What changed in this filing

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Item 9A. Controls and Procedures

2023-03-01 compared with 2022-02-25 · 334 added, 144 removed, 624 unchanged (43% of the section changed)

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Based on this assessment, we have concluded that our internal control over financial reporting was effective as of December 31, 2022.

Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022 excluded Smith Transport, which was acquired on May 31, 2022, and CFI, which was acquired on August 31, 2022.

The results of Smith Transport and CFI have been included in our consolidated financial statements since May 31, 2022 and August 31, 2022, respectively.

Smith Transport represented 12.3% of consolidated total assets as of December 31, 2022, and represented 13.3% of operating revenue for the twelve months ended December 31, 2022.

CFI represented 43.0% of consolidated total assets as of December 31, 2022, and represented 21.6% of operating revenue for the twelve months ended December 31, 2022.

The exclusion of Smith Transport and CFI is in accordance with the SEC's general guidance that an assessment of a recently acquired business may be omitted from the scope in the year of acquisition.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with generally accepted accounting principles.

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The Company’s internal control over financial reporting as of December 31, 2022 has been audited by Grant Thornton LLP, an independent registered public accounting firm as stated in its report which is included herein.

Changes in Internal Control Over Financial Reporting – There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15 and 15d-15 under the Exchange Act) that occurred during the twelve months ended December 31, 2021 that have materially affected, or were reasonably likely to materially affect, the Company’s internal control over financial reporting.

Changes in Internal Control Over Financial Reporting – Except for the acquisitions of Smith Transport and CFI noted above, there were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15 and 15d-15 under the Exchange Act) that occurred during the twelve months ended December 31, 2022 that have materially affected, or were reasonably likely to materially affect, the Company’s internal control over financial reporting.

OTHER INFORMATION

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DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

The information required by Item 10 of Part III, with the exception of the Code of Ethics discussed below, is incorporated herein by reference to our Proxy Statement for the annual shareholders’ meeting to be held on May 12, 2022 (the “Proxy Statement”) under the headings “Proposal 1 - Election of Directors,” and “Corporate Governance and the Board of Directors.”

Corporate Governance

We have adopted a Governance Structure and Polices document which communicates our corporate governance strategy.

We make these charters and policies available on our website at www.heartlandexpress.com (and in print to any shareholder who requests them, free of charge).

Information on our website is not incorporated by reference into this Annual Report.

Code of Ethics

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Information on our website is not incorporated by reference into this Annual Report.

The remaining information required by this Item will be included in the Company's definitive proxy statement to be filed with the SEC within 120 days after December 31, 2022, in connection with the solicitation of proxies for the Company's 2023 Annual Meeting of Stockholders (the "2023 Proxy Statement"), and is incorporated herein by reference.

EXECUTIVE COMPENSATION

The information required by Item 11 of Part III is incorporated herein by reference to our Proxy Statement under the headings “Compensation Discussion and Analysis,” “Corporate Governance and the Board of Directors,” and “Summary of Cash and Certain Other Compensation Paid to the Named Executive Officers.”

The information required by this Item will be included in the 2023 Proxy Statement, and is incorporated herein by reference.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, AND RELATED STOCKHOLDER MATTERS

The information required by Item 12 of Part III is incorporated herein by reference to Item 5 of Part II of this Annual Report and the Proxy Statement under the heading “Security Ownership of Principal Stockholders, Management and Others.”

In July 2011, a Special Meeting of Stockholders of Heartland Express, Inc.

was held, at which meeting the approval of the Heartland Express, Inc.

2011 Restricted Stock Award Plan (the “2011 Plan”) was ratified.

The 2011 Plan authorized the issuance of up to 0.9 million shares and is administered by the Compensation Committee of our Board of Directors (the “Committee”).

In accordance with and subject to the provisions of the 2011 Plan, the Committee has the authority to determine all provisions of awards of restricted stock, including, without limitation, the employees who will receive awards, the number of shares awarded to individual employees, the time or times when awards will be granted, restrictions and other conditions (including, for example, the lapse of time) to which the vesting of awards may be subject, and other terms and conditions and form of agreement to be entered into by us and employees subject to awards of restricted stock.

Per the terms of the awards, employees receiving awards will have all of the rights of a stockholder with respect to the unvested restricted shares including, but not limited to, the right to receive such cash dividends, if any, as may be declared on such shares from time to time and the right to vote such shares at any meeting of our stockholders.

The following table summarizes, as of December 31, 2022, information about the 2011 Plan:

Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights Weighted Average Stock Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a))

Equity compensation plan approved by stockholders 33,360 — —

Total 33,360 — —

Column (a) represents unvested restricted stock awards outstanding under the 2011 Plan as of December 31, 2022.

The weighted average stock price on the date of grant for outstanding restricted stock awards was $16.24, which is not reflected in column (b), because restricted stock awards do not have an exercise price.

Column (c) represents the maximum aggregate number of shares of restricted stock that can be issued under the 2011 Plan as of December 31, 2022.

In May 2021, at the 2021 Annual Meeting of Stockholders, the approval of the Heartland Express, Inc.

2021 Restricted Stock Plan (the "2021 Plan") was ratified.

The 2021 Plan made available up to 0.6 million shares for the purpose of making restricted stock grants to our eligible employees, directors and consultants.

The following table summarizes, as of December 31, 2022, information about the 2021 Plan:

Equity compensation plan approved by stockholders 6,720 — 579,866

Total 6,720 — 579,866

Column (a) represents unvested restricted stock awards outstanding under the 2021 Plan as of December 31, 2022.

The weighted average stock price on the date of grant for outstanding restricted stock awards was $14.88, which is not reflected in column (b), because restricted stock awards do not have an exercise price.

Column (c) represents the maximum aggregate number of shares of restricted stock that can be issued under the 2021 Plan as of December 31, 2022.

We do not have any equity compensation plans that were not approved by stockholders.

The remaining information required by this Item will be included in the 2023 Proxy Statement, and is incorporated herein by reference.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by Item 13 of Part III is incorporated herein by reference to the Proxy Statement under the headings “Certain Relationships and Related Transactions” and “Corporate Governance and the Board of Directors.”

The information required by this Item will be included in the 2023 Proxy Statement, and is incorporated herein by reference.

PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by Item 14 of Part III is incorporated herein by reference to the Proxy Statement under the heading “Relationship with Independent Registered Public Accounting Firm.”

The information required by this Item will be included in the 2023 Proxy Statement, and is incorporated herein by reference.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

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EXHIBIT INDEX

Acquisition and Merger Agreement, dated August 26, 2019, by and among, Midwest Holding Group, Inc., Millis Real Estate Leasing, LLC, the members of Millis Real Estate Leasing, LLC, Heartland Trucking, Inc., Heartland Express Inc.

of Iowa, Heartland Express, Inc., in its capacity as guarantor, and David P.

Millis, in his capacity as Sellers’ Representative.

Incorporated by reference to Exhibit 2.1 to the Company’s Form 10-Q for the quarter ended September 30, 2019.

Stock Purchase Agreement dated May 31, 2022, by and among, Smith Transport, Inc.

Employee Stock Ownership Plan and Trust, Smith Transport, Inc., Heartland Express Inc.

of Iowa, Heartland Express, Inc., in its capacity as guarantor, and Todd Smith, in his capacity as Sellers’ Representative.

Incorporated by reference to Exhibit 2.1 to the Company’s Form 10-Q for the quarter ended June 30, 2022.

Stock Purchase Agreement, dated August 21, 2022, by and among TForce US Holdco, Inc., TForce TL Holdings USA, Inc., Heartland Express, Inc.

of Iowa, and Heartland Express, Inc.

