behalf of key employees. The shares vest
over a five year period or upon death or disability of the recipient. The shares
were valued at the March 7, 2002 market value of approximately $2.0 million. The
market value of $2.0 million is being amortized over a five year period as
compensation expense. Compensation expense of $93,567 for the three month period
ended September 30, 2006 and $94,227 for the same period of 2005 is recorded in
salaries, wages, and benefits on the consolidated statement of income. For the
nine months ended September 30, 2006 and 2005, compensation expense of $282,022
and $272,713 is recorded in salaries, wages, and benefits on the consolidated
statement of income. As of September 30, 2006, there was $156,679 of unearned
compensation cost related to the restricted stock granted. This cost will be
recognized over the next five months. All unvested shares are included in the
Company's 98.3 million outstanding shares.
7
A summary of the Company's non-vested restricted stock as of September 30,
2006, and changes during the nine months ended September 30, 2006 is presented
in the table below:
Grant-date
Shares Fair Value
-------- ----------
Non-vested stock outstanding at January 1, 2006 68,200 $ 11.00
Granted - -
Vested (33,800) 11.00
Forfeited - -
-------- ----------
Non-vested stock outstanding at September 30, 2006 34,400 $ 11.00
======== ==========
The fair value of the shares vested was $575,181 and $546,134 for the nine
months ended September 30, 2006 and 2005, respectively.
In December 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment," a
revision of SFAS No. 123, which addresses the accounting for share-based payment
transactions. SFAS No. 123(R) eliminates the ability to account for employee
share-based compensation transactions using APB Opinion No. 25, "Accounting for
Stock Issued to Employees," and generally requires instead that such
transactions be accounted and recognized in the consolidated statement of income
based on their fair value. SFAS No. 123(R) also requires entities to estimate
the number of forfeitures expected to occur and record expense based upon the
number of awards expected to vest. The Company implemented SFAS No. 123(R) on
January 1, 2006. The unamortized portion of unearned compensation was
reclassified to retained earnings upon implementation. The amortization of
unearned compensation is being recorded as additional paid-in capital effective
January 1, 2006. The implementation of SFAS No. 123(R) had no effect on the
Company's results of operations for the three and nine months ended September
30, 2006.
Note 11. Commitments and Contingencies
The Company is party to ordinary, routine litigation and administrative
proceedings incidental to its business. In the opinion of management, the
Company's potential exposure under pending legal proceedings is adequately
provided for in the accompanying consolidated financial statements.
The Company had commitments at September 30, 2006 to acquire new revenue
equipment for approximately $40.9 million in fourth quarter 2006. These
commitments are expected to be financed from existing cash and short-term
investment balances and cash flows from operations and trade-in of existing
equipment.
The Company announced on September 8, 2006 that our Board of Directors
declared a regular quarterly dividend of $.02 per common share, payable on
October 2, 2006, to stockholders of record on September 20, 2006.
The Company announced on September 22, 2005 the planned construction of a
new corporate headquarters and an adjacent shop facility. These new facilities
will be funded with the proceeds from the sale of the real estate and from
existing cash and short-term investment balances and cash flows from operations.
Total expenditures for the new building are expected to range from between $12.0
million to $15.0 million. Construction is expected to be completed in the second
quarter of 2007.
Note 12. Related Party Transactions
The Company leases two office buildings and a storage building from its CEO
under a lease that provides for monthly rentals of $27,618 plus the payment of
all property taxes, insurance and maintenance. The lease was renewed for a five
year term on June 1, 2005, increasing the monthly rental from $24,969 to
$27,618. In the opinion of management, the rates paid are comparable to those
that could be negotiated with a third party.
8
Rent expense paid to the Company's CEO totaled $82,854 for the three months
ended September 30, 2006 and 2005. Rent expense paid to the Company CEO totaled
$248,561 and $235,315 for the nine months ended September 30, 2006 and 2005,
respectively. In 2005, the Company announced the construction of a new corporate
headquarters which is expected to be ready for occupancy in 2007. The lease will
be canceled upon the occupancy of the new corporate headquarters and shop
facility.
During the first quarter of 2006, the Company purchased 16.7 acres of land
in North Liberty from the Company's CEO for $1,250,000. The purchase price was
based on the fair market value that could be obtained from an unrelated third
party on an arm's length basis. The transaction was approved by the Board of
Directors.
Note 13. Accounting Pronouncements
In June 2006, the FASB issued FASB Interpretation No. 48 "Accounting for
Uncertainty in Income Taxes (an interpretation of FASB Statement No. 109)",
which is effective for fiscal years beginning after December 15, 2006 with
earlier adoption encouraged. This interpretation was issued to clarify the
accounting for uncertainty in income taxes recognized in the financial
statements by prescribing a recognition threshold and measurement attribute for
the financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. We are currently evaluating the potential
impact of this interpretation.
In September 2006, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin No. 108, "Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements (SAB 108)", to address diversity in practice in quantifying financial
statement misstatements. SAB 108 requires that we quantify misstatements based
on their impact on each of our financial statements and related disclosures. SAB
108 is effective as of the end of our 2006 fiscal year, allowing a one-time
transitional cumulative effect adjustment to retained earnings as of January 1,
2006 for errors that were not previously deemed material, but are material under
the guidance in SAB 108. We are currently evaluating the impact of adopting SAB
108 on our financial statements.
Note 14. Reclassifications
Certain reclassifications have been made to the prior period financial
statements to conform to the September 30, 2006 presentation.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward Looking Statements
Except for certain historical information contained herein, this Quarterly
Report on Form 10-Q contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
involve risks, assumptions and uncertainties which are difficult to predict. All
statements, other than statements of historical fact, are statements that could
be deemed forward-looking statements, including any projections of earnings,
revenues, or other financial items; any statements of plans, strategies, and
objectives of management for future operations; any statements concerning
proposed new strategies or developments; any statements regarding future
economic conditions or performance; any statements of belief and any statement
of assumptions underlying any of the foregoing. Words such as "believe," "may,"
"could," "expects," "anticipates," and "likely," and variations of these words
or similar expressions, are intended to identify such forward-looking
statements. The Company's actual results could differ materially from those
discussed in the section entitled "Factors That May Affect Future Results,"
included in "Management's Discussion and Analysis of Financial Condition and
Results of Operations" set forth in the Company's Annual report on Form 10-K,
which is by this reference incorporated herein. The Company does not assume, and
specifically disclaims, any obligation to update any forward-looking statements
contained in this Quarterly report.
9
Overview
Heartland Express, Inc. is a short-to medium-haul truckload carrier. The
Company transports freight for major shippers and generally earns revenue based
on the number of miles per load delivered. The Company provides regional dry van
truckload services from eight regional operating centers plus its corporate
headquarters. The Company's eight regional operating centers accounted for 61.9%
of the third quarter 2006 operating revenues. The Company takes pride in the
quality of the service that it provides to its customers. The keys to
maintaining a high level of service are the availability of late-model equipment
and experienced drivers.
Operating efficiencies and cost controls are achieved through equipment
utilization, operating a fleet of late model equipment, maintaining an industry
leading driver to non-driver employee ratio, and the effective management of
fixed and variable operating costs. At September 30, 2006, the Company's tractor
fleet had an average age of 1.2 years while the trailer fleet had an average age
of 2.9 years. The Company has grown internally by providing quality service to
targeted customers with a high density of freight in the Company's regional
operating areas. In addition to the development of its regional operating
centers, the Company has made five acquisitions since 1987. Future growth is
dependent upon several factors including the level of economic growth and the
related customer demand, the available capacity in the trucking industry,
potential of acquisition opportunities, and the availability of experienced
drivers.
The Company ended the third quarter of 2006 with operating revenues of
$147.1 million, including fuel surcharges, net income of $23.0 million, and
earnings per share of $0.23 on average outstanding shares of 98.3 million. The
Company posted a 77.9% operating ratio (operating expenses as a percentage of
operating revenues) and a 15.6% net margin. The Company ended the quarter with
cash, cash equivalents, and short-term investments of $321.9 million and a
debt-free balance sheet. The Company had total assets of $649.8 million at
September 30, 2006. The Company achieved a return on assets of 14.8% and a
return on equity of 19.7%, both improvements over the third quarter of 2005. The
Company's cash flow from operations for the first nine months of $88.1 million
represented a 21.1% increase over the same period of 2005.
The three and nine month ended results for 2006 have been favorably
impacted by gains on the trade-in of revenue equipment. Prior to the
implementation of Statement of Financial Accounting Standard No. 153 ("SFAS" No
153) on July 1, 2005, the gains related to trade-in of revenue producing
equipment was deferred as a reduction of the basis of the new equipment.
Management believes that gains reported in future periods will not be at the
same level as seen in the first nine months of 2006.
The Company hires only experienced drivers with safe driving records. In
order to attract and retain experienced drivers who understand the importance of
customer service, the Company increased pay for all drivers in the past three
consecutive years including an increase in 2006. Effective October 2, 2004, the
Company began paying all drivers an incremental amount for miles driven in the
upper Northeastern United States. The Company has solidified its position as an
industry leader in driver compensation with these aforementioned increases. The
driver pay increases in 2006 are for selected regional operations including a
fleet-wide incentive to maintain a hazardous materials endorsement on their
commercial driver's license.
The Company has been recognized as one of the Forbes magazine's "200 Best
Small Companies in America" fifteen times in the past twenty years and for the
past five consecutive years including 2006. The Company has paid cash dividends
over the past thirteen consecutive quarters. The Company became publicly traded
in November, 1986 and is traded on the NASDAQ National Market under the symbol
HTLD.
10
Results of Operations:
The following table sets forth the percentage relationship of expense items
to operating revenue for the periods indicated.
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
------ ------ ------ ------
Operating revenue ........................ 100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------
Operating expenses:
Salaries, wages, and benefits ......... 32.6% 33.1% 33.0% 34.2%
Rent and purchased transportation ..... 4.1 5.5 4.5 6.0
Fuel .................................. 26.5 25.0 25.8 22.9
Operations and maintenance ............ 2.3 2.8 2.3 2.7
Operating taxes and licenses .......... 1.5 1.7 1.5 1.7
Insurance and claims .................. 1.8 3.7 2.7 3.1
Communications and utilities .......... 0.6 0.7 0.6 0.7
Depreciation .......................... 8.5 7.2 8.0 7.1
Other operating expenses .............. 3.3 3.1 3.1 3.3
Gain on disposal of property and
equipment............................ (3.3) (1.4) (4.1) (0.6)
------ ------ ------ ------
Total operating expenses .............. 77.9% 81.4% 77.4% 81.1%
------ ------ ------ ------
Operating income ................... 22.1% 18.6% 22.6% 18.9%
Interest income .......................... 2.2 1.4 2.0 1.4
------ ------ ------ ------
Income before income taxes ......... 24.3% 20.0% 24.6% 20.3%
Federal and state income taxes ........... 8.7 7.1 8.7 7.2
------ ------ ------ ------
Net income ......................... 15.6% 12.9% 15.9% 13.1%
====== ====== ====== ======
The following is a discussion of the results of operations of the three
and nine month period ended September 30, 2006 compared with the same periods in
2005.
Three Months Ended September 30, 2006 and 2005
Operating revenue increased $10.9 million (8.0%), to $147.1 million in the
third quarter of 2006 from $136.2 million in the third quarter of 2005. The
increase in revenue resulted from the Company's expansion of its fleet and
improved freight rates. Operating revenue for both periods was positively
impacted by fuel surcharges assessed to customers. Fuel surcharge revenue
increased $6.8 million to $23.1 million in the third quarter of 2006 from $16.3
million in the third quarter of 2005.
Salaries, wages, and benefits increased $2.9 million (6.4%), to $47.9
million in the third quarter of 2006 from $45.0 million in the third quarter of
2005. These increases were the result of increased reliance on employee drivers
due to a decrease in the number of independent contractors utilized by the
Company and driver pay increases. During the third quarter of 2006, employee
drivers accounted for 94% and independent contractors 6% of the total fleet
miles, compared with 92% and 8%, respectively, in the third quarter of 2005. The
Company implemented an increase in driver pay during the first and second
quarters of 2006. All drivers maintaining a valid hazardous materials
endorsement on their commercial driver's license received a $0.01 per mile
increase in January 2006. Additional increases were given to drivers in selected
regional operations. Workers' compensation expense increased $0.7 million
(116.7%) to $1.4 million in the quarter ended September 30, 2006 from $0.7
million in for the same period in 2005 due to an increase in frequency and
severity of claims. Health insurance expense decreased $0.3 million (11.6%) to
$2.1 million in the third quarter of 2006 from $2.4 million in third quarter of
2005 due to an decrease in frequency and severity of claims.
11
Rent and purchased transportation decreased $1.4 million (18.3%), to $6.1
million in the third quarter of 2006 from $7.5 million in the third quarter of
2005. This reflects the Company's decreased reliance upon independent
contractors. Rent and purchased transportation for both periods includes amounts
paid to independent contractors under the Company's fuel stability program. The
Company increased the independent contractor base mileage pay by $0.01 per mile
in the first quarter of 2006 for all independent contractors maintaining a
hazardous materials endorsement on their commercial driver's license, and an
additional $0.01 per mile per quarter beginning on April 1, 2006.
Fuel increased $5.0 million (14.7%), to $39.0 million for the three months
ended September 30, 2006 from $34.0 million for the same period of 2005. The
increase is the result of increased fuel prices, an increased reliance on
company-owned tractors, and a decrease in fuel economy associated with the
EPA-mandated clean air engines. The Company's fuel cost per company-owned
tractor mile increased 13.1% in third quarter of 2006 compared to 2005. Fuel
cost per mile, net of fuel surcharge, decreased 11.1% in the third quarter of
2006 compared to 2005. The Company's third quarter fuel cost per gallon
increased 10.4% in 2006 compared to 2005. Tractors with the EPA-mandated clean
air engines experienced a 5.9% reduction in fuel efficiency as compared to older
model tractors being replaced. In the quarter ended September 30, 2006, tractors
with the EPA-mandated clean air engine accounted for 90.5% of the miles
generated by the company-owned fleet compared to 51.9% of the company-owned
fleet in the 2005 period. This resulted in a 2.4% decrease in fleet fuel
efficiency in the third quarter of 2006 compared to 2005.
Operations and maintenance decreased $0.8 million (18.3%), to $3.3 million
in the third quarter of 2006 from $4.1 million in the third quarter of 2005.
This is primarily attributed to the average age of the revenue equipment in our
fleet. The average age of our tractor fleet is 1.2 years while the average age
of the trailer fleet is 2.9 years, both improvements over the third quarter of
2005.
Insurance and claims decreased $2.4 million (47.7%), to $2.6 million in the
third quarter of 2006 from $5.0 million in the third quarter of 2005 due to a
decrease in the frequency and severity of auto claims.
Depreciation increased $2.6 million (26.8%), to $12.4 million during the
third quarter of 2006 from $9.8 million in the third quarter of 2005. This
increase is attributable to the growth of our company-owned tractor and trailer
fleet, an increased cost of new tractors primarily associated with the
EPA-mandated clean air engines, and the implementation of SFAS No. 153. New
tractors have a higher cost than the models being replaced due to EPA-mandated
clean air standards. As of September 30, 2006, 97.4% of the Company's tractor
fleet had the EPA clean air engine compared to 53.1% at September 30, 2005. For
the quarter ended September 30, 2006, as a result of SFAS No. 153, approximately
$0.9 million of additional depreciation was recognized due to a higher
depreciable basis of revenue equipment acquired through trade-ins. For the same
period of 2005, the additional depreciation attributable to SFAS No. 153 was
$70,500. In future periods, we expect depreciation will increase as we continue
to upgrade our fleet in compliance with EPA-mandated engine changes and due to
the impact of SFAS No. 153.
Other operating expenses increased $0.5 million (12.2%), to $4.7 million in
the third quarter of 2006 from $4.2 million in the third quarter of 2005. Other
operating expenses consists of costs incurred for advertising expense, freight
handling, highway tolls, driver recruiting expenses, and administrative costs.
Gain on the disposal of property and equipment increased $2.8 million
(144.2%), to $4.8 million during the third quarter of 2006 from $2.0 million in
the third quarter of 2005. For 2006, $4.7 million represents gains on trade-ins
of revenue equipment which are recognized under SFAS No. 153 compared to $1.9
million for the same period of 2005. Prior to the implementation of SFAS No 153,
gains were deferred as a reduction of the basis of the new equipment.
Interest income increased $1.2 million (68.4%), to $3.1 million in the
third quarter of 2006 from $1.9 million in the same period of 2005. The increase
is the result of higher average balances of cash, cash equivalents, and
short-term investments and higher yields than 2005.
The Company's effective tax rate was 35.5% in the third quarter of 2006 and
2005.
12
As a result of the foregoing, the Company's operating ratio (operating
expenses as a percentage of operating revenue) was 77.9% during the third
quarter of 2006 compared with 81.4% during the third quarter of 2005. Net income
increased $5.5 million (31.2%), to $23.0 million during the third quarter of
2006 from $17.5 million during the third quarter of 2005.
Nine Months Ended September 30, 2006 and 2005
Operating revenue increased $41.4 million (10.8%), to $425.1 million in the
nine months ended September 30, 2006 from $383.7 million in the 2005 period. The
increase in revenue resulted from the Company's expansion of its fleet and
improved freight rates. Operating revenue for both periods was positively
impacted by fuel surcharges assessed to customers. Fuel surcharge revenue
increased $22.4 million to $61.8 million in the nine months ended September 30,
2006 from $39.4 million in the compared 2005 period.
Salaries, wages, and benefits increased $9.1 million (7.0%), to $140.3
million in the nine months ended September 30, 2006 from $131.2 million in the
2005 period. These increases were the result of increased reliance on employee
drivers due to a decrease in the number of independent contractors utilized by
the Company and driver pay increases. During the first nine months of 2006,
employee drivers accounted for 93% and independent contractors 7% of the total
fleet miles, compared with 91% and 9%, respectively, in the compared 2005
period. The Company implemented an increase in driver pay during the first and
second quarters of 2006. All drivers maintaining a valid hazardous materials
endorsement on their commercial driver's license received a $0.01 per mile
increase in January 2006. Additional increases were given to drivers in selected
regional operations. Workers' compensation expense increased $1.1 million
(42.1%) to $3.7 million in the nine months ended September 30, 2006 from $2.6
million in for the same period in 2005 due to an increase in frequency and
severity of claims. Health insurance expense increased $0.2 million (2.7%) to
$6.3 million in the nine months ended September 30, 2006 from $6.1 million in
the same period of 2005 due to an increase in frequency and severity of claims
and increased reliance on employee drivers.
Rent and purchased transportation decreased $3.9 million (17.1%), to $19.1
million in the first nine months of 2006 from $23.0 million in the compared 2005
period. This reflects the Company's decreased reliance upon independent
contractors. Rent and purchased transportation for both periods includes amounts
paid to independent contractors under the Company's fuel stability program. The
Company increased the independent contractor base mileage pay by $0.01 per mile
in the first quarter of 2006 for all independent contractors maintaining a
hazardous materials endorsement on their commercial driver's license, and an
additional $0.01 per mile per quarter for all independent contractors beginning
on April 1, 2006.
Fuel increased $21.7 million (24.6%), to $109.7 million in first nine month
of 2006 from $88.0 million in the compared 2005 period. The increase is the
result of increased fuel prices, an increased reliance on company-owned
tractors, and a decrease in fuel economy associated with the EPA-mandated clean
air engines. The Company's fuel cost per company-owned tractor mile increased
20.8% in the first nine months of 2006 compared to the 2005 period. Fuel cost
per mile, net of fuel surcharge, decreased 3.9% when comparing the first nine
months 2006 to the 2005 period. The Company's fuel cost per gallon increased
18.8% in 2006 compared to 2005. Tractors with the EPA-mandated clean air engines
experienced a 4.9% reduction in fuel efficiency as compared to older model
tractors being replaced. In the nine months ended September 30, 2006, tractors
with the EPA-mandated clean air engine accounted for 80.2% of the miles
generated by the company-owned fleet compared to 41.6% of the company-owned
fleet in the 2005 period. This resulted in a 1.8% decrease in fleet fuel
efficiency in the nine months ended September 30, 2006 compared to the 2005
period.
Operations and maintenance decreased $0.8 million (7.6%) to $9.6 million
for the nine months ended September 30, 2006 from $10.4 in the compared 2005
period. This is primarily attributed to the average age of the revenue equipment
in our fleet. The average age of our tractor fleet is 1.2 years while the
average age of the trailer fleet is 2.9 years. The newer fleet has resulted in a
decrease in parts and maintenance costs nearly equal to the overall decrease for
the nine months comparative period.
13
Insurance and claims decreased $0.3 million (2.3%), to $11.5 million in the
nine months ended September 30, 2006 from $11.8 million in the same period of
2005 due to a decrease in the frequency and severity of auto claims.
Depreciation increased $6.5 million (24.0%), to $33.8 million during the
first nine months of 2006 from $27.3 million in the compared 2005 period. This
increase is attributable to the growth of our company-owned tractor and trailer
fleet, an increased cost of new tractors primarily associated with the
EPA-mandated clean air engines, and the implementation of SFAS No. 153. New
tractors have a higher cost than the models being replaced due to EPA-mandated
clean air standards. As of September 30, 2006, 97.4% of the Company's tractor
fleet had the EPA clean air engine compared to 47.3% at September 30, 2005. For
the nine months ended September 30, 2006, as a result of SFAS No. 153,
approximately $1.9 million of additional depreciation was recognized due to a
higher depreciable basis of revenue equipment acquired through trade-ins. For
the 2005 period, the additional depreciation attributable to SFAS No. 153 was
$70,500. In future periods, we expect depreciation will increase as we continue
to upgrade our fleet in compliance with EPA-mandated engine changes and due to
the impact of SFAS No. 153.
Other operating expenses increased $0.6 million (5.1%), to $13.1 million
during the nine months ended September 30, 2006 from $12.5 million in the same
period of 2005. Other operating expenses consists of costs incurred for
advertising expense, freight handling, highway tolls, driver recruiting
expenses, and administrative costs.
Gain on the disposal of property and equipment increased $15.3 million
(676.6%), to $17.6 million during the nine months ended September 30, 2006 from
$2.3 million in the compared 2005 period. For the nine months ended September
30, 2006, $17.1 million represents gains on trade-ins of revenue equipment which
are recognized under SFAS No. 153. For the same period of 2005, $1.9 million was
the recognized under SFAS No. 153. It is important to note that the gains
reported for 2006 represent a nine month period while gains for 2005 represent
only that period from July 1, 2005, the implementation date of SFAS No. 153.
Gains on trade-in were deferred prior to the adoption of SFAS No. 153 on July 1,
2005 as a reduction of the depreciable basis of new revenue equipment. The gains
recognized for the 2006 period, to date, are not expected to continue at the
same level into the future.
Interest income increased $3.3 million (62.8%), to $8.6 million in the nine
months ended September 30, 2006 from $5.3 million in the same period of 2005.
The increase is the result of higher average balances of cash, cash equivalents,
and short-term investments and higher yields than 2005.
The Company's effective tax rate was 35.5% for the nine months ended
September 30, 2006 and 2005.
As a result of the foregoing, the Company's operating ratio (operating
expenses as a percentage of operating revenue) was 77.4% during the first nine
months of 2006 compared with 81.1% during the same period of 2005. Net income
increased $17.2 million (34.3%), to $67.5 million during the nine months ended
September 30 2006 from $50.3 million during the compared 2005 period.
Liquidity and Capital Resources
The growth of the Company's business has required significant investments
in new revenue equipment. Historically the Company has been debt-free, funding
revenue equipment purchases with cash flow provided by operations. The Company
also obtains tractor capacity by utilizing independent contractors, who provide
a tractor and bear all associated operating and financing expenses. The
Company's primary source of liquidity for the nine months ended September 30,
2006, was net cash provided by operating activities of $88.1 million compared to
$72.8 million in the corresponding 2005 period.
Capital expenditures for property and equipment, primarily revenue
equipment net of trade-ins, totaled $47.4 million for the first nine months of
14
2006 compared to $28.6 million for the same period in 2005. The Company
anticipates new tractor and trailer purchases, net of trades, totaling
approximately $94.4 million in 2006. The Company will buy additional tractors
before year-end prior to phase two of the federally mandated engine emissions
standards that will become effective in January of 2007.
During the nine months ended September 30, 2006, the Company repurchased
176,700 shares of its common stock in the amount of $2.5 million. The Company's
Board of Directors authorized a repurchase of up to a maximum of 5.0 million
shares of the Company's common stock. At September 30, 2006, the Company has 4.9
million shares remaining under the current Board authorization. Future purchases
are dependent upon market conditions. The Company paid cash dividends of $4.9
million and $4.5 million during the first nine months of 2006 and 2005,
respectively. The Company began paying cash dividends in the third quarter of
2003 and has paid a quarterly dividend for thirteen consecutive quarters. The
Company declared a $2.0 million cash dividend in September 2006, payable on
October 2, 2006.
Management believes the Company has adequate liquidity to meet its current
and projected needs. The Company will continue to have significant capital
requirements over the long term. Future capital expenditures are expected to be
funded by cash flow provided by operations and from existing cash, cash
equivalents, and short-term investments. The Company ended the quarter with
$321.9 million in cash, cash equivalents, and short-term investments and no
debt. Based on the Company's strong financial position, management believes
outside financing could be obtained, if necessary, to fund capital expenditures.
Off-Balance Sheet Transactions
The Company's liquidity is not materially affected by off-balance sheet
transactions.
Risk Factors
You should refer to Item 1A of our annual report (Form 10-K) for the year
ended December 31, 2005, under the caption "Risk Factors" for specific details
on the following factors that are not within the control of the Company and
could affect our financial results.
o Our business is subject to general economic and business factors that
are largely out of our control.
o Our growth may not continue at historic rates.
o Increased prices, reduced productivity, and restricted availability of
new revenue equipment may adversely affect our earnings and cash flow.
o If fuel prices increase significantly, our results of operations could
be adversely affected.
o Difficulty in driver and independent contractor recruitment and
retention may have a materially adverse effect on our business.
o We operate in a highly regulated industry, and increased costs of
compliance with, or liability for violation of, existing regulations
could have a materially adverse effect on our business.
o Our operations are subject to various environmental laws and
regulations, the violations of which could result in substantial fines
or penalties.
o We may not make acquisitions in the future, or if we do, we may not be
successful in integrating the acquired company, either of which could
have a materially adverse effect on our business.
o If we are unable to retain our key employees or find, develop, and
retain service center managers, our business, financial condition, and
results of operations could be adversely affected.
o We are highly dependent on a few major customers, the loss of one or
more of which could have a materially adverse effect on our business.
o Seasonality and the impact of weather affect our operations
profitability.
o Ongoing insurance and claims expenses could significantly reduce our
earnings.
o We are dependent on computer and communications systems, and a systems
failure could cause a significant disruption to our business.
15
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company purchases only high quality, liquid investments. Primarily all
investments as of September 30, 2006 have an original maturity or interest reset
date of twelve months or less. Due to the short term nature of the investments,
the Company is exposed to minimal market risk related to its cash equivalents
and investments.
The Company had no debt outstanding as of September 30, 2006 and therefore,
had no market risk related to debt.
As of September 30, 2006, the Company did not have any long-term fuel
purchase contracts, and had not entered into any other hedging arrangements that
protect against fuel price increases. Volatile fuel prices will continue to
impact us significantly. A significant increase in fuel costs, or a shortage of
diesel fuel, could materially and adversely affect our results of operations.
Item 4. Controls and Procedures
As of the end of the period covered by this report, the Company carried out
an evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operations of the Company's
disclosure controls and procedures, and as defined in Exchange Act Rule
15d-15(e). Based upon that evaluation, the Company's Chief Executive Officer and
Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective in enabling the Company to record, process, summarize
and report information required to be included in the Company's periodic SEC
filings within the required time period. There have been no changes in the
Company's internal controls over financial reporting that occurred during the
Company's most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the Company's internal control over
financial reporting.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
The Company is a party to ordinary, routine litigation and administrative
proceedings incidental to its business. These proceedings primarily involve
claims for personal injury, property damage, and workers' compensation
incurred in connection with the transportation of freight. The Company
maintains insurance to cover liabilities arising from the transportation of
freight for amounts in excess of certain self-insured retentions.
Item 2. Changes in Securities
Total Number Average Price Authorization
of Shares Paid per Remaining
Period Purchased Share
7/1/2006 - 7/31/2006 - - - - 5,095,333
8/1/2006 - 8/31/2006 176,700 $14.41 4,918,633
9/1/2006 - 9/30/2006 - - - - 4,918,633
------------ ------------- --------------
Total 176,700 $14.41 4,918,633
============ ============= ==============
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
16
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit
31.1 Certification of Chief Executive Officer Pursuant to Rule
13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as
amended.
31.2 Certification of Chief Financial Officer Pursuant to Rule
13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as
amended.
32 Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
1. Report on Form 8-K, dated July 18, 2006, announcing the Company's
financial results for the quarter ended June 30, 2006. 2. Report
on Form 8-K, dated September 8, 2006, announcing the declaration
of a quarterly cash dividend.
No other information is required to be filed under Part II of the form.
17
SIGNATURE
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.
Date: November 6, 2006 BY:/s/John P. Cosaert
--------------------
John P. Cosaert
Executive Vice President-Finance,
Chief Financial Officer and Treasurer
(principal accounting and financial
officer)
18
Exhibit No. 31.1
Certification
I, Russell A. Gerdin, Chairman and Chief Executive Officer of Heartland Express,
Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Heartland
Express, Inc. (the "Registrant");
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rule
13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or cause
such disclosure controls and procedures to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the controls and
procedures, as of the end of the period covered by this report
based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's first fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: November 6, 2006 By: /s/ Russell A. Gerdin
-----------------------
Russell A. Gerdin
Chairman and Chief Executive Officer
19
Exhibit No. 31.2
Certification
I, John P. Cosaert, Executive Vice President, Chief Financial Officer and
Treasurer of Heartland Express, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Heartland
Express, Inc. (the "Registrant");
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rule
13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this quarterly report is being prepared;
b) Designed such internal control over financial reporting, or cause
such disclosure controls and procedures to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the controls and
procedures, as of the end of the period covered by this report
based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's first fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
(a) all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: November 6, 2006 By: /s/ John P. Cosaert
---------------------
John P. Cosaert
Executive Vice President-Finance
Chief Financial Officer and Treasurer
(principal accounting and financial
officer)
20
Exhibit No. 32
CERTIFICATION OF
CHIEF EXECUTIVE OFFICER
AND
CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Russell A. Gerdin, certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the
Quarterly Report of Heartland Express, Inc., on Form 10-Q for the period ended
September 30, 2006 fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended, and that information
contained in such Quarterly Report on Form 10-Q fairly presents in all material
respects the financial condition and results of operations of Heartland Express,
Inc.
Dated: November 6, 2006 By: /s/ Russell A. Gerdin
---------------------
Russell A. Gerdin
Chairman and Chief Executive Officer
I, John P. Cosaert, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
Report of Heartland Express, Inc., on Form 10-Q for the period ended September
30, 2006 fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended, and that information contained in
such Quarterly Report on Form 10-Q fairly presents in all material respects the
financial condition and results of operations of Heartland Express, Inc.
Dated: November 6, 2006 By: /s/ John P. Cosaert
-------------------
John P. Cosaert
Executive Vice President
and Chief Financial Officer
21
END OF REPORT