HEARTLAND EXPRESS INC 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures – We have established disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) to ensure that material information relating to us, including our consolidated subsidiaries, is made known to the officers who certify our financial reports and to other members of senior management and the Board of Directors. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Accounting and Financial Officer), of the effectiveness of the design and operations of our disclosure controls and procedures. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2023. Management’s Annual Report on Internal Control Over Financial Reporting – Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. In making this assessment, our management used the criteria for effective internal control over financial reporting described in “Internal Control-Integrated Framework (2013),” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, we have concluded that our internal control over financial reporting was effective as of December 31, 2023. 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. 48 Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Accordingly, even effective internal control over financial reporting can only provide reasonable assurance of achieving its control objectives. 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 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. ITEM 9B. OTHER INFORMATION None. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS None. 49 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE 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 We have adopted a code of ethics known as the “Code of Business Conduct and Ethics” that applies to our employees including the principal executive officer, principal financial officer, controller, and persons performing similar functions. In addition, we have adopted a code of ethics known as “Code of Ethics for Senior Financial Officers” that applies to our senior financial officers, including our chief executive officer, chief financial officer, treasurer, controller, and other senior financial officers performing similar functions who have been identified by the chief executive officer. We make these codes 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. 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, 2023, in connection with the solicitation of proxies for the Company's 2024 Annual Meeting of Stockholders (the "2024 Proxy Statement"), and is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item will be included in the 2024 Proxy Statement, and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, AND RELATED STOCKHOLDER MATTERS 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. 50 The following table summarizes, as of December 31, 2023, 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)) (a) (b) (c) Equity compensation plan approved by stockholders 14,000 — — Total 14,000 — — Column (a) represents unvested restricted stock awards outstanding under the 2011 Plan as of December 31, 2023. The weighted average stock price on the date of grant for outstanding restricted stock awards was $15.95, 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, 2023. 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, 2023, information about the 2021 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)) (a) (b) (c) Equity compensation plan approved by stockholders 71,768 — 460,992 Total 71,768 — 460,992 Column (a) represents unvested restricted stock awards outstanding under the 2021 Plan as of December 31, 2023. The weighted average stock price on the date of grant for outstanding restricted stock awards was $14.63, 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, 2023. 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 2024 Proxy Statement, and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this Item will be included in the 2024 Proxy Statement, and is incorporated herein by reference. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required by this Item will be included in the 2024 Proxy Statement, and is incorporated herein by reference. 51 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES (a) 1. Financial Statements and Schedules. Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248 ) F- 1 Consolidated Balance Sheets - as of December 31, 2023 and 2022 F- 4 Consolidated Statements of Comprehensive Income - Years ended December 31, 2023, 2022 and 2021 F- 5 Consolidated Statements of Stockholders' Equity - Years ended December 31, 2023, 2022 and 2021 F- 6 Consolidated Statements of Cash Flows - Years ended December 31, 2023, 2022 and 2021 F- 7 Notes to Consolidated Financial Statements F- 9 2. Financial Statements Schedule Schedule II - Valuation and Qualifying Accounts and Reserves - Years ended December 31, 2023, 2022, and 2021 S- 1 Schedules not listed have been omitted because they are not applicable or are not required or the information required to be set forth therein is included in the Consolidated Financial Statements or Notes thereto. 3. Exhibits–The exhibits required by Item 601 of Regulation S-K are listed at paragraph (b) below. (b) Exhibits. The following exhibits are filed with this Form 10-K or incorporated herein by reference to the document set forth next to the exhibit listed below: 52 EXHIBIT INDEX 2.1 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. 2.2 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. 