UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities 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 ss.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
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(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
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( ) 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
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HEARTLAND EXPRESS, INC.
2777 Heartland Drive
Coralville, Iowa 52241
NOTICE AND PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 10, 2007
Dear Fellow Stockholders:
The 2007 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 10, 2007, for the following purposes:
1. To consider and act upon a proposal to elect six (6) directors of the
Company; and
2. To consider and act upon such other matters as may properly come
before the meeting and any adjournment thereof.
The foregoing matters are more fully described in the accompanying Proxy
Statement.
The Board of Directors has fixed the close of business on March 14, 2007,
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
March 30, 2007
HEARTLAND EXPRESS, INC.
2777 Heartland Drive
Coralville, Iowa 52241
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 10, 2007
This Proxy Statement is furnished in connection with the solicitation of
proxies from the stockholders of Heartland Express, Inc., a Nevada corporation
(the "Company"), to be voted at the 2007 Annual Meeting of Stockholders of the
Company (the "Annual Meeting"), which will be held at The Holiday Inn Conference
Center/Hampton Inn, 1220 First Avenue, Coralville, Iowa 52241, on Thursday, May
10, 2007, at 8:00 a.m. local time, and any adjournment thereof. THE ENCLOSED
PROXY IS SOLICITED BY OUR BOARD OF DIRECTORS. 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 March 30, 2007.
PROXIES AND VOTING
Only stockholders of record at the close of business on March 14, 2007
("Stockholders") are entitled to vote, either in person or by valid proxy, at
the Annual Meeting. On the record date of March 14, 2007, the Company had
98,251,889 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, any matters submitted to the Stockholders will require 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 proposals specified in this Proxy
Statement, and at the discretion of the proxy holders, 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 six (6) directors to
serve as the Board of Directors until the 2008 Annual Meeting of Stockholders or
until their successors are duly elected and qualified. The Company currently has
six directors: Russell A. Gerdin, Richard O. Jacobson, Dr. Benjamin J. Allen,
Michael J. Gerdin, Lawrence D. Crouse and James G. Pratt. In the absence of
contrary instructions, each proxy will be voted for the election of each 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.
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DIRECTOR
NAME AGE POSITION SINCE
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Russell A. Gerdin 65 Chairman of the Board and
Chief Executive Officer 1978
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Michael J. Gerdin 37 Director and President 1996
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Richard O. Jacobson 70 Director 1994
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Dr. Benjamin J. Allen 60 Director 1995
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Lawrence D. Crouse 66 Director 1999
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James G. Pratt 58 Director 2006
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John P. Cosaert 59 Executive Vice President of
Finance and Treasurer N/A
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Richard L. Meehan 61 Executive Vice President of
Marketing and Operations N/A
--------------------------------------------------------------------------------
Thomas E. Hill 53 Vice President, Controller,
and Secretary N/A
--------------------------------------------------------------------------------
Russell A. Gerdin has served as the Company's Chief Executive Officer since
1978 and Chairman of the Board since 1986. Mr. Russell Gerdin served as
President of the Company from 1978 to May 2006. Russell A. Gerdin is the father
of Michael J. Gerdin.
Michael J. Gerdin has served as President of the Company since May of 2006
and as a director since 1996. Mr. Michael Gerdin served as the Company's Vice
President of Regional Operations from January 2001 until May 2006. In addition
he previously 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. Michael Gerdin coordinated the operations departments of Heartland
Express and A & M Express. From 1992 until July 1997, Mr. Michael 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. Mr. Michael Gerdin is a trustee for Grantor Retained
Annuity Trusts for the benefit of Russell and Ann Gerdin.
2
Richard O. Jacobson has served as a director since 1994 and is Chairman of
the Nominating Committee and a member of the Audit and Compensation Committees.
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.
Dr. Benjamin J. Allen has served as a director since 1995 and is Chairman
of the Compensation Committee and a member of the Audit and Nominating
Committees. Dr. Allen is currently the President of the University of Northern
Iowa, a position he assumed in June of 2006. Dr. Allen was the Vice President
for Academic Affairs and Provost at Iowa State University in Ames, Iowa from
2002 through May 2006. He also served as a Distinguished Professor in Business
at Iowa State University, a position to which he was originally appointed in
1988. In addition, Dr. Allen served as Dean of the College of Business at Iowa
State University from 1994 to 2001 and as the Interim Vice President for
External Affairs of Iowa State University 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 from 1976 to 1977. Dr. Allen
served as Chair of the Committee for the Study of Freight Capacity for the Next
Century for the National Academy of Sciences in 2001 and 2002.
Lawrence D. Crouse has served as a director from 1986 to 1991 and from 1999
to present. Mr. Crouse is a member of the Audit, Compensation, and Nominating
Committees. He served as the Chairman of the Audit Committee until August 2006.
Mr. Crouse is a business consultant and the 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, and trustee for Grantor Retained Annuity Trusts for the benefit of
Russell and Ann Gerdin.
James G. Pratt has served as a director since June 2006 and is Chairman of
the Audit Committee. Mr. Pratt is a Senior Vice President and Chief Financial
Officer of Hills Bank and Trust Company in Hills, Iowa, positions he has held
since 1986. In addition, he has served as the Treasurer of Hills Bancorporation,
an SEC reporting one-bank holding company, since 1983 and Secretary of Hills
Bancorporation since 2004. Mr. Pratt is a certified public accountant and
previously was employed by Ernst & Ernst, now Ernst & Young, and McGladrey &
Pullen, now RSM McGladrey, prior to joining Hills Bank and Trust Company in
1982.
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.
Thomas E. Hill has served as the Company's Vice President and Controller
since April 1996 and as the Company's Secretary since May 2006. Mr. Hill has
served in the Company's accounting department since June 1983.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE NOMINEES FOR DIRECTOR PRESENTED IN PROPOSAL 1.
3
CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS
Meetings and Director Compensation
The Board of Directors of the Company meets on a regularly scheduled basis.
The Board of Directors held a total of six meetings during the last fiscal year,
including an annual meeting, one special meeting, and four regularly scheduled
meetings. Each of the directors attended 75% or more of the meetings of the
Board of Directors and the meetings held by all of the committees of the Board
on which he or she served. The Company has no formal policy regarding attendance
by its directors at annual stockholders meetings. All directors have
historically attended those meetings, and four out of five then-current
directors were present at the 2006 annual meeting of stockholders.
Independent Directors
Of the six members currently serving on the Board of Directors, the Board
has determined that Lawrence D. Crouse, Richard O. Jacobson, Dr. Benjamin J.
Allen, and James G. Pratt are "independent directors" as defined in the NASDAQ
rules and also meet the additional independence standards and other requirements
for audit committee membership set forth in NASDAQ and Securities and Exchange
Commission ("SEC") rules.
Committees of the Board and Other Corporate Governance Matters
The Board of Directors has a standing Audit Committee, Compensation
Committee, and Nominating Committee. All three committees are composed of
independent directors.
Audit Committee. The Audit Committee presently consists of independent
directors James G. Pratt (Chairman), Lawrence D. Crouse, Dr. Benjamin J. Allen,
and Richard O. Jacobson. Mr. Pratt succeeded Mr. Crouse as the audit committee
chairman in August 2006. The Board has determined that James G. Pratt qualifies
as an "audit committee financial expert," as defined by the SEC. The Audit
Committee's primary duties include maintaining communication between the Board
of Directors, the Company's independent registered public accounting firm 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 registered public
accounting firm. The Audit Committee also reviews quarterly financial and
operating results of the Company, through meetings and conference calls, with
the management, independent registered public accounting firm, and, when
appropriate, the securities counsel for 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. A copy of the charter
is available on the Company's website at www.heartlandexpress.com. The Audit
Committee met one time in person and four times via conference call during
fiscal year 2006.
4
Compensation Committee. The Compensation Committee presently consists of
independent directors Dr. Benjamin J. Allen (Chairman), Richard O. Jacobson, and
Lawrence D. Crouse. The primary responsibilities of the Compensation Committee
are to review the compensation policies of the Company and to periodically make
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. The Compensation Committee met one time in person
during fiscal year 2006. Additional information concerning the Compensation
Committee Report on Executive Compensation is set forth under the caption
"Compensation Committee Report."
Nominating Committee. The Nominating Committee presently consists of
independent directors Richard O. Jacobson (Chairman), Lawrence D. Crouse, and
Dr. Benjamin J. Allen. The Nominating Committee met one time via conference call
during fiscal year 2006. The primary responsibilities of the Nominating
Committee are to identify and recommend to the Board for nomination individuals
qualified to serve as directors. 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. The
Nominating Committee recommends that the Board of Directors nominate the six
directors named in this Proxy Statement for re-election at the Annual Meeting.
Stockholder Communications. Stockholders 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.
5
Compensation Committee Interlocks and Insider Participation
In 2006, our Compensation Committee was comprised of Richard O. Jacobson,
Dr. Benjamin J. Allen, and Lawrence D. Crouse. No member of the Compensation
Committee is or has been an officer or employee of the Company, or has or had
any relationship with the Company requiring disclosure under Item 404 of SEC
Regulation S-K.
All compensation decisions affecting the executive officers of the Company
are made by the Compensation Committee of the Board of Directors. The Committee
deliberates and votes upon the compensation to be paid to each of the four
executive officers. The Committee does take the guidance from the Company's
Chief Executive Officer concerning the compensation of executive officers other
than him.
Compensation Committee Report
Report of the Compensation Committee. In performing its duties, the
Compensation Committee, as required by applicable rules and regulations
promulgated by the SEC, issues a report recommending to the Board of Directors
that our Compensation Discussion and Analysis be included in this Proxy
Statement and our Annual Report on Form 10-K. The Report of the Compensation
Committee follows.
The Report of the Compensation Committee shall not be deemed to be
incorporated by reference into any filing made by us under the Securities Act of
1933 or the Exchange Act, notwithstanding any general statement contained in any
such filings incorporating this Proxy Statement by reference, except to the
extent we incorporate such report by specific reference.
Report of the Compensation Committee
We have reviewed and discussed the Compensation Discussion and Analysis
contained in this Proxy Statement with management. Based on that review and
discussion, we have recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in this Proxy Statement and in Heartland
Express, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2006.
By the Members of the Compensation Committee:
Dr. Benjamin J. Allen (Chairman)
Lawrence D. Crouse
Richard O. Jacobson
6
Compensation Discussion and Analysis
Overview
The Compensation Committee assists the Board of Directors in its
responsibilities relating to executive compensation and in fulfilling its
responsibilities relating to our compensation and benefit programs and policies.
The Compensation Committee may make recommendations with respect to our
compensation plans and reviews and approves the compensation of executive
officers. The Compensation Committee currently consists of three directors, all
of whom are independent under applicable NASD and SEC standards. The
Compensation Committee receives recommendations from our Chief Executive Officer
regarding the compensation of executive officers (other than the Chief Executive
Officer).
Compensation Philosophy and Objectives
Our executive compensation policies are designed to achieve four primary
objectives: o attract and retain well-qualified executives who will lead us and
inspire superior performance; o provide incentives for achievement of corporate
goals and individual performance; o provide incentives for achievement of
long-term stockholder return; and o align the interests of management with those
of the stockholders to encourage continuing increases in stockholder value.
Elements of Compensation
The components of compensation are intended to accomplish one or more of
the compensation objectives discussed above.
Base Salary and Benefits. To attract and retain officers with exceptional
abilities and talent, annual base salaries are set to provide competitive levels
of compensation. The Compensation Committee considers each officer's
performance, current compensation, and responsibilities within our Company. The
Compensation Committee considers base salaries paid by competitors within our
peer group and those paid by other businesses of comparable size in the Midwest.
The Compensation Committee also considers past individual performance and
achievements when establishing base salaries.
Annual Cash Bonus Incentives. Annual cash bonus incentives are sometimes
used to reward our employees. The current bonus plan is based on the percentage
increase in growth of our fleet and revenue miles, and maintaining a certain
level of customer service. The bonus paid is based upon a pre-determined
percentage of base-salary based upon departmental responsibilities.
Longer-Term Equity-Based Incentives. A portion of potential career
compensation is also linked to corporate performance through equity-based
compensation awards, historically in the form of stock awards. Since going
public in 1986, our Chief Executive Officer has contributed shares of our common
stock from his personal holdings to two separate stock award plans. The most
recent plan was adopted in March 2002. The plan participants have included our
executive officers and other key personnel. The awarded stock has vested
incrementally over a five-year period. All stock awards for executive officers
were fully vested as of March 7, 2007.
7
Stock awards under our equity-based compensation plan are designed to: o
more closely align executive officer and stockholder interests; o reward key
employees for building stockholder value; and o encourage long-term investment
in the Company by participating officers.
Although we do not have specific stock ownership guidelines, the
Compensation Committee believes that stock ownership by management has been
demonstrated to be beneficial to stockholders.
We have never granted awards of stock options and have no plans to do so in
the foreseeable future.
Tuition Plan. We maintain a tuition award program for the children of
certain employees, including executive officers. Contributions to the program
are based upon our performance. During 2006, we contributed $523,000 to the
program, based upon 2005 performance. Other than payments to Mr. Hill, there
were no tuition payments to our executive officers in 2006.
Retirement Plan. We have a qualified retirement plan ("Pension Plan") that
covers certain employees, and a 401(k) savings plan that covers all employees,
except for highly-compensated employees as defined by Internal Revenue code.
Accordingly, none of our named executive officers participate in the retirement
plan.
Deferred Compensation Plan. We have a non-qualified deferred compensation
plan ("DC Plan") primarily for employees excluded from participation in our
qualified retirement plan due to being highly compensated employees as
determined by Internal Revenue limitations. The DC Plan is unfunded for tax
purposes and for purposes of ERISA. The named executive officers in this proxy
statement are eligible to participate in the DC Plan. Employer contributions to
the DC Plan are discretionary and subject to the approval of our Compensation
Committee. Participants may elect to defer up to 100% of their salary, including
any cash bonus, to the DC Plan. The election to defer compensation under the DC
Plan is irrevocable for each plan year as of the beginning of each plan year.
Participant contributions are made into a trust account for the purpose of
administering and providing for payment of the deferred compensation under this
plan. The investment of contributions are self-directed by participants within
an established array of money market, equity and fixed income mutual funds.
Investment in our common stock is prohibited under the DC Plan. We do not pay
interest or other earnings on the invested contributions. Earnings are generated
by the investments selected by the participants. The aggregate earnings on these
investments, by each named executive officer who is a participant in the DC
Plan, is included in the table below and are attributable to the specific
investments selected by each participant. Participants may change the
designation of their investments at such times as mutually agreed by the
parties. As of December 31, 2006, participants could change their investment
designation on a daily basis. Participants elect in advance of the deferral of
their compensation when the funds will be distributable. The aggregate vested
balances of the participants are distributable, as designated by each
participant, when the following occur: the participant's termination of
employment; a change in control; or the participant's death or disability. The
DC Plan provides for distributions to be made in either a lump sum amount or
installments.
8
Compensation Paid to Our Named Executive Officers During 2006
A summary of the Compensation Committee's considerations for setting the
compensation for 2006, earned by, or paid to those persons who were, at December
31, 2006, (i) our Chief Executive Officer, (ii) our Chief Financial Officer, and
(iii) our three other most highly compensated executive officers with total
compensation exceeding $100,000 for the fiscal year ended December 31, 2006
(collectively, the "Named Executive Officers") are set forth below. The
Compensation Committee evaluates and sets the compensation of Mr. Russell
Gerdin, our Chief Executive Officer differently than it does our other executive
officers.
Compensation of Our Chief Executive Officer. Mr. Russell Gerdin receives a
base salary only, with no bonus or long-term incentives. The Compensation
Committee recognizes Mr. Russell Gerdin's substantial responsibility and
contribution to our operating performance, operating margin, revenue and net
income growth rates, and attainment of our goals, as well as his large
stockholdings. At Mr. Russell Gerdin's request, his salary has remained the same
since 1986, and he has never been paid a bonus. The Compensation Committee
believes that Mr. Russell Gerdin's salary is reasonable compared to similarly
situated executives, and that as a direct and indirect holder of approximately
35% of our outstanding stock, Mr. Russell Gerdin receives an incentive through
appreciation in the market value of our stock. Because of Mr. Russell Gerdin's
request, the Compensation Committee did not consider or recommend an increase in
annual compensation or any incentive compensation for Mr. Russell Gerdin. Thus,
our performance directly affects Mr. Russell Gerdin, but not in the form of
salary or bonuses.
Compensation of Our Other Named Executive Officers. Our other Named
Executive Officers are compensated through a mix of salary, incentive
compensation, and restricted stock awards. Factors considered in establishing
the compensation for other Named Executive Officers include (i) our operating
performance, stock performance, operating margin, and revenue and net income
growth rates, (ii) team-building skills, past individual performance and future
potential with us, (iii) local compensation levels and cost of living, (iv)
compensation information disclosed by similarly situated publicly-held truckload
motor carriers, and (v) the suggestions of our Chief Executive Officer. 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 Compensation Committee
believes that the compensation of our Named Executive Officers as a group,
historically and during the last fiscal year, has been comparable to that of
other carriers.
Based upon our financial performance for the fiscal year ended December 31,
2005, and considering our compensation philosophy and the guidelines described
above, the Compensation Committee approved the following annual base salary
increases for our Named Executive Officers, other than our CEO: (i) a $113,400
increase for Michael J. Gerdin in recognition of his development and increased
level of responsibilities as our President, with the relatively large percentage
increase being justified by a very low starting point and the need to bring his
salary more in line with the position of President; (ii) a $9,020 increase for
John P. Cosaert in continued recognition of his role in the Company's efforts to
control costs, increase efficiency, and promote growth, as well as increased
responsibilities attendant to his position; (iii) a $9,020 increase for Richard
L. Meehan in recognition of his role in meeting performance targets and the
increased responsibilities attendant to his position, and (iv) a $5,928 increase
for Thomas E. Hill in continued recognition of his increased responsibilities as
our Vice President and Controller.
9
For 2006, our Named Executive Officers, other than Mr. Russell Gerdin, were
awarded performance-based cash bonuses of approximately 9% of their base salary.
All full-time, non-driver personnel were included in this bonus program. The
percentage of salary assigned to each participating employee was based on their
level of responsibility and the attainment of growth targets. This percentage
may change from time to time as responsibilities of the executive officers
change and as specific goals evolve.
We believe that stock ownership by our Named Executive Officers helps to
align the interests of such officers with the interests of stockholders in
maximizing long-term stockholder value. This objective was advanced through the
award of shares of restricted stock contributed by Mr. Russell Gerdin to key
employees, including certain Named Executive Officers, in 2002. The Compensation
Committee believes that the equity ownership of our senior management currently
is sufficient to align their long-term interests with those of our stockholders,
and therefore did not recommend any stock-based awards to the Named Executive
Officers in 2006.
Except as provided by the terms of the DC Plan, whereupon employer
contributions to this plan immediately become fully vested in the event of a
change of control of our Company, there are no employment contracts, termination
of employment agreements, change in control agreements, or other arrangements
with our executive officers, including our Named Executive Officers, that
provide for payment or benefits to any executive officer at, following, or in
connection with a change in control of our Company, a change in an executive
officer's responsibilities, or an executive officer's termination of employment,
including resignation, severance, retirement, or constructive termination.
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
PAID TO THE NAMED EXECUTIVE OFFICERS
Summary Compensation Table
The following table sets forth information concerning the total
compensation for the fiscal year 2006 awarded to, earned by, or paid to those
persons, who were, at December 31, 2006, the Named Executive Officers.
-------------------------------------------------------------------------------
Stock All
Salary Bonus Awards Other
(1) Compen-
sation(2) Total
Name and Principal Position Year ($) ($) ($) ($) ($)
----------------------------- ---- -------- ------- ------- -------- -------
Russell A. Gerdin, Chairman 2006 300,000 - - - 300,000
and Chief Executive Officer
----------------------------- ---- -------- ------- ------- -------- -------
Michael J. Gerdin, 2006 152,396 13,716 - 166,112
President and Director
----------------------------- ---- -------- ------- ------- -------- -------
John P. Cosaert, Executive 2006 204,623 18,416 87,960 - 310,999
Vice President of Finance,
Treasurer, and Chief
Financial Officer
----------------------------- ---- -------- ------- ------- -------- -------
Richard L. Meehan, Executive 2006 204,623 18,416 87,960 - 310,999
Vice President of Marketing
and Operations
----------------------------- ---- -------- ------- ------- -------- -------
Thomas E. Hill, Vice 2006 109,862 9,888 32,985 11,175 163,910
President, Controller, and
Secretary
----------------------------- ---- -------- ------- ------- -------- -------
(1) No restricted stock grants were made during 2006. This column represents
10
the dollar amount recognized for financial statement reporting purposes
with respect to the 2006 fiscal year for the fair value of restricted stock
granted in prior fiscal years in accordance with SFAS 123R. Pursuant to SEC
rules, the amounts shown exclude the impact of estimated forfeitures
related to service-based vesting conditions. For information on the
valuation assumptions with respect to grants made prior to 2006, refer to
the notes of our financial statements as provided in the Form 10-K for the
respective year-end, as filed with the SEC. These amounts reflect our
accounting expense for these awards, and do not correspond to the actual
value that will be recognized by the Named Executive Officers.
(2) This amount represents contributions made under our tuition award program
as discussed in the Compensation Discussion and Analysis.
Narrative to the Summary Compensation Table
See "Compensation Discussion and Analysis" for a complete description of
our compensation plans pursuant to which the amounts listed under the Summary
Compensation Table were paid or awarded and the criteria for such award or
payment.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information concerning all stock awards
held by our Named Executive Officers as of December 31, 2006.
-------------------------------------------------------------------------------
Stock Awards
-------------------------------------------------------------------------------
Name Number of Shares or Market Value of Shares
Stock Units of Stock That or Units of Stock
Award Have Not Vested(1) That Have Not Vested(2)
Grant Date (#) ($)
------------------- ------------ ------------------- --------------------------
Russell A. Gerdin - - -
------------------- ------------ ------------------- --------------------------
Michael J. Gerdin - - -
------------------- ------------ ------------------- --------------------------
John P. Cosaert 3/7/02 8,000 120,160
------------------- ------------ ------------------- --------------------------
Richard L. Meehan 3/7/02 8,000 120,160
------------------ ------------ ------------------- ---------------------------
Thomas E. Hill 3/7/02 3,000 45,060
------------------- ------------ ------------------- --------------------------
(1) These awards became fully vested on March 7, 2007.
(2) The market value of the awards was calculated by multiplying the closing
market price of our stock at December 29, 2006, by the number of shares
of stock that have not vested.
11
Stock Vested in Fiscal Year 2006
The following table sets forth information concerning the number of shares
acquired upon the vesting of stock awards in the form of restricted stock awards
and the value realized for fiscal 2006 for our Named Executive Officers.
--------------------------------------------------------------
Name Stock Awards
--------------------------------------------------------------
Number of Shares Value Realized on
Acquired on Vesting Vesting(1)
(#) ($)
------------------- ------------------- ------------------
Russell A. Gerdin - -
------------------- ------------------- ------------------
Michael J. Gerdin - -
------------------- ------------------- ------------------
John P. Cosaert 8,000 136,200
------------------- ------------------- ------------------
Richard L. Meehan 8,000 136,200
------------------- ------------------- ------------------
Thomas E. Hill 3,000 51,075
------------------- ------------------- ------------------
(1) The value realized was calculated by multiplying the number of shares of
restricted stock by the market value of the underlying shares on the
vesting date.
Nonqualified Deferred Compensation
The following table provides information with respect to the DC Plan as
discussed in the Compensation Discussion and Analysis. The amounts shown include
compensation earned and deferred in prior years, and earnings on, or
distributions of, such amounts.
---------------------------------------------------------
Aggregate Aggregate Balance
Earnings in at December 31,
2006 2006
Name ($) ($)
----------------------- ----------- -----------------
Russell A. Gerdin - -
----------------------- ----------- -----------------
Michael J. Gerdin 279 28,807
----------------------- ----------- -----------------
John P. Cosaert 45,704 659,541
----------------------- ----------- -----------------
Richard L. Meehan 53,991 440,887
----------------------- ----------- -----------------
Thomas E. Hill 16,280 192,068
---------------------------------------------------------
Narrative to Nonqualified Deferred Compensation
See "Compensation Discussion and Analysis" for a complete description of
our DC Plan. Under the terms of the DC Plan, in the event of a change of control
of our Company, the employer contributions to this plan immediately become fully
vested. There were no employer contributions or employee deferrals during the
year ended December 31, 2006.
12
Director Compensation Table
The following table provides information concerning the compensation of
all directors for the fiscal year ended December 31, 2006.
----------------------------------------------------------
Fees Earned or
Paid in Cash Total
Name ($) ($)
------------------------ ----------------- ---------------
Benjamin Allen 10,500 10,500
------------------------ ----------------- ---------------
James G. Pratt 9,103 9,103
------------------------ ----------------- ---------------
Lawrence D. Crouse 10,500 10,500
------------------------ ----------------- ---------------
Richard Jacobson 10,500 10,500
----------------------------------------------------------
Narrative to Director Compensation Table
Directors who are not employees of the Company are paid a $5,000 annual
retainer, which is paid in quarterly installments. Additionally, directors who
are not employees are compensated $1,000 for attendance at each Board of
Directors meeting along with travel expenses. For each committee meeting
attended, non-employee directors are paid $500. If the Audit Committee
chairperson is a CPA, he receives an additional $10,000 in annual compensation.
13
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth, as of March 14, 2007, 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 and
Nature Percent
Title of Class Name and Address of of Beneficial of
Beneficial Owner Ownership Class
-------------------------------------------------------------------------------
Russell A. Gerdin,
Chief Executive Officer
and Director
2777 Heartland Drive,
Common Stock Coralville, IA 52241 23,793,895 (1) 24.2%
-------------------------------------------------------------------------------
Michael J. Gerdin, President
and Director
Common Stock 2777 Heartland Drive,
Coralville, IA 52241 12,000,000 (3) 12.2%
-------------------------------------------------------------------------------
Richard O. Jacobson, Director
Common Stock P.O. Box 224,
Des Moines, IA 50301 285,413 (2) *
-------------------------------------------------------------------------------
Benjamin J. Allen, Director
Common Stock Room 20 Seerley Hall,
Cedar Falls, Iowa 50614 1,588 *
-------------------------------------------------------------------------------
Lawrence D. Crouse, Director
Common Stock P.O. Box 480,
Burke, SD 57523 5,984,678 (4) 6.1%
-------------------------------------------------------------------------------
James G. Pratt, Director
Common Stock 2525 Potomac Drive,
Iowa City, Iowa 52245 1,000 *
-------------------------------------------------------------------------------
John P. Cosaert, Executive
Vice President
Common Stock 2777 Heartland Drive,
Coralville, IA 52241 67,745 *
-------------------------------------------------------------------------------
Richard L. Meehan, Executive
Vice President
Common Stock 2777 Heartland Drive,
Coralville, IA 52241 78,882 (5) *
-------------------------------------------------------------------------------
Thomas E. Hill, Vice President
and Secretary
Common Stock 2777 Heartland Drive,
Coralville, Iowa 52241 41,734 *
-------------------------------------------------------------------------------
Lord, Abbett & Co. LLC
Common Stock 90 Hudson Street,
Jersey City, NJ 07302 5,325,115 (6) 5.4%
-------------------------------------------------------------------------------
All directors and executive
officers as a group
Common Stock (9 individuals) 40,318,659 41.0%
-------------------------------------------------------------------------------
14
--------------------------------------------------------------------------------
* Less than one percent (1%)
1 Mr. Russell Gerdin owns 21,857,619 shares directly. An additional
1,936,276 shares are held of record by a voting trust, the voting
trust certificates of which are owned by Gerdin Family Investments,
L.P. Mr. Russell Gerdin is the general partner of the limited
partnership and has dispositive power over the voting trust
certificates and stock. Mr. Russell Gerdin is not the voting trustee
and does not have the power to vote the shares in the voting trust.
Mr. Russell Gerdin's stock ownership does not include 16,015,837
shares held by Grantor Retained Annuity Trusts for the benefit of
Russell and Ann Gerdin.
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. Michael J. Gerdin is the trustee for 12,000,000 shares held by
Grantor Retained Annuity Trusts for the benefit of Russell and Ann
Gerdin. Mr. Michael Gerdin has sole voting and sole dispositive power
over these shares and also has an indirect remainder interest.
4 Mr. Crouse owns 32,565 shares directly. An additional 1,936,276 shares
are held by Gerdin Family Investments, L.P., of which Mr. Crouse is
the voting trustee. Mr. Crouse is the trustee for 4,015,837 shares
held by Grantor Retained Annuity Trusts for the benefit of Russell and
Ann Gerdin. Mr. Crouse has sole voting and sole dispositive power over
these shares.
5 All shares are owned directly except for 25,069 shares held by Mr.
Meehan's wife. Mr. Meehan disclaims beneficial ownership
of such shares.
6 Lord, Abbett & Co. LLC. has sole voting power and sole dispositive
power over 5,325,115 shares. It has shared voting power and shared
dispositive power over no shares.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
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 SEC. Officers, directors, and
greater than 10% stockholders are required by SEC regulations to furnish the
Company with copies of all reports that they file under Section 16(a). 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.
15
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 2006, 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 in Coralville, Iowa from Russell A. Gerdin for $331,415 plus
taxes, utilities, insurance and maintenance. The lease agreement will be
cancelled in 2007 prior to the completion of the construction of a new corporate
headquarters and shop facility in North Liberty, Iowa. The new facilities will
be owned by the Company.
On March 13, 2006 the Company acquired 16.7 acres of land in North Liberty,
Iowa for $1,250,000 from Russell A. Gerdin. The purchase price was based on the
fair market value of the land as determined by an independent appraisal. The
land is at the site of the Company's new corporate headquarters and shop
facility that is scheduled for completion in 2007.
Our Audit Committee has established procedures relating to the review,
approval, or ratification of any transaction, or any proposed transaction, in
which we were or are to be a participant and the amount involved exceeds
$120,000, and in which any "related person" (as that term is defined in
Instruction 1 to Item 402(a) of Regulation S-K) had or will have a direct or
indirect material interest ("Interested Transactions"). Upon review of the
material facts of all Interested Transactions, the Audit Committee will either
approve or disapprove the Interested Transactions, subject to certain
exceptions, by taking into account, among other factors it deems appropriate,
whether the terms are arms'-length and the extent of the related person's
interest in the transaction. No director may participate in any discussion or
approval of an interested transaction for which he is a related party. If an
Interested Transaction will be ongoing, the Audit Committee may establish
guidelines for our management to follow in its ongoing dealings with the related
party and then at least annually must review and assess ongoing relationships
with the related party. The Company's lease and purchase of land for our new
corporate headquarters described above were subject to such review, approval, or
ratification.
16
AUDIT COMMITTEE
Audit Committee Report for Fiscal 2006
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, 2006, 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
Company's independent registered public accounting firm its independence
from management and the Company, including the matters in the written
disclosures required by the Independence Standards Board, and considered
the compatibility of non-audit services with the independent registered
public accounting firm's independence.
The Audit Committee discussed with the Company's independent
registered public accounting firm the matters required to be discussed by
SAS 61 (Codification of Statements on Auditing Standards, AU ss.380), as
well as the overall scope and plans for their audit. The committee meets
with the independent registered public accounting firm, with and without
management present, to discuss the results of its examinations, its
evaluations of the Company's internal controls, and the overall quality of
the Company's financial reporting. The Audit Committee met two times in
person and two times via conference call during fiscal 2006.
In reliance on the reviews and discussions referred to above, and
after receiving and reviewing the written disclosures and the letter from
the independent registered public accounting firm as required by
Independence 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, 2006 for filing with the SEC.
By the Members of the Audit Committee:
James G. Pratt, Chairman
Lawrence D. Crouse
Dr. Benjamin J. Allen
Richard O. Jacobson
17
RELATIONSHIP WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Audit and Other Fees
The following table shows the fees for professional services provided by
KPMG LLP, the Company's independent registered public accounting firm, for the
audit of our annual financial statements for each of the fiscal years ended
December 31, 2006 and 2005, 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 LLP for other services rendered during those periods:
2006 2005
--------- ---------
Audit Fees (1) $ 245,382 $ 302,852
Audit-Related Fees (2) 42,865 -
Tax Fees (3) 15,300 18,700
All Other Fees - -
--------- ---------
Total $ 303,547 $ 321,552
========= =========
(1) Audit Fees represent fees billed for professional services rendered by the
principal independent registered public accounting firm for the audit of
our annual financial statements and review of financial statements included
in our quarterly reports on Form 10-Q, audits of internal controls over
financial reporting, 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 registered public accounting firm that are
reasonably related to the performance of the audit or review of financial
statements.
(3) Tax Fees represent fees billed for professional services rendered by the
principal independent accountant for tax compliance, tax advice, and tax
planning.
Audit Committee Pre-Approval Policy
The Company's Audit Committee approves all audit and non-audit services
that KPMG LLP 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, 2006.
INDEPENDENT AUDITORS
Representatives of KPMG LLP are expected to be present at the Annual
Meeting. They will have the opportunity to make a statement if they desire to do
so and will be available to respond to appropriate questions.
18
PROPOSALS BY STOCKHOLDERS
Stockholder proposals intended to be presented at the 2008 Annual Meeting
of the Stockholders of the Company must be received by the Company on or before
December 1, 2007, to be eligible for inclusion in the Company's proxy materials
relating to the meeting. The inclusion of any such stockholder proposals in such
proxy materials will be subject to the requirements of the proxy rules adopted
under the Exchange Act, including Rule 14a-8.
The Company must receive in writing any stockholder proposals intended to
be considered at its 2008 Annual Meeting of Stockholders, but not included in
the Company's proxy materials relating to the meeting, by February 14, 2008.
Pursuant to Rule 14(a)-4(c)(1) under the Exchange Act, the proxy holders
designated by an executed proxy in the form accompanying the Company's 2008
proxy statement will have discretionary authority to vote on any stockholder
proposal that is considered at the 2008 Annual Meeting of Stockholders, but not
received on or prior to the deadline described above.
All stockholder proposals should be sent via certified mail, return receipt
requested, and addressed to Thomas E. Hill, Secretary, Heartland Express, Inc.,
2777 Heartland Drive, Coralville, Iowa 52241.
Form 10-K Report Available
Copies of the Company's 2006 Form 10-K Annual Report to the SEC, including
financial statements and financial statement schedule, are available through the
Company's internet website, www.heartlandexpress.com, in the "Investor
Information" section or through the SEC's website at www.sec.gov. This
information may also be obtained without charge from the Company. Such report is
not incorporated in this Proxy Statement and is not to be considered a part of
the proxy solicitation material.
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. If any other matters do
properly come before the meeting, it is intended that the persons named in the
accompanying proxy will vote thereon in accordance with their judgment. The
proxy will also have the power to vote for the adjournment of the meeting from
time to time.
A copy of the Annual Report of the Company for the year ended December 31,
2006, is mailed to stockholders together with this Proxy Statement. Such report
is not incorporated in this Proxy Statement and is not to be considered a part
of the proxy solicitation material.
By order of the Board of Directors
Russell A. Gerdin
Chairman of the Board
March 30, 2007
Coralville, Iowa
19