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,” 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.

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 sales of property, including any gains therefrom, 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 …

Excerpt shortened here; the source contains the full paragraph.

Previous 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.

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. Trucking capacity has been reduced in the industry and freight rates are currently improving, but meaningful improvement 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. However, general consumer product output and inventory volatility, consumer demand, the political landscape, governmental regulations and enforcement, potential tariffs, foreign wars, and disruption in oil and diesel markets all could create additional volatility regarding future freight demand, capacity, rates, and fuel prices.

Previous 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.

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 we have incurred debt with certain acquisitions. Debt incurred in the CFI acquisition has been significantly lowered 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. Our 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

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.

Current wording

The issue of a decreasing number 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 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

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.

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 has and will continue to improve current supply and demand dynamics 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 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.

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 June 30, 2026 and 2025 were $5.35 and $3.56 (a 50.4% increase), respectively. Average DOE price in July was $4.96 but has been above $5.00 each of the last two weeks through the end of July. Average DOE prices were $3.76, $3.70, and $4.75 for the three months ended September 30, 2025, December 31, 2025, and March 31, 2026, 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 our second highest expense behind salaries, wages, and benefits.

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, 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.

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 June 30, 2026, the Company’s tractor fleet had an average age of 2.3 years and the Company's trailer fleet had an average age of 7.1 years compared to June 30, 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 7.5 years.

Previous 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.

Current wording

We ended the first six months of 2026 with operating revenues of $360.4 million, including fuel surcharges, net income of $5.8 million, and basic earnings per share of $0.07 on basic weighted average outstanding shares of 77.4 million compared to 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 shares of 78.3 million in the first six months of 2025. We posted a 96.3% operating ratio (operating expenses as a percentage of operating revenues) for the six months ended June 30, 2026 compared to 106.4% for the same period of 2025. We posted a 94.9% non-GAAP adjusted operating ratio(1) for the six months ended June 30, 2026 compared to 106.5% for the same period of 2025. We had total assets of $1.2 billion at June 30, 2026. We had a loss on assets of 1.8% and a loss on equity of 2.9% over the immediate past four quarters ended June 30, 2026, compared to a loss on assets of 2.7% and a loss on equity of 4.4% for the immediate past four quarters ended June 30, 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 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.

Current wording

Our cash flow from operating activities for the six months ended June 30, 2026 of $36.0 million was 10.0% of operating revenues, compared to $46.8 million and 10.9% of operating revenues in the same period of 2025. During 2026, we had net cash provided by investing activities of $38.9 million resulting primarily from net property and equipment transactions. We had net cash used in financing activities of $30.6 million resulting primarily from $24.9 million debt repayments associated with debt taken on with our 2022 acquisitions along with $3.1 million for dividend payments and $2.3 million for repurchases of common stock. Our cash, cash equivalents and restricted cash increased $44.3 million during the six months ended June 30, 2026. We ended the second quarter of 2026 with cash, cash equivalents and restricted cash of $75.8 million. Cash and cash equivalents, excluding restricted cash was $62.4 million at June 30, 2026.

Previous 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.

Current wording

(a) Operating revenue excluding fuel surcharge revenue is based upon operating revenue minus fuel surcharge revenue. Adjusted operating income (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 income (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 income (loss), and adjusted operating ratio are not substitutes for operating revenue, operating income (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 income (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 income (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

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.

Current wording

Operating revenue decreased $26.3 million (12.5%), to $184.1 million for the three months ended June 30, 2026 from $210.4 million for the three months ended June 30, 2025. For the three month period, the decrease in revenue was the result of strategic fleet changes throughout the back half of 2025 and early 2026 in response to the weak freight environment in recent years. This led to fewer drivers and a decline in total miles compared to the prior year period, causing the decrease in trucking and other revenues of $33.5 million (18.0%) partially offset by an increase to fuel surcharge revenue of $7.2 million (29.5%) from $24.5 million in 2025 to $31.7 million in 2026. Driver capacity throughout the industry tightened late first quarter of 2026 and pricing improved throughout the second quarter of 2026 as a result. 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. Continued contraction in market capacity has showed signs of favorably impacting pricing in the freight market during the three months ended June 30, 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 (13.5%) during the three months ended March 31, 2026 compared to March 31, 2025.

