8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):

August 31, 2022

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HEARTLAND EXPRESS, INC.

(Exact name of registrant as specified in its charter)

Nevada	000-15087	93-0926999
(State of other Jurisdiction	(Commission	(IRS Employer
of Incorporation)	File Number)	Identification No.)
901 HEARTLAND WAY,  NORTH LIBERTY, IA	52317
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(Address of Principal Executive Offices)	(Zip Code)		(319) 626-3600
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Registrant's Telephone Number (including area code):

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	HTLD	NASDAQ

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ☐

If an emerging growth 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. ☐

EXPLANATORY NOTE

On August 31, 2022, Heartland Express, Inc. (the "Company"), through Heartland Express, Inc. of Iowa, a wholly owned subsidiary, completed the acquisition of all the issued and outstanding common stock of Transportation Resources, Inc. ("TRI"). TRI operates as Contract Freighters, Inc. ("CFI"). This Amendment No. 1 to the Current Report on Form 8-K is being filed to amend the Current Report on Form 8-K filed August 31, 2022 (the "Original Form 8-K") with the Securities and Exchange Commission. This Amendment No. 1 amends Item 9.01 of the Original Form 8-K to present certain financial statements of TRI and to present certain unaudited pro forma financial statements of the Company in connection with the Company's acquisition of TRI. All of the other information in the Original Form 8-K remains unchanged.

Item 9.01.   Financial Statements and Exhibits

(a) Financial Statements of Business Acquired.

The audited combined carve out financial statements of TRI as of December 31, 2021 and 2020, and for the years then ended, the notes related thereto, and the report of KPMG LLP are filed as Exhibit 99.2 and are incorporated in their entirety herein by reference.

The unaudited combined carve out financial statements of TRI as of June 30, 2022 and for the six months ended June 30, 2022 and 2021, and the notes related thereto, are filed as Exhibit 99.3 and are incorporated in their entirety herein by reference.

(b) Pro Forma Financial Information

The unaudited pro forma consolidated financial statements of the Company as of and for the six months ended June 30, 2022 and for the year ended December 31, 2021, giving effect to the acquisition of TRI, are filed as Exhibit 99.4 and are incorporated in their entirety herein by reference. Such unaudited pro forma consolidated financial statements are not necessarily indicative of the operating results and financial position that actually would have been achieved if the acquisition had been in effect on the dates indicated or that may be achieved for future periods, and should be read in conjunction with the financial statements of the Company and TRI.

(c) Exhibits

EXHIBIT
NUMBER	EXHIBIT DESCRIPTION
23.1	Consent of Independent Auditor
99.2	Transportation Resources, Inc. Audited Combined Carve Out Financial Statements as of
	December 31, 2021 and 2020, and for each of the years then ended, the Related Notes Thereto,
	and the Report of KPMG LLP.
99.3	Transportation Resources, Inc. Unaudited Combined Carve Out Financial Statements
	as of June 30, 2022 and for the six months ended June 30, 2022 and 2021,
	and the Related Notes Thereto.
99.4	Unaudited Pro Forma Consolidated Financial Statements of Heartland Express, Inc. as of
	and for the six months ended June 30, 2022 and the year ended December 31, 2021
	and the notes thereto.
104	Cover Page Interactive Data File

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf by the undersigned thereunto duly authorized.

		HEARTLAND EXPRESS, INC.
Date:	November 14, 2022	By:/s/Christopher A. Strain
		Christopher A. Strain
		Vice President-Finance,
		Treasurer and Chief Financial Officer

Document

KPMG LLP    Telephone     (514) 840-2100

600 de Maisonneuve Blvd. West    Fax    (514) 840-2187

Suite 1500, Tour KPMG    Internet    www.kpmg.ca

Montréal (Québec) H3A 0A3

Canada

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the registration statement on Form S-3 (File No. 333-239983) of Heartland Express, Inc. of our report dated November 14, 2022, with respect to the combined carve-out financial statements which comprise the combined carve-out balance sheets as at December 31, 2021 and 2020, and the related combined carve-out statements of net income, comprehensive income, changes in net parent investment and cash flows for the years then ended, and the related notes to the combined carve-out financial statement of Transportation Resources Inc., which report appears in the Form 8-K/A of Heartland Express, Inc. dated November 14, 2022.

/s/ KPMG LLP

Montréal, Canada

November 14, 2022

KPMG LLP, an Ontario limited liability partnership and member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. KPMG Canada provides services to KPMG LLP.

Document

TRANSPORTATION RESOURCES INC.

COMBINED CARVE-OUT FINANCIAL STATEMENTS

For the years ended

December 31, 2021 and 2020

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KPMG LLP    Telephone     (514) 840-2100

600 de Maisonneuve Blvd. West    Fax    (514) 840-2187

Suite 1500, Tour KPMG    Internet    www.kpmg.ca

Montréal (Québec) H3A 0A3

Canada

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors of Transportation Resources Inc.

Opinion

We have audited the combined carve-out financial statements of Transportation Resources Inc. (the ʺCompanyʺ), which comprise the combined carve-out balance sheets as of December 31, 2021 and 2020, and the related combined carve-out statements of net income, comprehensive income, changes in net parent investment, and cash flows for the years then ended, and the related notes to combined carve-out financial statements.

In our opinion, the accompanying combined carve-out financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended in accordance with U.S. generally accepted accounting principles.

Basis for Opinion

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (ʺGAASʺ). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Combined Carve-out Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Combined Carve-out Financial Statements

Management is responsible for the preparation and fair presentation of the combined carve-out financial statements in accordance with U.S. generally accepted accounting principles, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of combined carve-out financial statements that are free from material misstatement, whether due to fraud or error.

KPMG LLP, an Ontario limited liability partnership and member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. KPMG Canada provides services to KPMG LLP.

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In preparing the combined carve-out financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that the combined carve-out financial statements are available to be issued.

Auditors’ Responsibilities for the Audit of the Combined Carve-out Financial Statements

Our objectives are to obtain reasonable assurance about whether the combined carve-out financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the combined carve-out financial statements.

In performing an audit in accordance with GAAS, we:

•Exercise professional judgment and maintain professional skepticism throughout the audit.

•Identify and assess the risks of material misstatement of the combined carve-out financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the combined carve-out financial statements.

•Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed.

•Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the combined carve-out financial statements.

•Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time.

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We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.

/s/ KPMG LLP

Montréal, Canada

November 14, 2022

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Transportation Resources Inc.	COMBINED CARVE-OUT BALANCE SHEET
(in thousands of U.S. dollars)		As at			As at
---	---	---	---	---	---	---	---
	Note	December 31,<br><br>2021			December 31,<br><br>2020
Assets
Cash and cash equivalents			6,056			5,729
Trade and other receivables	5		58,908			53,364
Inventoried supplies			2,180			1,368
Due from parent			-			9,364
Prepaid expenses			12,632			5,033
Current assets			79,776			74,858
Property and equipment	6		322,103			301,755
Operating lease right-of-use assets			9,252			9,781
Goodwill	7		198,327			197,728
Intangible assets, net	7		44,328			45,991
Other assets			142			471
Non-current assets			574,152			555,726
Total assets			653,928			630,584
Liabilities
Trade and other payables			4,394			13,452
Accrued liabilities	8		26,900			17,592
Due to parent			53,038			-
Income taxes payable			8,980			16,427
Current portion of provisions	10		7,522			6,863
Current portion of operating lease liabilities	9		4,523			2,873
Current liabilities			105,357			57,207
Operating lease liabilities	9		4,697			6,891
Other postretirement benefits			1,157			1,111
Provisions	10		12,629			11,672
Other financial liabilities			-			2,587
Deferred tax liabilities			76,922			71,870
Non-current liabilities			95,405			94,131
Total liabilities			200,762			151,338
Net Parent Investment
Accumulated other comprehensive loss			(2,177	)		(1,713	)
Parent Investment			455,343			480,959
Total liabilities and net parent investment			653,928			630,584

The notes are an integral part of these combined carve-out financial statements.

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Transportation Resources Inc.	COMBINED CARVE-OUT STATEMENTS OF NET INCOME
(In thousands of U.S. dollars, except per share amounts)	Note	2021			2020
---	---	---	---	---	---	---	---
Revenue			472,733			437,820
Fuel surcharge			72,395			49,995
Total revenue			545,128			487,815
Materials and services expenses	13		243,814			201,055
Personnel expenses			186,587			176,745
Other operating expenses			17,882			16,959
Depreciation of property and equipment	6		52,265			51,817
Amortization of intangible assets	7		2,707			2,584
Gain on sale of rolling stock and equipment			(8,011	)		(1,926	)
Other			(16	)		(27	)
Total operating expenses			495,228			447,207
Operating income			49,900			40,608
Interest income			(44	)		-
Interest expense			603			398
Income before income tax			49,341			40,210
Income tax expense	14		17,505			10,702
Net income			31,836			29,508

The notes are an integral part of these combined carve-out financial statements.

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TRANSPORTATION RESOURCES INC.	COMBINED CARVE-OUT STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of U.S. dollars)	2021			2020
---	---	---	---	---	---	---
Net income		31,836			29,508
Other comprehensive income (loss)
Foreign currency translation adjustments		(464	)		(1,034	)
Other comprehensive loss		(464	)		(1,034	)
Total comprehensive income		31,372			28,474

The notes are an integral part of these combined carve-out financial statements.

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TRANSPORTATION RESOURCES INC.	COMBINED CARVE-OUT STATEMENTS OF CHANGES IN NET PARENT INVESTMENT
	DECEMBER 31, 2021 AND 2020
(In thousands of U.S. dollars)
---	---	---	---	---	---	---	---	---	---	---
					Accumulated
					other			Total
		Parent			comprehensive			net parent
	Note	Investment			income (loss)			investment
Balance as at December 31, 2020			480,959			(1,713	)		479,246
Net income			31,836			-			31,836
Other comprehensive loss			-			(464	)		(464	)
Total comprehensive income (loss)			31,836			(464	)		31,372
Net distribution to parent			(57,452	)		-			(57,452	)
Total transactions with parent, recorded directly in equity			(57,452	)		-			(57,452	)
Balance as at December 31, 2021			455,343			(2,177	)		453,166
Balance as at December 31, 2019			511,451			(679	)		510,772
Net income			29,508			-			29,508
Other comprehensive loss			-			(1,034	)		(1,034	)
Total comprehensive income (loss)			29,508			(1,034	)		28,474
Net distribution to parent			(60,000	)		-			(60,000	)
Total transactions with parent, recorded directly in equity			(60,000	)		-			(60,000	)
Balance as at December 31, 2020			480,959			(1,713	)		479,246

The notes are an integral part of these combined carve-out financial statements.

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Transportation Resources Inc.	COMBINED CARVE-OUT STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)	Note		2021			2020
---	---	---	---	---	---	---	---	---
Cash flows from operating activities
Net income for the year				31,836			29,508
Adjustments for:
Depreciation of property and equipment		6		52,265			51,817
Amortization of intangible assets		7		2,707			2,584
Deferred Income tax expense		14		2,572			(8,596	)
Gain on sale of rolling stock and equipment				(8,011	)		(1,926	)
Other post retirement benefits and provisions				1,826			1,256
Other				(500	)		(45	)
Changes in operating assets and liabilities
Trade and other receivables, net				(1,724	)		(2,814	)
Inventoried supplies, net				(812	)		313
Prepaid expenses, net				(6,621	)		474
Other assets				329			(138	)
Trade and other payables, net				(9,335	)		4,736
Accrued liabilities, net				8,431			4,179
Income taxes payable				(7,447	)		11,171
Other financial liabilities				(2,587	)		2,587
Net cash from operating activities				62,929			95,106
Cash flows used in investing activities
Purchases of property and equipment		6		(103,751	)		(40,296	)
Proceeds from sale of property and equipment				50,416			14,136
Proceeds from sale of assets held for sale				-			1,800
Purchases of intangible assets		7		(173	)		-
Proceeds from sale of intangible assets		7		-			710
Business combinations, net of cash acquired		4		(14,481	)		(9,614	)
Other				481			(138	)
Net cash used in investing activities				(67,508	)		(33,402	)
Cash flows (used in) from financing activities
Due to parent, net				62,402			1,538
Net distributions to parent				(57,452	)		(60,000	)
Other				(44	)		84
Net cash (used in) from financing activities				4,906			(58,378	)
Net change in cash and cash equivalents				327			3,326
Cash and cash equivalents, beginning of year				5,729			2,403
Cash and cash equivalents, end of year				6,056			5,729

The notes are an integral part of these combined carve-out financial statements.

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Transportation Resource Inc.	NOTES TO THE COMBINED CARVE OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)	YEARS ENDED DECEMBER 31, 2021 AND 2020

1.    Reporting entity and the business

Transportation Resources Inc. (“TRI”), through its combined entities, is a full truckload motor carrier that utilizes a fleet of tractors and trailers to provide short- and long-haul, asset- based transportation services throughout North America. TRI provides dry-van transportation services to manufacturing, industrial and retail customers while using single drivers as well as two-person driver teams over long-haul routes, with each trailer containing only one customer's goods.

TRI also offers "through-trailer" service into and out of Mexico through major gateways in Texas, Arizona and California. This service eliminates the need for shipment transfer and/or storage fees at the border and typically involves equipment- interchange operations with various Mexican motor carriers. For a shipment with an origin or destination in Mexico, TRI provides transportation for the domestic portion of the freight move, and a Mexican carrier provides the pick-up, linehaul and delivery services within Mexico.

On August 31, 2022, TRI was sold to Heartland Express, Inc. (“Heartland”) (NASDAQ: HTLD) for $525 million, subject to certain agreed upon adjustments. The agreement excluded certain tangible assets with a carrying amount of approximately $9.1 million and TFI International, Inc. (“TFI”) retains pre-closing worker’s compensation and auto liability claims included in provisions for which Heartland paid TFI an additional $24.0 million for which such assets and provisions are included in the combined carve-out financial statements.

2.    Basis of preparation

The combined carve-out financial statements are prepared in connection with the Stock Purchase Agreement dated August 31, 2022 between Heartland and TFI (Note 16). These combined carve-out financial statements include the following legal entities: Transportation Resources, Inc., Contract Freighters, Inc., CFI Truckload de Mexico, S.A. de C.V., CFI Logistica, S.A. de C.V., Solucionnes Internationales de Transporte, S.A. de C.C., and CFI Mex, S. de R.L. de C.V. and exclude the assets and liabilities and operating results of the legal entity of CFI Logistics, a subsidiary of TRI during the reporting period. The combined entities are referred to herein as TRI. TRI’s investment in CFI logistics was sold to TFI prior to the purchase of TRI by Heartland. Throughout the periods covered by the combined carve-out financial statements, TRI operated as part of TFI. Consequently, stand-alone financial statements have not historically been prepared for TRI.

The accompanying combined carve-out financial statements have been prepared on a combined basis as they represent the TRI business excluding CFI Logistics that was sold by TRI to TFI prior to the transaction with Heartland. These combined carve-out financial statements have also been prepared on a “carve-out” basis and are derived from the consolidated financial statements and accounting records of TFI using the historical results of operations and historical cost basis of the assets and liabilities of TFI that comprise TRI. The combined carve-out financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP). These combined carve-out financial statements may not be indicative of the future performance of TRI and do not necessarily reflect what the combined results of the operations, financial position and cash flows would have been if TRI had been operated as an independent company during the periods presented.

The combined carve-out statements of operations include all associated revenues from the assets being included in the combined carve-out financial statements, and the corporate functional related expenses to generate those revenues (direct, indirect, and allocated overhead). These corporate functional related costs have been allocated to TRI based on direct usage or benefit, where identifiable, with the remainder allocated based on proportionate labor costs and usage that management believes are consistent and reasonable. However, the combined carve-out financial statements may not reflect the actual costs that would have been incurred had TRI been an independent company during the period presented. See note 12, Net investment and related party transactions. The allocated costs

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TRANSPORTATION RESOURCES INC.	NOTES TO THE COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)	YEARS ENDED DECEMBER 31, 2021 AND 2020

have been recorded as a due to or due from the parent account in the period in which the expense was recorded in the combined carve-out statement of income. Current and deferred income taxes and related tax expenses have been determined on the carve-out results of TRI by applying Accounting Standards Codification (ASC) No. 740, Income Taxes, to TRI’s operations in each country as if it were a separate taxpayer.

Transactions between TRI and TFI included in these combined carve-out financial statements are generally settled through a due to or due from parent account and occasionally through the issuance of dividends. Transactions that impacted the due to or due from parent account are reported as financing activities in the combined carve-out statements of cash flows. The net effect of these transactions is included in the combined carve-out balance sheet’s due to or due from parent account. The net investment represents the parent’s interest in the recorded net assets of TRI and represents the cumulative net investment by the parent in TRI through the dates presented and includes cumulative operating results. Distribution to the parent company are also reported as financing activities in the combined carve-out statements of cash flows.

Certain related party transactions between TRI and TFI and its subsidiaries that occur as arm’s length transactions, are recorded through revenues and expenses, with corresponding amounts being recorded in trade receivables and trade payables. See note 12, Net investment and related party transactions. These transactions are not eliminated in the combined carve-out financial statements.

a)    Functional and reporting currency

The Company’s combined carve-out financial statements are presented in U.S. dollars (“U.S. dollars” or “USD”), the same as the functional currency of the Company.

All financial information presented in U.S. dollars has been rounded to the nearest thousand.

b)    Use of estimates and judgments

Management makes estimates and assumptions when preparing the combined carve-out financial statements in conformity with accounting principles generally accepted in the US. These estimates and assumptions affect the amounts reported in the accompanying combined carve-out financial statements and notes. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenue and expenses. Such estimates relate to revenue-related adjustments, impairment of goodwill and long-lived assets, amortization and depreciation, income taxes, self-insurance accruals, contingencies, and assets and liabilities recognized in connection with acquisitions, and allocation of related party related costs.

TRI evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. Estimates and assumptions are adjusted when facts and circumstances dictate. Volatility in financial markets and changing levels of economic activity increase the uncertainty inherent in such estimates and assumptions. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the combined carve-out financial statements in future periods, and assumptions resulting from changes in the economic environment will be reflected in the combined carve-out financial statements of future periods.

3.    Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these combined carve-out financial statements. The accounting policies have been applied consistently by TRI.

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TRANSPORTATION RESOURCES INC.	NOTES TO THE COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)	YEARS ENDED DECEMBER 31, 2021 AND 2020

a)Basis of combination

i)Business combinations

TRI applies the acquisition method to account for business combinations. TRI measures goodwill as the fair value of the consideration transferred including the fair value of liabilities resulting from contingent consideration arrangements, less the net recognized amount of the identifiable assets acquired and liabilities assumed, all measured at fair value as of the acquisition date. When the excess is negative, a bargain purchase gain is recognized immediately in income or loss.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, TRI records provisional amounts for the items for which the accounting is incomplete. During the measurement period (a period not to exceed twelve months from the acquisition date), those provisional amounts are adjusted in the reporting period in which the amounts are determined, or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date.

Transaction costs, other than those associated with the issue of debt or equity securities, that TRI incurs in connection with a business combination, are expensed as incurred.

ii)Transactions eliminated on combination

Intra-group balances and transactions, any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the combined carve-out financial statements.

b)Foreign currency translation

i)Foreign currency transactions

Transactions in foreign currencies are translated to the functional currency of TRI at the exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the exchange rate in effect at the reporting date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and amortized cost in foreign currency translated at the exchange rate at the end of the reporting period. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated at the rate in effect on the transaction date. Income and expense items denominated in foreign currency are translated at the date of the transactions. Gains and losses are included in income or loss.

ii)Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on business combinations, are translated to US dollars at exchange rates in effect at the reporting date. The income and expenses of foreign operations are translated to US Dollars at the average exchange rate in effect during the period.

Foreign currency differences are recognized in other comprehensive income (“OCI”).

When a foreign operation is disposed of, the relevant amount in the cumulative amount of foreign currency translation differences is transferred to income or loss as part of the income or loss on disposal.

Foreign exchange gains or losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which neither planned nor likely to occur in the foreseeable future and which in substance is considered to form part of the net investment in foreign operations, are recognized in other comprehensive income.

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TRANSPORTATION RESOURCES INC.	NOTES TO THE COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)	YEARS ENDED DECEMBER 31, 2021 AND 2020

c)    Financial instruments

The fair values of cash and cash equivalents, trade receivables, accounts payable and accrued liabilities, which are recorded at cost, approximate fair value based on the short-term nature and high credit quality of these financial instruments.

d)    Property and equipment

Property, plant and equipment are reported at historical cost and are depreciated on a straight-line basis over their estimated useful lives, 5 to 40 years for buildings and leasehold improvements, 4 to 10 years for rolling stock equipment and 3 to 10 years for most other equipment.

Expenditures for equipment maintenance and repairs are charged to operating expenses as incurred, and betterments are capitalized. Gains or losses on sales of equipment and property are recorded in other operating expenses.

e)    Intangible assets and goodwill

i) Goodwill

Goodwill that arises upon business combinations is included in the intangible assets.

Goodwill is not amortized and is measured at cost less accumulated impairment losses.

iii)Other intangible assets

Intangible assets consist of customer relationships, trademarks, non-compete agreements and information technology.

TRI determines the fair value of the customer relationship intangible assets using the excess earnings model and internally developed significant assumptions including:

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TRANSPORTATION RESOURCES INC.	NOTES TO THE COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)	YEARS ENDED DECEMBER 31, 2021 AND 2020

1.Forecasted revenue attributable to existing customer contracts and relationships;

2.Estimated annual attrition rate;

3.Forecasted operating margins; and

4.Discount rates.

The internally developed assumptions are based on limited observable market information which cause measurement uncertainty, and the fair value of the customer related intangible assets are sensitive to changes to these assumptions.

Intangible assets that are acquired by TRI and have finite lives are measured at cost less accumulated amortization and accumulated impairment losses.

Intangible assets with finite lives are amortized on a straight-line basis over 5 to 20 years for customer relationships and trademarks, 3 to 10 years for non-compete agreements, and 5 to 7 years from information technology. Certain trademarks have indefinite useful lives and are not amortized, but are tested for impairment at least annually, unless events occur or circumstances change between annual tests that would more likely than not reduce the fair value. Trademarks with indefinite useful life are tested for impairment annually using a relief-from-royalty method.

Useful lives are reviewed at each financial year-end and are adjusted prospectively, if appropriate.

f)    Leases

At the inception of a contract, TRI assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Leases with a term of twelve months or less are not recorded by TRI on the combined carve-out balance sheet.

Finance and operating leases right-of-use assets and liabilities are recognized based on the present value of future lease payments over the lease term at the commencement date. The leases are discounted using the interest rate implicit in the lease or, if that cannot be readily determined, TRI’s incremental borrowing rate. The incremental borrowing rate is a function of TFI’s incremental borrowing rate, the nature of the underlying asset, and the length of the lease. Generally, TRI uses its incremental borrowing rate as the discount rate. Operating lease expense is recognized on a straight-line basis over the lease term. Leases which have been identified as operating in nature are expensed in materials and service expenses (for vehicle and operating equipment) and through other operating expenses (for rent and other administrative equipment).

TRI’s lease contracts may contain termination, renewal and/or purchase options, residual value guarantees, or a combination thereof, all of which are evaluated by TRI. TRI accounts for renewal options when it is reasonably certain that it will exercise one of these options.

Lease contracts may contain lease and non-lease components that TRI generally accounts for separately.

TRI does not have material finance leases.

g)    Long-Lived assets

Long-lived assets, such as property and equipment, and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the

│14

TRANSPORTATION RESOURCES INC.	NOTES TO THE COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)	YEARS ENDED DECEMBER 31, 2021 AND 2020

extent that the carrying amount exceeds its fair value. Fair values are determined using quoted market values, discounted cash flows or external appraisals, as applicable.

Goodwill is not amortized but tested for impairment on an annual basis, or more frequently If circumstances warrant. The impairment of the TRI reporting unit is tested for impairment as at year end. The Company may first assess certain qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill, or proceed directly to a quantitative goodwill impairment test. If the qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test must be performed. The quantitative impairment test is performed by comparing the fair value of a reporting unit with its carrying amount, including goodwill, and an impairment loss is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, up to the value of goodwill. The Company defines the fair value of a reporting unit as the price that would be received to sell the reporting unit as a whole in an orderly transaction between market participants as of the impairment date. To determine the fair value of a reporting unit, the Company uses the value in use approach. The value in use methodology is based on discounted future cash flows. Management believes that the discounted future cash flows method is appropriate as it allows more precise valuation of specific future cash flows and reflects current market assessments of the time value of money and the risks specific to the reporting unit.

h)    Provisions

Self-insurance provisions represent the uninsured portion of outstanding claims at year-end. The provision represents an accrual for estimated future disbursements associated with the self-insured portion for claims filed at year-end and incurred but not reported, related to cargo loss, bodily injury, worker’s compensation and property damages. The estimates are based on the TRI’s historical experience including settlement patterns and payment trends. The most significant assumptions in the estimation process include the consideration of historical claim experience, severity factors affecting the amounts ultimately paid, and current and expected levels of cost per claims. Changes in assumptions and experience could cause these estimates to change significantly in the near term.

For all other legal claims, TRI maintains, and regularly updates on a case-by-case basis, provisions for such items when the expected loss is both probable and can be reasonably estimated based on currently available information.

i)    Revenue recognition

Revenue is recognized as services are rendered, when the control of the promised services are transferred to customers in an amount that reflect the consideration of TRI expects to be entitled to receive in exchange for those services measured based on the consideration specified in a contract with the customers. TRI recognizes revenue and related direct costs over time in the statement of net income. The stage of completion of the service is determined using the proportion of days completed to date compared to the estimated total days of the service. Revenue is presented on a net of trade discounts and volume rebates. TRI considers the contract with customers to include the general transportation service agreement and the individual bill of ladings with customers.

j)    Income Taxes

TRI has been included in the consolidated federal income tax return and consolidated/combined unitary state income tax returns of TFI. Furthermore, TRI files various stand-alone state income/franchise tax returns. TRI’s provision for income taxes and deferred tax balances as presented in the combined carve-out financial statements are calculated on a separate tax return basis. Under the separate return method, income taxes for each of the combined entities are calculated as if the entity was a separate taxpayer. Income taxes reflected in the accompanying combined carve-out financial statements of income represent a proportionate share of

│15

TRANSPORTATION RESOURCES INC.	NOTES TO THE COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)	YEARS ENDED DECEMBER 31, 2021 AND 2020

TFI’s consolidated income tax provision or benefit and approximate the amounts that would have been recorded had TRI filed separate tax returns. Federal and state income taxes payable and receivable in the US are settled in the current period through the intercompany payable account with TFI while income taxes payable to foreign jurisdictions are reported in the combined carve-out balance sheets. Current and long-term deferred taxes presented in the accompanying combined carve-out balance sheets represent TRI’s proportionate share of TFI’s consolidated deferred income tax accounts and approximate those that would have been recorded had TRI filed separate tax returns.

TRI follows the asset and liability method of accounting for income taxes. Under the asset and liability method, the change in the net deferred income tax asset or liability is included in the computation of net income (loss) or other comprehensive income (loss). Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial statement reporting purposes and the bases for income tax purposes, and (b) operating losses and tax credit carry forwards. Deferred income tax assets are evaluated and, if realization is not considered to be more-likely-than-not, a valuation allowance is provided.

The Company recognizes 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

k)    Cash and cash equivalents

Cash equivalents consist of short-term interest-bearing instruments with maturities of three months or less at the date of purchase. The US denominated bank accounts of TRI are part of the TFI’s cash pooling mechanism, resetting the bank balance on a daily basis. The bank accounts denominated in Pesos are excluded from the cash pooling.

l)    Owner’s Net Investment and Funding Structure

Amounts for cash and debt (amounts due to parent) are reflected in the Combined Carve-out Financial Statements only for the activities of TRI that operated or existed in separate dedicated TRI entities, during the period of the Combined Carve-out Financial Statements. The funding structure is therefore not necessarily representative of the financing that would have been reported if TRI operated on its own or as an entity independent from TFI during the periods presented, nor is it indicative of the financing that may arise in the future.

m)    New standards and interpretations not yet adopted

The following standards are not yet effective for the year ended December 31, 2021, and have not been applied in preparing these combined carve-out financial statements:

ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance

On November 17, 2021, the FASB issued ASU 2021-10, which requires new annual disclosures for entities receiving government assistance.

This ASU is effective for annual periods in fiscal years beginning after December 15, 2021. The ASU may be applied prospectively from the date of initial application or retrospectively.

Early application is permitted.

The adoption of the standard is not expected to have a material impact.

│16

TRANSPORTATION RESOURCES INC.	NOTES TO THE COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)	YEARS ENDED DECEMBER 31, 2021 AND 2020

ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers

On October 28, 2021, the FASB issued ASU 2021-08, which provides an exception to fair value measurement for revenue contracts acquired in business combinations. This ASU is effective for:

•    public business entities for annual and interim periods in fiscal years beginning after December 15, 2022 and is applied prospectively.

Early adoption is permitted for both interim and annual financial statements that have not yet been issued (or made available for issuance).

The adoption of the standard will only impact future business combinations.

4.    Business combinations

a)    Business combinations

On November 26, 2021, TRI acquired D&D Sexton (“D&D”). Based in Carthage, Missouri, D&D Specializes in refrigerated transportation providing both long-haul over-the-road services as well as local and shuttle operations.

During the twelve months ended December 31, 2021, this business contributed revenue and net income of $2.7 million and $0.1 million, respectively, since the acquisition. Had TRI acquired this business on January 1, 2021, as per management’s best estimates, the revenue and net income for these entities would have been $29.0 million and nil, respectively. In determining these estimated amounts, management assumed that the fair value adjustments that arose on the date of acquisition would have been the same had the acquisitions occurred on January 1, 2021 and adjusted for interest, based on the purchase price and average borrowing rate of TRI, and income tax expense based on the effective tax rate.

During the twelve months ended December 31, 2021, nil transaction costs have been expensed in other operating expenses in the combined carve-out financial statements of net income in relation to the above-mentioned business acquisition.

As of the reporting date, TRI has recorded the purchase price allocation over the identifiable net assets and goodwill of the acquisition based on the estimated purchase price. The purchase price allocation is not finalized as the purchase price is still subject to working capital adjustments based on the sale purchase agreement and TRI is awaiting approval from the seller to finalize.

The table below presents the preliminary purchase price allocation based on the best information available to TRI to date:

│17

TRANSPORTATION RESOURCES INC.	NOTES TO THE COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)	YEARS ENDED DECEMBER 31, 2021 AND 2020
Identifiable assets acquired and liabilities assumed	Note		November 26, 2021
---	---	---	---	---
Trade and other receivables				3,820
Prepaid expenses				978
Property and equipment		6		11,151
Operating lease right-of-use assets		9		2,656
Intangible assets		7		1,000
Trade and other payables				(77)
Accrued Liabilities				(877)
Operating lease liabilities		9		(2,656)
Deferred tax liabilities				(2,440)
Total identifiable net assets				13,555
Total consideration transferred				14,481
Goodwill		7		926
Total cash consideration transferred				14,481

The trade receivables comprise gross amounts due of $3.1 million, of which nil was expected to be uncollectible at the acquisition date.

No goodwill and intangible assets acquired through this business combinations are deductible for tax purposes.

b)    Prior year business combinations

On June 26, 2020, TRI completed the acquisition of MCT Transportation, LLC (“MCT”). Based in South Dakota, MCT provides transportation for major companies in the packaged food, agriculture, medical and automotive industries, primarily throughout Southeast and Mid-West regions of the United States.

During the twelve months ended December 31, 2021, this business contributed revenue and net income of $24.3 million and $1.0 million, respectively, since the acquisition. Had TRI acquired this business on January 1, 2020, as per management’s best estimates, the revenue and net income for these entities would have been $44.9 million and $0.9 million, respectively. In determining these estimated amounts, management assumed that the fair value adjustments that arose on the date of acquisition would have been the same had the acquisitions occurred on January 1, 2020 and adjusted for interest, based on the purchase price and average borrowing rate of TRI, and income tax expense based on the effective tax rate.

During the twelve months ended December 31, 2021, $0.1 million of transaction costs have been expensed in other operating expenses in the combined carve-out statements of net income in relation to the above-mentioned business acquisition.

│18

TRANSPORTATION RESOURCES INC.	NOTES TO THE COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)	YEARS ENDED DECEMBER 31, 2021 AND 2020

The table below presents the final purchase price allocation:

Identifiable assets acquired and liabilities assumed	Note		June 26, 2020
Trade and other receivables				4,953
Inventoried supplies and prepaid expenses				56
Property and equipment		6		813
Operating lease right-of-use assets		9		11,949
Intangible assets		7		3,375
Trade and other payables				(130)
Operating lease liabilities		9		(11,949)
Total identifiable net assets				9,067
Total consideration transferred				9,614
Goodwill		7		547
Total cash consideration transferred				9,614

5.Trade and other receivables

	December 31, 2021		December 31, 2020
Trade receivables		55,103		51,481
Allowance for doubtful accounts		(1,768)		(1,946)
Unbilled revenue		2,256		1,650
Sales taxes receivable		1,031		1,264
Other		2,286		915
		58,908		53,364

│19

TRANSPORTATION RESOURCES INC.	NOTES TO THE COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)	YEARS ENDED DECEMBER 31, 2021 AND 2020

6.    Property and equipment

			Land and			Rolling
	Note		buildings			stock			Equipment			Total
Cost
Balance at December 31, 2019				34,062			388,466			5,147			427,675
Additions through business combinations		4		-			813			-			813
Other additions				1,100			36,761			24			37,885
Disposals				-			(29,512	)		-			(29,512	)
Reclassification to assets held for sale				(1,800	)		-			-			(1,800	)
Effect of movements in exchange rates				(49	)		(9	)		(11	)		(69	)
Balance at December 31, 2020				33,313			396,519			5,160			434,992
Additions through business combinations		4		248			10,494			409			11,151
Other additions				5,378			97,604			969			103,951
Disposals				-			(82,735	)		(1,230	)		(83,965	)
Effect of movements in exchange rates				(27	)		(57	)		(6	)		(90	)
Balance at December 31, 2021				38,912			421,825			5,302			466,039
Accumulated Depreciation
Balance at December 31, 2019				4,157			92,416			2,156			98,729
Depreciation				1,210			49,640			967			51,817
Disposals				-			(17,301	)		-			(17,301	)
Effect of movements in exchange rates				2			(10	)		-			(8	)
Balance at December 31, 2020				5,369			124,745			3,123			133,237
Depreciation				1,252			50,135			878			52,265
Disposals				-			(40,447	)		(1,113	)		(41,560	)
Effect of movements in exchange rates				(2	)		(1	)		(3	)		(6	)
Balance at December 31, 2021				6,619			134,432			2,885			143,936
Net carrying amounts
At December 31, 2020				27,944			271,774			2,037			301,755
At December 31, 2021				32,293			287,393			2,417			322,103

As at December 31, 2021, $0.3 million is included in trade and other payables for the purchases of property and equipment (December 31, 2020 – $0.1 million). As at December 31, 2021, the carrying amount of property and equipment for the Mexican operations was $0.9 million (December 31, 2020 - $1.1 million).

│20

TRANSPORTATION RESOURCES INC.	NOTES TO THE COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)	YEARS ENDED DECEMBER 31, 2021 AND 2020

7.    Intangible assets and goodwill

					Intangible assets
											Non-
					Customer						compete		Information
	Note	Goodwill			relationships			Trademarks			agreements		technology		Total
Cost
Balance at December 31, 2019			262,120			30,690			28,199			-		713		321,722
Additions through business combinations			547			3,375			-			-		-		3,922
Sale of intangibles			-			(710	)		-			-		-		(710	)
Effect of movements in exchange rates			(678	)		(415	)		(27	)		-		-		(1,120	)
Balance at December 31, 2020			261,989			32,940			28,172			-		713		323,814
Additions through business combinations			926			430			420			150		-		1,926
Other additions			-			-			-			-		173		173
Effect of movements in exchange rates			(327	)		(219	)		(15	)		-		-		(561	)
Balance at December 31, 2021			262,588			33,151			28,577			150		886		325,352
Amortization and impairment losses
Balance at December 31, 2019			64,261			9,679			2,964			-		693		77,597
Amortization			-			2,564			-			-		20		2,584
Effect of movements in exchange rates			-			(83	)		(3	)		-		-		(86	)
Balance at December 31, 2020			64,261			12,160			2,961			-		713		80,095
Amortization			-			2,696			6			5		-		2,707
Effect of movements in exchange rates			-			(103	)		(2	)		-		-		(105	)
Balance at December 31, 2021			64,261			14,753			2,965			5		713		82,697
Net carrying amounts
At December 31, 2020			197,728			20,780			25,211			-		-		243,719
At December 31, 2021			198,327			18,398			25,612			145		173		242,655

We have performed our annual impairment test for goodwill and the indefinite life intangible assets and no impairment charge was taken in fiscal 2021 and 2020. As at December 31, 2021 the indefinite life trademarks had a carrying value of $25.2 million (December 31, 2020 - $25.2 million.

8.    Accrued liabilities

	December 31, 2021		December 31, 2020
Accruals		14,339		8,132
Accrued compensation and benefits		9,064		6,430
Accrued payroll deductions		3,497		3,030
		26,900		17,592

│21

TRANSPORTATION RESOURCES INC.	NOTES TO THE COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)	YEARS ENDED DECEMBER 31, 2021 AND 2020

9. Operating leases

The following table provides TRI’s lease expense for the years ending December 31:

	2021		2020
Operating lease expense		4,059		1,711
Short-term lease expense		918		1,810
Variable lease expense		1,173		1,241
Total Lease Expense		6,150		4,762

The lease expenses are included in operating activities on the combined carve-out statements of cash flows. Right-of use assets obtained in exchange for operating lease liabilities were $2.2 million for the year ended December 31, 2021 (December 31, 2020 of $1.2 million).

The following table provides TRI’s operating lease right-of-use assets and lease liabilities:

	As at		As at
	December 31, 2021		December 31, 2020
Operating lease right-of-use assets		9,252		9,781
Current portion of operating lease liabilities		4,523		2,873
Long-term portion of operating lease liabilities		4,697		6,891
Total operating lease liabilities		9,220		9,764

TRI does not have a significant exposure to termination options and penalties.

The following table provides the remaining lease terms and discount rates for TRI’s operating leases for the year ended December 31:

	2021			2020
Weight average remaining lease term (years)		2.22			3.55
Weighted-average discount rate (%)		3.32	%		1.91%

Contractual cash flows

The total contractual cash flow maturities of the TRI’s lease liabilities are as follows:

	As at
	December 31, 2021
Less than 1 year		4,799
Between 1 and 2 years		3,421
Between 2 and 3 years		910
Between 3 and 4 years		218
Between 4 and 5 years		91
More than 5 years		-
Total lease payments		9,439
Less: Imputed interest		219
		9,220

│22

TRANSPORTATION RESOURCES INC.	NOTES TO THE COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)	YEARS ENDED DECEMBER 31, 2021 AND 2020

10.    Provisions

	Self insurance
As at December 31, 2021
Current provisions		7,522
Non-current provisions		12,629
		20,151
As at December 31, 2020
Current provisions		6,863
Non-current provisions		11,672
		18,535
	Self insurance
Balance at December 31, 2019		17,455
Provisions made during the year		29,150
Provisions used during the year		(25,177	)
Provisions reversed during the year		(2,893	)
Balance at December 31, 2020		18,535
Provisions made during the year		24,695
Provisions used during the year		(19,468	)
Provisions reversed during the year		(3,611	)
Balance at December 31, 2021		20,151

Self-insurance provisions represent the uninsured portion of outstanding claims at period-end and is included in materials and services expenses on the combined carve-out statement of net income.

11.    Net investment and related party transactions

Movements in the net investment between TRI and its parent occur periodically as determined by the parent company. For the year ended December 31, 2021 TRI distributed $57.5 million to the parent company (December 31, 2020 - $60.0 million).

Historically, TRI has been managed and operated in the normal course of business with other affiliates of the parent. Accordingly, certain shared costs have been allocated to TRI and reflected as expenses in the combined carve-out financial statements. Management considers the allocation methodologies used to be reasonable and appropriate reflections of the historical parent expenses attributable to TRI for the purposes of the combined carve-out financial statement. The expenses reflected in the combined carve-out financial statements may not be indicative of expenses that will be incurred by TRI in the future. The following expense have been allocated to the combined carve-out financial statements:

Insurance

TFI manages the insurance portfolio on a consolidated basis, and allocates the expenses proportionately to the operations.

General Corporate Overhead:

TFI incurs significant corporate costs for support services to TRI as well as its other subsidiaries. These costs include expenses for accounting, claims management, other financial services such as treasury and audit functions, human resources, legal, facilities, marketing and business support. These allocated costs have been recorded in materials and services expense for $3.4 million (2020 -

│23

TRANSPORTATION RESOURCES INC.	NOTES TO THE COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)	YEARS ENDED DECEMBER 31, 2021 AND 2020

$2.9 million), personnel expenses for $2.0 million (2020 - $1.7 million), and in other operating expenses for $0.4 million (2020 - $0.3 million).

Allocation of revenues:

TRI occasionally chooses to engage a related party logistics divisions to obtain brokers to perform transportation services for their customers. Historically, some of the revenues and expenses generated from these activities were recorded entirely in the related party logistics divisions, as the operations were under common management of TFI. These combined carve-out financial statements allocate the necessary revenues and expenses from these activities to TRI at the gross margin determined from the related party logistics operations. For the year ended December 31, 2021, TRI recorded revenues of $19.1 million of revenues allocated to TRI that were performed by the logistic related party (December 31, 2020 - $11.9 million) and purchases of $17.8 million for the services performed (December 31, 2020 - $11.1 million), which are included in materials and services expenses. These transactions were recorded as part of the due to or due from parent accounts.

Other related party transactions between TRI and TFI subsidiaries occurred as arm’s length transactions, and were recorded through revenues and expenses of TRI historically, with corresponding amounts being recorded in trade receivables and payables. For the year ended December 31, 2021, TRI generated revenues of $6.9 million from sales with related parties (December 31, 2020 - $2.6 million) and incurred purchases of $2.0 million of services from related parties (December 31, 2020 - $0.9 million) included in materials and services expenses. Trade receivables and trade payables as at December 31, 2021 are $0.8 million and $0.2 million, respectively (December 31, 2020 - $0.3 million and $0.1 million, respectively).

Certain of the combined entities of TRI are considered material credit parties for TFI’s revolving credit facilities. These parties change as necessary to cover specific amounts of TFI’s consolidated earnings and assets, and provide guarantees to TFI’s lenders. No liability and expense have been recorded by TRI with respect to these guarantees.

12. Stock-Based compensation

TFI grants stock-based awards, including stock options, restricted stock awards, and performance stock awards to certain employees, including some of TRI. Stock-based compensation expense is measured at the grant based on the fair value of the award and recognized over the vesting or service period, as applicable, of the stock-based award.

Forfeitures are accounted for as they occur.

Share-based compensation expense recognized was $1,4 million for the year ended December 31, 2021 (December 31, 2020 - $0.7 million) and included in personnel expenses.

13.    Materials and services expenses

TRI’s materials and services expenses are primarily costs related to independent contractors and vehicle operation expenses. Vehicle operation expenses consists primarily of fuel costs, repairs and maintenance, insurance, permits and operating supplies.

	2021		2020
Independent contractors		93,054		79,482
Vehicle operation expenses		150,760		121,573
		243,814		201,055

│24

TRANSPORTATION RESOURCES INC.	NOTES TO THE COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)	YEARS ENDED DECEMBER 31, 2021 AND 2020

14.    Income tax expense

The following table presents TRI’s income tax expense:

	2021			2020
Current tax expense
Federal		10,715			14,534
State		3,645			4,152
Foreign		573			612
		14,933			19,298
Deferred tax expense (recovery)
Federal		2,150			(6,845	)
State		573			(1,563	)
Foreign		(151	)		(188	)
		2,572			(8,596	)
Income tax expense		17,505			10,702

Reconciliation of effective tax rate:

	2021					2020
Income before income tax				49,341					40,264
Income tax using the Company’s statutory tax rate		25.2	%	12,489			24.4	%	9,823
Increase (decrease) resulting from:
Rate differential between jurisdictions		0.1	%	49			0.4	%	141
Variation in tax rate		0.5	%	253			1.7	%	678
Non deductible expenses		2.3	%	1,140			3.2	%	1,276
Tax deductions and tax exempt income		-0.5	%	(242	)		-0.3	%	(114	)
Adjustment for prior periods		7.6	%	3,759			-2.8	%	(1,110	)
Multi-jurisdiction tax		0.1	%	57			0.0	%	8
		35.4	%	17,505			26.6	%	10,702

The components of the net deferred tax asset (liability) included in “Deferred tax liabilities” in the combined carve-out balance sheet were:

	2021			2020
Deferred tax assets:
Trade and other receivables		466			209
Trade and other payables		768			823
Accrued liabilities		1,440			1,936
Provisions		5,421			4,528
Postretirement benefits		444			430
Other		57			89
Total deferred tax assets		8,596			8,015
Deferred tax liabilities:
Property and equipment		(73,073	)		(67,203	)
Intangible assets		(11,021	)		(11,323	)
Prepaid expenses		(1,236	)		(1,187	)
Other		(188	)		(171	)
Total deferred tax liabilities		(85,518	)		(79,885	)
Deferred income taxes		(76,922	)		(71,870	))

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TRANSPORTATION RESOURCES INC.	NOTES TO THE COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.)	YEARS ENDED DECEMBER 31, 2021 AND 2020

Income taxes paid for the year ended December 31, 2021 was $22.1 million (December 31, 2020 - $8.0 million).

15.    Contingencies, letters of credit and other commitments

a)    Contingencies

There are pending operational and personnel related claims against the TRI. In the opinion of management, these claims are adequately provided for in Provisions (note 10) on the combined carve-out balance sheet and settlement is not expected to have a material adverse effect on the TRI’s financial position or results of operations.

b)    Letters of credit

As at December 31, 2021, TRI had $1.5 million of outstanding letters of credit (December 31, 2020 - $1.1 million).

c)    Other commitments

As at December 31, 2021, TRI had $2.0 million of purchase commitments (December 31, 2020 – $39.8 million). December 31, 2020

16.    Subsequent events

Subsequent events have been evaluated to November 14, 2022 which is the date the combined carve-out financial statements were available to be issued.

On August 31, 2022, TRI was sold to Heartland Express, Inc. (NASDAQ: HTLD) for consideration of $525 million, subject to certain agreed upon adjustments.

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Document

TRANSPORTATION RESOURCES INC.

INTERIM COMBINED CARVE-OUT FINANCIAL STATEMENTS

For the interim periods ended

June 30, 2022 and 2021

│1

Transportation Resources Inc.	INTERIM COMBINED CARVE-OUT BALANCE SHEET
(in thousands of U.S. dollars) (unaudited)		As at			As at
---	---	---	---	---	---	---	---
	Note	June 30,<br><br>2022			December 31, 2021
Assets
Cash and cash equivalents			10,957			6,056
Trade and other receivables	5		72,300			58,908
Income taxes receivable			713			-
Inventoried supplies			2,630			2,180
Prepaid expenses			8,927			12,632
Assets held for sale			1,871			-
Current assets			97,398			79,776
Property and equipment	6		330,506			322,103
Operating lease right-of-use assets	9		3,575			9,252
Goodwill	7		198,634			198,327
Intangible assets, net	7		43,129			44,328
Other assets			326			142
Non-current assets			576,170			574,152
Total assets			673,568			653,928
Liabilities
Trade and other payables			12,576			4,394
Accrued liabilities	8		33,367			26,900
Due to parent			38,076			53,038
Income taxes payable			-			8,980
Current portion of provisions	10		9,618			7,522
Current portion of operating lease liabilities	9		2,350			4,523
Current liabilities			95,987			105,357
Operating lease liabilities	9		1,149			4,697
Other postretirement benefits			1,303			1,157
Provisions	10		16,257			12,629
Deferred tax liabilities			73,747			76,922
Non-current liabilities			92,456			95,405
Total liabilities			188,443			200,762
Net Parent Investment
Accumulated other comprehensive loss			(1,662	)		(2,177	)
Parent Investment			486,787			455,343
Total liabilities and net parent investment			673,568			653,928

The notes are an integral part of these interim combined carve-out financial statements.

│2

Transportation Resources Inc.	INTERIM COMBINED CARVE-OUT STATEMENTS OF NET INCOME
(In thousands of U.S. dollars, except per share amounts) (unaudited)	Note	Six months ended June 30, 2022			Six months ended June 30, 2021
---	---	---	---	---	---	---	---
Revenue			260,591			233,762
Fuel surcharge			59,748			33,584
Total revenue			320,339			267,346
Materials and services expenses	13		156,575			120,968
Personnel expenses			108,854			91,286
Other operating expenses			10,777			8,647
Depreciation of property and equipment	6		29,666			26,118
Amortization of intangible assets	7		1,456			1,345
Gain on sale of rolling stock and equipment			(27,871	)		(2,350	)
Other			(44	)		-
Total operating expenses			279,413			246,014
Operating income			40,926			21,332
Interest expense			960			268
Income before income tax			39,966			21,064
Income tax expense	14		8,522			5,788
Net income			31,444			15,276

The notes are an integral part of these interim combined carve-out financial statements.

