Except for certain historical information contained herein, the following discussion contains forward-looking statements (as discussed in Item 1 above) that involve risks, assumptions, and uncertainties which are difficult to predict. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements, including without limitation: any projections of earnings, revenues, or other financial items; any statement of plans, strategies, and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; and any statements of belief and any statement of assumptions underlying any of the foregoing. Words such as "believe," "may," "could," "expects," "hopes," "anticipates," and "likely," and variations of these words, or similar expressions, are intended to identify such forward-looking statements. Actual events or results could differ materially from those discussed in forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section entitled "Item 1A. Risk Factors," set forth above. We do not assume, and specifically disclaim, any obligation to update any forward-looking statement contained in this Annual Report.

Overview

Heartland Express, Inc. is a short-to-medium haul truckload carrier. The Company transports freight for major shippers and generally earns revenue based on the number of miles per load delivered. The Company operated ten regional operating divisions that provided regional dry van truckload services from eight regional operating centers in addition to its corporate headquarters during 2008. The Company's ten regional operating divisions, not including operations at the corporate headquarters, accounted for 73.5% and 72.7% of the 2008 and 2007 operating revenues. The Company's newest regional operating center near Dallas, Texas opened in early January 2009 and increased the Company's regional operating centers to nine and regional operating divisions to eleven, in addition to operations at the Company's corporate headquarters. The Company takes pride in the quality of the service that it provides to its customers. The keys to maintaining a high level of service are the availability of late-model equipment and experienced drivers.

Operating efficiencies and cost controls are achieved through equipment utilization, operating a fleet of late model equipment, maintaining an industry leading driver to non-driver employee ratio, and the effective management of fixed and variable operating costs. As fuel prices soared to historical highs during 2008, management of fuel cost became a top priority of management. The industry experienced soft freight demand throughout the year which forced downward pressures on freight rates and fuel surcharge rates. The unseasonably low freight demand the Company experienced through the fourth quarter of 2008 has continued into the first quarter of 2009. The challenging freight environment throughout the year combined with record high fuel prices, resulted in many carriers in the trucking industry declaring bankruptcy and or exiting the industry. The industry continues to fight excess capacity in the market place along with declining freight volumes due to the current economic downturn. During 2008 the Company undertook fuel initiative strategies to effectively manage fuel costs. These initiatives included, encouraging fueling at terminal locations rather than over-the-road purchases to take advantage of bulk fuel purchases when cost effective to do so, reduction of tractor idle time and controlling out-of-route miles. Although the Company experienced declining fuel costs throughout the second half of 2008, Company management continues to encourage these initiatives. At December 31, 2008, the Company's tractor fleet had an average age of 2.2 years while the trailer fleet had an average age of 4.6 years. The Company continues to focus on growing internally by providing quality service to targeted customers with a high density of freight in the Company's regional operating areas. In addition to the development of its regional operating centers, the Company has made five acquisitions since 1987. Quality service allowed the Company to hold its freight rates stable throughout 2008. Future growth is dependent upon several factors including the level of economic growth and the related customer demand, the available capacity in the trucking industry, potential of acquisition opportunities, and the availability of experienced drivers.

The Company ended the year with operating revenues of $625.6 million, including fuel surcharges, net income of $70.0 million, and earnings per share of $0.73 on weighted average outstanding shares of 95.9 million. The Company posted an 84.3% operating ratio (operating expenses as a percentage of operating revenues) and an 11.2% net margin (net income as a percentage of operating revenues). The Company has total assets of $557.7 million at December 31, 2008. The Company achieved a return on assets of 12.9% and a return on equity of 19.9%. The Company's cash flow from operations for the year of $121.8 million was 19.5% of operating revenues. The Company used $27.1 million in net investing cash flows,

mainly due to the purchase of new revenue equipment, and $46.0 million in financing activities, which was made up of $36.4 million in stock repurchases and $9.6 million in dividend payments during 2008. As a result, the Company increased cash and cash equivalents $48.7 million during the year ended December 31, 2008. The Company ended the year with cash, cash equivalents, and investments of $228.0 million and a debt-free balance sheet.

The decline in the demand for freight services and an overcapacity of trucks has negatively impacted the operating results of 2008. The soft freight demand has resulted in downward pressures on freight and fuel surcharge rates and has resulted in higher empty miles and lower equipment utilization. Fuel expense during 2008 was the result of two distinct periods of pricing. From January 2008 to July 2008, the Company experienced rising fuel prices that reached a peak during early July 2008. From early July 2008 to December 2008, the Company experienced declining fuel prices. U.S. average DOE prices were approximately $3.38 per gallon the first part of January 2008, which rose to approximately $4.73 in early July and fell to approximately $2.29 by the end of 2008. Due to the rise and fall of fuel prices during the year, fuel expense, net of fuel surcharge recoveries, decreased 3.1% to $79.4 million during the year ended December 31, 2008 compared to $81.9 million for the year ended December 31, 2007. Annualizing fuel expense, net of fuel surcharge recoveries, at the peak of fuel during 2008, would have resulted in an increase of approximately 16% in our net fuel expense for 2008. Therefore increases and decreases in fuel prices, as we experienced during 2008 will continue to have the potential for materially affecting our financial results.

The Company hires only experienced drivers with safe driving records. In order to attract and retain experienced drivers who understand the importance of customer service, the Company has sought to solidify its position as an industry leader in driver compensation by increasing driver compensation three out of the last five years.

The Company has been recognized as one of the Forbes magazine's "200 Best Small Companies in America" seventeen times in the past twenty-two years and for the past seven consecutive years. The Company has paid cash dividends over the past twenty-two consecutive quarters, including a special dividend of $196.5 million in May, 2007. The Company became publicly traded in November, 1986 and is traded on the NASDAQ National Market under the symbol HTLD.

Results of Operations

The following table sets forth the percentage relationships of expense items to total operating revenue for the years indicated.

                                                 Year Ended December 31,
                                              ----------------------------
                                               2008       2007       2006
                                              ------     ------     ------
Operating revenue ......................      100.0%     100.0%     100.0%
                                              ------     ------     ------
Operating expenses:
  Salaries, wages, and benefits ........       31.6%      33.2%      33.1%
  Rent and purchased transportation ....        3.0        3.6        4.3
  Fuel .................................       32.7       27.8       25.6
  Operations and maintenance ...........        2.5        2.1        2.2
  Operating taxes and license ..........        1.5        1.6        1.6
  Insurance and claims .................        3.9        3.1        2.9
  Communications and utilities .........        0.6        0.7        0.7
  Depreciation .........................        7.4        8.2        8.3
  Other operating expenses .............        2.7        2.9        3.0
  Gain on disposal of property
      and equipment ....................       (1.5)      (1.7)      (3.2)
                                              ------     ------     ------
                                               84.3%      81.3%      78.4%
                                              ------     ------     ------
      Operating income .................       15.7%      18.7%      21.6%
Interest income ........................        1.5        1.7        2.1
                                              ------     ------     ------
  Income before income taxes ...........       17.1%      20.4%      23.6%
Income taxes ...........................        5.9        7.5        8.4
                                              ------     ------     ------
  Net income ...........................       11.2%      12.9%      15.2%
                                              ======     ======     ======

Year Ended December 31, 2008 Compared With Year Ended December 31, 2007

Operating revenue increased $33.7 million (5.7%), to $625.6 million for the year ended December 31, 2008 from $591.9 million in the 2007 period. The increase in revenue was the net effect of a $44.2 million increase (51%) in fuel surcharge revenue from $86.6 million in 2007 to $130.8 million in 2008 offset by a decrease in freight revenues of $10.5 million from $505.3 million in 2007 to $494.8 million in 2008. Freight revenues declined $10.5 million (2.0%) on the net result of fewer miles driven ($13.5 million) and a slight increase in rates due to general changes in customer mix ($3.0 million). Miles driven year over year was directly related to soft freight demand experienced during 2008 compared to 2007. The increase in fuel surcharge revenues was the direct result of higher average fuel prices throughout 2008 compared to 2007. Fuel surcharge revenues represent fuel costs passed on to customers based on customer specific fuel charge recovery rates and billed loaded miles.

Salaries, wages, and benefits increased $1.7 million (0.9%), to $198.0 million for the year ended December 31, 2008 from $196.3 million in the 2007 period. The increase was the net result of a $2.6 million decrease (1.8%) in driver wages, a $1 million increase (5.4%) in office and shop wages, a $2.1 million (33.3%) increase in workers compensation and a $1.4 million increase (19.8%) increase in health insurance, and a decrease of other benefits and payroll taxes of $0.2 million. During the year ended December 31, 2008, employee drivers accounted for 96% and independent contractors for 4% of the total fleet miles, compared with 95% and 5%, respectively, for 2007. Company driver wages decrease was consistent with the decrease in freight revenues detailed above due to freight volume declines in 2008 compared to 2007 with no mileage rate changes during 2008. Office and shop personnel increased as a result of a higher number of employees in certain strategic areas as well as annual wage increases. Workers' compensation expense increased $2.1 million due to an overall increase in frequency and severity of claims incurred. Health insurance expense increased $1.4 million due mainly to an increase in average monthly claims.

