What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2026-03-03 compared with 2025-02-18 · 102 added, 119 removed, 271 unchanged (45% of the section changed)

6 unchanged sentences

Actual results could differ materially from those discussed.

Prior to 2022 we, together with our subsidiaries, historically were a short-to-medium haul truckload carrier where approximately 99.9% of our operating revenue was derived from shipments within the United States with the remainder being Canada and no operations in Mexico.

With the acquisition of CFI on August 31, 2022, we significantly expanded our scale and our transportation services.

We continue to provide nationwide asset-based dry van truckload service for major shippers from across the U.S.

and now including cross border freight to and from Mexico and our consolidated average length of haul is under 400 miles.

We continue to focus on providing high quality service to targeted customers with a high density of freight in our regional operating areas.

We also offer truckload temperature-controlled transportation services and logistics services in Mexico, which are not significant to our consolidated operations.

Through the acquisition of CFI, we now provide transportation logistics services across Mexico for our customers and provide cross-border freight services for customer loads moving from the United States into Mexico and loads originating from Mexico into the United States.

We utilize third party service providers for all miles run in Mexico and to move freight across the US-Mexico border while leveraging terminal locations in the US and Mexico near the border to facilitate these moves.

We 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.

Our consolidated average length of haul is under 400 miles.

We focus on providing high quality service to targeted customers with a high density of freight in our operating areas.

We also offer truckload temperature-controlled transportation services and Mexico logistics services, which are not significant to our consolidated operations.

We generally earn revenue based on the number of miles per load delivered and the revenue per mile or per load paid.

We operate our consolidated operations under the brand names of Heartland Express, Millis Transfer, Smith Transport, and CFI.

We operate our consolidated operations under the brand names of Heartland Express, Millis Transfer, Smith Transport, and CFI (for services within Mexico).

We manage our business based on overall corporate operating goals and objectives that are the same for all of our brands.

Our CODM, our CEO, evaluates the operational efficiencies of our transportation services, operating performance and asset allocation on a combined basis based on consolidated operating goals and objectives.

Our Chief Operating Decision Maker (“CODM”), our CEO and President, evaluates the operational efficiencies of our transportation services, operating performance and asset allocation on a combined basis based on consolidated operating goals and objectives.

In addition to consolidated data on a combined basis that has been historically used, our CODM also makes use of available disaggregated operating segment data as well.

5 unchanged sentences

We believe our geographic reach and terminal locations assist us with driver recruiting and retention, efficient fleet maintenance, and consistent customer engagement.

The challenging freight environment during 2024 and 2023, combined with acquisitions of Smith Transport and CFI in 2022, have pressured our financial results to a level below our historical results and management expectations, and also resulted in the incurrence of debt.

However, the acquisitions have also allowed us to deliver $1.0 billion and $1.2 billion of operating revenues during 2024 and 2023, a significant increase from $607.0 million in 2021.

Our consolidated operating results for the fourth quarter of 2024 reflected both sequential and year-over year operating improvement due to a combination of continued progress with acquisition integration, enterprise-wide cost controls, and a modestly better freight environment.

While it is early in the quarter and extreme winter weather conditions so far in 2025 make comparison difficult, we are seeing a positive shift in customer rate and volume negotiations that we expect to strengthen as the year unfolds.

The challenging freight environment over the past three years, combined with acquisitions of Smith Transport and CFI in 2022, have pressured our financial results to a level below our historical results and management expectations, and also resulted in the incurrence of debt.

However, the acquisitions have also allowed us to deliver $0.8 billion and $1.0 billion of operating revenues during 2025 and 2024.

Our financial goals continue to be (i) generate an operating ratio in the low to mid 80s, (ii) grow revenue profitably, organically and through acquisitions, and (iii) carry a debt-free balance sheet.

Throughout our history, these principles have allowed us to generate significant cash flows and be opportunistic with acquiring and disposing of equipment and facilities, making acquisitions, and returning capital to stockholders.

In 2022, we incurred substantial debt to acquire CFI and Smith Transport and have been integrating and improving those businesses in the teeth of a deep and lengthy freight market downturn.

Our operating ratio remains significantly above our historical financial performance and our financial and operational targets.

3 unchanged sentences

Even in this challenging and prolonged negative operating environment, we continued to generate positive operating cash flows.

Since making the acquisitions of CFI and Smith Transport in 2022, we have repaid almost $300 million of debt and capitalized leases while maintaining a relatively young fleet.

Since making the acquisitions of CFI and Smith Transport in 2022, we have repaid $337.0 million of debt and capital leases while maintaining a relatively young fleet.

From a capital allocation standpoint, we believe we are nearing the place where all alternatives will be equally available once again.

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this document generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024.

Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this document can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 that are not included in this document can be found in “Management’s

Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Recent Developments

In 2024, we generated operating revenues of $1.0 billion, including fuel surcharges, net loss of $29.7 million, and basic loss per share of $0.38 on basic weighted average outstanding shares of 78.7 million.

This compared to operating revenues of $1.2 billion, including fuel surcharges, net income of $14.8 million, and basic net income per share of $0.19 on basic weighted average outstanding shares of 79.0 million in 2023.

We posted an 101.9% operating ratio (which represents operating expenses as a percentage of operating revenues) for the year ended December 31, 2024, compared to 96.5% for the same period of 2023, and a 2.8% net loss as a percentage of operating revenues for 2024, compared to 1.2% net income as a percentage of operating revenues in the same period of 2023.

In 2025, we generated operating revenues of $805.7 million, including fuel surcharges, net loss of $52.5 million, and basic loss per share of $0.67 on basic weighted average outstanding shares of 77.9 million.

This compared to operating revenues of $1.0 billion, including fuel surcharges, net loss of $29.7 million, and basic net loss per share of $0.38 on basic weighted average outstanding shares of 78.7 million in 2024.

We posted an 107.1% operating ratio (which represents operating expenses as a percentage of operating revenues) for the year ended December 31, 2025, compared to 101.9% for the same period of 2024, and a 6.5% net loss as a percentage of operating revenues for 2025, compared to 2.8% net loss as a percentage of operating revenues in the same period of 2024.

We posted an 104.7% non-GAAP adjusted operating ratio (1) for the year ended December 31, 2025 compared to 101.7% for the same period of 2024.

1 unchanged sentence

We had total assets of $1.2 billion and total stockholders' equity of $755.3 million at December 31, 2025.

We had a loss on assets of 2.1% and a loss on equity of 3.6% over the year ended December 31, 2024, compared to a return on assets of 0.9% and a return on equity of 1.7% respectively, for 2023.

We had a loss on assets of 4.1% and a loss on equity of 6.7% over the year ended December 31, 2025, compared to a loss on assets of 2.1% and a loss on equity of 3.6% respectively, for 2024.

GAAP to Non-GAAP Reconciliation Schedule:

Operating revenue, operating revenue excluding fuel surcharge revenue, fuel surcharge revenue, operating income, operating ratio, and adjusted operating ratio reconciliation (a)

Operating revenue, operating revenue excluding fuel surcharge revenue, fuel surcharge revenue, operating loss, operating ratio, and adjusted operating ratio reconciliation (a)

Twelve Months Ended December 31,

6 unchanged sentences

Amortization of intangibles 5,017 5,017

Impairment of trade name 18,991 —

Adjusted operating expenses 742,486 928,870

Operating income (20,236) 42,385

Adjusted operating income $ (15,219) $ 47,549

Operating loss (57,412) (20,236)

Adjusted operating loss $ (33,404) $ (15,219)

Operating ratio 107.1 % 101.9 %

1 unchanged sentence

(a) Operating revenue excluding fuel surcharge revenue, as reported in this annual report is based upon operating revenue minus fuel surcharge revenue.

Adjusted operating income as reported in this annual report is based upon operating revenue excluding fuel surcharge revenue, less operating expenses, net of fuel surcharge revenue, and non-cash amortization expense related to intangible assets.

Adjusted operating ratio as reported in this annual report is based upon operating expenses, net of fuel surcharge revenue, and amortization of intangibles, as a percentage of operating revenue excluding fuel surcharge revenue.

We believe that operating revenue excluding fuel surcharge revenue, adjusted operating income, and adjusted operating ratio are more representative of our underlying operations by excluding the volatility of fuel prices, which we cannot control, and removes items resulting from acquisitions that do not reflect our core operating performance.

Operating revenue excluding fuel surcharge revenue, adjusted operating income, and adjusted operating ratio are not substitutes for operating revenue, operating income, or operating ratio measured in accordance with GAAP.

Adjusted operating (loss) income as reported in this annual report is based upon operating revenue excluding fuel surcharge revenue, less operating expenses, net of fuel surcharge revenue, non-cash amortization expense related to intangible assets, and non-cash impairment of trade name associated with the decision to unify CFI with Heartland Express.

Adjusted operating ratio as reported in this annual report is based upon operating expenses, net of fuel surcharge revenue, non-cash amortization expense related to intangible assets, and non-cash impairment of trade name associated with the decision to unify CFI with Heartland Express, as a percentage of operating revenue excluding fuel surcharge revenue.

We believe that operating revenue excluding fuel surcharge revenue, adjusted operating (loss) income, and adjusted operating ratio are more representative of our underlying

operations by excluding the volatility of fuel prices, which we cannot control, and removes other items that, in our opinion, do not reflect our core operating performance.

Operating revenue excluding fuel surcharge revenue, adjusted operating (loss) income, and adjusted operating ratio are not substitutes for operating revenue, operating (loss) income, or operating ratio measured in accordance with GAAP.

There are limitations to using non-GAAP financial measures.

Although we believe that operating revenue excluding fuel surcharge revenue, adjusted operating income, and adjusted operating ratio improve comparability in analyzing our period-to-period performance, they could limit comparability to other companies in our industry if those companies define such measures differently.

Because of these limitations, operating revenue excluding fuel surcharge revenue, adjusted operating income, and adjusted operating ratio should not be considered measures of income generated by our business or discretionary cash available to us to invest in the growth of our business.

Although we believe that operating revenue excluding fuel surcharge revenue, adjusted operating (loss) income, and adjusted operating ratio improve comparability in analyzing our period-to-period performance, they could limit comparability to other companies in our industry if those companies define such measures differently.

Because of these limitations, operating revenue excluding fuel surcharge revenue, adjusted operating (loss) income, and adjusted operating ratio should not be considered measures of income generated by our business or discretionary cash available to us to invest in the growth of our business.

Management compensates for these limitations by primarily relying on GAAP results and using non-GAAP financial measures on a supplemental basis.

3 unchanged sentences

We had net cash of $58.2 million used by financing activities during 2025, including $41.2 million of repayments of finance leases and debt, $10.4 million used to repurchase common stock, and $6.2 million used to pay dividends to our shareholders.

As a result, our cash, cash equivalents, and restricted cash decreased by $14.9 million during the year ended December 31, 2024 to $26.3 million.

Unrestricted cash and cash equivalents decreased $15.3 million to $12.8 million.

As a result, our cash, cash equivalents, and restricted cash increased by $5.2 million during the year ended December 31, 2025 to $31.4 million.

Unrestricted cash and cash equivalents increased $5.7 million to $18.5 million.

We operate in a cyclical industry.

In early 2022, freight demand was initially strong, but demand began to soften in the back half of 2022 and continued to degrade throughout all of 2023 and was weak during 2024.

We expect freight demand to remain challenged in at least the first half of 2025 based upon the freight demand experienced in January and February of 2025, however the freight environment is modestly better than what was experienced throughout much of 2024.

We expect the strategic and operational changes that we have implemented during 2024 will improve our operational readiness ahead of future expected freight demand growth.

However, general consumer product output and inventory volatility, consumer demand, the political landscape, potential tariffs, foreign wars, and disruption in oil and diesel markets all could create additional volatility regarding freight demand during 2025.

The trucking industry has been faced with a qualified driver shortage.

However, driver availability began to change late in 2022 and into 2023, as a result of the declining freight and economic environments and we believe certain drivers have moved from smaller less financially stable carriers to more financially stable carriers and from independent contractors to company drivers.

Although there has been some increased movement of drivers between companies in our industry, the issue of a decreasing amount of qualified CDL drivers in our industry continues.

Freight demand was degraded throughout all of 2023 and continued to be weak during 2024 and 2025.

While we believe we are seeing positive signs across the transportation industry to reduce excess capacity, which could lead to a positive shift in customer rate and volume negotiations during 2026, the weak freight environment has extended longer than we previously expected and it remains uncertain when we will see meaningful improvement.

We believe that cost improvements and transportation system changes implemented during 2025 will provide a better cost structure and operating visibility to deliver a path toward operating profitability for our consolidated operations over the next twelve months.

The issue of a decreasing amount of overall qualified CDL drivers in our industry continues.

We continually explore new strategies to attract and retain qualified drivers with changes in market conditions and demands.

In addition, we continue to evaluate and explore different driving options and offerings for our existing and potential new drivers across our unique mix of driver offerings at Heartland Express, Millis Transfer, Smith Transport, and CFI.

We hire the majority of our drivers with at least six months of over-the-road experience and safe driving records.

As discussed under "Drivers, Independent Contractors, and Other Employees " in Part I, Item 1 of this Annual Report, the Company's driver training program provides an additional source of future potential professional drivers.

We hire the majority of our drivers with at least six to twelve months of over-the-road experience and safe driving records.

As discussed under "Drivers, Independent Contractors, and Other Employees " in Part I, Item 1 of this Annual Report, the Company's driver training programs provide an additional source of future potential professional drivers.

In order to attract and retain experienced drivers who understand the importance of customer service, we have sought to solidify our position as an industry leader in driver compensation in our operating markets and for the services we provide.

1 unchanged sentence

Our comprehensive driver compensation and benefits program rewards drivers for years of service and safe operating mileage benchmarks, which are critical to our operational and financial performance.

Certain driver pay packages include minimum pay protection provisions, future pay increases based on years of continued service with us, increased rates for accident-free miles of operation, detention pay, and other pay programs to assist drivers with unproductive time associated with circumstances outside of their control, such as inclement weather, equipment breakdowns, and customer issues.

As a result of the freight environment during 2023 and 2024, we paid more through these programs, resulting in an increase of driver pay per mile and as a percentage of revenue.

This has allowed us to maintain driver turnover rates lower than the industry average.

Certain driver pay packages include future pay increases based on years of continued service with us, increased rates for accident-free miles of operation, detention pay, and other pay programs to assist drivers with unproductive time associated with circumstances outside of their control, such as inclement weather, equipment breakdowns, and customer issues.

Driver pay, home time, and other amenities have allowed us to maintain driver turnover rates lower than the industry average.

We believe that our driver compensation and benefits package is consistently among the best in the industry.

1 unchanged sentence

Currently over 16% of our driver employees, individually, have achieved 1.0 million safe miles.

Current government focus on English proficiency requirements, as well as reviews of CDL status for non-domiciled drivers, will potentially eliminate some level of driver capacity in our industry.

We believe this could help supply and demand dynamics currently being experienced in our industry.

However, due to our comprehensive hiring and safety standards, we continue to experience a challenging driver hiring environment.

Growth History and Capital Allocation

In addition to past organic growth through the development of our regional operating areas, we have completed ten acquisitions since 1986 with the most recent and our fifth acquisition since 2013, CFI, occurring on August 31, 2022 following the acquisition of Smith Transport on May 31, 2022.

In addition to past organic growth through the development of our operating areas, we have completed ten acquisitions since 1986 with the most recent and our fifth acquisition since 2013, CFI, occurring on August 31, 2022 following the acquisition of Smith Transport on May 31, 2022.

These ten acquisitions have enabled us to solidify our position within existing regions, expand into new operating regions, expand service offerings to address longer length of haul needs from customers, and pursue new customer relationships in new markets, as well as expand business relationships with current customers in new markets.

We are highly selective about acquisitions, with our main criteria being (i) safe operations, (ii) high quality professional truck drivers, (iii) fleet profile that is compatible with our philosophy or can be replaced economically, and (iv) freight profile that will allow a path to a low to mid 80s operating ratio upon full integration, application of our cost structure, and freight optimization, including exiting certain business that fails to meet our operating profile.

We have historically been a debt free organization although with the acquisition of CFI we now have a significant amount of debt, although we significantly lowered our debt balance during 2024.

We have historically been a debt free organization although with the acquisition of CFI we incurred debt, but have significantly lowered our debt balance since the acquisition.

We expect to continue to evaluate acquisition candidates presented to us, however, we do not expect to make any significant acquisitions while we are paying down debt.

5 unchanged sentences

However, we expect to focus primarily on paying down the debt resulting from our 2022 acquisitions in 2026.

For the periods ended December 31, 2024, our operating

cash flows as a percentage of operating revenues five-year average was 18.0%, our three-year average was 15.6%, and most recently for 2024 was 13.8%.

For the periods ended December 31, 2025, our operating cash flows as a percentage of operating revenues five-year average was 15.5%, our three-year average was 13.0%, and most recently for 2025 was 11.1%.

Tractor Strategy and Depreciation

4 unchanged sentences

One method we use to accomplish these goals is to depreciate our new tractors (excludes assets acquired through an acquisition) for financial reporting purposes using the declining balance method, in which depreciation is higher in early periods and tapers off in later periods.

We believe this method more accurately reflects actual asset values and affords us the flexibility to sell tractors at most points during their life cycle without experiencing losses.

We believe this method more accurately reflects actual asset values and makes it less likely that we will experience losses on sales at most points during their life cycle.

In addition, the decline in depreciation during later periods is typically offset by increased repairs and maintenance expense as the tractors age, which keeps our total operating costs more uniform over the operating life of the equipment.

6 unchanged sentences

At December 31, 2025, our tractor fleet had an average age of 2.6 years and our trailer fleet had an average age of 7.3 years.

During 2025, we expect the age of both our tractor and trailer fleets to increase from the average age at December 31, 2024, based on estimated net capital expenditures in 2025.

During 2026, we expect the average age of our tractor fleet to increase while we expect our trailer fleet average age to decrease from the average age at December 31, 2025, based on estimated net capital expenditures in 2026.

After Salaries, wages, and benefits and Deprecation and amortization, Fuel expense was our next highest operating cost in 2025.

2 unchanged sentences

The average price per gallon in 2026, through February 23, 2026, was $3.62.

During March 2022 the DOE average fuel prices increased to over $5.00 per gallon.

The DOE average fuel cost remained above this elevated threshold for the period from March through most of 2022, although the DOE weekly average for the last four weeks of December 2022 fell below $5.00 per gallon.

The trend of fuel prices below the $5.00 per gallon threshold has continued through 2023, 2024 and to date in 2025.

Through February 23, 2026, the last time the weekly DOE average was above the $4.00 threshold was the data published April 15, 2024.

The average DOE price for 2024 was $3.76 compared to $4.21 in 2023 and $4.99 in 2022.

During this same period the weekly DOE average was never below the $3.00 threshold, marking a period of relatively stable diesel fuel prices.

We are not able to pass through all fuel price increases through fuel surcharge agreements with customers due to tractor idling time, along with empty and out-of-route miles.

15 unchanged sentences

Depreciation and amortization 19.7 17.3

Impairment of trade name 2.4 —

Other operating expenses 5.7 5.5

1 unchanged sentence

107.1 % 101.9 %

Operating income (1.9) % 3.5 %

Operating loss (7.1) % (1.9) %

Interest income 0.1 % 0.1 %

2 unchanged sentences

Income tax expense (1.9) (0.7)

Net income (2.8) % 1.2 %

Net loss (6.5) % (2.8) %

Year Ended December 31, 2025 Compared with the Year Ended December 31, 2024

Operating revenue decreased $160.0 million (13.2%), to $1.0 billion for the year ended December 31, 2024 from $1.2 billion for the year ended December 31, 2023.

Operating revenue decreased $241.8 million (23.1%), to $805.7 million for the year ended December 31, 2025 from $1.0 billion for the year ended December 31, 2024.

The decrease in revenue was driven by a decrease in trucking and other revenues of $204.6 million and a decrease in fuel surcharge revenue of $37.2 million.

The decrease in trucking and other revenues was the result of a weak freight environment leading to a decline in total miles and lower freight rates.

The decreased fuel surcharge revenue was the result of decreased miles driven, along with a decrease in average DOE diesel fuel prices of 10.8% during 2024 compared to 2023, as reported by the DOE.

The decreased fuel surcharge revenue was the result of decreased miles driven, along with a decrease in average DOE diesel fuel prices of 2.6% during 2025 compared to 2024.

Operating revenues (the total of trucking and fuel surcharge revenue) are primarily earned based on loaded miles driven in providing truckload services.

1 unchanged sentence

The number of tractors is directly affected by the number of available drivers providing capacity to us.

The freight rates, earned on miles driven, were generally soft due to weak market conditions and demand for freight services during 2023, particularly during the second half of 2023 and throughout 2024.

Our operating revenues are reviewed regularly by our CODM on a combined basis across our operations, due to the similar nature of our services offerings and related similar base pricing structure.

The freight rates, earned on miles driven, were generally soft due to weak market conditions and demand for freight services during 2024 and throughout 2025.

Our operating revenues are reviewed regularly by our CODM on a combined basis across our operations, due to the similar nature of our service offerings and related similar base pricing structure.

In addition to consolidated data on a combined basis that has been historically used, our CODM also makes use of available disaggregated operating segment data as an additional resource of performance review.

Rent and purchased transportation decreased $28.4 million, to $51.7 million for the year ended December 31, 2025 from $80.1 million for the same period of 2024.

The significant decrease resulted from reduced purchased transportation and lower contractor miles associated with the CFI business integration, along with a reduction of leased equipment.

This decrease was partially offset by an increase in property leases due to terminals sold in late 2023 that are now under short term leases.

The significant decrease resulted from reduced purchased transportation and lower contractor miles associated with the CFI business integration, along with a reduction of leased equipment and terminal facilities.

We believe these strategic cost reductions position the Company for profitable operations in an improved freight environment.

Currently contractor miles account for less than 2% of our total miles, while at the beginning of 2024 contractor miles accounted for approximately 5% of total miles.

Salaries, wages, and benefits decreased $98.5 million (23.0%), to $329.2 million for the year ended December 31, 2025 from $427.7 million in the 2024 period.

Salaries, wages, and benefits decreased primarily due to the reduction of driver payroll as a result of lower company miles, along with a reduction of office and shop employees.

Offsetting this decrease was an increase in driver pay for non-productive time associated with weather shut downs, layovers, and other factors associated with a slower freight environment.

As a result, salaries, wages, and benefits as a percentage of operating revenues was higher in 2024

compared to 2023.

We have continued to get more creative in providing better pay, driving opportunities, benefits, equipment, and facilities for our drivers.

With the consistently weak freight environment experienced in 2024 and 2025, salaries, wages, and benefits as a percentage of operating revenues was similar.

We continue to evaluate creative ways in providing better pay, driving opportunities, benefits, equipment, and facilities for our drivers.

We expect the qualified driver shortage within the trucking industry to continue to be a challenge in the foreseeable future.

However, driver availability improved in 2023 and 2024, as a result of the changing freight and economic environments and we believe certain drivers have moved from smaller less financially stable carriers to more financially stable carriers.

Fuel decreased $42.0 million (23.7%), to $135.2 million for the year ended December 31, 2025 from $177.2 million for the same period of 2024.

The decrease in fuel was primarily due lower average diesel price per gallon (10.8%) as reported by the DOE along with less miles driven.

The average DOE diesel fuel prices per gallon for 2024 and 2023 were $3.76 and $4.21, respectively.

Through February 10, 2025, the last time the weekly DOE average was above the $4.00 threshold was the data published April 15, 2024.

We cannot currently predict whether the trend of reduced fuel prices will continue.

The decreased fuel was mainly the result of a reduction in miles driven and less significantly a decrease in average DOE diesel fuel prices of 2.6% during 2025 compared to 2024.

The average DOE diesel fuel prices per gallon for 2025 and 2024 were $3.66 and $3.76, respectively which represents relative stability of diesel fuel prices.

We cannot currently predict whether the trend of relatively stable diesel fuel prices will continue especially given recent conflicts in the Middle East.

Depreciation and amortization decreased $22.3 million (12.3%), to $159.2 million during the year ended December 31, 2025 from $181.5 million in the same period of 2024.

1 unchanged sentence

We expect depreciation expense in 2026 to be approximately $140 million to $150 million.

Operating and maintenance expense increased $7.4 million (11.7%), to $70.8 million during the year ended December 31, 2024, from $63.4 million in the same period of 2023.

Operating and maintenance costs increase is mainly attributable to higher tractor maintenance costs due to the average age of our tractor fleet, which was up to 2.7 years at September 30, 2024.

Impairment of trade name increased to $19.0 million during the year ended December 31, 2025 as there was no impairment in the same period of 2024.

The impairment is a result of the integration and rebranding of the U.S.

operations of CFI into Heartland Express.

Operating and maintenance expense decreased $7.9 million (11.1%), to $62.9 million during the year ended December 31, 2025, from $70.8 million in the same period of 2024.

The decrease in operating and maintenance costs was the result of a weak freight environment leading to a decline in active units of revenue equipment and a decline in total miles as the average age of our revenue equipment was comparable.

At December 31, 2025, the Company’s tractor fleet had an average age of 2.6 years compared to 2.5 years at December 31, 2024.

The average age of our trailer fleet was 7.4 years at December 31, 2024 compared to 6.4 years at December 31, 2023, however the trailer fleet average age is less impactful to maintenance costs than the tractor fleet average age.

The operating and maintenance expense during 2025 will be impacted by the volume of fleet modernization as newer equipment operating under warranty results in less realized maintenance costs.

The average age of our trailer fleet was 7.3 years at December 31, 2025 compared to 7.4 years at December 31, 2024.

The operating and maintenance expense during 2026 will be impacted by the total miles driven, along with the volume of fleet modernization as newer equipment operating under warranty results in less realized maintenance costs.

Operating taxes and licenses expense decreased $3.1 million (15.3%), to $17.3 million during the year ended December 31, 2025 from $20.4 million in 2024, due to a decrease in number of revenue equipment units (tractors and trailers) licensed in 2025 as compared to 2024.

6 unchanged sentences

Insurance carriers have raised premiums and collateral requirements for many businesses, including trucking companies.

In our April 2023 renewal we increased retained claim exposure in response to the premium increase trend, but also were able to increase our aggregate excess coverage.

In our 2024 renewal we added an additional corridor feature which has the effect of increasing retained exposure.

Our premiums are subject to upward or downward adjustments based on claims experience with the opportunity for net savings if we have positive claims experience in one of our excess layers.

In recent years we have increased retained claim exposure in response to the premium increase trend and added corridor features which have the effect of increasing retained exposure.

Our premiums are subject to upward or downward adjustments based on claims experience with the opportunity for net savings if we have positive claims experience in our excess layers.

As a result, our insurance and claims expense could likely increase with unfavorable claims experience and will be volatile in future periods.

Other operating expenses decreased $11.5 million (20.1%), to $45.7 million, during the year ended December 31, 2025 from $57.2 million in 2024, due mainly to a reduction of costs stemming from a reduction in freight volume as a result of weak freight demand in combination with expense reduction initiatives.

Gains on the disposal of property and equipment decreased $33.6 million (81.7%), to $7.5 million during the year ended December 31, 2024, from $41.1 million in the same period of 2023.

The decrease was primarily due to a $23.9 million decrease from the sale of terminal facilities, $4.2 million decrease in gains on sales of trailer equipment and a $5.5 million decrease in gains on sales of tractor equipment.

The decrease in gains on trailer sales was primarily due to a 18.9% decrease in the gains per unit sold in 2024 as compared to 2023.

Gains on tractor equipment sales decreased as a result of a 53.9% decrease in gains per tractor sold.

Gains on the disposal of property and equipment increased $15.9 million, to $23.4 million during the year ended December 31, 2025, from $7.5 million in the same period of 2024.

The increase was primarily due to $12.5 million increase in gains on sales of trailer equipment and a $3.9 million increase in gains on sales of tractor equipment.

The increase in gains on trailer sales was primarily due to a 87.2% increase in the gains per unit sold in 2025 as compared to 2024.

Gains on tractor equipment sales increased as a result of a 24.2% increase in gains per tractor sold.

Based on currently agreed upon equipment deals we expect equipment transaction gains to be between $20.0 million to $30.0 million during 2026.

3 unchanged sentences

Our effective tax rate was 23.0% and 19.0% for the years ended December 31, 2025 and 2024, respectively.

The decrease in the effective tax rate is primarily the result of permanent differences and items not correlated to income reducing the rate for 2024 calculated on a loss before tax.

The change in rate is primarly the result of increased taxable loss not correlated to the change in uncertain tax positions and other adjustments.

Inflation and Fuel Cost

2 unchanged sentences

Significant price increases in original equipment manufacturer revenue equipment has impacted the cost for us to acquire new equipment.

While there was a corresponding inflationary impact to prices offered on the sale of our used equipment during prior years, the market for used equipment softened significantly during 2023 and was weak throughout 2024.

Inflation has also impacted the cost of parts for equipment repairs and maintenance, inclusive of tires.

The cost of parts and equipment have the potential for further increases due to proposed tariffs.

The cost of parts and equipment have the potential for further increases due to tariffs.

The continued qualified driver shortage experienced by the trucking industry has had the effect of increasing compensation paid to drivers.

Our pay protection programs assist drivers with unproductive time associated with circumstances outside of their control, such as inclement weather, equipment breakdowns, and customer issues.

As a result of the freight environment during 2024 we paid more through these programs, resulting in an increase of driver pay per mile.

Significant inflation has been experienced in insurance and claims cost related to health insurance and claims as well as auto liability insurance and claims.

9 unchanged sentences

Additionally, we are not able to recover fuel surcharge on empty miles, out of route miles, or fuel used in idling.

Empty miles, out of route miles and idling were all elevated in 2024 as a result of lower freight demand throughout the year.

Empty miles, out of route miles and idling have been elevated as a result of lower freight demand.

Liquidity and Capital Resources

4 unchanged sentences

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 the CFI Closing Date and amounts borrowed under the Term Facility that are repaid or prepaid may not be reborrowed.

4 unchanged sentences

Amounts repaid under the Revolving Facility may be reborrowed.

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 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 and certain other subsidiaries of the Company.

10 unchanged sentences

The Smith Debt has $4.1 million of outstanding principal and is made up of installment notes with a weighted average interest rate of 4.4% at December 31, 2025, due in monthly installments with final maturities at various dates ranging from February 2027 to January 2029, secured by related revenue equipment.

The remaining Smith Debt of $11.0 million are finance lease obligations with a weighted average interest rate of 4.0% at December 31, 2024, due in monthly installments with final maturities at various dates ranging from August 2025 to April 2026 with the weighted average remaining lease term of 1.0 year.

The remaining Smith Debt of $3.8 million are finance lease obligations with a weighted average interest rate of 4.3% at December 31, 2025, due in monthly installments with final maturities at various dates ranging from January 2026 to April 2026 with the weighted average remaining lease term of 0.2 years.

At December 31, 2025, we had $18.5 million in cash and cash equivalents, $156.0 million in outstanding debt, $3.8 million in finance lease liabilities, $1.6 million in operating lease obligations, and $88.8 million available borrowing capacity on the Revolving Facility.

2 unchanged sentences

Operating cash flow for 2025 was $89.3 million compared to $144.3 million for 2024.

This $21.0 million decrease was primarily due to a $41.2 million decrease in net income net of non-working capital adjustment items, offset by $20.2 million more cash provided by working capital items.

This $55.0 million decrease was primarily due to a $36.7 million decrease in net income net of non-working capital adjustment items along with $18.3 million less cash provided by working capital items.

Cash flow from operating activities was 11.1% of operating revenues for the year ended December 31, 2025, compared to 13.8% for the same period of 2024.

Cash flows used in investing activities were $26.0 million during 2025, representing a decrease in cash used of $20.5 million compared to cash flows used in investing activities of $46.5 million during 2024.

The decrease in cash used in investing activities was mainly the result of $24.7 million less net cash used for property and equipment in 2024.

We currently anticipate net capital expenditures for revenue equipment and terminal properties in 2025 to be between $55.0 million to $65.0 million.

The decrease in cash used in investing activities was mainly the result of less net cash used for property and equipment in 2025.

We currently do not anticipate net capital expenditures for revenue equipment and terminal properties in 2026 to be significantly different than 2025.

Cash flows used in financing activities decreased $54.5 million in 2025 compared to 2024.

The $112.7 million used in financing activities during 2024 included $100.3 million of repayments of finance leases and debt, $7.3 million repurchases of common stock, and $4.7 million used to pay dividends to our shareholders.

In 2023, $120.7 million was used in financing activities included $114.1 million used for repayments of finance leases and debt along with $6.3 million to pay dividends.

The $58.2 million used in financing activities during 2025 included $41.2 million of repayments of finance leases and debt, $10.4 million repurchases of common

stock, and $6.2 million used to pay dividends to our shareholders.

In 2024, $112.7 million used in financing activities included $100.3 million used for repayments of finance leases and debt, $7.3 million to repurchase common stock, and $4.7 million to pay dividends.

We have a stock repurchase program with 4.8 million shares remaining authorized for repurchase as of December 31, 2025 and the program has no expiration date.

There were 0.6 million shares repurchased in the open market during the year ended December 31, 2024 while there were no shares repurchased during 2023.

There were 1.2 million shares repurchased in the open market during the year ended December 31, 2025 while there were 0.6 million shares repurchased during 2024.

While we are paying down the debt, we do not currently expect to repurchase a significant volume of shares of our common stock, however we will remain flexible to ensure the best deployment of our capital.

2 unchanged sentences

We had net payments of 9.3 million and 15.6 million for income taxes, net of refunds, for the years ended December 31, 2025 and 2024.

The reduction in taxes paid during the year ended December 31, 2024 is due to prior year overpayment credit forwards and reduced current year taxable income.

The reduction in taxes paid during the year ended December 31, 2025 is primarily due to 100% bonus depreciation being made permanent in 2025 reducing the current year tax liability.

Management believes we have adequate liquidity to meet our current and projected needs in the foreseeable future.

23 unchanged sentences

Obligations for unrecognized tax benefits $ 5,428

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 income 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 net combination of expiration of certain statute of limitations and estimated additions.

The federal statute of limitations remains open for the years 2022 and forward.

8 unchanged sentences

Revenue equipment estimated useful lives and salvage values

Over 96% of our total miles comes from company drivers operating the Company's revenue equipment.

Of our total miles, 98% come from company drivers operating the Company's revenue equipment.

Management estimates the useful lives of revenue equipment based on estimated period of use for the asset.

28 unchanged sentences

It is reasonably likely that the ultimate outcome of settling all outstanding claims will be more or less than the estimated claims liability at December 31, 2025.

Management believes that the ultimate resolution of these claims will not significantly affect the long-term financial condition of the Company or its ability to fund its continuing operations.

Management believes that the ultimate resolution of these claims will not significantly affect the

long-term financial condition of the Company or its ability to fund its continuing operations.

A change in estimate could impact salaries, wages and benefits (workers compensation) or insurance and claims (auto liability) in the consolidated statements of comprehensive income and insurance accruals in the consolidated balance sheets.

We have not had any material changes to our estimate methodology in the past three years.

Business Combination Estimates

The purchase price of an acquired businesses is allocated to the estimated fair values of the assets acquired and liabilities assumed as of the date of the acquisition.

The calculations used to determine the fair value of the long-lived assets acquired, including intangible assets, revenue equipment and properties can be complex and require significant judgment.

For the valuation of long-lived assets we weigh many factors when completing these estimates.

Goodwill and other intangibles valuation

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 has performed its annual impairment test as of October 1, however beginning with the year ended December 31, 2026, the Company has elected to change its annual impairment test to November 1.

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.

Fair value estimates are determined through various valuation techniques, including discounted cash flow models, quoted market values, and third-party independent appraisals, as necessary.

Estimating fair value includes several significant assumptions, including future cash flow estimates, determination of appropriate discount rates, and other assumptions that management believed reasonable under the circumstances.

Changes in these estimates and assumptions could materially affect the determination of fair value.

We may also engage independent valuation specialists to assist in the fair value calculations.

During 2022 we engaged valuation specialists to assist us in determining the fair value of intangible assets, revenue equipment and properties acquired through our acquisitions of Smith Transport and CFI.

Goodwill is not amortized, but is subject to impairment testing on at least an annual basis and its valuation is directly impacted by the valuation estimates of the other acquired long-lived assets.

We are also required to determine if an intangible asset has a finite or indefinite life.

For intangible assets determined to have a finite life, we estimate the useful lives of the acquired intangible assets, which determines the amount of acquisition-related amortization expense we will record in future periods.

During 2025 we engaged valuation specialists to assist us in determining the fair value of goodwill and intangible assets.

While we use our best estimates and assumptions, our fair value estimates are inherently uncertain.

During the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill.

Any adjustments required after the one year measurement period would be recorded in the consolidated statements of income.

The judgments required in determining the estimated fair values and expected useful lives assigned to each class of assets can significantly affect net income.

In 2025, the decision to unify CFI with Heartland Express resulted in $19.0 million of impairment charges related to the CFI trade name.

Significant management judgment is required to determine the provision for income taxes and to determine whether deferred income taxes will be realized.

8 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis