HTLD 10-K & 10-Q changes, risk factors and insider trading

In addition, events outside our control, such as deterioration of U.S. transportation infrastructure and reduced investment in such infrastructure, public health crises, epidemics, pandemicspandemics, or similar events, such as the COVID-19 outbreak, strikes or other work stoppages at our facilities or at customer, vendor, port, border or other shipping locations, armedglobal conflicts, including conflicts in Ukraine and the Middle East or as a result of the rising tensions between China and Taiwan, terrorist attacks, efforts to combat terrorism, military action against a foreign state or group located in a foreign stateaction, or heightened security requirements could lead to wear, tear and damage to our equipment, lack of availability of new equipment, driver dissatisfaction, reduced economic demand and freight volumes, reduced availability of credit, increased prices for fuel, or temporary closing of the shipping locations or U.S. borders. Such events or enhanced security measures in connection with such events could impair our operating efficiency and productivity and result in higher operating costs.

TheSince TrumpApril administration2025, hasnew, statedsubstantial itstariffs intentionhave been imposed on imports to imposethe newU.S. Imposition of additional tariffs or increasedimport tariffor ratesexport oncontrols, importedchanges goodsto from a number of countries, including China, Canada, Mexico, and the E.U. Suchcertain trade policiesagreements, and tariff implementations, and any related retaliatory trade policies andcould, tariffamong implementationsother by foreign governments, maythings, result in decreased shipping volumes and have an adverse impact on our revenues and results of operations.

We may not maintain our current level of operations, and any decrease in revenuesrevenues, increase in losses, or profitsinability to improve our profitability may impair our ability to implement our business strategy, which could have a materially adverse effect on our results of operations.

Historically, we have experienced significant growth in revenue and profits, although recently, due in part to our acquisitions of CFI and Smith Transport and related financing, as well as the overall freight environment, our profitability has decreased compared to periods prior to such acquisitions. While our acquisitions of CFI and Smith Transport during 2022 has resulted in revenue growth, other metrics such as operating ratio have been impaired compared to periods prior to such acquisitions. There can be no assurance that our business will grow in the future, or at all, or that we can effectively adapt our management, administrative, and operational systems to respond to any future growth.growth and return to profitability. Further, there can be no assurance that we will be able to successfully implement cost controls and improve our operating ratio.

We have established terminals throughout the contiguous U.S. and one in Mexico in order to serve markets in various regions. These regional operations require the commitment of additional personnel and revenue equipment, as well as management resources, for future development and establishing terminals and operations in new markets could require more time, resources or a more substantial financial commitment than anticipated. Should the growth in our regional operations stagnate or decline, the results of our operations could be adversely affected. If we seek to further expand, it may become more difficult to identify large cities that can support a terminal and we may expand into smaller cities where there is insufficient economic activity, fewer opportunities for growth and fewer drivers and non-driver personnel to support the terminal. We may encounter operating conditions in these new markets, as well as our current markets, that differ substantially from our current operations and customer relationships and appropriate freight rates in new markets could be challenging to attain. We may not be able to duplicate or sustain our operating strategy and establishing service centers or terminals and operations in new markets could require more time or resources, or a more substantial financial commitment than anticipated. These challenges may negatively impact our growth, which could have a materially adverse effect on our ability to execute our business strategy and our results of operations.

Historically, acquisitions have been a part of our growth. Our acquisitions of CFI and Smith Transport have experienced headwinds due to the weakened freight environment in recent years. This has led to internal integration issues with respect to CFI and Smith Transport which has negatively affected our results of operations. On December 31, 2025 we integrated and rebranded the U.S. operations of CFI into Heartland Express. There is no assurance that we will be successful in identifying, negotiating, or consummating any future acquisitions, and that any acquisitions will not experience similar issues to those we are experiencing with CFI and Smith Transport. If we fail to make any future acquisitions, our historical growth rate could be materially and adversely affected. If we succeed in consummating future acquisitions, our business, financial condition and results of operations, may be materially adversely affected because:

Although we do not have any direct operations inoutside Russia, Belarus, Ukraine,of the MiddleU.S. East,Mexico, China,and or TaiwanCanada, we may be affected by the broader consequences of the global conflicts, or expansion of such conflicts to other areas or countries or similar conflicts elsewhere, such as,as increased inflation, supply chain issues (including access to parts for our revenue equipment), embargoes, tariffs, geopolitical shift, access to diesel fuel, higher energy prices, potential retaliatory actionactions by the Russian or other governments, including cyber-attacks, and the extent of the conflict’s effect on the global economy. The increased tensions between China and Taiwan, and any resulting hostilities, may have similar consequences. The magnitude of these risks cannot be predicted, including the extent to which the conflict may heighten other risks disclosed herein. Ultimately, these or other factors could materially and adversely affect our results of operations.

Like many truckload carriers, we experience substantial difficulty in attracting and retaining sufficient numbers of qualified drivers. The truckload industry is subject to a shortage of qualified drivers. Such shortage is exacerbated during periods of economic expansion, in which alternative employment opportunities, such as those in the construction and manufacturing industries, are more plentiful and freight demand increases. Furthermore, increased scrutiny of accreditation of driving schools and limitations on capacity at driving schoolsschools, maywhether beresulting limited byfrom future outbreaks of contagious diseases,diseases likeor COVID-19.other factors, may reduce the pool of potential drivers available to us. Regulatory requirements,requirements could further reduce the number of drivers available, including those related to safety ratings, ELDs and HOS changes,HOS, drug and alcohol testing national database, governmentand the DOT guidelines issued in 2025 strengthening enforcement of the FMCSA’s longstanding English proficiency requirements for commercial drivers. Further, the FMCSA issued an interim rule in 2025 revising the requirements for the issuance or renewal of CDLs to non-domiciled persons and restricting the issuance or renewal of a CDL for non-domiciled persons without a lawful immigration status or legitimate employment-based reason to hold a CDL. While the interim rule has been challenged and enforcement has been temporarily stayed by a federal appeals court while it reviews the legality of the interim rule, it remains uncertain whether there will be further changes to the interim rule in response to such challenges or whether it will go into effect as originally issued. Government imposed measures related to future outbreaks of contagious diseases, like COVID-19, an improved economy, and aging of the driver workforce, could further reduce the pool of eligible drivers or force us to increase driver compensation to attract and retain drivers. We have seen evidence that CSA, the drug and alcohol clearing house, and stricter enforcement of HOS and English proficiency regulations adopted by the DOT in the past have tightened, and, to the extent new regulations are enacted, may continue to tighten, the market for eligible drivers. The lack of adequate tractor parking along some U.S. highways and congestion caused by inadequate highway funding may make it more difficult for drivers to comply with HOS regulations and cause added stress for drivers, further reducing the pool of eligible drivers. Further, the compensation we offer our drivers is subject to market conditions, and we may find it necessary to increase driver compensation in future periods.

Our acquisition of CFI presentsand integration and rebranding of the U.S. operations of CFI into Heartland Express present certain additional risks to our business and operations.

The acquisition of CFI is the largest acquisition we have made in our history. Given the nature and size of CFI, as well as the structure of the acquisition as a carveout from the seller, and due to general economic conditions, the acquisition of CFI presentsand integration and rebranding of the U.S. operations of CFI into Heartland Express present the following risks.

WeWith areour stillacquisition inof CFI and integration and rebranding of the processU.S. operations of integrating CFI into ourHeartland operations andExpress, we have been unable to achieve the operating results we typically see and on the timeframe we typically see with prior acquisitions. Although we anticipate achieving synergies in connection with the acquisition of CFI, as well as integration and rebranding of the U.S. operations of CFI into Heartland Express, we have incurred costs to implement such cost savings measures. Additionally, these synergies could be delayed and may not be achieved. Integration costsCosts related to improving the acquisitionperformance of CFI (including the U.S. operations integrated into Heartland Express) could continue to adversely affect our results of operations. In 2025, the decision to unify CFI with Heartland Express resulted in $19.0 million of impairment charges related to the CFI trade name. The acquisition of CFI involvesand integration and rebranding of the U.S. operations of CFI into Heartland Express involve numerous ongoing risks, including:

These disruptions and difficulties may cause us to fail to realize the cost savings, synergies, revenue enhancements, and other benefits that we expectexpected to resultachieve from integratingthe CFI integration and rebranding to Heartland Express and may cause material adverse short- and long-term effects on our operating results, financial condition, and liquidity. DuringSince 2024,our acquisition of CFI, we experienced difficulties in controlling costs and improving profitability at CFI. Further, integrating Smith Transport, which was acquired shortly before CFI, could cause further disruptions and difficulties on efforts to integrate CFI, or vice-versa.

Even if we are able to successfully integrate CFI’s operations into our operations, weWe may not realize the full benefits of the cost savings, synergies, revenue enhancements, or other benefits that we may have expected at the time of acquisitionacquisition, at the time of integration and rebranding, or on the timeframe expected. Also, the cost savings and other benefits from this acquisition may be offset by unexpected costs incurred in integrating CFI, increases in other expenses, or problems in the business unrelated to this acquisition.

Because our operations are dependent upon fuel, significant increases in fuel costs, as well as widespread or long-term fuel shortages, rationings, or supply disruptions of diesel fuel could materially and adversely affect our results of operations and financial condition, particularly if we are unable to pass increased costs on to customers through rate increases or fuel surcharges. Even if we are able to pass some increased costs on to customers, fuel surcharge programs generally do not protect us against all of the increases in fuel prices. Also, we generally do not recoup fuel surcharge on non-billable miles (deadhead) and fuel consumed idling revenue equipment. Moreover, in times of rising fuel prices, the lag between purchasing the fuel, and the billing for the surcharge (which typically is based on the prior week's average price), can negatively impact our earnings and cash flows and lead to fluctuations in our levels of reimbursement, which have occurred in the past. In addition, the terms of each customer's fuel surcharge agreement vary, and certain customers have sought to modify the terms of their fuel surcharge agreements to minimize recoverability for fuel price increases. During periods of low freight volumes, customers may use their negotiating leverage to impose fuel surcharge policies that provide a lower reimbursement of our fuel costs. There is no assurance that our fuel surcharge programs can be maintained indefinitely or will be sufficiently effective. Our results of operations would be negatively affected to the extent we cannot recover higher fuel costs or fail to improve our fuel price protection through our fuel surcharge programs.

Our business depends on the efficient and uninterrupted operation of our information and communications systems and other technology assets, including the data contained therein and our communication system with our fleet of revenue equipment. We currently use a centralized computer networks within each operating companynetwork and regular communication to achieve system-wide load coordination. We are actively working to further integrate our computer networks. Our operating systems are critical to understanding customer demands, accepting and planning loads, dispatching equipment and drivers, and billing and collecting for our services. Our financial reporting system is critical to producing accurate and timely financial statements and analyzing business information to help us manage effectively. Furthermore, data privacy laws, which provide data privacy rights for consumers and operational requirements for companies, may result in increased liability and amplified compliance and monitoring costs, any of which could have a material adverse effect on our financial performance and business operations.

Our operations and those of our technology and communications service providers are vulnerable to interruption by natural disasters, such as fires, storms, and floods, which may increase in frequency and severity due to climate change, as well as power loss, telecommunications failure, terrorist attacks, cyberattacks, internet failures, computer viruses, deliberate attacks of unauthorized access to systems, denial-of-service attacks on websites, and other events beyond our control. More sophisticated and frequent cyberattacks in recent years have also increased security risks associated with information technology systems.systems and the use of artificial intelligence (“AI”) by bad actors may make cyberattacks more difficult to anticipate or control in the future. We also maintain information security policies to protect our systems, networks, and other information technology assets (and the data contained therein) from cybersecurity breaches and threats, such as hackers, malware, and viruses; however, such policies cannot ensure the protection of our systems, networks, and other information technology assets (and the data contained therein). If any of our critical information systems fail or become otherwise unavailable, whether as a result of a system upgrade project or otherwise, we would have to perform the functions manually, which could temporarily impact our ability to dispatch and manage our fleet efficiently, to respond to customers’ requests effectively, to maintain billing and other records reliably, and to bill for services and prepare financial statements accurately or in a timely manner. We do not carry a corporate-wide cybersecurity insurance policy. Any significant system failure, upgrade complication, security breach (including cyberattacks), or other system disruption could interrupt or delay our operations, damage our reputation, cause us to lose customers, or impact our ability to manage our operations and report our financial performance, any of which could have a materially adverse effect on our business. Such risks related to system failure, upgrade complication, security breach (including cyberattacks), or other system disruption may also impact our customers, vendors, third party capacity providers, and other counterparties, which could result in declines and volatility in customer demand and unavailability of products and services from vendors and third-party capacity providers, any of which would have a material adverse effect on our business. For further discussion of our cybersecurity programs, please see “Item 1C. Cybersecurity.”

In addition, the adoption of artificial intelligence (“AI”) and other emerging technologies may become significant to operating results in the future. While AI and other technologies may offer substantial benefits, they may also introduce additional risk.risks, including those related to errors or inaccuracies in the work product developed through the use of AI, and privacy, intellectual property, legal, and regulatory risks. If we are unable to successfully implement and utilize such emerging technologies as effectively as competitors, our results of operation may be negatively affected. We do not currently use AI in any material capacity, and such lack of use may put us at a competitive disadvantage to any competitors who use AI in a material capacity.

Weather and other seasonal events could adversely affect our operating results. Our tractor productivity decreases during the winter season because inclement weather impedes operations, and some shippers reduce their shipments after the winter holiday season. Further, fuel costs may be impacted by increased tractor idling during severe winter weather. Revenue can also be affected by bad weather, holidays, and the number of business days that occur during a given period, since revenue is directly related to available working days of shippers. At the same time, operating expenses increase and fuel efficiency declines because of engine idling, while harsh weather creates higher accident frequency, increased claims, and more equipment repairs. In addition, many of our customers, particularly those in the retail industry where we have a large presence, demand additional capacity during the fourth quarter, which limits our ability to take advantage of more attractive market rates that generally exist during such periods. Further, despite our efforts to meet such demands, we may fail to do so, which may result in lost future business opportunities with such customers, which could have a materially adverse effect on our operations. Demand during the fourth quarter may be muted during soft freight environments, like we experienced in the last three years. We may also suffer from natural disasters and weather-related events, such as tornadoes, hurricanes, blizzards, ice storms, floods, and fires, which may increase in frequency and severity due to climate change, as well as other man-made disasters. These events may disrupt fuel supplies, increase fuel costs, disrupt freight shipments or routes, affect regional economies, destroy our assets, or adversely affect the business or financial condition of our customers, any of which could have a materially adverse effect on our results of operations or make our results of operations more volatile. We could incur significant costs to improve the climate resiliency of our equipment and properties and otherwise prepare for, respond to, and mitigate such physical effects of climate change. We are not able to accurately predict the materiality of any potential losses or costs associated with the physical effects of climate change. Concern over climate change, including the impact of global warming, has led to significant legislative and regulatory efforts to limit carbon and other greenhouse gas emissions. Emission-related regulatory actions have historically resulted in increased costs related to revenue equipment, diesel fuel, equipment maintenance, and environmental monitoring or reporting requirements, and future legislation, if any, could impose substantial costs that may adversely affect our results of operations. In addition, any such legislation may require changes in our operating practices, impair equipment productivity, or require additional reporting disclosures, and compliance with any such legislation may increase our risk of litigation or governmental investigations or proceedings. Weather, climate change, and other seasonal events could adversely affect our operating results.

We face a wide variety of risks related to public health crises, epidemics, pandemics, or similar events, such as COVID-19.events. If a new health epidemic or outbreak were to occur, we could experience broad and varied impacts similar to the impact of COVID-19,impacts, including adverse impacts to our workforce, our operations, equipment availability, and financial impacts, such as increased costs, tightening of credit markets, greater risk for collecting amounts owed, market volatility and a weakened freight environment. If any of these were to occur, our operations, financial condition, liquidity, results of operations, and cash flows could be adversely impacted.

We self-insure for a significant portion of our claims exposure,and have exposure outside of our insurance coverage, which could significantly increase the volatility of, and decrease the amount of, our earnings.

Our future insurance and claims expense might exceed historical levels, which could reduce our earnings. Our business results in a substantial number of claims and litigation related to workers’ compensation, auto liability, general liability, cargo and property damage claims, personal injuries, and employment issues as well as employees’ health insurance. We self-insure for a portion of our claims,claims and have exposure outside of our insurance coverage, which could increase the volatility of, and decrease the amount of, our earnings, and could have a materially adverse effect on our results of operations. See Note 87 of the consolidated financial statements for more information regarding our self-insured retention amounts. We are also responsible for our legal expenses relating to such claims. We reserveaccrue currently for anticipated losses and related expenses. We periodically evaluate and adjust our claims reservesaccruals to reflect trends in our own experience as well as industry trends. However, ultimate results may differ from our estimates due to a number of uncertainties, including evaluation of severity, legal costs, and claims that have been incurred but not reported, which could result in losses over our reservedaccrued amounts. Due to our high retained amounts,amounts and exposure outside of insurance coverage, we have significant exposure to fluctuations in the number and severity of claims. If we are required to reserveaccrue or pay additional amounts because our estimates are revised or the claims ultimately prove to be more severe than originally assessed or if our self-insured retention levels change, our financial condition and results of operations may be materially adversely affected.

We maintain insurance for most risks above the amounts for which we self-insure with licensed insurance carriers. We do not currently maintain directors’ and officers’ insurance coverage, although we are obligated to indemnify them against certain liabilities they may incur while serving in such capacities. If any claim is not covered by an insurance policy, exceeds our coverage, or falls outside the aggregatescope or coverage limit, we would bear the excess or uncovered amount, in addition to our other self-insured amounts. Certain insurance carriers that provide excess insurance coverage to us 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 given significantly increased judgements and settlements of over-the-road accident claims. This trend is expected to continue. As a result, our insurance and claims expense could likely increase if we have a similar experience at renewal, or we could find it necessary to raise our self-insured retention or decrease our aggregate coverage limits when our policies are renewed or replaced.

In April 2023, we renewed our primary auto liability insurance with a three year program. Under the April 2023 renewal, our auto liability retention limit across all operating entities was increased to $3.0 million for any individual claim, subject to a $3.5 million corridor for anythe onefirst accident or combinationseries of accidents that exceed $3.0 million, based on the insured party, accident date, and circumstances of the loss event. In April 2024,2025, the $5.0 million in excess of $10.0 million layer and the $5.0 million in excess of $15.0 million layer became part of a three year structured program, each with a $5.0 million per occurrence and a $10.0 million aggregate limit per policy year. For the duration of the three year structured program, the $5.0 million in excess of $10.0 million layer has a $15.0 million aggregate limit and the $5.0 million in excess of $15.0 million layer has a $10.0 million aggregate limit. Also, in April 2025, an additional corridor was added, where we retain liability of $5.0 million for anythe onefirst accident or combinationseries of accidents that exceed $10.0 million. Liabilities in excess of the $3.0 million deductible, the $3.5 million corridor, and the $5.0 million corridor are covered by insurance up to $80.0$20.0 million. We maintain limited excess liability coverage, subject to the foregoing limits and corridors, and retain any liability in excess of $80.0the million.coverage. Furthermore, under the April 2023 renewal, our premiums for certain layers are subject to upward or downward adjustments based on claims experience in the $3.0 million to $10.0 million policy during the three year program.experience. The elevated retention limit and the premium adjustment feature could lead to increased volatility in our insurance and claims expense, depending on the frequency and magnitude of claims, which is exacerbated given significantly increased judgements and settlements of over-the-road accident claims.

Developments in labor and employment law and any unionizing efforts by employees or employees of related businesses could have a materially adverse effect on our results of operations.

We have in the past, and currently,past exceeded the FMCSA's established intervention thresholds in certain of the seven CSA safety-related categories among our respective operating authorities. We currently exceed the threshold in one category under one of our operating authorities. Based on these unfavorable ratings, we may be prioritized for an intervention action or roadside inspection, either of which could adversely affect our results of operations. In addition, customers may be less likely to assign loads to us. We have put procedures in place in an attempt to address areas where we have exceeded the thresholds. However, we cannot assure you these measures will be effective.

Governmental agencies continue to enact more stringentrevise laws and regulations toregarding reducegreenhouse enginegases and emissions. These laws and regulations are applicable to engines used in our revenue equipment. WeWhen these laws and regulations have incurredbecome more stringent, we have incurred, and continue to incurincur, costsincreased relatedcompliance costs. More recently, the EPA proposed to repeal certain federal regulations regarding greenhouse gases and emissions, which could lead to more states enacting similar laws, resulting in a patchwork of emission regulations, which may increase our compliance costs. Legal challenges to the implementationrepeal or enactment of these more rigoroussuch laws and regulations.regulations at both the federal and state level could lead to uncertainty regarding our compliance which may negatively affect our results of operations. Additionally, in certain locations governments have banned or may in the future ban internal combustion engines for some types of vehicles. To the extent these bans affect our revenue equipment, we may be forced to incur substantial expense to retrofit existing engines or make capital expenditures to update our fleet. As a result, our business, results of operations, and financial condition could be negatively affected.

As the environmental laws and regulations to which we are subject become more stringent, we may experience increased costs related to compliance, and if such laws and regulations take effect faster than we anticipate or are prepared for, we may experience difficulty complying. In addition, certain environmental laws and regulations may require us to disclose certain metrics or other data related to our operations that have historically been confidential. Failure to comply with these laws and regulations may result in fines or penalties, a decrease in productivity, and other constraints that could impair our financial and operational position and have a negative impact on our stock price and reputation. "Environmental Regulation" in Part I, Item 1 of this Annual Report, provides a discussion of the environmental laws and regulations applicable to our business and operations.

Changes to trade regulation, quotas, duties, export restrictions, or tariffs, caused by the changing U.S. and geopolitical environments or otherwise, may increase our costs and materially adversely affect our business.

Since April 2025, new substantial tariffs have been imposed on imports to the U.S. The imposition of additional tariffstariffs, import or quotasexport controls, or changes to certain trade agreements, including tariffs applied to goods traded between the United States and China, and proposed changes to tariffs on various imports from other countries (such as Canada, Mexico, and the E.U.)agreements could, among other things, increase the costs of the materials and decrease the availability of certain materials used by our suppliers to produce new revenue equipment or increase the price of fuel. Such cost increases for our revenue equipment suppliers would likely be passed on to us, and to the extent fuel prices increase, we may not be able to fully recover such increases through rate increases or our fuel surcharge program, either of which could have a material adverse effect on our business.

The outcome of litigation, particularly class action lawsuits and regulatory actions, is difficult to assess or quantify, and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time. The cost to defend litigation may also be significant. Not all claims are covered by our insurance, and there can be no assurance that our coverage limits will be adequate to cover all amounts in dispute. Additionally, our premiums for certain insurance layers are subject to upward adjustments based on claims experience. To the extent we experience claims that are uninsured, exceed our coverage limits, involve significant aggregate use of our self-insured retention amounts, or cause increases in our future insurance premiums, theit could lead to increased volatility in our insurance and claims expense and any resulting increases in such expenses could have a significant materially adverse effect on our business, results of operations, financial condition, or cash flows.

Conflicting views on environmental, socialenvironmental and governance (“ESG”)societal matters may have a negative impact on our business, impose additional costs on us, and expose us to additional risks.

Certain stakeholders have pressured companies on initiatives relating to ESGenvironmental and societal matters, including environmental stewardship, social responsibility, and corporate governance. Organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to ESGsuch matters. Such ratings are used by some investors to inform their investment and voting decisions. Unfavorable ESGenvironmental and societal ratings may lead to negative investor sentiment toward the Company, which could have a negative impact on our stock price. Additionally,Further, givenstandards thefor Trump administration’s initiatives surrounding ESGtracking and diversity,reporting equity,environmental and inclusionsocietal matters,matters whichcontinue to evolve, and our reporting may conflictnot withmatch stakeholder initiatives on such matters, we may experience conflicts between governmental regulations and stakeholder expectations which could impose additional costs on our business and negatively impact investor sentiment.expectations.

We are subject to risk with respect to higher prices for new tractors and trailers. We have at times experienced an increase in prices for new tractors and trailers, and the resale values of the tractors and trailers have not always increased to the same extent. Prices have increased in the past and may continue to increase, due to, among other reasons, (i) increases in commodity prices, (ii) government regulations applicable to newly manufactured tractors, trailers, and diesel engines, (iii) the pricing discretion of equipment manufacturers, (iv) increased demand for equipment due to a more favorable freight market, and (v) proposed changes in tariffs.tariffs and other trade policies. In addition, we have equipped our tractors with safety, aerodynamic, and other options that increase the price of new equipment. Compliance with governmental regulations has increased the cost of our new tractors, may increase the cost of new trailers, could impair equipment productivity, in some cases, result in lower fuel mileage, and increase our operating expenses. Our business could be harmed if we are unable to continue to obtain an adequate supply of new tractors and trailers for these or other reasons, and the future use of autonomous tractors and alternative fuel could increase the price of new tractors and decrease the value of used, non-autonomous tractors. As a result, we expect to continue to pay steady to increased prices for equipment and incur additional expenses for the foreseeable future. In addition, reduced equipment efficiency may result from new engines designed to reduce emissions, thereby increasing our operating expenses.