Incorporated by reference to Exhibit 2.2 of the Company's Form 10-Q for the quarter ended September 30, 2022.

Articles of Incorporation, as amended.

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Form Award Notice under the 2021 Restricted Stock Award Plan.

Incorporated by reference to Exhibit 10.3 to the Company's Form 10-K for the year ended December 31, 2011.

Credit Agreement, dated November 11, 2013, by and between Wells Fargo Bank, National Association and Heartland Express, Inc.

of Iowa, Heartland Express, Inc., A&M Express, Inc., Heartland Express, Maintenance Services, Inc., Heartland Express Services, Inc., and Gordon Trucking Inc.

Incorporated by reference to Exhibit 10.4 to the Company’s Form 10-K for the year ended December 31, 2013.

First Amendment to Credit Agreement, dated August 31, 2018, by and between Wells Fargo Bank, National Association and Heartland Express, Inc.

of Iowa, Heartland Express, Inc., A&M Express, Inc., Heartland Express, Maintenance Services, Inc., and Heartland Express Services, Inc.

Incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q, for the quarter ended September 30, 2018.

Heartland Express, Inc.

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Incorporated by reference to Appendix A to the Company’s Schedule 14A filed April 2, 2021.

Second Amendment to Credit Agreement, dated August 31, 2021, by and between Wells Fargo Bank, National Association and Heartland Express, Inc.

of Iowa, Heartland Express, Inc., Heartland Express Maintenance Services, Inc., Heartland Express Services, Inc., Millis Transfer, LLC, and Midwest Holding Group, LLC.

Credit Agreement, dated August 31, 2022, by and among Heartland Express, Inc., Heartland Express, Inc.

of Iowa, certain other of the Company’s direct and indirect wholly owned subsidiaries as Guarantors, the Lenders party thereto, JPMorgan Chase Bank, N.A., as Syndication Agent, and Wells Fargo Bank, National Association, as Administrative Agent.

Incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended September 30, 2022.

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HEARTLAND EXPRESS, INC.

February 25, 2022 By:

March 1, 2023 By:

/s/ Michael J.

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/s/ Michael J.

Gerdin Chairman, President, Chief Executive Officer and Director (Principal Executive Officer) February 25, 2022

Gerdin Chairman, President, Chief Executive Officer and Director (Principal Executive Officer) March 1, 2023

/s/ Christopher A.

Strain Vice President of Finance, Treasurer, and Chief Financial Officer (Principal Accounting and Financial Officer) February 25, 2022

Strain Vice President of Finance, Treasurer, and Chief Financial Officer (Principal Accounting and Financial Officer) March 1, 2023

Christopher A.

/s/ Benjamin J.

Allen Director February 25, 2022

Gordon Director February 25, 2022

Millis Director February 25, 2022

Allen Director March 1, 2023

Gordon Director March 1, 2023

Millis Director March 1, 2023

/s/ Brenda S.

Neville Director February 25, 2022

Pratt Director February 25, 2022

Neville Director March 1, 2023

Pratt Director March 1, 2023

/s/ Michael J.

Sullivan Director February 25, 2022

Sullivan Director March 1, 2023

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 25, 2022 expressed an unqualified opinion.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 1, 2023 expressed an unqualified opinion.

Basis for opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

Critical audit matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.

Auto Liability and Workers’ Compensation Claims Reserve Accrual

As described further in the notes to the consolidated financial statements, the Company is self-insured for a portion of its risk related to auto liability and workers’ compensation.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Auto liability claims reserve accrual

As described further in the notes to the consolidated financial statements, the Company is self-insured for a portion of its risk related to auto liability.

Self-insurance results when the Company insures itself by maintaining funds to cover possible losses rather than by purchasing an insurance policy.

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The actual cost to settle self-insured claim liabilities may differ from the Company’s reserve estimates due to legal costs, claims that have been incurred but not reported, and various other uncertainties.

We identified the estimation of auto liability and workers’ compensation claims accruals subject to self-insurer insurance retention of $2.0 million and $1.0 million, respectively, as a critical audit matter.

Auto liability and workers’ compensation unpaid claim liabilities are determined by projecting the estimated ultimate loss related to a claim, less actual costs paid to date.

These estimates rely on the assumption that historical claim patterns are an accurate representation for future claims that have been incurred but not completely paid.

The principal considerations for assessing auto liability and workers’ compensation claims as a critical audit matter are the high level of estimation uncertainty related to determining the severity of these types of

claims, as well as the inherent subjectivity in management’s judgment in estimating the total costs to settle or dispose of these claims.

Our audit procedures related to the critical audit matter included the following, among others.

• We tested the effectiveness of controls over auto liability and workers’ compensation claims, including the completeness and accuracy of claim expenses and payments.

• We tested management’s process for determining the auto liability and workers’ compensation accrual, including evaluating the reasonableness of the methods and assumptions used in estimating the ultimate claim losses with the assistance of an actuarial specialist.

We identified the estimation of auto liability claims accruals subject to self-insurer retention of $2.0 million as a critical audit matter.

Auto liability unpaid claim liabilities are determined by projecting the estimated ultimate loss related to a claim, less actual costs paid to date.

These estimates rely on the assumption that historical claim patterns are an accurate representation of future claims that have been incurred but not completely paid.

The principal considerations for assessing auto liability claims as

a critical audit matter are the high level of estimation uncertainty related to determining the severity of these types of claims, as well as the inherent subjectivity in management’s judgement in estimating the total costs to settle or dispose of these claims.

Our audit procedures related to the auto liability claims reserve accrual included the following, among others.

• We tested the effectiveness of controls over auto liability claims, including the completeness and accuracy of claim expenses and payments.

• We tested management’s process for determining the auto liability accrual, including evaluating the reasonableness of the methods and assumptions used in estimating the ultimate claim losses with the assistance of an actuarial specialist.

• We tested management’s claim reserve estimates by inspecting source documents to test key attributes of the claims data.

Customer relationships acquired with the CFI acquisition

As described further in the footnotes to the consolidated financial statements, on August 31, 2022, the Company acquired Transportation Resources, Inc.

and Contract Freighters, Inc., as well as the seller's interest in the CFI Logistica entities (collectively “CFI”).

The total purchase price consideration was $558.6 million, which was allocated $55.1 million to separately identified intangible assets, including customer relationships of $31.6 million.

The determination of the fair value of the customer relationships requires management to make significant estimates and assumptions related to forecasts of future revenues, expenses, and the discount rate applied.

Changes in these assumptions could materially affect the determination of the fair value of the customer relationships.

We identified the fair value assigned to the customer relationships included on the opening balance sheet as a critical audit matter.

The principal considerations for our determination that the acquired customer relationships are a critical audit matter is that management utilized significant judgement when estimating the fair value assigned to the customer relationships.

In turn, auditing management’s judgements regarding the assigned fair value involved a high degree of subjectivity due to the estimation uncertainty of management’s significant judgements.

Our audit procedures related to the estimated fair value assigned to acquired customer relationships included the following, among others.

• We tested the operating effectiveness of controls relating to the identification of the acquired customer relationships, including the determination of the fair value.

• We tested management’s process for determining the fair value of the acquired customer relationships.

This included evaluating the appropriateness of the valuation method and testing the completeness, accuracy, and relevance of data used by management.

• We evaluated the reasonableness of management’s significant assumptions, which included forecasted revenues and operating expenses.

We tested whether these forecasts were reasonable and consistent with historical performance and third-party market data.

• We tested the reasonableness of the Company’s discount rate applied to the present value of the estimated future cash flows model with the assistance of valuation specialists.

/s/ GRANT THORNTON LLP

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Tulsa, Oklahoma

February 25, 2022

March 1, 2023

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2021, and our report dated February 25, 2022 expressed an unqualified opinion on those financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2022, and our report dated March 1, 2023 expressed an unqualified opinion on those financial statements .

Basis for opinion

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We believe that our audit provides a reasonable basis for our opinion.

Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of Smith Transport, Inc., Smith Trucking, Inc., Franklin Logistics, Inc., Transportation Resources, Inc., Contract Freighters, Inc., and the CFI Logistica entities, whose financial statements reflect total assets and revenues constituting 55.3 and 34.9 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2022.

As indicated in Management’s Report, Smith Transport, Inc., Smith Trucking, Inc., Franklin Logistics, Inc., Transportation Resources, Inc., Contract Freighters, Inc., and the CFI Logistica entities were acquired during 2022.

Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of Smith Transport, Inc., Smith Trucking, Inc., Franklin Logistics, Inc., Transportation Resources, Inc., Contract Freighters, Inc., and the CFI Logistica entities.

Definition and limitations of internal control over financial reporting

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Tulsa, Oklahoma

February 25, 2022

March 1, 2023

HEARTLAND EXPRESS, INC.

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OTHER ASSETS 19,894 16,754

OPERATING LEASE RIGHT OF USE ASSETS 20,954 —

$ 1,669,488 $ 928,542

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Insurance accruals 18,490 15,677

Long-term debt and finance lease liabilities - current portion 13,946 —

Operating lease liabilities - current portion 12,001 —

Other accruals 18,636 13,968

Income taxes payable — 1,475

Total current liabilities 156,757 71,594

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Income taxes payable 6,466 5,491

Long-term debt and finance lease liabilities less current portion 399,062 —

Operating lease liabilities less current portion 8,953 —

Deferred income taxes, net 207,516 89,971

Insurance accruals less current portion 34,384 45,995

Accident and work comp accruals less current portion 35,257 34,384

Total long-term liabilities 657,254 129,846

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Dividends on common stock, $0.08 per share — — ( 6,502 ) — ( 6,502 )

Issuance of common stock for acquisition — 113 — 637 750

Repurchases of common stock — — — ( 26,139 ) ( 26,139 )

Stock-based compensation, net of tax — 189 — 1,321 1,510

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Dividends on common stock, $0.08 per share — — ( 6,318 ) — ( 6,318 )

Repurchases of common stock — — — ( 31,540 ) ( 31,540 )

Stock-based compensation, net of tax — 24 — 1,085 1,109

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Stock-based compensation expense 1,399 1,150 2,092

Debt-related amortization 360 — —

Gain on disposal of property and equipment ( 96,906 ) ( 37,438 ) ( 14,830 )

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Cash dividends paid ( 6,318 ) ( 45,872 ) ( 6,502 )

Proceeds from issuance of long-term debt 447,343 — —

Shares withheld for employee taxes related to stock-based compensation ( 290 ) ( 247 ) ( 582 )

Repayments on acquired debt — — ( 93,348 )

Repayments on finance leases and debt ( 81,478 ) — —

Repurchases of common stock — ( 32,025 ) ( 25,654 )

Net cash used in financing activities ( 78,144 ) ( 32,738 ) ( 100,443 )

Net increase (decrease) in cash, cash equivalents and restricted cash 42,627 35,064 ( 86,862 )

Net cash provided by (used in) financing activities 359,257 ( 78,144 ) ( 32,738 )

Net increase (decrease) in cash and cash equivalents ( 109,289 ) 42,627 35,064

CASH, CASH EQUIVALENTS AND RESTRICTED CASH

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SUPPLEMENTAL DISCLOSURES OF CASH FLOW

Interest paid $ — $ — $ 929

Cash paid during the period for interest expense $ 6,384 $ — $ —

Cash paid during the period for income taxes, net of refunds $ 44,010 $ 38,519 $ 13,664

Noncash investing and financing activities:

Fair value of revenue equipment traded $ 428 $ — $ —

Purchased property and equipment in accounts payable $ 11,938 $ 9,019 $ 2,172

Sold revenue equipment in other current assets $ 1,512 $ 3,383 $ 1,282

Sold revenue equipment and property in other current assets $ 1,558 $ 1,512 $ 3,383

Treasury stock acquired in accounts payable $ — $ — $ 485

Right-of-use assets obtained in exchange for operating lease liabilities $ 3,345 $ — $ —

Year Ended December 31,

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Heartland Express, Inc.

is a holding company incorporated in Nevada, which directly or indirectly owns all of the stock of Heartland Express, Inc.

of Iowa, Heartland Express Services, Inc., Heartland Express Maintenance Services, Inc., Midwest Holding Group, LLC and Millis Transfer, LLC.

is a holding company incorporated in Nevada, which directly or indirectly owns all of the stock of the following active legal entities:

Heartland Express, Inc.

of Iowa, Heartland Express Services, Inc., Heartland Express Maintenance Services, Inc.

("Heartland Express"), and Midwest Holding Group, LLC and Millis Transfer, LLC ("Millis Transfer"), and Smith Transport, Inc., Smith Trucking, Inc., and Franklin Logistics, Inc.

("Smith Transport"), and CFI entities, Transportation Resources, Inc.

and Contract Freighters, Inc.

(collectively with certain Mexican entities, "CFI").

On May 31, 2022, Heartland Express, Inc.

of Iowa acquired Smith Transport, a truckload carrier headquartered in Roaring Spring, Pennsylvania.

On August 31, 2022, Heartland Express, Inc.

of Iowa acquired Midwest Holding Group, Inc.

and Millis Real Estate Leasing, LLC (together, "Millis Transfer"), a truckload carrier headquartered in Black River Falls, Wisconsin.

Effective December 31, 2019, Millis Transfer, Inc.

and Midwest Holding Group, Inc.

were converted to Millis Transfer, LLC and Midwest Holding Group, LLC, respectively.

Further, effective December 31, 2019, Millis Real Estate Leasing, LLC, Rivera Real Estate, LLC, and Great River Leasing, LLC were merged into Millis Transfer, LLC.

We, together with our subsidiaries, are a short-to-medium haul truckload carrier (predominately 500 miles or less per load).

We primarily provide nationwide asset-based dry van truckload service for major shippers from Washington to Florida and New England to California.

of Iowa acquired CFI's non-dedicated U.S.

dry van and temperature-controlled truckload business located in Joplin, Missouri, and certain Mexican entities (collectively "CFI Logistica") operations located in Mexico.

We, together with our subsidiaries, are a short, medium, and long-haul truckload carrier and transportation services provider.

We primarily provide nationwide asset-based dry van truckload service for major shippers across the United States, along with cross-border freight and other transportation services offered through third party partnerships in Mexico.

Principles of Consolidation

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Segment Information

We provide truckload services across the United States (U.S.) and parts of Canada.

These truckload services are primarily asset-based transportation services in the dry van truckload market, and we also offer truckload temperature-controlled transportation services to select dedicated customers, which are not significant to our operations.

We provide truckload services across the United States (U.S.), Mexico, and parts of Canada.

These truckload services are primarily asset-based transportation services in the dry van truckload market, and we also offer truckload temperature-controlled transportation services and Mexico logistics services, which are not significant to our operations.

Our Chief Operating Decision Maker oversees and manages all of our transportation services, on a combined basis, including previously acquired entities.

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Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000.

At December 31, 2021, the Company had $ 37.5 million in excess of the FDIC insured limit, subsequently reduced to $ 12.4 million in February 2022.

At December 31, 2022, the Company had $ 13.9 million in excess of the FDIC insured limit.

At December 31, 2022 and 2021, restricted and designated cash and investments totaled $ 15.1 million and $ 16.0 million, respectively.

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The restricted and designated funds represent deposits required by state agencies for self-insurance purposes and funds that are earmarked for a specific purpose and not for general business use.

Municipal bonds of $ 1.5 million at December 31, 2021 and 2020, are stated at amortized cost, are classified as held-to-maturity and are included in restricted cash in other non-current assets.

Municipal bonds of $ 0.8 million and $ 1.5 million at December 31, 2022 and 2021, respectively, are stated at amortized cost, are classified as held-to-maturity and are included in restricted cash in other assets presented as non-current.

Investment income received on held-to-maturity municipal bond investments is generally exempt from federal income taxes and is recognized as earned.

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The Company recognizes revenue over time as control of the promised services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.

The delivery of the shipment and completion of the performance obligation allows for the collection of payment based on the credit terms for customer accounts which are generally on a net 30 day basis or less.

The delivery of the shipment and completion of the performance obligation allows for the collection of payment based on the credit terms for customer accounts which are predominantly on a net 30 day basis.

We use our write off history and our knowledge of uncollectible accounts in estimating the allowance for bad debts.

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Tires are capitalized separately from revenue equipment and are reported separately as “Prepaid tires” in the consolidated balance sheets and amortized over two years .

Depreciation expense of $ 0.1 million and $ 0.4 million for the years ended December 31, 2021 and 2020, respectively, has been included in communications and utilities in the consolidated statements of comprehensive income.

Depreciation for financial statement purposes is computed by the straight-line method for all assets other than new tractors.

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Revenue equipment acquired through acquisitions is generally revalued to current market values as of the acquisition date.

These acquired assets are depreciated on a straight-line basis aligned with the remaining period of expected use.

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.

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The Company performs its annual impairment test as of September 30.

The Company first assesses qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50%) that the fair value of our reporting unit is less than its carrying amount, including goodwill.

If, after assessing qualitative factors, the Company determines that it is more likely than not that the fair value of our reporting unit is less than its carrying amount, then the Company performs a full fair value assessment of identifiable net assets to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized, if any.

The Company first assesses qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50%) that the fair value of each reporting unit is less than its carrying amount, including goodwill.

If, after assessing qualitative factors, the Company determines that it is more likely than not that the fair value of each reporting unit is less than its carrying amount, then the Company performs a full fair value assessment of identifiable net assets to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized, if any.

As of September 30, 2022, the Company’s assessment of qualitative factors informed its conclusion that a goodwill impairment did not occur.

The significant qualitative factors considered include an increase in the Company’s earnings and continued strong cash flow.

Our reporting unit had fair value significantly in excess of its carrying value.

Our reporting units had fair value in excess of their carrying value.

Management determined that no impairment charge was required for the years ended December 31, 2022, 2021, and 2020.

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The useful life of an intangible asset is the period over which the asset is expected to contribute directly or indirectly to future cash flows.

We periodically evaluate amortizable intangible assets for impairment upon occurrence of events or changes in circumstances that indicate the carrying amount of intangible assets may not be recoverable.

We periodically evaluate both finite and indefinite lived intangible assets for impairment upon occurrence of events or changes in circumstances that indicate the carrying amount of intangible assets may not be recoverable.

Management determined that no intangible impairment charge was required for the years ended December 31, 2022, 2021, and 2020.

13 unchanged sentences

The delivery of the shipment and completion of the performance obligation allows for the collection of payment generally within 30 days after the delivery date of the shipment for the majority of our customers.

The delivery of the shipment and completion of the performance obligation allows for the collection of payment predominantly within 30 days after the delivery date of the shipment for the majority of our customers.

The Company's operations are consistent with those in the trucking industry where freight is hauled twenty-four hours a day and seven days a week, subject to hours of service rules.

The Company’s average length of haul is 400-500 miles per trip and each individual shipment accepted by the Company is considered a separate contract with the performance obligation being the delivery of the freight.

Our average length of haul for each load of freight generally equals less than one day of continuous transit time.

The Company’s average length of haul is approximately 500 miles per trip and each individual shipment accepted by the Company is considered a separate contract with the performance obligation

being the delivery of the freight.

Our average length of haul for each load of freight generally equals less than two days of continuous transit time.

The Company estimates revenue for multiple-stop loads based on miles run and estimates revenue for single stop loads based on transit time, as the customer simultaneously receives and consumes the benefit provided.

2 unchanged sentences

Recorded contract assets are included in the accounts receivable line item of the balance sheet.

Corresponding liabilities are recorded in the accounts payable and accrued liabilities and compensation and benefits line items for the estimated expenses on

these same in-process loads.

Corresponding liabilities are recorded in the accounts payable and accrued liabilities and compensation and benefits line items for the estimated expenses on these same in-process loads.

The Company had no contract liabilities associated with our operations as of December 31, 2022 and 2021.

8 unchanged sentences

Diluted earnings per share is based on the basic weighted earnings per share with additional weighted common shares for common stock equivalents.

During the years ended December 31, 2021, 2020, and 2019, we granted restricted shares of common stock to certain of our employees, and in 2021 certain Directors, under the Company's restricted stock award plans.

During the years ended December 31, 2022, 2021, and 2020, we granted restricted shares of common stock to certain employees and Directors, under the Company's restricted stock award plans.

A reconciliation of the numerator (net income) and denominator (weighted average number of shares outstanding) of the basic and diluted earnings per share (“EPS”) for 2022, 2021, and 2020 is as follows (in thousands, except per share data):

13 unchanged sentences

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amount of existing assets and liabilities and their respective tax basis.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or

Such amounts are adjusted, as appropriate, to reflect changes in tax rates expected to be in effect when the temporary differences reverse.

2 unchanged sentences

In management’s opinion, it is more likely than not that we will be able to utilize these deferred tax assets in future periods as a result of our history of profitability, taxable income, and reversal of deferred tax liabilities.

Pursuant to the authoritative accounting guidance on income taxes, when establishing a valuation allowance, we consider future sources of taxable income such as “future reversals of existing taxable temporary differences and carry-forwards” and “tax

planning strategies”.

In the event we determine that the deferred tax assets will not be realized in the future, the valuation adjustment to the deferred tax assets is charged to earnings or accumulated other comprehensive loss based on the nature of the asset giving rise to the deferred tax asset and the facts and circumstances resulting in that conclusion.

22 unchanged sentences

Our five largest customers accounted for approximately 23 % and 33 % of gross accounts receivable as of December 31, 2022 and 2021, respectively.

There was one customer that accounted for 10.0 % of operating revenues for the year ended December 31, 2021 and no customers exceeded 10 %.

There were no customers that exceeded 10 % of operating revenues for the years ended December 31, 2022 and December 31, 2020, respectively.

During the year ended December 31, 2021 there was one single customer that accounted for 10 % of operating revenues.

This customer had accounts receivable of $ 6.1 million as of December 31, 2021.

During the year ended December 31, 2020 there was no single customer that accounted for more than 10 % of operating revenues.

During the year ended December 31, 2019, there was one customer that accounted for more than 10 % of operating revenues at 10.9 %.

Revenue Recognition

The Company's operations are consistent with those in the trucking industry where freight is hauled twenty-four hours a day and seven days a week, subject to hours of service rules.

The Company’s average length of haul is approximately 500 miles per trip and each individual shipment accepted by the Company is considered a separate contract with the performance obligation being the delivery of the freight.

Our average length of haul for each load of freight generally equals less than one day of continuous transit time.

