UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31,June 30, 2022

[  ]          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                                                    to

Commission file number 0-15087

319-645-7060

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act:

If an emerging company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

As of May 6,August 1, 2022 there were 78,933,45078,936,981 shares of the registrant’s common stock ($0.01 par value) outstanding.

HEARTLAND EXPRESS, INC.

AND SUBSIDIARIES

PART I

The accompanying notes are an integral part of these consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

HEARTLAND EXPRESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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, Inc., Smith Trucking, Inc., and Franklin Logistics, Inc. ("Smith Transport"). On May 31, 2022, Heartland Express, Inc. of Iowa acquired Smith Transport, a truckload carrier headquartered in Roaring Spring, Pennsylvania. We, together with our subsidiaries, are a short-to-medium haul truckload carrier (predominately 500 miles or less per load). We primarily provide nationwide asset-based dry van truckload service for major shippers across the United States.

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. The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and notes to the financial statements required by U.S. GAAP for complete financial statements. In the opinion of management, all normal, recurring adjustments considered necessary for a fair presentation have been included. The consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 31, 2021 included in the Annual Report on Form 10-K the Company filed with the Securities and Exchange Commission (the "SEC") on February 25, 2022. Interim results of operations are not necessarily indicative of the results to be expected for the full year or any other interim periods. There were no changes to the Company's significant accounting policies during the three and six months ended March 31,June 30, 2022.

The preparation of the consolidated financial statements in conformity with 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. There were no significant changes in estimates and assumptions used by management related to our critical accounting policies during the three and six months ended March 31,June 30, 2022.

We provide truckload services across the United States (U.S.) and parts of Canada. These truckload services are primarily asset-based transportation services in the dry van truckload market, and we also offer truckload temperature-controlled transportation services to select dedicated customers, which are not significant to our operations. Our Chief Operating Decision Maker (“CODM”) 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 1 segment, consistent with the authoritative accounting guidance on disclosures about segments of an enterprise and related information.

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 generally within 30 days after the delivery date of the shipment for the majority of our customers.

The Company's operations are consistent with those in the trucking industry where freight is hauled twenty-four hours a day and seven days a week, subject to hours of service rules. The Company’s average length of haul is 400-500 miles per trip and each individual shipment accepted by the Company is considered a separate contract with the performance obligation being the delivery of the freight. Our average length of haul for each load of freight generally equals less than one day of continuous transit time. The Company 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 $1.3 million and $1.3 million at March 31, 2022 and December 31, 2021,

estimated revenue of these in-process loads for $1.7 million and $1.3 million at June 30, 2022 and December 31, 2021, respectively. Recorded contract assets are included in the accounts receivable line item of the balance sheet. Corresponding liabilities are recorded in the accounts payable and accrued liabilities and compensation and benefits line items for the estimated expenses on these same in-process loads. The Company had no contract liabilities associated with our operations as of March 31,June 30, 2022 and December 31, 2021, respectively.

Total revenues recorded were $151.3$187.8 million and $152.4$154.1 million for the three months ended March 31,June 30, 2022 and 2021, respectively. Fuel surcharge revenues were $24.0$36.4 million and $16.8$19.1 million for the three months ended March 31,June 30, 2022 and 2021, respectively. Accessorial and other revenues recorded in the consolidated statements of comprehensive income collectively represented $3.2$4.3 million and $3.1$2.8 million for the three months ended March 31,June 30, 2022 and 2021, respectively.

Cash equivalents are short-term, highly liquid investments with insignificant interest rate risk and original maturities of three months or less at acquisition. At March 31,June 30, 2022, restricted and designated cash and investments totaled $15.8$14.8 million, of which $0.9 million was included in other current assets and $14.9$13.9 million was included in other non-current assets in the consolidated balance sheet. Restricted and designated cash and investments totaled $16.0 million at December 31, 2021, of which $0.9 million was included in other current assets and $15.1 million was included in other non-current assets in the consolidated balance sheet. The restricted funds represent deposits required by state agencies for self-insurance purposes and designated funds that are earmarked for a specific purpose and not for general business use.

Property and equipment are reported at cost, net of accumulated depreciation. Maintenance and repairs are charged to operations as incurred. New 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 tractors. We recognize depreciation expense on new tractors (excludes assets acquired in an acquisition) using the 125% declining balance method. Revenue equipment acquired through acquisitions is generally revalued to current market values as of the acquisition date. These acquired assets are depreciated on a straight-line basis aligned with the remaining period of expected use. As acquired equipment is replaced, our fleet returns to our base methods of declining balance depreciation for tractors and straight-line depreciation for trailers. New tractors are depreciated to salvage values of $15,000 while new trailers are depreciated to salvage values of $4,000. At March 31,June 30, 2022, there was $1.2$3.1 million amounts receivable related to equipment sales recorded in other current assets compared to $1.5 million at December 31, 2021.

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. ThereAs a result of the acquisition of Smith Transport on May 31, 2022, there was no changea $28.1 million increase in the gross amountintangible assets made up of identifiable$20.1 million finite lived intangible assets and $8.0 million of indefinite lived intangible assets during the three and six months ended March 31,June 30, 2022. The increase in gross indefinite lived intangible assets is associated with the Smith Transport trade name, while the intangible assets for customer relationships and covenants not to compete have finite lives. Amortization expense of $0.6 million and $0.6 million for the three months ended March 31,June 30, 2022 and 2021, respectively, was included in depreciation and amortization in the consolidated statements of comprehensive income. Amortization expense of $1.2 million and $1.2 million for the six months ended June 30, 2022 and 2021, respectively, was included in depreciation and amortization in the consolidated statements of comprehensive income.

Intangible assets subject to amortization consisted of the following at March 31,June 30, 2022:

Change in carrying amount of goodwill was $168.3 million at March 31, 2022 and December 31, 2021, respectively.goodwill:

Basic earnings per share is 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 three and six months ended March 31,June 30, 2022 and March 31,June 30, 2021, we had outstanding restricted shares of common stock to

We have a stock repurchase program with 6.6 million shares remaining authorized for repurchase as of March 31,June 30, 2022. During the three months ended June 30, 2022 and 2021, there were no shares repurchased on the open market. There were no shares repurchased in the open market during the threesix months ended March 31,June 30, 2022 and there were 0.8 million shares repurchased in the open market for $14.5 million during the threesix months ended March 31,June 30, 2021. Repurchases are expected to continue from time to time, as determined by market conditions, cash flow requirements, securities law limitations, and other factors, until the number of shares authorized have been repurchased, or until the authorization is terminated. The share repurchase authorization is discretionary and has no expiration date.

During the three months ended March 31,June 30, 2022 and 2021, our Board of Directors declared dividends totaling $1.6 million and $1.6 million, respectively. During the six months ended June 30, 2022 and 2021, our Board of Directors declared dividends totaling $3.2 million and $3.2 million, respectively. Future payment of cash dividends and the amount of such dividends will depend upon our financial conditions,condition, our results of operations, our cash requirements, tax treatment, and certain corporate law requirements, as well as factors deemed relevant by our Board of Directors.

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. In May 2021, at the 2021 Annual Meeting of Stockholders, the Heartland Express, Inc. 2021 Restricted Stock Award Plan (the "2021 Plan") was approved. 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. All shares granted and vested during the three and six months ended March 31,June 30, 2022, as well as shares that remain unvested at March 31,June 30, 2022, were issued from the 2011 plan.

There were no shares that were issued during the period 2011 to 2018 that remain unvested at March 31,June 30, 2022. Shares granted in 2019 through 2022 have various vesting terms that range from immediate to four years from the date of grant. 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 is included in salaries, wages and benefits 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 $0.3$0.1 million and $0.6$0.3 million respectively, for the three and six months ended March 31, 2022June 30, 2022. Compensation expense associated with restricted stock awards was $0.2 million and March 31,$0.8 million respectively, for the three and six months ended June 30, 2021. Unrecognized compensation expense was $0.2 million at March 31,June 30, 2022 which will be recognized over a weighted average period of 1.00.8 years.

The following tables summarize our restricted stock award activity for the three and six months ended March 31,June 30, 2022 and 2021.

In November 2013, Heartland Express, Inc. of Iowa, (the "Borrower"), a wholly owned subsidiary of the Company, entered into a Credit Agreement with Wells Fargo Bank, National Association, (the “Bank”). On August 31, 2021, the Borrower and the Bank entered into the Second Amendment to this Credit Agreement. The Second Amendment (i) provides for a $25.0 million Revolver, which may be used for working capital, equipment financing, permitted acquisitions, and general corporate purposes, (ii) provides an uncommitted accordion feature, which allows the Company a one-time request, at the discretion of the Bank, to increase the Revolver by up to an additional $100.0 million, (iii) decreases the letter of credit subfeature of the Credit Agreement from $30.0 million to $20.0 million, and (iv) extends the maturity of the Credit Agreement to August 31, 2023, subject to the Borrower’s ability to terminate the commitment at any time at no additional cost to the Borrower.

The Credit Agreement is unsecured, with a negative pledge against all assets of our consolidated group, except for debt associated with permitted acquisitions, new purchase-money debt and capital lease obligations as described in the Credit Agreement. Interest on outstanding indebtedness under the Second Amendment is based on the Secured Overnight Financing Rate (“SOFR”) plus a spread based on the Company’s consolidated funded debt to adjusted EBITDA ratio. A non-usage fee is payable on the unused portion of the Revolver based on the Company’s consolidated funded debt to adjusted EBITDA ratio.

The Credit Agreement contains customary financial covenants including, but not limited to, (i) a maximum adjusted leverage ratio of 2:1, measured quarterly on a trailing twelve month basis, (ii) a minimum net income requirement of $1.00, measured quarterly on a trailing twelve month basis, (iii) a minimum tangible net worth of $250.0 million requirement, measured quarterly, and (iv) limitations on other indebtedness and liens. The Credit Agreement also includes customary events of default, covenants, representations and warranties, and indemnification provisions. We were in compliance with the respective financial covenants at March 31,June 30, 2022 and during the three and six months then ended.

We had no outstanding debt on the Credit Agreement at March 31,June 30, 2022 and December 31, 2021, respectively. Outstanding letters of credit associated with the revolving line of credit at March 31,June 30, 2022 were $8.5$10.1 million. As of March 31,June 30, 2022, the line of credit available for future borrowing was $16.5$14.9 million.

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 statement carrying amount of existing assets

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.

At March 31,June 30, 2022 and December 31, 2021, we had a total of $4.5$5.8 million and $4.7 million in gross unrecognized tax benefits, respectively included in long-term income taxes payable in the consolidated balance sheet. Of this amount, $3.6$4.6 million and $3.7 million represents the amount of unrecognized tax benefits that, if recognized, would impact our effective tax rate as of March 31,June 30, 2022 and December 31, 2021. The net change in unrecognized tax benefits was an increase of $1.3 million and a

decrease of $0.2 million and $0.2$0.1 million during the three months ended March 31,June 30, 2022 and March 31,June 30, 2021, respectively. The net decreasechange in unrecognized tax benefits was an increase of $1.1 million and a decrease of $0.4 million during the six months ended June 30, 2022 and June 30, 2021, respectively. The net increase in unrecognized tax benefits for the three and six month periods ended June 30, 2022 is due to lapse of applicable statutes of limitations with corresponding reductions to uncertain tax liabilities occurringspecific non-recurring transactions in the three months ended March 31, 2022, and March 31,that did not occur in 2021. The total net amount of accrued interest and penalties for such unrecognized tax benefits was $0.8$0.7 million and $0.8 million at March 31,June 30, 2022 and December 31, 2021, respectively and is included in long-term income taxes payable in the consolidated balance sheets. These unrecognized tax benefits relate to risks associated with state income tax filing positions for our subsidiaries. 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.

Net interest and penalties included in income tax expense for the three month period ended March 31,June 30, 2022 and March 31,June 30, 2021 was a net expensebenefit of approximately 0$0.1 million and zero,$0.1 million, respectively. Net interest and penalties included in income tax expense for the six month period ended June 30, 2022 and June 30, 2021 was a net benefit of approximately $0.2 million and $0.1 million, respectively.

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 combination of expiration of certain statute of limitations and estimated additions.  The federal statute of limitations remains open for the years 20182019 and forward. Tax years 20112012 and forward are subject to audit by state tax authorities depending on the tax code and administrative practice of each state.

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.  

OF OPERATIONS

This Item 2 contains certain statements that may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are subject to the safe harbor created by such sections and the Private Securities Litigation Reform Act of 1995, as amended. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements, including without limitation: any projections of earnings, revenues, or other financial items; any statement of plans, strategies, and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; and any statements of belief and any statement of assumptions underlying any of the foregoing. Such statements may be identified by their use of terms or phrases such as “seek,” “expects,” “estimates,” “anticipates,” “projects,” “believes,” “hopes,” “plans,” “goals,” “intends,” “may,” “might,” “likely,” “will,” “should,” “would,” “could,” “potential,” “predict,” “continue,” “strategy,” “future,” “outlook,” and similar terms and phrases. Forward-looking statements are based on currently available operating, financial, and competitive information. In this Form 10-Q, statements relating to general trucking industry trends, including future demand and capacity, freight rates, operating ratio goals, anticipated revenue equipment sales and purchases, including revenue equipment gains, the used equipment market, and the availability of revenue equipment, future customer relationships, future growth and acquisitions, our ability to attract and retain drivers, future driver compensation, including possible driver compensation increases, future insurance and claims expense, the impact of changes in interest rates and tire prices, future liquidity, expected fuel costs, including strategies for managing fuel costs, the potential impact of pending litigation, our dividend policy, capital spending, including our mix of leased versus owned revenue equipment, future depreciation expense, our future repurchases of our shares, the anticipated impact of the COVID-19 pandemic, reducing unnecessary or unproductive costs,future cost reduction, including at Millis Transfer and Smith Transport, and our ability to react to changing market conditions, among others, are forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, which could cause future events and actual results to differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the sections entitled "Item 1A. Risk Factors," set forth in the Company's 2021 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 25, 2022. Readers should review and consider such factors, along with various disclosures in our press releases, stockholder reports, and other filings with the Securities and Exchange Commission.

All such forward-looking statements speak only as of the date of this Quarterly Report. You are cautioned not to place undue reliance on such forward-looking statements. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or any change in the events, conditions, or circumstances on which any such statement is based.

References in this Quarterly Report to “we,” “us,” “our,” “Heartland,” or the “Company” or similar terms refer to Heartland Express, Inc. and its subsidiaries.

We, together with our subsidiaries, are a short-to-medium haul truckload carrier (predominately 500 miles or less per load). We primarily provide nationwide asset-based dry van truckload service for major shippers from across the U.S. Approximately 99.9% of our operating revenue is derived from shipments within the United States with the remainder being Canada. We do not have any operations in Mexico. We focus on providing high quality service to targeted customers with a high density of freight in our regional operating areas. We also offer limited temperature-controlled truckload services, which are not significant to our operations, serving select dedicated customers. We generally earn revenue based on the number of miles per load delivered and the revenue per mile paid. We operate our consolidated operations under the brand names of Heartland Express, Millis Transfer, and Millis Transfer.Smith Transport. We manage our business based on overall corporate operating goals and objectives that are the same for bothall of our brands. Our Chief Operating Decision Maker (“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. We believe the keys to success are maintaining high levels of customer service and safety, which are predicated on the availability of experienced drivers and late-model equipment. We believe that our service standards, safety record, and equipment accessibility have made us a core carrier to many of our major customers, as well as allowed us to build solid, long-term relationships with customers and brand ourselves as an industry leader for on-time service.

We operate in a cyclical industry. Throughout 2021, freight demand was strong and we were able to capitalize on rising freight rates and better utilization across our operating fleet. In 2022, freight demand has continued to be strong even though demand reached lower levels sequentially during the first quarter.and second quarters of 2022. While the current levels are down compared

against the unprecedented levels experienced during the second half of 2021, we continued to have significantly more opportunities to haul

We continue to focus on providing quality service to targeted customers with a high density of freight in our regional operating areas. Organic growth has become increasingly difficult for traditional over-the-road truckload carriers given a shortage of qualified drivers in the industry. We continue to evaluate and explore different driving options and offerings for our existing and potential new drivers.