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TRANSPORTATION RESOURCES INC.	INTERIM COMBINED CARVE-OUT STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of U.S. dollars) (Unaudited)	Six months ended June 30, 2022		Six months ended June 30, 2021
---	---	---	---	---
Net income		31,444		15,276
Other comprehensive income
Foreign currency translation adjustment		515		134
Other comprehensive income		515		134
Total comprehensive income		31,959		15,410

The notes are an integral part of these interim combined carve-out financial statements.

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TRANSPORTATION RESOURCES INC.	INTERIM COMBINED CARVE-OUT STATEMENTS OF CHANGES IN NET PARENT INVESTMENT
(In thousands of U.S. dollars) (unaudited)
---	---	---	---	---	---	---	---	---
				Accumulated
				other			Total
		Parent		comprehensive			net parent
	Note	Investment		Income (loss)			investment
Balance as at December 31, 2021			455,343		(2,177	)		453,166
Net income			31,444		-			31,444
Other comprehensive income			-		515			515
Total comprehensive income			31,444		515			31,959
Balance as at June 30, 2022			486,787		(1,662	)		485,125
Balance as at December 31, 2020			480,959		(1,713	)		479,246
Net income			15,276		-			15,276
Other comprehensive income			-		134			134
Total comprehensive income			15,276		134			15,410
Balance as at June 30, 2021			496,235		(1,579	)		494,656

The notes are an integral part of these interim combined carve-out financial statements.

│5

Transportation Resources Inc.	INTERIM COMBINED CARVE-OUT STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars) (unaudited)	Note		Six months ended June 30, 2022			Six months ended June 30, 2021
---	---	---	---	---	---	---	---	---
Cash flows from operating activities
Net income for the period				31,444			15,276
Adjustments for:
Depreciation of property and equipment		6		29,666			26,118
Amortization of intangible assets		7		1,456			1,345
Deferred Income taxes		14		(3,158	)		(2,527	)
Gain on sale of rolling stock and equipment				(27,871	)		(2,350	)
Other post-retirement benefits and provisions				5,833			3,103
Other				(89	)		(61	)
Changes in operating assets and liabilities
Trade and other receivables, net				(13,215	)		(4,105	)
Inventoried supplies, net				(450	)		(164	)
Prepaid expenses, net				3,716			1,967
Other assets				(184	)		-
Trade and other payables, net				8,182			1,958
Accrued liabilities, net				6,611			4,630
Income taxes payable				(9,697	)		(630	)
Net cash from operating activities				32,244			44,560
Cash flows used in investing activities
Purchases of property and equipment		6		(73,206	)		(42,018	)
Proceeds from sale of property and equipment				61,164			22,186
Purchases of intangible assets		7		(150	)		-
Others				(185	)		324
Net cash used in investing activities				(12,377	)		(19,508	)
Cash flows from financing activities
Due to parent, net				(14,966	)		(24,179	)
Decrease in other financial liabilities				-			7
Net cash from financing activities				(14,966	)		(24,172	)
Net change in cash and cash equivalents				4,901			880
Cash and cash equivalents, beginning of period				6,056			5,729
Cash and cash equivalents, end of period				10,957			6,609

The notes are an integral part of these interim combined carve-out financial statements.

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Transportation Resources Inc.	NOTES TO THE INTERIM COMBINED CARVE OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.) (unaudited)	PERIODS ENDED JUNE 30, 2022 AND 2021

1.    Reporting entity and the business

Transportation Resources Inc. (“TRI”), through its combined entities, is a full truckload motor carrier that utilizes a fleet of tractors and trailers to provide short- and long-haul, asset- based transportation services throughout North America. TRI provides dry-van transportation services to manufacturing, industrial and retail customers while using single drivers as well as two-person driver teams over long-haul routes, with each trailer containing only one customer's goods.

TRI also offers "through-trailer" service into and out of Mexico through major gateways in Texas, Arizona and California. This service eliminates the need for shipment transfer and/or storage fees at the border and typically involves equipment- interchange operations with various Mexican motor carriers. For a shipment with an origin or destination in Mexico, TRI provides transportation for the domestic portion of the freight move, and a Mexican carrier provides the pick-up, linehaul and delivery services within Mexico.

On August 31, 2022, TRI was sold to Heartland Express, Inc. (“Heartland”) (NASDAQ: HTLD) for $525 million, subject to certain agreed upon adjustments. The agreement excluded certain tangible assets with a carrying amount of approximately $9.1 million and TFI International, Inc. (“TFI”) retains pre-closing worker’s compensation and auto liability claims included in provisions for which Heartland paid TFI an additional $24.0 million for which such assets and provisions are included in the interim combined carve-out financial statements.

These unaudited interim combined carve-out financial statements have been prepared in accordance with United States generally accepted accounting principles (U.S. GAAP) for interim financial statements. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. In management's opinion, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. Interim operating results are not necessarily indicative of the results that may be expected for the full year. These unaudited interim combined carve-out interim financial statements have been prepared using accounting policies consistent with those used in preparing the annual combined carve-out financial statements.

2.    Basis of preparation

The interim combined carve-out financial statements of are prepared in connection with the Stock Purchase Agreement dated August 31, 2022 between Heartland and TFI (Note 16). These interim combined carve-out financial statements include the following legal entities: Transportation Resources, Inc., Contract Freighters, Inc., CFI Truckload de Mexico, S.A. de C.V., CFI Logistica, S.A. de C.V., Solucionnes Internationales de Transporte, S.A. de C.C., and CFI Mex, S. de R.L. de C.V. and exclude the assets and liabilities and operating results of the legal entity of CFI Logistics, a subsidiary of TRI during the reporting period. The combined entities are referred to herein as TRI. TRI’s investment in CFI logistics was sold to TFI prior to the purchase of TRI by Heartland. Throughout the periods covered by the interim combined carve-out financial statements, TRI operated as part of TFI. Consequently, stand-alone financial statements have not historically been prepared for TRI.

The accompanying interim combined carve-out financial statements have been prepared on a combined basis as they represent the TRI business excluding CFI Logistics that was sold by TRI to TFI prior to the transaction with Heartland. These interim combined carve-out financial statements have also been prepared on a “carve-out” basis and are derived from the consolidated financial statements and accounting records of TFI using the historical results of operations and historical cost basis of the assets and liabilities of TFI that comprise TRI. The interim combined carve-out financial statements have been prepared in accordance with accounting principles. These interim combined carve-out financial statements may not be indicative of the future performance of TRI and do not necessarily

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Transportation Resources Inc.	NOTES TO THE INTERIM COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.) (unaudited)	PERIODS ENDED JUNE 30, 2022 AND 2021

reflect what the combined results of the operations, financial position and cash flows would have been if TRI had been operated as an independent company during the periods presented.

The interim combined carve-out statements of operations include all associated revenues from the assets being included in the interim combined carve-out financial statements, and the corporate functional related expenses to generate those revenues (direct, indirect, and allocated overhead). These corporate functional related costs have been allocated to TRI based on direct usage or benefit, where identifiable, with the remainder allocated based on proportionate labor costs and usage that management believes are consistent and reasonable. However, the interim combined carve-out financial statements may not reflect the actual costs that would have been incurred had TRI been an independent company during the period presented. See note 12, Net investment and related party transactions. The allocated costs have been recorded as a due to or due from the parent account in the period in which the expense was recorded in the interim combined carve-out statement of income. Current and deferred income taxes and related tax expenses have been determined on the carve-out results of TRI by applying Accounting Standards Codification (ASC) No. 740, Income Taxes, to TRI’s operations in each country as if it were a separate taxpayer.

Transactions between TRI and TFI included in these interim combined carve-out financial statements are generally settled through a due to or due from parent account and occasionally through the issuance of dividends. Transactions that impacted the due to or due from parent account are reported as financing activities in the interim combined carve-out statements of cash flows. The net effect of these transactions is included in the interim combined carve-out balance sheet’s due to or due from parent account. The net investment represents the parent’s interest in the recorded net assets of TRI and represents the cumulative net investment by the parent in TRI through the dates presented and includes cumulative operating results. Distribution to the parent company are also reported as financing activities in the interim combined carve-out statements of cash flows.

Certain related party transactions between TRI and TFI and its subsidiaries that occur as arm’s length transactions, are recorded through revenues and expenses, with corresponding amounts being recorded in trade receivables and trade payables. See note 12, Net investment and related party transactions. These transactions are not eliminated in the combined carve-out financial statements.

a)    Functional and reporting currency

The Company’s interim combined carve-out financial statements are presented in U.S. dollars (“U.S. dollars” or “USD”), the same as the functional currency of the Company.

All financial information presented in U.S. dollars has been rounded to the nearest thousand.

b)    Use of estimates and judgments

Management makes estimates and assumptions when preparing the interim combined carve-out financial statements in conformity with accounting principles generally accepted in the US. These estimates and assumptions affect the amounts reported in the accompanying interim combined carve-out financial statements and notes. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenue and expenses. Such estimates relate to revenue-related adjustments, impairment of goodwill and long-lived assets, amortization and depreciation, income taxes, self-insurance accruals, contingencies, and assets and liabilities recognized in connection with acquisitions, and allocation of related party related costs.

TRI evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. Estimates and assumptions are adjusted when facts and circumstances dictate. Volatility in financial markets and changing levels of economic activity increase the uncertainty inherent in such estimates and assumptions.

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Transportation Resources Inc.	NOTES TO THE INTERIM COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.) (unaudited)	PERIODS ENDED JUNE 30, 2022 AND 2021

Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the interim combined carve-out financial statements in future periods, and assumptions resulting from changes in the economic environment will be reflected in the interim combined carve-out financial statements of future periods.

3.    Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these interim combined carve-out financial statements. The accounting policies have been applied consistently by TRI.

a)Basis of combination

i)Business combinations

TRI applies the acquisition method to account for business combinations. TRI measures goodwill as the fair value of the consideration transferred including the fair value of liabilities resulting from contingent consideration arrangements, less the net recognized amount of the identifiable assets acquired and liabilities assumed, all measured at fair value as of the acquisition date. When the excess is negative, a bargain purchase gain is recognized immediately in income or loss.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, TRI records provisional amounts for the items for which the accounting is incomplete. During the measurement period (a period not to exceed twelve months from the acquisition date), those provisional amounts are adjusted in the reporting period in which the amounts are determined, or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date.

Transaction costs, other than those associated with the issue of debt or equity securities, that TRI incurs in connection with a business combination, are expensed as incurred.

ii)Transactions eliminated on combinations

Intra-group balances and transactions, any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the interim combined carve-out financial statements.

b)Foreign currency translation

i)Foreign currency transactions

Transactions in foreign currencies are translated to the functional currency of TRI at the exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the exchange rate in effect at the reporting date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and amortized cost in foreign currency translated at the exchange rate at the end of the reporting period. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated at the rate in effect on the transaction date. Income and expense items denominated in foreign currency are translated at the date of the transactions. Gains and losses are included in income or loss.

ii)Foreign operations

│9

Transportation Resources Inc.	NOTES TO THE INTERIM COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.) (unaudited)	PERIODS ENDED JUNE 30, 2022 AND 2021

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on business combinations, are translated to US dollars at exchange rates in effect at the reporting date. The income and expenses of foreign operations are translated to US Dollars at the average exchange rate in effect during the period.

Foreign currency differences are recognized in other comprehensive income (“OCI”).

When a foreign operation is disposed of, the relevant amount in the cumulative amount of foreign currency translation differences is transferred to income or loss as part of the income or loss on disposal.

Foreign exchange gains or losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which neither planned nor likely to occur in the foreseeable future and which in substance is considered to form part of the net investment in foreign operations, are recognized in other comprehensive income.

c)    Financial instruments

The fair values of cash and cash equivalents, trade receivables, accounts payable and accrued liabilities, which are recorded at cost, approximate fair value based on the short-term nature and high credit quality of these financial instruments.

d)    Property and equipment

Property, plant and equipment are reported at historical cost and are depreciated on a straight-line basis over their estimated useful lives, 5 to 40 years for buildings and leasehold improvements, 4 to 10 years for rolling stock equipment and 3 to 10 years for most other equipment.

Expenditures for equipment maintenance and repairs are charged to operating expenses as incurred, and betterments are capitalized. Gains or losses on sales of equipment and property are recorded in other operating expenses.

e)    Intangible assets and goodwill

i) Goodwill

Goodwill that arises upon business combinations is included in the intangible assets.

Goodwill is not amortized and is measured at cost less accumulated impairment losses.

iii)Other intangible assets

Intangible assets consist of customer relationships, trademarks, non-compete agreements and information technology.

TRI determines the fair value of the customer relationship intangible assets using the excess earnings model and internally developed significant assumptions including:

1.Forecasted revenue attributable to existing customer contracts and relationships;

2.Estimated annual attrition rate;

3.Forecasted operating margins; and

4.Discount rates.

The internally developed assumptions are based on limited observable market information which cause measurement uncertainty, and the fair value of the customer related intangible assets are sensitive to changes to these assumptions.

│10

Transportation Resources Inc.	NOTES TO THE INTERIM COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.) (unaudited)	PERIODS ENDED JUNE 30, 2022 AND 2021

Intangible assets that are acquired by TRI and have finite lives are measured at cost less accumulated amortization and accumulated impairment losses.

Intangible assets with finite lives are amortized on a straight-line basis over 5 to 20 years for customer relationships and trademarks, 3 to 10 years for non-compete agreements, and 5 to 7 years from information technology. Certain trademarks have indefinite useful lives and are not amortized, but are tested for impairment at least annually, unless events occur or circumstances change between annual tests that would more likely than not reduce the fair value. Trademarks with indefinite useful life are tested for impairment annually using a relief-from-royalty method.

Useful lives are reviewed at each financial year-end and are adjusted prospectively, if appropriate.

f)    Leases

At the inception of a contract, TRI assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Leases with a term of twelve months or less are not recorded by TRI on the interim combined carve-out balance sheet.

Finance and operating leases right-of-use assets and liabilities are recognized based on the present value of future lease payments over the lease term at the commencement date. The leases are discounted using the interest rate implicit in the lease or, if that cannot be readily determined, TRI’s incremental borrowing rate. The incremental borrowing rate is a function of TFI’s incremental borrowing rate, the nature of the underlying asset, and the length of the lease. Generally, TRI uses its incremental borrowing rate as the discount rate. Operating lease expense is recognized on a straight-line basis over the lease term. Leases which have been identified as operating in nature are expensed in materials and service expenses (for vehicle and operating equipment) and through other operating expenses (for rent and other administrative equipment).

TRI’s lease contracts may contain termination, renewal and/or purchase options, residual value guarantees, or a combination thereof, all of which are evaluated by TRI. TRI accounts for renewal options when it is reasonably certain that it will exercise one of these options.

Lease contracts may contain lease and non-lease components that TRI generally accounts for separately.

TRI does not have material finance leases.

g)    Long-Lived assets

Long-lived assets, such as property and equipment, and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair values are determined using quoted market values, discounted cash flows or external appraisals, as applicable.

Goodwill is not amortized but tested for impairment on an annual basis, or more frequently If circumstances warrant. The impairment of the TRI reporting unit is tested for impairment as at year end. The Company may first assess certain qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill, or proceed directly to a quantitative goodwill impairment test. If the qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test must be performed. The quantitative impairment test is performed by comparing the fair value of a reporting unit with its carrying amount, including

│11

Transportation Resources Inc.	NOTES TO THE INTERIM COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.) (unaudited)	PERIODS ENDED JUNE 30, 2022 AND 2021

goodwill, and an impairment loss is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, up to the value of goodwill. The Company defines the fair value of a reporting unit as the price that would be received to sell the reporting unit as a whole in an orderly transaction between market participants as of the impairment date. To determine the fair value of a reporting unit, the Company uses the value in use approach. The value in use methodology is based on discounted future cash flows. Management believes that the discounted future cash flows method is appropriate as it allows more precise valuation of specific future cash flows and reflects current market assessments of the time value of money and the risks specific to the reporting unit.

h)    Provisions

Self-insurance provisions represent the uninsured portion of outstanding claims at year-end. The provision represents an accrual for estimated future disbursements associated with the self-insured portion for claims filed at year-end and incurred but not reported, related to cargo loss, bodily injury, worker’s compensation and property damages. The estimates are based on the TRI’s historical experience including settlement patterns and payment trends. The most significant assumptions in the estimation process include the consideration of historical claim experience, severity factors affecting the amounts ultimately paid, and current and expected levels of cost per claims. Changes in assumptions and experience could cause these estimates to change significantly in the near term.

For all other legal claims, TRI maintains, and regularly updates on a case-by-case basis, provisions for such items when the expected loss is both probable and can be reasonably estimated based on currently available information.

i)    Revenue recognition

Revenue is recognized as services are rendered, when the control of the promised services is transferred to customers in an amount that reflect the consideration of TRI expects to be entitled to receive in exchange for those services measured based on the consideration specified in a contract with the customers. TRI recognizes revenue and related direct costs over time in the statement of net income. The stage of completion of the service is determined using the proportion of days completed to date compared to the estimated total days of the service. Revenue is presented on a net of trade discounts and volume rebates. TRI considers the contract with customers to include the general transportation service agreement and the individual bill of ladings with customers.

j)    Income Taxes

TRI has been included in the consolidated federal income tax return and consolidated/combined unitary state income tax returns of TFI. Furthermore, TRI files various stand-alone state income/franchise tax returns. TRI’s provision for income taxes and deferred tax balances as presented in the interim combined carve-out financial statements are calculated on a separate tax return basis. Under the separate return method, income taxes for each of the combined entities are calculated as if the entity was a separate taxpayer. Income taxes reflected in the accompanying interim combined carve-out financial statements of income represent a proportionate share of TFI’s consolidated income tax provision or benefit and approximate the amounts that would have been recorded had TRI filed separate tax returns. Federal and state income taxes payable and receivable in the US are settled in the current period through the intercompany payable account with TFI while income taxes payable to foreign jurisdictions are reported in the interim combined carve-out balance sheets. Current and long-term deferred taxes presented in the accompanying interim combined carve-out balance sheets represent TRI’s proportionate share of TFI’s consolidated deferred income tax accounts and approximate those that would have been recorded had TRI filed separate tax returns.

│12

Transportation Resources Inc.	NOTES TO THE INTERIM COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.) (unaudited)	PERIODS ENDED JUNE 30, 2022 AND 2021

TRI follows the asset and liability method of accounting for income taxes. Under the asset and liability method, the change in the net deferred income tax asset or liability is included in the computation of net income (loss) or other comprehensive income (loss). Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial statement reporting purposes and the bases for income tax purposes, and (b) operating losses and tax credit carry forwards. Deferred income tax assets are evaluated and, if realization is not considered to be more-likely-than-not, a valuation allowance is provided.

The Company recognizes 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

k)    Cash and cash equivalents

Cash equivalents consist of short-term interest-bearing instruments with maturities of three months or less at the date of purchase. The US denominated bank accounts of TRI are part of the TFI’s cash pooling mechanism, resetting the bank balance on a daily basis. The bank accounts denominated in Pesos are excluded from the cash pooling.

l)    Owner’s Net Investment and Funding Structure

Amounts for cash and debt (amounts due to parent) are reflected in the interim combined carve-out financial statements only for the activities of TRI that operated or existed in separate dedicated TRI entities, during the period of the interim combined carve-out financial statements. The funding structure is therefore not necessarily representative of the financing that would have been reported if TRI operated on its own or as an entity independent from TFI during the periods presented, nor is it indicative of the financing that may arise in the future.

m)    New standards and interpretations not yet adopted

The following standards are not yet effective for the year ended December 31, 2021, and have not been applied in preparing these interim combined carve-out financial statements:

ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance

On November 17, 2021, the FASB issued ASU 2021-10, which requires new annual disclosures for entities receiving government assistance.

This ASU is effective for annual periods in fiscal years beginning after December 15, 2021. The ASU may be applied prospectively from the date of initial application or retrospectively.

Early application is permitted.

The adoption of the standard is not expected to have a material impact.

ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers

On October 28, 2021, the FASB issued ASU 2021-08, which provides an exception to fair value measurement for revenue contracts acquired in business combinations. This ASU is effective for:

•    public business entities for annual and interim periods in fiscal years beginning after December 15, 2022 and is applied prospectively.

│13

Transportation Resources Inc.	NOTES TO THE INTERIM COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.) (unaudited)	PERIODS ENDED JUNE 30, 2022 AND 2021

Early adoption is permitted for both interim and annual financial statements that have not yet been issued (or made available for issuance).

The adoption of the standard will only impact future business combinations.

4.    Business combinations

On November 26, 2021, TRI acquired D&D Sexton (“D&D”). Based in Carthage, Missouri, D&D Specializes in refrigerated transportation providing both long-haul over-the-road services as well as local and shuttle operations. The purchase price allocation is not finalized as the purchase price is still subject to working capital adjustments based on the sale purchase agreement and TRI is awaiting approval from the seller to finalize.

5.Trade and other receivables

	June 30, 2022			December 31, 2021
Trade receivables		67,359			55,103
Allowance for doubtful accounts		(1,882	)		(1,768	)
Unbilled revenue		2,492			2,256
Sales taxes receivable		473			1,031
Other		3,858			2,286
		72,300			58,908

6.    Property and equipment

	Land and			Rolling
	buildings			stock			Equipment			Total
Cost
Balance at December 31, 2021		38,912			421,825			5,302			466,039
Additions through business combinations		-			-			-			-
Other additions		400			72,639			167			73,206
Reclassified to assets held for sale		(3,039	)		-			-			(3,039	)
Disposals		(74	)		(58,574	)		(1,814	)		(60,462	)
Effect of movements in exchange rates		25			5			6			36
Balance at June 30, 2022		36,224			435,895			3,661			475,780
Accumulated Depreciation
Balance at December 31, 2021		6,619			134,432			2,885			143,936
Depreciation		618			28,745			303			29,666
Reclassified to assets held for sale		(1,168	)		-			-			(1,168	)
Disposals		-			(25,492	)		(1,677	)		(27,169	)
Effect of movements in exchange rates		2			3			4			9
Balance at June 30, 2022		6,071			137,688			1,515			145,274
Net carrying amounts
At December 31, 2021		32,293			287,393			2,417			322,103
At June 30, 2022		30,153			298,207			2,146			330,506

As at June 30, 2022, $0.3 million is included in trade and other payables for the purchases of property and equipment (December 31, 2021 – $0.3 million). As at June 30, 2022, the carrying amount of property and equipment for the Mexican operations was $0.9 million (December 31, 2021 - $0.9 million).

│14

Transportation Resources Inc.	NOTES TO THE INTERIM COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.) (unaudited)	PERIODS ENDED JUNE 30, 2022 AND 2021

7.    Intangible assets and goodwill

				Intangible assets
								Non-
				Customer				compete		Information
	Note	Goodwill		relationships		Trademarks		agreements		technology			Total
Cost
Balance at December 31, 2021			262,588		33,151		28,577		150		886			325,352
Other additions			-		-		-		-		150			150
Extinguishments			-		-		-		-		(37	)		(37	)
Effect of movements in exchange rates			307		205		14		-		-			526
Balance at June 30, 2022			262,895		33,356		28,591		150		999			325,991
Amortization and impairment losses
Balance at December 31, 2021			64,261		14,753		2,965		5		713			82,697
Amortization			-		1,359		21		15		61			1,456
Extinguishments			-		-		-		-		(37	)		(37	)
Effect of movements in exchange rates			-		111		1		-		-			112
Balance at June 30, 2022			64,261		16,223		2,987		20		737			84,228
Net carrying amounts
At December 31, 2021			198,327		18,398		25,612		145		173			242,655
At June 30, 2022			198,634		17,133		25,604		130		262			241,763

As at June 30, 2022, the indefinite useful life intangible trademarks had a carrying value of $25.2 million (December 31, 2021 - $25.2 million).

8.    Accrued liabilities

	As at June 30,<br><br>2022		As at December 31, 2021
Accruals		23,159		14,339
Accrued compensation and benefits		7,410		9,064
Accrued payroll deductions		2,798		3,497
		33,367		26,900

9. Operating leases

The following table provides TRI’s lease expense for the six months ending June 30:

	2022	2021
Operating lease expense	1,385	1,935
Short-term lease expense	936	459
Variable lease expense	666	770
Total Lease Expense	2,987	3,164

│15

Transportation Resources Inc.	NOTES TO THE INTERIM COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.) (unaudited)	PERIODS ENDED JUNE 30, 2022 AND 2021

The lease expenses are included in operating activities on the interim combined carve-out cash flows. Right-of use assets obtained in exchange for operating lease liabilities were nil for the period ended June 30, 2022 (June 30, 2021 of $2.0 million).

The following table provides TRI’s operating lease right-of-use assets and lease liabilities:

	As at		As at
	June 30, 2022		December 31, 2021
Operating lease right-of-use-assets		3,575		9,252
Current portion of operating lease liabilities		2,350		4,523
Long-term portion of operating lease liabilities		1,149		4,697
Total operating lease liabilities		3,499		9,220

TRI does not have a significant exposure to termination options and penalties.

The following table provides the remaining lease terms and discount rates for TRI’s operating leases for the six months ended June 30:

	2022	2021
Weight average remaining lease term (years)	1.85	2.93
Weighted-average discount rate (%)	2.32%	3.82%

Contractual cash flows

The total contractual cash flow maturities of the TRI’s lease liabilities are as follows:

	As at
	June 30, 2022
Less than 1 year		2,529
Between 1 and 2 years		581
Between 2 and 3 years		259
Between 3 and 4 years		199
More than 4 years		-
Total lease payments		3,569
Less: Imputed interest		70
Present value of lease payments		3,499

10.    Provisions

	Self insurance
As at June 30, 2022
Current provisions		9,618
Non-current provisions		16,257
		25,875
As at December 31, 2021
Current provisions		7,522
Non-current provisions		13,183
		20,705

Self-insurance provisions represent the uninsured portion of outstanding claims at period-end and is included in the materials and services expenses on the interim combined carve-out statement of net income.

│16

Transportation Resources Inc.	NOTES TO THE INTERIM COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.) (unaudited)	PERIODS ENDED JUNE 30, 2022 AND 2021

11.    Net investment and related party transactions

Movements in the net investment between TRI and its parent occur periodically as determined by the parent company.

Historically, TRI has been managed and operated in the normal course of business with other affiliates of the parent. Accordingly, certain shared costs have been allocated to TRI and reflected as expenses in the interim combined carve-out financial statements. Management considers the allocation methodologies used to be reasonable and appropriate reflections of the historical parent expenses attributable to TRI for the purposes of the interim combined carve-out financial statement. The expenses reflected in the interim combined carve-out financial statements may not be indicative of expenses that will be incurred by TRI in the future. The following revenues and expenses have been allocated to the interim combined carve-out financial statements:

Insurance

TFI manages the insurance portfolio on a consolidated basis, and allocates the expenses proportionately to the operations.

General Corporate Overhead:

TFI incurs significant corporate costs for support services to TRI as well as its other subsidiaries. These costs include expenses for accounting, claims management, other financial services such as treasury and audit functions, human resources, legal, facilities, marketing and business support. Certain of the combined entities of TRI are considered material credit parties for TFI’s revolving credit facilities, and provide guarantees to TFI’s lenders. No liability and expense has been recorded by TRI with respect to these guarantees.

For the six months ended June 30, 2022, these allocated costs have been recorded in materials and services expense for $1.6 million (June 30, 2021 - $1.7 million), personnel expenses for $1.0 million (June 30, 2021 - $1.0 million), and in other operating expenses for $0.2 million (June 30, 2021 - $0.2 million).

Allocation of revenues:

TRI occasionally chooses to engage related party logistics divisions to obtain brokers to perform transportation services for their customers. Historically, some of the revenues and expenses generated from these activities were recorded entirely in the related party logistics divisions, as the operations were under common management of TFI. These interim combined carve-out financial statements allocate the necessary revenues and expenses from these activities to TRI at the gross margin determined from the related party logistics operations. For the period ended June 30, 2022, TRI recorded revenues of $12.5 million of revenues allocated to TRI that were performed by the logistic related party (June 30, 2021 - $8.2 million) and purchases of $11.6 million for the services performed (June 30, 2021 - $7.7 million), which are included in materials and services expenses. These transactions were recorded as part of the due to or due from parent accounts.

Other related party transactions between TRI and TFI subsidiaries occurred as arm’s length transactions and were recorded through revenues and expenses of TRI historically, with corresponding amounts being recorded in trade receivables and payables. For the period ended June 30, 2022, TRI generated revenues of $5.3 million from sales with related parties (June 30, 2021 - $2.0 million) and incurred purchases $0.7 million of services from related parties (June 30, 2021 - $0.5 million), included in materials and services

│17

Transportation Resources Inc.	NOTES TO THE INTERIM COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.) (unaudited)	PERIODS ENDED JUNE 30, 2022 AND 2021

expenses. Trade receivables and trade payables as at June 30, 2022 are $1.3 million and $0.2 million, respectively (June 30, 2021 - $0.5 million and $0.1 million, respectively).

12. Stock-Based compensation

TFI grants stock-based awards, including stock options, restricted stock awards, and performance stock awards to certain employees, including some of TRI. Stock-based compensation expense is measured at the grant based on the fair value of the award and recognized over the vesting or service period, as applicable, of the stock-based award.

Forfeitures are accounted for as they occur.

Share-based compensation expense recognized was $0.8 million for the six months ended June 30, 2022 (June 30, 2021 - $0.7 million) and included in personnel expenses.

13.    Materials and services expenses

TRI’s materials and services expenses are primarily costs related to independent contractors and vehicle operation expenses. Vehicle operation expenses consists primarily of fuel costs, repairs and maintenance, insurance, permits and operating supplies.

	Six months ended June 30, 2022		Six months ended<br><br>June 30, 2021
Independent contractors		50,346		47,006
Vehicle operation expenses		106,229		73,962
		156,575		120,968

14.    Income tax expense

The following table presents TRI’s income tax expense:

	Six months ended June 30, 2022			Six months ended June 30, 2021
Current tax expense
Federal		8,481			6,471
State		2,456			1,480
Foreign		742			364
		11,679			8,315
Deferred tax expense (recovery)
Federal		(1,789	)		(1,806	)
State		(518	)		(414	)
Foreign		(850	)		(307	)
		(3,157	)		(2,527	)
Income tax expense		8,522			5,788

│18

Transportation Resources Inc.	NOTES TO THE INTERIM COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.) (unaudited)	PERIODS ENDED JUNE 30, 2022 AND 2021

Reconciliation of effective tax rate:

	Six months ended<br><br>June 30, 2022					Six months ended<br><br>June 30, 2021
Income before income tax				39,966					21,064
Income tax using the Company’s statutory tax rate		25.6	%	10,216			24.6	%	5,186
Increase (decrease) resulting from:
Rate differential between jurisdictions		0.1	%	37			0.2	%	43
Variation in tax rate		0.2	%	61			0.1	%	28
Non deductible expenses		0.3	%	108			3.0	%	633
Tax deductions and tax exempt income		-0.1	%	(58	)		-0.4	%	(91	)
Adjustment for prior periods		-4.6	%	(1,842	)		-0.0	%	(7	)
Multi-jurisdiction tax		0.0	%	-			0.0	%	4
		21.4	%	8,522			27.5	%	5,788

The components of the net deferred tax asset (liability) included in “Deferred tax liabilities” in the combined carve-out balance sheet were:

	As at June 30, 2022			As at December 31, 2021
Deferred tax assets:
Trade and other receivables		502			466
Trade and other payables		1,532			768
Accrued liabilities		1,380			1,440
Provisions		6,750			5,421
Postretirement benefits		500			444
Other		-			57
Total deferred tax assets		10,664			8,596
Deferred tax liabilities:
Property and equipment		(71,954	)		(73,073	)
Intangible assets		(10,804	)		(11,021	)
Prepaid expenses		(1,235	)		(1,236	)
Other		(418	)		(188	)
Total deferred tax liabilities		(84,411	)		(85,518	)
Deferred income taxes		(73,747	)		(76,922	)

Income taxes paid for the period ended June 30, 2022 was $21.2 million (June 30, 2022 - $8.8 million).

15.    Contingencies, letters of credit and other commitments

a)    Contingencies

There are pending operational and personnel related claims against the TRI. In the opinion of management, these claims are adequately provided for in Provisions (note 10) in the interim combined carve-out balance sheet and settlement is not expected to have a material adverse effect on TRI’s financial position or results of operations.

│19

Transportation Resources Inc.	NOTES TO THE INTERIM COMBINED CARVE-OUT FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise noted.) (unaudited)	PERIODS ENDED JUNE 30, 2022 AND 2021

b)    Letters of credit

As at June 30, 2022, the TRI had $1.5 million of outstanding letters of credit (December 31, 2021 - $1.5 million).

c)    Other commitments

As at June 30, 2022, the TRI had $34.4 million of purchase commitments (December 31, 2021 – $2.0 million).

16.    Subsequent events

Subsequent events have been evaluated to November 14, 2022 which is the date the interim combined carve-out financial statements were available to be issued.

On August 31, 2022, TRI was sold to Heartland Express, Inc. (NASDAQ: HTLD) for consideration of $525 million, subject to certain agreed upon adjustments.

│20

Document

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

On August 31, 2022, Heartland Express, Inc. of Iowa, an Iowa corporation and a wholly owned subsidiary of Heartland Express, Inc., a Nevada corporation (the "Company”), acquired Transportation Resources, Inc., a Missouri corporation (“TRI”), for an enterprise value of approximately $525 million in cash, subject to certain customary adjustments specified in the Stock Purchase Agreement, including for working capital, cash, indebtedness, transaction expenses, and a claims reserve amount. The Stock Purchase Agreement contains customary representations, warranties, covenants, and indemnification provisions.

The unaudited pro forma consolidated financial information is based on the assumptions set forth in the notes to such information. These adjustments are provisional and subject to further adjustment as additional information becomes available, additional analyses are performed, and as warranted by changes in current conditions and future expectations. The unaudited pro forma adjustments made in the compilation of the unaudited pro forma financial information are based upon available information and assumptions that the Company considers to be reasonable, and have been made solely for purposes of developing such unaudited pro forma financial information for illustrative purposes in compliance with the disclosure requirements of the Securities and Exchange Commission (“SEC”).

The pro forma adjustments have been made solely for informational purposes. The actual results reported by the consolidated company in periods following the acquisition may differ significantly from that reflected in these unaudited pro forma consolidated financial statements for a number of reasons, including but not limited to cost savings from operating efficiencies, synergies and the impact of the incremental costs incurred in integrating the two companies. As a result, the unaudited pro forma consolidated information is not intended to represent and does not purport to be indicative of what the combined company’s financial condition or results of operations would have been had the acquisition been completed on the applicable dates of this unaudited pro forma consolidated financial information. In addition, the unaudited pro forma condensed consolidated financial information does not purport to project the future financial condition and results of operations of the consolidated company.

The unaudited pro forma consolidated financial statements are based on various assumptions, including assumptions relating to the consideration paid and the allocation thereof to the assets acquired and liabilities assumed from TRI based on preliminary estimates of fair value. The pro forma assumptions and adjustments are described in the accompanying notes presented on the following pages. The following unaudited pro forma consolidated financial statements have been prepared in accordance with Article 11 of Regulation S-X. The final purchase price and the allocation thereof may differ from that reflected in the pro forma condensed consolidated financial statements after working capital, cash, indebtedness, transaction expense, and claims reserve adjustments are performed.

The unaudited pro forma consolidated statements of income included herein do not reflect any potential cost savings or other operating efficiencies that may result from the integration of the companies or the costs to achieve such efficiencies.

These unaudited pro forma consolidated financial information and the accompanying notes should be read together with (1) the Company’s audited consolidated financial statements and accompanying notes, as of and for the fiscal years ended December 31, 2021 and 2020, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which was filed with the SEC on February 25, 2022 and (2) the Company’s unaudited consolidated financial statements and accompanying notes as of and for the six months ended June 30, 2022 and 2021 and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2022, which was filed with the SEC on August 8, 2022, (3) TRI’s audited combined carve-out financial statements as of December 31, 2021 and 2020, and for the years then ended, the notes related thereto, included as Exhibit 99.2 to this Form 8-K/A, and (4) TRI’s unaudited combined carve-out financial statements as of June 30, 2022 and for the six months ended June 30, 2022 and 2021, and the notes related thereto, included as Exhibit 99.3 to this Form 8-K/A.

A pro forma balance sheet is not presented because the acquisition of TRI is already reflected in the Company’s balance sheet as of September 30, 2022 contained in the Company’s Quarterly Report on Form 10-Q, filed on November 9, 2022.