The Company hauls freight and earns revenue on a consistent basis throughout the periods presented.

Company hauls freight and earns revenue on a consistent basis throughout the periods presented.

A corresponding contract asset existed for the estimated revenue of these in-process loads for $ 2.6 million and $ 1.3 million as of December 31, 2022 and 2021, respectively.

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Fuel surcharge revenues were $ 169.2 million, $ 76.1 million, and $ 61.7 million for the twelve months ended December 31, 2022, 2021, and 2020, respectively.

Accessorial and other revenues recorded in the consolidated statements of comprehensive income collectively represented $ 11.4 million, $ 14.3 million, and $ 13.5 million for the twelve months ended December 31, 2021, 2020, and 2019, respectively .

Acquisition of Millis Transfer

On August 26, 2019, Heartland Express, Inc.

of Iowa (the “Buyer”) and Heartland Express, Inc., as guarantor, entered into an Acquisition and Merger Agreement with Millis Transfer.

Millis Transfer is a truckload carrier headquartered in Black River Falls, Wisconsin, providing asset-based dry van truckload transportation services, including local, regional, and dedicated services.

Pursuant to the Acquisition and Merger Agreement of the Millis Transfer acquisition, the Buyer acquired all of Millis Transfer’s outstanding equity (the “Transaction”).

The Buyer paid $ 156.0 million of total consideration, including cash (net of working capital adjustment), restricted shares of the Company's common stock, and assumed indebtedness of Millis Transfer.

With the Millis Transfer acquisition, total cash paid, net of working capital adjustment, and common stock issued of $ 62.7 million was funded out of the Company’s available cash and restricted shares of the Company's common stock issued from treasury stock.

The transaction included the assumption of $ 93.3 million of Millis Transfer's indebtedness, of which no debt was outstanding at December 31, 2019.

The Acquisition and Merger Agreement contains customary representations, warranties, covenants, escrow, and indemnification provisions.

The following unaudited pro forma financial information for the year ended December 31, 2019, assumes that the acquisition of Millis occurred as of January 1, 2019.

Pro forma adjustments reflected in the financial information below relate to accounting policy changes, such as changes in depreciation expense of revenue equipment, amortization of intangible assets, and accounting for certain operations and maintenance costs, along with other adjustments for terminal rent expense to align Millis results with those of the Company and income tax effects for the periods presented.

The net effect of these pro forma adjustments increased net income by $ 3.0 million for the period ended December 31, 2019.

December 31, 2019

As a result of the CFI acquisition we now outsource the transportation of certain loads to third-party carriers.

The company is a principal in these arrangements resulting in revenue associated with these contracts being recorded on a gross basis.

The primary responsibility to meet the customer's requirements is maintained by the Company as the party performing billing, collection and pricing negotiations with the customer.

The company is also responsible for selecting third-party transportation providers that satisfy our premium customer service requirements.

Accessorial, brokerage and other revenues recorded in the consolidated statements of comprehensive income collectively represented $ 50.7 million, $ 11.4 million, and $ 14.3 million for the twelve months ended December 31, 2022, 2021, and 2020, respectively .

On May 31, 2022, Heartland Express, Inc.

of Iowa (the “Buyer”) and Heartland Express, Inc., as guarantor, entered into a Stock Purchase Agreement with Smith Transport.

Smith Transport is a truckload carrier headquartered in Roaring Spring, Pennsylvania, providing asset-based dry van truckload transportation services, including local, regional, and dedicated services.

Pursuant to the Smith Stock Purchase Agreement, the Buyer acquired all of Smith Transport’s outstanding equity (the “Smith Transaction”) under an Internal Revenue Code Section 338(h)(10) election.

The Buyer's purchase price of $ 169.4 million includes total cash consideration and assumed indebtedness of Smith Transport subject to purchase accounting adjustments including final valuation of intangibles.

Gross cash paid in the Smith Transaction was $ 140.6 million.

Net cash paid was $122.0 million after consideration of $ 18.6 million of Smith Transport cash on the date of acquisition.

Gross cash paid was funded out of the Company’s available cash.

The Smith Transaction included the assumption of $ 46.8 million of Smith Transport's indebtedness, including finance leases, of which $ 40.3 million of the debt was outstanding at December 31, 2022.

The Smith Stock Purchase Agreement contains customary representations, warranties, covenants, escrow, and indemnification provisions.

The results of the Smith Transport acquired business have been included in the consolidated financial statements since the date of acquisition and represented 12.3 % of consolidated total assets as of December 31, 2022, and represented 13.3 % of operating revenue for the twelve months ended December 31, 2022.

The following unaudited pro forma consolidated results of operations for the years ended December 31, 2021 and 2022 assume that the acquisition of Smith Transport occurred as of January 1, 2021.

Year ended Year ended

December 31, 2021 December 31, 2022

(in thousands)

1 unchanged sentence

Net income $ 96,466 $ 140,647

The Millis pro forma amounts do not purport to be indicative of the results that would have actually been obtained if the acquisition had occurred at the beginning of the periods presented or that may be obtained in the future.

The results of the acquired businesses have been included in the consolidated financial statements since the date of acquisition.

Millis represented 8.8 % of operating revenue for the twelve months ended December 31, 2019.

Millis acquisition related expenses of $ 0.5 million are included in the consolidated statement of comprehensive income within the other operating expenses line item for the twelve months ended December 31, 2019.

These pro forma amounts do not purport to be indicative of the results that would have actually been obtained if the acquisition had occurred at the beginning of the periods presented or that may be obtained in the future.

The allocation of the Smith Transport purchase price is detailed in the table below.

The final purchase price allocation remains subject to other purchase accounting adjustments which may be identified, such as the final valuation of intangible assets, and therefore may differ materially from that reflected below.

The goodwill recognized represents expected synergies from combining the operations of the Company with Smith Transport, as well as other intangible assets that did not meet the criteria for separate recognition.

Goodwill and intangible assets recognized in the transaction are deductible for tax purposes.

the three months ended December 31, 2022, the Smith Transport goodwill asset decreased by $ 1.8 million as a result of further valuation analysis of the intangible assets.

The assets and liabilities associated with Smith Transport were recorded at their fair values as of the acquisition date and the amounts are as follows:

(in thousands)

Trade and other accounts receivable $ 32,300

Other current assets 6,238

Property and equipment 68,196

Operating lease right of use assets 26,661

Other non-current assets 4,079

Intangible assets 29,902

Goodwill 40,297

Total assets 207,673

Accounts payable and accrued expenses ( 7,917 )

Insurance accruals ( 4,263 )

Long-term debt ( 11,424 )

Finance lease liabilities ( 35,359 )

Operating lease liabilities ( 26,661 )

Net cash paid $ 122,049

On August 31, 2022, Buyer and Heartland Express, Inc., as guarantor, entered into a Stock Purchase Agreement to acquire Contract Freighters (CFI), and related entities, from a subsidiary of TFI International, Inc.

CFI is a truckload carrier headquartered in Joplin, Missouri, providing asset-based dry van and temperature-controlled truckload transportation services, and asset-light logistics services in Mexico.

Pursuant to the CFI Stock Purchase Agreement, the Buyer acquired outstanding equity of CFI and related entities (the “CFI Transaction”).

The Buyer's purchase price of $ 560.6 million includes total cash consideration and bank financing obtained for the purchase of CFI and to facilitate negotiated terms of the CFI Stock Purchase Agreement.

These terms included the funding to eliminate risk associated with pre-acquisition accident and workers compensation claims, cash on hand at closing, and net working capital, subject to purchase accounting adjustments including final valuation of intangibles.

