10-Q 1 0001.txt 10-Q 3RD QUARTER REPORT FOR HEARTLAND EXPRESS 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, 2000 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 [ ] At September 30, 2000, there were 25,366,582 shares of the Company's $.01 par value common stock outstanding. PART I FINANCIAL INFORMATION Page Number Item 1. Financial statements Consolidated balance sheets September 30, 2000 (unaudited) and December 31, 1999 2-3 Consolidated statements of income (unaudited) for the three and nine month periods ended September 30, 2000 and 1999 4 Consolidated statements of cash flows (unaudited) for the nine months ended September 30, 2000 and 1999 5 Notes to financial statements 6 Item 2. Management's discussion and analysis of financial condition and results of operations 7-12 PART II OTHER INFORMATION Item 1. Legal proceedings 13 Item 2. Changes in securities 13 Item 3. Defaults upon senior securities 13 Item 4. Submission of matters to a vote of 13 security holders Item 5. Other information 13 Item 6. Exhibits and reports on Form 8-K 13-15 1 HEARTLAND EXPRESS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
ASSETS September 30 December 31, 2000 1999 ------------ ------------ (Unaudited) CURRENT ASSETS Cash and cash equivalents ..................... $122,088,772 $126,211,056 Trade receivables, less allowance: 2000 and 1999 $402,812 ........................ 26,772,785 23,478,708 Prepaid tires ................................. 3,310,174 1,655,018 Investments ................................... 3,109,839 500,000 Deferred income taxes ......................... 16,479,000 15,979,000 Other current assets .......................... 1,029,373 359,472 ------------ ------------ Total current assets .................. $172,789,943 $168,183,254 ------------ ------------ PROPERTY AND EQUIPMENT Land and land improvements .................... $ 3,237,875 $ 3,701,400 Buildings ..................................... 8,532,621 9,740,487 Furniture and fixtures ........................ 2,604,400 2,611,166 Shop and service equipment .................... 1,513,251 1,563,485 Revenue equipment ............................. 124,899,036 121,822,991 ------------ ------------ $140,787,183 $139,439,529 Less accumulated depreciation & amortization .. 58,457,247 66,533,949 ------------ ------------ Property and equipment, net ................... $ 82,329,936 $ 72,905,580 ------------ ------------ OTHER ASSETS .................................. $ 5,253,846 $ 5,404,707 ------------ ------------ $260,373,725 $246,493,541 ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 2 HEARTLAND EXPRESS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY September 30 December 31, 2000 1999 ------------ ------------ (Unaudited) CURRENT LIABILITIES Accounts payable & accrued liabilities ........ $ 7,853,276 $ 10,595,662 Compensation & benefits ....................... 5,416,630 4,225,023 Income taxes payable .......................... 5,627,468 4,974,341 Insurance accruals ............................ 35,399,542 34,285,500 Other ......................................... 2,962,090 2,427,464 ------------ ------------ Total current liabilities .................. $ 57,259,006 $ 56,507,990 ------------ ------------ DEFERRED INCOME TAXES ............................ $ 15,876,000 $ 15,146,000 ------------ ------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred, $.01 par value; authorized 5,000,000 shares; none issued .............. $ -- $ -- Common, $.01 par value; authorized 395,000,000 shares; issued and outstanding 25,366,582 in 2000 and 26,460,251 in 1999 ......................... 253,666 264,603 Additional paid in capital .................... 6,608,170 6,608,170 Retained earnings ............................. 180,376,883 167,966,778 ------------ ------------ $187,238,719 $174,839,551 ------------ ------------ $260,373,725 $246,493,541 ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 3 HEARTLAND EXPRESS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three months ended Nine months ended September 30, September 30, 2000 1999 2000 1999 OPERATING REVENUE ..................... $ 68,107,430 $ 65,350,697 $ 204,558,697 $ 194,542,137 ------------- ------------- ------------- ------------- OPERATING EXPENSES: Salaries, wages, benefits .......... $ 18,722,396 $ 15,640,809 $ 53,705,524 $ 44,474,681 Rent and purchased transportation .. 18,013,117 22,257,019 58,246,522 68,719,748 Operations and maintenance ......... 10,565,512 7,867,562 30,175,800 21,481,960 Taxes and licenses ................. 1,516,106 1,604,825 4,276,661 4,470,401 Insurance and claims ............... 1,591,330 1,395,942 5,090,063 4,625,863 Communications and utilities ....... 774,854 659,183 2,169,272 1,966,512 Depreciation ....................... 4,143,218 3,913,127 11,902,708 12,037,282 Other operating expenses ........... 