Rent and purchased transportation decreased $2.7 million (12.6%), to $18.7 million for the year ended December 31, 2008 from $21.4 million in the compared period of 2007. Of the total decrease, $3.4 million related to a decrease in miles driven by independent contractors, offset by an increase of $1.2 million in fuel stabilization payments due to higher average fuel costs during 2008 compared to 2007. The remaining $0.5 million decrease was due to other rents which included rents on office space prior to the Company moving into a Company owned terminal location in Phoenix and corporate headquarters in North Liberty during May and July 2007, respectively.

Fuel increased $40.4 million (24.6%), to $204.7 million for the year ended December 31, 2008 from $164.3 million for the same period of 2007. The increase is the net result of an average increase in fuel cost per gallon of $0.85 (31.4%) per gallon from an average of $2.71 per gallon in 2007 to an average of $3.56 per gallon in 2008 offset by an approximate 5% decrease in total gallons purchased. The decrease in gallons purchased during 2008 compared to 2007 was the result of fewer company driver miles due to weaker freight demand and an increase in fuel economy. The Company's average miles per gallon increased 2.4% compared to 2007 and out of route miles decreased 9.5% which the Company attributes to the efforts to manage idle time and out of route costs during the year.

Operations and maintenance increased $3.3 million (26.8%), to $15.6 million for the year ended December 31, 2008 from $12.3 million for the compared 2007 period due to an increase in preventative maintenance and parts replacement related to an increase in the average age of the tractor fleet, costs associated with trade truck campaign and higher than usual operations and maintenance costs during the early months of 2008 based on more adverse weather conditions.

Insurance and claims increased $6.2 million (34.3%), to $24.3 million for the year ended December 31, 2008 from $18.1 million in the same period of 2007 due to an increase in the frequency and severity of larger claims during 2008 compared to 2007.

Depreciation decreased $2.5 million (5.2%), to $46.1 million during the year ended December 31, 2008 from $48.5 million in the compared 2007 period. Tractors accounted for $3.3 million of the total decrease. The tractor decrease is attributable to an overall decrease in average depreciation per tractor 2008 compared to 2007 mainly as a result of the average age of the tractor fleet. This decrease was due to timing of new tractor purchases. New tractors with higher depreciable bases were not purchased and placed in service until the third and fourth quarters of 2008, as such older tractor equipment was depreciated for the majority of 2008. As tractors are depreciated using the 125% declining balance method, depreciation expense declines in years subsequent to the first year after initial purchase and continue to decline with the age of the fleet. The decrease in tractor depreciation was offset by higher depreciation on buildings, furniture and fixtures, and land improvements due to a full year of depreciation on our new corporate headquarters facilities (opened in July 2007) and new Phoenix terminal (opened in June 2007).

Other operating expenses were essentially unchanged during the year ended December 31, 2008 compared to the same period of 2007. Other operating expenses consists of costs incurred for advertising expense, freight handling, highway tolls, driver recruiting expenses, and administrative costs.

Gain on the disposal of property and equipment decreased $0.6 million (5.8%), to $9.6 million during the year ended December 31, 2008 from $10.2 million in the same period of 2007. During 2008 the Company started a tractor fleet upgrade campaign and as of December 31, 2008, the Company was approximately 36% through this campaign. As such, approximately $9.2 million of the 2008 gains related to gains on traded tractors. During 2007 the Company sold real estate in Columbus, Ohio, Coralville, Iowa, and Dubois, Pennsylvania recording total gains of approximately $6.8 million with the remaining gains attributable to revenue equipment sales and trades. The proceeds received from these sales were used in the financing of the new corporate headquarters. A tractor fleet upgrade was completed in December 2006 and therefore tractor trades in 2007 were less than compared to 2008. The Company does not expect gains on a per tractor basis to be as high during future years as it has been for the past several years as the Company will have substantially disposed of all tractors with a lower initial recorded basis due to purchases of tractors prior to adoption of SFAS 153.

Interest income decreased $1.2 million (11.7%), to $9.1 million during the year ended December 31, 2008 from $10.3 million in the same period of 2007 as the net result of a decrease in average cash, cash equivalents, and investments year over year due primarily to the payment of the special dividend in May 2007 ($196.5 million). Offsetting the decrease in average interest bearing balances was an improved average rate of return on cash, cash equivalents, and investments. The majority of interest income continues to be associated with the Company's investment in student loan auction rate securities. The current rates of return on these investments continues to exceed the rates of return on similar AAA rated, non taxable securities.

The Company's effective tax rate was 34.7% and 36.9%, respectively, for the years ended December 31, 2008 and 2007. This decrease is primarily attributable to a net reduction of tax accruals for uncertain tax positions as required under FASB Interpretation No. 48 ("FIN 48"). During 2008 the Company's FIN 48 tax adjustment was a net reduction to tax expense of $2.3 million. This decrease relates to the reduction of the accrual for uncertain tax positions and associated accrued penalties and interest due to lapse of applicable statute of limitations.

As a result of the foregoing, the Company's operating ratio (operating expenses as a percentage of operating revenue) was 84.3% during the year ended December 31, 2008 compared with 81.3% during the year ended December 31, 2007. Net income decreased $6.2 million (8.2%), to $70.0 million for the year ended December 31, 2008 from $76.2 million during the compared 2007 period as a result of the net effects discussed above.

Year Ended December 31, 2007 Compared With Year Ended December 31, 2006

Operating revenue increased $20.0 million (3.5%), to $591.9 million for the year ended December 31, 2007 from $571.9 million in the 2006 period. The increase in revenue resulted from the Company's expansion of its fleet, increased freight miles, and improved freight rates. Operating revenue for both periods was positively impacted by fuel surcharges assessed to customers. Fuel surcharge revenue increased $5.2 million, (6.4%) to $86.6 million for the year ended December 31, 2007 from $81.4 million in the compared 2006 period.

Salaries, wages, and benefits increased $7.1 million (3.8%), to $196.3 million for the year ended December 31, 2007 from $189.2 million in the 2006 period. These increases were the result of increased reliance on employee drivers due to a decrease in the number of independent contractors utilized by the Company and driver pay increases. The Company increased driver pay by $0.01 per mile in January 2006 for all drivers maintaining a valid hazardous materials endorsement on their commercial driver's license and implemented quarterly pay increases in 2006 for selected operating divisions. The cumulative impact of the quarterly increases to driver compensation in 2006 resulted in a cost increase of approximately $1.8 million for the year ended December 31, 2007. During the year ended December 31, 2007, employee drivers accounted for 95% and independent contractors for 5% of the total fleet miles, compared with 94% and 6%, respectively, for 2006. Additional miles in 2007 by company drivers accounted for approximately $4.0 million increase in wages over 2006. Workers' compensation expense increased $2.3 million (53.6%) to $6.5 million for the year ended December 31, 2007 from $4.2 million in for the same period in 2006 due to an increase in frequency and severity of claims. Health insurance expense decreased $1.4 million (16.2%) to $7.1 million for the year ended December 31, 2007 from $8.5 million in the same period of 2006 due to a decrease in frequency and severity of claims. The remaining increase was the result of non-driver payroll increases.

Rent and purchased transportation decreased $3.0 million (12.2%), to $21.4 million for the year ended December 31, 2007 from $24.4 million in the compared period of 2006. This reflects the Company's decreased reliance upon independent contractors. Rent and purchased transportation for both periods includes amounts paid to independent contractors under the Company's fuel stability program. In the first quarter of 2006, the Company increased the independent contractor base mileage pay by $0.01 per mile for all independent contractors maintaining a hazardous materials endorsement on their commercial driver's license, and an additional $0.01 per mile per quarter in 2006 beginning on April 1, 2006. These base mileage pay increases of approximately $0.3 million in 2007 were offset by a decrease attributable to fewer miles driven by independent contractors.

Fuel increased $18.0 million (12.3%), to $164.3 million for the year ended December 31, 2007 from $146.2 million for the same period of 2006. The increase is the result of an increase in fuel cost per gallon, an increased reliance on company-owned tractors, and a decrease in fuel economy associated with certain EPA mandated clean air engine requirements on tractor models acquired during 2006. The Company's fuel cost per company-owned tractor mile increased 9.3% during 2007 compared to 2006. Fuel cost per mile, net of fuel surcharge, increased 14.7% in 2007 compared to 2006. The Company's fuel cost per gallon increased 7.2% in 2007 and average miles per gallon decreased 2.2% compared to 2006.

Operations and maintenance decreased $0.3 million (2.6%), to $12.3 million for the year ended December 31, 2007 from $12.6 million for the compared 2006 period due to an increase in preventative maintenance and parts replacement.

Operating taxes and licenses increased $0.3 million (3.4%), to $9.5 million for the year ended December 31, 2007 from $9.1 million in the compared 2006 period due an increase in the property taxes associated with new facilities in Phoenix, Arizona and North Liberty, Iowa and an increase in fuel taxes paid.

Insurance and claims increased $1.5 million (9.0%), to $18.1 million for the year ended December 31, 2007 from $16.6 million in the same period of 2006 due to an increase in the frequency of larger claims and development increases on existing liability claims.

Depreciation increased $1.1 million (2.4%), to $48.5 million during the year ended December 31, 2007 from $47.4 million in the compared 2006 period. This increase is attributable to the growth of our company-owned tractor and trailer fleet, and an increased cost of new tractors and trailers relative to the costs of those units being replaced. Our tractor and trailer fleet have grown approximately 3.4% and 5.7% respectively in comparison to the same period in 2006. This contributed to a $0.6 million increase in revenue equipment depreciation during 2007. Also, higher depreciation on new corporate headquarters facilities and new Phoenix terminal contributed to an increase of $0.5 million in other property and equipment depreciation.

Other operating expenses were essentially unchanged during the year ended December 31, 2007 compared to the same period of 2006. Other operating expenses consists of costs incurred for advertising expense, freight handling, highway tolls, driver recruiting expenses, and administrative costs.

Gain on the disposal of property and equipment decreased $8.0 million (44.0%), to $10.2 million during the year ended December 31, 2007 from $18.1 million in the same period of 2006. The decline is attributable to an 87% decrease in the total number of tractors and trailers traded during the 2007 period compared to the same period of 2006. A tractor fleet upgrade was completed in December 2006. During 2007 the Company sold real estate in Columbus, Ohio, Coralville, Iowa, and Dubois, Pennsylvania recording total gains of approximately $6.8 million. The proceeds received from these sales were used in the financing of the new corporate headquarters.

Interest income decreased $1.4 million (12.3%), to $10.3 million during the year ended December 31, 2007 from $11.7 million in the same period of 2006 because of the decrease in cash, cash equivalents, and investments associated with the payment of the special dividend in May 2007 offset by improved rate of return on cash, cash equivalents, and short-term investments.

The Company's effective tax rate was 36.9% and 35.5%, respectively, for the years ended December 31, 2007 and 2006. The increase is primarily attributable to a higher effective state rate as a result of the adoption of FASB Interpretation No. 48 ("FIN 48") effective January 1, 2007.

As a result of the foregoing, the Company's operating ratio (operating expenses as a percentage of operating revenue) was 81.3% during the year ended December 31, 2007 compared with 78.4% during the year ended December 31, 2006. Net income

decreased $11.0 million (12.6%), to $76.2 million for the year ended December 31, 2007 from $87.2 million during the compared 2006 period as a result of the net effects discussed above.

Inflation and Fuel Cost

Most of the Company's operating expenses are inflation-sensitive, with inflation generally producing increased costs of operations. During the past three years, the most significant effects of inflation have been on revenue equipment prices and the compensation paid to the drivers. Innovations in equipment technology, EPA mandated new engine emission requirements on tractor engines manufactured after January 1, 2007, and driver comfort have resulted in higher tractor prices, as well as there has been an industry-wide increase in wages paid to attract and retain qualified drivers. The Company historically has limited the effects of inflation through increases in freight rates and certain cost control efforts. During 2008 the Company experienced a 17% increase in tractor prices associated with tractors with latest engine emission requirements compared to tractor prices associated with the last fleet upgrade with pre-January 2007 tractor engines. The majority of this increase was not limited by increases in freight rates during 2008.

In addition to inflation, fluctuations in fuel prices can affect profitability. Most of the Company's contracts with customers contain fuel surcharge provisions. Although the Company historically has been able to pass through most long-term increases in fuel prices and operating taxes to customers in the form of surcharges and higher rates, shorter-term increases are not fully recovered. Fuel prices, compared to historical averages, were high throughout 2005, 2006, . . .