SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities and Exchange Act of
1934
Filed by Registrant (X)
Filed by a party other than the Registrant ( )
Check the Appropriate Box:
( ) Preliminary Proxy Statement
( ) Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material under 240.14a-12
HEARTLAND EXPRESS, INC.
(Name of Registrant as Specified in its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the Appropriate Box):
(X) No fee required
( ) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2),
or Item 22(a)(2) of Schedule 14A
( ) Fee computed on table below per Exchange Act Rules 14a-6(i) (4) and 0-11
(1) Title of each class of securities to which transaction applies: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid: N/A
( ) Fee paid previously with preliminary materials: N/A
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a) (2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid: N/A
(2) Form, Schedule or Registration Statement No.: N/A
(3) Filing Party: N/A
(4) Date Filed: N/A
HEARTLAND EXPRESS, INC.
2777 Heartland Drive
Coralville, Iowa 52241
NOTICE AND PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 6, 2004
Dear Fellow Stockholders:
The 2004 Annual Meeting of Stockholders (the "Annual Meeting") of Heartland
Express, Inc., a Nevada corporation (the "Company"), will be held at The Holiday
Inn & Conference Center, 1220 First Avenue, Coralville, Iowa, at 8:00 a.m. local
time, on Thursday, May 6, 2004, for the following purposes:
1. To consider and act upon a proposal to elect five (5) directors of the
Company;
2. To consider and act upon such other matters as may properly come before the
meeting and any adjournment thereof.
3. The foregoing matters are more fully described in the accompanying Proxy
Statement.
The Board of Directors has fixed the close of business on March 10, 2004,
as the record date for the determination of Stockholders entitled to receive
notice of and to vote at the Annual Meeting or any adjournment thereof. Shares
of common stock may be voted at the Annual Meeting only if the holder is present
at the Annual Meeting in person or by valid proxy. YOUR VOTE IS IMPORTANT. TO
ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE REQUESTED TO PROMPTLY
DATE, SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE. Returning
your proxy now will not interfere with your right to attend the Annual Meeting
or to vote your shares personally at the Annual Meeting, if you wish to do so.
The prompt return of your proxy may save the Company additional expenses of
solicitation.
All Stockholders are cordially invited to attend the Annual Meeting.
By Order of the Board of Directors,
Russell A. Gerdin
Chairman of the Board
Coralville, Iowa 52241
April 2, 2004
HEARTLAND EXPRESS, INC.
2777 Heartland Drive
Coralville, Iowa 52241
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 6, 2004
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Heartland Express, Inc., a Nevada
corporation (the "Company"), to be used at the 2004 Annual Meeting of
Stockholders of the Company (the "Annual Meeting"), which will be held at The
Holiday Inn and Conference Center, 1220 First Avenue, Coralville, Iowa 52241, on
Thursday, May 6, 2004, at 8:00 a.m. local time, and any adjournment thereof. All
costs of the solicitation will be borne by the Company. The approximate date of
mailing this proxy statement and the enclosed form of proxy is April 2, 2004.
The enclosed copy of the Company's annual report for the fiscal year ended
December 31, 2003, is not incorporated into this Proxy Statement and is not to
be deemed a part of the proxy solicitation material.
PROXIES AND VOTING
Only stockholders of record at the close of business on March 10, 2004
("Stockholders") are entitled to vote, either in person or by valid proxy, at
the Annual Meeting. On the record date of March 10, 2004, the Company had
50,000,000 shares of $0.01 par value common stock issued and outstanding. Each
share is entitled to one vote. The Company has no other class of stock
outstanding. Stockholders are not entitled to cumulative voting in the election
of directors.
All proxies that are properly executed and received by the Company prior to
the Annual Meeting will be voted in accordance with the choices indicated unless
timely revoked. Any Stockholder may be represented and may vote at the Annual
Meeting by a proxy or proxies appointed by an instrument in writing. In the
event that any such instrument in writing shall designate two (2) or more
persons to act as proxies, a majority of such persons present at the meeting
shall have and may exercise, or, if only one shall be present, then that one
shall have and may exercise, all of the powers conferred by such written
instrument upon all of the persons so designated unless the instrument shall
otherwise provide. No such proxy shall be valid after the expiration of six (6)
months from the date of its execution, unless coupled with an interest or unless
the person executing it specifies therein the length of time for which it is to
continue in force, which in no case shall exceed seven (7) years from the date
of its execution. Any Stockholder giving a proxy may revoke it at any time prior
to its use at the Annual Meeting by filing with the Secretary of the Company a
revocation of the proxy, by delivering to the Company a duly executed proxy
bearing a later date, or by attending the meeting and voting in person.
Other than the election of directors, which requires a plurality of the
votes cast, each matter to be submitted to the Stockholders requires the
affirmative vote of a majority of the votes cast at the meeting. For purposes of
determining the number of votes cast with respect to a particular matter, only
those cast "For" or "Against" are included. If no direction is specified by the
stockholder, the proxy will be voted "For" the proposal as specified in this
notice, and at the discretion of the proxy holder, upon such other matters as
may properly come before the meeting or any adjournment thereof. Proxies marked
"Abstain" and broker non-votes are counted only for purposes of determining
whether a quorum is present at the meeting.
