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 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.

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,” derivations thereof, 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, 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, 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, or underlying the forward-looking statements. Factors that could cause or contribute to such differences include, bu…

Excerpt shortened here; the source contains the full paragraph.

Previous 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.

Current wording

We primarily provide nationwide asset-based dry van truckload service for major shippers across the United States, along with cross-border freight and other transportation services offered through third party partnerships in Mexico. Our consolidated average length of haul is under 400 miles. We focus on providing high quality service to targeted customers with a high density of freight in our operating areas. We also offer truckload temperature-controlled transportation services and Mexico logistics services, which are not significant to our consolidated operations. 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 (for services within Mexico). We manage our business based on overall corporate operating goals and objectives that are the same for all of our brands. Our Chief Operating Decision Maker (“CODM”), our CEO and President, 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 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.

Current wording

We operate in a cyclical industry. Freight demand was degraded throughout all of 2023 and continued to be weak during 2024 and 2025. We have begun to see some encouraging signs related to market capacity reductions and freight demand improvements in 2026. We believe that meaningful improvements in freight demand and freight pricing have started, but may not fully materialize until later in 2026. 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. Trucking capacity has been reduced in the industry and freight rates are currently improving. 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.

Current wording

In addition to past organic growth through the development of our 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, and pursue new customer relationships in new markets, as well as expand business relationships with current customers in new markets. We have historically been a debt free organization although with the acquisition of CFI we incurred debt but have 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.

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 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.

Current wording

The issue of a decreasing amount of overall qualified and safe operating CDL drivers in our industry continues. 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 to twelve months of over-the-road experience and safe driving records. As discussed below, the Company's driver training programs provide 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. Driver pay, home time, and other amenities have 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 16% of our driver employees, individually, have achieved 1.0 million or more safe miles.

Previous wording

Millis Training Institute, opened in 1989, and Heartland Training Institute, opened in 2022, are driver school training programs dedicated to identifying, training, and developing capable individuals into obtaining their commercial driving license and becoming professional truck drivers. These programs offer an additional opportunity to hire professional drivers other than the traditional approach of hiring only experienced over-the-road drivers. Further, CFI has a training program for individuals who have obtained their CDL, but have less driving experience, as a source of driver trainees, but does not operate a driver school training program.

Current wording

Millis Training Institute, opened in 1989, and Heartland Training Institute, opened in 2022, are driver training programs dedicated to identifying, training, and developing capable individuals into obtaining their commercial driving license and becoming professional truck drivers. These driver training programs offer additional opportunities to hire professional drivers other than the traditional approach of hiring only experienced over-the-road drivers.

Previous wording

Current government focus on english-speaking language requirements as well as other reviews of CDL status for non-domiciled drivers will potentially eliminate some level of driver capacity in our industry. We believe this could help supply and demand dynamics currently being experienced in our industry. However, due to our comprehensive hiring and safety standards we continue to experience a challenging driver hiring environment.

Current wording

Current government focus on English language proficiency requirements, as well as reviews of CDL status for non-domiciled drivers, will potentially eliminate some level of driver capacity in our industry. We believe this could help improve supply and demand dynamics currently being experienced in our industry. However, due to our comprehensive hiring and safety standards, we continue to experience a challenging qualified driver hiring environment.

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 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.

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 March 31, 2026 and 2025 were $4.12 and $3.63 (a 13.5% increase), respectively. Average DOE price in April was $5.50 and has been above $5.00 each of the last seven weeks through the end of April. Average DOE prices were $3.56, $3.76, and $3.70 for the three months ended June 30, 2025, September 30, 2025, and December 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 2026, 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 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.

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, like we experienced in March 2026, 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 March 31, 2026, the Company’s tractor fleet had an average age of 2.6 years and the Company's trailer fleet had an average age of 7.3 years compared to March 31, 2025 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 7.4 years.

Previous 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.

Current wording

We ended the first three months of 2026 with operating revenues of $176.3 million, including fuel surcharges, net loss of $4.8 million, and basic net loss per share of $0.06 on basic weighted average outstanding shares of 77.5 million compared to operating revenues of $219.4 million, including fuel surcharges, net loss of $13.9 million, and basic net loss per share of $0.18 on basic weighted average shares of 78.5 million in the first three months of 2025. We posted a 101.9% operating ratio (operating expenses as a percentage of operating revenues) for the three months ended March 31, 2026 compared to 106.8% for the same period of 2025. We posted a 101.3% non-GAAP adjusted operating ratio(1) for the three months ended March 31, 2026 compared to 107.1% for the same period of 2025. We had total assets of $1.2 billion at March 31, 2026. We had a loss on assets of 3.5% and a loss on equity of 5.7% over the immediate past four quarters ended March 31, 2026, compared to a loss on assets of 2.1% and a loss on equity of 3.5% for the immediate past four quarters ended March 31, 2025.

Previous 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.

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 three months ended March 31, 2026 of $23.2 million was 13.1% of operating revenues, compared to $25.8 million and 11.8% of operating revenues in the same period of 2025. During 2026, we had net cash provided by investing activities of $14.9 million resulting from net property and equipment transactions. We had net cash used in financing activities of $11.5 million resulting primarily from $9.9 million debt repayments associated with debt taken on with our 2022 acquisitions along with $1.6 million for dividend payments. Our cash, cash equivalents and restricted cash increased $26.6 million during the three months ended March 31, 2026. We ended the first quarter of 2026 with cash, cash equivalents and restricted cash of $58.0 million. Cash and cash equivalents, excluding restricted cash was $44.5 million at March 31, 2026.

Previous 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.

Current wording

Operating revenue decreased $43.1 million (19.7%), to $176.3 million for the three months ended March 31, 2026 from $219.4 million for the three months ended March 31, 2025. For the three month period, the decrease in revenue was the result of strategic fleet changes in response to the weak freight environment. This led to fewer drivers and a decline in total miles, causing the decrease in trucking and other revenues of $39.2 million (20.3%) along with a decrease to fuel surcharge revenue of $3.9 million (14.7%) from $26.3 million in 2025 to $22.4 million in 2026. 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 qualified 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, however continued contraction in market capacity has showed signs of favorably impacting pricing in the freight market during the three months ended March 31, 2026. 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 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.

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 (13.5%) during the three months ended March 31, 2026 compared to March 31, 2025.

Previous 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.

Current wording

Salaries, wages, and benefits decreased $24.1 million (25.9%), to $69.1 million for the three months ended March 31, 2026 from $93.2 million in the 2025 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 $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.

Current wording

Rent and purchased transportation decreased $3.8 million, to $10.5 million for the three months ended March 31, 2026 from $14.3 million for the same period of 2025. The decrease resulted from reduced purchased transportation and lower contractor miles, along with a reduction of leased equipment costs as we eliminated all remaining revenue equipment leases during the three months ended March 31, 2026.

Previous 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.

Current wording

Operations and maintenance expense decreased $5.4 million (31.3%), to $11.9 million during the three months ended March 31, 2026 from $17.3 million in the same period of 2025. The net decrease is mainly attributable to lower equipment maintenance costs as a result of lower company miles and fewer revenue equipment units, as the age of equipment did not change significantly. At March 31, 2026, the Company’s tractor fleet had an average age of 2.6 years and the Company's trailer fleet had an average age of 7.3 years compared to March 31, 2025 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 7.4 years. We anticipate that the average age of our fleet of tractors and trailers will decrease by December 31, 2026. The operating and maintenance expense during 2026 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 $0.8 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.

Current wording

Operating taxes and licenses decreased $0.7 million, to $4.0 million during the three months ended March 31, 2026 from $4.7 million in the same period of 2025. The decrease resulted from a reduction of operating units as a result of the soft freight environment.

Previous 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.

Current wording

Depreciation and amortization decreased $6.4 million (15.5%), to $35.2 million during the three months ended March 31, 2026 from $41.6 million in the same period of 2025 as a result of ongoing fleet replacement strategies. We expect depreciation expense in 2026 to be approximately $125 million to $135 million.

Previous 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.

Current wording

Other operating expenses decreased $3.6 million, to $9.2 million during the three months ended March 31, 2026 from $12.8 million in the same period of 2025. 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 $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.

Current wording

Gains on the disposal of property and equipment increased $5.5 million, to a gain on disposal of $7.3 million during the three months ended March 31, 2026 compared to a $1.8 million gain on disposal in the same period of 2025. The increase is primarily due to the sale of certain real estate along with an increase of trailer sales volume and average gain per tractor sold. During the calendar year of 2026, we currently expect $25 to $35 million of gains on disposal of property and equipment.

Previous 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.

Current wording

Interest expense decreased $0.9 million, to $2.2 million during the three months ended March 31, 2026 from $3.1 million in the same period of 2025. The decrease was mainly due to debt repayments and a corresponding decrease to average outstanding debt balances. The interest expense is made up of $2.1 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 eliminated all remaining debt and financing leases assumed through the Smith Transport acquisition during the three months ended March 31, 2026. We expect further reductions to interest expense as we continue to pay down the debt.

Previous wording

The full amount of the Term Facility was made in a single draw on the CFI Closing Date and amounts borrowed under the Term Facility that are repaid or prepaid may not be reborrowed. The Term Facility amortizes in quarterly installments which began in September 2023, at 5% per annum through June 2025 and 10% per annum from September 2025 through June 2027, with the balance due on the date that is five years from the CFI Closing Date. Based on debt repayments made through September 30, 2025, required minimum payments have been covered until the term loan maturity on August 31, 2027.

Current wording

The full amount of the Term Facility was made in a single draw on the CFI Closing Date and amounts borrowed under the Term Facility that are repaid or prepaid may not be reborrowed. The Term Facility amortizes in quarterly installments which began in September 2023, at 5% per annum through June 2025 and 10% per annum from September 2025 through June 2027, with the balance due on the date that is five years from the CFI Closing Date. Based on debt repayments and prepayments made through March 31, 2026, required minimum payments have been covered until the term loan maturity on August 31, 2027.

Previous wording

The indebtedness, obligations, and liabilities under the Credit Facilities are unconditionally guaranteed, jointly and severally, on an unsecured basis by the Company and certain other subsidiaries of the Company. The borrower may voluntarily prepay outstanding loans under the Credit Facilities in whole or in part at any time without premium or penalty, subject to payment of customary breakage costs in the case of Secured Overnight Financing Rate (“SOFR”) rate loans.

Current wording

The indebtedness, obligations, and liabilities under the Credit Facilities are unconditionally guaranteed, jointly and severally, on an unsecured basis by the Company and certain other subsidiaries of the Company. We may voluntarily prepay outstanding loans under the Credit Facilities in whole or in part at any time without premium or penalty, subject to payment of customary breakage costs in the case of Secured Overnight Financing Rate (“SOFR”) rate loans.

Previous 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%.

Current wording

We had $149.9 million outstanding on the Term Facility and no outstanding borrowings under the Revolving Facility at March 31, 2026. Outstanding letters of credit associated with the Revolving Facility at March 31, 2026 were $11.2 million. As of March 31, 2026 the weighted average interest rate on outstanding borrowings under the Credit Facilities was 5.4%.

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 $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.

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. During the three months ended March 31, 2026 we paid off all remaining debt and financing lease obligations from the acquisition of Smith Transport.

Previous 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.

Current wording

At March 31, 2026, we had $44.5 million in cash and cash equivalents, $149.9 million in outstanding debt, $3.3 million in operating lease obligations, and $88.8 million available borrowing capacity on the Revolving Facility.

Previous wording

We intend to continue paying down the debt we incurred and assumed to complete our most recent acquisitions, while maintaining our regular quarterly dividends and funding our ongoing capital expenditure needs. While we still maintain debt, we do not currently expect to declare special dividends, or make significant acquisitions, however we will remain flexible on repurchases of shares of common stock and will continue to evaluate the best deployment of our capital.

Current wording

We intend to continue paying down the CFI debt, while maintaining our regular quarterly dividends and funding our ongoing capital expenditure needs. While we are paying down the CFI debt, we do not currently expect to declare special dividends, repurchase a significant volume of shares of our common stock, or make significant acquisitions, however we will remain flexible to ensure the best deployment of our capital.

Previous 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.

Current wording

The total estimated purchase commitments for tractors (net of tractor sale commitments) and trailer equipment as of March 31, 2026 was $31.9 million. These commitments extend through the remainder of 2026. We anticipate continued fleet modernization throughout 2026 and beyond. During the calendar year of 2026, we currently expect net capital expenditures of approximately $10 to $20 million and $25 to $35 million of gains on disposal of property and equipment.

Previous wording

Cash flow provided by operating activities during the nine months ended September 30, 2025 was $74.4 million as compared to $106.6 million during the same period of 2024. This decrease was due to a $22.7 million reduction in net income net of non-working capital items along with a decrease of $9.5 million in working capital items. Cash flows provided by operating activities was 11.9% of operating revenues for the nine months ended September 30, 2025 compared with 13.2% for the same period of 2024.

Current wording

Cash flow provided by operating activities during the three months ended March 31, 2026 was $23.2 million as compared to $25.8 million during the same period of 2025. This decrease was due to a decrease of $4.9 million in working capital items partially offset by an increase of $2.2 million in net income net of non-working capital items. Cash flows provided by operating activities was 13.1% of operating revenues for the three months ended March 31, 2026 compared with 11.8% for the same period of 2025.

Previous wording

Cash used in investing activities was $24.2 million during the nine months ended September 30, 2025 compared to cash provided by investing activities of $1.5 million during the comparative 2024 period. The change is primarily due to the $25.8 million increase in net property and equipment cash used.

Current wording

Cash provided by investing activities was $14.9 million during the three months ended March 31, 2026 compared to cash used in investing activities of $11.5 million during the comparative 2025 period. The change is primarily due to the $26.6 million decrease in net property and equipment cash used as cash was provided by net property and equipment activities in 2026 while net cash was used in 2025.

Previous wording

We have a stock repurchase program with 4.8 million shares remaining authorized for repurchase under the program as of September 30, 2025 and the program has no expiration date. There were 1.2 million shares repurchased in the open market during the nine months ended September 30, 2025 while 0.6 million shares were repurchased during the nine months ended September 30, 2024. Shares repurchased are accounted for as treasury stock. We will remain flexible on the repurchase of our common stock to ensure the best deployment of our capital. Any future repurchases will depend on market conditions, cash flow requirements, securities law limitations, and other factors. The share repurchase authorization is discretionary and has no expiration date.

Current wording

We have a stock repurchase program with 4.8 million shares remaining authorized for repurchase under the program as of March 31, 2026 and the program has no expiration date. Shares repurchased are accounted for as treasury stock. While we are paying down the debt, we do not currently expect to repurchase a significant volume of shares of our common stock, however we will remain flexible to ensure the best deployment of our capital. Any future repurchases will depend on market conditions, cash flow requirements, securities law limitations, and other factors. The share repurchase authorization is discretionary and has no expiration date.

Previous wording

Management believes we have adequate liquidity to meet our current and projected needs in the foreseeable future. Management believes we will continue to have significant capital requirements over the long-term, which we may fund with current available cash, cash flows provided by operating activities, proceeds from the sale of used equipment, and to a lesser extent, available capacity on the Credit Facilities.

Current wording

Management believes we have adequate liquidity to meet our current and projected needs in the foreseeable future. Management believes we will continue to have significant capital requirements over the long-term, which we may fund with current available cash, cash flows provided by operating activities, proceeds from the sale of used equipment or stock offerings, and to a lesser extent, available capacity on the Credit Facilities.