3.1 Articles of Incorporation, as amended. Incorporated by reference to Exhibit 3.1 to the Company’s Form 10-Q, for the quarter ended September 30, 2017. 3.2 Amended and Restated Bylaws. Incorporated by reference to Exhibit 3.2 to the Company’s Form 10-Q, for the quarter ended September 30, 2017. 4.1 Description of the Registrant's securities registered pursuant to Section 12 of the Securities Exchange Act of 1934. Incorporated by reference to Exhibit 4.1 to the Company's Form 10-K for the year ended December 31, 2019. 10.1 # Heartland Express, Inc. 2011 Restricted Stock Award Plan. Incorporated by reference to Appendix A to the Company’s Schedule 14-A filed June 13, 2011. 10.2 # Nonqualified Deferred Compensation Plan. Incorporated by reference to Exhibit 10.3 to the Company’s Form 10-K for the year ended December 31, 2006. 10.3 #* Form Award Notice under the 2021 Restricted Stock Award Plan. 10.4 # Heartland Express, Inc. 2021 Restricted Stock Award Plan. Incorporated by reference to Appendix A to the Company’s Schedule 14A filed April 2, 2021. 10.5 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. 21 * Subsidiaries of the Registrant. 23.1 * Consent of Grant Thornton LLP. 31.1 * Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended. 31.2 * Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended. 32.1 ** Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 ** Certification of the Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 97 * 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. 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) # Management contract or compensatory plan or arrangement. * Filed herewith. ** Furnished herewith. ITEM 16. FORM 10-K SUMMARY None. 53 SIGNATURES Pursuant to the requirements of Sections 13 or 15(d) of the Securities Act of 1934, the registrant has duly caused the report to be signed on its behalf by the undersigned thereunto duly authorized. HEARTLAND EXPRESS, INC. Date: February 28, 2024 By: /s/ Michael J. Gerdin Michael J. Gerdin Chairman, President, and Chief Executive Officer (Principal Executive Officer) By: /s/ Christopher A. Strain Christopher A. Strain Vice President of Finance, Treasurer, and Chief Financial Officer (Principal Accounting and Financial Officer) Pursuant to the Securities Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated. Signature Title Date /s/ Michael J. Gerdin Chairman, President, Chief Executive Officer and Director (Principal Executive Officer) February 28, 2024 Michael J. Gerdin /s/ Christopher A. Strain Vice President of Finance, Treasurer, and Chief Financial Officer (Principal Accounting and Financial Officer) February 28, 2024 Christopher A. Strain /s/ Benjamin J. Allen Director February 28, 2024 Benjamin J. Allen /s/ Brenda M. Lantz Director February 28, 2024 Brenda M. Lantz /s/ David P. Millis Director February 28, 2024 David P. Millis /s/ Brenda S. Neville Director February 28, 2024 Brenda S. Neville /s/ James G. Pratt Director February 28, 2024 James G. Pratt /s/ Michael J. Sullivan Director February 28, 2024 Michael J. Sullivan 54 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders Heartland Express, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of Heartland Express, Inc. (a Nevada corporation) and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedule II (collectively referred to as the “financial statements”). 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, 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 These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. 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: (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. Self-insurance results when the Company insures itself by maintaining funds to cover possible losses rather than by purchasing an insurance policy. 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. 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 F-1 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 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. /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2018. Tulsa, Oklahoma February 28, 2024 F-2 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders Heartland Express, Inc. Opinion on internal control over financial reporting We have audited the internal control over financial reporting of Heartland Express, Inc. (a Nevada corporation) and subsidiaries (the “Company”) 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”). 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, 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. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and limitations of internal control over financial reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ GRANT THORNTON LLP Tulsa, Oklahoma February 28, 2024 F-3 HEARTLAND EXPRESS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) ASSETS December 31, 2023 December 31, 2022 CURRENT ASSETS Cash and cash equivalents $ 28,123 $ 49,462 Trade receivables, net 102,740 139,819 Prepaid tires 10,650 11,293 Other current assets 17,602 26,069 Income tax receivable 10,157 3,139 Total current assets 169,272 229,782 PROPERTY AND EQUIPMENT Land and land improvements 118,682 94,155 Buildings 149,780 143,899 Furniture and fixtures 6,835 6,946 Shop and service equipment 20,822 21,652 Revenue equipment 1,021,208 1,000,472 Construction in Progress 2,582 15,070 1,319,909 1,282,194 Less accumulated depreciation 434,558 308,936 Property and equipment, net 885,351 973,258 GOODWILL 322,597 320,675 OTHER INTANGIBLES, NET 98,537 103,701 DEFERRED INCOME TAXES, NET 1,494 1,224 OTHER ASSETS 14,953 19,894 