HEARTLAND EXPRESS INC

Previous wording

This Item 2 contains certain statements that may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are subject to the safe harbor created by such sections and the Private Securities Litigation Reform Act of 1995, as amended. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements, including without limitation: any projections of earnings (losses), 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. Such statements may be identified by their use of terms or phrases such as “seeks,” “expects,” “estimates,” “anticipates,” "ensure," “projects,” “believes,” “hopes,” “plans,” “goals,” “intends,” “may,” “might,” “likely,” “will,” “should,” “would,” “could,” “potential,” “predict,” “continue,” “strategy,” “future,” “outlook,” and similar terms and phrases. Forward-looking statements are based on currently available operating, financial, and competitive information. In this Form 10-Q, statements relating to general trucking industry trends, including future freight demand and capacity, freight rates, operating ratio goals, anticipated revenue equipment sales and purchases, including revenue equipment gains, the used equipment market, and the availability of revenue equipment, future utilization, future customer relationships, future growth and acquisitions, including the anticipated impact of our acquisitions of Smith Transport and CFI, our ability to attract and retain drivers, future driver compensation, including possible driver compensation increases, future insurance and claims expense, including the impact of our insurance renewal, the impact of changes in interest rates and tire prices, future liquidity, expected fuel costs, including strategies for managing fuel costs, the potential impact of pending litigation, our dividend policy, future capital spending, future depreciation expense, our future repurchases of our shares, future cost reduction and implementation of freight optimization strategies, including at Millis Transfer, CFI, and Smith Transport, our ability to react to and capitalize on changing market conditions, and the expected impact of operational improvements and strategic changes, among others, are forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, which could cause future events and actual results to differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. Factors that c…

Excerpt shortened here; the source contains the full paragraph.

Current wording

This Item 2 contains certain statements that may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are subject to the safe harbor created by such sections and the Private Securities Litigation Reform Act of 1995, as amended. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements, including without limitation: any projections of earnings (losses), 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. Such statements may be identified by their use of terms or phrases such as “seeks,” “expects,” “estimates,” “anticipates,” "ensure," “projects,” “believes,” “hopes,” “plans,” “goals,” “intends,” “may,” “might,” “likely,” “will,” “should,” “would,” “could,” “potential,” “predict,” “continue,” “strategy,” “future,” “outlook,” and similar terms and phrases. Forward-looking statements are based on currently available operating, financial, and competitive information. In this Form 10-Q, statements relating to general trucking industry trends, including future freight demand and capacity, freight rates, operating ratio goals, anticipated revenue equipment sales and purchases, including revenue equipment gains, the used equipment market, and the availability of revenue equipment, future utilization, future customer relationships, future growth and acquisitions, including the anticipated impact of our acquisitions of Smith Transport and CFI, our ability to attract and retain drivers, future driver compensation, including possible driver compensation increases, future insurance and claims expense, including the impact of our insurance renewal, the impact of changes in interest rates and tire prices, future liquidity, expected fuel costs, including strategies for managing fuel costs, the potential impact of pending litigation, our dividend policy, future capital spending, future depreciation expense, our future repurchases of our shares and debt reduction, future cost reduction and implementation of freight optimization strategies, including at Millis Transfer, CFI, and Smith Transport, our ability to react to and capitalize on changing market conditions, and the expected impact of operational improvements and strategic changes, including transportation system changes, among others, are forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, which could cause future events and actual results to differ materially from those set forth in, contemplated by, …

Excerpt shortened here; the source contains the full paragraph.

Previous wording

Prior to 2022 we, together with our subsidiaries, historically were a short-to-medium haul truckload carrier where approximately 99.9% of our operating revenue was derived from shipments within the United States with the remainder being Canada and no operations in Mexico. With the acquisition of CFI on August 31, 2022, we significantly expanded our scale and our transportation services. We continue to provide nationwide asset-based dry van truckload service for major shippers from across the U.S. and now including cross border freight to and from Mexico and our consolidated average length of haul is under 400 miles. We continue to focus on providing high quality service to targeted customers with a high density of freight in our regional operating areas. We also offer truckload temperature-controlled transportation services and logistics services in Mexico, which are not significant to our consolidated operations. Through the acquisition of CFI, we now provide transportation logistics services across Mexico for our customers and provide cross-border freight services for customer loads moving from the United States into Mexico and loads originating from Mexico into the United States. We utilize third party service providers for all miles run in Mexico and to move freight across the US-Mexico border while leveraging terminal locations in the US and Mexico near the border to facilitate these moves. We continue to focus on providing quality service to targeted customers with a high density of freight in our regional operating areas. We generally earn revenue based on the number of miles per load delivered and the revenue per mile or per load paid. We operate our consolidated operations under the brand names of Heartland Express, Millis Transfer, Smith Transport, and CFI. We manage our business based on overall corporate operating goals and objectives that are the same for all of our brands. Our CODM, our CEO, evaluates the operational efficiencies of our transportation services, operating performance and asset allocation on a combined basis based on consolidated operating goals and objectives. In addition to consolidated data on a combined basis that has been historically used, our CODM also makes use of available disaggregated operating segment data as well. We believe the keys to success are maintaining high levels of customer service and safety, which are predicated on the availability of experienced drivers and late-model equipment. We believe that our service standards, safety record, and equipment accessibility have made us a core carrier to many of our major customers, as well as allowed us to build solid, long-term relationships with customers and brand ourselves as an industry leader for on-time service.

Current wording

We provide nationwide asset-based dry van truckload service for major shippers from across the U.S. and approximately 75% of our loads are less than 500 miles in length of haul. We focus on providing high quality service to targeted customers with a high density of freight in our regional operating areas. We also offer truckload temperature-controlled transportation services and logistics services in Mexico, which are not significant to our consolidated operations. We focus on providing quality service to targeted customers with a high density of freight in our regional operating areas. We generally earn revenue based on the number of miles per load delivered and the revenue per mile or per load paid. We operate our consolidated operations under the brand names of Heartland Express, Millis Transfer, Smith Transport, and CFI. We manage our business based on overall corporate operating goals and objectives that are the same for all of our brands. Our CODM, our CEO, evaluates the operational efficiencies of our transportation services, operating performance and asset allocation on a combined basis based on consolidated operating goals and objectives. In addition to consolidated data on a combined basis that has been historically used, our CODM also makes use of available disaggregated operating segment data as well. We believe the keys to success are maintaining high levels of customer service and safety, which are predicated on the availability of experienced drivers and late-model equipment. We believe that our service standards, safety record, and equipment accessibility have made us a core carrier to many of our major customers, as well as allowed us to build solid, long-term relationships with customers and brand ourselves as an industry leader for on-time service.

Previous wording

We operate in a cyclical industry. In early 2022, freight demand was initially strong, but demand began to soften in the back half of 2022 and continued to degrade throughout all of 2023 and was weak during 2024. While we have begun to see some encouraging signs within current freight demand and customer pricing, we do not expect material improvements until potentially later in 2025 and a resulting positive impact to future financial results and an improved freight outlook in 2026. We have continued to strategically reduce underperforming lanes of freight and reduce our overall fleet size to better align with current freight demand while focusing on driver utilization and operating cost reductions. We believe that cost improvements and transportation system changes, which are already underway or planned for each of our brands, will provide a better cost structure and operating visibility to deliver a path toward operating profitability for our consolidated operations over the next twelve months. However, general consumer product output and inventory volatility, consumer demand, the political landscape, potential tariffs, foreign wars, and disruption in oil and diesel markets all could create additional volatility regarding freight demand during 2025.