In addition to past organic growth through the development of our regional operating areas, we have completed eightnine acquisitions since 1986 with the most recent and our thirdfourth acquisition within the last nine years, Millis Transfer,Smith Transport, occurring on August 26, 2019.May 31, 2022. These eightnine acquisitions have enabled us to solidify our position within existing regions, expand into new operating regions, and pursue new customer relationships 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-80s operating ratio upon full integration, application of our cost structure, and freight optimization, including exiting certain loads that fail to meet our operating profile. We expect to continue to evaluate acquisition candidates presented to us. We believe future growth depends upon several factors including the level of economic growth and the related customer demand, the available capacity in the trucking industry, our ability to identify and consummate future acquisitions, our ability to integrate operations of acquired companies to realize efficiencies, and our ability to attract and retain experienced drivers that meet our hiring standards.

The trucking industry has been faced with a qualified driver shortage. During 2021, increased freight demand, combined with the COVID-19 pandemic, intensified an already challenging qualified driver market. Competition for qualified drivers will continuecontinues to be challenging to date in 2022 and is expected to be a challenge going forward due to the decreasing numbers of qualified drivers in our industry. We continually explore new strategies to attract and retain qualified drivers with changes in market conditions and demands. We hire the majority of our drivers with at least six months of over-the-road experience and safe driving records. As discussed below, Millis Transfer'sthe Company's driver training program provides 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. We have increased wages and enhanced the compensation for our drivers multiple times in the last twelve months. Further, we have continued to get more creative in providing better pay, benefits, equipment, and facilities for our drivers. Our comprehensive driver compensation and benefits program rewards drivers for years of service and safe operating mileage benchmarks, which are critical to our operational and financial performance. Our driver pay package includes 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 equipment breakdowns.customer issues. We believe that our driver compensation and benefits package is consistently among the best in the industry. We are committed to investing in our drivers and compensating them for safety as both are key to our operational and financial performance.

In response to the driver shortage in our industry, the Company continues to evaluate and pursue the expansion of driver training schools. Millis Transfer has operated a driver training school program, Millis Training Institute, since 1989. Millis Training Institute is a driver training program dedicated to identifying, training, and developing capable individuals into obtaining their commercial driving license and becoming professional truck drivers. This driver training program currently provides a source of qualified professional drivers for Millis Transfer and Heartland Express as we expanded the training program in 2021.Express. The driver training program offers an additional opportunity to hire professional drivers other than the traditional approach of hiring only experienced over-the-road drivers. We will continue to evaluate this training program for future expansion.

As one of our highest expense categories, managing fuel cost continues to be one of management's top priorities. Average prices for diesel fuel steadily increased since during 2021 and into 2022. During March 2022 Department of Energy ("DOE") average fuel prices increased to over $5.00 per gallon. The DOE average fuel cost has remained above this elevated threshold into MayAugust with the most recently published DOE diesel fuel price up to $5.51at $5.14 per gallon. Average DOE diesel fuel prices per gallon for the three months ended March 31,June 30, 2022 and 2021 were $4.24$5.49 and $2.91$3.21 (a 45.7%70.9% increase), respectively. We cannot predict what fuel prices will be for the remainder of 2022, but fuel expense has become the second highest expense behind

salaries, wages, and benefits. We are not able to pass through all fuel price increases through fuel surcharge agreements with customers due to tractor idling time, along with empty and out-of-route miles. Therefore, our operating income is negatively

Our cash flow from operating activities for the threesix months ended March 31,June 30, 2022 of $37.6$58.5 million was 24.9%17.3% of operating revenues, compared to $35.4$62.8 million and 23.2%20.5% in the same period of 2021. During 2022, we had net cash used by investing activities of $8.4$42.8 million resulting from net cash used of $122.0 million for the acquisition of Smith Transport partially offset by $79.3 million provided by property and equipment. Net cash provided by property and equipment was primarily the result of proceeds from the sale of a terminal facility. We have an extensive network of terminals and are continually reviewing opportunities for the acquisition or disposition of terminals in response to the real estate market and operational needs. Our cash, cash equivalents and restricted cash increased $29.2$12.9 million during the threesix months ended March 31,June 30, 2022. We ended the firstsecond quarter of 2022 with cash, cash equivalents and restricted cash of $202.9$186.7 million. Cash and cash equivalents, excluding restricted cash was $187.1$171.9 million at March 31,June 30, 2022.

(1)