The adjusted purchase price consideration was $ 558.6 million as a result of net adjustments for cash on hand, net working capital and valuation of pre-acquisition accident and workers compensation claims of $ 2.0 million.

Gross cash paid in transaction was $ 560.6 million.

Net cash paid was $553.8 million after consideration of $ 6.8 million of CFI cash on the date of acquisition.

Gross cash paid was funded out of the Company’s available cash and bank financing obtained to facilitate the transaction.

The CFI Stock Purchase Agreement contains customary representations, warranties, covenants, escrow, and indemnification provisions.

The results of the CFI acquired business have been included in the consolidated financial statements since the date of acquisition and represented 43.0 % of consolidated total assets as of December 31, 2022, and represented 21.6 % of operating revenue for the twelve months ended December 31, 2022.

The following unaudited pro forma consolidated results of operations for the year ended December 31, 2021 and 2022 assume that the acquisition of CFI occurred as of January 1, 2021.

Year ended Year ended

December 31, 2021 December 31, 2022

(in thousands) (in thousands)

Operating Revenue $ 1,152,412 $ 1,394,552

Net Income $ 83,219 $ 174,684

The allocation of the purchase price is detailed in the table below.

The final purchase price allocation remains subject to other purchase accounting adjustments which may be identified, such as the final valuation of intangible assets, working capital adjustments, and income taxes, and therefore may differ materially from that reflected below.

The goodwill recognized represents expected synergies from combining the operations of the Company with CFI, as well as other intangible assets that did not meet the criteria for separate recognition.

Goodwill and intangible assets recognized in the transaction are deductible for tax purposes.

During the three months ended December 31, 2022, the CFI goodwill asset increased by $ 5.7 million as a result of further valuation analysis, primarily associated with adjusted insurance reserves and deferred taxes net of the purchase price consideration adjustment for cash on hand, net working capital and valuation of pre-acquisition accident and workers compensation claims.

The assets and liabilities associated with CFI were recorded at their fair values as of the acquisition date and the amounts are as follows:

(in thousands)

Trade and other accounts receivable $ 74,740

Other current assets 13,054

Property and equipment 461,147

Other non-current assets 306

Deferred income taxes 2,018

Intangible assets 55,097

Goodwill 112,083

Total assets 718,445

Accounts payable and accrued expenses ( 47,819 )

Insurance accruals ( 1,621 )

Income taxes payable ( 765 )

Deferred income taxes ( 116,506 )

Purchase consideration net of cash on hand 551,734

Purchase adjustment receivable from seller 2,069

Net cash paid $ 553,803

Acquisition related expenses of $ 2.3 million related to both the Smith Transport and CFI acquisitions are included in the consolidated statement of comprehensive income for the twelve months ended December 31, 2022.

Intangible Assets and Goodwill

All intangible assets determined to have finite lives are amortized over their estimated useful lives.

The useful life of an intangible asset is the period over which the asset is expected to contribute directly or indirectly to future cash flows.

There was no change in the gross amount of identifiable intangible assets during the twelve months ended December 31, 2021.

As a result of the acquisitions of Smith Transport and CFI there was a $ 85.0 million increase in the gross intangible assets made up of $ 53.4 million finite lived intangible assets and $ 31.6 million of indefinite lived intangible assets during the twelve months ended December 31, 2022.

The increase in gross indefinite lived intangible assets is associated with the Smith Transport and CFI trade names, while the intangible assets for customer relationships and covenants not to compete have finite lives.

The majority of change in gross finite lived intangible assets is the $ 52.8 million of customer relationship intangible assets, including $ 21.2 million from Smith Transport and $ 31.6 million from CFI.

Amortization expense of $ 3.7 million, $ 2.4 million and $ 2.4 million for the twelve months ended December 31, 2022, 2021 and 2020, respectively, was included in depreciation and amortization in the consolidated statements of comprehensive income.

Intangible assets subject to amortization consisted of the following at December 31, 2022 and 2021:

Amortization period (years) Gross Amount Accumulated Amortization Net intangible assets

Amortization period (years) Gross Amount Accumulated Amortization Net finite intangible assets

(in thousands)

3 unchanged sentences

$ 94,575 $ 22,498 $ 72,077

Amortization period (years) Gross Amount Accumulated Amortization Net intangible assets

Amortization period (years) Gross Amount Accumulated Amortization Net finite intangible assets

(in thousands)

3 unchanged sentences

$ 41,200 $ 18,845 $ 22,355

Change in carrying amount of goodwill:

Goodwill (in thousands)

Balance at December 31, 2021 $ 168,295

Acquisition May 31, 2022 40,297

Acquisition August 31, 2022 112,083

Balance at December 31, 2022 $ 320,675

Future amortization expense for intangible assets is estimated at $ 5.8 million for 2023, $ 5.5 million for 2024, $ 5.5 million for 2025, $ 5.5 million for 2026, and $ 5.5 million for 2027.

There were no changes in the carrying amount of goodwill during the twelve months ended December 31, 2021 and 2020.

Long-Term Debt

In November 2013, Heartland Express, Inc.

of Iowa, (the "Borrower"), a wholly owned subsidiary of the Company, entered into a Credit Agreement with Wells Fargo Bank, National Association, (the “Bank”).

On August 31, 2021, the Borrower and the Bank entered into the Second Amendment to this Credit Agreement.

The Second Amendment (i) provides for a $ 25.0 million Revolver, which may be used for working capital, equipment financing, permitted acquisitions, and general corporate purposes, (ii) provides an uncommitted accordion feature, which allows the Company a one-time request, at the discretion of the Bank, to increase the Revolver by up to an additional $ 100.0 million, (iii) decreases the letter of credit subfeature of the Credit Agreement from $ 30.0 million to $ 20.0 million, and (iv) extends the maturity of the Existing Credit Agreement to August 31, 2023, subject to the Borrower’s ability to terminate the commitment at any time at no additional cost to the Borrower.

The Credit Agreement is unsecured, with a negative pledge against all assets of our consolidated group, except for debt associated with permitted acquisitions, new purchase-money debt and capital lease obligations as described in the Credit Agreement.

Interest on outstanding indebtedness under the Second Amendment is based on the Secured Overnight Financing Rate (“SOFR”) plus a spread based on the Company’s consolidated funded debt to adjusted EBITDA ratio.

A non-usage fee is payable on the unused portion of the Revolver based on the Company’s consolidated funded debt to adjusted EBITDA ratio.

The Credit Agreement contains customary financial covenants including, but not limited to, (i) a maximum adjusted leverage ratio of 2 :1, measured quarterly on a trailing twelve month basis, (ii) a minimum net income requirement of $ 1.00 , measured quarterly on a trailing twelve month basis, (iii) a minimum tangible net worth of $ 250.0 million requirement, measured quarterly, and (iv) limitations on other indebtedness and liens.

The Credit Agreement also includes customary events of default, covenants, representations and warranties, and indemnification provisions.

We were in compliance with the respective financial covenants as of and for the years ended December 31, 2021 and December 31, 2020.

We had no long term debt outstanding at December 31, 2021 or 2020.

Outstanding letters of credit associated with the revolving line of credit at December 31, 2021 were $ 8.5 million compared to $ 11.5 million at December 31, 2020.

As of December 31, 2021, availability for future borrowing under the Credit Agreement was $ 16.5 million compared to $ 88.5 million at December 31, 2020.

In conjunction with the acquisition of CFI on August 31, 2022, (the “CFI Closing Date”), Heartland entered into a $ 550.0 million unsecured credit facility which included a $ 100.0 million revolving line of credit (“Revolving Facility”) and $ 450.0 million in term loans (“Term Facility” and, together with the Revolving Facility, the “Credit Facilities”).