The actual operating results for TRI will be consolidated with the Company’s operating results for all periods subsequent to the acquisition date of August 31, 2022.

The unaudited pro forma consolidated statement of comprehensive income of the Company and TRI for the year ended December 31, 2021 gives effect to the acquisition of TRI by the Company as if it had occurred effective January 1, 2021, the beginning of the Company’s 2021 fiscal year.

The unaudited pro forma consolidated statement of comprehensive income of the Company and TRI for the six months ended June 30, 2022 gives effect to the acquisition of TRI by the Company as if it had occurred effective January 1, 2021, the beginning of the Company’s 2021 fiscal year.

HEARTLAND EXPRESS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share amounts)
(unaudited)
	Six Months Ended June 30, 2022
	Heartland Express		Transportation Resources		Pro Forma Adjustments		Notes	Pro Forma Consolidated
			(H)
OPERATING REVENUE	$	339,097	$	320,339	$	—		$	659,436
OPERATING EXPENSES
Salaries, wages, and benefits	124,506		108,854		(1,800)		(A) (F)	231,560
Rent and purchased transportation	3,874		50,346					54,220
Operations and maintenance	89,466		100,505		(988)		(B) (F)	188,983
Insurance and claims	11,905		5,724					17,629
Depreciation and amortization	47,620		31,122		10,368		(C)	89,110
Other operating expenses	20,246		10,777		(300)		(F)(G)	30,723
Gain on disposal of property and equipment	(85,970)		(27,915)					(113,885)
	211,647		279,413		7,280			498,340
Operating income	127,450		40,926		(7,280)			161,096
Interest income	406		—					406
Interest expense	(174)		(960)		(10,260)		(D)	(11,394)
Income before income taxes	127,682		39,966		(17,540)			150,108
Federal and state income taxes	34,001		8,522		(5,028)		(E)	37,495
Net income	$	93,681	$	31,444	$	(12,512)		$	112,613
Other comprehensive income, net of tax	—		515		—			—
Comprehensive income	$	93,681	$	31,959	$	(12,512)		$	112,613
Net income per share
Basic	$	1.19						$	1.43
Diluted	$	1.19						$	1.43
Weighted average shares outstanding
Basic	78,931							78,931
Diluted	78,956							78,956
HEARTLAND EXPRESS, INC. AND SUBSIDIARIES
---	---	---	---	---	---	---	---	---	---
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share amounts)
(unaudited)
	Twelve Months Ended December 31, 2021
	Heartland Express		Transportation Resources		Pro Forma Adjustments		Notes	Pro Forma Consolidated
			(I)
OPERATING REVENUE	$	607,284	$	545,128	$	—		$	1,152,412
OPERATING EXPENSES
Salaries, wages, and benefits	250,035		186,587		(3,400)		(A) (F)	433,222
Rent and purchased transportation	3,810		93,054					96,864
Operations and maintenance	134,714		129,676		(2,176)		(B) (F)	262,214
Insurance and claims	20,826		21,084					41,910
Depreciation and amortization	104,083		54,972		20,940		(C)	179,995
Other operating expenses	25,847		17,882		800		(F)(G)	44,529
Gain on disposal of property and equipment	(37,438)		(8,027)					(45,465)
	501,877		495,228		16,164			1,013,269
Operating income	105,407		49,900		(16,164)			139,143
Interest income	640		44					684
Interest expense	—		(603)		(21,837)		(D)	(22,440)
Income before income taxes	106,047		49,341		(38,001)			117,387
Federal and state income taxes	26,770		17,505		(10,571)		(E)	33,704
Net income	$	79,277	$	31,836	$	(27,430)		$	83,683
Other comprehensive income, net of tax	—		(464)		—			(464)
Comprehensive income	$	79,277	$	31,372	$	(27,430)		$	83,219
Net income per share
Basic	$	1.00						$	1.05
Diluted	$	1.00						$	1.05
Weighted average shares outstanding
Basic	79,573							79,573
Diluted	79,612							79,612

HEARTLAND EXPRESS, INC.

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Summary of transaction

On August 31, 2022, Heartland Express, Inc. of Iowa, a wholly owned subsidiary of Heartland Express, Inc. a Nevada corporation (the "Company”) acquired Transportation Resources, Inc., a Missouri corporation (“TRI”) for $525 million of total consideration payable in cash, subject to certain customary adjustments specified in the Stock Purchase Agreement, including for working capital, cash, indebtedness, transaction expenses, and a claims reserve amount. The Stock Purchase Agreement contains customary representations, warranties, covenants, and indemnification provisions.

TRI is a full truckload motor carrier that utilizes a fleet of tractors and trailers to provide short- and long-haul, asset-based transportation services throughout North America. In addition, TRI offers “through-trailer” service into and out of Mexico through major gateways in Texas, Arizona and California.

Note 2 - Estimate of Assets Acquired and Liabilities Assumed

The fair value of the total consideration transferred was $553.8 million, net of approximately $6.8 million of cash balances acquired as of August 31, 2022. The acquisition excluded $9.1 million of assets related to real estate, included in property, plant and equipment, and software, included in other assets, that were historically recorded in the balance sheet of TRI at June 30, 2022. The acquisition also excluded $24.0 million of auto liability and workers’ compensation accruals, that were retained by seller that were previously recorded in liabilities at June 30, 2022. A summary of the preliminary purchase price allocation with the acquisition of TRI, as if the transaction occurred on June 30, 2022, is as follows:

	(in thousands)
Cash paid			$	560,624
Allocated to:
Historical book value of TRI’s assets and liabilities, net of cash acquired	$	485,125
Adjustments to recognize assets and liabilities at acquisition-date fair value:
Property, plant and equipment	130,641
Other assets	(241,102)
Liabilities	36,314
Fair value of tangible net assets acquired			410,978
Identifiable intangibles at acquisition-date fair value			55,097
Excess of consideration transferred over the net amount of assets and liabilities recognized.			$	94,549
	(in thousands)
Cash paid for enterprise value pursuant to Stock Purchase Agreement	$	525,000
Cash paid for claims reserve pursuant to Stock Purchase Agreement	24,000
Cash paid for estimated working capital and estimated cash pursuant to Stock Purchase Agreement	11,624
Cash acquired as of August 31, 2022	(6,821)
	$	553,803
Debt assumption	—
Total purchase price	$	553,803

Note 3 - Intangible Assets

Based on the preliminary allocation of the purchase price, the following amounts have been allocated to identifiable intangible assets along with the respective amortization periods:

	(in thousands)		Life (months)
Trade name	$	23,840	—
Customer relationships	31,257		180
	$	55,097

These preliminary estimates of fair value and useful life could be different from the final acquisition accounting, and the difference could have a material impact on the accompanying pro forma financial statements. The combined

effect of any such changes could then also result in a significant increase or decrease to the Company's estimate of associated amortization expense.

Note 4 - Pro Forma Adjustments

The pro forma adjustments in the unaudited pro forma condensed consolidated financial information are as follows:

(A) To reflect the elimination of stock-based compensation related to grants of TRI parent company stock-based awards, including stock options, restricted stock awards, and performance stock awards to certain employees of TRI prior to the acquisition. Employees of TRI are no longer eligible for participation with the close of the acquisition.

(B) To reflect the increase in tires expense due to the amortization of prepaid tires to conform with the accounting methods and amortization period for prepaid tires utilized by the Company.

(C) To reflect the increase in depreciation and amortization expense due to (1) the amortization of identifiable intangibles with a definitive life using the straight-line method over the assigned life of each intangible as detailed in Note 3, net of the elimination of amortization expense of eliminated TRI identifiable intangibles from prior acquisitions of TRI and (2) net increase in depreciation resulting from the depreciation of property, plant, and equipment based on acquisition date fair value using the Company's accelerated depreciation methods and useful lives consistent with those utilized by the Company.

(D) To reflect the increase in interest expense associated with term debt issued at close of the acquisition. Outstanding borrowings 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. The weighted average interest rate on outstanding borrowings at closing was 4.8%, which rate was used to compute pro forma interest expese. A 0.125% change in interest rates would increase or decrease annual interest expense an estimated $0.6 million.

(E) To reflect the income tax effect of each of the pro forma adjustments, at an effective tax rate of 25.5%.

(F) To remove expenses for corporate costs charged by TFI International, Inc. to TRI. These costs included expenses for accounting, claims management, other financial services such as treasury and audit functions, human resources, legal, facilities, marketing and business support.

(G) Represents the full amount of transaction costs ($1.2 million) incurred by the Company related to the acquisition of TRI. The transaction costs recorded of $0.1 million were removed from the historical Consolidated Statement of Comprehensive Income for the six months ended June 30, 2022 to reflect the transaction having occurred on January 1, 2021. The $1.1 million remaining amount was incurred subsequent to June 30, 2022. These costs will not affect the Company’s Consolidated Statement of Comprehensive Income beyond twelve months after the acquisition date.

(H)

	(1)			(2)
Revenue	$	260,591
Fuel Surcharge	59,748
Total Revenue	320,339		Operating Revenues	$	320,339
Materials and services expenses	156,575		Operations and maintenance	100,505
			Rent and purchased transportation	50,346
			Insurance and claims	5,724
				156,575
Personnel expenses	108,854		Salaries, wages, and benefits	108,854
Other operating expenses	10,777		Other operating expenses	10,777
Depreciation of property and equipment	29,666		Depreciation and amortization	29,666
Amortization of intangible assets	1,456		Depreciation and amortization	1,456
	31,122		Depreciation and amortization	31,122
Gain on sale of rolling stock and equipment	(27,871)		Gain on disposal of property and equipment	(27,871)
Other	(44)		Gain on disposal of property and equipment	(44)
	(27,915)		Gain on disposal of property and equipment	(27,915)
Total operating expenses	279,413		Total operating expenses	279,413
Operating income	40,926		Operating income	40,926
Interest income	—		Interest income	—
Interest expense	(960)		Interest expense	(960)
Income before income tax	39,966		Income before income tax	39,966
Income tax expense	8,522		Federal and state income taxes	8,522
Net income	$	31,444	Net income	$	31,444
Other comprehensive income (loss)	515		Other comprehensive income, net of tax	515
Total comprehensive income	$	31,959	Comprehensive income	$	31,959

(1)     Represents respective line items of the Combined Carve-out Statements of Comprehensive Income for the six months ended June 30, 2022 as presented by Transportation Resources Inc.

(2)     Represents respective line items of the Combined Carve-out Statements of Comprehensive Income for the six months ended June 30, 2022 as presented by Transportation Resources Inc. reclassified to conform to the Consolidated Statements of Comprehensive Income as presented by Heartland Express, Inc. and subsidiaries.

(I)

	(1)			(2)
Revenue	$	472,733
Fuel Surcharge	72,395
Total Revenue	545,128		Operating Revenues	$	545,128
Materials and services expenses	243,814		Operations and maintenance	129,676
			Rent and purchased transportation	93,054
			Insurance and claims	21,084
				243,814
Personnel expenses	186,587		Salaries, wages, and benefits	186,587
Other operating expenses	17,882		Other operating expenses	17,882
Depreciation of property and equipment	52,265		Depreciation and amortization	52,265
Amortization of intangible assets	2,707		Depreciation and amortization	2,707
	54,972		Depreciation and amortization	54,972
Gain on sale of rolling stock and equipment	(8,011)		Gain on disposal of property and equipment	(8,011)
Other	(16)		Gain on disposal of property and equipment	(16)
	(8,027)		Gain on disposal of property and equipment	(8,027)
Total operating expenses	495,228		Total operating expenses	495,228
Operating income	49,900		Operating income	49,900
Interest income	44		Interest income	44
Interest expense	(603)		Interest expense	(603)
Income before income tax	49,341		Income before income tax	49,341
Income tax expense	17,505		Federal and state income taxes	17,505
Net income	$	31,836	Net income	$	31,836
Other comprehensive income (loss)	(464)		Other comprehensive income, net of tax	(464)
Total comprehensive income	$	31,372	Comprehensive income	$	31,372

(1)     Represents respective line items of the Combined Carve-out Statements of Comprehensive Income for the year ended December 31, 2021 as presented by Transportation Resources Inc.

(2)     Represents respective line items of the Combined Carve-out Statements of Comprehensive Income for the year ended December 31, 2021 as presented by Transportation Resources Inc. reclassified to conform to the Consolidated Statements of Comprehensive Income as presented by Heartland Express, Inc. and subsidiaries.