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 increased due to higher average DOE diesel fuel prices (50.4%) partially offset by a decrease in loaded miles during the three months ended June 30, 2026 compared to June 30, 2025.

Previous 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.

Current wording

Salaries, wages, and benefits decreased $18.1 million (20.7%), to $69.1 million for the three months ended June 30, 2026 from $87.2 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 $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.

Current wording

Rent and purchased transportation decreased $2.5 million, to $10.8 million for the three months ended June 30, 2026 from $13.3 million for the same period of 2025. The decrease resulted from lower contractor miles along with a reduction of leased equipment costs as we eliminated all remaining revenue equipment leases in 2026.

Previous wording

Fuel decreased $5.2 million (13.7%), to $32.7 million for the three months ended March 31, 2026 from $37.9 million for the same period of 2025. The decrease was due to lower company miles, partially offset by higher average DOE diesel price per gallon (13.5%). DOE fuel prices in March 2026 were 43% higher compared to the three months ended March 31, 2025. These elevated fuel prices have continued throughout April and so far in May 2026. We expect fuel prices to remain elevated, compared to historical prices prior to March 1, 2026, until current conflicts in the Middle East subside. As our fuel surcharge agreements do not cover fuel consumed in out-of-route miles, empty miles, and idle time, we expect fuel prices to negatively impact our operating results until fuel prices reduce to the average DOE pricing of 2025.

Current wording

Fuel increased $6.8 million (20.3%), to $40.5 million for the three months ended June 30, 2026 from $33.7 million for the same period of 2025. The increase was due to higher average DOE diesel price per gallon (50.4%), partially offset by lower company miles. We expect fuel prices to remain elevated, compared to historical prices until current conflicts in the Middle East subside. As our fuel surcharge agreements do not cover fuel consumed in out-of-route miles, empty miles, and idle time, we expect fuel prices to negatively impact our operating results until fuel prices reduce to the average DOE pricing of 2025.

Previous 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.

Current wording

Operations and maintenance expense decreased $4.6 million (26.7%), to $12.8 million during the three months ended June 30, 2026 from $17.4 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 June 30, 2026, the Company’s tractor fleet had an average age of 2.3 years and the Company's trailer fleet had an average age of 7.1 years compared to June 30, 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 7.5 years. We anticipate that the average age of our fleet of tractors and trailers will not change significantly by December 31, 2026 as new equipment purchases are largely expected to offset the aging of our existing fleet. Operating and maintenance expense is 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 $0.7 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.

Current wording

Operating taxes and licenses decreased $0.6 million, to $3.8 million during the three months ended June 30, 2026 from $4.4 million in the same period of 2025. The decrease resulted from strategic disposals of under-utilized assets.

Previous 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.

Current wording

Depreciation and amortization decreased $9.2 million (22.1%), to $32.3 million during the three months ended June 30, 2026 from $41.5 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 $3.6 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.

Current wording

Other operating expenses decreased $2.2 million, to $9.5 million during the three months ended June 30, 2026 from $11.7 million in the same period of 2025. The decrease resulted from a reduction of costs associated directly with miles driven as well as general corporate expense initiatives.

Previous 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.

Current wording

Gains on the disposal of property and equipment increased $22.3 million, to a gain on disposal of $25.1 million during the three months ended June 30, 2026 compared to a $2.8 million gain on disposal in the same period of 2025. The increase is primarily due to the sale of certain real estate, an increase of tractor and trailer sales volume, and an increase in average gain per unit sold. For the remainder of 2026, we currently expect $13 to $19 million of gains on disposal of property and equipment.

Previous wording

Our effective tax rate was 9.0% and 22.4% for the three months ended March 31, 2026 and 2025, respectively. The reduction in the effective tax rate is primarily the result of permanent differences generating tax expense which are not directly correlated with the reduction in the loss realized before tax in the three months ended March 31, 2026 relative to the same period in 2025. These permanent differences generate tax expense offsetting the tax benefit which reduces the effective tax rate.

Current wording

Our effective tax rate was 29.6% and 28.5% for the three months ended June 30, 2026 and 2025, respectively. The increase in the effective tax rate is primarily the result of permanent differences and changes in unrecognized tax benefits generating tax expense which are not correlated to the change in income.

Previous wording

Our quarterly operating ratio was 101.9% and 101.3% non-GAAP adjusted operating ratio as compared to the prior year 106.8% and 107.1%. See the “GAAP to Non-GAAP Reconciliation Schedule” above for a reconciliation of our non-GAAP adjusted operating ratio. Our net loss was $4.8 million for the three months ended March 31, 2026 compared to net loss of $13.9 million during the period ended March 31, 2025. Our consolidated operating results for the three months ended March 31, 2026 reflect a combination of challenges from adverse weather experienced in January and February while results for March were better, reflecting improved freight volumes and driver utilization compared to the beginning of the quarter due to ongoing industry capacity reductions and more favorable weather patterns. The positive variables in March 2026 were partially offset by a headwind of higher fuel prices as compared to the beginning of the quarter and the 2025 quarter. The 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. The average DOE price of diesel was $3.65 for the January through February 2026 and was $5.18 in March 2026, a 41.9% increase. 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.

Current wording

Our operating ratio was 96.3% and 94.9% non-GAAP adjusted operating ratio as compared to the prior year 106.4% and 106.5%. See the “GAAP to Non-GAAP Reconciliation Schedule” above for a reconciliation of our non-GAAP adjusted operating ratio. Our net income was $5.8 million for the six months ended June 30, 2026 compared to net loss of $24.7 million during the period ended June 30, 2025. Our consolidated operating results for the six months ended June 30, 2026, reflect a combination of challenges from adverse weather experienced in the first two months of 2026 while results for the remainder of the period were better, reflecting improved freight volumes, customer pricing, and driver utilization due to ongoing industry capacity reductions, as well as strategic disposals of under-utilized assets. The positive variables were partially offset by a headwind of higher fuel prices. The DOE average diesel fuel prices per gallon for the six months ended June 30, 2026 and 2025 were $4.74 and $3.59 (a 31.7% increase), respectively. Average DOE price in July was $4.96 but has been above $5.00 each of the last two weeks through the end of July.

Previous wording

Insurance and claims expense was $12.8 million during the three months ended March 31, 2026 compared to $11.9 million in 2025. The increase is due to unfavorable claim severity and frequency along with rising insurance cost. The overall cost to insure our operations has increased in recent years due to a lack of insurance capacity across the transportation industry, mainly as a result of the current legal environment. Certain insurance carriers that provide excess insurance coverage currently and for past claim years have encountered financial issues. In recent years there have been several insurance carriers that have exited the excess reinsurance market. Insurance carriers have raised premiums and collateral requirements for many businesses, including trucking companies. In recent years we have increased retained claim exposure in response to the premium increase trend and added corridor features which have the effect of increasing retained exposure. Our premiums are subject to upward or downward adjustments based on claims experience with the opportunity for net savings if we have positive claims experience in our excess layers. As a result, our insurance and claims expense could likely increase with unfavorable claims experience and will be volatile in future periods.

Current wording

Insurance and claims expense was $24.6 million during the six months ended June 30, 2026 compared to $26.1 million in 2025. The decrease is due to favorable claim severity and frequency along with insurance program changes. The overall cost to insure our operations has increased in recent years due to a lack of insurance capacity across the transportation industry, mainly as a result of the current legal environment. Certain insurance carriers that provide excess insurance coverage currently and for past claim years have encountered financial issues. In recent years there have been several insurance carriers that have exited the excess reinsurance market. Insurance carriers have raised premiums and collateral requirements for many businesses, including trucking companies. In recent years we have increased retained claim exposure in response to the premium increase trend and added corridor features which have the effect of increasing retained exposure. Our premiums are subject to upward or downward adjustments based on claims experience with the opportunity for net savings if we have positive claims experience in our excess layers. As a result, our insurance and claims expense could likely increase with unfavorable claims experience and will be volatile in future periods.

Previous 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.

Current wording

Interest expense decreased $2.0 million, to $4.1 million during the six months ended June 30, 2026 from $6.1 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 $4.0 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 six months ended June 30, 2026. We expect further reductions to interest expense as we continue to pay down the debt.

Previous wording

The growth of our business requires significant investments in new revenue equipment. Historically, except for acquisitions, we have been debt-free, funding revenue equipment purchases with our primary sources of liquidity, cash flow provided by operating activities and proceeds from sales of used equipment. In conjunction with the acquisition of CFI on August 31, 2022, (the “CFI Closing Date”), Heartland entered into a $550.0 million unsecured credit facility which included a $100.0 million revolving line of credit (“Revolving Facility”) and $450.0 million in term loans (“Term Facility” and, together with the Revolving Facility, the “Credit Facilities”). The Credit Facilities includes a consortium of lenders, including joint bookrunners JPMorgan Chase Bank, N.A. and Wells Fargo Bank, National Association (“Wells Fargo”).

Current wording

The growth of our business requires significant investments in new revenue equipment. Historically, except for acquisitions, we have been debt-free, funding revenue equipment purchases with our primary sources of liquidity, cash flow provided by operating activities and proceeds from sales of used equipment. In conjunction with the acquisition of CFI on August 31, 2022, (the “CFI Closing Date”), Heartland entered into a $550.0 million unsecured credit facility which included a $100.0 million revolving line of credit (“Revolving Facility”) and $450.0 million in term loans (“Term Facility” and, together with the

Previous 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%.

Current wording

We had $134.9 million outstanding on the Term Facility and no outstanding borrowings under the Revolving Facility at June 30, 2026. Outstanding letters of credit associated with the Revolving Facility at June 30, 2026 were $11.2 million. As of June 30, 2026 the weighted average interest rate on outstanding borrowings under the Credit Facilities was 5.1%.

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

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 six months ended June 30, 2026 we paid off all remaining debt and financing lease obligations from the acquisition of Smith Transport.

Previous 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.

Current wording

At June 30, 2026, we had $62.4 million in cash and cash equivalents, $134.9 million in outstanding debt, $11.5 million in operating lease obligations, and $88.8 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 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.

Current wording

The total estimated purchase commitments for tractors (net of tractor sale commitments) and trailer equipment as of June 30, 2026 was $29.2 million. These commitments extend through the remainder of 2026. We expect continued fleet modernization throughout 2026 and beyond. For the remainder of 2026, we currently anticipate net capital expenditures to be approximately $8 to $14 million and $13 to $19 million of gains on disposal of property and equipment.

Previous 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.

Current wording

Cash flow provided by operating activities during the six months ended June 30, 2026 was $36.0 million as compared to $46.8 million during the same period of 2025. This decrease was due to a decrease of $0.3 million in working capital items along with a reduction of $10.5 million in net income net of non-working capital items. Cash flows provided by operating activities was 10.0% of operating revenues for the six months ended June 30, 2026 compared with 10.9% for the same period of 2025.

Previous 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.

Current wording

Cash provided by investing activities was $38.9 million during the six months ended June 30, 2026 compared to cash used in investing activities of $17.3 million during the comparative 2025 period. The change is primarily due to the $56.7 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

Cash used in financing activities increased $8.5 million during the three months ended March 31, 2026 compared to the same period of 2025 due to an increase of $8.5 million of repayments of finance leases and debt. During the three months ended March 31, 2026 we paid off all remaining debt and financing lease obligations from the acquisition of Smith Transport in addition to paydowns on the Credit Facilities.

Current wording

Cash used in financing activities increased $11.4 million during the six months ended June 30, 2026 compared to the same period of 2025 due to an increase of $17.9 million of repayments of finance leases and debt partially offset by $6.6 million less cash used for the repurchase of common stock. During the six months ended June 30, 2026 we paid off all remaining debt and financing lease obligations from the acquisition of Smith Transport in addition to paydowns on the Credit Facilities.

Previous 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.

Current wording

We have a stock repurchase program with 4.7 million shares remaining authorized for repurchase under the program as of June 30, 2026 and the program has no expiration date. There were 0.2 million shares repurchased in the open market during the six months ended June 30, 2026 while 1.0 million shares were repurchased during the six months ended June 30, 2025. 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

We had net cash payments of $0.2 million and net cash refunds of $0.3 million for income taxes during the three months ended March 31, 2026 and 2025, respectively. The increase in paid taxes net of refunds during the three months ended March 31, 2026 is due to refunds associated with prior year filings received in 2025 that were not recurring in 2026.

Current wording

We had net cash payments of $2.5 million and $6.8 million for income taxes for the six months ended June 30, 2026 and 2025, respectively. The decrease in income taxes paid net of refunds during the six months ended June 30, 2026 is due to recognition of deferred tax liabilities in 2025 that increased the 2025 Federal and state estimate which have not occurred in 2026.

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 or stock offerings, 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 and property, or stock offerings, and to a lesser extent, available capacity on the Credit Facilities.