Tractor and trailer vendors may reduce their manufacturing output in response to lower demand for their products in economic downturns or shortages of raw materials, other key components or labor. A decrease in vendor output may have a materially adverse effect on our ability to purchase or take possession of a quantity of new revenue equipment that is sufficient to sustain our desired growth rate and to maintain a late-model fleet. DuringIn therecent COVID-19 pandemic,years some tractor and trailer manufacturers experienced periodic shortages of certain component parts and supplies, including semiconductor chips, forcing such manufacturers to curtail or suspend their production. This led to a lower supply of tractors and trailers and higher prices. An inability to obtain an adequate supply of new tractors or trailers could have a materially adverse effect on our business, financial condition, and results of operation, particularly our maintenance expense, driver retention, and the length of our trade cycle.

As of December 31, 2024,2025, we had goodwill of $322.6 million and other intangible assets of $93.5$69.5 million. We evaluate our goodwill and other intangible assets for impairment. In 2025, the decision to unify CFI with Heartland Express resulted in $19.0 million of impairment charges related to the CFI trade name. We could recognize additional impairments in the future, and we may never realize the full value of our intangible assets. If these events occur, our profitability and financial condition will suffer.

Moreover, Mr. Michael J. Gerdin serves as our Chief Executive Officer, President, and Chairman of our Board of Directors (the “Board”). Although the Board has determined that, given the size of the Company, the combination of the Chief Executive Officer, President and Chairman of the Board positions is the most appropriate and suitable structure for proper and efficient Board functioning and communication, Mr. Gerdin may have an outsized ability to influence the operations of the Company, which may result in conflicts with the interests of Mr. Gerdin, the Gerdin Family, and the interests of our other stockholders. Additionally, if Mr. Gerdin were to become unavailable for any reason, there could be a material adverse impact on our operations.

Our effective tax rate may be adversely impacted by, among other things, changes in the regulations relating to capital expenditure deductions, or changes in tax laws where we operate, including the uncertainty of future tax rates. The OBBBA was signed into law in 2025. The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation and the business interest expense limitation. Although we do not expect the OBBBA to have a negative effect on our financial position, results of operations, and cash flows, until certain regulations are promulgated, we may not know the full extent of the OBBBA’s effects on our financial results and financial position. Additionally, President Trump has indicated a desire to potentially amend the federal tax laws.laws further. Until any changes are passed into law we will not know if such changes, if any, will have a materially adverse effect on our financial results and financial position. At December 31, 2024,2025, the Company had a total deferred income tax liability of $158.4$133.6 million. The amount of deferred tax liability is determined by using the enacted tax rates in effect for the year in which differences between the financial statement and tax basis of assets and liabilities are expected to reverse. Accordingly, our net current tax liability has been determined based on the currently enacted federal tax laws. Any changes to the federal tax laws are likely to have an immediate revaluation of our deferred tax assets and liabilities in the year of enactment.

Prior to 2022 we, together with our subsidiaries, historically were a short-to-medium haul truckload carrier where approximately 99.9% of our operating revenue was derived from shipments within the United States with the remainder being Canada and no operations in Mexico. With the acquisition of CFI on August 31, 2022, we significantly expanded our scale and our transportation services. We continue toprimarily provide nationwide asset-based dry van truckload service for major shippers from across the U.S.United States, along with cross-border freight and nowother includingtransportation crossservices borderoffered freightthrough tothird andparty frompartnerships Mexicoin andMexico. ourOur consolidated average length of haul is under 400 miles. We continue to focus on providing high quality service to targeted customers with a high density of freight in our regional operating areas. We also offer truckload temperature-controlled transportation services and Mexico logistics services in Mexico,services, which are not significant to our consolidated operations. Through the acquisition of CFI, we now provide transportation logistics services across Mexico for our customers and provide cross-border freight services for customer loads moving from the United States into Mexico and loads originating from Mexico into the United States. We utilize third party service providers for all miles run in Mexico and to move freight across the US-Mexico border while leveraging terminal locations in the US and Mexico near the border to facilitate these moves. We 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.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 CODM,Chief Operating Decision Maker (“CODM”), our CEO,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.

The challenging freight environment duringover 2024the andpast 2023,three years, combined with acquisitions of Smith Transport and CFI in 2022, have pressured our financial results to a level below our historical results and management expectations, and also resulted in the incurrence of debt. However, the acquisitions have also allowed us to deliver $1.0$0.8 billion and $1.2$1.0 billion of operating revenues during 20242025 and 2023, a significant increase from $607.0 million in 2021.2024.

Our financial goals continue to be (i) generate an operating ratio in the low to mid 80s, (ii) grow revenue profitably, organically and through acquisitions, and (iii) carry a debt-free balance sheet. Throughout our history, these principles have allowed us to generate significant cash flows and be opportunistic with acquiring and disposing of equipment and facilities, making acquisitions, and returning capital to stockholders. In 2022, we incurred substantial debt to acquire CFI and Smith Transport and have been integrating and improving those businesses in the teeth of a deep and lengthy freight market downturn.

In addition to margin progress, we are making strides toward our goal to be debt free. Even in this challenging and prolonged negative operating environment, we continued to generate positive operating cash flows. Since making the acquisitions of CFI and Smith Transport in 2022, we have repaid almost $300$337.0 million of debt and capitalizedcapital leases while maintaining a relatively young fleet. From a capital allocation standpoint, we believe we are nearing the place where all alternatives will be equally available once again.

In 2024,2025, we generated operating revenues of $805.7 million, including fuel surcharges, net loss of $52.5 million, and basic loss per share of $0.67 on basic weighted average outstanding shares of 77.9 million. This compared to operating revenues of $1.0 billion, including fuel surcharges, net loss of $29.7 million, and basic net loss per share of $0.38 on basic weighted average outstanding shares of 78.7 million. This compared to operating revenues of $1.2 billion, including fuel surcharges, net income of $14.8 million, and basic net income per share of $0.19 on basic weighted average outstanding shares of 79.0 million in 2023.2024. We posted an 101.9%107.1% operating ratio (which represents operating expenses as a percentage of operating revenues) for the year ended December 31, 2024,2025, compared to 96.5%101.9% for the same period of 2023,2024, and a 2.8%6.5% net loss as a percentage of operating revenues for 2024,2025, compared to 1.2%2.8% net incomeloss as a percentage of operating revenues in the same period of 2023.2024. We posted an 101.7%104.7% non-GAAP adjusted operating ratio(1) for the year ended December 31, 20242025 compared to 95.4%101.7% for the same period of 2023.2024. See the “GAAP to Non-GAAP Reconciliation Schedule” below for a reconciliation of our non-GAAP adjusted operating ratio. We had total assets of $1.3$1.2 billion and total stockholders' equity of $822.6$755.3 million at December 31, 2024.2025. We had a loss on assets of 4.1% and a loss on equity of 6.7% over the year ended December 31, 2025, compared to a loss on assets of 2.1% and a loss on equity of 3.6% over the year ended December 31, 2024, compared to a return on assets of 0.9% and a return on equity of 1.7% respectively, for 2023.2024.

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

Our cash flow provided by operating activities for the twelve months ended December 31, 20242025 was $89.3 million or 11.1% of operating revenues, compared to $144.3 million or 13.8% of operating revenues, compared to $165.3 million or 13.7% of operating revenues in 2023.2024. During 2024,2025, we used $46.5$26.0 million in net investing cash flows, which was the result of net cash used for the purchase of property and equipment. We used $109.5$156.2 million to purchase property and equipment and received $63.0$129.9 million from the sales of property and equipment. We had net cash of $112.7$58.2 million used by financing activities during 2024,2025, including $100.3$41.2 million of repayments of finance leases and debt, $7.3$10.4 million used to repurchase common stock, and $4.7$6.2 million used to pay dividends to our shareholders. As a result, our cash, cash equivalents, and restricted cash decreasedincreased by $14.9$5.2 million during the year ended December 31, 20242025 to $26.3$31.4 million. Unrestricted cash and cash equivalents decreasedincreased $15.3$5.7 million to $12.8$18.5 million.

We operate in a cyclical industry. In early 2022, freightFreight demand was initially strong, but demand began to soften in the back half of 2022 and continued to degradedegraded throughout all of 2023 and wascontinued to be weak during 2024.2024 Weand expect2025. freightWhile demandwe believe we are seeing positive signs across the transportation industry to remainreduce challengedexcess capacity, which could lead to a positive shift in atcustomer leastrate and volume negotiations during 2026, the first half of 2025 based upon the freight demand experienced in January and February of 2025, however theweak freight environment ishas modestlyextended betterlonger than whatwe waspreviously experiencedexpected throughoutand muchit ofremains 2024.uncertain when we will see meaningful improvement. We expectbelieve thethat strategiccost improvements and operationaltransportation system changes that we have implemented during 20242025 will improveprovide a better cost structure and operating visibility to deliver a path toward operating profitability for our operationalconsolidated readinessoperations aheadover ofthe futurenext expectedtwelve freight demand growth.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 during 2025.demand.

The trucking industry has been faced with a qualified driver shortage. However, driver availability began to change late in 2022 and into 2023, as a result of the declining freight and economic environments and we believe certain drivers have moved from smaller less financially stable carriers to more financially stable carriers and from independent contractors to company drivers. Although there has been some increased movement of drivers between companies in our industry, the issue of a decreasing amount of overall qualified CDL drivers in our industry continues. We continually explore new strategies to attract and retain qualified drivers with changes in market conditions and demands. In addition, we continue to evaluate and explore different driving options and offerings for our existing and potential new drivers across our unique mix of driver offerings at Heartland Express, Millis Transfer, Smith Transport, and CFI. 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 under "Drivers, Independent Contractors, and Other Employees " in Part I, Item 1 of this Annual Report, the Company's driver training programprograms providesprovide an additional source of future potential professional drivers. In order to attract and retain experienced drivers who understand the importance of customer service, we have sought to solidify our position as an industry leader in driver compensation in our operating markets and for the services we provide. We have continued to get more creative in providing better pay, benefits, equipment, and facilities for our drivers. Our comprehensive driver compensation and benefits program rewards drivers for years of service and safe operating mileage benchmarks, which are critical to our operational and financial performance. Certain driver pay packages include minimum pay protection provisions, future pay increases based on years of continued service with us, increased rates for accident-free miles of operation, detention pay, and other pay programs to assist drivers with unproductive time associated with circumstances outside of their control, such as inclement weather, equipment breakdowns, and customer issues. AsDriver apay, resulthome of the freight environment during 2023time, and 2024,other weamenities paid more through these programs, resulting in an increase of driver pay per mile and as a percentage of revenue. This hashave 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%16% of our driver employees, individually, have achieved 1.0 million safe miles.

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. We are highly selective about acquisitions, with our main criteria being (i) safe operations, (ii) high quality professional truck drivers, (iii) fleet profile that is compatible with our philosophy or can be replaced economically, and (iv) freight profile that will allow a path to a low to mid 80s operating ratio upon full integration, application of our cost structure, and freight optimization, including exiting certain business that fails to meet our operating profile. We have historically been a debt free organization although with the acquisition of CFI we now have a significant amount ofincurred debt, althoughbut wehave significantly lowered our debt balance duringsince 2024.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.

Our CODM makes all revenue equipment purchasing and selling decisions on a combined basis based primarily on age, condition, and current market conditions for the equipment regardless of which legacy fleet the equipment was associated with. Our tractor strategy is important to our goals and differs from the practices of many of our peers. We strive to operate a relatively new fleet to keep operating costs low, improve driver comfort, and enhance dependability. We seek the flexibility to buy and sell tractors (and trailers) opportunistically to capitalize on new and used equipment markets, size our fleet to the volume of attractive freight, and manage cash tax expense. One method we use to accomplish these goals is to depreciate our new tractors (excludes assets acquired through an acquisition) for financial reporting purposes using the declining balance method, in which depreciation is higher in early periods and tapers off in later periods. We believe this method more accurately reflects actual asset values and affordsmakes usit theless flexibilitylikely tothat sellwe tractorswill experience losses on sales at most points during their life cycle without experiencing losses.cycle. In addition, the decline in depreciation during later periods is typically offset by increased repairs and maintenance expense as the tractors age, which keeps our total operating costs more uniform over the operating life of the equipment. Trailers are depreciated using the straight-line method.

Revenue equipment acquired through acquisitions is generally revalued to current market values as of the acquisition date. Assets obtained more than a year prior to the acquisition by the acquired company are depreciated on a straight-line basis aligned with the remaining period of expected use, whereas those obtained less than a year prior are depreciated consistent with newly purchased assets. As acquired equipment is replaced, our fleet returns to our base methods of declining balance depreciation for tractors and straight-line depreciation for trailers. We believe our revenue equipment strategy is sound over the long term. However, it can contribute to volatility in gain on sale of equipment and quarterly earnings per share. At December 31, 2024,2025, our tractor fleet had an average age of 2.52.6 years and our trailer fleet had an average age of 7.47.3 years. During 2025,2026, we expect the average age of both our tractor and trailer fleetsfleet to increase while we expect our trailer fleet average age to decrease from the average age at December 31, 2024,2025, based on estimated net capital expenditures in 2025.2026.

After Salaries, wages, and benefits and Deprecation and amortization, Fuel expense was our next highest operating cost in 2024.2025. Containment of fuel cost continues to be one of management's top priorities. Average DOE diesel fuel prices per gallon for 20242025 and 20232024 were $3.76$3.66 and $4.21,$3.76, respectively. The average price per gallon in 2025,2026, through February 10,23, 2025,2026, was $3.64. During March 2022 the DOE average fuel prices increased to over $5.00 per gallon. The DOE average fuel cost remained above this elevated threshold for the period from March through most of 2022, although the DOE weekly average for the last four weeks of December 2022 fell below $5.00 per gallon. The trend of fuel prices below the $5.00 per gallon threshold has continued through 2023, 2024 and to date in 2025.$3.62. Through February 10,23, 2025,2026, the last time the weekly DOE average was above the $4.00 threshold was the data published April 15, 2024. TheDuring this same period the weekly DOE average DOE price for 2024 was $3.76never comparedbelow tothe $4.21$3.00 inthreshold, 2023marking anda $4.99period inof 2022.relatively stable diesel fuel prices. 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 initiatives 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.

Operating revenue decreased $160.0$241.8 million (13.2%23.1%), to $805.7 million for the year ended December 31, 2025 from $1.0 billion for the year ended December 31, 2024 from $1.2 billion for the year ended December 31, 2023.2024. The decrease in revenue was driven by a decrease in trucking and other revenues of $120.0$204.6 million and a decrease in fuel surcharge revenue of $40.0$37.2 million. The decrease in trucking and other revenues was the result of a weak freight environment leading to a decline in total miles and lower freight rates. The decreased fuel surcharge revenue was the result of decreased miles driven, along with a decrease in average DOE diesel fuel prices of 10.8%2.6% during 20242025 compared to 2023, as reported by the DOE.2024. 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 tractors. The number of tractors is directly affected by the number of available drivers providing capacity to us. The freight rates, earned on miles driven, were generally soft due to weak market conditions and demand for freight services during 2023, particularly during the second half of 20232024 and throughout 2024.2025. While itwe is early in the quarter and extreme winter weather conditions so far in 2025 make comparison difficult,believe we are seeing positive signs across the transportation industry to reduce excess capacity, which could lead to a positive shift in customer rate and volume negotiations thatduring 2026, the weak freight environment has extended longer than we expectpreviously toexpected strengthenand asit theremains yearuncertain unfolds.when we will see meaningful improvement.

Our operating revenues are reviewed regularly by our CODM on a combined basis across our operations, due to the similar nature of our servicesservice 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.

Rent and purchased transportation decreased $32.6$28.4 million, to $80.1$51.7 million for the year ended December 31, 20242025 from $112.7$80.1 million for the same period of 2023.2024. The significant decrease resulted from reduced purchased transportation and lower contractor miles associated with the CFI business integration, along with a reduction of leased equipment.equipment Thisand decreaseterminal wasfacilities. partiallyWe offsetbelieve bythese strategic cost reductions position the Company for profitable operations in an increaseimproved infreight propertyenvironment. leasesCurrently duecontractor tomiles terminalsaccount soldfor inless latethan 20232% thatof areour nowtotal undermiles, shortwhile termat leases.the beginning of 2024 contractor miles accounted for approximately 5% of total miles.

Salaries, wages, and benefits decreased $47.1$98.5 million (9.9%23.0%), to $427.7$329.2 million for the year ended December 31, 20242025 from $474.8$427.7 million in the 20232024 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. OffsettingWith thisthe decreaseconsistently wasweak anfreight increaseenvironment experienced in driver pay for non-productive time associated with weather shut downs, layovers,2024 and other factors associated with a slower freight environment. As a result,2025, salaries, wages, and benefits as a percentage of operating revenues was highersimilar. inWe 2024 comparedcontinue to 2023. We have continued to get moreevaluate creative ways in providing better pay, driving opportunities, benefits, equipment, and facilities for our drivers. We expect the qualified driver shortage within the trucking industry to continue to be a challenge in the foreseeable future. However, driver availability improved in 2023 and 2024, as a result of the changing freight and economic environments and we believe certain drivers have moved from smaller less financially stable carriers to more financially stable carriers.

Fuel decreased $35.0$42.0 million (16.5%23.7%), to $177.2$135.2 million for the year ended December 31, 20242025 from $212.2$177.2 million for the same period of 2023.2024. The decreased fuel was mainly the result of a reduction in miles driven and less significantly a decrease in fuelaverage was primarily due lower averageDOE diesel pricefuel perprices gallonof (10.8%)2.6% asduring reported2025 bycompared theto DOE along with less miles driven.2024. The average DOE diesel fuel prices per gallon for 20242025 and 20232024 were $3.76$3.66 and $4.21,$3.76, respectively.respectively Throughwhich Februaryrepresents 10,relative 2025,stability theof lastdiesel timefuel the weekly DOE average was above the $4.00 threshold was the data published April 15, 2024.prices. We cannot currently predict whether the trend of reducedrelatively stable diesel fuel prices will continue.continue especially given recent conflicts in the Middle East.

Operating and maintenance expense increaseddecreased $7.4$7.9 million (11.7%11.1%), to $70.8$62.9 million during the year ended December 31, 2024,2025, from $63.4$70.8 million in the same period of 2023.2024. OperatingThe decrease in operating and maintenance costs increasewas isthe mainlyresult attributableof a weak freight environment leading to highera tractordecline maintenancein costsactive dueunits toof revenue equipment and a decline in total miles as the average age of our tractorrevenue fleet, whichequipment was up to 2.7 years at September 30, 2024.comparable. At December 31, 2024,2025, the Company’s tractor fleet had an average age of 2.52.6 years compared to 2.22.5 years at December 31, 2023.2024. The average age of our trailer fleet was 7.3 years at December 31, 2025 compared to 7.4 years at December 31, 2024 compared to 6.4 years at December 31, 2023, however the trailer fleet average age is less impactful to maintenance costs than the tractor fleet average age.2024. The operating and maintenance expense during 20252026 will be impacted by the total miles driven, along with the volume of fleet modernization as newer equipment operating under warranty results in less realized maintenance costs.

Insurance and claims expense increased $5.6$7.0 million (12.3%13.8%), to $50.9$57.9 million during the year ended December 31, 20242025 from $45.3$50.9 million in 2023.2024. The increase is due to unfavorable claim severity and frequency along with 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 ourrecent April 2023 renewalyears we have increased retained claim exposure in response to the premium increase trend,trend but also were able to increase our aggregate excess coverage. In our 2024 renewal weand added an additional corridor featurefeatures which hashave 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 one of 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.

Gains on the disposal of property and equipment decreasedincreased $33.6$15.9 million (81.7%),million, to $7.5$23.4 million during the year ended December 31, 2024,2025, from $41.1$7.5 million in the same period of 2023.2024. The decreaseincrease was primarily due to a $23.9$12.5 million decrease from the sale of terminal facilities, $4.2 million decreaseincrease in gains on sales of trailer equipment and a $5.5$3.9 million decreaseincrease in gains on sales of tractor equipment. The decreaseincrease in gains on trailer sales was primarily due to a 18.9%87.2% decreaseincrease in the gains per unit sold in 20242025 as compared to 2023.2024. Gains on tractor equipment sales decreasedincreased as a result of a 53.9%24.2% decreaseincrease in gains per tractor sold. Based on currently agreed upon equipment deals we expect equipment transaction gains to be between $5.0$20.0 million to $10.0$30.0 million during 2025.2026.

Our effective tax rate was 19.0%23.0% and 25.6%19.0% for the years ended December 31, 20242025 and 2023,2024, respectively. The decreasechange in the effective tax rate is primarilyprimarly the result of permanentincreased differencestaxable and itemsloss not correlated to income reducing the ratechange forin 2024uncertain calculatedtax onpositions aand lossother before tax.adjustments.

Most of our operating expenses are inflation-sensitive, with inflation generally producing increased costs of operations. In recent years there has been an inflation uptick. Significant price increases in original equipment manufacturer revenue equipment has impacted the cost for us to acquire new equipment. While there was a corresponding inflationary impact to prices offered on the sale of our used equipment during prior years, the market for used equipment softened significantly duringcorresponding 2023to and wasthe weak throughoutfreight 2024.environment. Inflation has also impacted the cost of parts for equipment repairs and maintenance, inclusive of tires. The cost of parts and equipment have the potential for further increases due to proposed tariffs. The continued qualified driver shortage experienced by the trucking industry has had the effect of increasing compensation paid to drivers. Our pay protection programs 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 2024 we paid more through these programs, resulting in an increase of driver pay per mile. Significant inflation has been experienced in insurance and claims cost related to health insurance and claims as well as auto liability insurance and claims. Further, innovations in equipment technology, EPA mandated new engine emission requirements and driver comfort have also resulted in higher tractor prices. We have the ability to limit new equipment purchases given our average age of revenue equipment, particularly our tractor fleet, is in the top tier of our industry. We historically have limited the effects of inflation through increases in freight rates and certain cost control efforts. Over the long term, general economic growth and industry supply and demand conditions have allowed rate increases, although the rate increases received have significantly lagged the increases in tractor prices and related depreciation expense.

In addition to inflation, significant fluctuations in fuel prices can adversely affect our operating results and profitability. We have attempted to limit the effects of increases in fuel prices through certain cost control efforts and our fuel surcharge program. We impose fuel surcharges on substantially all accounts. Although we historically have been able to pass through most long-term increases in fuel prices and operating taxes to customers in the form of surcharges for fuel and higher rates for operating taxes, these arrangements generally do not fully protect us from short-term fuel price increases or continued rising price environments. These arrangements also may prevent us from receiving the full benefit of any fuel price decreases. Additionally, we are not able to recover fuel surcharge on empty miles, out of route miles, or fuel used in idling. Empty miles, out of route miles and idling werehave allbeen elevated in 2024 as a result of lower freight demand throughout the year.demand.

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 $16.9$7.9 million was outstanding at December 31, 2024,2025 (the "Smith Debt"). The Smith Debt has $5.9$4.1 million of outstanding principal and is made up of installment notes with a weighted average interest rate of 4.4% at December 31, 2024,2025, 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 $11.0$3.8 million are finance lease obligations with a weighted average interest rate of 4.0%4.3% at December 31, 2024,2025, due in monthly installments with final maturities at various dates ranging from AugustJanuary 20252026 to April 2026 with the weighted average remaining lease term of 1.00.2 year.years.

Operating cash flow for 20242025 was $144.3$89.3 million compared to $165.3$144.3 million for 2023.2024. This $21.0$55.0 million decrease was primarily due to a $41.2$36.7 million decrease in net income net of non-working capital adjustment items,items offsetalong bywith $20.2$18.3 million moreless cash provided by working capital items. Cash flow from operating activities was 13.8%11.1% of operating revenues for the year ended December 31, 2024,2025, compared to 13.7%13.8% for the same period of 2023.2024.

Cash flows used in investing activities were $46.5$26.0 million during 2024,2025, representing a decrease in cash used of $21.4$20.5 million compared to cash flows used in investing activities of $67.9$46.5 million during 2023.2024. The decrease in cash used in investing activities was mainly the result of $24.7 million less net cash used for property and equipment in 2024.2025. We currently do not anticipate net capital expenditures for revenue equipment and terminal properties in 20252026 to be betweensignificantly $55.0different millionthan to $65.0 million.2025.

Cash flows used in financing activities decreased $8.0$54.5 million in 20242025 compared to 2023.2024. The $112.7$58.2 million used in financing activities during 20242025 included $100.3$41.2 million of repayments of finance leases and debt, $7.3$10.4 million repurchases of common stock, and $4.7$6.2 million used to pay dividends to our shareholders. In 2023,2024, $120.7$112.7 million was used in financing activities included $114.1$100.3 million used for repayments of finance leases and debtdebt, along$7.3 withmillion $6.3to repurchase common stock, and $4.7 million to pay dividends.

We have a stock repurchase program with 6.04.8 million shares remaining authorized for repurchase as of December 31, 20242025 and the program has no expiration date. There were 0.61.2 million shares repurchased in the open market during the year ended December 31, 20242025 while there were no0.6 million shares repurchased during 2023.2024. 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.

We had net payments of $15.69.3 million and $30.115.6 million for income taxes, net of refunds, for the years ended December 31, 20242025 and 2023.2024. The reduction in taxes paid during the year ended December 31, 20242025 is primarily due to prior100% yearbonus overpaymentdepreciation creditbeing forwardsmade andpermanent reducedin 2025 reducing the current year taxabletax income.liability.

Over 96% ofOf our total milesmiles, comes98% come from company drivers operating the Company's revenue equipment. Management estimates the useful lives of revenue equipment based on estimated period of use for the asset. It has been our historical practice to buy new tractor and trailer equipment directly from manufacturers. Tractors and trailers are depreciated using the declining balance method for new tractors (excludes assets acquired in an acquisition) and straight-line method, respectively, over the estimated useful life down to an estimated salvage value. Management believes this is the best matching of depreciation expense with the decline in estimated tractor and trailer values based on the use of the tractor and trailers. Revenue equipment acquired through acquisitions is generally revalued to current market values as of the acquisition date. Assets obtained more than a year prior to the acquisition by the acquired company are depreciated on a straight-line basis aligned with the remaining period of expected use, whereas those obtained less than a year prior are depreciated consistent with newly purchased assets. As acquired equipment is replaced, our fleet returns to our base methods of declining balance depreciation for tractors and straight-line depreciation for trailers. Depreciable lives of tractors and trailers are 5 and 7 years, respectively, when purchased new. Management estimates the useful lives on tractors based on average miles per truck per year as well as manufacturer warranty periods. We have not historically run tractors outside of manufacturer warranty periods. Management estimates the useful lives of trailers based on manufacturer warranty periods as well as our internal maintenance programs. Estimates of salvage value are based upon the expected market values of equipment at the end of the expected useful life. A key component to expected market values of equipment is our historical maintenance programs which in management's opinion are critical to the resale value of equipment. Management selects depreciation methods that it believes most accurately reflects the timing of benefit received from the applicable assets. It is reasonably likely that changing revenue equipment markets could result in a change in depreciable life or salvage value estimate. Management believes that a change in estimate will not significantly affect the long-term financial condition of the Company or its ability to fund its continuing operations. A change in estimate would impact depreciation and amortization in the consolidated statements of comprehensive income and revenue equipment in the consolidated balance sheets. We have not had any material changes to our estimate methodology in the past three years.

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 could cause or contribute to such differences include, but are not limited to, those discussed in the sections entitled "Item 1A. Risk Factors," set forth in this Form 10-Q and the Company's 2025 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 3, 2026 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, filed with the Securities and Exchange Commission on May 11, 2026. Readers should review and consider such factors, along with various disclosures in our press releases, stockholder reports, and other filings with the Securities and Exchange Commission.

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 marketTrucking capacity reductionshas been reduced in the industry and freight demandrates improvementsare incurrently 2026.improving, We believe thatbut meaningful improvements in freight demand and freight pricing have started, butimprovement 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, governmental regulations and enforcement, potential tariffs, foreign wars, and disruption in oil and diesel markets all could create additional volatility regarding future freight demand.demand, capacity, rates, and fuel prices.

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 withwe the acquisition of CFI wehave incurred debt butwith havecertain acquisitions. Debt incurred in the CFI acquisition has been 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 believeOur 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.

The issue of a decreasing amountnumber 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 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 couldhas helpand will continue to improve current 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.

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 MarchJune 31,30, 2026 and 2025 were $4.12$5.35 and $3.63$3.56 (a 13.5%50.4% increase), respectively. Average DOE price in AprilJuly was $5.50$4.96 andbut has been above $5.00 each of the last seventwo weeks through the end of April.July. Average DOE prices were $3.56,$3.76, $3.76,$3.70, and $3.70$4.75 for the three months ended June 30, 2025, September 30, 2025, and 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 theour thirdsecond highest expense behind salaries, wages, and benefits as well as deprecation and amortization.benefits.

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 MarchJune 31,30, 2026, the Company’s tractor fleet had an average age of 2.62.3 years and the Company's trailer fleet had an average age of 7.37.1 years compared to MarchJune 31,30, 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 7.47.5 years.

We ended the first threesix months of 2026 with operating revenues of $176.3$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 $4.8$24.7 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$0.32 on basic weighted average shares of 78.578.3 million in the first threesix months of 2025. We posted a 101.9%96.3% operating ratio (operating expenses as a percentage of operating revenues) for the threesix months ended MarchJune 31,30, 2026 compared to 106.8%106.4% for the same period of 2025. We posted a 101.3%94.9% non-GAAP adjusted operating ratio(1) for the threesix months ended MarchJune 31,30, 2026 compared to 107.1%106.5% for the same period of 2025. We had total assets of $1.2 billion at MarchJune 31,30, 2026. We had a loss on assets of 3.5%1.8% and a loss on equity of 5.7%2.9% over the immediate past four quarters ended MarchJune 31,30, 2026, compared to a loss on assets of 2.1%2.7% and a loss on equity of 3.5%4.4% for the immediate past four quarters ended MarchJune 31,30, 2025.

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 threesix months ended MarchJune 31,30, 2026 of $23.2$36.0 million was 13.1%10.0% of operating revenues, compared to $25.8$46.8 million and 11.8%10.9% of operating revenues in the same period of 2025. During 2026, we had net cash provided by investing activities of $14.9$38.9 million resulting primarily from net property and equipment transactions. We had net cash used in financing activities of $11.5$30.6 million resulting primarily from $9.9$24.9 million debt repayments associated with debt taken on with our 2022 acquisitions along with $1.6$3.1 million for dividend payments.payments and $2.3 million for repurchases of common stock. Our cash, cash equivalents and restricted cash increased $26.6$44.3 million during the threesix months ended MarchJune 31,30, 2026. We ended the firstsecond quarter of 2026 with cash, cash equivalents and restricted cash of $58.0$75.8 million. Cash and cash equivalents, excluding restricted cash was $44.5$62.4 million at MarchJune 31,30, 2026.

(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 loss,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 loss,income (loss), and adjusted operating ratio are not substitutes for operating revenue, operating loss,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 loss,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 loss,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.

Three Months Ended MarchJune 31,30, 2026 Compared With the Three Months Ended MarchJune 31,30, 2025

Our quarterly operating ratio was 101.9%91.0% and 101.3%88.3% non-GAAP adjusted operating ratio as compared to the prior year 106.8%105.9% and 107.1%.106.0%. See the “GAAP to Non-GAAP Reconciliation Schedule” above for a reconciliation of our non-GAAP adjusted operating ratio. Our net lossincome was $4.8$10.6 million for the three months ended MarchJune 31,30, 2026 compared to net loss of $13.9$10.9 million during the period ended MarchJune 31,30, 2025. Our consolidated operating results for the three months ended MarchJune 31,30, 2026 reflect a combination of challenges from adverse weather experienced in January and February while results for March were better, reflecting improved freight volumesvolumes, customer pricing, and driver utilization compared to the beginningsame ofperiod in the quarterprior year due to ongoing industry capacity reductionsreductions, andas morewell favorableas weatherstrategic patterns.disposals of under-utilized assets. The positiveimproved variablesfreight inenvironment March 2026 werewas 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 MarchJune 31,30, 2026 and 2025 were $4.12$5.35 and $3.63$3.56 (a 13.5%50.4% 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 AprilJuly was $5.50$4.96 andbut has been above $5.00 each of the last seventwo weeks through the end of April.July.

Operating revenue decreased $43.1$26.3 million (19.7%12.5%), to $176.3$184.1 million for the three months ended MarchJune 31,30, 2026 from $219.4$210.4 million for the three months ended MarchJune 31,30, 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.environment in recent years. This led to fewer drivers and a decline in total miles,miles compared to the prior year period, causing the decrease in trucking and other revenues of $39.2$33.5 million (20.3%18.0%) alongpartially withoffset aby decreasean increase to fuel surcharge revenue of $3.9$7.2 million (14.7%29.5%) from $26.3$24.5 million in 2025 to $22.4$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. Due to continued over capacity in the market compared to freight demand, our truck assets continue to be under utilized, however continuedContinued contraction in market capacity has showed signs of favorably impacting pricing in the freight market during the three months ended MarchJune 31,30, 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.