OPERATING LEASE RIGHT OF USE ASSETS 17,442 20,954 $ 1,509,646 $ 1,669,488 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued liabilities $ 37,777 $ 62,712 Compensation and benefits 28,492 30,972 Insurance accruals 21,507 18,490 Long-term debt and finance lease liabilities - current portion 9,303 13,946 Operating lease liabilities - current portion 9,259 12,001 Other accruals 17,138 18,636 Total current liabilities 123,476 156,757 LONG-TERM LIABILITIES Income taxes payable 6,270 6,466 Long-term debt and finance lease liabilities less current portion 290,696 399,062 Operating lease liabilities less current portion 8,183 8,953 Deferred income taxes, net 189,121 207,516 Accident and work comp accruals less current portion 26,640 35,257 Total long-term liabilities 520,910 657,254 COMMITMENTS AND CONTINGENCIES (Note 13) STOCKHOLDERS' EQUITY Preferred stock, par value $.01; authorized 5,000 shares; none issued — — Capital stock, common, $.01 par value; authorized 395,000 shares; issued 90,689 in 2023 and 2022; outstanding 79,039 and 78,984 in 2023 and 2022, respectively 907 907 Additional paid-in capital 4,527 4,165 Retained earnings 1,060,094 1,051,641 Treasury stock, at cost; 11,650 and 11,705 shares in 2023 and 2022, respectively ( 200,268 ) ( 201,236 ) 865,260 855,477 $ 1,509,646 $ 1,669,488 The accompanying notes are an integral part of these consolidated financial statements. F-4 HEARTLAND EXPRESS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands, except per share amounts) Year Ended December 31, 2023 2022 2021 OPERATING REVENUE $ 1,207,458 $ 967,996 $ 607,284 OPERATING EXPENSES Salaries, wages and benefits 474,803 346,271 250,035 Rent and purchased transportation 112,749 54,288 3,810 Fuel 212,228 194,608 99,597 Operations and maintenance 63,358 39,092 21,522 Operating taxes and licenses 21,804 16,387 13,595 Insurance and claims 45,278 34,436 20,826 Communications and utilities 10,508 6,995 4,447 Depreciation and amortization 199,039 133,047 104,083 Other operating expenses 66,393 51,420 21,400 Gain on disposal of property and equipment ( 41,087 ) ( 96,906 ) ( 37,438 ) 1,165,073 779,638 501,877 Operating income 42,385 188,358 105,407 Interest income 1,655 1,288 640 Interest expense ( 24,187 ) ( 8,555 ) — Income before income taxes 19,853 181,091 106,047 Federal and state income tax expense 5,078 47,507 26,770 Net income $ 14,775 $ 133,584 $ 79,277 Other comprehensive income, net of tax — — — Comprehensive income $ 14,775 $ 133,584 $ 79,277 Net income per share Basic $ 0.19 $ 1.69 $ 1.00 Diluted $ 0.19 $ 1.69 $ 1.00 Weighted average shares outstanding Basic 79,010 78,941 79,573 Diluted 79,079 78,974 79,612 Dividends declared per share $ 0.08 $ 0.08 $ 0.58 The accompanying notes are an integral part of these consolidated financial statements. F-5 HEARTLAND EXPRESS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands, except per share amounts) Capital Additional Stock, Paid-In Retained Treasury Common Capital Earnings Stock Total Balance, January 1, 2021 $ 907 $ 4,330 $ 890,970 $ ( 171,873 ) $ 724,334 Net income — — 79,277 — 79,277 Dividends on common stock, $0.58 per share — — ( 45,872 ) — ( 45,872 ) Repurchases of common stock — — — ( 31,540 ) ( 31,540 ) Stock-based compensation, net of tax — ( 189 ) — 1,092 903 Balance, December 31, 2021 907 4,141 924,375 ( 202,321 ) 727,102 Net income — — 133,584 — 133,584 Dividends on common stock, $0.08 per share — — ( 6,318 ) — ( 6,318 ) Stock-based compensation, net of tax — 24 — 1,085 1,109 Balance, December 31, 2022 907 4,165 1,051,641 ( 201,236 ) 855,477 Net income — — 14,775 — 14,775 Dividends on common stock, $0.08 per share — — ( 6,322 ) — ( 6,322 ) Stock-based compensation, net of tax — 362 — 968 1,330 Balance, December 31, 2023 $ 907 $ 4,527 $ 1,060,094 $ ( 200,268 ) $ 865,260 The accompanying notes are an integral part of these consolidated financial statements. F-6 HEARTLAND EXPRESS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended December 31, OPERATING ACTIVITIES 2023 2022 2021 Net income $ 14,775 $ 133,584 $ 79,277 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 199,039 133,047 104,232 Deferred income taxes ( 18,081 ) 2,412 ( 5,869 ) Stock-based compensation expense 1,620 1,399 1,150 Debt-related amortization 1,069 360 — Gain on disposal of property and equipment ( 41,087 ) ( 96,906 ) ( 37,438 ) Changes in certain working capital items (net of acquisition): Trade receivables 37,079 20,033 2,765 Prepaid expenses and other current assets 9,065 845 3,657 Accounts payable, accrued liabilities, and accrued expenses ( 30,998 ) ( 1,227 ) ( 18,476 ) Accrued income taxes ( 7,214 ) 1,166 ( 5,880 ) Net cash provided by operating activities 165,267 194,713 123,418 INVESTING ACTIVITIES Proceeds from sale of property and equipment 137,319 172,750 130,184 Purchases of property and equipment, net of trades ( 208,596 ) ( 160,568 ) ( 132,640 ) Acquisition of business, net of cash acquired — ( 675,852 ) — Change in other assets 3,410 411 ( 191 ) Net cash used in investing activities ( 67,867 ) ( 663,259 ) ( 2,647 ) FINANCING ACTIVITIES Cash dividends paid ( 6,322 ) ( 6,318 ) ( 45,872 ) Proceeds from issuance of long-term debt — 447,343 — Shares withheld for employee taxes related to stock-based compensation ( 290 ) ( 290 ) ( 247 ) Repayments on finance leases and debt ( 114,078 ) ( 81,478 ) — Repurchases of common stock — — ( 32,025 ) Net cash provided by (used in) financing activities ( 120,690 ) 359,257 ( 78,144 ) Net increase (decrease) in cash and cash equivalents ( 23,290 ) ( 109,289 ) 42,627 CASH, CASH EQUIVALENTS AND RESTRICTED CASH Beginning of period 64,478 173,767 131,140 End of period $ 41,188 $ 64,478 $ 173,767 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for interest expense $ 22,444 $ 6,384 $ — Cash paid during the period for income taxes, net of refunds $ 30,135 $ 44,010 $ 38,519 Noncash investing and financing activities: Fair value of revenue equipment traded $ — $ 428 $ — Purchased property and equipment in accounts payable $ 3,912 $ 11,938 $ 9,019 Sold revenue equipment and property in other current assets $ 2,516 $ 1,558 $ 1,512 Right-of-use assets obtained in exchange for operating lease liabilities $ 8,236 $ 3,345 $ — F-7 Year Ended December 31, RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH 2023 2022 2021 Cash and cash equivalents $ 28,123 $ 49,462 $ 157,742 Restricted cash included in other current assets $ 332 $ 752 $ 928 Restricted cash included in other assets $ 12,733 $ 14,264 $ 15,097 Total cash, cash equivalents and restricted cash $ 41,188 $ 64,478 $ 173,767 The accompanying notes are an integral part of these consolidated financial statements. F-8 HEARTLAND EXPRESS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Significant Accounting Policies Nature of Business Heartland Express, Inc. 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, 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. of Iowa acquired Smith Transport, a truckload carrier headquartered in Roaring Spring, Pennsylvania. On August 31, 2022, Heartland Express, Inc. 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 The accompanying consolidated financial statements include the parent company, Heartland Express, Inc., and its subsidiaries, all of which are wholly owned. All material intercompany items and transactions have been eliminated in consolidation. Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Segment Information 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. 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 Cash equivalents are short-term, highly liquid investments with insignificant interest rate risk and original maturities of three months or less at acquisition. The Company has deposits that potentially subject it to concentration of credit risk consisting of cash equivalents. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At December 31, 2023, the Company had $ 12.8 million in excess of the FDIC insured limit. At December 31, 2023 and 2022, restricted and designated cash and investments totaled $ 13.0 million and $ 15.1 million, respectively. At December 31, 2023, $ 0.3 million was included in other current assets and $ 12.7 million was included in other non-current assets in the consolidated balance sheets. At December 31, 2022, $ 0.8 million was included in other current assets and $ 14.3 million was included in other non-current assets in the consolidated balance sheets. 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. F-9 Investments Municipal bonds of $ 0.3 million and $ 0.8 million at December 31, 2023 and 2022, 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. Trade Receivables 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 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. 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. Conditions that would lead an account to be considered uncollectible include customers filing bankruptcy and the exhaustion of all practical collection efforts. We will use the necessary legal recourse to recover as much of the receivable as is practical under the law. 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 Property and equipment are reported at cost, net of accumulated depreciation. Maintenance and repairs are charged to operations as incurred. 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 for financial statement purposes is computed by the straight-line method for all assets other than new tractors. We recognize depreciation expense on new tractors (excluded tractors acquired through acquisition) at 125% declining balance method. New tractors are depreciated to salvage values of $ 15,000 , while new trailers are depreciated to salvage values of $ 4,000 . Revenue equipment acquired through acquisitions is generally revalued to current market values as of the acquisition date. Assets obtained more than a year prior to the acquisition by the acquired company are depreciated on a straight-line basis aligned with the remaining period of expected use, whereas those obtained less than a year prior are depreciated consistent with newly purchased assets. As acquired equipment is replaced, our fleet returns to our base methods of declining balance depreciation for tractors and straight-line depreciation for trailers. Lives of the assets are as follows: Years Land improvements and buildings 5-30 Furniture and fixtures 3-5 Shop and service equipment 3-10 Revenue equipment 5-7 Impairment of Long-Lived Assets We periodically evaluate property and equipment and amortizable intangible assets for impairment upon the occurrence of events or changes in circumstances that indicate the carrying amount of assets may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset group to future net undiscounted cash flows expected to be generated by the group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount over which the carrying amount of the assets exceeds the fair value of the assets. There were no impairment charges recognized during the years ended December 31, 2023, 2022, and 2021. Fair Value of Financial Instruments The fair values of cash and cash equivalents, trade receivables, held-to-maturity investments and accounts payable, which are recorded at cost, approximate fair value based on the short-term nature and high credit quality of these financial instruments. F-10 Advertising Costs We expense all advertising costs as incurred. Advertising costs are included in other operating expenses in the consolidated statements of comprehensive income. 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 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. 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, 2023, the Company’s assessment of qualitative factors informed its conclusion that a goodwill impairment did not occur. 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. Management determined that no impairment charge was required for the years ended December 31, 2023, 2022, and 2021. Other Intangibles, Net Other intangibles, net consists of a tradename, covenants not to compete, and customer relationships. 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. 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 in addition to our annual impairment test discussed in the Goodwill section above. Management determined that no intangible impairment charge was required for the years ended December 31, 2023, 2022, and 2021. See Note 5 for additional information regarding intangible assets. Insurance Accruals We are self-insured for auto liability, cargo loss and damage, bodily injury and property damage ("BI/PD"), and workers’ compensation. Insurance accruals reflect the estimated cost of claims, including estimated loss and loss adjustment expenses incurred but not reported, and 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. Insurance accruals are not discounted. In addition to internally developed reserves and estimates, we utilize an actuarial specialist to provide an independent annual assessment and quarterly monitoring reports of the internally developed accident and workers' compensation accruals. The cost of cargo and BI/PD insurance and claims are included in insurance and claims expense, while the costs of workers’ compensation insurance and claims are included in salaries, wages, and benefits in the consolidated statements of comprehensive income. Insurance accruals are presented as either current or non-current in the consolidated balance sheets based on our expectation of when payment will occur. Health insurance accruals reflect the estimated cost of health related claims, including estimated expenses incurred but not reported. The cost of health insurance and claims are included in salaries, wages and benefits in the consolidated statements of comprehensive income. Health insurance accruals of $ 9.6 million and $ 10.0 million are included in other accruals in the consolidated balance sheets as of December 31, 2023 and 2022, respectively. Revenue and Expense 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 400 miles per trip and each individual shipment accepted by the Company is considered a separate contract with the performance obligation F-11 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. The 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 $ 1.9 million and $ 2.6 million as of December 31, 2023 and 2022, 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, 2023 and 2022. Stock-Based Compensation We have stock-based compensation plans that provide for the grants of restricted stock awards to our employees, directors and consultants. We account for restricted stock awards using the fair value method of accounting for stock-based compensation. Issuances of stock upon vesting of restricted stock are made from treasury stock. Compensation expense for restricted stock grants is recognized over the requisite service period of each award and is included in salaries, wages and benefits in the consolidated statements of comprehensive income. Total compensation of $ 17.5 million related to all awards granted under the 2011 and 2021 Restricted Stock Award Plans has been amortized over the requisite service period for each separate vesting period as if the award is, in substance, multiple awards between 2011 and 2026. Earnings per Share Basic earnings per share are based upon the weighted average common shares outstanding during each year. 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, 2023, 2022, and 2021, 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 2023, 2022, and 2021 is as follows (in thousands, except per share data): 2023 Net Income (numerator) Shares (denominator) Per Share Amount Basic EPS $ 14,775 79,010 $ 0.19 Effect of restricted stock — 69 Diluted EPS $ 14,775 79,079 $ 0.19 2022 Net Income (numerator) Shares (denominator) Per Share Amount Basic EPS $ 133,584 78,941 $ 1.69 Effect of restricted stock — 33 Diluted EPS $ 133,584 78,974 $ 1.69 2021 Net Income (numerator) Shares (denominator) Per Share Amount Basic EPS $ 79,277 79,573 $ 1.00 Effect of restricted stock — 39 Diluted EPS $ 79,277 79,612 $ 1.00 Income Taxes We use the asset and liability method of accounting for income taxes. 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 F-12 settled. Such amounts are adjusted, as appropriate, to reflect changes in tax rates expected to be in effect when the temporary differences reverse. The effect of a change in tax rates on deferred taxes is recognized in the period that the change is enacted. We have not recorded a valuation allowance against any deferred tax assets at December 31, 2023 and 2022. 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. We calculate our current and deferred tax provision based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed in subsequent years. Adjustments based on filed returns are recorded when identified. We recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50 % likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. We record interest and penalties related to unrecognized tax benefits in income tax expense. New Accounting Pronouncements 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. Note 2. Concentrations of Credit Risk and Major Customers Our major customers represent primarily the consumer goods, appliances, food products and automotive industries. Credit is granted to customers on an unsecured basis. Our five largest customers accounted for approximately 22 %, 27 %, and 36 % of operating revenues for the years ended December 31, 2023, 2022, and 2021, respectively. 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, 2023 and 2022, respectively. During the year ended December 31, 2021 there was one single customer that accounted for 10 % of operating revenues. Note 3. Revenue Recognition 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 outsourced certain loads to third-party carriers in the U.S. and Mexico. 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. 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 $ 94.8 million, $ 50.7 million, and $ 11.4 million for the twelve months ended December 31, 2023, 2022, and 2021, respectively . F-13 Note 4. Acquisitions 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.. 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 $ 26.2 million of the debt was outstanding at December 31, 2023. 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) Operating revenue $ 810,459 $ 1,060,718 Net income $ 96,466 $ 140,647 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 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. F-14 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 CFI, and related entities, from a subsidiary of TFI International, Inc. ("TFI"). 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 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. 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 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. F-15 The allocation of the purchase price is detailed in the table 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 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: (in thousands) Trade and other accounts receivable $ 74,740 Other current assets 12,596 Property and equipment 459,099 Other non-current assets 306 Deferred income taxes 2,018 Intangible assets 55,097 Goodwill 114,005 Total assets 717,861 Accounts payable and accrued expenses ( 47,819 ) Insurance accruals ( 1,621 ) Income taxes payable ( 765 ) Deferred income taxes ( 115,922 ) 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. Note 5. 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. 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. F-16 Intangible assets subject to amortization consisted of the following at December 31, 2023 and 2022: 2023 Amortization period (years) Gross Amount Accumulated Amortization Net finite intangible assets (in thousands) Customer relationships 15-20 $ 75,836 $ 12,637 $ 63,199 Tradename 0.5-10 12,900 10,180 2,720 Covenants not to compete 1-10 5,839 4,845 994 $ 94,575 $ 27,662 $ 66,913 2022 Amortization period (years) Gross Amount Accumulated Amortization Net finite intangible assets (in thousands) Customer relationships 15-20 $ 75,836 $ 8,441 $ 67,395 Tradename 0.5-10 12,900 9,700 3,200 Covenants not to compete 1-10 5,839 4,357 1,482 $ 94,575 $ 22,498 $ 72,077 Change in carrying amount of goodwill: Goodwill (in thousands) Balance at December 31, 2022 $ 320,675 Purchase accounting 1,922 Balance at December 31, 2023 $ 322,597 Future amortization expense for intangible assets is estimated at $ 5.0 million for 2024, $ 5.0 million for 2025, $ 5.0 million for 2026, $ 5.0 million for 2027, and $ 4.9 million for 2028. Note 6. Long-Term Debt 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 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. 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 F-17 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. 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. 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. As of December 31, 2023, the Revolving Facility available for future borrowing was $ 88.0 million. As of December 31, 2023 the weighted average interest rate on outstanding borrowings under the Credit Facilities was 7.1 %. The May 31, 2022 acquisition of Smith Transport included the assumption of $ 46.8 million of debt and financing lease obligations associated with the fleet of revenue equipment of which $ 26.2 million was outstanding at December 31, 2023, (the "Smith Debt"). 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: (in thousands) 2024 $ 1,795 2025 $ 1,832 2026 $ 1,913 2027 $ 276,589 2028 $ 569 Thereafter $ 11 Total outstanding principle $ 282,709 Less: unamortized debt issuance costs $ 1,228 Less: amounts payable within one year $ 1,795 Total long-term debt $ 279,686 F-18 Note 7. 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. 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 $ 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. 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. The components of the Company's lease cost were as follows: 2023 2022 2021 (in thousands) Operating lease cost $ 12,903 $ 9,718 $ — Finance lease interest expense 1,048 772 — Finance lease equipment depreciation 8,825 4,733 — Total finance lease cost $ 9,873 $ 5,505 $ — Total operating and finance lease cost $ 22,776 $ 15,223 $ — Our future minimum lease payments as of December 31, 2023, are summarized as follows by lease category: (in thousands) Operating Finance 2024 9,901 8,135 2025 6,609 7,557 2026 1,587 3,840 2027 320 — 2028 — — Thereafter — — Total minimum lease payments $ 18,417 $ 19,532 Less: future payment amount for interest 975 1,014 Present value of minimum lease payments $ 17,442 $ 18,518 Less: current portion 9,259 7,508 Lease obligations, long-term $ 8,183 $ 11,010 F-19 Note 8. 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. 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. 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. 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, 2023 and 2022 total deposits in this account were $ 0.9 million and $ 0.8 million, respectively. 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. There were no outstanding balances due on any letters of credit at December 31, 2023 or 2022. 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. Since the reported liability is an estimate, the ultimate liability may be more or less than reported. In addition to internally developed reserves and estimates, we utilize an actuarial specialist to provide an independent annual assessment of the internally developed accident and workers' compensation accruals. If adjustments to previously established accruals are required, such amounts are included in operating expenses in the current period. These accruals are recorded on an undiscounted basis. Estimated claim payments to be made within one year of the balance sheet date have been classified as insurance accruals within current liabilities as of December 31, 2023 and 2022. F-20 Note 9. Income Taxes Deferred tax assets and liabilities as of December 31 are as follows: 2023 2022 Deferred income tax assets: (in thousands) Allowance for credit losses $ 672 $ 772 Accrued expenses 4,964 6,383 Stock-based compensation 120 36 Insurance accruals 12,869 13,278 State net operating loss carryforward 94 — Indirect tax benefits of unrecognized tax benefits 1,160 1,206 Other 2 45 Total gross deferred tax assets 19,881 21,720 Less valuation allowance — — Net deferred tax assets 19,881 21,720 Deferred income tax liabilities: Property and equipment ( 167,911 ) ( 188,999 ) Goodwill and amortizable intangibles ( 36,048 ) ( 34,396 ) Prepaid expenses ( 3,549 ) ( 4,617 ) 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: 2023 2022 (in thousands) Noncurrent assets, net $ 1,494 $ 1,224 Long-term liabilities, net ( 189,121 ) ( 207,516 ) $ ( 187,627 ) $ ( 206,292 ) We have not recorded a valuation allowance against any deferred tax assets at December 31, 2023 and 2022. 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. Income tax expense consists of the following: 2023 2022 2021 (in thousands) Current income taxes: Federal $ 19,020 $ 31,951 $ 25,571 State 3,543 9,657 7,068 Foreign 596 195 — 23,159 41,803 32,639 Deferred income taxes: Federal ( 14,500 ) 3,717 ( 4,392 ) State ( 3,311 ) 2,005 ( 1,477 ) Foreign ( 270 ) ( 18 ) — ( 18,081 ) 5,704 ( 5,869 ) Total $ 5,078 $ 47,507 $ 26,770 F-21 The income tax provision differs from the amount determined by applying the U.S. federal tax rate as follows: 2023 2022 2021 (in thousands) Federal tax at statutory rate (21%) $ 4,169 $ 38,029 $ 22,270 State taxes, net of federal benefit 708 9,711 4,452 Permanent differences to return 1,740 449 ( 227 ) Return to provision adjustment ( 1,482 ) ( 203 ) 302 Uncertain income tax penalties and interest, net ( 152 ) ( 226 ) ( 266 ) Foreign Rate Differential 154 58 — Other ( 59 ) ( 311 ) 239 $ 5,078 $ 47,507 $ 26,770 At December 31, 2023 and December 31, 2022, we had a total of $ 5.5 million and $ 5.7 million in gross unrecognized tax benefits, respectively, included in long-term income taxes payable in the consolidated balance sheets. 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 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. 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, 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. Income tax expense is reduced in periods by the amount of accrued interest and penalties associated with reversed uncertain tax positions due to lapse of applicable statute of limitations, when applicable or when a position is settled. Income tax expense was reduced during the years ended December 31, 2023, 2022 and 2021 due to reversals of interest and penalties due to lapse of applicable statute of limitations and settlements, net of additions for interest and penalty accruals during the same period. These unrecognized tax benefits relate to risks associated with state income tax filing positions for our corporate subsidiaries. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: 2023 2022 (in thousands) Balance at January 1, $ 5,744 $ 4,671 Additions based on tax positions related to current year 345 1,921 Additions for tax positions of prior years — 131 Reductions for tax positions of prior years ( 176 ) — Reductions due to lapse of applicable statute of limitations ( 391 ) ( 771 ) Settlements — ( 208 ) Balance at December 31, $ 5,522 $ 5,744 A number of years may elapse before an uncertain tax position is audited and ultimately settled. It is difficult to predict the ultimate outcome or the timing of resolution for uncertain tax positions. It is reasonably possible that the amount of unrecognized tax benefits could significantly increase or decrease within the next twelve months. These changes could result from the expiration of the statute of limitations, examinations or other unforeseen circumstances. We do not have any outstanding litigation related to tax matters. At this time, management’s best estimate of the reasonably possible change in the amount of gross unrecognized tax benefits is approximately no change to an increase of $ 1.0 million during the next twelve months, due to the combination of expiration of certain statute of limitations and estimated additions. The federal statute of limitations remains open for the years 2020 and forward. Tax years 2013 and forward are subject to audit by state tax authorities depending on the tax code and administrative practice of each state. F-22 Note 10. Equity 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 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. During the years ended December 31, 2023, 2022 and 2021 our Board of Directors declared dividends totaling $ 6.3 million, $ 6.3 million, and $ 45.9 million for each year, respectively. The 2021 dividends included a $0.50 per share special dividend totaling $ 39.5 million and regular quarterly dividends totaling $ 6.4 million, while the 2023 and 2022 dividends were regular quarterly dividends. Future payment of cash dividends and the amount of such dividends will depend upon our financial conditions, our results of operations, our cash requirements, our tax treatment, and certain corporate law requirements, as well as factors deemed relevant by our Board of Directors. Note 11. Stock-Based Compensation 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 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 no shares that remain available for the purpose of making restricted stock grants at December 31, 2023. In May 2021, at the 2021 Annual Meeting of Stockholders, the approval of the Heartland Express, Inc. 2021 Restricted Stock Award 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 2021 Plan has 0.5 million shares that remain available for the purpose of making restricted stock grants at December 31, 2023. There were no shares granted during the period 2011 to 2021 that remain unvested at December 31, 2023. Shares granted in 2022 through 2023 have various vesting terms that range from immediate to four years from the date of grant and have share prices ranging between $ 11.89 and $ 16.67 . Compensation expense associated with these awards is based on the market value of our stock on the grant date. Compensation expense associated with restricted stock awards to employees is included in salaries, wages and benefits while awards to directors or consultants is included in other operating expenses in the consolidated statements of comprehensive income. There were no significant assumptions made in determining fair value. 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. The following table summarizes our restricted stock award activity for the years ended December 31, 2023, 2022 and 2021. The vesting dates for the awards vested in 2023 occurred relatively evenly throughout the year ended December 31, 2023. The fair value of awards vested during 2023, 2022 and 2021 was $ 1.1 million, $ 1.2 million and $ 1.5 million, respectively. 2023 Number of Restricted Stock Awards ( in thousands) Weighted Average Grant Date Fair Value Unvested at January 1 40.1 $ 16.01 Granted 118.9 14.53 Vested ( 73.2 ) 14.97 Forfeited — — Outstanding (unvested) at end of year 85.8 $ 14.84 F-23 2022 Number of Restricted Stock Awards ( in thousands) Weighted Average Grant Date Fair Value Unvested at January 1 14.0 $ 19.70 Granted 106.0 15.19 Vested ( 79.9 ) 15.57 Forfeited — — Outstanding (unvested) at end of year 40.1 $ 16.01 2021 Number of Restricted Stock Awards (in thousands) Weighted Average Grant Date Fair Value Unvested at beginning of year 59.7 $ 20.29 Granted 32.1 17.92 Vested ( 77.8 ) 19.42 Forfeited — — Outstanding (unvested) at end of year 14.0 $ 19.70 Note 12. Profit Sharing Plan and Retirement Plan We have retirement savings plans (the “Retirement Savings Plans”) for substantially all employees who have completed one year of service and are 19 years of age or older. Employees may make 401(k) contributions subject to Internal Revenue Code limitations. 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"). 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 $ 3.1 million, $ 2.2 million, and $ 2.2 million, for the years ended December 31, 2023, 2022 and 2021, respectively. Note 13. Commitments and Contingencies We are a party to ordinary, routine litigation and administrative proceedings incidental to our business. In the opinion of management, our potential exposure under pending legal proceedings is adequately provided for in the accompanying consolidated financial statements. The total estimated purchase commitments for tractors (net of tractor sale commitments) and trailer equipment at December 31, 2023, was $ 6.9 million. F-24 SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (In Thousands, Except Per Share Data) Column C Column A Column B Charges To Column D Column E Balance At Cost Balance Beginning And Other At End Description of Period Expense Accounts Deductions of Period Allowance for credit losses: Year ended December 31, 2023 $ 3,300 $ — $ — $ 600 $ 2,700 Year ended December 31, 2022 1,100 — 2,200 — 3,300 Year ended December 31, 2021 1,100 — — — 1,100 See accompanying Report of Independent Registered Public Accounting Firm. S-1