1,685,214 1,364,868 4,740,272 4,476,752 (Gain) on sale of fixed assets ..... (23,235) (934,812) (1,516,913) (934,812) ------------- ------------- ------------- ------------- $ 56,988,512 $ 53,768,523 $ 168,789,909 $ 161,318,387 ------------- ------------- ------------- ------------- Operating income ....... $ 11,118,918 $ 11,582,174 $ 35,768,788 $ 33,223,750 Interest income .................... 1,592,934 1,543,826 4,244,938 4,542,147 ------------- ------------- ------------- ------------- Income before income taxes ......... $ 12,711,852 $ 13,126,000 $ 40,013,726 $ 37,765,897 Federal and state income taxes ..... 4,322,021 4,528,469 13,604,658 13,087,537 ------------- ------------- ------------- ------------- Net income ......................... $ 8,389,831 8,597,531 $ 26,409,068 $ 24,678,360 ============= ============= ============= ============= Earnings per common share: Basic earnings per share ....... $ 0.33 $ 0.29 $ 1.03 $ 0.82 ============= ============= ============= ============= Basic weighted average shares outstanding ...................... 25,366,582 30,000,000 25,598,089 30,000,000 ============= ============= ============= =============
The accompanying notes are an integral part of these financial statements. 4 HEARTLAND EXPRESS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine months ended September 30, 2000 1999 ------------- ------------- OPERATING ACTIVITIES Net Income ................................... $ 26,409,068 $ 24,678,360 Adjustments to reconcile to net cash provided by operating activities: Depreciation and amortization ............. 12,641,155 12,859,618 Deferred income taxes ..................... 230,000 (1,148,000) Gain on sale of fixed assets .............. (1,516,913) (913,618) Changes in certain working capital items: Trade receivables ...................... (3,294,077) (1,954,500) Other current assets ................... (669,901) (1,176,410) Prepaid expenses ....................... (1,655,156) (577,317) Accounts payable and accrued expenses .. 2,018,864 1,985,218 Accrued income tax ..................... 653,127 1,355,668 ------------- ------------- Net cash provided by operating activities . $ 34,816,167 $ 35,109,019 ------------- ------------- INVESTING ACTIVITIES Proceeds from sale of prop. and equipment .... $ 2,140,220 $ 1,586,007 Capital additions ............................ (24,026,206) (14,490,375) Net sales of municipal bonds ................. (2,609,839) (2,120,523) Other ........................................ (432,726) (263,532) ------------- ------------- Net cash used in investing activities ........ $ (24,928,551) $ (15,288,423) ------------- ------------- FINANCING ACTIVITIES Repurchase of common stock ................... $ (14,009,900) $ -- ------------- ------------- Net cash used in financing activities ....... $ (14,009,900) $ -- ------------- ------------- Net increase (decrease) in cash and cash equivalents ............................... $ (4,122,284) $ 19,820,596 CASH AND CASH EQUIVALENTS Beginning of period .......................... 126,211,056 143,434,594 ------------- ------------- End of period ................................ $ 122,088,772 $ 163,255,190 ============= ============= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for: Income taxes ............................ $ 12,721,531 $ 12,879,869 Noncash investing activities: Book value of revenue equipment traded .. $ 9,105,429 $ 3,607,676
The accompanying notes are an integral part of these consolidated financial statements. 5 HEARTLAND EXPRESS, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (Unaudited) Note 1. Basis of Presentation The consolidated financial statements include the accounts of Heartland Express, Inc., a Nevada holding company, and its wholly-owned subsidiaries (the Company). All significant intercompany balances and transactions have been eliminated in consolidation. The financial statements have been prepared, without audit, in accordance with generally accepted accounting principles, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying financial statements include all adjustments which are necessary for a fair presentation of the results for the interim periods presented, such adjustments being of a normal recurring nature. Certain information and footnote disclosures have been condensed or omitted pursuant to such rules and regulations. The December 31, 1999 Consolidated Balance Sheet was derived from the audited balance sheet of the Company for the year then ended. It is suggested that these consolidated financial statements and notes thereto be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Form 10-K for the year ended December 31, 1999. Results of operations in interim periods are not necessarily indicative of results to be expected for a full year. Note 2. Income Taxes Income tax expense varies from the amount computed by applying the federal corporate income tax rate of 35% to income before income taxes primarily due to state income taxes, net of federal income tax effect, plus the effect of interest earned exempt from federal taxes. Effective income tax expense approximated 34% in the three and nine months periods ended September 30, 2000. Effective income tax expense approximated 34.5% for the three months ended September 30, 1999 and 34.7% for the nine months ended September 30, 1999. 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 three and nine months periods ended September 30, 2000 compared with the same periods in 1999, and the changes in financial condition through the third quarter of 2000. 6 Results of Operations: Three Months Ended September 30, 2000 and 1999 Operating revenue increased $2.8 million (4.2%), to $68.1 million in the third quarter of 2000 from $65.3 million in the third quarter of 1999. The revenue increase was primarily attributable to increased freight rates, and fuel surcharges resulting from high diesel prices. Salaries, wages, and benefits increased $3.1 million (19.7%), to $18.7 million in the third quarter of 2000 from $15.6 million in the third quarter of 1999. As a percentage of revenue, salaries, wages and benefits increased to 27.5% in 2000 from 23.9% in 1999. These increases were a result of increased reliance on employee drivers and a corresponding decrease in miles driven by independent contractors. In addition, the Company increased employee driver pay in June, 1999 and March, 2000. The increase in employee driver miles was attributable to internal growth in the company tractor fleet. During the third quarter of 2000, employee drivers accounted for 61% and independent contractors 39% of the total fleet miles, compared with 52% and 48%, respectively, in the third quarter of 1999. The Company also experienced an increase in the frequency and severity of workers' compensation and health insurance claims in comparison to the 1999 period. Rent and purchased transportation decreased $4.2 million (19.1%), to $18.0 million in the third quarter of 2000 from $22.2 million in the third quarter of 1999. As a percentage of revenue, rent and purchased transportation decreased to 26.4% in the third quarter of 2000 from 34.1% in the third quarter of 1999. This reflects the Company's decreased reliance upon independent contractors. Independent contractors own their own tractors and are responsible for associated operating costs. Accordingly, the Company reimbursed independent contractors for the high cost of diesel prices experienced during the third quarter of 2000. Operations and maintenance increased $2.7 million (34.3%) to $10.6 million in the third quarter of 2000 from $7.9 million in the third quarter of 1999. As a percentage of revenue, operations and maintenance increased to 15.5% in 2000 from 12.0% 1999. This increase is attributable to an increase in fuel prices and increased reliance on the Company owned fleet. The fuel cost per gallon steadily increased after the first quarter of 1999 with heavy increases experienced in the fourth quarter of 1999 and the first nine months of 2000. Taxes and licenses decreased $0.1 million (5.5%), to $1.5 million in the third quarter of 2000 from $1.6 million in the third quarter of 1999. As a percentage of revenue, taxes and licenses decreased to 2.2% in 2000 from 2.5% in 1999. These decreases resulted from increased fleet utilization and efficient management of these costs. 7 Insurance and claims increased $0.2 million (14.0%), to $1.6 million in the third quarter of 2000 from $1.4 million in the third quarter of 1999. As a percentage of revenue, insurance and claims increased to 2.3% in the third quarter of 2000 from 2.1% in the third quarter of 1999. Insurance and claims expense will vary as a percentage of operating revenue from period to period based on the frequency and severity of claims incurred in a given period as well as changes in claims development trends. Communications and utilities increased $0.1 million (17.5%), to $0.8 million in the 2000 period from $0.7 million in the 1999 period. As a percentage of revenue, communications and utilities increased to 1.1% in the third quarter of 2000 from 1.0% in third quarter of 1999. Depreciation increased $0.2 million (5.9%) to $4.1 million during the third quarter of 2000 from $3.9 million in the third quarter of 1999. As a percentage of revenue, depreciation increased to 6.1% of revenue during the third quarter of 2000 from 6.0% during the third quarter of 1999. The increase was primarily the result of increased company-owned tractors in the Company's fleet. Other operating expenses increased $0.3 million (23.5%) to $1.7 million during the third quarter of 2000 from $1.4 million in the third quarter of 1999. As a percentage of revenue, other operating expenses increased to 2.5% of revenue during the third quarter of 2000 from 2.1% during the third quarter of 1999. Other operating expenses consists primarily of pallet cost, driver recruiting expense, and administrative costs. Interest income increased $0.1 million (3.2%) to $1.6 million during the third quarter of 2000 from $1.5 million in the third quarter of 1999. The Company's effective tax rate was 34.0% for the three month period ended September 30, 2000 and 34.5% in the 1999 period. As a result of the foregoing, the Company's operating ratio (operating expenses as a percentage of operating revenue) was 83.7% during the third quarter of 2000 compared with 82.3% during the third quarter of 1999. Net income decreased $0.2 million (2.4%), to $8.4 million during the three months ended September 30, 2000 from $8.6 million in the 1999 period. The Company's operating ratio and net income for the 1999 period were positively impacted by a $0.9 million gain recognized on the sale of three properties. Nine Months Ended September 30, 2000 and 1999 Operating revenue increased $10.0 million (5.1%), to $204.5 million in the nine months ended September 30, 2000 from $194.5 million in the compared 1999 period. The revenue increase was primarily attributable to increased freight rates, and fuel surcharges resulting from high fuel prices. 8 Salaries, wages, and benefits increased $9.2 million (20.8%), to $53.7 million in the nine months ended September 30, 2000 from $44.5 million in the compared 1999 period. As a percentage of revenue, salaries, wages and benefits increased to 26.3% in 2000 from 22.9% in 1999. These increases were a result of increased reliance on employee drivers and a corresponding decrease in miles driven by independent contractors. In addition, the Company increased employee driver pay in June, 1999 and March, 2000. The increase in employee driver miles was attributable to internal growth in the company tractor fleet. During the first nine months of 2000, employee drivers accounted for 58% and independent contractors 42% of the total fleet miles, compared with 50% and 50%, respectively, in the compared 1999 period. The Company also experienced an increase in the frequency and severity of workers' compensation and health insurance claims in comparison to the compared 1999 period. Rent and purchased transportation decreased $10.5 million (15.2%), to $58.2 million in the first nine months of 2000 from $68.7 million in the 1999 period. As a percentage of revenue, rent and purchased transportation decreased to 28.5% in the 2000 period from 35.3% in the compared 1999 period. This reflects the Company's decreased reliance upon independent contractors. In addition, an increased industry demand for independent contractors has negated the Company's previous competitive advantage. Additionally, the high cost of fuel experienced since the first quarter of 1999 has resulted in independent contractors leaving the industry. Independent contractors own their own tractors and are responsible for associated operating costs. Accordingly, the Company has reimbursed the independent contractors for high fuel prices incurred during the 2000 period. Operations and maintenance increased $8.7 million (40.5%) to $30.2 million in the nine months ended September 30, 2000 from $21.5 million in the compared 1999 period. As a percentage of revenue, operations and maintenance increased to 14.8% of revenue in the nine months ended September 30, 2000 from 11.0% during the compared 1999 period. This increase is attributable to an increase in fuel prices and increased reliance on the Company owned fleet. The fuel cost per gallon steadily increased after the first quarter of 1999 with heavy increases experienced in the fourth quarter of 1999 and in 2000. Taxes and licenses decreased $0.2 million (4.3%), to $4.3 million in the nine months ended September 30, 2000 from $4.5 million in the compared 1999 period. As a percentage of revenue, taxes and licenses decreased to 2.1% of revenue in the nine months ended September 30, 2000 from 2.3% during the compared 1999 period. These decreases resulted from increased fleet utilization and efficient management of these costs. 9 Insurance and claims increased $0.5 million (10.0%), to $5.1 million in the nine months ended September 30, 2000 from $4.6 million in the compared 1999 period. As a percentage of revenue, insurance and claims increased to 2.5% in the nine months ended September 30, 2000 from 2.4% in the compared 1999 period. Insurance and claims expense will vary as a percentage of operating revenue from period to period based on the frequency and severity of claims incurred in a given period as well as changes in claims development trends. Communications and utilities increased $0.2 million (10.3%), to $2.2 million in the 2000 period from $2.0 million in 1999 period. As a percentage of revenue, communications and utilities increased to 1.1% in the nine months ended September 30, 2000 from 1.0% in the compared 1999 period. Depreciation decreased $0.1 million (1.1%) to $11.9 million during the nine months ended September 30, 2000 from $12.0 million in the compared 1999 period. As a percentage of revenue, depreciation decreased to 5.8% of revenue during the nine months ended September 30, 2000 from 6.2% during the compared 1999 period. The decrease resulted from the increase in the number of trailers in the Company's fleet becoming fully depreciated, and from the change in estimated salvage value on the Company's revenue equipment. Other operating expenses increased $0.2 million (5.9%) to $4.7 million during the nine months ended September 30, 2000 from $4.5 million during the compared 1999 period. As a percentage of revenue, other operating expenses was 2.3% for both periods. Other operating expenses consists primarily of pallet cost, driver recruiting expense, and administrative costs. Interest income decreased $0.3 million (6.5%) to $4.2 million during the nine months ended September 30, 2000 from $4.5 million during the compared 1999 period. Interest income earned is primarily exempt from federal taxes and therefore earned at a lower rate. The decrease is attributable to the repurchase of 4.6 million shares of the Company's common stock for $59.1 million in the fourth quarter of 1999 and first quarter of 2000, and a $9.5 million increase in capital expenditures. The Company's effective tax rate was 34.0% for the first nine months ended September 30, 2000 and 34.7% for the nine months ended September 30, 1999. As a result of the foregoing, the Company's operating ratio (operating expenses as a percentage of operating revenue) was 82.5% during the nine months ended September 30, 2000 compared with 82.9% during the compared 1999 period. Net income increased $1.7 million (7.0%), to $26.4 million during the nine months ended September 30, 2000 from $24.7 million during the compared 1999 period. In addition, the net income for the 2000 period includes gains of $1.5 million from the sale of two properties. The 1999 period was positively impacted by the $0.9 million gain from the sale of three properties. 10 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, financing revenue equipment through cash flow from 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 at September 30, 2000, were funds provided by cash flow from operating activities. The Company believes its sources of liquidity are adequate to meet its current and projected needs. The Company expects to finance further growth in its company-owned fleet through cash flow from operations and cash equivalents currently on hand. Based on the Company's strong financial position (current ratio of 3.0 and no debt), management foresees no barrier to obtaining outside financing, if necessary, to continue with its growth plans. During the nine months ended September 30, 2000, the Company generated net cash flow from operations of $34.8 million. Net cash provided by and used in investing and financing activities included $24.0 million for capital expenditures, primarily revenue equipment and $14.0 million for the repurchase of 1,093,669 shares of the Company's outstanding common stock. Working capital at September 30, 2000 was $115.5 million, including $125.2 million in cash, cash equivalents, and investments. These investments generated $4.2 million in interest income (primarily tax-exempt) during the nine months ended September 30, 2000. The Company's policy is to purchase only investment quality, highly liquid investments. 11 Forward Looking Information Except for the historical information contained herein, the discussion in this quarterly report contains forward-looking statements that involve risk, assumptions, and uncertainties that are difficult to predict. Words such as "believe," "may," "could," "expects," "likely," variations of these words, and similar expressions, are intended to identify such forward-looking statements. The Company's actual results could differ materially from those discussed herein. Forward-looking information is subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Without limitation, these risks and uncertainties include economic factors such as recessions, downturns in customers' business cycles, surplus inventories, inflation, fuel price increases, and higher interest rates: the resale value of the Company's used revenue equipment; the availability and compensation of qualified drivers; competition from trucking, rail, and intermodal competitors; and the ability to identify acceptable acquisition targets and negotiate, finance, and consummate acquisitions and integrate acquired companies. Readers should review and consider the various disclosures made by the Company in its press releases, stockholders reports, and public filings, as well as the factors explained in greater detail in the Company's annual report of Form 10-K. 12 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 filed during the third quarter of 2000. Page of Method of Exhibit No. Document Filing 3.1 Articles of Incorporation Incorporated by Reference to the Company's registration statement on Form S-1, Registration No. 33-8165, effective November 5, 1986. 3.2 Bylaws Incorporated by Reference to the Company's registration statement on form S-1, Registration No. 33-8165, effective November 5, 1986. 13 3.3 Certificate of Amendment To Incorporated by Reference Articles of Incorporation to the Company's form 10-QA, for the quarter ended June 30, 1997, dated March 26, 1998. 4.1 Articles of Incorporation Incorporated by Reference to the Company's registration statement on form S-1 Registration No. 33-8165, effective November 5, 1986. 4.2 Bylaws Incorporated by Reference to the Company's registration statement on form S-1, Registration No. 33-8165, effective November 5, 1986. 4.3 Certificate of Amendment to Incorporated by Reference Articles of Incorporation to the Company's Form 10-QA, for the quarter ended June 30, 1997, dated March 26, 1998. 9.1 Voting Trust Agreement dated Incorporated by Reference June 6, 1997 among the Gerdin to the Company's Educational Trusts and Larry Form 10-K for the year Crouse voting trustee. ended December 31, 1997. Commission file no. 0-15087. 10.1 Business Property Lease Filed herewith. between Russell A. Gerdin as Lessor and the Company as Lessee, regarding the Company's headquarters at 2777 Heartland Drive Coralville, Iowa 52241 14 10.2 Form of Independent Contractor Incorporated by Reference Operating Agreement between the to the Company's Form Company and its independent 10-K for the year ended contractor providers of tractors December 31, 1993. Commission file no. 0-15087. 10.3 Description of Key Management Incorporated by Reference Deferred Incentive Compensation to the Company's Form Arrangement 10-K for the year ended December 31, 1993. Commission file no. 0-15087. 21 Subsidiaries of the Registrant Incorporated by Reference to the Company's Form 10-K for the year ended December 31, 1997. Commission file no. 0-15087. 27 Financial Data Schedule Filed herewith. 15 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 16 AMENDED AND RESTATED LEASE AGREEMENT THIS AGREEMENT, effective as of September 15, 2000, is a Lease Agreement by and between Russell A. Gerdin, a resident of Iowa ("Lessor") and Heartland Express, Inc. of Iowa, an Iowa corporation ("Lessee"). THE PARTIES AGREE: 1. Description. The Lessor hereby leases to the Lessee the following described real estate and improvements, all located in the City of Coralville, State of Iowa (the "Property"): (a) Office building at 2777 Heartland Drive; (b) Office building at 2757 Heartland Drive; and (c) Storage building at 2757 Heartland Drive (north of Office Building). 2. Term. The term of this Agreement shall be five (5) years from the 1st day of June 2000, to the 31st day of May 2005. 3. Rent. The Lessee shall pay to the Lessor as rent, at such address as the Lessor may from time to time designate in writing, the sum of $1,498,125.00 in monthly installments of $24,968.75, each payable in advance on the first day of each month commencing on the first day of the term of this Agreement. 4. Option to Renew Lease. The Lessee has the option to renew the lease at the end of the term for an additional five (5) years at the existing monthly rent plus a cost-of-living allowance. 5. Use. The Lessee shall use the Property for general office space and storage. The Lessee will not, without the written consent of the Lessor, use Property for any other purpose. The Lessee shall maintain the Property in compliance with all applicable federal, state, and local laws, rules, regulations, and ordinances (collectively, "Laws") including specifically Laws involving protection of the environment and worker safety. Lessee shall indemnify, defend, and hold Lessor harmless from and against any violation of Law as well as any liability arising from the use of or presence on the Property of employees, agents, invitees, or other person connected with Lessee. 6. Lessee's Obligations. The Lessee shall: (a) Maintain, at Lessee's expense, the Property in good condition and repair, including windows but excluding the other exterior of the Property; (b) Pay from time to time, as the utility payments shall become due, all utility payments including water, gas, electricity, sewer, trash removal and similar payments; (c) Pay all real estate taxes and special assessments levied against the Property: (d) Maintain, at Lessee's expense, general liability coverage and any liability coverage which Lessor may require as a result of the particular use of the Property; and (e) Maintain, at Lessee's expense, insurance with respect to the Property against loss by fire, lightning, and other perils covered by the standard all-risk endorsement, in an amount equal to at least 100% of the full replacement value thereof,with no deduction for depreciation, and shall maintain, at Lessee's expense, insurance against such other hazards and in such amounts as is customarily carried by operators of similar properties. Lessee shall name Lessor as an additional insured upon the policies. 7. Lessee's Improvements. The Lessee shall not make any improvements or alterations to the Property without submitting plans and specifications for such improvements or alterations to the Lessor and securing the Lessor's written consent. The Lessee shall pay all costs of such improvements and alterations, shall provide evidence of such payment to the Lessor upon request, and shall hold the Lessor harmless from any costs, liens, or damages. Any improvement constructed on the Property by the Lessee shall become the property of the Lessor upon the expiration of the term of this Agreement. Any trade fixtures installed by the Lessee may be removed by the Lessee upon the expiration of the term of this Agreement, but the Lessee shall repair any damage arising from the removal of such trade fixtures. 8. Waste. The Lessee shall not commit or permit any waste of the Property, nor any public or private nuisance on the Property, nor any use of the Property which is contrary to any law, governmental regulation or insurance policy affecting or covering the Property or which may be dangerous to persons or property. The Lessor may enter and inspect the premises at any reasonable time. 9. Assignment. The Lessee shall not assign this Agreement, nor allow any transfer of or lien upon the Lessee's interest in this Agreement by operation of law, nor sublet any portion of the Property, nor permit the use of any portion of the Property by anyone other than the Lessee and the employees, agents and business invitees of the Lessee, without securing the written consent of the Lessor. 10. Condemnation. If all or a substantial portion of the Property shall be taken or condemned for any public use to purpose, so as to render the Property unsuitable for occupancy, this Agreement shall terminate on the date when possession shall by required for such use, or purpose, at the option of the Lessee, and the rent shall be prorated to the date of such termination. The award for such taking or condemnation shall be apportioned between the Lessor and the Lessee, and the Lessee shall be entitled to any portion of the award made for improvements constructed on the Property. 11. Default. Each of the following acts and omissions shall constitute a default by the Lessee and a breach of this Agreement: (a) Voluntary or involuntary bankruptcy, assignment for benefit of creditors, reorganization or rearrangement under the Bankruptcy Code, receivership, dissolution or the commencement of any action or proceeding for the dissolution or liquidation of the Lessee whether instituted by or against the Lessee or any other similar action or proceeding. (b) The failure of the Lessee to pay the rent for a period of 15 days after the rent shall have become due. (c) The failure of the Lessee to perform any other agreement to be performed on the part of the Lessee for a period of 30 days after written notice of such failure. 12. Remedies. Upon a default by the Lessee, the Lessor may reenter and recover possession of the Property with or without terminating this Agreement. If delivery of possession of the Property refused by the Lessee, the Lessor shall be entitled to the appointment of a receiver for the Property by any court of competent jurisdiction, as a matter of right, without regard to the solvency or insolvency of the Lessee, to collect the rents and profits from the Property and apply such rents and profits according to the orders of the court. 13. Termination. Upon termination of this Agreement, the Lessee shall deliver possession of the Property to the Lessor. 14. Miscellaneous. No waiver by the Lessor of a default by the Lessee shall be implied, and no express waiver shall be extended beyond the default and period specified. No term or condition of this Agreement shall be construed to have been waived by the Lessor, unless the Lessee shall have secured such waiver from Lessor in writing. The invalidity or unenforceability of any term or condition of the Agreement shall not prejudice the enforceability of any other term or condition. 15. Modification. This Agreement shall not be amended or modified, except by a written instrument executed by both the Lessor and the Lessee. 16. Headings. The paragraph headings of this Lease Agreement are solely for the convenience of reference and shall not in any way modify the terms and conditions thereof. 17. Binding Effect. This Agreement shall be binding upon the successors in interest of the parties. LESSOR: LESSEE: Heartland Express, Inc. of Iowa By: Russell A. Gerdin Russell A. Gerdin, President