The Credit Facilities includes a consortium of lenders, including joint bookrunners JPMorgan Chase Bank, N.A.

and Wells Fargo Bank, National Association (“Wells Fargo”).

The Credit Facilities replaced the previous credit arrangements in place for the Company which consisted of a November 2013 Credit Agreement with Wells Fargo, along with an asset-based credit facility with Citizens Bank of Pennsylvania that was assumed as part of the acquisition of Smith Transport on May 31, 2022.

The full amount of the Term Facility was made in a single draw on August 31, 2022 and amounts borrowed under the Term Facility that are repaid or prepaid may not be reborrowed.

The Term Facility will amortize in quarterly installments beginning 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.

The Revolving Facility consists of a five-year revolving credit facility with aggregate commitments in an amount equal to $ 100.0 million, of which up to $ 50.0 million is available for the issuance of letters of credit, and including a swingline facility in an amount equal to $ 20.0 million.

The Revolver will mature and the commitments thereunder will terminate on the date that is five years after the CFI Closing Date.

Amounts repaid under the Revolving Facility may be reborrowed.

The Credit Facilities include an uncommitted accordion feature pursuant to which the Company may request up to $ 275.0 million in incremental revolving or term loans, subject to lender approvals.

The indebtedness, obligations, and liabilities under the Credit Facilities are unconditionally guaranteed, jointly and severally, on an unsecured basis by the Company, Borrower, and certain other subsidiaries of the Company.

The Borrower may voluntarily prepay outstanding loans under the Credit Facilities in whole or in part at any time without premium or penalty, subject to payment of customary breakage costs in the case of SOFR rate loans.

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.

Outstanding borrowings under the Credit Facilities will accrue interest, at the option of the Borrower, at a per annum rate of (i) for an “ABR Loan”, the alternate base rate (defined as the interest rate per annum equal to the highest of (a) the variable rate of interest announced by the administrative agent as its “prime rate”, (b) 0.50 % above the Federal Funds Rate, (c) the Term SOFR for an interest period of one-month plus 1.1 %, or (d) 1.00 %) plus the applicable margin or (ii) for a “SOFR Loan”, the Term SOFR Rate for an interest period of one, three or six-months as selected by Company plus the applicable margin.

The applicable margin for ABR Loans ranges from 0.250 % to 0.875 % and the applicable margin for SOFR Loans ranges from 1.250 % to 1.875 %, depending on the Company’s net leverage ratio.

One of the nine consortium lenders is West Bank.

Our CEO has served on the Board of Directors of West Bancorporation and West Bank, a wholly owned subsidiary of West Bancorporation, Inc., the financial institution that holds a portion of our deposits, since 2013.

We have had a banking relationship with West Bank since 2003.

West Bank's share of the Revolving Facility is $ 8.2 million while the West Bank share of the initial Term Facility was $ 36.8 million.

We had $ 375.0 million outstanding on the Term Facility and no outstanding under the Revolving Facility at December 31, 2022.

Outstanding letters of credit associated with the Revolving Facility at December 31, 2022 were $ 13.9 million.

As of December 31, 2022, the Revolving Facility available for future borrowing was $ 86.1 million.

As of December 31, 2022 the weighted average interest rate on outstanding borrowings under the Credit Facilities was 5.6 %.

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 $ 40.3 million was outstanding at December 31, 2022, (the "Smith Debt").

The Smith Debt has $ 9.7 million of outstanding principal and is made up of installment notes with a weighted average interest rate of 4.4 % at December 31, 2022, due in monthly installments with final maturities at various dates ranging from November 2023 to January 2029, secured by related revenue equipment.

The remaining Smith Debt of $ 30.6 million are finance lease obligations with a weighted average interest rate of 3.9 % at December 31, 2022, due in monthly installments with final maturities at various dates ranging from July 2023 to April 2026 with the weighted average remaining lease term of 2.3 years.

The annual maturities of long term debt are as follows:

(in thousands)

2024 $ 10,550

2025 $ 35,585

2026 $ 46,919

2027 $ 289,095

Thereafter $ 580

Total outstanding principle $ 384,738

unamortized debt issuance costs $ ( 2,297 )

amounts payable within one year $ ( 2,009 )

Total long-term debt $ 380,432

Lease Obligations

In May 2022, the Company completed a sale of an owned terminal property for a $ 73.2 million gain.

In a separate transaction related to the sale, we entered into a lease agreement with a base term of two years plus a five-year renewal option with the purchaser.

The right-of-use asset associated with the leased terminal facility is $ 3.3 million as of December 31, 2022.

Smith Transport has revenue equipment operating lease right-of-use assets from leases entered into before the May 31, 2022 acquisition.

These right-of-use operating lease assets have a total balance of $ 17.6 million as of December 31, 2022.

The operating leases have a weighted average interest rate of 3.8 % at December 31, 2022, due in monthly installments with final maturities at various dates ranging from February 2023 to March 2026 with the weighted average remaining lease term of 1.7 years.

Smith Transport also has related party operating leases with the founder of Smith Transport, where Smith Transport is both a lessor and lessee of certain real estate properties.

These leases represent an insignificant portion of the right-of-use lease assets discussed above.

Long-Term Debt for additional details on the finance leases.

Operating lease cost is recorded in rent and purchased transportation, finance lease interest expense is recorded in interest expense, and finance lease equipment depreciation is recorded in depreciation and amortization within the consolidated statements of comprehensive income.

The components of the Company's lease cost were as follows:

2022 2021 2020

(in thousands)

Operating lease cost $ 9,718 $ — $ —

Finance lease interest expense 772 — —

Finance lease equipment depreciation 4,733 — —

Total finance lease cost $ 5,505 $ — $ —

Total operating and finance lease cost $ 15,223 $ — $ —

Our future minimum lease payments as of December 31, 2022, are summarized as follows by lease category:

(in thousands) Operating Finance

2023 12,498 12,961

2024 6,193 8,231

2025 3,008 7,511

2026 151 3,901

Thereafter — —

Total minimum lease payments $ 21,850 $ 32,604

future payment amount for interest 896 2,037

Present value of minimum lease payments $ 20,954 $ 30,567

current portion 12,001 11,937

Lease obligations, long-term $ 8,953 $ 18,630

Auto Liability and Workers’ Compensation Insurance Accruals

We act as a self-insurer for auto liability, defined as including property damage, personal injury, or cargo based on defined insurance retention of $ 0.1 million under our Millis policy prior to April 1, 2020 and $ 1.0 million subsequent to April 1, 2020, or $ 2.0 million under our Heartland policy, for any individual claim based on the insured party, accident date, and circumstances of the loss event.

Effective April 1, 2022 Millis is covered under the Heartland policy with retention of $ 2.0 million for any individual claim based on the insured party, accident date, and circumstances of the loss event.

Within the Heartland policy, there is an additional $ 1.0 million aggregate self-insurance corridor for claims between $ 2.0 million and $ 3.0 million.

6 unchanged sentences

For both policies prior to April 1, 2020, we retain any liability in excess of $ 60.0 million.

We act as a self-insurer for workers’ compensation based on defined insurance retention of $1.0 million under our Heartland policy, which includes Millis, effective July 1, 2020.

The entities acquired during 2022 include features which limit pre-acquisition exposure for the Company.

Prior to the acquisition and through June 30, 2022 Smith Transport was a member of a group captive insurance program with retention of $ 0.1 million.

Coverage was moved from the group captive to our Smith policy with a $ 0.5 million retention.

The Smith policy is covered by the Heartland policy excess insurance for liabilities in excesses of the Smith Policy deductible.

