What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-02-28 compared with 2021-03-05 · 427 added, 605 removed, 1293 unchanged (44% of the section changed)

25 unchanged sentences

OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

36 unchanged sentences

Equity compensation plans not approved by security holders

Represents unvested restricted shares granted under the 2006 Omnibus Incentive Plan, as amended.

Represents unvested restricted shares and unvested stock options granted under the 2006 Omnibus Incentive Plan, as amended.

The weighted average stock price on the date of grant for outstanding restricted stock awards was $18.12, which is not reflected in column (b), because restricted stock awards do not have an exercise price.

The amount in column (b) represents the weighted average exercise price of the outstanding unvested stock options.

We incorporate by reference the information set forth under the section entitled "Security Ownership of Certain Beneficial Owners and Management" in the Proxy Statement.

8 unchanged sentences

Our audited consolidated financial statements are set forth at the following pages of this report:

Report of Independent Registered Public Accounting Firm - Opinion on the Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm - Opinion on the Consolidated Financial Statements (PCAOB ID Number 248 )

Report of Independent Registered Public Accounting Firm - Opinion on Internal Control Over Financial Reporting

13 unchanged sentences

Third Amended and Restated Articles of Incorporation (Incorporated by reference to Exhibit 3.1 to the Company's Report on Form 8-K, filed July 2, 2020)

Fifth Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.2 to the Company's Report on Form 8-K, filed July 2, 2020)

Sixth Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.2 to the Company's Report on Form 8-K, filed August 9, 2021)

Third Amended and Restated Articles of Incorporation (Incorporated by reference to Exhibit 3.1 to the Company's Report on Form 8-K, filed July 2, 2020)

Fifth Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.2 to the Company's Report on Form 8-K, filed July 2, 2020)

Description of the Registrant's Securities

Form of Indemnification Agreement between Covenant Transport, Inc.

and each officer and director, effective May 1, 2004 (Incorporated by reference to Exhibit 10.2 to the Company's Form 10-Q, filed August 5, 2004)

Sixth Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.2 to the Company's Report on Form 8-K, filed August 9, 2021)

Description of the Registrant's Securities (Incorporated by reference to Exhibit 4.3 to the Company’s Form 10-K, filed March 5, 2021)

Form of Indemnification Agreement for Executive Officers and Directors (Incorporated by reference to Exhibit 10.1 to the Company's Form 10-Q, filed August 5, 2021)

Form of Restricted Stock Award Notice under the 2006 Omnibus Incentive Plan (Incorporated by reference to Exhibit 10.22 to the Company's Form 10-Q, filed August 9, 2006)

36 unchanged sentences

Eighteenth Amendment to Third Amended and Restated Credit Agreement, dated as of October 23, 2020, among Covenant Logistics Group, Inc., Covenant Transport, Inc., CTG Leasing Company, Covenant Asset Management, LLC, Southern Refrigerated Transport, Inc., Covenant Transport Solutions, LLC, Star Transportation, Inc., Covenant Logistics, Inc., Transport Management Services, LLC, Landair Holdings, Inc., Landair Transport, Inc., Landair Logistics, Inc., Landair Leasing, Inc., and Bank of America, N.A.

(Incorporated by reference to Exhibit 10.23 to the Company’s Form 10-K, filed March 5, 2021)

First Amendment to the Covenant Transportation Group, Inc.

3 unchanged sentences

Form of Restricted Stock Award Notice under the Third Amended and Restated 2006 Omnibus Incentive Plan, as amended (Double Trigger Change in Control) (Incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q, filed August 10, 2020)

Form of Option Award Notice under the Third Amended and Restated 2006 Omnibus Incentive Plan, as amended

Form of Restricted Stock Award Notice under the Third Amended and Restated 2006 Omnibus Incentive Plan, as amended (Incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q, filed August 5, 2021)

Form of Option Award Notice under the Third Amended and Restated 2006 Omnibus Incentive Plan, as amended (Incorporated by reference to Exhibit 10.28 to the Company’s Form 10-K, filed March 5, 2021)

Form of Executive Severance Agreement (Incorporated by reference to Exhibit 10.5 to the Company’s Form 10-Q, filed November 3, 2020)

Separation Agreement between Richard Cribbs and Transport Management Services, LLC (Incorporated by reference to Exhibit 10.1 to the Company's Form 10-Q, filed November 3, 2020)

First Amended and Restated Executive Severance Agreement with John Tweed (Incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q, filed May 10, 2021)

Consulting Agreement with John Tweed (Incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q, filed May 10, 2021)

First Amendment to Consulting Agreement with John Tweed (Incorporated by reference to Exhibit 10.3 to the Company’s Form 10-Q, filed August 5, 2021)

Account Management Agreement, Amendment to Purchase Agreement and Mutual Release, by and among Covenant Transport Solutions, LLC, Covenant Logistics Group, Inc., Triumph Bancorp, Inc., and Advance Business Capital LLC, dated as of September 23, 2020 (Incorporated by reference to Exhibit 10.2 to the Company's Form 10-Q, filed November 3, 2020)

4 unchanged sentences

Grant Thornton LLP

Consent of Independent Registered Public Accounting Firm - KPMG LLP

Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by David R.

Parker, the Company's Principal Executive Officer

Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by M.

Paul Bunn, the Company's Principal Financial Officer

Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by Joey B.

Hogan, the Company's Principal Financial Officer

Certification pursuant to 18 U.S.C.

2 unchanged sentences

Certification pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by M.

Paul Bunn, the Company's Chief Financial Officer

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Joey B.

Hogan, the Company's Chief Financial Officer

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

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COVENANT Logistics GROUP, INC.

Date: March 5, 2021

Executive Vice President, Chief Financial Officer, and Secretary in his capacity as such and as duly authorized on behalf of the issuer.

Date: February 28, 2022

President and Principal Financial Officer in his capacity as such and as duly authorized on behalf of the issuer.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature and Title

March 5, 2021

February 28, 2022

Chairman of the Board and Chief Executive Officer

(principal executive officer)

March 5, 2021

Executive Vice President, Chief Financial Officer, and Secretary

February 28, 2022

(principal financial officer)

March 5, 2021

February 28, 2022

Chief Accounting Officer

1 unchanged sentence

/s/ Bradley A.

March 5, 2021

February 28, 2022

/s/ Rachel Parker-Hatchett

March 5, 2021

February 28, 2022

Rachel Parker-Hatchett

/s/ Robert E.

March 5, 2021

February 28, 2022

/s/ Herbert J.

March 5, 2021

February 28, 2022

Miller Welborn

March 5, 2021

February 28, 2022

Miller Welborn

Michael Kramer

March 5, 2021

February 28, 2022

Michael Kramer

/s/ Benjamin Carson Sr.

February 28, 2022

Benjamin Carson Sr.

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

Board of Directors and Stockholders

Covenant Logistics Group, Inc.

Opinion on the financial statements

We have audited the accompanying consolidated balance sheet of Covenant Logistics Group, Inc.

(a Nevada holding company) (and subsidiaries) (the “Company”) as of December 31, 2020, the related consolidated statements of comprehensive income, changes in stockholders’

equity, and cash flows for the year ended  December 31, 2020, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of Covenant Logistics Group, Inc.

(a Nevada holding company) and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, stockholders’

equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in the 2013 Internal Control —

Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 5, 2021 expressed an unqualified opinion.

Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 28, 2022 expressed an unqualified opinion.

Basis for opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a  separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Auto Liability Self-Insurance Reserves

As described further in Note 1 to the consolidated financial statements, the Company has significant self-insured amounts related to its auto liability and has exposure to fluctuations in the number and severity of claims and to variations between estimated and actual ultimate payouts.

The Company records a liability for the uninsured portion of pending claims and claims related expenses, including legal and other direct costs associated with the claim, based on estimates made by management.

Estimates require judgment concerning the nature and severity of the claim, historical trends, and other relevant information based on specific facts and circumstances for individual claims. 

We identified the estimation of the Company’s auto liability accrual subject to self-insured insurance retention amounts as a critical audit matter.

Incurred auto claim liabilities are determined by projecting the estimated ultimate loss related to a claim, less actual costs paid to date, based on the assumption that historical claim patterns are an accurate representation of future claim development.

The Company records a liability for the uninsured portion of pending claims and claims related expenses including legal and other direct costs associated with the claim. Estimates require judgment concerning the nature and severity of the claim, historical trends, and other relevant information based on specific facts and circumstances for individual claims. We identified the estimation of the Company’s auto liability accrual subject to self-insured insurance retention amounts as a critical audit matter.

Incurred auto claim liabilities are determined by projecting the estimated ultimate loss related to a claim, less actual costs paid to date, based upon the nature and severity of the claim and historical trends.

The principal considerations for assessing auto liability claims as a critical audit matter are the high level of estimation uncertainty related to determining the severity of these types of claims, as well as the inherent subjectivity in management’s judgment in estimating the total costs to settle or dispose of these claims.

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We tested a sample of underlying claims through analysis of accident reports and insurance and legal records to validate information utilized by management in determining the accrual was complete and accurate.

We reconciled claims data to the actuarial software used to determine loss development factors and tested management’s estimation methodology.

We reconciled claims data to the actuarial software used to determine loss development factors and used in management’s estimation methodology.

We utilized a specialist in evaluating management’s calculated loss development factors to test that the factors provide a reasonable basis for determining estimated loss reserves.

2 unchanged sentences

We have served as the Company's auditor since 2020.

Atlanta, Georgia

March 5, 2021

Charlotte, North Carolina

February 28, 2022

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

Board of Directors and Stockholders

Covenant Logistics Group, Inc.

5 unchanged sentences

Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2020, and our report dated March 5, 2021 expressed an unqualified opinion on those financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2021, and our report dated February 28, 2022 expressed an unqualified opinion on those financial statements.

Basis for opinion

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/s/ Grant Thornton LLP

Atlanta, Georgia

March 5, 2021

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Covenant Logistics Group, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Covenant Logistics Group, Inc.

(and subsidiaries) (the Company) as of December 31, 2019, the related consolidated statements of operations, comprehensive income, stockholders’

equity, and cash flows for each of the years in the two-year period ended December 31, 2019, and the related notes (collectively, the consolidated financial statements).

In our opinion, based on our audits and the report of the other auditors, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.

Adoption of ASU 2016-02

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2019 due to the adoption of ASU 2016-02 Leases , and subsequently issued additional ASU's amending this ASU (collectively ASC 842, Leases ).

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion.

We served as the Company’s auditor from 2001 to 2019.

Nashville, Tennessee

March 9, 2020 except as to Notes 1 (Segment Realignment), 2 and 15, which is as of March 5, 2021

Charlotte, North Carolina

February 28, 2022

COVENANT Logistics 

18 unchanged sentences

15,007  

12,010  

Income taxes receivable

Other short-term assets

Current assets from discontinued operations

10,177  

Other short-term assets

Total current assets

16 unchanged sentences

60,897  

Noncurrent assets from discontinued operations  

$ 651,662  

10 unchanged sentences

27,830  

Current maturities of long-term debt

Accrued purchased transportation

24,689  

10,708  

Current maturities of long-term debt

Current portion of finance lease obligations

Current portion of operating lease obligations  

15,811  

13 unchanged sentences

10,756  

26,010  

Long-term portion of operating lease obligations  

21,554  

12 unchanged sentences

386,074  

Commitments and contingencies  

Stockholders' equity:

3 unchanged sentences

and 40,000,000 authorized;

16,165,145 shares issued and outstanding as of December 31, 2019

Class B common stock, $ .01 par value;

16,183,139 shares issued and 14,784,214 shares outstanding as of December 31, 2020

Class B common stock, $ .

01 par value;

5,000,000 shares authorized;

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Treasury stock at cost;

1,398,925 and no shares as of December 31, 2020 and 2019, respectively

1,711,627 and 1,398,925 shares as of December 31, 2021 and December 31, 2020, respectively

( 23,662 )  

1 unchanged sentence

( 1,306 )  

Retained earnings  

225,076  

166,325  

Total stockholders' equity  

349,699  

290,642  

Total liabilities and stockholders' equity  

$ 651,662  

4 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2020, 2019, and 2018

YEARS ENDED DECEMBER 31,  2021 and 2020

(In thousands, except per share data)

Freight revenue

$ 949,913  

$ 776,218  

Fuel surcharge revenue

96,090  

62,343  

Total revenue

$ 1,046,003  

$ 838,561  

Operating expenses:

Salaries, wages, and related expenses

350,246  

315,023  

103,641  

77,443  

Operations and maintenance

59,269  

48,368  

Revenue equipment rentals and purchased transportation

331,685  

222,705  

Operating taxes and licenses

10,899  

11,621  

Insurance and claims

38,788  

53,052  

Communications and utilities

General supplies and expenses

29,673  

34,143  

Depreciation and amortization

(Gain) loss on disposition of property and equipment, net

53,881  

65,472  

Gain on disposition of property and equipment, net

( 3,799 )  

Impairment of long lived property, equipment, and right-of-use assets

26,569  

Total operating expenses

Operating (loss) income

978,841  

852,588  

Operating income (loss)

67,162  

Interest expense, net

Income from equity method investment

(Loss) income from continuing operations

Income tax (benefit) expense

(Loss) income from continuing operations

(Loss) income from discontinued operations, net of tax

Net (loss) income

Basic (loss) income per share:

(Loss) income from continuing operations

(Loss) income from discontinued operations

Net (loss) income

Diluted (loss) income per share:

(Loss) income from continuing operations

(Loss) income from discontinued operations

Net (loss) income

( 14,782 )  

Income (loss) from continuing operations

79,153  

Income tax expense (benefit)

20,962  

Income (loss) from continuing operations

58,191  

Income (loss) from discontinued operations, net of tax

Net income (loss)

$ 60,731  

Basic income (loss) per share:

Income (loss) from continuing operations

$ 3.46  

Income (loss) from discontinued operations

$ 0.15  

Net income (loss)

$ 3.61  

Diluted income (loss) per share:

Income (loss) from continuing operations

$ 3.42  

Income (loss) from discontinued operations

$ 0.15  

Net income (loss)

$ 3.57  

Basic weighted average shares outstanding

16,803  

17,358  

Diluted weighted average shares outstanding

17,020  

17,358  

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

4 unchanged sentences

(In thousands)

Net (loss) income

$ ( 42,718 )  

$ 8,477  

$ 42,503  

Other comprehensive (loss):

Unrealized (loss) gain on effective portion of cash flow hedges, net of tax of $ 548 , $ 437 , and $ 377 in 2020, 2019 and 2018, respectively

( 1,898 )  

( 1,278 )  

Reclassification of cash flow hedge losses (gains) into statement of operations, net of tax of ($ 189 ), ($ 5 ), and $ 408 in 2020, 2019 and 2018, respectively

Unrealized holding loss on investments classified as available-for-sale

Total other comprehensive (loss)

( 1,237 )  

( 1,218 )  

Comprehensive (loss) income

Net income (loss)

$ 60,731  

Other comprehensive income (loss):

Unrealized gain (loss) on effective portion of cash flow hedges, net of tax of ($ 263 ) and $ 548 in 2021 and 2020, respectively

Reclassification of cash flow hedge losses into statement of operations, net of tax of ($ 78 ), and ($ 189 ) in 2021 and 2020, respectively

Unrealized holding (gain) loss on investments classified as available-for-sale

( 63 )  

Total other comprehensive income (loss)

Comprehensive income (loss)

$ 61,676  

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Comprehensive

Income (Loss)

Balances at December 31, 2017

Effect of adoption of ASU 2014-09

Other comprehensive loss

Stock-based employee compensation expense

Issuance of restricted shares, net

(Loss) Income

Balances at December 31, 2019

$ 141,885  

$ ( 1,014 )  

$ 209,043  

$ 350,111  

( 42,718 )  

Share repurchase

( 17,486 )  

Other comprehensive loss

( 1,237 )  

Stock-based employee compensation expense

Issuance of restricted shares, net

( 717 )  

Balances at December 31, 2020

$ 143,438  

$ ( 17,067 )  

$ ( 2,251 )  

$ 166,325  

$ 290,642  

60,731  

Share repurchase

Other comprehensive loss

( 8,367 )  

( 1,980 )  

Other comprehensive income

Stock-based employee compensation expense

Issuance of restricted shares, net

( 11 )  

( 3,091 )  

Balances at December 31, 2021

$ 149,406  

$ ( 23,662 )  

$ ( 1,306 )  

$ 225,076  

$ 349,699  

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

7 unchanged sentences

$ 60,731  

$ 8,477  

$ 42,503  

Adjustments to reconcile net income to net cash provided by operating activities:

Provision for losses on accounts receivable

Deferral (reversal) of gain on sales to equity method investee, net

Reversal of gain on sales to equity method investee, net

Depreciation and amortization

1 unchanged sentence

65,480  

75,859  

Impairment of property and equipment  

26,569  

2 unchanged sentences

18,413  

13,840  

Income tax benefit (expense) arising from restricted share vesting and stock options exercised

Income tax (expense) benefit arising from restricted share vesting and stock options exercised

( 334 )  

2 unchanged sentences

( 14,782 )  

( 7,017 )  

Return on investment in affiliated company

(Gain) loss on disposition of property and equipment

Gain on disposition of property and equipment

( 3,799 )  

(Gain) loss on disposition of reportable segment

( 3,412 )  

Loss on disposition of reportable segment  

40,431  

4 unchanged sentences

( 36,544 )  

( 6,706 )  

Prepaid expenses and other assets

( 710 )  

Inventory and supplies

2 unchanged sentences

( 31,653 )  

Accounts payable and accrued expenses

32,203  

Accounts payable and accrued expenses

16,345  

3 unchanged sentences

63,040  

124,800  

Cash flows from investing activities:

Acquisition of Landair Holdings, Inc., net of cash acquired

Redemption (purchase) of available-for-sale securities

Investment in affiliated company

( 13 )  

Redemption of available-for-sale securities

Acquisition of property and equipment

( 35,285 )  

( 138,273 )  

Proceeds from disposition of reportable segment

3 unchanged sentences

122,278  

61,687  

Net cash flows provided (used in) investing activities

Net cash flows provided by investing activities

10,344  

5 unchanged sentences

75,591  

107,251  

100,811  

Repayments of notes payable

( 14,397 )  

( 44,278 )  

Repayments of capital lease obligations

( 20,083 )  

Repayments of finance lease obligations

( 5,626 )  

2 unchanged sentences

1,341,678  

1,598,213  

Repayments under revolving credit facility

( 695,513 )  

( 1,738,249 )  

( 1,326,678 )

1 unchanged sentence

( 1,332 )  

( 1,110 )  

Debt refinancing costs

Common stock repurchased

( 10,348 )  

Net cash flows (used in) provided by financing activities

( 236,270 )  

Net cash flows used in financing activities

( 83,557 )  

Net change in cash and cash equivalents

( 35,184 )  

20,464  

Cash and cash equivalents at beginning of year

43,591  

23,127  

15,356  

Cash and cash equivalents at end of year

1 unchanged sentence

$ 8,407  

$ 23,127  

Supplemental disclosure of cash flow information:

Cash paid (received) during the year for:

Interest, net of capitalized interest  

$ 2,762  

1 unchanged sentence

$ 10,236  

Income taxes  

Non-cash transactions during the year for:

Equipment purchased under finance leases  

$ 3,258  

Equipment purchased under finance leases

$ 3,258  

Contingent liabilities  

$ 44,151  

3 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2020, 2019, and 2018

DECEMBER 31,  2021 and 2020

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

On July 1, 2020, the stockholders of Covenant Transportation Group, Inc.

approved the amendment to the organization’s Articles of Incorporation to change the Company’s name to Covenant Logistics Group, Inc.

All references herein reflect the change of name to Covenant Logistics Group, Inc.

Covenant Logistics Group, Inc., a Nevada holding company, together with its wholly owned subsidiaries offers transportation and logistics services to customers throughout the continental United States. 

Principles of Consolidation

rinciples of Consolidation

The consolidated financial statements include the accounts of Covenant Logistics Group, Inc., a holding company incorporated in the state of Nevada in 1994, and its wholly owned subsidiaries:

16 unchanged sentences

All significant intercompany balances and transactions have been eliminated in consolidation.

Segment Realignment

In 2020, we made a number of changes to our organizational structure in an effort to streamline our business in a manner that we believe will allow us to significantly lower our fixed costs, pay down debt and produce consistent acceptable margins. These changes impacted the Company’s reportable operating segments but did not impact the Company’s Consolidated Financial Statements.

We have recast prior year information to conform to the realignment.

Under this revised reporting structure, we have four reportable operating segments, which include:

four reportable operating segments, which include:

Non-dedicated truckload services ("Expedited"), which services customers with high service freight and delivery standards, such as 1,000 miles in 22 hours, or 15 -minute delivery windows. 

2 unchanged sentences

Warehousing services (“Warehousing”), provides day-to-day warehouse management services to customers who have chosen to outsource this function.

The following table summarizes our revenue by our four reportable operating segment, at the service offering level, as used by our chief operating decision maker in making decisions regarding allocation of resources, etc., for the years ended December 31, 2020 , 2019 , and 2018 :

Year ended December 31,

4 unchanged sentences

288,652  

342,473  

257,739  

Managed Freight

3 unchanged sentences

52,128  

47,777  

23,580  

Total revenues

1 unchanged sentence

$ 838,561  

$ 880,417  

Investment in Transport Enterprise Leasing, LLC

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Risks and Uncertainties

We are continuing to monitor the progression of the COVID- 19 pandemic, further government response, and development of treatments and vaccines and their potential effect on our short-term and long-term financial position, results of operations, cash flows and liquidity.

We are continuing to monitor the progression of the COVID- 19 pandemic, further government response, including, vaccine, testing, and mask mandates, and development of treatments and vaccines and their potential effect on our short-term and long-term financial position, results of operations, cash flows and liquidity.

These events could have an impact in future periods on certain estimates used in the preparation of our financial results, including, but not limited to impairment of goodwill, other intangible assets and other long-lived assets, income tax provision and recoverability of certain receivables.

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The health and safety of our team members and the community is our first priority, as such, we've put certain measures into place, including remote work arrangements, enforced social distancing and increased sanitation protocols, among others.

Should the pandemic continue for an extended period of time, the impact on our operations could have a material adverse effect on our financial condition, results of operations, cash flows and liquidity.

Adverse developments in the pandemic could the impact our operations and have a material adverse effect on our financial condition, results of operations, cash flows and liquidity.

Our insurance program includes multi-year policies with specific insurance limits that may be eroded over the course of the policy term.

If that occurs, we will be operating with less liability coverage insurance at various levels of our insurance tower.

For the current policy period ( April 1, 2018 

For the policy period that ran from April 1, 2018 

to March 31, 2021, the aggregate limits available in the coverage layer $ 9.0 million in excess of $ 1.0 million were estimated to be fully eroded based on claims expense accruals.

We have replaced our $9.0 million in excess of $1.0 million layer with a new $ 7.0 million in excess of $ 3.0 million policy that runs from January 28, 2021 to April 1, 2024.

We replaced our $9.0 million in excess of $1.0 million layer with a new $ 7.0 million in excess of $ 3.0 million policy that runs from January 28, 2021 to April 1, 2024.

Due to the erosion of the $9.0 million in excess of $1.0 million layer, any adverse developments in claims filed between April 1, 2018 and March 

31, 2021, could result in additional expense accruals.

Effective April 1, 2020, consistent with an extremely difficult insurance market for the industry, our insurance renewal terms include a higher fixed premium expense of approximately $ 0.5 million per quarter, greater self-insured retention, and lower aggregate limits than prior coverage. Due to these developments, we may experience additional expense accruals, increased insurance and claims expenses, and greater volatility in our insurance and claims expenses, which could have a material adverse effect on our business, financial condition, and results of operations.

Effective April 1, 2021, consistent with an extremely difficult insurance market for the industry, our insurance renewal terms include a higher fixed premium expense of approximately $ 0.4 million per quarter.

 Due to these developments, we may experience additional expense accruals, increased insurance and claims expenses, and greater volatility in our insurance and claims expenses, which could have a material adverse effect on our business, financial condition, and results of operations.

On July 8, 2020, we sold a portfolio of accounts receivable, contract rights, and associated assets consisting of approximately $ 103.3 million in net funds employed (the “Portfolio”) previously held by Transport Financial Services ("TFS"), a division of Covenant Transport Solutions, LLC, an indirect wholly owned subsidiary of the Company, to a subsidiary of Triumph Bancorp, Inc.

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During the fourth quarter of 2020, the Company recorded $ 44.2 million of contingent liabilities, reflected as other long-term liabilities from discontinued operations in our consolidated balance sheet, because as of December 31, 2020 it was probable and estimable that such amount would be due to Triumph under the amended purchase agreement.

To date no indemnification obligations have been required to be funded and the Company and Triumph are cooperating to manage the covered accounts and assist the clients with, among other things, operational improvements in an attempt to minimize losses on the covered accounts.

During the first quarter of 2021, we received an indemnification call from Triumph of $ 35.6 million related to the TFS Settlement, all of which was reserved during the fourth quarter of 2020.

Additionally, Triumph was able to collect some funds related to our fourth quarter 2020 accrual that allowed us the opportunity to reverse $ 3.4 million of our accrual during the first quarter of 2021.

During the second quarter of 2021 we repaid $ 31.0 million of the borrowings under the Draw Note and during the third quarter of 2021 we repaid the remaining balance.

As of December 31, 2021, there were no outstanding borrowings under the Draw Note and a remaining contingent liability of $ 5.1 million.

The payment of amounts with respect to the indemnification obligations could create volatility in our reported future financial results and could have an adverse effect on our cash flows, available liquidity, and total indebtedness. 

Revenue Recognition

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There are no assets or liabilities recorded in conjunction with revenue recognized, other than accounts receivable and allowance for doubtful accounts.

We recognized in-process revenue of $ 1.2 million, $ 0.8 million, and $ 1.3  million for the years ended December 31, 2020, 2019, and 2018, respectively.

We had accounts receivable, net of allowance for doubtful accounts, of $ 91.3 million, $ 81.2 million, and $ 97.5 million at December 31, 2020, 2019, and 2018, respectively.

We recognized in-process revenue of $ 0.4 million and $ 1.2 million for the years ended December 31, 2021 and 

2020, respectively.

We had accounts receivable, net of allowance for doubtful accounts, of $ 142.4 million and $ 91.3 million at December 31, 2021 and 2020, respectively.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make decisions based upon estimates, assumptions, and factors we consider as relevant to the circumstances.

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Accounts receivable are comprised of a diversified customer base that mitigates the level of concentration of credit risk.

During 2020, 2019, and 2018 , our top ten customers generated 48 %, 45 %, and 

49 % of total revenue, respectively.

In 2020 , 

2019 , and 2018 one customer accounted for more than 10% of our consolidated revenue in each year. The carrying amount reported in the consolidated balance sheet for accounts receivable approximates fair value based on the fact that the receivables collection averaged approximately 

38 days and 33 days in 2020  and 2019 , respectively.

The following table provides a summary (in thousands) of the activity in the allowance for doubtful accounts for 2020, 2019, and 2018 : 

During 2021  and 

2020 , our top ten customers generated 53 % and 

48 % of total revenue, respectively. 

No customers in 

2021  and one customer in 

2020  accounted for more than 10% of our consolidated revenue in each year. The carrying amount reported in the consolidated balance sheet for accounts receivable approximates fair value based on the fact that the receivables collection averaged approximately 

44  days and 

38 days in 2021  and 2020 , respectively.

The following table provides a summary (in thousands) of the activity in the allowance for doubtful accounts for 2021  and 

Years ended December 31:

Beginning balance January 1,  

Additional provisions to allowance  

Write-offs and other adjustments  

Ending balance December 31,  

$ 1,440  

Beginning balance January 1,

Additional provisions to allowance

Write-offs and other adjustments

Ending balance December 31,

$ 2,992  

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Inventories and supplies consist of parts, tires, fuel, and supplies.

Tires on new revenue equipment are capitalized as a component of the related equipment cost when the tractor or trailer is placed in service and recovered through depreciation over the life of the vehicle.

Tires on new revenue equipment are capitalized as a component of the related equipment cost when the tractor or trailer is placed in service and recognized through depreciation over the life of the vehicle.

Replacement tires and parts on hand at year end are recorded at the lower of cost or net realizable value with cost determined using the first -in, first -out (FIFO) method.

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Fair value is determined based on a discounted cash flow analysis or the appraised value of the assets, as appropriate.

We recognized an impairment of $ 26.6 million during the twelve months ended December 31, 2020. 

There were no such events in during the twelve months ended December 31, 2021. 

See Note 3, "Cost Savings and Restructuring" for additional discussion around the impairment.

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December 31, 2021 , our insurance program involves self-insurance with the following risk retention levels (before giving effect to any commutation of an auto liability policy):

auto liability - the aggregate limits available in the coverage layer $ 9.0 million in excess of $ 1.0 million were estimated to be fully eroded based on claims expense accruals at December 31, 2020 and we replaced such layer with a new $7.0 million in excess of $3.0 million policy that runs from January 28, 2021 to April 1, 2024

auto liability - $ 7.0 million in excess of $ 3.0 million policy that runs from January 28, 2021 to April 1, 2024

workers' compensation - $ 1.3 million

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Upon settling claims and expenses associated with claims where we have third party coverage, we are generally required to initially fund payment to the claimant and seek reimbursement from the insurer.

Receivables from insurers for claims and expenses we have paid on behalf of insurers were $ 0.0 and $ 0.3 million at December 31, 2020  and 2019 , respectively, and are included in drivers' advances and other receivables on our consolidated balance sheet.

We had no receivables from insurers for claims and expenses we paid on behalf of insurers at December 31, 2021  and 2020 .

When such receivables exist, they are included in drivers' advances and other receivables on our consolidated balance sheet.

Additionally, we accrue claims above our self-insured retention and record a corresponding receivable for amounts we expect to collect from insurers upon settlement of such claims.

We have $ 7.4 million and $ 0.0 million as other short-term assets and a corresponding accrual in the short-term portion of insurance and claims accruals and $ 24.4 million and $ 2.1 million as other long-term assets and as a corresponding accrual in the long-term portion of insurance and claims accruals on our consolidated balance sheet for claims above our self-insured retention for which we believe it is reasonably assured that the insurers will provide their portion of such claims at December 31, 2020  and 2019 , respectively. We evaluate collectability of the receivables based on the credit worthiness and surplus of the insurers, along with our prior experience and contractual terms with each.

We have $ 0.9 million and $ 7.4 million as other short-term assets and a corresponding accrual in the short-term portion of insurance and claims accruals and $ 6.5 million and $ 24.4 million as other long-term assets and as a corresponding accrual in the long-term portion of insurance and claims accruals on our consolidated balance sheet for claims above our self-insured retention for which we believe it is reasonably assured that the insurers will provide their portion of such claims at December 31, 2021  and 2020 , respectively. We evaluate collectability of the receivables based on the credit worthiness and surplus of the insurers, along with our prior experience and contractual terms with each.

If any claim occurrence were to exceed our aggregate coverage limits, we would have to accrue for the excess amount.

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If we commute a policy, we assume 100 % risk for covered claims in exchange for a policy refund.

Effective April 2018, we entered into new auto liability policies with a three -year term.

The policy includes a limit for a single loss of $ 9.0 million, an aggregate of $ 18.0 million for each policy year, and a $ 30.0 million aggregate for the 36 month term ended March 31, 2021.

The policy included a policy release premium refund or commutation option of up to $ 14.0 million, less any future amounts paid on claims by the insurer.

A decision with respect to commutation of the policy could be made before April 1, 2021.

Additionally, our prior auto liability policy that ran from October 1, 2014 through March 31, 2018, was commuted, resulting in a premium release of $ 7.3 million.

Effective April 2018, we entered into an auto liability policy with a three -year term.

The policy included a limit for a single loss of $ 9.0 million, an aggregate of $ 18.0 million for each policy year, and a $ 30.0 million aggregate for the 36 month term ended March 31, 2021.

The policy included a release premium refund or commutation option of up to $ 14.0 million, less any future amounts paid on claims by the insurer.

We decided not to commute this policy.

Our prior auto liability policy that ran from October 1, 2014 through March 31, 2018, was commuted, resulting in a premium release of $ 7.3 million.

Management cannot predict whether or not future claims or the development of existing claims will justify a commutation of either policy period, and accordingly, no related amounts were recorded at December 31, 2021.

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Interest is capitalized based on the average interest rate on related debt.

Capitalized interest was less than $ 0.1 million in 2020 and 2018 and approximately $ 0.1 million in 2019 , respectively.

Capitalized interest was less than $ 0.1 million in 2021 and 2020 , respectively.

Fair Value of Financial Instruments

Our financial instruments consist primarily of cash and cash equivalents, accounts receivable, available-for-sale securities, accounts payable, debt, and interest rate swaps.

The carrying amount of cash and cash equivalents, accounts receivable, accounts payable, and current debt approximates their fair value because of the short-term maturity of these instruments.

The carrying value of the factored receivables approximates the fair value, as the receivables are generally repaid directly to us by the client's customer within 30–40 days due to the combination of the short-term nature of the financing transaction and the underlying quality of the receivables.

Interest rates that are currently available to us for issuance of long-term debt with similar terms and remaining maturities are used to estimate the fair value of our long-term debt, which primarily consists of revenue equipment installment notes.

The carrying amount of cash and cash equivalents, accounts receivable, accounts payable, and current debt approximates their fair value because of the short-term maturity of these instruments. Interest rates that are currently available to us for issuance of long-term debt with similar terms and remaining maturities are used to estimate the fair value of our long-term debt, which primarily consists of revenue equipment installment notes.

The fair value of our revenue equipment installment notes approximated the carrying value at December 31, 2021 , as the weighted average interest rate on these notes approximates the market rate for similar debt.

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Diluted income per share reflects the dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in our earnings.

There were approximately 195,000;

and 129,000 shares issuable upon conversion of unvested restricted shares for the years ended 

December 31, 2020, 2019, and 2018 , respectively. Of such shares, 195,000 unvested shares have been excluded from the calculation of diluted earnings per share since the effect of any assumed exercise of the related awards would be anti-dilutive for the year ended December 31, 2020. 

There were approximately 70,000;

and 0 shares issuable upon conversion of unvested employee stock options for the years ended 

December 31, 2020, 2019, and 2018 , respectively. Of such options, 70,000 unvested options have been excluded from the calculation of diluted earnings per share since the effect of any assumed exercise of the related options would be anti-dilutive for the year ended December 31, 2020. 

Income per share is the same for both Class A and Class B shares.

The following table sets forth the calculation of net income per share included in the consolidated statements of operations for each of the three years ended December 31:

There were approximately 374,000 shares and 195,000 shares issuable upon conversion of unvested restricted shares for the years ended 

December 31, 2021 and 2020, respectively.

Of such shares, 157,000 unvested shares have been excluded from the calculation of diluted earnings per share because the performance targets were not achieved as of December 31, 2021.

Additionally, none and 195,000 unvested shares have been excluded from the calculation of diluted earnings per share since the effect of any assumed exercise of the related awards would be anti-dilutive for the year ended December 31, 2021 and 2020, respectively.

There were approximately 158,000 shares and 70,000 shares issuable upon conversion of unvested employee stock options for the years ended 

December 31, 2021 and 2020, respectively.

Of such options, 34,000 unvested options have been excluded from the calculation of diluted earnings per share because the performance targets were not attained as of December 31, 2021.

Additionally, 124,000 and 195,000 unvested options have been excluded from the calculation of diluted earnings per share since the effect of any assumed exercise of the related awards would be anti-dilutive for the year ended December 31, 2021 and 2020, respectively.

The following table sets forth the calculation of net income per share included in the consolidated statements of operations for each of the two years ended December 31:

(in thousands except per share data)

(Loss) income from continuing operations  

$ ( 14,120 )  

$ 5,219  

$ 40,860  

(Loss) income from discontinued operations  

( 28,598 )  

Net (loss) income

$ ( 42,718 )  

Income (loss) from continuing operations

$ 58,191  

Income (loss) from discontinued operations, net of tax

Net income (loss)

$ 60,731  

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17,358  

18,340  

Effect of dilutive securities:

Equivalent shares issuable upon conversion of unvested restricted shares

Equivalent shares issuable upon conversion of unvested employee stock options  

Denominator for diluted income per share adjusted weighted-average shares and assumed conversions

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17,358  

18,469  

Basic (loss) income per share:

Income (loss) from continuing operations  

$ ( 0.81 )  

$ 0.28  

$ 2.23  

(Loss) income from discontinued operations  

$ ( 1.65 )  

$ 0.18  

$ 0.09  

Net (loss) income per basic share

$ ( 2.46 )  

$ 0.46  

$ 2.32  

Diluted (loss) income per share:

Income (loss) from continuing operations  

$ ( 0.81 )  

$ 0.28  

$ 2.21  

(Loss) income from discontinued operations  

Basic income (loss) per share:

Income (loss) from continuing operations

$ 3.46  

Income (loss) from discontinued operations

$ 0.15  

Net income (loss)

$ 3.61  

Diluted income per share

Diluted income (loss) per share:

Income (loss) from continuing operations

$ 3.42  

Income (loss) from discontinued operations

$ 0.15  

Net income (loss)

$ 3.57  

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We are currently evaluating the impacts the adoption of this standard will have on the consolidated financial statements.

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

Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing the exceptions to the incremental approach for intra-period tax allocation in certain situations, the requirement to recognize a deferred tax liability for a change in the status of a foreign investment, and the general methodology for computing income taxes in an interim period when year-to date loss exceeds the anticipated loss for the year. The amendments also simplify the accounting for income taxes with regard to franchise tax, the evaluation of step up in the tax basis goodwill in certain business combinations, allocating current and deferred tax expense to legal entities that are not subject to tax and enacted change in tax laws or rates.

The Company adopted these provisions in the first quarter of 2021 and the adoption did not have a material impact on its consolidated financial statements.

There are no other new accounting pronouncements that are expected to have a significant impact on our consolidated financial statements.

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$ 5,397  

$ 9,140  

$ 5,038  

Operating expenses

Gain on disposal  

( 3,720 )  

Loss contingency  

Gain on disposal

(Reversal of) loss contingency

( 3,412 )  

Operating (loss) income

44,151  

Operating income (loss)

Interest expense

(Loss) income before income taxes

( 38,133 )  

Income tax (benefit) expense

( 9,535 )  

Net (loss) income from discontinued operations, net of tax

$ ( 28,598 )  

$ 3,258  

Income (loss) before income taxes

Income tax expense (benefit)

Net income (loss) from discontinued operations, net of tax

$ 2,540  

As of December 31, 2020, we had a contingent liability due to Triumph recorded in other long-term liabilities from discontinued operations on our consolidated balance sheet of $ 44.2 million. Based on the terms of the amended purchase agreement, as described in Note 1, we estimate our possible indemnification exposure to be from $ 44.2 million to $ 45.0 million.

Operating income for the year ended December 31, 2021 relates to the gain on the reversal of our contingent loss liability in the amount of $ 3.4 million.

Reversal of contingent loss liability relates to the reduced exposure of future indemnification by the Company to Triumph as a result of the collection of covered receivables identified in the amended purchase agreement, as described in Note 1.

Interest expense not directly attributable to or related to other operations has been allocated to discontinued operations in a manner consistent with debt needed to finance the net average funds employed by the Factoring reportable segment, multiplied by the Company's weighted average interest rate.

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December 31, 2020

Current assets:

Accounts receivable, net of allowance of $0 in 2020 and $408 in 2019

$ 86,620  

Current assets of discontinued operations

86,620  

Noncurrent deferred tax asset  

Noncurrent assets from discontinued operations  

Total assets from discontinued operations  

Noncurrent deferred tax asset

Noncurrent assets from discontinued operations

Total assets from discontinued operations

$ 1,275  

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Accounts payable

$ 6,245  

Current liabilities of discontinued operations

Contingent liabilities  

44,151  

Total liabilities  

Total liabilities from discontinued operations

$ 5,100  

$ 44,967  

The net cash flows for operating activities related to discontinued operations provided $ 11.7 million and used $ 28.1 million and $ 17.3 million for the years ended December 31, 2020, 2019, and 2018,  respectively.

There were $ 108.4 million investing and no financing cash flows related to discontinued operations for the year ended December 31, 2020 and no investing or financing cash flows related to discontinued operations for the same 2019 and 2018 periods.

There were no net cash flows related to discontinued operations for the year ended December 31, 2021.

The net cash flows for operating activities related to discontinued operations provided $ 11.7 million for the year ended December 31, 2020, and there were no related investing or financing cash flows related to discontinued operations for the year ended December 31, 2020.

The following unaudited summary information is presented on a consolidated pro forma basis as if the Factoring assets were sold as of January 1, 2020:

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$ 838,561  

$ 880,417  

(Loss) income from continuing operations

( 14,120 )  

40,860  

(Loss) income per basic share from continuing operations

$ ( 0.81 )  

$ 0.28  

$ 2.23  

(Loss) income per diluted share from continuing operations

Income (loss) from continuing operations

58,191  

Income (loss) per basic share from continuing operations

$ 3.46  

Income (loss) per diluted share from continuing operations

$ 3.42  

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We expect to sell all the assets within the next twelve months.

We terminated the lease agreement on a leased office facility in Chattanooga, TN during the second quarter of 2020 and recognized the related loss on the termination of the right of use asset and the abandonment of leasehold improvements within the impairment of property and equipment line item of the consolidated statements of operations. The following table provides a summary of the asset groups impaired, amount of the impairment and a description of the valuation technique used to determine fair value. We believe that these impairment activities are substantially complete.

Accordingly, we incurred no additional charges during the third and fourth quarters of 2020 and do not expect to incur additional charges in connection with this activity. There were no such charges in 2019 or 2018.

There were no such charges in 2021.

(in thousands)

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$ 26,569  

Other restructuring related gains and charges incurred during the twelve months ended December 31, 2020 are summarized in the table below. Unless noted below, we believe that these other restructuring related gains and charges are substantially complete.

Accordingly, we do not expect to incur additional charges in connection with this activity.

There were no such activities in 2019 or 2018.

Other restructuring related gains and charges incurred during the twelve months ended December 31, 2020 are summarized in the table below.

There were no such activities in 2021.

(in thousands)

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At December 31, 2021 , 

1,785,014 of the 

4,200,000 shares noted above were available for award under the amended Incentive Plan.

1,152,479 of the 4,200,000  shares noted above were available for award under the amended Incentive Plan.

No participant in the Incentive Plan may receive awards of any type of equity instruments in any calendar-year that relates to more than 500,000 shares of our Class A common stock or $ 4,000,000 .

No awards may be made under the Incentive Plan after March 31, 2023.

To the extent available, we have issued treasury stock to satisfy all share-based incentive plans.

Included in salaries, wages, and related expenses within the consolidated statements of operations is stock-based compensation expense of $ 1.8 million, $ 0.4 million, and $ 4.8 million in 2020, 2019, and 2018 , respectively.

Included in general supplies and expenses within the consolidated statements of operations is stock-based compensation expenses for non-employee directors of $ 0.4 million in 2020 , 

2019 , and 

2018 , respectively.

All the stock compensation expense recorded in 2020, 2019, and 2018  relates to restricted shares granted, other than less than $ 0.1 million in 2020, as no options were granted during 2019 or 2018.

Associated with stock compensation expense was $ 0.2 million, $ 0.1 million, and $ 0.3 million of income tax expense in 2020 , 

2019 , and 

Included in salaries, wages, and related expenses within the consolidated statements of operations is stock-based compensation expense of $ 5.0 million and $ 1.8 million, in 2021 and 2020, respectively.

Included in general supplies and expenses within the consolidated statements of operations is stock-based compensation expenses for non-employee directors of $ 0.4 million in each 

2021  and 

All the stock compensation expense recorded in 2021 and 2020  relates to restricted shares granted, other than $ 2.4 million and less than $ 0.1 million in 2021 and 2020, respectively which relates to stock options.

Associated with stock compensation expense was $ 0.3 million and $ 0.2 million of income tax expense in 2021  and 

2020 , respectively, related to the exercise of restricted share vesting as no stock options were eligible to vest during those years.

The Incentive Plan allows participants to pay the federal and state minimum statutory tax withholding requirements related to awards that vest or allows the participant to deliver to us shares of Class A common stock having a fair market value equal to the minimum amount of such required withholding taxes.

To satisfy withholding requirements for shares that vested, certain participants elected to deliver to us 20,570 , 62,255 , and 

11,052 Class A common stock shares, which were withheld at weighted average per share prices of $ 14.65 , $ 17.75 , and $ 21.89 , respectively, based on the closing prices of our Class A common stock on the dates the shares vested in 2020, 2019, and 2018 , respectively, in lieu of the federal and state minimum statutory tax withholding requirements.

We remitted $ 0.3 million, $ 1.1 million, and $ 0.8 million in 2020, 2019, and 2018 , respectively, to the proper taxing authorities in satisfaction of the employees' minimum statutory withholding requirements.

To satisfy withholding requirements for shares that vested, certain participants elected to deliver to us 60,752  and 

20,570  Class A common stock shares, which were withheld at weighted average per share prices of $ 21.87  and $ 14.65 , respectively, based on the closing prices of our Class A common stock on the dates the shares vested in 2021  and 

2020 , respectively, in lieu of the federal and state minimum statutory tax withholding requirements.

We remitted $ 0.5 million and $ 0.3 million in 2021  and 

2020 , respectively, to the proper taxing authorities in satisfaction of the employees' minimum statutory withholding requirements.

The payment of minimum tax withholdings on stock compensation are reflected within the issuances of restricted shares from treasury stock in the accompanying consolidated statement of stockholders' equity.

The following table summarizes our restricted share award activity for the fiscal years ended December 31, 2020, 2019, and 2018 :

The following table summarizes our restricted share award activity for the fiscal years ended December 31, 2021  and 

Number of stock awards (in thousands)

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$ 18.12  

$ 13.43  

( 65 )  

$ 23.82  

( 196 )  

$ 20.05  

Unvested at December 31, 2020

$ 16.25  

The unvested shares at 

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All awards require continued service to vest, and 

192,472 of these awards vest solely based on continued service, in varying increments between 

307,967  of these awards vest solely based on continued service, in varying increments between 

2021 and 2026 .

Performance based awards account for 

397,499 of the unvested shares at December 31, 2020 , for which we have not recognized any compensation cost as vesting is not probable.

Market based awards account for 55,000 of the unvested shares at December 31, 2020 and have no unrecognized compensation cost as the cost has been fully recognized based on the market targets having been achieved for the year ended December 31, 2020.

The fair value of restricted share awards that vested in 2020, 2019, and 2018 was approximately $ 0.9 million, $ 3.4 million, and $ 0.7 million, respectively.

As of December 31, 2020 , we had approximately $ 1.9 million of unrecognized compensation expense related to 192,472 service-based shares, which is probable to be recognized over a weighted average period of approximately 30 months.

253,672  of the unvested shares at December 31, 2021 , and have $ 2.5 million of unrecognized compensations cost.

There were no unvested market based awards at 

December 31, 2021 .

The fair value of restricted share awards that vested in 2021 and 2020  was approximately $ 4.9 million and $ 0.9 million, respectively.

As of December 31, 2021 , we had approximately $ 2.7 million of unrecognized compensation expense related to 307,967  service-based shares, which is probable to be recognized over a weighted average period of approximately 

14.2  months.

All restricted shares awarded to executives and other key employees pursuant to the Incentive Plan provide the holder with voting and other stockholder-type rights, but will not be issued until the relevant restrictions are satisfied.

Forfeitures are recognized as they're incurred.

There were no outstanding options at December 31, 2019 or 2018.

The following table summarizes our stock option activity for the fiscal year ended December 31, 2020:

The following table summarizes our stock option activity for the fiscal year ended December 31, 2021  and 2020:

Number of options (in thousands)

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$ 15.77  

Options granted

$ 21.24  

Options exercised

Options forfeited

( 60 )  

$ 15.77  

Outstanding at December 31, 2021

$ 17.99  

$ 9,382  

Exercisable at December 31, 2021

Unrecognized compensation cost for outstanding options was $ 6.7 million at 

December 31, 2021 .

PROPERTY AND EQUIPMENT

22 unchanged sentences

$ 541,276  

Depreciation expense was $ 60.4 million, $ 77.6 million, and $ 74.4 million, in 2020, 2019, and 2018 , respectively.

This depreciation expense excludes net gains on the sale of property and equipment totaling $ 7.7 million and $ 1.7 million in 2020 and 2019, respectively, and net losses of $ 0.3 million in 

Depreciation expense was $ 49.8 million and $ 60.4 million in 2021 and 2020, respectively.

This depreciation expense excludes net gains on the sale of property and equipment totaling $ 3.8 million and $ 7.7 million in 2021  and 2020, respectively.

We lease certain revenue equipment under finance and operating leases with terms of approximately 48 to 84 months.

At December 31, 2021  and 2020 , property and equipment included finance and operating leases.

Our finance leases had capitalized costs of $ 50.2 million and $ 55.0 million and accumulated amortization of $ 20.8 million and $ 21.0 million at December 31, 2020  and 2019 , respectively. Amortization of these leased assets is included in depreciation and amortization expense in the consolidated statement of operations and totaled $ 4.1 million, $ 5.5 million, and $ 5.4 million during 2020, 2019, and 2018 , respectively. See Note 9.

Our finance leases had capitalized costs of $ 45.5 million and $ 50.2 million and accumulated amortization of $ 22.3 million and $ 20.8 million at December 31, 2021  and 2020 , respectively. Amortization of these leased assets is included in depreciation and amortization expense in the consolidated statement of operations and totaled $ 3.6 million and $ 4.1 million during 2021 and 2020, respectively. See Note 9.

Leases  for additional information about our finance and operating leases.

5 unchanged sentences

June 30, 2020. 

At the end of its useful life, the Landair trade name will have a residual value of $ 0.5  million.

The Landair trade name has a residual value of $ 0.5  million.

The non-compete agreement with a former Landair executive was terminated during the 

27 unchanged sentences

Remaining Life (months)

Dedicated  

$ 2,402  

$ ( 2,130 )  

$ 1,198  

Managed Freight  

( 885 )  

Warehousing  

( 885 )  

1 unchanged sentence

( 3,900 )  

Non-Compete agreement:

Dedicated  

( 914 )  

Managed Freight  

( 130 )  

Warehousing  

( 356 )  

Total non-compete agreement  

( 1,400 )  

Customer relationships:

Dedicated  

14,072  

( 4,104 )  

11,141  

Managed Freight  

( 494 )  

Warehousing  

12,436  

14 unchanged sentences

Remaining Life (months)

Dedicated  

$ 2,402  

1 unchanged sentence

$ 1,198  

Managed Freight  

( 501 )  

Warehousing  

( 501 )  

1 unchanged sentence

( 2,206 )  

Non-Compete agreement:

Dedicated  

( 274 )  

Managed Freight  

( 39 )  

Warehousing  

( 107 )  

Total non-compete agreement  

( 420 )  

Customer relationships:

Dedicated  

14,072  

1 unchanged sentence

11,141  

Managed Freight  

( 213 )  

Warehousing  

Managed Freight

( 354 )  

10 unchanged sentences

The above finite-lived intangible assets have a weighted average remaining life of 

105  months and 128 months as of 

102 months and 

105 months as of 

December 31, 2021  and 2020 , respectively as a result of the change in estimated useful life as discussed above.

Amortization expense was $ 5.1 million, $ 2.9 million, and $ 1.5 million for the years ended December 31, 

2020, 2019, and 2018 , respectively.

Amortization expense was $ 4.0 million and $ 5.1 million for the years ended December 31, 2021 and 2020, respectively.

The expected amortization expense of these assets for the next five years is as follows:

1 unchanged sentence

$ 2,350  

10,574  

A summary of other assets as of December 31, 2021  and 2020 is as follows:

3 unchanged sentences

$ 34,365  

Other long-term receivables  

24,378  

3 unchanged sentences

$ 60,897  

Other long-term receivables represents amounts recorded as a receivable in other assets and as a corresponding accrual in the long-term portion of insurance and claims accruals on our consolidated balance sheet for claims above our self-insured retention for which we believe it is reasonably assured that the insurers will provide their portion of such claims.

Other long-term receivables primarily represents amounts recorded as a receivable in other assets and as a corresponding accrual in the long-term portion of insurance and claims accruals on our consolidated balance sheet for claims above our self-insured retention for which we believe it is reasonably assured that the insurers will provide their portion of such claims.

The Company conducted its annual impairment assessments and tests of goodwill for each reporting unit as of October 1, 2021. 

3 unchanged sentences

If the estimation of fair value indicates that impairment potentially exists, the Company will then measure the amount of the impairment, if any. Goodwill impairment exists when the estimated implied fair value of goodwill is less than its carrying value. Changes in strategy or market conditions could significantly impact these fair value estimates and require adjustments to recorded asset balances.

As a result of the most recent goodwill impairment analysis performed ( October 1, 2021), the fair value of the Dedicated reporting unit exceeded its carrying amount by approximately 8.5 %.

Additionally, the Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable.

Impairment is recognized on assets classified as held and used when the sum of undiscounted estimated cash flows expected to result from the use of the asset is less than the carrying value.

If such measurement indicates a possible impairment, the estimated fair value of the asset is compared to its net book value to measure the impairment charge, if any. 

Our business requires significant capital investments over the short-term and the long-term.

We generally finance our capital requirements with borrowings under our Credit Facility, cash flows from operations, long-term operating leases, finance leases, secured installment notes with finance companies, and proceeds from the sale of our used revenue equipment.

We had working capital (total current assets less total current liabilities) of $ 14.4 million and $ 93.1 million at December 31, 2020  and 2019 , respectively.

We had working capital (total current assets less total current liabilities) of $ 45.8 million and $ 14.4 million at December 31, 2021  and 2020 , respectively.

Based on our expected financial condition, net capital expenditures, and results of operations and related net cash flows, we believe our working capital and sources of liquidity will be adequate to meet our current and projected needs for at least the next year.

As of December 31, 2020 , we had 

$15.0 million of borrowings outstanding, undrawn letters of credit outstanding of approximately $ 29.7 million, and available borrowing capacity of $ 65.3 million under the Credit Facility.

As of December 31, 2021 , we had no  borrowings outstanding, undrawn letters of credit outstanding of approximately $ 26.4 million, and available borrowing capacity of $ 83.6 million under the Credit Facility.

Additionally, we had availability of a $ 45.0 million line of credit from Triumph Bank which is available solely to fund any indemnification owed to Triumph in relation to the sale of TFS.

Fluctuations in the outstanding balance and related availability under our Credit Facility are driven primarily by cash flows from operations and the timing and nature of property and equipment additions that are not funded through notes payable and leases, as well as the nature and timing of collection of accounts receivable, payments of accrued expenses, and receipt of proceeds from disposals of property and equipment.

During the first half of 2020, in response to the uncertainty of the upcoming economic environment as a result of COVID- 19 and as part of our strategic focus to reduce overhead costs, we took measures to preserve our liquidity, including capital reductions, financing, cost reduction, and working capital actions. During 2020 we have paid down more than $ 200.0 million of debt and lease obligations.

After taking measures in the first half of 2020 to preserve our liquidity in response to the economic uncertainty as a result of COVID- 19, we paid down more than $ 200.0 million of debt and lease obligations in the latter half of the year.

During 2021, we have continued to pay down debt, decreasing our debt and lease obligations by $ 36.1 million since December 31, 2020.

If needed, we have other potential flexible sources of liquidity that we can leverage such as unencumbered owned revenue equipment.

5 unchanged sentences

$ 15,000  

Borrowings under the Draw Note  

Revenue equipment installment notes;

weighted average interest rate of 2.0% at December 31, 2020, and 3.7% December 31, 2019, due in monthly installments with final maturities at various dates ranging from January 2021 to January 2024, secured by related revenue equipment

11,358  

53,431  

weighted average interest rate of 1.2% at December 31, 2021, and 2.0% December 31, 2020, due in monthly installments with final maturities at various dates ranging from January 2022 to November 2022, secured by related revenue equipment

11,358  

3 unchanged sentences

21,530  

Deferred loan costs

20,347  

47,888  

54,377  

200,177  

Principal portion of finance lease obligations, secured by related revenue equipment

10,756  

26,010  

Principal portion of operating lease obligations, secured by related equipment  

15,811  

15 unchanged sentences

The unused line fee is the product of 0.25 % times the average daily amount by which the Lenders' aggregate revolving commitments under the Credit Facility exceed the outstanding principal amount of revolver loans and the aggregate undrawn amount of all outstanding letters of credit issued under the Credit Facility. The obligations under the Credit Facility are guaranteed by us and secured by a pledge of substantially all of our assets, with the notable exclusion of any real estate or revenue equipment pledged under other financing agreements, including revenue equipment installment notes and finance leases.

Any LIBOR loans under our Credit Facility will continue to be indexed against LIBOR until the earlier of an amendment to the Credit Facility or June 2023.

We do not expect a change from LIBOR to an alternate index to have a material impact to our financial statements.

Borrowings under the Credit Facility are subject to a borrowing base limited to the lesser of (A) $110.0 million (increased from $95.0 million by the Eighteenth Amendment), minus the sum of the stated amount of all outstanding letters of credit;

4 unchanged sentences

Failure to comply with the covenants and restrictions set forth in the Credit Facility could result in an event of default. 

In connection with the TFS Settlement, on September 23, 2020, TBK Bank, SSB, as lender and agent for Triumph (“TBK Bank”), provided the Company with a $ 45 million line of credit (the “Draw Note”), the proceeds of which are to be used solely to satisfy our indemnification obligations under the TFS Settlement.

We may borrow pursuant to the Draw Note until September 23, 2025.

Any amount outstanding under the Draw Note will accrue interest at a per annum rate equal to one and one -half ( 1.5 ) percentage points over LIBOR, provided, however, that LIBOR shall be deemed to be at least 0.25 %. Accrued interest is due monthly and the outstanding principal balance is due on September 23, 2026.

To secure our obligations under the TFS Settlement and the Draw Note, we pledged certain unencumbered revenue equipment with an estimated net orderly liquidation value of $ 60 million.

The Draw Note includes usual and customary events of default for a facility of this nature and provides that, upon occurrence and continuation of an event of default, payment of all amounts payable under the Draw Note may be accelerated.

Pricing for the revenue equipment installment notes is quoted by the respective financial affiliates of our primary revenue equipment suppliers and other lenders at the funding of each group of equipment acquired and include fixed annual rates for new equipment under retail installment contracts.

The notes included in the funding are due in monthly installments with final maturities at various dates ranging from January 2021 to 

January 2024 .

The notes included in the funding are due in monthly installments with final maturities at various dates ranging from 

January 2022 to 

November 2022 .

The notes contain certain requirements regarding payment, insuring of collateral, and other matters, but do not have any financial or other material covenants or events of default except certain notes totaling $ 4.5 million are cross-defaulted with the Credit Facility.

Additional borrowings from the financial affiliates of our primary revenue equipment suppliers and other lenders are expected to be available to fund new tractors expected to be delivered in 2022, while any other property and equipment purchases, including trailers, are expected to be funded with a combination of available cash, notes, operating leases, finance leases, and/or from the Credit Facility.

In April 2020, in an effort to improve our liquidity during the COVID- 19 pandemic, we executed a modification to certain of our revenue equipment installment notes, exercising an option to make interest only payments for a period of 90 days, extending the due date of $ 177.3 million of debt by three months.

Subsequently, we paid down more than $ 200.0 million of debt and lease obligations, including the debt we had extended the due date on.

In August 2015, we financed a portion of the purchase of our corporate headquarters, a maintenance facility, and certain surrounding property in Chattanooga, Tennessee by entering into a $ 28.0 million variable rate note with a third party lender.

Concurrently with entering into the note, we entered into an interest rate swap to effectively fix the related interest rate to 4.2 %. The note contains certain restrictions and covenants that are usual and customary for a note of this nature.

Failure to comply with the covenants and restrictions set forth in the note could result in an event of default. For the second quarter ended June 30, 2020, we obtained a waiver from the third -party lender for a financial covenant that we did not comply with.

Absent the waiver we would have been in default under our covenants. During the third quarter ended September 30, 2020, there was an amendment to the calculation of the covenant and we were in compliance with the calculation as stated in the amendment. We expect to be in compliance with our debt covenants for the next 12 months.

Failure to comply with the covenants and restrictions set forth in the note could result in an event of default.

We expect to be in compliance with our debt covenants for the next 12 months.

In connection with the TFS Settlement, on September 23, 2020, TBK Bank, SSB, as lender and agent for Triumph (“TBK Bank”), provided the Company with a $ 45.0 million line of credit (the “Draw Note”), the proceeds of which are to be used solely to satisfy our indemnification obligations under the TFS Settlement.

We may borrow pursuant to the Draw Note until September 23, 2025.

To secure our obligations under the TFS Settlement and the Draw Note, we pledged certain unencumbered revenue equipment with an estimated net orderly liquidation value of $ 60 million.

During the first quarter of 2021, we received an indemnification call from Triumph of $ 35.6 million related to the TFS Settlement, which was funded by drawing on the Draw Note.

During the second quarter of 2021 we repaid $ 31.0 million of the borrowings under the Draw Note and during the third quarter of 2021 we repaid the remaining balance.

As of December 31, 2021, there were no outstanding borrowings under the Draw Note.

As of December 31, 2021 , the scheduled principal payments of debt, excluding finance leases for which future payments are discussed in Note 9  are as follows:

2 unchanged sentences

15,054  

16,456  

Finance lease obligations are utilized to finance a portion of our revenue equipment and are entered into with certain finance companies who are not parties to our Credit Facility.

29 unchanged sentences

$ 1,003  

$ 7,226  

Operating cash flows from operating leases

17 unchanged sentences

December 31, 2021 , summarized as follows by lease category:

(in thousands)  

Operating  

6 unchanged sentences

$ 10,634  

amount representing interest  

Present value of minimum lease payments  

amount representing interest

( 7,302 )  

Present value of minimum lease payments

$ 37,365  

current portion  

$ 10,817  

Lease obligations, long-term  

current portion

( 15,811 )  

Lease obligations, long-term

$ 21,554  

$ 3,969  

Certain leases contain cross-default provisions with other financing agreements and additional charges if the unit's mileage exceeds certain thresholds defined in the lease agreement.

Rental expense is summarized as follows for each of the three years ended December 31:

Rental expense is summarized as follows for each of the two years ended December 31:

(in thousands)

2 unchanged sentences

$ 22,505  

$ 14,682  

Building and lot rentals  

Other equipment rentals

Total rental expense  

$ 25,965  

Total rental expense

$ 24,091  

$ 25,965  

Income tax (benefit) expense for the years ended December 31, 2020, 2019, and 2018 is comprised of:

Income tax expense (benefit) for the years ended December 31, 2021 and 2020  is comprised of:

(in thousands)

2 unchanged sentences

Federal, deferred

( 2,391 )  

14,117  

State, current

State, deferred

( 2,825 )  

( 415 )  

Income tax (benefit) expense

$ 20,962  

$ 2,349  

$ 14,944  

Income tax (benefit) expense for the years ended December 31, 2020, 2019, and 2018 is summarized below:

Income tax expense (benefit) for the years ended December 31, 2021 and 2020  is summarized below:

(in thousands)

1 unchanged sentence

$ 16,643  

$ 1,642  

$ 11,745  

State income taxes, net of federal income tax effect

( 227 )  

( 600 )  

831(b) election  

( 123 )  

( 393 )  

831(b) election

Per diem allowances

Tax contingency accruals

Valuation allowance, net

( 295 )  

Valuation allowance, net

( 242 )  

1 unchanged sentence

Excess tax benefits on share-based compensation

Change in prior year estimates  

( 259 )  

Income tax (benefit) expense

$ ( 2,804 )  

Change in prior year estimates

( 86 )  

Executive compensation disallowance

Income tax (benefit) expense

$ 20,962  

The amount of income tax (benefit) expense allocated to discontinued operations for TFS is $ 9.5  million, $ 1.1 million, and $ 0.6 million for the years ended December 31, 2020, 2019, and 2018, respectively.

The amount of income tax expense (benefit) allocated to discontinued operations for TFS is $ 0.8 million expense and $ 9.5 million benefit for the years ended December 31, 2021 and 

2020, respectively.

Income tax expense varies from the amount computed by applying the applicable federal corporate income tax rate of 21 % for 

2019 , and 

2018 , to income before income taxes primarily due to state income taxes, net of federal income tax effect, adjusted for permanent differences, the most significant of which is the effect of the per diem pay structure for drivers. Drivers who meet the requirements to receive per diem receive non-taxable per diem pay in lieu of a portion of their taxable wages. This per diem program increases our drivers' net pay per mile, after taxes, while decreasing gross pay, before taxes. As a result, salaries, wages, and employee benefits are slightly lower and our effective income tax rate is higher than the statutory rate. Generally, as pre-tax income increases, the impact of the driver per diem program on our effective tax rate decreases, because aggregate per diem pay becomes smaller in relation to pre-tax income, while in periods where earnings are at or near breakeven, the impact of the per diem program on our effective tax rate is significant. Due to the partially nondeductible effect of per diem pay, our tax rate will fluctuate in future periods based on fluctuations in earnings.

2021  and 

2020 , to income before income taxes primarily due to state income taxes, net of federal income tax effect, adjusted for permanent differences, the most significant of which is the effect of the per diem pay structure for drivers in 2020.

 Drivers who meet the requirements to receive per diem receive non-taxable per diem pay in lieu of a portion of their taxable wages. This per diem program increases our drivers' net pay per mile, after taxes, while decreasing gross pay, before taxes. As a result, salaries, wages, and employee benefits are slightly lower and our effective income tax rate is higher than the statutory rate. Generally, as pre-tax income increases, the impact of the driver per diem program on our effective tax rate decreases, because aggregate per diem pay becomes smaller in relation to pre-tax income, while in periods where earnings are at or near breakeven, the impact of the per diem program on our effective tax rate is significant. The nondeductible effect of per diem is temporarily suspended for 2021 and 2022 in accordance with IRS guidance issued during the quarter ended December 31, 2021.

The rate impact of these items will fluctuate in future periods as income fluctuates.

The temporary differences and the approximate tax effects that give rise to our net deferred tax liability at December 31, 2021  and 2020 are as follows:

6 unchanged sentences

11,395  

10,942  

Leased liability  

15,668  

Finance lease obligation  

State bonus  

Leased liability

Finance lease obligation

Valuation allowance

( 242 )  

Total deferred tax assets

6 unchanged sentences

( 34,400 )  

ROU Asset- leases  

( 9,178 )  

( 783 )  

481(a) - finance leases  

( 2,177 )  

5 unchanged sentences

$ ( 84,661 )  

The net deferred tax liability of $ 65.0 million primarily relates to differences in cumulative book versus tax depreciation of property and equipment, partially off-set by tax credit carryovers and insurance claims that have been reserved but not paid.

The carrying value of our deferred tax assets assumes that we will be able to generate, based on certain estimates and assumptions, sufficient future taxable income in certain tax jurisdictions to utilize these deferred tax benefits. If these estimates and related assumptions change in the future, we may be required to establish a valuation allowance against the carrying value of the deferred tax assets, which would result in additional income tax expense. On a periodic basis, we assess the need for adjustment of the valuation allowance. Based on forecasted taxable income resulting from the reversal of deferred tax liabilities, primarily generated by accelerated depreciation for tax purposes in prior periods, and tax planning strategies available to us, a valuation allowance has been established at December 31, 2020 of approximately $ 0.3  million related to certain state net operating loss carry forwards. If these estimates and related assumptions change in the future, we may be required to modify our valuation allowance against the carrying value of the deferred tax assets.

The net deferred tax liability of $ 84.7 million primarily relates to differences in cumulative book versus tax depreciation of property and equipment, partially off-set by net operating carryovers and insurance claims that have been reserved but not paid.

The carrying value of our deferred tax assets assumes that we will be able to generate, based on certain estimates and assumptions, sufficient future taxable income in certain tax jurisdictions to utilize these deferred tax benefits. If these estimates and related assumptions change in the future, we may be required to establish a valuation allowance against the carrying value of the deferred tax assets, which would result in additional income tax expense. On a periodic basis, we assess the need for adjustment of the valuation allowance. Based on forecasted taxable income resulting from the reversal of deferred tax liabilities, primarily generated by accelerated depreciation for tax purposes in prior periods, and tax planning strategies available to us, no valuation allowance has been established at December 31, 2021 .

If these estimates and related assumptions change in the future, we may be required to modify our valuation allowance against the carrying value of the deferred tax assets.

As of December 31, 2021 , we had a $ 0.6 million liability recorded for unrecognized tax benefits, which includes interest and penalties of $ 0.1 million.

1 unchanged sentence

As of December 31, 2020 , we had a $ 0.9 million liability recorded for unrecognized tax benefits, which included interest and penalties of $ 0.1 million.

Interest and penalties recognized for uncertain tax positions provided for no expense in 2020,  a $ 0.8 million benefit in 2019,  and a $ 0.1 million expense in 2018.

Interest and penalties recognized for uncertain tax positions provided for de minimus expense in 2021 and 2020.

The following tables summarize the annual activity related to our gross unrecognized tax benefits (in thousands) for the years ended December 31, 2021 and 2020:

Balance as of January 1,

$ 1,796  

$ 1,924  

Increases related to prior year tax positions

2 unchanged sentences

Decreases related to settlements with taxing authorities

( 4,200 )  

Decreases related to lapsing of statute of limitations

( 291 )  

( 29 )  

Balance as of December 31,

$ 1,796  

If recognized, approximately $ 0.9 million of unrecognized tax benefits would impact our effective tax rate as of both December 31, 2020  and 2019 .

If recognized, approximately $ 0.6 million and $ 0.9 million of unrecognized tax benefits would impact our effective tax rate as of both December 31, 2021  and 2020 , respectively.

Any prospective adjustments to our reserves for income taxes will be recorded as an increase or decrease to our provision for income taxes and would impact our effective tax rate.

2015 through 2019  tax years remain subject to examination by the IRS for U.S.

2016 through 2020 tax years remain subject to examination by the IRS for U.S.

federal tax purposes, our major taxing jurisdiction. In the normal course of business, we are also subject to audits by state and local tax authorities.

While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, we believe that our reserves reflect the more likely than not outcome of known tax contingencies.

We adjust these reserves, as well as the related interest, in light of changing facts and circumstances.

Settlement of any particular issue would usually require the use of cash.

Favorable resolution would be recognized as a reduction to our annual tax rate in the year of resolution.

We do not expect any significant increases or decreases for uncertain income tax positions during the next year. 

Our federal net operating loss ("NOL") of $ 101.9 million is expected to be substantially consumed in the current year.

The remaining $ 3.9 million will carryforward indefinitely.

Our $ 3.1 million of charitable contributions are all expected to be converted to NOL carryover in the current year, thereby extending their benefit indefinitely and increasing the indefinite NOL carryforward to $ 7.0 million. In addition to our federal net operating losses and charitable contributions, we also have $ 10.9  million of federal tax credits available to offset future federal taxable income which will begin to expire in 2030.

We do not anticipate total unrecognized tax benefits to materially change in the next twelve months.

Our federal net operating loss ("NOL") will be fully consumed in the current year.

We have $ 2.1 million of federal tax credits available to offset future tax.

Our state net operating loss carryforwards and state tax credits of $ 86.8 million and $ 0.4 million, respectively, expire beginning in 2023 and 2029 based on jurisdiction.

1 unchanged sentence

The CARES Act, among other things, includes provisions for refundable payroll tax credits, deferral for employer-side social-security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property.

The Company considered the impacts of the legislation in the 

2020 financial statements, noting that some items are continuing to be assessed through preparation of the 2020 income tax returns.

The Company considered the impacts of the legislation in the 2021 and 2020 financial statements.

On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (the "ARPA") into law.

The new law includes several provisions meant to stimulate the U.S.

Of relevance to the Company, ARPA extended the reach of IRC Section 162 (m) to include compensation paid to the eight highest-paid individuals other than the chief executive officer and chief financial officer (rather than the three highest), however, this change is not effective until 2027.

There is no material impact to the financial statements at this time.

EQUITY METHOD INVESTMENT

2 unchanged sentences

We have not guaranteed any of TEL's debt and have no obligation to provide funding, services, or assets.

In May 2016, the operating agreement with TEL was amended to, among other things, remove the previously agreed to fixed date purchase options.

Our option to acquire up to the remaining 51 % of TEL would have expired May 31, 2016, and TEL’s majority owners would have received the option to purchase our ownership in TEL.

There are no current put rights to purchase or sell with any owners.

1 unchanged sentence

There are no third party liquidity arrangements, guarantees, and/or other commitments that may affect the fair value or risk of our interest in TEL.

For the years ended December 31, 2020 , 

2019 , and 2018 we sold tractors and trailers to TEL for $ 2.1 million, 

none , and less than $ 0.1 million, respectively, and received $ 6.6 million, $ 9.4 million, and $ 8.2 million, respectively, for providing various maintenance services, certain back-office functions, and for miscellaneous equipment.

Equipment purchased from TEL totaled $ 0.0 million, $ 10.5 million, and $ 1.8 million in 

2020 , 2019 , and 2018 , respectively.

Additionally, we paid $ 0.6 million, $ 0.6 million, and $ 0.9 million to TEL for leases of revenue equipment in 2020 , 2019 , and 2018 , respectively.

We recorded net deferred gains of less than $ 0.1 million for the year ended 

December 31, 2020  and reversed previously deferred gains of less than $ 0.1 million for the same year ended and 2019 , representing 49 % of the gains on tractors and trailers sold to TEL less any gains previously deferred and recognized when the equipment was sold to a third party. Deferred gains totaling $ 0.2 million at December 31, 2020  and 2019 , respectively, are being carried as a reduction in our investment in TEL. 

We have accounted for our investment in TEL using the equity method of accounting and thus our financial results include our proportionate share of TEL's net income, which amounted to $ 3.9 million in 2020 , $ 7.0 million in 2019 , and $ 7.7 million in 2018 .

We received an equity distribution from TEL for $ 1.5 million, $ 1.3 million, and $ 2.0 million in 

For the years ended December 31, 2021  and 

2020 , we sold tractors and trailers to TEL for $ 0.3 million and $ 2.1 million, respectively, and received $ 0.9 million and $ 6.6 million, respectively, for providing various maintenance services, certain back-office functions, and for miscellaneous equipment.

We did not purchase any equipment from TEL in 

2021  or 

Additionally, we paid $ 0.6 million and 

$0.6 million to TEL for leases of revenue equipment in 2021  and 

2020 , respectively.

We recorded net deferred gains of $ 0.1 million and $ 0.0 million for the years ended 

December 31, 2021  and 

2020 , respectively, representing 49 % of the gains on tractors and trailers sold to TEL less any gains previously deferred and recognized when the equipment was sold to a third party. Deferred gains totaling $ 0.2 million at December 31, 2021  and 2020 , respectively, are being carried as a reduction in our investment in TEL. 

We have accounted for our investment in TEL using the equity method of accounting and thus our financial results include our proportionate share of TEL's net income, which amounted to $ 14.8 million in 2021  and $ 3.9 million in 2020 .

We received an equity distribution from TEL for $ 4.9 million, and $ 1.5 million in 

2021  and 

3 unchanged sentences

Balance Sheet Line Item:

Accounts receivable from TEL Driver advances and other receivables  

Accounts receivable from TEL

Driver advances and other receivables

Investment in TEL

Other assets  

 $ 34,365  

 $ 31,906  

$ 44,196  

$ 34,365  

Our accounts receivable from TEL related to cash disbursements made pursuant to our performance of certain back-office and maintenance functions on TEL's behalf. Our investment in TEL is comprised of $ 4.9 million cash investment and our equity in TEL's earnings since our investment, partially offset by dividends received since our investment for minimum tax withholdings as noted above and the abovementioned deferred gains on sales of equipment to TEL.

20 unchanged sentences

$ 95,016  

$ 108,801  

Cost of Sales  

11,617  

20,404  

Cost of Sales

11,617  

2 unchanged sentences

64,581  

47,281  

Operating Income

3 unchanged sentences

$ 8,344  

$ 13,403  

$ 16,496  

DEFERRED PROFIT SHARING EMPLOYEE BENEFIT PLAN

2 unchanged sentences

We may make discretionary contributions as determined by a committee of our Board of Directors.

We made contributions of $ 0.7 million in 2020 , $ 1.9 million in 2019 , and $ 1.7 million in 

2018 to the profit sharing and savings plan.

We made contributions of $ 1.9 million in 2021  and $ 0.7 million in 2020 , to the profit sharing and savings plan.

The discretionary employer contributions were temporarily suspended during the first half of 2020 in light of the uncertain impact of COVID- 19 on the Company's operations.

RELATED PARTY TRANSACTIONS

During the fourth quarter of 2020, we purchased a shop facility in Greeneville, TN, from WLC Properties which is owned, in part, by our Co-President and Chief Operating Officer. Other than the Greeneville, TN shop purchase and the transactions associated with TEL, there are no other material related party transactions.

Other than those associated with TEL, there are no  material related party transactions.

See Note 11 for discussions of the related party transactions associated with TEL.

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District Court in the Central District of California and subsequently the case was transferred to the U.S.

District Court in the Eastern District of Tennessee where the case is now pending. Covenant Transport intends to vigorously defend itself in this matter. We do not currently have enough information to make a reasonable estimate as to the likelihood, or amount of a loss, or a range of reasonably possible losses as a result of this claim, as such there have been no related accruals recorded as of 

December 31, 2020. 

District Court in the Eastern District of Tennessee where the case is now pending. This lawsuit was settled at mediation on April 29, 2021, for an immaterial amount, pending court approval.

The Court entered an Order preliminarily approving the Class Settlement on December 31 2021.

Our accruals related to this claim as of December 31, 2021 were sufficient to cover this settlement. 

On February, 28 2019, Covenant Transport was named in a separate (but related) lawsuit filed in the Superior Court of Los Angeles County, California requesting civil penalties under the California Private Attorneys’

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On August 1, 2019, the Los Angeles Superior Court entered an order staying the action pending completion of the earlier-filed action that is pending in the United States District Court for the Eastern District of Tennessee.

Covenant Transport intends to vigorously defend itself in this matter. We do not currently have enough information to make a reasonable estimate as to the likelihood, or amount of a loss, or a range of reasonably possible losses as a result of this claim, as such there have been no related accruals recorded as of December 31, 2020.

The claims set forth in this lawsuit are included in the settlement referenced above.

On August 2, 2018, Curtis Markson, et al.

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Plaintiffs contend that these notifications evidence a collusive agreement by the named defendants to restrain competition among trucking companies in California and suppress wages.

Southern Refrigerated Transport, Inc.

and Covenant Transport, Inc.

are vigorously defending themselves against these claims.

We do not currently have enough information to make a reasonable estimate as to the likelihood, or amount of a loss, or a range of reasonably possible losses as a result of this claim, as such there have been no related accruals recorded as of December 31, 2020. 

This lawsuit was settled following mediation on August 20, 2021, for an immaterial amount pending court approval.

Our accruals related to this claim as of December 31, 2021 were sufficient to cover this settlement. 

On February 11, 2021, a lawsuit was filed against Covenant Transport on behalf of Wesley Maas (a California resident and former driver) who is seeking to have the lawsuit certified as a class action.

The lawsuit was filed in the Superior Court of San Bernardino County, California.

The Complaint alleges claims for failure to pay all lawful wages, failure to provide lawful meal and rest periods or compensation in lieu thereof, failure to timely pay wages, failure to comply with itemized wage statement provisions, failure to indemnify for expenditures, and violations of California Labor Code and unfair competition laws. Based on our present knowledge of the facts and, in certain cases, advice of outside counsel, management believes the resolution of open claims and pending litigation, discussed above, taking into account existing reserves, is not likely to have a materially adverse effect on our condensed consolidated financial statements, however, any future liability claims could impact this analysis. Covenant Transport intends to vigorously defend itself in this matter. We do not currently have enough information to make a reasonable estimate as to the likelihood, or amount of a loss, or a range of reasonably possible losses as a result of this claim, as such there have been no related accruals recorded as of 

December 31, 2021.

We maintain insurance to cover liabilities arising from the transportation of freight for amounts in excess of certain self-insured retentions.

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Based on our present knowledge of the facts and, in certain cases, advice of outside counsel, management believes the resolution of open claims and pending litigation, discussed above, taking into account existing reserves, is not likely to have a materially adverse effect on our condensed consolidated financial statement.

We had $ 29.7 million and $ 35.2 million of outstanding and undrawn letters of credit as of December 31, 2020  and 2019 , respectively.

We had $ 26.4 million and $ 29.7 million of outstanding and undrawn letters of credit as of December 31, 2021  and 2020 , respectively.

The letters of credit are maintained primarily to support our insurance programs.

Additionally, we had $ 45.0 million of availability on a line of credit from Triumph solely to fund any indemnification owed to Triumph in relation to the sale of TFS.

We had commitments outstanding at December 31, 2020 , to acquire revenue equipment totaling approximately $ 34.8 million in 

2021 versus commitments at December 31, 2019 of approximately $ 68.4 million.

We had commitments outstanding at December 31, 2021 , to acquire revenue equipment totaling approximately $ 73.8 million versus commitments at December 31, 2020 of approximately $ 34.8 million.

These commitments are cancelable upon stated notice periods, subject to certain adjustments in the underlying obligations and benefits.

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SEGMENT INFORMATION

Until the second quarter of 2020, we had four reportable segments, Highway Services, Dedicated, Managed Freight, and Factoring.

As discussed in Note 2, our Factoring reportable segment was classified as discontinued operations as of June 30, 2020.

As of September 30, 2020, the segment formerly known as Highway Services is now reflected as Expedited, given the change in business mix surrounding the exit of the majority of the solo-refrigerated business in the second quarter of 2020.

In addition, given management changes and growth, we have reported Warehousing as a separate reportable segment from Managed Freight.

We believe the updated reportable segments reflect our service offerings, strategic directions, and how management, including our chief operating decision maker, monitors our performance.

Our four reportable segments are:

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We evaluate performance based on operating income of the respective business units.

The following table summarizes our segment information for 2020 , 

2019 , and 2018:

(in thousands)  

The following table summarizes our segment information for 2021  and 

(in thousands)

Year Ended December 31, 2021

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Intersegment revenue

Operating income (loss)

33,064  

( 1,357 )  

Operating (loss) income

32,461  

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53,881  

Year Ended December 31, 2019  

Expedited  

Dedicated  

Managed Freight  

Warehousing  

Consolidated  

Total revenue from external customers  

(in thousands)

Year Ended December 31, 2020

Managed Freight

Total revenue from external customers

$ 320,202  

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11,630  

Operating income  

( 1,260 )  

Depreciation and amortization

39,371  

38,716  

80,502  

Year Ended December 31, 2018  

Expedited  

Dedicated  

Managed Freight  

Warehousing  

Consolidated  

Total revenue from external customers  

$ 469,308  

$ 257,739  

$ 129,790  

$ 23,580  

$ 880,417  

Intersegment revenue  

Operating income  

32,693  

Operating (loss) income

( 7,038 )  

( 15,534 )  

Depreciation and amortization  

31,969  

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$ 838,561  

$ 880,417  

Intersegment revenues for reportable segments

11,630  

10,302  

Elimination of intersegment revenues

( 7,429 )  

( 10,302 )  

Total consolidated revenues

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$ 838,561  

$ 880,417  

Balance sheet data by reportable segment is not maintained by the Company.

QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

(in thousands except per share amounts)

Quarters ended

Total revenue

Operating (loss) income

(Loss) income from continuing operations

Income (loss) from discontinued operations, net of tax

Net (loss) income

Basic (loss) income per share:

(Loss) income from continuing operations

Income (loss) from discontinued operations

Net (loss) income

Diluted (loss) income per share:

(Loss) income from continuing operations

Income (loss) from discontinued operations

Net (loss) income

(in thousands except per share amounts)  

Quarters ended

Total revenue

$ 217,333  

$ 217,040  

$ 220,459  

$ 230,555  

Operating income (loss)

( 3,870 )  

Income (loss) from continuing operations  

( 4,042 )  

Income from discontinued operations, net of tax  

Net income (loss)

( 3,189 )  

Basic income (loss) per share:

Income (loss) from continuing operations  

$ 0.20  

$ 0.28  

$ ( 0.22 )  

$ 0.01  

Income from discontinued operations

$ 0.04  

$ 0.05  

Net income (loss)

$ 0.24  

$ 0.33  

$ ( 0.17 )  

$ 0.06  

Diluted income (loss) per share:

Income (loss) from continuing operations  

$ 0.20  

$ 0.28  

$ ( 0.22 )  

$ 0.01  

Income from discontinued operations  

$ 0.04  

$ 0.05  

Net income (loss)  

$ 0.24  

$ 0.33  

$ ( 0.17 )  

$ 0.06  

SUBSEQUENT EVENTS

On January 6, 2021 

the Company sold its terminal location in Allentown, PA, which resulted in an approximately $ 1.0 million gain on disposal.

On January 25, 2021, the Board of Directors of the Company approved a stock repurchase program authorizing the purchase of up to $ 40 million of the Company's Class A common stock from time-to-time based upon market conditions and other factors. The stock may be repurchased on the open market or in privately negotiated transactions.

The repurchased shares will be held as treasury stock and may be used for general corporate purposes as the Board may determine.

The Company did not place a limit on the duration of the repurchase program.

The stock repurchase program does not obligate the Company to repurchase any specific number of shares and the Company may suspend or terminate the program at any time without prior notice.

As of March 2, 2021, 

362,988  shares had been repurchased.

Effective January 28, 2021, we have purchased an auto-liability insurance policy that covers the $ 7.0 million in excess of $ 3.0 million layer.

On January 26, 2022, our Board of Directors approved a quarterly cash dividend program of $ 0.0625 per share, subject to quarterly approval by our Board of Directors.

Our Board of Directors has approved the first dividend, which will be for stockholders of record as of March 4, 2022, and payable on March 25, 2022.

On February 9, 2022, we acquired AAT Carriers, Inc.

("AAT") headquartered in Chattanooga, TN.

AAT will become a part of our Expedited reportable segment.

AAT specializes in highly regulated, time-sensitive loads for the U.S.

For 2021, AAT generated approximately $ 25 million in revenue.

The purchase price includes a substantial earnout component based on AAT's adjusted earnings before interest, taxes, depreciation, and amortization reported for the first and second years following closing.

The total purchase price, including any earnout achieved, is expected to range from $ 35 million to $ 55 million depending on the results achieved by AAT.

The initial accounting for the acquisition is incomplete.

The transaction included a Code Section 338 (h)( 10 ) election and is expected to be immediately accretive to earnings per diluted share.

On February 10, 2022, our Board of Directors adopted a 10b5 - 1 plan for the purchase of up $ 30.0 million in shares subject to defined trading parameters, under our current stock repurchase program authorizing the purchase of up to $ 38.0 million of our Class A common stock.

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

What changed 10-K

Item 9A. Controls and Procedures