1
PROPOSAL 1 - ELECTION OF DIRECTORS
At the Annual Meeting, the Stockholders will elect five (5) directors to
serve as the Board of Directors until the 2005 Annual Meeting of Stockholders or
until their successors are duly elected and qualified. The Company currently has
five directors: Russell A. Gerdin, Richard O. Jacobson, Dr. Benjamin J. Allen,
Michael J. Gerdin, and Lawrence D. Crouse. In the absence of contrary
instructions, each proxy will be voted for the election of the existing
directors.
Information Concerning Directors and Executive Officers
Information concerning the names, ages, positions with the Company, tenure
as a director, and business experience of the Company's current directors and
other executive officers is set forth below. All references to experience with
the Company include positions with the Company's operating subsidiary, Heartland
Express, Inc. of Iowa, an Iowa corporation. The Board of Directors elects all
executive officers annually.
--------------------------------------------------------------------------------
DIRECTOR
NAME AGE POSITION SINCE
--------------------------------------------------------------------------------
Russell A. Gerdin 62 Chairman of the Board,
President, Secretary 1978
--------------------------------------------------------------------------------
John P. Cosaert 56 Executive Vice President
of Finance, Treasurer N/A
--------------------------------------------------------------------------------
Richard L. Meehan 58 Executive Vice President
of Marketing and Operations N/A
--------------------------------------------------------------------------------
Michael J. Gerdin 34 Vice President of Regional
Operations, Director 1996
--------------------------------------------------------------------------------
Richard O. Jacobson (1) 67 Director 1994
--------------------------------------------------------------------------------
Dr. Benjamin J. Allen (1) 57 Director 1995
--------------------------------------------------------------------------------
Lawrence D. Crouse (1) 63 Director 1999(2)
--------------------------------------------------------------------------------
1 Member of Audit Committee, Compensation Committee and Nominating Committee.
2 Mr. Crouse previously served on the Board of Directors from 1986 to 1991.
Russell A. Gerdin has served as the Company's President since 1978 and as
Chairman of the Board since 1986. Russell A. Gerdin is the father of Michael J.
Gerdin.
John P. Cosaert has served as the Company's Executive Vice President of
Finance since April 1996. From 1986 to April 1996 he served as Vice President of
Finance and Treasurer of the Company.
Richard L. Meehan has served as the Company's Executive Vice President of
Marketing and Operations since April 1996. From 1986 to April 1996 he served as
Vice President of Marketing of the Company.
2
Michael J. Gerdin has served as a director since 1996. Mr. Gerdin has
served as the Company's Vice President of Regional Operations since May 2001. He
served as President of A & M Express, Inc., a subsidiary of the Company, from
September 1998 through December 2000. From July 1997 to September 1998, Mr.
Gerdin coordinated the operations departments of Heartland Express and A & M
Express. From 1992 until July 1997, Mr. Gerdin held a variety of positions
within the Company, including positions in the operations, sales, safety, and
driver recruiting departments. Michael J. Gerdin is the son of Russell A.
Gerdin.
Richard O. Jacobson has served as a director since 1994. Mr. Jacobson has
served as Chairman since October 1998, and served as President and Chief
Executive Officer from 1968 to October 1998, of Jacobson Warehouse Company, Inc.
and Jacobson Transportation Company, Inc., Des Moines, Iowa. Mr. Jacobson also
serves as a director for Atrion Corporation and FelCor Lodging Trust, Inc.
Dr. Benjamin J. Allen has served as a director since 1995. Dr. Allen is the
Vice President for Academic Affairs and Provost at Iowa State University in
Ames, Iowa. He is a Distinguished Professor in Business at Iowa State University
where he served as Dean of the College of Business from 1994 to 2001. Dr. Allen
also served as Interim Vice President for External Affairs in 2001 and 2002. Dr.
Allen was a Brookings Economics Fellow in the Office of Transportation
Regulatory Policy of the United States Department of Transportation. Dr. Allen
served as Chair of the Committee for the Study of Freight Capacity for the Next
Century for the National Academy of Sciences.
Lawrence D. Crouse has served as a director from 1986 to 1991 and from 1999
to present. Mr. Crouse is a business consultant and President of Oak Creek
Ranch, LLC, a real estate holding company with operations in several states. Mr.
Crouse served as Chairman and CEO of Crouse Cartage Company, a regional,
less-than-truckload carrier based in Carroll, Iowa, from 1987 to December 1996
and as its Vice Chairman from January 1997 to May 1998. Crouse Cartage was a
subsidiary of Transfinancial Holdings, Inc., a publicly traded company. Mr.
Crouse served as Vice President and a director of Transfinancial Holdings, Inc.
from 1991 until May 1998. He is the trustee of trusts for the benefit of Russell
Gerdin's children.
Meetings and Director Compensation
The Board of Directors held four regularly scheduled meetings during the
last fiscal year. Each director was present at all meetings of the Board of
Directors and all meetings of the committees on which he served. The Company has
no formal policy regarding attendance by its directors at annual stockholders
meetings. All directors have historically attended those meetings, and all five
directors were present at the 2003 Annual Meeting of Stockholders.
Directors who are not employees of the Company are paid $1,000 for
attendance at each Board of Directors or committee meeting attended (if the
committee meeting is held on a day other than the day of a Board meeting), and
are reimbursed for expenses incurred in attending such meetings.
Independent Directors
Of the five members currently serving on the Board of Directors, the Board
has determined that Lawrence D. Crouse, Richard O. Jacobsen, and Dr. Benjamin J.
Allen are "independent directors" as defined in the NASDAQ rules and also meet
the additional independence standards and other requirements for audit committee
membership.
3
Committees of the Board and Other Corporate Governance Matters
The Board of Directors has a standing Audit Committee. In addition to the
Audit Committee, the Board established standing Compensation and Nominating
Committees at its February 20, 2004 meeting.
Audit Committee and Audit Committee Report. The Audit Committee presently
consists of Lawrence D. Crouse (Chairman), Dr. Benjamin J. Allen and Richard O.
Jacobson. The Board has determined that Lawrence D. Crouse qualifies as an
"audit committee financial expert," as defined by the Securities and Exchange
Commission. The Audit Committee's primary duties include maintaining
communication between the Board of Directors, the independent auditors and the
Company's executive officers and accounting personnel with respect to the
Company's financial affairs in general, including financial statements and
audits, the adequacy and effectiveness of the internal accounting controls and
systems and the retention and termination of the independent auditors The Audit
Committee also reviews quarterly financial and operating results of the Company,
through meetings and conference calls, with the management, independent auditors
and securities counsel of the Company. The Board has adopted a charter for the
Audit Committee, which sets forth the purpose and responsibilities of the Audit
Committee in greater detail. The Audit Committee charter was revised in February
2004. A copy of the revised charter is attached to this proxy statement as
Appendix A. The Audit Committee met two times in person and two times via
conference call during the past year.
The following Audit Committee Report shall not be deemed to be incorporated
by reference into any filing made by the Company under the Securities Act of
1933 or the Securities Exchange Act of 1934, notwithstanding any general
statement contained in any such filings incorporating this Proxy Statement by
reference, except to the extent the Company incorporates such report by specific
reference.
4
Audit Committee Report for Fiscal 2003
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. The Audit committee's actions are governed by
a written charter, which has been adopted by the Board of Directors. All of the
members of the Audit Committee are independent as defined by Rule 4200(a)(15) of
the National Association of Securities Dealer's listing standards, and also meet
the additional independence and other requirements for audit committee
membership under Rule 4350(d)(2) of those standards. In fulfilling its oversight
responsibilities, the Audit Committee reviewed and discussed with management the
audited financial statements included in the Company's Annual Report on Form
10-K for the year ended December 31, 2003, including a discussion of the
quality, not just the acceptability, of the accounting principles, the
reasonableness of significant judgments, and the clarity of disclosures in the
financial statements. In addition, the Audit Committee has discussed with the
independent auditors the auditors' independence from management and the Company
including the matters in the written disclosures required by the Independent
Standards Board and considered the compatibility of non-audit services with the
auditors' independence.
The Audit Committee discussed with the Company's independent auditors the
matters required to be discussed by SAS 61 (Codification of Statements on
Auditing Standards, AV Section 380), as well as the overall scope and plans for
their audit. The committee meets with the independent auditors, with and without
management present, to discuss the results of their examinations, their
evaluations of the Company's internal controls, and the overall quality of the
Company's financial reporting. The Audit Committee held two meetings and two
conference calls during the fiscal year 2003.
In reliance on the reviews and discussions referred to above, and after
receiving and reviewing the written disclosures and the letter from the
independent accountants as required by Independent Standards Board Standard No.
1 (Independence Discussions with Audit Committees), the Audit Committee
recommended to the Board of Directors (and the Board has approved) that the
audited financial statements be included in the Annual Report on Form 10-K for
the year ended December 31, 2003 for filing with the Securities and Exchange
Commission.
By the Members of the Audit Committee:
Lawrence D. Crouse (Chairman)
Dr. Benjamin J. Allen
Richard O. Jacobson
5
Compensation Committee. The Compensation Committee presently consists of
Lawrence D. Crouse, Dr. Benjamin J. Allen and Richard O. Jacobson. The primary
responsibilities of the Compensation Committee will be to review the
compensation policies of the Company and approve salary recommendations to the
Board of Directors for all elected officers. The Board has adopted a charter for
the Compensation Committee, which sets forth the purpose and responsibilities of
the Compensation Committee in greater detail. A copy of the charter is available
on the Company's website at www.heartlandexpress.com.
Nominating Committee. The Nominating Committee presently consists of
Lawrence D. Crouse, Dr. Benjamin J. Allen and Richard O. Jacobson. The primary
responsibilities of the Nominating Committee will be to identify and approve
individuals qualified to serve as members of our Board. The Nominating Committee
will consider recommendations from many sources, including stockholders,
regarding possible director candidates. Such recommendations, together with
appropriate biographical information, should be submitted to the Secretary of
the Company for consideration by the Nominating Committee by December 31 of the
year preceding the annual meeting of stockholders at which the proposed director
candidate would be elected. Guidelines regarding the qualifications of
candidates for directors, including stockholder proposed candidates, insofar as
they apply to non-employees, generally favor individuals who have managed
relatively large, complex business, educational, or other organizations or who,
in a professional or business capacity, are accustomed to dealing with complex
business or financial problems. In addition to these guidelines, the Committee
will also evaluate whether the candidate's skills are complementary to the
existing Board members' skills, and the Board's needs for operational,
management, financial and other expertise. With regard to specific qualities and
skills, the Nominating Committee believes it necessary that: (i) at least a
majority of the members of the Board of Directors qualify as independent under
NASDAQ Rules; (ii) at least three members of the Board of Directors satisfy the
additional independence and other requirements for audit committee membership;
and (iii) at least one member of the Board of Directors eligible to serve on the
Audit Committee has sufficient knowledge, experience, and training concerning
accounting and financial matters so as to qualify as an "audit committee
financial expert" within the meaning of applicable SEC rules. The Board has
adopted a charter for the Nominating Committee, which sets forth the purpose and
responsibilities of the Nominating Committee in greater detail. A copy of the
charter is available on the Company's website at www.heartlandexpress.com.
Stockholder Communications. Shareholders may send communications to any
Director in writing by sending them to the Director in care of the Secretary of
Heartland Express at 2777 Heartland Drive, Coralville, Iowa 52241. The Secretary
will forward all such written communications to the Director to whom it is
addressed.
Code of Ethics. The Board of Directors has adopted a Code of Business
Conduct and Ethics for all employees and directors of the Company, and a Code of
Ethics for Senior Financial Officers, as recommended by the Audit Committee.
Copies of the codes are available on the Company's website at
www.heartlandexpress.com.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE NOMINEES FOR DIRECTOR PRESENTED IN PROPOSAL 1.
6
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation paid by the Company to its chief executive officer and
the two other named executive officers of the Company (the "Named Officers"),
for services in all capacities for the fiscal years ended December 31, 2003,
2002, and 2001.
Summary Compensation Table
--------------------------------------------------------------------------------
Long-Term Compensation
----------------------------------
Annual Compensation Awards Payouts
----------------------------------------------------------
Other Restric- All
Annual ted LTIP Other
Compen- Stock Options/Pay- Compen-
Name and Principal Salary Bonus sation Award(s)SARs outs sation
Position Year ($) ($) ($) ($)(1) (#) ($) ($) (2)
--------------------------------------------------------------------------------
Russell A. Gerdin 2003 300,000 - - - - - - -
Chairman and 2002 300,000 - - - - - - -
President(Chief 2001 300,000 - - - - - - -
Executive Officer)
John P. Cosaert, 2003 154,520 - - - - - - -
Executive Vice 2002 150,000 - - 439,800 - - - 50,000
President of Finance, 2001 147,248 - - - - - - -
Treasurer, and Chief
Financial Officer
Richard L. Meehan 2003 154,520 - - - - - - -
Executive Vice 2002 150,000 - - 439,800 - - - 50,000
President of 2001 147,248 - - - - - - -
Marketing and
Operations
--------------------------------------------------------------------------------
1 Aggregate restricted stock holdings at December 31, 2002 and their value at
March 7, 2002, the date of the award, are 20,000 shares valued at $439,800
for both Mr. Cosaert and Mr. Meehan. The shares for both named executive
officers vest as follows: 8,000 shares in 2004 and 4,000 shares per year in
2005 through 2007.
2 All other compensation reflects the Company's contribution to the
non-qualified deferred compensation plan for key management employees.
Non-Qualified Deferred Compensation Plan
In 1993, the Company's operating subsidiary, Heartland Express, Inc. of
Iowa, adopted a non-qualified deferred compensation plan for key management
employees designated by the board of directors of the subsidiary for a given
year. The chief executive officer does not participate in the deferred
compensation plan. The total contingent benefit available for all participants
is determined annually by the Company's President pursuant to a formula that is
based upon the Company's net profits and operating ratio for the previous year.
The benefits vest in increments up to age 65, payment is deferred until
cessation of employment, and all contributions are subject to certain vesting
and forfeiture provisions. Contributions are made pursuant to the deferred
compensation plan only if the Company's operating ratio for the previous year
was below a pre-determined target established by the President. The President
determines the portion of the annual total deferred compensation pool to
allocate to individual executive officers based upon a subjective evaluation of
the job performance of each individual executive officer.
7
Tuition Award Program
The Company maintains a tuition award program for the children of certain
employees, including executive officers. Contributions to the program are based
upon the Company's performance. During 2003, the Company contributed $340,000 to
the program, based upon 2002 performance. The amounts paid for children of the
Company's Named Officers were none in 2003 and 2002 and $10,954 in 2001.
Restricted Stock Awards
On March 7, 2002, Russell Gerdin transferred 90,750 shares of his Common
Stock to key employees, including 40,000 shares to the named executive officers.
Shares distributed under the award generally vest over a five year period or
upon death or disability of a recipient. Unvested shares cannot be sold,
assigned, or transferred and are to be forfeited to Mr. Gerdin in the event of a
recipient's termination of employment.
Compensation Committee Interlocks and Insider Participation
The 2003 Board of Directors consisted of Russell A. Gerdin, Richard O.
Jacobson, Michael J. Gerdin, Dr. Benjamin J. Allen, and Lawrence D. Crouse, all
of whom participated in deliberations concerning executive officer compensation
during 2003. No other individuals participated in such deliberations. During
2003, Russell A. Gerdin served as the President and Secretary and Michael J.
Gerdin served as Vice President of Regional Operations of the Company.
Historically, the Board of Directors has established the compensation of Russell
A. Gerdin and reviewed compensation set by Russell A. Gerdin for other executive
officers.
During fiscal year 2003, none of our executive officers served as a member
of the board of directors or compensation committee (or other committee
performing equivalent functions) of any entity that had one or more executive
officers serving as a member of our Board of Directors.
In February 2004, the Board established a Compensation Committee comprised
of the three independent Board Members. Beginning in fiscal 2004, determinations
with respect to the compensation of the Company's executive officers will be
made subject to review and approval of the Compensation Committee.
See "Certain Relationships and Related Transactions" on page 12 below for a
description of certain transactions between the Company and members of the Board
of Directors and their affiliates.
8
Report of the Board of Directors on Executive Compensation
The Board of Directors Report on Executive Compensation, and the
performance graph appearing later in this Proxy Statement, shall not be deemed
to be incorporated by reference into any filing made by the Company under the
Securities Act of 1933 or the Securities Exchange Act of 1934, notwithstanding
any general statement contained in any filing incorporating this proxy statement
by reference, except to the extent that Company incorporates this report and
graph by specific reference.
The members of the Board of Directors prepared the following report on
executive compensation:
The Board of Directors reviewed the compensation of the Company's executive
officers for fiscal 2003. In conducting this review, the Board evaluated the
compensation of Mr. Gerdin, the Company's chief executive officer, differently
than that of the other executive officers. A summary of the considerations for
each is set forth below.
Chief Executive Officer. Mr. Gerdin receives a base salary only, with no
bonus or long-term incentives. The Board of Directors recognizes Mr. Gerdin's
substantial responsibility and contribution to the Company's operating
performance, operating margin, revenue and net income growth rates, and
attainment of Company goals, as well as his large stockholdings. At Mr. Gerdin's
request, his salary has remained the same since 1986, and he has never been paid
a bonus. The Board believes that Mr. Gerdin's salary is reasonable compared to
similarly situated executives, and that as a holder of approximately 40% of the
Company's outstanding stock, Mr. Gerdin receives an incentive through
appreciation in the value of the Company's stock. Because of Mr. Gerdin's
request, the Board of Directors has not considered or approved an increase in
annual compensation or any incentive compensation for Mr. Gerdin. Thus,
corporate performance directly affects Mr. Gerdin, but not through his
compensation by the Company.
Other Executive Officers. The Company's other executive officers are
compensated through a mix of salary, restricted stock awards, and incentive
compensation. In establishing compensation, the Company's Chief Executive
Officer, subject to the review of the Board of Directors, annually considers (i)
the Company's operating performance, stock performance, operating margin, and
revenue and net income growth rates, (ii) team-building skills, individual
performance, past performance and potential with the Company, (iii) local
compensation levels and cost of living, and (iv) compensation information
disclosed by similar publicly-held truckload motor carriers. Salary and bonus
levels are largely subjective, with individual performance being the most
important factor. Compensation levels at other publicly-traded truckload motor
carriers are used as a general guide, and the Board believes that the
compensation of its executive officers as a group, historically and during the
last fiscal year, has been comparable to that of other carriers.
The restricted stock award plan was adopted for key management employees to
provide long-term incentive through equity ownership. Mr. Gerdin transferred
shares of his Common Stock to the plan to provide executive officers and other
key employees with incentive to maximize long-term stockholder value. The awards
vest over a five year period contingent upon continued employment.
The Board believes that providing an incentive for its executive officers
to maximize profitability is important, and that this objective is advanced by
9
the non-qualified deferred compensation plan for key management employees
maintained by the Company's operating subsidiary. The Company's President
determines the portion of the annual total deferred compensation pool to
allocate to individual executive officers based upon a subjective evaluation of
the job performance of each individual executive officer.
Board of Directors
Russell A. Gerdin Benjamin J. Allen
Richard O. Jacobson Michael J. Gerdin
Lawrence D. Crouse
10
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth, as of February 27, 2004, the number and
percentage of outstanding shares of Common Stock beneficially owned by each
person known by the Company to beneficially own more than 5% of such stock, by
each director and Named Officer of the Company, and by all directors and
executive officers of the Company as a group.
--------------------------------------------------------------------------------
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
--------------------------------------------------------------------------------
Amount
& Nature of Percent
Name and Address Beneficial of
Title of Class of Beneficial Owner Ownership Class
--------------------------------------------------------------------------------
Russell A. Gerdin, President,
Secretary, and Director
2777 Heartland Drive,
Common Stock Coralville, IA 52241 19,468,433 (1) 38.9%
--------------------------------------------------------------------------------
Richard O. Jacobson
Director
P.O. Box 224,
Common Stock Des Moines, IA 50301 142,707 (2) *
--------------------------------------------------------------------------------
Benjamin J. Allen
Director
2720 Thompson Drive,
Common Stock Ames, IA 50010 394 *
--------------------------------------------------------------------------------
Michael J. Gerdin
Director
2777 Heartland Drive,
Common Stock Coralville, IA 52241 - - *
--------------------------------------------------------------------------------
Lawrence D. Crouse
Director
P.O. Box 480,
Common Stock Burke, SD 57523 765,204 (3) 1.5%
--------------------------------------------------------------------------------
John P. Cosaert
Executive Vice President
2777 Heartland Drive,
Common Stock Coralville, IA 52241 48,719 *
--------------------------------------------------------------------------------
Richard L. Meehan
Executive Vice President
2777 Heartland Drive,
Common Stock Coralville, IA 52241 56,647 (4) *
--------------------------------------------------------------------------------
FMR Corp.
82 Devonshire Street,
Common Stock Boston, MA 02109 2,501,384 (5) 5.0%
--------------------------------------------------------------------------------
All directors and executive
officers as a group
Common Stock (7 individuals) 19,731,683 39.5%
--------------------------------------------------------------------------------
* Less than one percent (1%)
1 Mr. Gerdin owns 18,718,012 shares directly. An additional 750,421 shares
are held of record by a voting trust, the voting trust certificates of
which are owned by Gerdin Family Investments, L.P. Mr. Gerdin is the
general partner of the limited partnership and has dispositive power over
the voting trust certificates and stock. Mr. Gerdin is not the voting
trustee and does not have the power to vote the shares in the voting trust.
2 All shares are owned by the Richard O. Jacobson Foundation, a private
foundation established by Mr. Jacobson. Mr. Jacobson has voting and
dispositive power over the shares, but neither he nor any of his family
members may receive distribution from the foundations assets. Accordingly,
beneficial ownership is disclaimed.
3 Mr. Crouse owns 14,783 shares directly. The other 750,421 shares are held
by Gerdin Family Investments, L.P., and Mr. Crouse is the voting trustee.
4 All shares are owned directly except for 17,760 shares held by Mr. Meehan's
wife. Mr. Meehan disclaims beneficial ownership of such shares.
5 Based on Schedule 13G as of December 31, 2003, as filed with the Securities
and Exchange Commission by FMR Corp. FMR Corp. claims sole voting power
with respect to no shares, sole dispositive power with respect to 2,501,384
shares, and no shared voting or dispositive power with respect to any of
these shares.
11
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "SEC"). Officers,
directors, and greater than 10% stockholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely upon a review of the copies of such forms furnished to the Company, the
Company believes that its officers, directors and greater than 10% beneficial
owners complied with all Section 16(a) filing requirements applicable to them
during the Company's preceding fiscal year.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 2003, the Company leased two office buildings, totaling approximately
25,000 square feet, a storage building of approximately 3,500 square feet, and
five acres of land from Russell A. Gerdin for $299,625 plus taxes, utilities,
insurance and maintenance. The lease expires on May 31, 2005, but is renewable
at the Company's option for an additional five year term with a cost of living
adjustment.
During the year ended December 31, 2003, the Company purchased 8.9 acres of
land at its headquarters from Russell A. Gerdin for $1,350,000. The sale price
was determined by an independent appraisal of the property, and the transaction
was approved by the Board of Directors, including all of its independent
members.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The principal independent public accounting firm utilized by the Company
during fiscal 2003 was KPMG LLP, independent certified public accountants
("KPMG"). KPMG has been engaged by the Company in that capacity since April
2002. The Audit Committee has appointed KPMG as the Company's principal public
accounting firm for fiscal 2004. A representative of KPMG is expected to be
present at the Annual Meeting and to be available to respond to appropriate
questions, and such representative will have an opportunity to make a statement
at the Annual Meeting if he or she desires to do so.
Change of Independent Public Accountants in 2002
On April 5, 2002, the Audit Committee of the Board of Directors approved
the dismissal of our independent public accountants, Arthur Andersen LLP
("Arthur Andersen"). Arthur Andersen's reports on our financial statements for
each of the fiscal years ended December 31, 2000 and 2001 did not contain an
adverse opinion or disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principles. During the fiscal years
ended December 31, 2000 and 2001, and during the subsequent interim period
through the date of dismissal, April 5, 2002, there were not (i) any
disagreements between us and Arthur Andersen on any matters of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, which disagreements, if not resolved to Arthur Andersen's
satisfaction, would have caused Arthur Andersen to make reference to the subject
mater of the disagreements in connection with its reports, or (ii) any
reportable events, as defined under Item 304(a)(1)(v) of Regulation S-K,
promulgated by the Securities and Exchange Commission.
A copy of a letter addressed to the Securities and Exchange Commission from
Arthur Andersen stating that it agrees with the above statements was included as
Exhibit 16 to our Form 10-K for the year ended December 31, 2002 filed with the
Commission is incorporated by reference herein.
12
Also on April 5, 2002, based upon approval of the Audit Committee,
Heartland Express engaged KPMG to be our independent auditors. Heartland Express
did not consult with KPMG at any time during the fiscal years ended December 31,
2000 and 2001, and through April 5, 2002, with respect to the application of
accounting principles to a specified transaction, either completed or proposed,
or the type of audit opinion that might be rendered on our financial statements,
or concerning any disagreement or reportable event with Arthur Andersen LLP.
Principal Accounting Fees and Services
The following table shows the fees for professional services provided by
KPMG for the audit of our annual financial statements for each of the fiscal
years ended December 31, 2002 and 2003, and the review of financial statements
included in our quarterly reports on Form 10-Q during those periods, as well as
fees billed by KPMG for other services rendered during those periods:
2003 2002
Audit Fees (1) $ 77,500 $ 74,600
Audit-Related Fees (2) 20,400 -
Tax Fees (3) 18,700 18,700
All Other Fees - -
-------- --------
Total $116,600 $ 93,300
======== ========
1 Audit Fees represent fees billed for professional services rendered by the
principal independent public accountant for the audit of our annual
financial statements and review of financial statements included in our
quarterly reports on Form 10-Q, or services that are normally provided by
such accountant in connection with statutory or regulatory filings or
engagements for those fiscal years.
2 Audit-Related Fees represent fees billed for assurance and related services
by the principal independent public accountant that are reasonably related
to the performance of the audit or review of financial statements. For
fiscal 2002, we were not billed any Audit-Related Fees by KPMG. For fiscal
2003, Audit-Related Fees were comprised of fees for consultations on
accounting issues.
3 Tax Fees represent fees billed for professional services rendered by the
principal independent accountant for tax compliance, tax advice, and tax
planning.
The Company's Audit Committee approves all audit and non-audit services
that KPMG is engaged to perform in advance of any such engagement. There are no
other specific policies or procedures relating to the pre-approval of services
performed by KPMG LLP. No audit-related, tax, or other non-audit services were
approved by the Audit Committee pursuant to the de minimus exception to the
pre-approval requirement under Rule 2-01, paragraph (c)(7)(i)(C), of Regulation
S-X during the fiscal year ended December 31, 2003.
STOCK PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR HEARTLAND EXPRESS, INC.
The following graph compares the cumulative total stockholder return of the
Company's Common Stock with the cumulative total stockholder return of the
Nasdaq Stock Market (U.S. Companies) and the Nasdaq Trucking & Transportation
Stocks commencing December 31, 1998, and ending December 31, 2003.
13
[GRAPH]
--------------------------------------------------------------------------------
Legend
CRSP Total
Returns
Symbol Index for: 12/1998 12/1999 12/2000 12/2001 12/2002 12/2003
____ Heartland Express 100.0 90.0 130.4 198.4 258.1 272.9
- - - Nasdaq Stock Market
(U.S. Companies) 100.0 185.4 111.8 88.8 61.4 91.8
----- Nasdaq Trucking &
Transportation
Stocks 100.0 95.3 86.6 102.4 104.3 149.4
SIC 3700-3799, 4200-4299, 4400-4599, 4700-4799 U.S. and Foreign
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends
B. The indexes are reweighted daily, using the market capitalization on
the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a
trading day, the preceding trading day is used.
D. The index level for a all series was set to 100.0 on 12/31/1998.
--------------------------------------------------------------------------------
The stock performance graph assumes $100 was invested on January 1, 1999.
There can be no assurance that the Company's stock performance will continue
into the future with the same or similar trends depicted in the graph above. The
Company will not make or endorse any predictions as to future stock performance.
The CRSP Index for Nasdaq Trucking & Transportation Stocks includes all publicly
held truckload motor carriers traded on the Nasdaq Stock Market, as well as all
Nasdaq companies within the Standard Industrial Code Classifications 3700-3799,
4200-4299, 4400-4599, and 4700-4799 US and Foreign. The Company will provide the
names of all companies in such index upon request.
14
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 2005 Annual Meeting
of the Stockholders of the Company must be received by the Corporate Secretary
of the Company at the Company's principal executive offices on or before
December 9, 2004, to be included in the Company's proxy material related to the
meeting.
OTHER MATTERS
The Board of Directors does not intend to present at the Annual Meeting any
matters other than those described herein and does not presently know of any
matters that will be presented by other parties.
HEARTLAND EXPRESS, INC.
Russell A. Gerdin
Chairman of the Board
April 2, 2004
15
APPENDIX A
Heartland Express, Inc. Audit Committee Charter
Purpose
The purposes of Board of Directors Audit Committee are to manage the
Company's relationship with its independent public accounting firm and to
represent the Board in its oversight of the Company's accounting and financial
reporting processes and audits of the Company's financial statements. Management
is responsible for (a) the preparation, presentation and integrity of the
Company's financial statements; (b) accounting and financial reporting
principles; and (c) establishing, implementing, and maintaining the Company's
internal controls and procedures designed to promote compliance with accounting
standards and applicable laws and regulations. The Company's independent public
accounting firm is responsible for performing an independent audit of the
consolidated financial statements in accordance with generally accepted auditing
standards.
Membership
The Audit Committee shall consist of not less than three members who shall
be appointed by the Board of Directors. Each member shall be an independent
director as defined under listing standards of The NASDAQ Stock Market, Inc. and
applicable laws and regulations. In addition each member shall satisfy the
independence and other requirements for audit committee membership under
Securities and Exchange Commission regulations.
Responsibilities and Authority
o The appointment, compensation, retention and oversight of the work
(including resolution of disagreements between management and the
independent public accountants regarding financial reporting) of any
independent public accounting firm engaged for the purpose of preparing or
issuing an audit report or performing other audit, review or attest
services for the Company. Any such independent auditing firm shall report
directly to the Audit Committee.
o Obtain and review a written statement from the Company's independent public
accounting firm delineating all relationships between the firm and the
Company, consistent with Independence Standards Board Standard 1. The Audit
Committee shall actively engage in a dialogue with the independent public
accountants with respect to any disclosed relationships or services that
may impact their objectivity and independence, and take action to oversee
the independence of the Company's independent public accounting firm.
o Obtain and review annually a report by the Company's independent public
accounting firm describing the firm's internal quality control procedures
and any issues raised by the most recent internal quality control review,
peer review, or regulatory inquiry within the preceding five years.
o Establish procedures for the receipt, retention and treatment of complaints
received by the Company regarding accounting, internal accounting controls,
or auditing matters and the confidential, anonymous submission by employees
of concerns regarding questionable accounting or auditing matters.
o Shall have the authority to engage independent legal, accounting and other
advisors, as it determines necessary to carry out its duties. The Audit
Committee shall have sole authority to approve related fees and retention
terms.
o Shall be entitled to appropriate funding, as determined by the Audit
Committee, from the Company for payment of: (a) compensation to any
independent public accounting firm engaged for the purpose of preparing or
issuing an audit report or performing other audit, review or attest
services for the Company; (b) compensation to any advisers engaged by the
Audit Committee pursuant to the authority set forth above; and (c) ordinary
administrative expenses of the Audit Committee that are necessary or
appropriate in carrying out its duties.
o Review and reassess the adequacy of this charter on an annual basis.
o Issue the report of the Committee required by the rules of the Securities
and Exchange Commission to be included in the annual proxy statement.
o Establish policies and procedures for the review and pre-approval by the
Committee of audit and permissible non-audit services, including fees and
terms, to be performed by the Company's independent public accounting firm.
o Establish policies for the Company's hiring of employees and former
employees of the Company's independent public accounting firm.
o Unless another independent committee of the Board has been specifically
created for such purpose, the Audit Committee shall review and approve in
advance all transactions that the Company enters into with related parties
that would require disclosure under Item 404 of Regulation S-K promulgated
by the Securities and Exchange Commission.
In addition, in connection with its oversight of the Company's accounting
and financial reporting processes and audits of the Company's financial
statements, the Audit Committee shall, as appropriate:
o Consult with the Company's independent public accounting firm regarding:
(a) its audit plans and procedures, including scope, fees and timing of the
audit; (b) the results of the annual audit along with any accompanying
management suggestions; and (c) the results of its procedures with respect
to interim periods;
o Review and discuss with the independent public accountants all material
accounting issues, including alternative accounting treatments within GAAP,
which have been discussed with management or may have a significant impact
on the Company;
o Review with the Company's independent public accounting firm its judgment
as to the quality and appropriateness of the Company's accounting
principles and the adequacy of the Company's financial statement
disclosures;
o Discuss with management and the independent public accountants quarterly
earnings press releases, quarterly financial statements, and the annual
financial statements prior to filing, including Managements' Discussion and
Analysis of Financial Condition and Results of Operations;
o Review and discuss with management and the independent public accountants
the adequacy and the effectiveness of the Company's internal controls,
including any significant deficiencies and significant changes in internal
controls reported to the Committee by the independent public accountants or
management, and the adequacy and effectiveness of the Company's disclosure
controls and procedures;
o Review and discuss with management the Company's major financial risk
exposures and the steps management had taken to monitor and control such
exposures;
o Review the effectiveness of the Company's system for monitoring compliance
with laws, regulations and the Company's business conduct policies and the
results of management's investigation and follow-up on any fraudulent acts
or accounting irregularities;
o Obtain periodic reports from management regarding legal and regulatory
compliance; and
o Review with the Company's outside counsel legal matters that may have a
material impact on the consolidated financial statements and any material
reports or inquiries received from regulators or governmental agencies
regarding financial reporting compliance.
When appropriate, the Audit Committee may designate one or more of its
members to perform certain of its duties on its behalf, subject to such
reporting to or ratification by the Committee as the Committee shall direct.
The Audit Committee shall meet at such times and places as the Audit
Committee shall determine. The Audit Committee shall meet in executive session
with the independent public accountants and management periodically. The
Chairman of the Audit Committee shall report on the Audit Committee activities
to the full Board.
END OF REPORT