What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-02-28 compared with 2023-03-01 · 104 added, 144 removed, 814 unchanged (23% of the section changed)

7 unchanged sentences

Based on this assessment, we have concluded that our internal control over financial reporting was effective as of December 31, 2023.

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, 2023 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 – 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.

Changes in Internal Control Over Financial Reporting – Except for the design, implementation, and testing of Smith Transport and CFI internal controls, 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, 2023 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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1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Clawback Policy.

101.INS XBRL Instance Document - the instance document does not appear in the interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

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HEARTLAND EXPRESS, INC.

March 1, 2023 By:

February 28, 2024 By:

/s/ Michael J.

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/s/ Michael J.

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

Gerdin Chairman, President, Chief Executive Officer and Director (Principal Executive Officer) February 28, 2024

/s/ Christopher A.

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

Strain Vice President of Finance, Treasurer, and Chief Financial Officer (Principal Accounting and Financial Officer) February 28, 2024

Christopher A.

/s/ Benjamin J.

Allen Director March 1, 2023

Gordon Director March 1, 2023

Millis Director March 1, 2023

Allen Director February 28, 2024

/s/ Brenda M.

Lantz Director February 28, 2024

Millis Director February 28, 2024

/s/ Brenda S.

Neville Director March 1, 2023

Pratt Director March 1, 2023

Neville Director February 28, 2024

Pratt Director February 28, 2024

/s/ Michael J.

Sullivan Director March 1, 2023

Sullivan Director February 28, 2024

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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, 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, 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.

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, 2023, 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 28, 2024 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 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 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

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:

(1) relates 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 a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Heartland auto liability claims 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.

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The Company accrues for the cost of the self-insured portion of unpaid claims by evaluating the nature and severity of individual claims and by estimating future claims development based upon historical development trends.

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.

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, including the inherent difficulty in estimating the severity of the claims and the potential judgment or settlement amount to dispose of the claim.

We identified the estimation of the Heartland auto liability claims accrual subject to self-insured retention of $2.0 million or greater as a critical audit matter.

Auto liability unpaid claims 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 the effectiveness of controls over auto liability claims, including the completeness and accuracy of claims 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

March 1, 2023

February 28, 2024

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, 2023, 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, 2022, and our report dated March 1, 2023 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, 2023, and our report dated February 28, 2024 expressed an unqualified opinion on those financial statements.

Basis for opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting (“Management’s Report”).

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

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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

7 unchanged sentences

Tulsa, Oklahoma

March 1, 2023

February 28, 2024

HEARTLAND EXPRESS, INC.

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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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Sold revenue equipment and property in other current assets $ 2,516 $ 1,558 $ 1,512

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

Right-of-use assets obtained in exchange for operating lease liabilities $ 8,236 $ 3,345 $ —

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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.

("Heartland Express"), and Midwest Holding Group, LLC and Millis Transfer, LLC ("Millis Transfer"), and Smith Transport, LLC and Franklin Logistics, LLC ("Smith Transport"), and CFI entities, Transportation Resources, Inc.

and Contract Freighters, Inc.

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

Effective December 31, 2023, Smith Trucking, Inc.

was merged into Smith Transport, Inc.

Further, effective December 31, 2023 Smith Transport, Inc.

and Franklin Logistics, Inc.

were converted to Smith Transport, LLC and Franklin Logistics, LLC, respectively.

On May 31, 2022, Heartland Express, Inc.

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

As a result of the foregoing, we have determined that we have one segment, consistent with the authoritative accounting guidance on disclosures about segments of an enterprise and related information.

As a result of the foregoing, we have determined that we have one reportable segment, consistent with the authoritative accounting guidance on disclosures about segments of an enterprise and related information.

Cash and Cash Equivalents

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

We review the adequacy of our allowance for doubtful accounts on a monthly basis.

We review the adequacy of our allowance for credit losses on a monthly basis.

We are aggressive in our collection efforts resulting in a low number of write-offs annually.

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We will use the necessary legal recourse to recover as much of the receivable as is practical under the law.

Allowance for doubtful accounts was $ 3.3 million and $ 1.1 million at December 31, 2022 and 2021, respectively.

Allowance for credit losses was $ 2.7 million and $ 3.3 million at December 31, 2023 and 2022, respectively.

Prepaid Tires, Property, Equipment, and Depreciation

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Advertising expense was $ 5.3 million, $ 4.8 million, and $ 2.2 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Goodwill is not subject to amortization and is tested for impairment annually and whenever events or changes in circumstances indicate that impairment may have occurred.

Goodwill is not subject to amortization and is tested for impairment, together with indefinite lived intangible assets, annually and whenever events or changes in circumstances indicate that impairment may have occurred.

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

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As of September 30, 2023, 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.

The significant qualitative factors considered include the Company’s revenue growth, continued earnings and strong cash flow.

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

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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 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, 2023, 2022, and 2021.

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New Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments".

This update requires measurement and recognition of expected versus incurred credit losses for financial assets held.

ASU 2016-13 is effective for annual periods beginning after December 15, 2019, and interim periods therein.

We have adopted this standard effective January 1, 2020 and the impact of adoption of the standard did not have a material impact on our financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

“Simplifying the Accounting for Income Taxes.” The ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The ASU also clarifies and amends existing guidance to improve consistent application among reporting entities.

This ASU is effective for fiscal years beginning after December 15, 2020, including interim periods within that reporting period;

however, early adoption is permitted.

We have adopted this standard effective January 1, 2021 and the impact of adoption of the standard did not have a material impact on our financial statements.

In November 2023, the FASB issued Update 2023-07, "Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures".

The amendments in the update improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The amendments do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments.

The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The Company is currently evaluating the impact of adopting this new standard.

In December 2023, the FASB issued Update 2023-09, "Income Taxes (Topic 740):

Improvements to Income Tax Disclosures".

The amendments in the update improve income tax disclosures primarily related to the rate reconciliation and income taxes paid information as well as the effectiveness of certain other income tax disclosures.

The new standard is effective for annual periods beginning after December 15, 2024.

The Company is currently evaluating the impact of adopting this new standard.

Concentrations of Credit Risk and Major Customers

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Our five largest customers accounted for approximately 26 % and 23 % of gross accounts receivable as of December 31, 2023 and 2022, respectively.

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

There were no customers that exceeded 10 % of operating revenues for the years ended December 31, 2023 and 2022, 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.

Revenue Recognition

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 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 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 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.

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.

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.

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

Total revenues recorded were $ 1,207.5 million, $ 968.0 million, and $ 607.3 million for the twelve months ended December 31, 2023, 2022, and 2021, respectively.

Fuel surcharge revenues were $ 173.8 million, $ 169.2 million, and $ 76.1 million for the twelve months ended December 31, 2023, 2022, and 2021, respectively.

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

As a result of the CFI acquisition we now outsourced certain loads to third-party carriers in the U.S.

As of December 31, 2023 the Company is only outsourcing certain loads to third-party carriers in Mexico.

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

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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.

The Buyer's purchase price of $ 169.4 million includes total cash consideration and assumed indebtedness of Smith Transport..

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

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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:

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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.

On August 31, 2022, Buyer and Heartland Express, Inc., as guarantor, entered into a Stock Purchase Agreement to acquire 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.

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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.

Gross cash paid in the 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.

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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.

During the twelve months ended December 31, 2023, the CFI goodwill asset increased by $ 1.9 million as a result of further valuation analysis with the finalization of purchase accounting for the CFI acquisition.

The purchase accounting adjustment is primarily associated with equipment valuation determinations made upon finalization of post acquisition equipment existence and condition analysis.

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

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Intangible Assets and Goodwill

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.

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.

The $ 98.5 million of other intangibles, net recorded in the consolidated balance sheet at December 31, 2023 includes $ 31.6 million of indefinite lived trade name intangible assets, not subject to amortization, along with $ 66.9 million finite lived intangible assets, net.

There was no change in the gross amount of identifiable intangible assets during the twelve months ended December 31, 2023.

Amortization expense of $ 5.2 million, $ 3.7 million and $ 2.4 million for the twelve months ended December 31, 2023, 2022 and 2021, respectively, was included in depreciation and amortization in the consolidated statements of comprehensive income.

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Balance at December 31, 2022 $ 320,675

Acquisition May 31, 2022 40,297

Acquisition August 31, 2022 112,083

Purchase accounting 1,922

Balance at December 31, 2023 $ 322,597

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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 Term Facility amortizes in quarterly installments which began in September 2023, at 5% per annum through June 2025 and 10% per annum from September 2025 through June 2027, with the balance due on the date that is five years from the CFI Closing Date.

Based on debt repayments made through December 31, 2023, required minimum payments have been covered through March 31, 2027.

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.

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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 December 31, 2023 and have been in compliance since the inception of the Credit Facilities.

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.

We had $ 275.0 million outstanding on the Term Facility and no outstanding borrowings under the Revolving Facility at December 31, 2023.

Outstanding letters of credit associated with the Revolving Facility at December 31, 2023 were $ 12.0 million.

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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 $ 26.2 million was outstanding at December 31, 2023, (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 Smith Debt has $ 7.7 million of outstanding principal and is made up of installment notes with a weighted average interest rate of 4.4 % at December 31, 2023, due in monthly installments with final maturities at various dates ranging from March 2024 to January 2029, secured by related revenue equipment.

The remaining Smith Debt of $ 18.5 million are finance lease obligations with a weighted average interest rate of 3.9 % at December 31, 2023, due in monthly installments with final maturities at various dates ranging from October 2024 to April 2026 with the weighted average remaining lease term of 1.7 years.

The annual maturities of long term debt are as follows:

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2027 $ 276,589

2025 $ 35,585

2026 $ 46,919

2027 $ 289,095

Thereafter $ 11

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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.

We have provided notice that we will not be exercising the five-year renewal option having entered into a separate lease agreement for a facility better suited to our current operations.

During 2023 we sold multiple properties for a combined $ 25.6 million gain.

In separate transactions related to the respective sales, we entered into operating lease agreements, each with a base term of two years.

The right-of-use assets associated with terminal leases was $ 9.4 million and $ 3.3 million as of December 31, 2023 and 2022, respectively.

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.

These right-of-use operating lease assets have a total balance of $ 8.1 million and $ 17.6 million as of December 31, 2023 and 2022, respectively.

The equipment and property operating leases have a weighted average interest rate of 4.8 % at December 31, 2023, due in monthly installments with final maturities at various dates ranging from January 2024 to April 2027 with the weighted average remaining lease term of 2.0 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.

See Note 6 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.

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2026 1,587 3,840

2026 151 3,901

Thereafter — —

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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 from April 1, 2020 through April 1, 2022.

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.

For both Heartland and Millis claims, liabilities in excess of these deductibles are covered by insurance up to $ 60.0 million including retention of 50% of exposure from $ 5.0 million to $ 10.0 million.

We act as a self-insurer for auto liability, defined as including property damage, personal injury, or cargo based on defined insurance retention.

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 based on the insured party, accident date, and circumstances of the loss event subject to a $ 3.5 million corridor for any one accident or combination of accidents that exceed $ 3.0 million.

Prior to the April 2023 renewal, Heartland Express, Millis Transfer, and CFI had a retention limit of $ 2.0 million and Smith Transport had a retention limit of $ 0.5 million.

In addition to the $ 2.0 million base retention limit, Heartland Express, Millis Transfer, and CFI were subject to a $ 1.0 million corridor for any one accident or combination of accidents that exceeded $ 2.0 million.

For the April 2023 renewal, liabilities in excess of the $ 3.0 million deductible and $ 3.5 million corridor are covered by insurance up to $ 80.0 million.

We retain any liability in excess of $ 80.0 million.

Prior to the April 2023 renewal, our excess limit was $ 60.0 million, including retention of 50% of exposure from $ 5.0 million to $ 10.0 million.

Furthermore, under the April 2023 renewal, our premiums 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.

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.

We act as a self-insurer for property damage to our tractors and trailers.

Prior to April 1, 2020, Heartland and Millis claims in excess of insurance retention had different coverage features.

For the Heartland policy, claims in excess of the deductible are covered up to $ 60.0 million.

For the Millis policy, claims subsequent to August 26, 2019 and prior to April 1, 2020, we retain liability between $ 3.0 million and $ 10.0 million, while liabilities in excess of these amounts are covered by insurance up to $ 60.0 million.

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

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.

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

Liabilities in excess of insurance retention limits are covered by insurance.

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As of December 31, 2023 and 2022 total deposits in this account were $ 0.9 million and $ 0.8 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.

This deposit is made up of $ 0.3 million in municipal bonds classified as held-to-maturity and $ 0.6 million of other investments stated at market value as of December 31, 2023 while the entire $ 0.8 million deposit was held in municipal bonds as of December 31, 2022.

The deposit is recorded in other non-current assets on the consolidated balance sheets.

In addition, we have provided insurance carriers with letters of credit totaling $ 13.5 million in connection with our liability and workers’ compensation insurance arrangements and self-insurance requirements of the Federal Motor Carrier Safety Administration.

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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.

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(in thousands)

Allowance for doubtful accounts $ 772 $ 261

Allowance for credit losses $ 672 $ 772

Accrued expenses 4,964 6,383

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Prepaid expenses ( 3,549 ) ( 4,617 )

( 228,012 ) ( 108,429 )

Net deferred tax liability $ ( 206,292 ) $ ( 89,971 )

Total gross deferred tax liability ( 207,508 ) ( 228,012 )

Net deferred tax liabilities $ ( 187,627 ) $ ( 206,292 )

The deferred tax amounts above have been classified in the accompanying consolidated balance sheets at December 31, 2023 and 2022 as follows:

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Of this amount, $ 4.4 million and $ 4.5 million represents the amount of unrecognized tax benefits that, if recognized, would impact our effective tax rate as of December 31, 2023 and December 31, 2022, respectively.

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.

Unrecognized tax benefits were a net decrease of $ 0.2 million and a net increase of $ 1.1 million during the years ended December 31, 2023 and 2022, respectively.

The increase in 2022 is the result of non-recurring transactions occurring in 2022 that did not occur in 2023 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.

This had the effect of increasing the effective rate in 2022.

The total net amount of accrued interest and penalties for such unrecognized tax benefits was $ 0.7 million and $ 0.7 million at December 31, 2023 and December 31, 2022, 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, 2022, 2021 and 2020 was an expense of approximately $ 0.1 million, zero , and a benefit of approximately $ 0.1 million, respectively.

Net interest and penalties included in income tax expense for the years ended December 31, 2023, 2022 and 2021 was an expense of approximately zero , $ 0.1 million, and approximately zero , 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.

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We have a stock repurchase program with 6.6 million shares remaining authorized for repurchase as of December 31, 2023, following the additional authorization of 3.0 million shares by our Board of Directors on August 20, 2021.

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.

There were no shares repurchased in the open market during the years ended December 31, 2023 and 2022 while 1.8 million shares were repurchased in 2021.

Repurchases are expected to continue from time to time, as determined by market conditions, cash flow requirements, securities law limitations, long-term debt balances, 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.

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There were no significant assumptions made in determining fair value.

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.

Compensation expense associated with restricted stock awards was $ 1.6 million, $ 1.4 million, and $ 1.1 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Unrecognized compensation expense was $ 0.5 million at December 31, 2023 which will be recognized over a weighted average period of 0.6 years.

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Description of Period Expense Accounts Deductions of Period

Allowance for doubtful accounts:

Allowance for credit losses:

Year ended December 31, 2023 $ 3,300 $ — $ — $ 600 $ 2,700

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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