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 decreasedincreased due to a decrease in loaded miles partially offset by higher average DOE diesel fuel prices (13.5%50.4%) partially offset by a decrease in loaded miles during the three months ended MarchJune 31,30, 2026 compared to MarchJune 31,30, 2025.

Salaries, wages, and benefits decreased $24.1$18.1 million (25.9%20.7%), to $69.1 million for the three months ended MarchJune 31,30, 2026 from $93.2$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.

Rent and purchased transportation decreased $3.8$2.5 million, to $10.5$10.8 million for the three months ended MarchJune 31,30, 2026 from $14.3$13.3 million for the same period of 2025. The decrease resulted from reduced purchased transportation and lower contractor miles,miles along with a reduction of leased equipment costs as we eliminated all remaining revenue equipment leases during the three months ended March 31,in 2026.

Fuel decreasedincreased $5.2$6.8 million (13.7%20.3%), to $32.7$40.5 million for the three months ended MarchJune 31,30, 2026 from $37.9$33.7 million for the same period of 2025. The decreaseincrease was due to lower company miles, partially offset by higher average DOE diesel price per gallon (13.5%50.4%)., DOEpartially fueloffset pricesby inlower Marchcompany 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.miles. 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.

Operations and maintenance expense decreased $5.4$4.6 million (31.3%26.7%), to $11.9$12.8 million during the three months ended MarchJune 31,30, 2026 from $17.3$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 MarchJune 31,30, 2026, the Company’s tractor fleet had an average age of 2.62.3 years and the Company's trailer fleet had an average age of 7.37.1 years compared to MarchJune 31,30, 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 7.47.5 years. We anticipate that the average age of our fleet of tractors and trailers will decreasenot change significantly by December 31, 2026.2026 Theas operatingnew equipment purchases are largely expected to offset the aging of our existing fleet. Operating and maintenance expense during 2026 will beis impacted by the volume and timing of fleet modernization as newer equipment operating under warranty results in less realized maintenance costs.

Operating taxes and licenses decreased $0.7$0.6 million, to $4.0$3.8 million during the three months ended MarchJune 31,30, 2026 from $4.7$4.4 million in the same period of 2025. The decrease resulted from astrategic reductiondisposals of operatingunder-utilized units as a result of the soft freight environment.assets.

Insurance and claims expense was $12.8$11.8 million during the three months ended MarchJune 31,30, 2026 compared to $11.9$14.2 million in 2025. The increasedecrease is due to unfavorablefavorable claim severity and frequency along with rising insurance cost.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 recentresponse yearsto the premium increase trend 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.

Depreciation and amortization decreased $6.4$9.2 million (15.5%22.1%), to $35.2$32.3 million during the three months ended MarchJune 31,30, 2026 from $41.6$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.

Other operating expenses decreased $3.6$2.2 million, to $9.2$9.5 million during the three months ended MarchJune 31,30, 2026 from $12.8$11.7 million in the same period of 2025. The decrease resulted from a reduction of costs associated directly with freight,miles and a decrease in freight demand,driven as well as general corporate expense initiatives.

Gains on the disposal of property and equipment increased $5.5$22.3 million, to a gain on disposal of $7.3$25.1 million during the three months ended MarchJune 31,30, 2026 compared to a $1.8$2.8 million gain on disposal in the same period of 2025. The increase is primarily due to the sale of certain real estate along withestate, an increase of tractor and trailer sales volumevolume, and an increase in average gain per tractorunit sold. DuringFor the calendar yearremainder of 2026, we currently expect $25$13 to $35$19 million of gains on disposal of property and equipment.

Interest expense decreased $0.9$1.1 million, to $2.2$1.9 million during the three months ended MarchJune 31,30, 2026 from $3.1$3.0 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.CFI. We eliminated all remaining debt and financing leases assumed through the Smith Transport acquisition during the first three months ended March 31,of 2026. We expect further reductions to interest expense as we continue to pay down the debt.

Our effective tax rate was 9.0%29.6% and 22.4%28.5% for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The reductionincrease in the effective tax rate is primarily the result of permanent differences and changes in unrecognized tax benefits 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 periodchange in 2025. These permanent differences generate tax expense offsetting the tax benefit which reduces the effective tax rate.income.

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 MarchJune 31,30, 2026, required minimum payments have been covered until the term loan maturity on August 31, 2027.

The Credit Facilities contain usual and customary events of default and negative covenants for a facility of this nature including, among other things, restrictions on the Company’s ability to incur certain additional indebtedness or issue guarantees, to create liens on the Company’s assets, to make distributions on or redeem equity interests (subject to certain exceptions, including that (a) the Company may pay regularly scheduled dividends on the Company’s common stock not to exceed $10.0 million during any fiscal year and (b) the Company may make any other distributions so long as it maintains a net leverage ratio not greater than 2.50 to 1.00), to make investments and to engage in mergers, consolidations, or acquisitions. The Credit Facilities contain customary financial covenants, including (i) a maximum net leverage ratio of 2.75 to 1.00, measured quarterly on a trailing twelve-month basis, and (ii) a minimum interest coverage ratio of 3.00 to 1.00, measured quarterly on a trailing twelve-month basis. We were in compliance with the respective financial covenants at MarchJune 31,30, 2026 and have been in compliance since the inception of the Credit Facilities.

We had $149.9$134.9 million outstanding on the Term Facility and no outstanding borrowings under the Revolving Facility at MarchJune 31,30, 2026. Outstanding letters of credit associated with the Revolving Facility at MarchJune 31,30, 2026 were $11.2 million. As of MarchJune 31,30, 2026 the weighted average interest rate on outstanding borrowings under the Credit Facilities was 5.4%.5.1%.

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 threesix months ended MarchJune 31,30, 2026 we paid off all remaining debt and financing lease obligations from the acquisition of Smith Transport.

At MarchJune 31,30, 2026, we had $44.5$62.4 million in cash and cash equivalents, $149.9$134.9 million in outstanding debt, $3.3$11.5 million in operating lease obligations, and $88.8 million available borrowing capacity on the Revolving Facility.

The total estimated purchase commitments for tractors (net of tractor sale commitments) and trailer equipment as of MarchJune 31,30, 2026 was $31.9$29.2 million. These commitments extend through the remainder of 2026. We anticipateexpect continued fleet modernization throughout 2026 and beyond. DuringFor the calendar yearremainder of 2026, we currently expectanticipate net capital expenditures ofto be approximately $10$8 to $20$14 million and $25$13 to $35$19 million of gains on disposal of property and equipment.

Cash flow provided by operating activities during the threesix months ended MarchJune 31,30, 2026 was $23.2$36.0 million as compared to $25.8$46.8 million during the same period of 2025. This decrease was due to a decrease of $4.9$0.3 million in working capital items partiallyalong offsetwith bya an increasereduction of $2.2$10.5 million in net income net of non-working capital items. Cash flows provided by operating activities was 13.1%10.0% of operating revenues for the threesix months ended MarchJune 31,30, 2026 compared with 11.8%10.9% for the same period of 2025.

Cash provided by investing activities was $14.9$38.9 million during the threesix months ended MarchJune 31,30, 2026 compared to cash used in investing activities of $11.5$17.3 million during the comparative 2025 period. The change is primarily due to the $26.6$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.

Cash used in financing activities increased $8.5$11.4 million during the threesix months ended MarchJune 31,30, 2026 compared to the same period of 2025 due to an increase of $8.5$17.9 million of repayments of finance leases and debt.debt partially offset by $6.6 million less cash used for the repurchase of common stock. During the threesix months ended MarchJune 31,30, 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.

We have a stock repurchase program with 4.84.7 million shares remaining authorized for repurchase under the program as of MarchJune 31,30, 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.

We had net cash payments of $0.2$2.5 million and net cash refunds of $0.3$6.8 million for income taxes duringfor the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. The increasedecrease in paidincome taxes paid net of refunds during the threesix months ended MarchJune 31,30, 2026 is due to refundsrecognition associatedof withdeferred priortax year filings receivedliabilities in 2025 that wereincreased the 2025 Federal and state estimate which have not recurringoccurred in 2026.

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.