Current wording

We operate in a cyclical industry. In early 2022, freight demand was initially strong, but demand began to soften in the back half of 2022 and continued to degrade throughout all of 2023 and continued to be weak throughout 2024 and 2025. Currently, the overall capacity of available equipment in our industry exceeds the shipping demand for movement of goods. While we have begun to see some encouraging signs of stabilization within current freight demand and customer pricing, we do not expect material improvements until sometime in 2026. We have continued to strategically reduce underperforming lanes of freight and reduce our overall fleet size to better align with current freight demand while focusing on driver utilization and operating cost reductions. We believe that cost improvements and transportation system changes implemented during 2025 will provide a better cost structure and operating visibility to deliver a path toward operating profitability for our consolidated operations over the next twelve months. However, general consumer product output and inventory volatility, consumer demand, the political landscape, potential tariffs, foreign wars, and disruption in oil and diesel markets all could create additional volatility regarding future freight demand.

Previous wording

In addition to past organic growth through the development of our regional operating areas, we have completed ten acquisitions since 1986 with the most recent and our fifth acquisition since 2013, CFI, occurring on August 31, 2022 following the acquisition of Smith Transport on May 31, 2022. These ten acquisitions have enabled us to solidify our position within existing regions, expand into new operating regions, expand service offerings to address longer length of haul needs from customers, and pursue new customer relationships in new markets, as well as expand business relationships with current customers in new markets. However, in the past three years we have been challenged by the weak freight environment, resulting in a shortage of profitable freight and underutilization of our truck assets. We have historically been a debt free organization although with the acquisition of CFI we now have debt, although we significantly lowered our debt balance since the acquisition. We expect to continue to evaluate acquisition candidates presented to us, however, we do not expect to make any significant acquisitions while we are paying down debt. We believe future growth depends upon several factors including the level of economic growth and the related customer demand, the available capacity in the trucking industry, our ability to identify and consummate future acquisitions, our ability to integrate operations of acquired companies to realize efficiencies, and our ability to attract and retain experienced drivers that meet our hiring standards. We anticipate the profitable freight shortage will be a near term challenge whereas we expect our challenge to attract and retain experienced drivers will be ongoing.

Current wording

In addition to past organic growth through the development of our regional operating areas, we have completed ten acquisitions since 1986 with the most recent and our fifth acquisition since 2013, CFI, occurring on August 31, 2022 following the acquisition of Smith Transport on May 31, 2022. These ten acquisitions have enabled us to solidify our position within existing regions, expand into new operating regions, expand service offerings to address longer length of haul needs from customers, and pursue new customer relationships in new markets, as well as expand business relationships with current customers in new markets. However, in the past three years we have been challenged by the weak freight environment, resulting in a shortage of profitable freight and underutilization of our truck assets. We have historically been a debt free organization although with the acquisition of CFI we now have debt, although we significantly lowered our debt balance since the acquisition.

Previous wording

We continually explore new strategies to attract and retain qualified drivers with changes in market conditions and demands. We hire the majority of our drivers with at least six months of over-the-road experience and safe driving records. As discussed below, the Company's driver training program provides an additional source of future potential professional drivers. In order to attract and retain experienced drivers who understand the importance of customer service, we have sought to solidify our position as an industry leader in driver compensation in our operating markets and for the services we provide. We have continued to get more creative in providing better pay, benefits, equipment, and facilities for our drivers. Our comprehensive driver compensation and benefits program rewards drivers for years of service and safe operating mileage benchmarks, which are critical to our operational and financial performance. Certain driver pay packages include minimum pay protection provisions, future pay increases based on years of continued service with us, increased rates for accident-free miles of operation, detention pay, and other pay programs to assist drivers with unproductive time associated with circumstances outside of their control, such as inclement weather, equipment breakdowns, and customer issues. As a result of the freight environment during 2023, 2024, and the first half of 2025, we paid more through these programs, resulting in an increase of driver pay per mile and as a percentage of revenue. We will continue to evaluate our pay offerings to our drivers given the extended duration of lower freight demand. Driver pay, home time, and other amenities has allowed us to maintain driver turnover rates lower than the industry average. We believe that our driver compensation and benefits package is consistently among the best in the industry. We are committed to investing in our drivers and compensating them for safety as both are key to our operational and financial performance. Currently over 12% of our driver employees, individually, have achieved 1.0 million safe miles.

Current wording

We continually explore new strategies to attract and retain qualified drivers with changes in market conditions and demands. We hire the majority of drivers with at least six to twelve months of over-the-road experience and safe driving records. As discussed below, the Company's driver training program provides an additional source of future potential professional drivers. In order to attract and retain experienced drivers who understand the importance of customer service, we have sought to solidify our position as an industry leader in driver compensation in our operating markets and for the services we provide. We have continued to get more creative in providing better pay, benefits, equipment, and facilities for our drivers. Our comprehensive driver compensation and benefits program rewards drivers for years of service and safe operating mileage benchmarks, which are critical to our operational and financial performance. Certain driver pay packages include future pay increases based on years of continued service with us, increased rates for accident-free miles of operation, detention pay, and other pay programs to assist drivers with unproductive time associated with circumstances outside of their control, such as inclement weather, equipment breakdowns, and customer issues. As a result of the freight environment during 2023, 2024, and to date in 2025, we paid more through these programs, resulting in an increase of driver pay per mile and as a percentage of revenue. We will continue to evaluate our pay offerings to our drivers given the extended duration of lower freight demand. Driver pay, home time, and other amenities has allowed us to maintain driver turnover rates lower than the industry average. We believe that our driver compensation and benefits package is consistently among the best in the industry. We are committed to investing in our drivers and compensating them for safety as both are key to our operational and financial performance. Currently over 12% of our driver employees, individually, have achieved 1.0 million safe miles.

Previous wording

Managing fuel cost continues to be one of management's top priorities given the volatility in the price of diesel fuel. The Department of Energy ("DOE") average diesel fuel prices per gallon for the three months ended June 30, 2025 and 2024 were $3.56 and $3.86 (a 7.9% decrease), respectively. Average DOE price in July was $3.79 and has been at higher prices than the three months ended June 30, 2025 after global conflict issues in late June. Average DOE prices were $3.69, $3.53, and $3.63 for the three months ended September 30, 2024, December 31, 2024, and March 31, 2025 respectively. There are many factors that could impact diesel fuel prices including political, economic and geographic events, cyber attacks, potential tariffs, global conflicts, weather events, and other natural disasters. We cannot predict what fuel prices will be for the remainder of 2025, but year-to-date fuel expense is the third highest expense behind salaries, wages, and benefits as well as deprecation and amortization.

Current wording

Managing fuel cost continues to be one of management's top priorities given the volatility in the price of diesel fuel. The Department of Energy ("DOE") average diesel fuel prices per gallon for the three months ended September 30, 2025 and 2024 were $3.76 and $3.69 (a 1.8% increase), respectively. Average DOE price in October was $3.69 and has been at lower prices than the three months ended September 30, 2025. Average DOE prices were $3.53, $3.63, and $3.56 for the three months ended December 31, 2024, March 31, 2025, and June 30, 2025 respectively. There are many factors that could impact diesel fuel prices including political, economic and geographic events, cyber attacks, potential tariffs, global conflicts, weather events, and other natural disasters. We cannot predict what fuel prices will be for the remainder of 2025, but year-to-date fuel expense is the third highest expense behind salaries, wages, and benefits as well as deprecation and amortization.

Previous wording

We are not able to pass through all fuel price increases through fuel surcharge agreements with customers due to tractor idling time, along with empty and out-of-route miles. Therefore, our operating income is negatively impacted with increased net fuel costs (fuel expense less fuel surcharge revenue) in a rising fuel environment and is positively impacted in a declining fuel environment. We expect to continue to manage and implement fuel strategies that we believe will effectively manage fuel costs. These strategies include strategic fueling of our trucks, whether it be terminal fuel or over-the-road fuel, reducing tractor idle time, controlling out-of-route miles, controlling empty miles, utilizing on-board power units to minimize idling, educating drivers to save energy, trailer skirting, and increasing fuel economy through the purchase of newer, more fuel-efficient tractors. At June 30, 2025, the Company’s tractor fleet had an average age of 2.6 years and the Company's trailer fleet had an average age of 7.5 years compared to June 30, 2024 when the Company’s tractor fleet had an average age of 2.6 years and the Company's trailer fleet had an average age of 6.9 years.

Current wording

We are not able to pass through all fuel price increases through fuel surcharge agreements with customers due to tractor idling time, along with empty and out-of-route miles. Therefore, our operating income is negatively impacted with increased net fuel costs (fuel expense less fuel surcharge revenue) in a rising fuel environment and is positively impacted in a declining fuel environment. We expect to continue to manage and implement fuel strategies that we believe will effectively manage fuel costs. These strategies include strategic fueling of our trucks, whether it be terminal fuel or over-the-road fuel, reducing tractor idle time, controlling out-of-route miles, controlling empty miles, utilizing on-board power units to minimize idling, educating drivers to save energy, trailer skirting, and increasing fuel economy through the purchase of newer, more fuel-efficient tractors. At September 30, 2025, the Company’s tractor fleet had an average age of 2.6 years and the Company's trailer fleet had an average age of 7.5 years compared to September 30, 2024 when the Company’s tractor fleet had an average age of 2.7 years and the Company's trailer fleet had an average age of 7.2 years.

Previous wording

We ended the first six months of 2025 with operating revenues of $429.8 million, including fuel surcharges, net loss of $24.7 million, and basic net loss per share of $0.32 on basic weighted average outstanding shares of 78.3 million compared to operating revenues of $545.1 million, including fuel surcharges, net loss of $18.6 million, and basic net loss per share of $0.24 on basic weighted average shares of 79.0 million in the first six months of 2024. We posted a 106.4% operating ratio (operating expenses as a percentage of operating revenues) for the six months ended June 30, 2025 compared to 102.6% for the same period of 2024. We posted a 106.5% non-GAAP adjusted operating ratio(1) for the six months ended June 30, 2025 compared to 102.5% for the same period of 2024. We had total assets of $1.3 billion at June 30, 2025. We had a loss on assets of 2.7% and a loss on equity of 4.4% over the immediate past four quarters ended June 30, 2025, compared to a loss on assets of 1.6% and a loss on equity of 2.8% for the immediate past four quarters ended June 30, 2024.

Current wording

We ended the first nine months of 2025 with operating revenues of $626.4 million, including fuel surcharges, net loss of $33.0 million, and basic net loss per share of $0.42 on basic weighted average outstanding shares of 78.0 million compared to operating revenues of $804.9 million, including fuel surcharges, net loss of $27.9 million, and basic net loss per share of $0.35 on basic weighted average shares of 78.8 million in the first nine months of 2024. We posted a 105.5% operating ratio (operating expenses as a percentage of operating revenues) for the nine months ended September 30, 2025 compared to 102.6% for the same period of 2024. We posted a 105.6% non-GAAP adjusted operating ratio(1) for the nine months ended September 30, 2025 compared to 102.5% for the same period of 2024. We had total assets of $1.3 billion at September 30, 2025. We had a loss on assets of 2.7% and a loss on equity of 4.4% over the immediate past four quarters ended September 30, 2025, compared to a loss on assets of 1.6% and a loss on equity of 2.7% for the immediate past four quarters ended September 30, 2024.

Previous wording

Our cash flow from operating activities for the six months ended June 30, 2025 of $46.8 million was 10.9% of operating revenues, compared to $71.0 million and 13.0% of operating revenues in the same period of 2024. During 2025, we had net cash used in investing activities of $17.3 million resulting from net property and equipment transactions. We had net cash used in financing activities of $19.2 million resulting primarily from $8.9 million repurchases of common stock, $6.9 million debt repayments associated with debt taken on with our 2022 acquisitions along with $3.1 million for dividend payments. Our cash, cash equivalents and restricted cash increased $10.3 million during the six months ended June 30, 2025. We ended the second quarter of 2025 with cash, cash equivalents and restricted cash of $36.6 million. Cash and cash equivalents, excluding restricted cash was $22.9 million at June 30, 2025.

Current wording

Despite the recent operating losses, we continue to have positive cash flows from operations, mainly due to non-cash depreciation and amortization charges. Our cash flow from operating activities for the nine months ended September 30, 2025 of $74.4 million was 11.9% of operating revenues, compared to $106.6 million and 13.2% of operating revenues in the same period of 2024. During 2025, we had net cash used in investing activities of $24.2 million resulting from net property and equipment transactions. We had net cash used in financing activities of $30.9 million resulting primarily from $10.4 million repurchases of common stock, $15.5 million debt repayments associated with debt taken on with our 2022 acquisitions along with $4.7 million for dividend payments. Our cash, cash equivalents and restricted cash increased $19.3 million during the nine months ended September 30, 2025. We ended the third quarter of 2025 with cash, cash equivalents and restricted cash of $45.6 million. Cash and cash equivalents, excluding restricted cash was $32.7 million at September 30, 2025.

Previous wording

(a) Operating revenue excluding fuel surcharge revenue is based upon operating revenue minus fuel surcharge revenue. Adjusted operating income is based upon operating revenue excluding fuel surcharge revenue, less operating expenses, net of fuel surcharge revenue, and non-cash amortization expense related to intangible assets. Adjusted operating ratio is based upon operating expenses, net of fuel surcharge revenue, and amortization of intangibles, as a percentage of operating revenue excluding fuel surcharge revenue. We believe that operating revenue excluding fuel surcharge revenue, adjusted operating income, and adjusted operating ratio are more representative of our underlying operations by excluding the volatility of fuel prices, which we cannot control. Operating revenue excluding fuel surcharge revenue, adjusted operating income, and adjusted operating ratio are not substitutes for operating revenue, operating income, or operating ratio measured in accordance with GAAP. There are limitations to using non-GAAP financial measures. Although we believe that operating revenue excluding fuel surcharge revenue, adjusted operating income, and adjusted operating ratio improve comparability in analyzing our period-to-period performance, they could limit comparability to other companies in our industry if those companies define such measures differently. Because of these limitations, operating revenue excluding fuel surcharge revenue, adjusted operating income, and adjusted operating ratio should not be considered measures of income generated by our business or discretionary cash available to us to invest in the growth of our business. Management compensates for these limitations by primarily relying on GAAP results and using non-GAAP financial measures on a supplemental basis.

Current wording

(a) Operating revenue excluding fuel surcharge revenue is based upon operating revenue minus fuel surcharge revenue. Adjusted operating loss is based upon operating revenue excluding fuel surcharge revenue, less operating expenses, net of fuel surcharge revenue, and non-cash amortization expense related to intangible assets. Adjusted operating ratio is based upon operating expenses, net of fuel surcharge revenue, and amortization of intangibles, as a percentage of operating revenue excluding fuel surcharge revenue. We believe that operating revenue excluding fuel surcharge revenue, adjusted operating loss, and adjusted operating ratio are more representative of our underlying operations by excluding the volatility of fuel prices, which we cannot control. Operating revenue excluding fuel surcharge revenue, adjusted operating loss, and adjusted operating ratio are not substitutes for operating revenue, operating loss, or operating ratio measured in accordance with GAAP. There are limitations to using non-GAAP financial measures. Although we believe that operating revenue excluding fuel surcharge revenue, adjusted operating loss, and adjusted operating ratio improve comparability in analyzing our period-to-period performance, they could limit comparability to other companies in our industry if those companies define such measures differently. Because of these limitations, operating revenue excluding fuel surcharge revenue, adjusted operating loss, and adjusted operating ratio should not be considered measures of income generated by our business or discretionary cash available to us to invest in the growth of our business. Management compensates for these limitations by primarily relying on GAAP results and using non-GAAP financial measures on a supplemental basis.

Previous wording

Our quarterly operating ratio was 105.9% and 106.0% non-GAAP adjusted operating ratio as compared to the prior year 99.9% and 99.4%. See the “GAAP to Non-GAAP Reconciliation Schedule” above for a reconciliation of our non-GAAP adjusted operating ratio. Our net loss was $10.9 million for the three months ended June 30, 2025 compared to net loss of $3.5 million during the period ended June 30, 2024. Our consolidated operating results for the three months ended June 30, 2025 reflect a combination of tariff uncertainties amongst our customers and prolonged industry-wide challenges where operating cost inflation continued to outpace customer freight demand and freight rate improvements. Internally, our four operating brands have delivered current financial results based on their respective time within our legacy operating model - Heartland Express, Millis Transfer, Smith Transport, and CFI, respectively. Our Heartland Express brand was profitable during the three months ended June 30, 2025, but did not reflect the operating ratio and financial results that we have expected and delivered in past periods. However, we believe our Heartland Express brand has continued to operate in line with the recent results of the best full truckload carriers in our industry. The other three operating brands experienced under-utilized assets, operating cost growth, and driver retention challenges that hindered operational performance, resulting in a lack of profitability during the second quarter of 2025.

Current wording

Our quarterly operating ratio was 103.7% and 103.5% non-GAAP adjusted operating ratio as compared to the prior year 102.7% and 102.6%. See the “GAAP to Non-GAAP Reconciliation Schedule” above for a reconciliation of our non-GAAP adjusted operating ratio. Our net loss was $8.3 million for the three months ended September 30, 2025 compared to net loss of $9.3 million during the period ended September 30, 2024. Our consolidated operating results for the three months ended September 30, 2025 reflect a combination of tariff uncertainties amongst our customers and prolonged industry-wide challenges where operating cost inflation continued to outpace customer freight demand and freight rate improvements. Our Heartland Express, Millis Transfer and Smith Transport operating brands were profitable during the three months ended September 30, 2025, but did not reflect the operating ratio and financial results that we have expected and delivered in past periods. However, we believe our Heartland Express brand has continued to operate in line with the recent results of the best full truckload carriers in our industry. The CFI operating brand experienced under-utilized assets, operating cost growth, and driver retention challenges that hindered operational performance, resulting in a lack of profitability for the Company during the third quarter of 2025. However, CFI continues to generate positive operating cash flows due to non-cash charges within their operating results.

Previous wording

Operating revenue decreased $64.4 million (23.4%), to $210.4 million for the three months ended June 30, 2025 from $274.8 million for the three months ended June 30, 2024. For the three month period, the decrease in revenue was the result of fewer drivers and a weak freight environment which led to a decline in total miles resulting in the decrease in trucking and other revenues of $52.0 million (21.9%) along with a decrease to fuel surcharge revenue of $12.3 million (33.5%) from $36.8 million in 2024 to $24.5 million in 2025. Operating revenues (the total of trucking and fuel surcharge revenue) are primarily earned based on loaded miles driven in providing truckload services. The number of loaded miles is affected by general freight supply and demand trends and the number of revenue earning equipment vehicles (tractors). The number of tractors is directly affected by the number of available drivers providing capacity to us. Due to continued over capacity in the market compared to freight demand, our truck assets continue to be under utilized. Our operating revenues are reviewed regularly by our CODM on a combined basis due to the similar nature of our services offerings and related similar base pricing structure. In addition to consolidated data on a combined basis that has been historically used, our CODM also makes use of available disaggregated operating segment data as an additional resource of performance review.

Current wording

Operating revenue decreased $63.4 million (24.4%), to $196.5 million for the three months ended September 30, 2025 from $259.9 million for the three months ended September 30, 2024. For the three month period, the decrease in revenue was the result of fewer drivers and a weak freight environment which led to a decline in total miles resulting in the decrease in trucking and other revenues of $54.7 million (24.1%) along with a decrease to fuel surcharge revenue of $8.7 million (26.5%) from $32.8 million in 2024 to $24.1 million in 2025. Operating revenues (the total of trucking and fuel surcharge revenue) are primarily earned based on loaded miles driven in providing truckload services. The number of loaded miles is affected by general freight supply and demand trends and the number of revenue earning equipment vehicles (tractors). The number of tractors is directly affected by the number of available drivers providing capacity to us. Due to continued over capacity in the market compared to freight demand, our truck assets continue to be under utilized. Our operating revenues are reviewed regularly by our CODM on a combined basis due to the similar nature of our services offerings and related similar base pricing structure. In addition to consolidated data on a combined basis that has been historically used, our CODM also makes use of available disaggregated operating segment data as an additional resource of performance review.

Previous wording

Fuel surcharge revenues represent fuel costs passed on to customers based on customer specific fuel surcharge recovery rates and billed loaded miles. Fuel surcharge revenues decreased due to lower average DOE diesel fuel prices (8.1%), as reported by the DOE, along with a decrease in loaded miles during the six months ended June 30, 2025 compared to June 30, 2024.

Current wording

Fuel surcharge revenues represent fuel costs passed on to customers based on customer specific fuel surcharge recovery rates and billed loaded miles. Fuel surcharge revenues decreased due to a decrease in loaded miles partially offset by higher average DOE diesel fuel prices (1.8%), as reported by the DOE during the three months ended September 30, 2025 compared to September 30, 2024.

Previous wording

Salaries, wages, and benefits decreased $22.9 million (20.8%), to $87.2 million for the three months ended June 30, 2025 from $110.1 million in the 2024 period. Salaries, wages, and benefits decreased primarily due to the reduction of driver payroll as a result of lower company miles, along with a reduction of office and shop employees. Offsetting this decrease was an increase in driver pay for non-productive time associated with layovers and other factors associated with a slower freight environment. As a result, salaries, wages, and benefits as a percentage of gross revenues is higher in 2025 compared to 2024. We have continued to get more creative in providing better pay, driving opportunities, benefits, equipment, and facilities for our drivers. We expect our ability to attract and retain experienced drivers will continue to be a challenge in the foreseeable future.

Current wording

Salaries, wages, and benefits decreased $30.1 million (28.1%), to $77.3 million for the three months ended September 30, 2025 from $107.4 million in the 2024 period. Salaries, wages, and benefits decreased primarily due to the reduction of driver payroll as a result of lower company miles, along with a reduction of office and shop employees. We have continued to get more creative in providing better pay, driving opportunities, benefits, equipment, and facilities for our drivers. We expect our ability to attract and retain experienced drivers will continue to be a challenge in the foreseeable future.

Previous wording

Rent and purchased transportation decreased $8.4 million, to $13.3 million for the three months ended June 30, 2025 from $21.7 million for the same period of 2024. The decrease resulted from reduced purchased transportation and lower contractor miles associated with the CFI business integration, along with a reduction of leased equipment.

Current wording

Rent and purchased transportation decreased $6.0 million, to $12.3 million for the three months ended September 30, 2025 from $18.3 million for the same period of 2024. The decrease resulted from reduced purchased transportation and lower contractor miles associated with the CFI business integration, along with a reduction of leased equipment.

Previous wording

Fuel decreased $13.3 million (28.3%), to $33.7 million for the three months ended June 30, 2025 from $47.0 million for the same period of 2024. The decrease was due to lower average diesel price per gallon (7.9%) as reported by the DOE along with less miles driven. We expect to see fuel price volatility through the remainder of 2025.

Current wording

Fuel decreased $9.7 million (22.2%), to $34.1 million for the three months ended September 30, 2025 from $43.8 million for the same period of 2024. The decrease was due to lower company miles, partially offset by higher average diesel price per gallon (1.8%) as reported by the DOE. We expect to see fuel price volatility through the remainder of 2025.

Previous wording

Operations and maintenance expense increased $1.7 million (5.2%), to $34.7 million during the six months ended June 30, 2025 from $33.0 million in the same period of 2024. The net increase is mainly attributable to higher equipment maintenance costs on a per unit basis. At June 30, 2025, the Company’s tractor fleet had an average age of 2.6 years and the Company's trailer fleet had an average age of 7.5 years compared to June 30, 2024 when the Company’s tractor fleet had an average age of 2.6 years and the Company's trailer fleet had an average age of 6.9 years. Based upon current agreements for new revenue equipment we anticipate that the average age of our fleet of tractors will be flat while the average age of our fleet of trailers will decrease by December 31, 2025. The operating and maintenance expense during 2025 will be impacted by the volume and timing of fleet modernization as newer equipment operating under warranty results in less realized maintenance costs.

Current wording

Operations and maintenance expense decreased $3.9 million (20.4%), to $15.4 million during the three months ended September 30, 2025 from $19.3 million in the same period of 2024. The net decrease is mainly attributable to lower equipment maintenance costs as a result of lower company miles and fewer revenue equipment units. At September 30, 2025, the Company’s tractor fleet had an average age of 2.6 years and the Company's trailer fleet had an average age of 7.5 years compared to September 30, 2024 when the Company’s tractor fleet had an average age of 2.7 years and the Company's trailer fleet had an average age of 7.2 years. We anticipate that the average age of our fleet of tractors and trailers will slightly decrease by December 31, 2025. The operating and maintenance expense during 2025 will be impacted by the volume and timing of fleet modernization as newer equipment operating under warranty results in less realized maintenance costs.

Previous wording

Operating taxes and licenses decreased $0.9 million (16.2%), to $4.4 million during the three months ended June 30, 2025 from $5.3 million in the same period of 2024. The decrease resulted from a reduction of operating units as a result of the soft freight environment.

Current wording

Operating taxes and licenses decreased $0.8 million (15.3%), to $4.2 million during the three months ended September 30, 2025 from $5.0 million in the same period of 2024. The decrease resulted from a reduction of operating units as a result of the soft freight environment.

Previous wording

Insurance and claims expense was $14.2 million during the three months ended June 30, 2025 compared to $13.0 million in 2024. The increase is due to claim severity, frequency and general unfavorable accident claim trends experienced within the trucking industry that has generally increased the amount required to settle claims. Under the April 2023 renewal, our auto liability retention limit across all operating entities was increased to $3.0 million for any individual claim, subject to a $3.5 million corridor for the first accident or series of accidents that exceed $3.0 million, based on the insured party, accident date, and circumstances of the loss event. In April 2025, the $5.0 million in excess of $10.0 million layer and the $5.0 million in excess of $15.0 million layer became part of a three year structured program, each with a $5.0 million per occurrence and a $10.0 million aggregate limit per policy year. For the duration of the three year structured program, the $5.0 million in excess of $10.0 million layer has a $15.0 million aggregate limit and the $5.0 million in excess of $15.0 million layer has a $10.0 million aggregate limit. Also, in April 2025, an additional corridor was added, where we retain liability of $5.0 million for the first accident or series of accidents that exceed $20.0 million. Additionally, in April 2025, our aggregate excess liability coverage was reduced from $80.0 million to $75.0 million, subject to the foregoing limits and corridors. We retain any liability in excess of $75.0 million. Furthermore, our premiums for certain layers are subject to upward or downward adjustments based on claims experience. The elevated retention limit and the premium adjustment feature could lead to increased volatility in our insurance and claims expense, depending on the frequency and magnitude of claims, which is exacerbated given significantly increased judgements and settlements of over-the-road accident claims. We believe these insurance program features better meet the needs of our consolidated risk profile.

Current wording

Insurance and claims expense was $15.3 million during the three months ended September 30, 2025 compared to $11.3 million in 2024. The increase is due to claim severity, frequency and general unfavorable accident claim trends experienced within the trucking industry that has generally increased the amount required to settle claims. Under the April 2023 renewal, our auto liability retention limit across all operating entities was increased to $3.0 million for any individual claim, subject to a $3.5 million corridor for the first accident or series of accidents that exceed $3.0 million, based on the insured party, accident date, and circumstances of the loss event. In April 2025, the $5.0 million in excess of $10.0 million layer and the $5.0 million in excess of $15.0 million layer became part of a three year structured program, each with a $5.0 million per occurrence and a $10.0 million aggregate limit per policy year. For the duration of the three year structured program, the $5.0 million in excess of $10.0 million layer has a $15.0 million aggregate limit and the $5.0 million in excess of $15.0 million layer has a $10.0 million aggregate limit. Also, in April 2025, an additional corridor was added, where we retain liability of $5.0 million for the first accident or series of accidents that exceed $20.0 million. Additionally, in April 2025, our aggregate excess liability coverage was reduced from $80.0 million to $75.0 million, subject to the foregoing limits and corridors. We retain any liability in excess of $75.0 million. Furthermore, our premiums for certain layers are subject to upward or downward adjustments based on claims experience. The elevated retention limit and the premium adjustment feature could lead to increased volatility in our insurance and claims expense, depending on the frequency and magnitude of claims, which is exacerbated given significantly increased judgements and settlements of over-the-road accident claims. We believe these insurance program features better meet the needs of our consolidated risk profile.

Previous wording

Depreciation and amortization decreased $4.6 million (10.1%), to $41.5 million during the three months ended June 30, 2025 from $46.1 million in the same period of 2024 as a result of ongoing fleet replacement strategies. We expect depreciation expense in 2025 to be approximately $155 million to $165 million, as we strategically shrink our fleet in order to right size to freight demand.

Current wording

Depreciation and amortization decreased $6.3 million (13.9%), to $38.7 million during the three months ended September 30, 2025 from $45.0 million in the same period of 2024 as a result of ongoing fleet replacement strategies. We expect depreciation expense in 2025 to be approximately $158 million to $163 million, as we strategically shrink our fleet in order to right size to freight demand.

Previous wording

Other operating expenses decreased $1.7 million, to $11.7 million during the three months ended June 30, 2025 from $13.4 million in the same period of 2024. The decrease resulted from a reduction of costs associated directly with freight, and a decrease in freight demand, as well as general corporate expense initiatives.

Current wording

Other operating expenses decreased $3.5 million, to $11.0 million during the three months ended September 30, 2025 from $14.5 million in the same period of 2024. The decrease resulted from a reduction of costs associated directly with freight, and a decrease in freight demand, as well as general corporate expense initiatives.

Previous wording

Gains on the disposal of property and equipment increased $1.7 million, to a gain on disposal of $2.8 million during the three months ended June 30, 2025 compared to a $1.1 million gain on disposal in the same period of 2024. The increase is primarily due to an increase of equipment sales volume, as we strategically shrink our fleet in order to right size to freight demand along with the sale of certain real estate. During the calendar year of 2025, we currently expect $12 to $17 million of gains on disposal of property and equipment.

Current wording

Gains on the disposal of property and equipment increased $6.2 million, to a gain on disposal of $6.7 million during the three months ended September 30, 2025 compared to a $0.5 million gain on disposal in the same period of 2024. The increase is primarily due to an increase of equipment sales volume, as we strategically shrink our fleet in order to right size to freight demand along with the sale of certain real estate. During the calendar year of 2025, we currently expect $21 to $24 million of gains on disposal of property and equipment.

Previous wording

Interest expense decreased $1.6 million, to $3.0 million during the three months ended June 30, 2025 from $4.6 million in the same period of 2024. The decrease was mainly due to debt repayments and a corresponding decrease to average outstanding debt balances. The interest expense is made up of $2.8 million from the Credit Facilities coinciding with the acquisition of CFI while the remaining $0.2 million is the result of debt and financing leases assumed through the Smith Transport acquisition. We expect further reductions to interest expense as we continue to pay down the debt.

Current wording

Interest expense decreased $1.3 million, to $2.9 million during the three months ended September 30, 2025 from $4.2 million in the same period of 2024. The decrease was mainly due to debt repayments and a corresponding decrease to average outstanding debt balances. The interest expense is made up of $2.8 million from the Credit Facilities coinciding with the acquisition of CFI while the remaining $0.1 million is the result of debt and financing leases assumed through the Smith Transport acquisition. We expect further reductions to interest expense as we continue to pay down the debt.

Previous wording

Our operating ratio was 106.4% and 106.5% non-GAAP adjusted operating ratio as compared to the prior year 102.6% and 102.5%. See the “GAAP to Non-GAAP Reconciliation Schedule” above for a reconciliation of our non-GAAP adjusted operating ratio. Our net loss was $24.7 million for the six months ended June 30, 2025 compared to net loss of $18.6 million during the period ended June 30, 2024. Our consolidated operating results for the six months ended June 30, 2025, reflect a combination of adverse weather experienced in January and February, tariff uncertainties amongst our customers, along with prolonged industry-wide challenges where operating cost inflation continued to outpace customer freight demand and freight rate improvements. Internally, our four operating brands have delivered current financial results based on their respective time within our legacy operating model - Heartland Express, Millis Transfer, Smith Transport, and CFI, respectively. Our Heartland Express brand was profitable during the six months ended June 30, 2025, but did not reflect the operating ratio and financial results that we have expected and delivered in past periods. However, we believe our Heartland Express brand has continued to operate in line with the recent results of the best full truckload carriers in our industry. The other three operating brands experienced under-utilized assets, operating cost growth, and driver retention challenges that hindered operational performance, resulting in a lack of profitability during the first half of 2025.

Current wording

Our operating ratio was 105.5% and 105.6% non-GAAP adjusted operating ratio as compared to the prior year 102.6% and 102.5%. See the “GAAP to Non-GAAP Reconciliation Schedule” above for a reconciliation of our non-GAAP adjusted operating ratio. Our net loss was $33.0 million for the nine months ended September 30, 2025 compared to net loss of $27.9 million during the period ended September 30, 2024. Our consolidated operating results for the nine months ended September 30, 2025, reflect a combination of adverse weather experienced in January and February, tariff uncertainties amongst our customers, along with prolonged industry-wide challenges where operating cost inflation continued to outpace customer freight demand and freight rate improvements. Internally, our four operating brands have delivered current financial results based on their respective time within our legacy operating model - Heartland Express, Millis Transfer, Smith Transport, and CFI, respectively. Our Heartland Express and Millis Transfer brands were profitable during the nine months ended September 30, 2025, but did not reflect the operating ratio and financial results that we have expected and delivered in past periods. However, we believe our Heartland Express brand has continued to operate in line with the recent results of the best full truckload carriers in our industry. Smith Transport and CFI experienced under-utilized assets, operating cost growth, and driver retention challenges that hindered operational performance, resulting in a lack of profitability during the first nine months of 2025.

Previous wording

Operating revenue decreased $115.3 million (21.1%), to $429.8 million for the six months ended June 30, 2025 from $545.1 million for the six months ended June 30, 2024. For the six month period, the decrease in revenue was the result of fewer drivers and a weak freight environment. Significant winter weather disruptions in the Mid-South and South also led to a decline in total miles resulting in the decrease in trucking and other revenues of $93.1 million (19.7%) along with a decrease to fuel surcharge revenue of $22.2 million (30.4%) from $73.0 million in 2024 to $50.8 million in 2025. Operating revenues (the total of trucking and fuel surcharge revenue) are primarily earned based on loaded miles driven in providing truckload services. The number of loaded miles is affected by general freight supply and demand trends and the number of revenue earning equipment vehicles (tractors). The number of tractors is directly affected by the number of available drivers providing capacity to us. Due to continued over capacity in the market compared to freight demand, our truck assets continue to be under utilized. Our operating revenues are reviewed regularly by our CODM on a combined basis due to the similar nature of our services offerings and related similar base pricing structure. In addition to consolidated data on a combined basis that has been historically used, our CODM also makes use of available disaggregated operating segment data as an additional resource of performance review.

Current wording

Operating revenue decreased $178.5 million (22.2%), to $626.4 million for the nine months ended September 30, 2025 from $804.9 million for the nine months ended September 30, 2024. For the nine month period, the decrease in revenue was the result of fewer drivers and a weak freight environment resulting in the decrease in trucking and other revenues of $147.7 million (21.1%) along with a decrease to fuel surcharge revenue of $30.9 million (29.2%) from $105.9 million in 2024 to $75.0 million in 2025. Operating revenues (the total of trucking and fuel surcharge revenue) are primarily earned based on loaded miles driven in providing truckload services. The number of loaded miles is affected by general freight supply and demand trends and the number of revenue earning equipment vehicles (tractors). The number of tractors is directly affected by the number of available drivers providing capacity to us. Due to continued over capacity in the market compared to freight demand, our truck assets continue to be under utilized. Our operating revenues are reviewed regularly by our CODM on a combined basis due to the similar nature of our services offerings and related similar base pricing structure. In addition to consolidated data on a combined basis that has been historically used, our CODM also makes use of available disaggregated operating segment data as an additional resource of performance review.

Previous wording

Fuel surcharge revenues represent fuel costs passed on to customers based on customer specific fuel surcharge recovery rates and billed loaded miles. Fuel surcharge revenues decreased due to lower average DOE diesel fuel prices (7.9%), as reported by the DOE, along with a decrease in loaded miles during the three months ended June 30, 2025 compared to June 30, 2024.

Current wording

Fuel surcharge revenues represent fuel costs passed on to customers based on customer specific fuel surcharge recovery rates and billed loaded miles. Fuel surcharge revenues decreased due to lower average DOE diesel fuel prices (4.9%), as reported by the DOE, along with a decrease in loaded miles during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024.

Previous wording

Salaries, wages, and benefits decreased $42.4 million (19.0%), to $180.4 million for the six months ended June 30, 2025 from $222.8 million in the 2024 period. Salaries, wages, and benefits decreased primarily due to the reduction of driver payroll as a result of lower company miles, along with a reduction of office and shop employees. Offsetting this decrease was an increase in driver pay for non-productive time associated with layovers and other factors associated with a slower freight environment. As a result, salaries, wages, and benefits as a percentage of gross revenues is higher in 2025 compared to 2024. We have continued to get more creative in providing better pay, driving opportunities, benefits, equipment, and facilities for our drivers. We expect our ability to attract and retain experienced drivers will continue to be a challenge in the foreseeable future.

Current wording

Salaries, wages, and benefits decreased $72.6 million (22.0%), to $257.6 million for the nine months ended September 30, 2025 from $330.2 million in the 2024 period. Salaries, wages, and benefits decreased primarily due to the reduction of driver payroll as a result of lower company miles, along with a reduction of office and shop employees. We have continued to get more creative in providing better pay, driving opportunities, benefits, equipment, and facilities for our drivers. We expect our ability to attract and retain experienced drivers will continue to be a challenge in the foreseeable future.

Previous wording

Rent and purchased transportation decreased $18.0 million, to $27.6 million for the six months ended June 30, 2025 from $45.6 million for the same period of 2024. The decrease resulted from reduced purchased transportation and lower contractor miles associated with the CFI business integration, along with a reduction of leased equipment.

Current wording

Rent and purchased transportation decreased $24.0 million, to $39.9 million for the nine months ended September 30, 2025 from $63.9 million for the same period of 2024. The decrease resulted from reduced purchased transportation and lower contractor miles associated with the CFI business integration, along with a reduction of leased equipment.

Previous wording

Fuel decreased $22.7 million (24.1%), to $71.6 million for the six months ended June 30, 2025 from $94.3 million for the same period of 2024. The decrease was primarily due to lower average diesel price per gallon (8.1%) as reported by the DOE along with less miles driven. We expect to see fuel price volatility through the remainder of 2025.

Current wording

Fuel decreased $32.4 million (23.5%), to $105.7 million for the nine months ended September 30, 2025 from $138.1 million for the same period of 2024. The decrease was primarily due to lower average diesel price per gallon (4.9%) as reported by the DOE along with less miles driven. We expect to see fuel price volatility through the remainder of 2025.

Previous wording

Operations and maintenance expense increased $0.7 million (4.2%), to $17.4 million during the three months ended June 30, 2025 from $16.7 million in the same period of 2024. The net increase is mainly attributable to higher equipment maintenance costs on a per unit basis. At June 30, 2025, the Company’s tractor fleet had an average age of 2.6 years and the Company's trailer fleet had an average age of 7.5 years compared to June 30, 2024 when the Company’s tractor fleet had an average age of 2.6 years and the Company's trailer fleet had an average age of 6.9 years. Based upon current agreements for new revenue equipment we anticipate that the average age of our fleet of tractors will be flat while the average age of our fleet of trailers will decrease by December 31, 2025. The operating and maintenance expense during 2025 will be impacted by the volume and timing of fleet modernization as newer equipment operating under warranty results in less realized maintenance costs.

Current wording

Operations and maintenance expense decreased $2.2 million (4.3%), to $50.1 million during the nine months ended September 30, 2025 from $52.3 million in the same period of 2024. The net decrease is mainly attributable to lower company miles and less revenue equipment units partially offset by higher equipment maintenance costs on a per unit basis. At September 30, 2025, the Company’s tractor fleet had an average age of 2.6 years and the Company's trailer fleet had an average age of 7.5 years compared to September 30, 2024 when the Company’s tractor fleet had an average age of 2.7 years and the Company's trailer fleet had an average age of 7.2 years. Based upon current agreements for new revenue equipment we anticipate that the average age of our fleet of tractors and trailers will slightly decrease by December 31, 2025. The operating and maintenance expense during 2025 will be impacted by the volume and timing of fleet modernization as newer equipment operating under warranty results in less realized maintenance costs.

Previous wording

Operating taxes and licenses decreased $1.4 million (13.3%), to $9.2 million during the six months ended June 30, 2025 from $10.6 million in the same period of 2024. The decrease resulted from a reduction of operating units as a result of the soft freight environment.

Current wording

Operating taxes and licenses decreased $2.2 million (14.0%), to $13.4 million during the nine months ended September 30, 2025 from $15.6 million in the same period of 2024. The decrease resulted from a reduction of operating units as a result of the soft freight environment.

Previous wording

Insurance and claims expense was $26.1 million during the six months ended June 30, 2025 compared to $27.6 million in 2024. The decrease is due to favorable claim severity and frequency comparing the two periods. Under the April 2023 renewal, our auto liability retention limit across all operating entities was increased to $3.0 million for any individual claim, subject to a $3.5 million corridor for the first accident or series of accidents that exceed $3.0 million, based on the insured party, accident date, and circumstances of the loss event. In April 2025, the $5.0 million in excess of $10.0 million layer and the $5.0 million in excess of $15.0 million layer became part of a three year structured program, each with a $5.0 million per occurrence and a $10.0 million aggregate limit per policy year. For the duration of the three year structured program, the $5.0 million in excess of $10.0 million layer has a $15.0 million aggregate limit and the $5.0 million in excess of $15.0 million layer has a $10.0 million aggregate limit. Also, in April 2025, an additional corridor was added, where we retain liability of $5.0 million for the first accident or series of accidents that exceed $20.0 million. Additionally, in April 2025, our aggregate excess liability coverage was reduced from $80.0 million to $75.0 million, subject to the foregoing limits and corridors. We retain any liability in excess of $75.0 million. Furthermore, our premiums for certain layers are subject to upward or downward adjustments based on claims experience. The elevated retention limit and the premium adjustment feature could lead to increased volatility in our insurance and claims expense, depending on the frequency and magnitude of claims, which is exacerbated given significantly increased judgments and settlements of over-the-road accident claims. We believe these insurance program features better meet the needs of our consolidated risk profile.

Current wording

Insurance and claims expense was $41.4 million during the nine months ended September 30, 2025 compared to $38.9 million in 2024. The increase is due to claim severity, frequency and general unfavorable accident claim trends experienced within the trucking industry that has generally increased the amount required to settle claims. Under the April 2023 renewal, our auto liability retention limit across all operating entities was increased to $3.0 million for any individual claim, subject to a $3.5 million corridor for the first accident or series of accidents that exceed $3.0 million, based on the insured party, accident date, and circumstances of the loss event. In April 2025, the $5.0 million in excess of $10.0 million layer and the $5.0 million in excess of $15.0 million layer became part of a three year structured program, each with a $5.0 million per occurrence and a $10.0 million aggregate limit per policy year. For the duration of the three year structured program, the $5.0 million in excess of $10.0 million layer has a $15.0 million aggregate limit and the $5.0 million in excess of $15.0 million layer has a $10.0 million aggregate limit. Also, in April 2025, an additional corridor was added, where we retain liability of $5.0 million for the first accident or series of accidents that exceed $20.0 million. Additionally, in April 2025, our aggregate excess liability coverage was reduced from $80.0 million to $75.0 million, subject to the foregoing limits and corridors. We retain any liability in excess of $75.0 million. Furthermore, our premiums for certain layers are subject to upward or downward adjustments based on claims experience. The elevated retention limit and the premium adjustment feature could lead to increased volatility in our insurance and claims expense, depending on the frequency and magnitude of claims, which is exacerbated given significantly increased judgments and settlements of over-the-road accident claims. We believe these insurance program features better meet the needs of our consolidated risk profile.

Previous wording

Depreciation and amortization decreased $9.5 million (10.3%), to $83.1 million during the six months ended June 30, 2025 from $92.6 million in the same period of 2024 as a result of ongoing fleet replacement strategies. We expect depreciation expense in 2025 to be approximately $155 million to $165 million, as we strategically shrink our fleet in order to right size to freight demand.

Current wording

Depreciation and amortization decreased $15.8 million (11.5%), to $121.8 million during the nine months ended September 30, 2025 from $137.6 million in the same period of 2024 as a result of ongoing fleet replacement strategies. We expect depreciation expense in 2025 to be approximately $158 million to $163 million, as we strategically shrink our fleet in order to right size to freight demand.

Previous wording

Other operating expenses decreased $4.6 million, to $24.5 million during the six months ended June 30, 2025 from $29.1 million in the same period of 2024. The decrease resulted from a reduction of costs associated directly with freight, and a decrease in freight demand, as well as general corporate expense initiatives.

Current wording

Other operating expenses decreased $8.1 million, to $35.5 million during the nine months ended September 30, 2025 from $43.6 million in the same period of 2024. The decrease resulted from a reduction of costs associated directly with freight, and a decrease in freight demand, as well as general corporate expense initiatives.

Previous wording

Gains on the disposal of property and equipment increased $3.6 million, to a gain on disposal of $4.6 million during the six months ended June 30, 2025 compared to a $1.0 million gain on disposal in the same period of 2024. The increase is primarily due to an increase of equipment sales volume, as we strategically shrink our fleet in order to right size to freight demand along with the sale of certain real estate. During the calendar year of 2025, we currently expect $12 to $17 million of gains on disposal of property and equipment.

Current wording

Gains on the disposal of property and equipment increased $9.8 million, to a gain on disposal of $11.3 million during the nine months ended September 30, 2025 compared to a $1.5 million gain on disposal in the same period of 2024. The increase is primarily due to an increase of equipment sales volume, as we strategically shrink our fleet in order to right size to freight demand along with the sale of certain real estate. During the calendar year of 2025, we currently expect $21 to $24 million of gains on disposal of property and equipment.

Previous wording

Interest expense decreased $3.8 million, to $6.1 million during the six months ended June 30, 2025 from $9.9 million in the same period of 2024. The decrease was mainly due to debt repayments and a corresponding decrease to average outstanding debt balances. The interest expense is made up of $5.8 million from the Credit Facilities coinciding with the acquisition of CFI while the remaining $0.3 million is the result of debt and financing leases assumed through the Smith Transport acquisition. We expect further reductions to interest expense as we continue to pay down the debt.

Current wording

Interest expense decreased $5.1 million, to $9.0 million during the nine months ended September 30, 2025 from $14.1 million in the same period of 2024. The decrease was mainly due to debt repayments and a corresponding decrease to average outstanding debt balances. The interest expense is made up of $8.5 million from the Credit Facilities coinciding with the acquisition of CFI while the remaining $0.5 million is the result of debt and financing leases assumed through the Smith Transport acquisition. We expect further reductions to interest expense as we continue to pay down the debt.

Previous wording

We had $179.8 million outstanding on the Term Facility and no outstanding borrowings under the Revolving Facility at June 30, 2025. Outstanding letters of credit associated with the Revolving Facility at June 30, 2025 were $11.7 million. As of June 30, 2025 the weighted average interest rate on outstanding borrowings under the Credit Facilities was 6.0%.

Current wording

We had $174.9 million outstanding on the Term Facility and no outstanding borrowings under the Revolving Facility at September 30, 2025. Outstanding letters of credit associated with the Revolving Facility at September 30, 2025 were $11.7 million. As of September 30, 2025 the weighted average interest rate on outstanding borrowings under the Credit Facilities was 5.9%.

Previous wording

The May 31, 2022 acquisition of Smith Transport included the assumption of $46.8 million of debt and financing lease obligations associated with the fleet of revenue equipment of which $14.2 million was outstanding at June 30, 2025, (the "Smith Debt"). The Smith Debt has $5.0 million of outstanding principal and is made up of installment notes with a weighted average interest rate of 4.4% at June 30, 2025, due in monthly installments with final maturities at various dates ranging from February 2027 to January 2029, secured by related revenue equipment. The remaining Smith Debt of $9.2 million are finance lease obligations with a weighted average interest rate of 4.0% at June 30, 2025, due in monthly installments with final maturities at various dates ranging from August 2025 to April 2026 with the weighted average remaining lease term of 0.5 years.

Current wording

The May 31, 2022 acquisition of Smith Transport included the assumption of $46.8 million of debt and financing lease obligations associated with the fleet of revenue equipment of which $10.5 million was outstanding at September 30, 2025, (the "Smith Debt"). The Smith Debt has $4.6 million of outstanding principal and is made up of installment notes with a weighted average interest rate of 4.4% at September 30, 2025, due in monthly installments with final maturities at various dates ranging from February 2027 to January 2029, secured by related revenue equipment. The remaining Smith Debt of $5.9 million are finance lease obligations with a weighted average interest rate of 4.1% at September 30, 2025, due in monthly installments with final maturities at various dates ranging from November 2025 to April 2026 with the weighted average remaining lease term of 0.4 years.

Previous wording

At June 30, 2025, we had $22.9 million in cash and cash equivalents, $184.8 million in outstanding debt, $9.2 million in finance lease liabilities, $4.5 million in operating lease obligations, and $88.3 million available borrowing capacity on the Revolving Facility.

Current wording

At September 30, 2025, we had $32.7 million in cash and cash equivalents, $179.4 million in outstanding debt, $5.9 million in finance lease liabilities, $2.7 million in operating lease obligations, and $88.3 million available borrowing capacity on the Revolving Facility.

Previous wording

The total estimated purchase commitments for tractors (net of tractor sale commitments) and trailer equipment as of June 30, 2025 was $37.3 million. These commitments extend into 2026. We anticipate continued disposition of older tractors and trailers in the Smith Transport and CFI fleets throughout 2025 and beyond. During the calendar year of 2025, we currently expect net capital expenditures of approximately $35 to $45 million and $12 to $17 million of gains on disposal of property and equipment.

Current wording

The total estimated purchase commitments for tractors (net of tractor sale commitments) and trailer equipment as of September 30, 2025 was $36.0 million. These commitments extend into 2026. We anticipate continued disposition of older tractors and trailers in the Smith Transport and CFI fleets throughout 2025 and beyond. During the calendar year of 2025, we currently expect net capital expenditures of approximately $27 to $30 million and $21 to $24 million of gains on disposal of property and equipment.