The pre-acquisition claims from the CFI acquisition are retained by the seller while post acquisition claims are covered with the Heartland policy.

We act as a self-insurer for workers’ compensation based on defined insurance retention of $1.0 million under our Heartland policy, which includes Millis, effective July 1, 2020 and entities acquired in 2022.

Millis had defined insurance retention of $ 0.5 million from August 26, 2019 through July 1, 2020.

1 unchanged sentence

The State of Iowa initially required us to deposit $ 0.7 million into a trust fund as part of the self-insurance program.

As of December 31, 2021 and 2020 total deposits in this account were $ 1.5 million.

As of December 31, 2022 and 2021 total deposits in this account were $ 0.8 million and $ 1.5 million, respectively.

This deposit is in municipal bonds classified as held-to-maturity and is recorded in other non-current assets on the consolidated balance sheets.

In addition, we have provided insurance carriers with letters of credit totaling approximately $ 10.0 million in connection with our liability and workers’ compensation insurance arrangements and self-insurance requirements of the Federal Motor Carrier Safety Administration.

In addition, we have provided insurance carriers with letters of credit totaling $ 15.4 million in connection with our liability and workers’ compensation insurance arrangements and self-insurance requirements of the Federal Motor Carrier Safety Administration.

There were no outstanding balances due on any letters of credit at December 31, 2022 or 2021.

Accident and workers’ compensation accruals include the estimated settlements, settlement expenses and an estimate for claims incurred but not yet reported for property damage, personal injury and public liability losses from vehicle accidents and cargo losses as well as workers’ compensation claims for amounts not covered by insurance.

Accident and workers’ compensation accruals are based upon individual case estimates, including reserve development, and estimates of incurred-but-not-reported losses based upon our own historical experience and industry claim trends.

Accident and workers’ compensation

accruals are based upon individual case estimates, including reserve development, and estimates of incurred-but-not-reported losses based upon our own historical experience and industry claim trends.

Since the reported liability is an estimate, the ultimate liability may be more or less than reported.

12 unchanged sentences

Indirect tax benefits of unrecognized tax benefits 1,206 981

Other 227 221

Total gross deferred tax assets 21,720 18,458

20 unchanged sentences

State 9,657 7,068 4,472

Foreign 195 — —

41,803 32,639 15,307

2 unchanged sentences

State 2,005 ( 1,477 ) 7,412

Foreign ( 18 ) — —

5,704 ( 5,869 ) 8,148

9 unchanged sentences

Uncertain income tax penalties and interest, net ( 226 ) ( 266 ) ( 73 )

Foreign Rate Differential 58 — —

Other ( 311 ) 239 224

2 unchanged sentences

Of this amount, $ 4.5 million and $ 3.7 million represents the amount of unrecognized tax benefits that, if recognized, would impact our effective tax rate as of December 31, 2022 and December 31, 2021, respectively.

Unrecognized tax benefits were a net decrease of $ 0.2 million and $ 0.1 million during the years ended December 31, 2021 and 2020, respectively, due mainly to the expiration of certain statutes of limitation and reductions to prior year tax positions, net of current year additions with respective states.

This had the effect of decreasing the effective state tax rate in 2021 and 2020.

Unrecognized tax benefits were a net increase of $ 1.1 million and a net decrease of $ 0.2 million during the years ended December 31, 2022 and 2021, respectively.

The increase in 2022 is the result of non-recurring transactions occurring in 2022 that did not occur in 2021 more than offsetting the reduction to the liability due to the expiration of certain statutes of limitation and reductions to prior year tax positions, net of current year additions with respective states.

This had the effect of increasing the effective rate in 2022 and decreasing the effective rate in 2021.

The total net amount of accrued interest and penalties for such unrecognized tax benefits was $ 0.7 million and $ 0.8 million at December 31, 2022 and December 31, 2021, respectively, and is included in income taxes payable in the consolidated balance sheets.

Net interest and penalties included in income tax expense for the years ended December 31, 2021, 2020 and 2019 was a benefit of approximately zero , $ 0.1 million, and zero , respectively.

Net interest and penalties included in income tax expense for the years ended December 31, 2022, 2021 and 2020 was an expense of approximately $ 0.1 million, zero , and a benefit of approximately $ 0.1 million, respectively.

Income tax expense is increased each period for the accrual of interest on outstanding positions and penalties when the uncertain tax position is initially recorded.

6 unchanged sentences

Additions based on tax positions related to current year 1,921 446

Additions for tax positions of prior years 131 —

Reductions for tax positions of prior years — ( 179 )

11 unchanged sentences

We have a stock repurchase program with 6.6 million shares remaining authorized for repurchase as of December 31, 2022, following the additional authorization of 3.0 million shares by our Board of Directors on August 20, 2021.

There were 1.8 million shares repurchased in the open market during the year ended December 31, 2021, 1.5 million in 2020, and none in 2019.

Repurchases are expected to continue from time to time, as determined by market conditions, cash flow requirements, securities

law limitations, and other factors, until the number of shares authorized have been repurchased, or until the authorization is terminated.

There were no shares repurchased in the open market during the year ended December 31, 2022, 1.8 million in 2021, and 1.5 million in 2020.

Repurchases are expected to continue from time to time, as determined by market conditions, cash flow requirements, securities law limitations, and other factors, until the number of shares authorized have been repurchased, or until the authorization is terminated.

The share repurchase authorization is discretionary and has no expiration date.

7 unchanged sentences

The 2011 Plan made available up to 0.9 million shares for the purpose of making restricted stock grants to our eligible officers and employees.

The 2011 Plan has 0.1 million shares that remain available for the purpose of making restricted stock grants at December 31, 2021.

The 2011 Plan has no shares that remain available for the purpose of making restricted stock grants at December 31, 2022.

In May 2021, at the 2021 Annual Meeting of Stockholders, the approval of the Heartland Express, Inc.

1 unchanged sentence

The 2021 Plan made available up to 0.6 million shares for the purpose of making restricted stock grants to our eligible employees, directors and consultants.

2,000 shares from the 2021 Plan were granted and vested during the year ended December 31, 2021.

The 2021 Plan has 0.6 million shares that remain available for the purpose of making restricted stock grants at December 31, 2022.

There were no shares granted during the period 2011 to 2019 that remain unvested at December 31, 2022.

3 unchanged sentences

There were no significant assumptions made in determining fair value.

Compensation expense associated with restricted stock awards was $ 1.1 million, $ 2.1 million, and $ 2.1 million for the years ended December 31, 2021, 2020, and 2019, respectively.

Compensation expense associated with restricted stock awards was $ 1.4 million, $ 1.1 million, and $ 2.1 million for the years ended

December 31, 2022, 2021, and 2020, respectively.

Unrecognized compensation expense was $ 0.4 million at December 31, 2022 which will be recognized over a weighted average period of 0.7 years.

24 unchanged sentences

The Retirement Savings Plans provide for a discretionary profit sharing contribution to non-driver employees and a matching contribution of a discretionary percentage to driver employees ("Heartland Plan").

Following the acquisition of Millis Transfer on August 26, 2019 a retirement savings plan ("Millis Transfer Plan") was created.

The Millis Transfer Plan has the aforementioned characteristics of the Heartland Plan, but is for Millis Transfer employees.

Acquired entities also have retirement savings plans that generally have the aforementioned characteristics of the Heartland Plan, but are for employees of the respective entities.

Our contributions to the Retirement Savings Plans totaled approximately $ 2.2 million, $ 2.2 million, and $ 2.3 million, for the years ended December 31, 2022, 2021 and 2020, respectively.

15 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures