What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-06 compared with 2021-11-05 · 448 added, 649 removed, 763 unchanged (59% of the section changed)

4 unchanged sentences

(In thousands, except share data)

September 30, 2021

March 31, 2022

December 31, 2021

7 unchanged sentences

Drivers' advances and other receivables, net of allowance of $ 555 in 2022 and $ 542 in 2021

61,368  

13,624  

Inventory and supplies

1 unchanged sentence

12,536  

11,924  

Assets held for sale

15,007  

Income taxes receivable

10,177  

Other short-term assets

23 unchanged sentences

Current liabilities:

Checks outstanding in excess of bank balances

$ 1,215  

Accounts payable

4 unchanged sentences

38,001  

Accrued purchased transportation

17,120  

24,689  

Current maturities of long-term debt

7 unchanged sentences

Other short-term liabilities

Current liabilities of discontinued operations

Total current liabilities

5 unchanged sentences

Long-term portion of finance lease obligations

10,756  

Long-term portion of operating lease obligations

9 unchanged sentences

Long-term liabilities of discontinued operations

44,151  

Total liabilities

1 unchanged sentence

301,963  

Commitments and contingent liabilities

Stockholders' equity:

1 unchanged sentence

40,000,000 shares authorized;

16,125,786 shares issued and 14,367,543 outstanding as of September 30, 2021;

16,125,786 shares issued and 13,813,121 outstanding as of March 31, 2022;

and 16,125,786 shares issued and 14,414,159 outstanding as of December 31, 2021

6 unchanged sentences

Treasury stock at cost;

1,758,243 and 1,398,925 shares as of September 30, 2021 and December 31, 2020, respectively

2,312,665 and 1,711,627 shares as of March 31, 2022 and December 31, 2021, respectively

( 37,635 )  

Accumulated other comprehensive (loss) income

Accumulated other comprehensive loss

( 300 )  

13 unchanged sentences

FOR THE 

three and nine months ended September 30, 2021 and 2020

three months ended March 31, 2022 and 2021

(In thousands, except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Freight revenue

$ 257,614  

$ 200,688  

Fuel surcharge revenue

33,971  

20,201  

Total revenue

$ 291,585  

$ 220,889  

Operating expenses:

Salaries, wages, and related expenses

$ 95,338  

$ 82,586  

35,502  

22,822  

Operations and maintenance

17,936  

14,719  

Revenue equipment rentals and purchased transportation

83,661  

57,236  

Operating taxes and licenses

3 unchanged sentences

Depreciation and amortization

13,445  

14,087  

Gain on disposition of property and equipment, net

Impairment of long-lived property and equipment

( 167 )  

Total operating expenses

Operating income (loss)

267,738  

210,380  

Operating income

23,847  

10,509  

Interest expense, net

Income from equity method investment

Income (loss) before income taxes

Income tax expense (benefit)

Income (loss) from continuing operations, net of tax

( 6,785 )  

Income before income taxes

30,077  

12,726  

Income tax expense

Income from continuing operations, net of tax

22,167  

Income from discontinued operations, net of tax

Net income (loss)

Basic income (loss) per share:

Income (loss) from continuing operations

$ 22,167  

$ 11,140  

Basic income per share:

Income from continuing operations

$ 1.34  

$ 0.51  

Income from discontinued operations

Net income (loss) (1)

Diluted income (loss) per share:

Income (loss) from continuing operations

$ 1.34  

$ 0.66  

Diluted income per share:

Income from continuing operations

$ 1.32  

$ 0.50  

Income from discontinued operations

Net income (loss) (1)

$ 1.32  

$ 0.65  

Basic weighted average shares outstanding

16,602  

16,954  

Diluted weighted average shares outstanding

(1) Sum of the individual amounts may not add due to rounding.

16,769  

17,086  

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

1 unchanged sentence

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE three and nine months ended September 30, 2021 and 2020

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE three months ended March 31, 2022 and 2021

(Unaudited and in thousands )

Three Months Ended September 30,

Nine Months Ended September 30,

Net income (loss)

$ 16,442  

$ 7,501  

$ 42,999  

Other comprehensive (loss) income:

Unrealized gain (loss) on effective portion of cash flow hedges, net of tax of ($5) and ($240) in 2021 and $12 and $821 in 2020, respectively

( 34 )  

Reclassification of cash flow hedge losses into statement of operations, net of tax of ($44) and ($38) in 2021 and ($56) and ($185) in 2020, respectively

Reclassification of (gains) losses on sale of investments classified as available-for-sale

Three Months Ended March 31,

$ 22,167  

Total other comprehensive income (loss)

Comprehensive income (loss)

$ 11,140  

Other comprehensive income:

Unrealized gain on effective portion of cash flow hedges, net of tax of ($ 308 ) in 2022 and ($ 392 ) in 2021, respectively

Reclassification of cash flow hedge losses (gains) into statement of operations, net of tax of ($ 36 ) in 2022 and $ 51 in 2021, respectively

Reclassification of (gains) on sale of investments classified as available-for-sale

Total other comprehensive income

Comprehensive income

$ 23,173  

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE three and nine months ended September 30, 2021 and 2020

FOR THE three months ended March 31, 2022 and 2021

(Unaudited and in thousands)

For the Three and Nine Months Ended September 30, 2021

For the Three Months Ended

Comprehensive

1 unchanged sentence

Balances at December 31, 2021

$ 149,406  

$ ( 23,662 )  

$ ( 1,306 )  

$ 225,076  

$ 349,699  

22,167  

Cash dividend ($ 0.0625 per common share)

( 1,047 )  

Other comprehensive income

Share repurchase

( 14,800 )  

Stock-based employee compensation expense

Issuance of restricted shares, net

( 863 )  

Balances at March 31, 2022

Other comprehensive income

Share repurchase

Stock-based employee compensation expense

Issuance of restricted shares, net

Balances at June 30, 2021

Other comprehensive income

Share repurchase

Stock-based employee compensation expense

Issuance of restricted shares, net

Balances at September 30, 2021

For the Three and Nine Months Ended September 30, 2020

$ 150,436  

$ ( 37,635 )  

$ ( 300 )  

$ 246,196  

$ 358,882  

For the Three Months Ended

Comprehensive

1 unchanged sentence

Balances at December 31, 2020

Other comprehensive loss

Other comprehensive income

Share repurchase

2 unchanged sentences

Balances at March 31, 2021

Other comprehensive loss

Share repurchase

Stock-based employee compensation expense reversal

Issuance of restricted shares, net

Balances at June 30, 2020

Other comprehensive loss

Stock-based employee compensation expense

Issuance of restricted shares, net

Balances at September 30, 2020

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

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE  nine months ended September 30, 2021 and 2020

FOR THE  three months ended March 31, 2022 and 2021

(Unaudited and in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net income to net cash provided (used) by operating activities:

2 unchanged sentences

Depreciation and amortization

Impairment of property and equipment

Amortization of deferred financing fees

Deferred income tax expense (benefit)

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

Deferred income tax expense

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

Stock-based compensation expense

Income from equity method investment

Return on investment in equity method investee

Gain on disposition of property and equipment

Gain on disposition of reportable segment

Gain on reversal of contingent loss of discontinued operations

8 unchanged sentences

Cash flows from investing activities:

Acquisition of AAT Carriers, Inc., net of cash acquired

Other investment

1 unchanged sentence

Acquisition of property and equipment

Proceeds from disposition of reportable segment

Proceeds from dispositions of property and equipment

Net cash flows provided by investing activities

Proceeds from disposition of property and equipment

Net cash flows (used) provided by investing activities

Cash flows from financing activities:

Change in checks outstanding in excess of bank balances

Proceeds from issuance of notes payable

Cash dividend

Repayments of notes payable

4 unchanged sentences

Common stock repurchased

Net cash flows used by financing activities

Net cash flows provided (used) by financing activities

Net change in cash and cash equivalents

12 unchanged sentences

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10 -Q and Article 10 of Regulation S- X promulgated under the Securities Act of 1933.

In preparing financial statements, it is necessary for management to make assumptions and estimates affecting the amounts reported in the condensed consolidated financial statements and related notes.

In preparing finan cial statem ents, it is necessary for management to make assumptions and estimates affecting the amounts reported in the condensed consolidated financial statements and related notes.

These estimates and assumptions are developed based upon all information available.

4 unchanged sentences

Our operating results are subject to seasonal trends when measured on a quarterly basis;

therefore, operating results for the nine months ended September 30, 2021  are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 .

therefore, operating results for the three months ended March 31, 2022  are not necessarily indicative of the results that may be expected for the year ending December 31, 2022 .

These condensed consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in our Form 10 -K for the year ended December 31, 2021 .

4 unchanged sentences

After the transaction closed, the Company and Triumph became involved in a dispute over the nature of approximately $ 66.0 million of the assets included in the Portfolio. The dispute was resolved on September 23, 2020 with an amendment of the purchase agreement and related funding arrangements that reduced the purchase price of the Portfolio to approximately $ 108.4 million, representing the cash amount received by us at closing.

Additionally, the earnout opportunity was terminated and we were required to sell the Triumph stock we received at closing and deliver the net proceeds to Triumph.

In October 2020, we sold the Triumph stock acquired as part of the amended purchase agreement for $ 28.1 million and remitted the proceeds to Triumph upon settlement.

Additionally, the earnout opportunity was terminated and we were required to sell, and subsequently sold, the Triumph stock we received at closing for $ 28.1 million and remitted the proceeds to Triumph upon settlement.

The amended purchase agreement resulted in a gain on the sale of the Portfolio of $ 3.7 million, net of related expenses.

The amended purchase agreement specifically identified approximately $ 62.0 million of accounts within the Portfolio, which related to advances on services that had not yet been performed, were placed in a loss sharing pool to be repaid with proceeds other than those generated from ordinary working capital factoring.

To the extent losses on covered accounts are incurred, we will indemnify Triumph on a dollar for dollar basis for up to the first $ 30.0 million of losses, and on a 50 % basis for up to the next $30.0  million of losses, for total indemnification exposure of up to $ 45.0 million (the “TFS Settlement”). During the fourth quarter of 2020, we 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 TFS Settlement.

To the extent losses on covered accounts are incurred, we will indemnify Triumph on a dollar for dollar basis for up to the first $ 30.0 million of losses, and on a 50 % basis for up to the next $30.0  million of losses, for total indemnification exposure of up to $ 45.0 million (the “TFS Settlement”). During the fourth quarter of 2020, we 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 TFS Settlement.

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.

1 unchanged sentence

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 September 30, 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 results of operations, cash flows, available liquidity, and total indebtedness.

As of March 31, 2022, 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.

Property and Equipment

3 unchanged sentences

We generally depreciate new tractors over 

five  years to salvage values that range from 

10 % to 

35 % of their cost, depending on the operating segment profile of the equipment.

five  years to salvage values of approximately 35 % of their cost, depending on the operating segment profile of the equipment.

We generally depreciate new trailers over 

7 unchanged sentences

Recent Accounting Pronouncements

Accounting Standards adopted

In December 2019, FASB issued ASU 2019 - 12, Simplifying the Accounting for Income Taxes, 

which is intended to simplify various aspects related to accounting for income taxes.

ASU 2019 - 12 removes certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application.

We adopted this standard effective January 1, 2021.

The adoption of this standard had no impact on our consolidated financial statements and related disclosures.

Accounting Standards not yet adopted

4 unchanged sentences

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

Income (Loss)  

Basic income (loss) per share excludes dilution and is computed by dividing earnings available to common stockholders by the weighted-average number of common shares outstanding for the period.

Diluted income (loss) 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 193,000 and 209,000 shares issuable upon conversion of unvested restricted shares for the 

three or nine months ended September 30, 2021 , respectively.

There were approximately 133,000 shares issuable upon conversion of unvested restricted shares for the 

three months ended September 30, 2020. 

Unvested restricted shares were not included in the computation of diluted (loss) income per share for the nine months ended September 30, 2020 

as the inclusion would have been anti-dilutive due to the net loss.

Income Per Share

Basic income per share excludes dilution and is computed by dividing earnings available to common stockholders by the weighted-average number of common shares outstanding for the period.

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 

1,171,000 and no outstanding stock options at September 30, 2021 and September 30, 2020 , respectively. Income per share is the same for both Class A and Class B shares.

The following table sets forth, for the periods indicated, the calculation of net income (loss) per share included in the condensed consolidated statements of operations:

167,000 and 

132,000 shares issuable upon conversion of unvested restricted shares for the 

three months ended 

March 31, 2022  and March 31, 2021 , respectively.

There were 

153,000 unvested shares excluded from the calculation of diluted earnings per share because the performance targets were not achieved as of March 31, 2022 .

However, 

no  unvested shares have been excluded from the calculation of diluted earnings per share as anti-dilutive for either of the 

three months ended March 31, 2022 and 2021 .

There were 

no shares issuable upon conversion of unvested employee stock options for the 

three months ended 

March 31, 2022  and March 31, 2021 , respectively.

There were 

196,000  unvested employee stock options excluded from the calculation of diluted earnings per share because the performance targets were not achieved as of March 31, 2022 .

Additionally, 

no unvested employee stock options were anti-dilutive for the three months ended March 31, 2022  and March 31, 2021 , respectively. Income per share is the same for both Class A and Class B shares.

The following table sets forth, for the periods indicated, the calculation of net income per share included in the condensed consolidated statements of operations:

(in thousands except per share data)

Three Months Ended

Nine Months Ended

September 30,

Income (loss) from continuing operations

$ 16,442  

Income from continuing operations

$ 22,167  

1 unchanged sentence

Income from discontinued operations

Net income (loss)

$ 22,167  

$ 11,140  

$ 42,999  

Denominator for basic income (loss) per share –

Denominator for basic income per share –

weighted-average shares

1 unchanged sentence

16,954  

16,832  

17,435  

Effect of dilutive securities:

1 unchanged sentence

Equivalent shares issuable upon conversion of unvested employee stock options

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

16,975  

17,267  

17,041  

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

16,769  

Basic income (loss) per share:

Income (loss) from continuing operations

17,086  

Basic income per share:

Income from continuing operations

$ 1.34  

1 unchanged sentence

Income from discontinued operations

Net income (loss) (1)

$ 1.34  

$ 0.66  

$ 2.55  

Diluted income (loss) per share:

Income (loss) from continuing operations

$ 0.97  

Diluted income per share:

Income from continuing operations

$ 1.32  

1 unchanged sentence

Income from discontinued operations

Net income (loss) (1)

$ 1.32  

$ 0.65  

$ 2.52  

( 1 ) Sum of the individual amounts may not add due to rounding.

Fair Value of Financial Instruments

13 unchanged sentences

Hedge derivatives

September 30, 2021

March 31, 2022

December 31, 2021

Net Fair Value of Derivative

$ (2,055 )  

Quoted Prices in Active Markets (Level 1)

Significant Other Observable Inputs (Level 2)

(2,055 )  

Significant Unobservable Inputs (Level 3)

( 1 ) Includes derivative assets of $ 122 at December 31, 2020.

Available-for-sale securities

September 30, 2021

December 31, 2020

Fair Value of Securities

$ 1,541  

$ 1,310  

Quoted Prices in Active Markets (Level 1)

Significant Other Observable Inputs (Level 2)

Significant Unobservable Inputs (Level 3)

There were no available-for-sale securities recorded as of March 31, 2022 or December 31, 2021.

Our financial instruments consist primarily of cash and cash equivalents, certificates of deposit, accounts receivable, commodity contracts, accounts payable, debt, and interest rate swaps.

1 unchanged sentence

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 as of 

September 30, 2021 , as the weighted average interest rate on these notes approximates the market rate for similar debt.

Borrowings under our revolving Credit Facility (as defined herein) approximate fair value due to the variable interest rate on that facility. There were no fuel hedge derivatives outstanding as of September 30, 2021 .

March 31, 2022 , as the weighted average interest rate on these notes approximates the market rate for similar debt.

The fair value of all interest rate swap agreements that were in effect as of 

September 30, 2021 was an approximately $ 2.1 million liability.

March 31, 2022 was an approximately $ 0.4 million liability.

Discontinued Operations

3 unchanged sentences

We have reflected the former Factoring reportable segment as discontinued operations in the condensed consolidated statements of operations for all periods presented.

Prior periods have been adjusted to conform to the current presentation.

The following table summarizes the results of our discontinued operations for the three and nine months ended September 30, 2021 and 2020 :

The following table summarizes the results of our discontinued operations for the three months ended March 31, 2022 and 2021 :

(in thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Total revenue

$ 5,397  

Operating expenses

( 3,601 )  

Operating income

( 25 )  

Reversal of contingent loss liability

( 3,412 )  

Interest expense

Income before income taxes

Income tax (benefit) expense

Income tax expense

Income from discontinued operations, net of tax

$ 2,559  

$ 2,540  

$ 4,485  

Operating income for the nine months ended September 30, 2021  relates to the gain on the reversal of our contingent loss liability in the amount of $ 3.4 million. Reversal of contingent liability for the nine months ended 

September 30, 2021 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.

Reversal of contingent liability for the three months ended March 2021 

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.

The following table summarizes the major classes of assets and liabilities included as discontinued operations as of 

September 30, 2021 and December 31, 2020 :

March 31, 2022 and December 31, 2021 :

(in thousands)

September 30, 2021

March 31, 2022

December 31, 2021

6 unchanged sentences

$ 1,275  

Accounts payable

Current liabilities of discontinued operations

Long-term contingent loss liability

44,151  

Long-term liabilities of discontinued operations

44,151  

Total liabilities from discontinued operations

1 unchanged sentence

$ 5,100  

There were no net cash flows related to discontinued operations for the nine months ended September 30, 2021 .

For the nine months ended September 30, 2020 , discontinued operations used $ 10.0 million of net cash flows from operating activities, and there were no related investing or financing cash flows.

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.

(in thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

Total revenue

$ 274,561  

$ 210,830  

$ 751,775  

$ 613,333  

Income (loss) from continuing operations

16,442  

40,459  

Income (loss) per basic share from continuing operations

$ 0.98  

$ 0.28  

$ 2.40  

Income (loss) per diluted share from continuing operations

$ 0.97  

$ 0.27  

$ 2.37  

There were no net cash flows related to discontinued operations for the three months ended March 31, 2022 and 2021 .

Refer to Note 1, “Significant Accounting Policies”

13 unchanged sentences

TMS provides comprehensive logistics services on a contractual basis to customers who prefer to outsource their logistics needs.

The Warehousing segment provides day-to-day warehouse management services to customers who have chosen to outsource this function.

The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies in our 

2020  Form 10 -K.

The Warehousing segment provides day-to-day warehouse management services to customers who have chosen to outsource this function. We also provide shuttle and switching services related to shuttling containers and trailers in or around freight yards and to/from warehouses.

The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies in our Form 10 -K for the year ended December 31, 2021 .

Substantially all intersegment sales prices are market based.

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

The following table summarizes our total revenue by our four reportable segments, as used by our chief operating decision maker in making decisions regarding allocation of resources etc., for the three and nine months ended September 30, 2021 and 2020 :

(in thousands)

Three Months Ended September 30, 2021

Three Months Ended March 31, 2022

Managed Freight

Total revenue from external customers

$ 85,289  

$ 83,477  

$ 90,072  

$ 15,723  

$ 274,561  

Intersegment revenue

Operating income (loss)

11,064  

( 659 )  

20,083  

Nine Months Ended September 30, 2021

Operating income

Three Months Ended March 31, 2021

Managed Freight

Total revenue from external customers

$ 251,139  

$ 240,791  

$ 213,104  

$ 46,741  

$ 751,775  

Intersegment revenue

Operating income (loss)

27,479  

( 2,629 )  

21,510  

48,925  

Three Months Ended September 30, 2020

Managed Freight

Total revenue from external customers

$ 78,410  

$ 71,104  

$ 47,595  

$ 13,721  

$ 210,830  

Intersegment revenue

Operating (loss) income

Nine Months Ended September 30, 2020

Managed Freight

Total revenue from external customers

$ 244,347  

$ 218,833  

$ 112,695  

$ 37,458  

$ 613,333  

Intersegment revenue

10,213  

Operating (loss) income

( 11,845 )  

( 13,796 )  

( 893 )  

(in thousands)

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Total external revenues for reportable segments

$ 274,561  

$ 210,830  

$ 751,775  

$ 613,333  

Intersegment revenues for reportable segments

10,213  

Elimination of intersegment revenues

( 2,494 )  

( 2,610 )  

( 4,674 )  

Total consolidated revenues

$ 274,561  

$ 210,830  

$ 751,775  

$ 613,333  

Income tax expense in both 

1 unchanged sentence

2021 varies from the amount computed by applying the federal corporate income tax rates of 

21 % 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 related expenses 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.

21 % to income before income taxes, primarily due to state income taxes, net of federal income tax effect, adjusted for permanent differences. The IRS has issued guidance that allows meals and incidental expense per diem to be 100% deductible for tax years 2021 and 2022.

Accordingly, there is no adjustment in 2021 or 2022 as our per diem plan qualifies for this treatment.

In years with partially nondeductible per diem, the per diem program increases our drivers' net pay per mile, after taxes, while decreasing gross pay, before taxes. As a result, salaries, wages, and related expenses 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.

Drivers who meet the requirements to receive per diem receive non-taxable per diem pay in lieu of a portion of their taxable wages.

Our liability recorded for uncertain tax positions as of 

September 30, 2021 has decreased by less than $ 0.1 million since December 31, 2020 .

March 31, 2022 has decreased by less than $ 0.1 million since December 31, 2021 .

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 loss 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 September 30, 2021 , for $ 0.4 million related to certain state net operating loss carryforwards. 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 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. The Company has determined that a valuation allowance was not necessary at March 31, 2022 for its deferred tax assets since it is more likely than not they will be realized from the future reversals of temporary differences. 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.

March 27, 2020, 

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.

On September 30, 2021, the Company has recorded a benefit of $ 0.6 million against labor expense for refundable payroll tax credits.

As of September 30, 2021, the Company recorded a benefit of $ 0.6 million against labor expense for refundable payroll tax credits.

The Company will continue to monitor the benefits of the Cares Act going forward.

On March 11, 2021, President Biden signed the American Rescue Plan ("ARPA") into law. Of relevance to the Company, the ARPA extended the reach of Internal Revenue Code Section 162 (m) to include compensation paid to the eight highest-paid individuals (rather than three highest);

however, this change is not effective until 2027.

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

Current and long-term debt and lease obligations consisted of the following as of 

September 30, 2021 and December 31, 2020 :

March 31, 2022 and December 31, 2021 :

(in thousands)

September 30, 2021

March 31, 2022

December 31, 2021

3 unchanged sentences

Revenue equipment installment notes;

weighted average interest rate of 1.6% at September 30, 2021, and 2.0% at December 31, 2020, due in monthly installments with final maturities at various dates ranging from December 2021 to November 2022, secured by related revenue equipment

11,358  

weighted average interest rate of 1.8% at March 31, 2022, and 1.2% at December 31, 2021, due in monthly installments with final maturities at various dates ranging from April 2022 to November 2022, secured by related revenue equipment

Real estate notes;

interest rate of 1.8% at September 30, 2021 and 1.9% at December 31, 2020 due in monthly installments with a fixed maturity at August 2035, secured by related real estate

interest rate of 2.0% at March 31, 2022 and 1.8% at December 31, 2021 due in monthly installments with a fixed maturity at August 2035, secured by related real estate

20,035  

3 unchanged sentences

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

10,756  

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

8 unchanged sentences

$ 45,870  

We and substantially all of our subsidiaries are parties to the Credit Facility with Bank of America, N.A., as agent (the "Agent") and JPMorgan Chase Bank, N.A.

We and substantially all of our subsidiaries are parties to the Third Amended and Restated Credit Agreement (the "Credit Facility") with Bank of America, N.A., as agent (the "Agent") and JPMorgan Chase Bank, N.A.

(together with the Agent, the "Lenders").

On October 23, 2020, we amended and extended the Credit Facility (the “Eighteenth Amendment”).

The Credit Facility is a $ 110.0 million revolving credit facility, with an uncommitted accordion feature that, so long as no event of default exists, allows us to request an increase in the revolving credit facility of up to $ 50.0 million subject to Lender acceptance of the additional funding commitment. The Credit Facility includes a letter of credit sub facility in an aggregate amount of $ 105.0 million and a swing line sub facility in an aggregate amount equal to the greater of $ 10.0 million or 10 % of the Lenders' aggregate commitments under the Credit Facility from time-to-time. The Credit Facility matures in October 2025.

Borrowings under the Credit Facility are classified as either "base rate loans" or "LIBOR loans." Base rate loans accrue interest at a base rate equal to the greater of the Agent’s prime rate, the federal funds rate plus 0.5 %, or LIBOR plus 1.0 %, plus an applicable margin ranging from 0.25 % to 0.75%;

while LIBOR loans accrue interest at LIBOR, plus an applicable margin ranging from 1.25 % to 1.75 %.

The accordion feature was increased to $ 75.0 million in May 2022.

Refer to Note 15, "Subsequent Events" for a summary of certain changes made to the Credit Facility in May 2022.

The Credit Facility includes a letter of credit sub facility in an aggregate amount of $ 105.0 million and a swing line sub facility in an aggregate amount equal to the greater of $ 10.0 million or 10 % of the Lenders' aggregate commitments under the Credit Facility from time-to-time. The Credit Facility matures in May 2027.

As of March 31, 2022, borrowings under the Credit Facility were classified as either "base rate loans" or "LIBOR loans." Base rate loans accrued interest at a base rate equal to the greater of the Agent’s prime rate, the federal funds rate plus 0.5 %, or LIBOR plus 1.0 %, plus an applicable margin ranging from 0.25 % to 0.75%;

while LIBOR loans accrued interest at LIBOR, plus an applicable margin ranging from 1.25 % to 1.75 %.

The applicable rates are adjusted quarterly based on average pricing availability.

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.

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

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, revenue equipment pledged under other financing agreements, including revenue equipment installment notes and finance leases, and revenue equipment that we do not designate as being included in the borrowing base.

Refer to Note 15, "Subsequent Events" for a summary of certain changes made to the Credit Facility in May 2022.

As of March 31, 2022, borrowings under the Credit Facility were subject to a borrowing base limited to the lesser of (A) $110.0 million, minus the sum of the stated amount of all outstanding letters of credit;

or (B) the sum of (i) 87.5 % of eligible accounts receivable, plus (ii) the least of (a) 85 % of the appraised net orderly liquidation value of eligible revenue equipment, (b) 100 % of the net book value of eligible revenue equipment, (c) 40.9 % of the Lenders' aggregate revolving commitments under the Credit Facility, or (d) $ 45.0 million, plus (iii) the lesser of (a) $ 10.4 million or (b) 80 % of the appraised fair market value of eligible real estate, as reduced by a periodic amortization amount.

We had no  borrowings under the Credit Facility as of September 30, 2021 , undrawn letters of credit outstanding of approximately $ 29.5 million, and available borrowing capacity of $ 80.5 million.

As of September 30, 2021 , there were 

no  base rate and 

no of LIBOR loans.

Based on availability as of September 30, 2021 and 2020 , there was no fixed charge coverage requirement.

In May 2022, the Credit Facility was amended to remove real estate from this calculation and increase the noted caps on eligible revenue equipment from 40.9% and $45.0 million to 60.0 % and $ 65.0 million, respectively.

Refer to Note 15,  "Subsequent Events" for a summary of certain other changes made to the Credit Facility in May 2022.

We had $ 23.1 million borrowings outstanding under the Credit Facility as of March 31, 2022 , undrawn letters of credit outstanding of approximately $ 25.2 million, and available borrowing capacity of $ 61.7 million.

As of March 31, 2022 , there were $ 11.1 million base rate and $ 12.0 million of LIBOR loans.

Based on availability as of March 31, 2022 and 2021 , there was no fixed charge coverage requirement.

The Credit Facility includes usual and customary events of default for a facility of this nature and provides that, upon the occurrence and continuation of an event of default, payment of all amounts payable under the Credit Facility may be accelerated, and the Lenders' commitments may be terminated. If an event of default occurs under the Credit Facility and the Lenders cause, or have the ability to cause, all of the outstanding debt obligations under the Credit Facility to become due and payable, this could result in a default under other debt instruments that contain acceleration or cross-default provisions.

3 unchanged sentences

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

December 2021  

April 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 $ 6.1 million are cross-defaulted with the Credit Facility.

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 $ 3.4 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.

10 unchanged sentences

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 September 30, 2021, there were no outstanding borrowings under 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 March 31, 2022, there were no outstanding borrowings under the Draw Note.

Lease Obligations

The finance leases in effect at 

September 30, 2021 terminate from 

December 2021 through 

November 2023  and contain guarantees of the residual value of the related equipment by us.

 A summary of our lease obligations at September 30, 2021  and 2020 are as follows:

March 31, 2022 terminate from 

May 2022 through 

November 2023 and contain guarantees of the residual value of the related equipment by us.

 A summary of our lease obligations at March 31, 2022 and 2021  are as follows:

(dollars in thousands)

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

March 31, 2022

March 31, 2021

Finance lease cost:

Amortization of right-of-use assets

$ 1,018  

$ 2,806  

$ 3,023  

Interest on lease liabilities

Operating lease cost

18,044  

19,782  

Variable lease cost

Total lease cost

$ 7,332  

$ 7,080  

$ 21,442  

$ 23,971  

Other information

2 unchanged sentences

Operating cash flows from operating leases

14,388  

20,140  

Financing cash flows from finance leases

1 unchanged sentence

Right-of-use assets obtained in exchange for new operating lease liabilities

13,265  

15,795  

Weighted-average remaining lease term—finance leases (in years)

2 unchanged sentences

Weighted-average discount rate—operating leases

September 30, 2021 , and December 31, 2020 , right-of-use assets of $ 40.2 million and $ 37.4 million for operating leases and $ 24.3 million and $ 29.4 million for finance leases, respectively, are included in net property and equipment in our condensed consolidated balance sheets.

March 31, 2022 , and December 31, 2021 , right-of-use assets of $ 31.1 million and $ 35.7 million for operating leases and $ 22.9 million and $ 23.2 million for finance leases, respectively, are included in net property and equipment in our condensed consolidated balance sheets.

Operating lease right-of-use asset amortization is included in revenue equipment rentals and purchased transportation, communication and utilities, and general supplies and expenses, depending on the underlying asset, in the condensed consolidated statement of operations. Amortization of finance leased assets is included in depreciation and amortization expense in the condensed consolidated statement of operations.

Our future minimum lease payments as of September 30, 2021 , are summarized as follows by lease category:

Our future minimum lease payments as of March 31, 2022 , are summarized as follows by lease category:

(in thousands)

2021 (1)  

$ 4,607  

$ 7,655  

17,645  

13,669  

Total minimum lease payments

$ 49,275  

$ 13,579  

amount representing interest

( 7,904 )  

Present value of minimum lease payments

$ 41,371  

$ 13,250  

current portion

( 16,847 )  

Lease obligations, long-term

$ 24,524  

$ 5,751  

( 1 ) Excludes the nine months ended September 30, 2021 .

( 1 ) Excludes the three months ended March 31, 2022 .

Stock -Based Compensation

15 unchanged sentences

The Incentive Plan permits annual awards of shares of our Class A common stock to executives, other key employees, consultants, non-employee directors, and eligible participants under various types of options, restricted stock, or other equity instruments.

September 30, 2021 , there were 

March 31, 2022 , there were 

1,125,479  shares remaining of the 4,200,000 shares available for award under the Incentive Plan. 

1 unchanged sentence

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 condensed consolidated statements of operations is stock-based compensation expense of $ 1.7 million and the reversal of $ 0.2 million for the three months ended September 30, 2021 and 2020, respectively, and compensation expense of $ 5.4 million and $ 0.7 million for the nine months ended September 30, 2021 and 2020 , respectively. Of the stock compensation expense recorded for the three months ended 

September 30, 2021 , $ 1.0 million relates to restricted shares and $ 0.7 million relates to unvested options.

Of the stock compensation expense recorded for the nine months ended September 30, 2021 , $ 3.6 million relates to restricted shares and $ 1.8 million relates to unvested options. Included in general supplies and expenses within the condensed consolidated statements of operations is stock-based compensation expense for non-employee directors of $ 0.1 million and $ 0.2 million for the three and nine months ended September 

30, 2021, respectively and $ 0.4 million for the three and nine months ended September 30, 2020.

All stock compensation expense recorded in the 

2020  periods relates to restricted shares, as no unvested options were outstanding during this period.

Included in salaries, wages, and related expenses within the condensed consolidated statements of operations is stock-based compensation expense of $ 1.7 million and the expense of $ 2.6 million for the three months ended March 31, 2022 and 2021 , respectively. Of the stock compensation expense recorded for the three months ended 

March 31, 2022 , $ 1.0 million relates to restricted shares and $ 0.7 million relates to unvested employee stock options. Of the stock compensation expense recorded for the three months ended March 31, 2021 , $ 2.2 million relates to restricted shares and $ 0.4 million relates to unvested employee stock options.

Included in general supplies and expenses within the condensed consolidated statements of operations is stock-based compensation expense for non-employee directors of $ 0.1 million and $ 0.0 million for the three months ended March 31, 2022 and 2021 , respectively.

The Incentive Plan allows participants to pay the federal and state minimum statutory tax withholding requirements related to awards that vest or allows participants 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 through September 30, 2021 , certain participants elected to forfeit receipt of an aggregate of 

47,128  shares of Class A common stock at a weighted average per share price of $ 20.55  based on the closing price of our Class A common stock on the dates the shares vested in 2021 , in lieu of the federal and state minimum statutory tax withholding requirements.

We remitted $ 1.0 million to the proper taxing authorities in satisfaction of the employees' minimum statutory withholding requirements.

To satisfy withholding requirements for shares that vested through March 31, 2022 , certain participants elected to forfeit receipt of an aggregate of 

1,569  shares of Class A common stock at a weighted average per share price of $ 22.44  based on the closing price of our Class A common stock on the dates the shares vested in 2022 , in lieu of the federal and state minimum statutory tax withholding requirements.

We remitted less than $ 0.1 million to the proper taxing authorities in satisfaction of the employees' minimum statutory withholding requirements.

Commitments and Contingencies

3 unchanged sentences

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. This lawsuit was settled at mediation on April 29, 2021, for an immaterial amount, pending court approval.

Our accruals related to this claim as of September 

30, 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’

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 March 31, 2022 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’

General Act for the same underlying wage and hour claims at issue in the putative class action case noted above.

2 unchanged sentences

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

(collectively, “Markson”), filed a putative class action case in United States District Court, Central District of California generically claiming that five ( 5 ) specified trucking companies (including our subsidiary Southern Refrigerated Transport, Inc.) entered into a "no poaching conspiracy" in which they agreed not to solicit or hire employees in California who were "under contract" with a fellow defendant.

(collectively, “Markson”), filed a putative class action case in United States District Court, Central District of California generically claiming that five ( 5 ) specified trucking companies (including our subsidiary Southern Refrigerated Transport, Inc.) entered into a "no poaching conspiracy" in which they agreed not to solicit or hire employees in California who were "under contract" with a fellow defendant.

The allegations center around new drivers in California who received their commercial driver's license through driving schools associated with, or paid for by, one of the named defendants, in exchange for agreeing to drive for that defendant carrier for a specified amount of time (typically 8 - 10 months).

Over the ensuing 18 –

24  months, the Plaintiffs added more trucking companies as co-defendants in the lawsuit, including Covenant Transport on April 23, 2020. 

The lawsuit claims that the named defendants sent letters to one another, providing notice of "under contract" status, if these new California drivers were hired by another defendant carrier prior to the driver completing their contractual obligations.

24 months, the Plaintiffs added more trucking companies as co-defendants in the lawsuit, including our subsidiary, Covenant Transport, Inc., on April 23, 2020. 

The lawsuit claims that the named co-defendants sent letters to one another, providing notice of "under contract" status, if these new California drivers were hired by another defendant carrier prior to the driver completing their contractual obligations.

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

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 September 

30, 2021  were sufficient to cover this settlement.

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 March 31, 2022 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.

September 30, 2021. 

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 

March 31, 2022.

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.

We had $ 29.5 million of outstanding and undrawn letters of credit as of September 30, 2021  and December 31, 2020 .

We had $ 25.2 million and $ 26.4 million of outstanding and undrawn letters of credit as of March 31, 2022  and December 31, 2021 .

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.

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

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

TEL’s majority owners are generally restricted from transferring their interests in TEL, other than to certain permitted transferees, without our consent.

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.

We sold tractors and trailers to TEL for $ 1.0 million and $ 0.0 million during the nine months ended September 30, 2021 and 2020 , respectively, and we received $ 0.7 million and $ 6.3 million, respectively, for providing various maintenance services, certain back-office functions, building and lot rental, and for miscellaneous equipment for the same periods.

There was no equipment purchased from TEL during the nine months ended September 30, 2021 and 2020 .

Additionally, we paid approximately $ 0.2  million and $ 0.1 million to TEL for leases of revenue equipment during each of the 

nine months ended September 30, 2021 and 2020 , respectively.

We recognized a net deferral of gains totaling less than $ 0.1 million and net reversal of previously deferred gains totaling less than $ 0.1 million for the nine months ended September 30, 2021 and 2020 , respectively, representing 49 % of the gains on units sold to TEL less any gains previously deferred and recognized when the equipment was subsequently sold to a third -party. Deferred gains, totaling $ 0.3 million and $ 0.2 million at 

September 30, 2021  and 2020 , respectively, are being carried as a reduction in our investment in TEL. At 

September 30, 2021  and 

December 31, 2020 , we had accounts receivable from TEL of $ 0.8 million and $ 0.7 million, respectively, related to cash disbursements made pursuant to our performance of certain back-office and maintenance functions on TEL’s behalf.

We sold tractors and trailers to TEL for $ 0.0 million and $ 0.8 million during the three months ended March 31, 2022 and 2021 , respectively, and we received $ 0.2 million and $ 0.3 million, respectively, for providing various maintenance services, certain back-office functions, building and lot rental, and for miscellaneous equipment for the same periods.

There was no  equipment purchased from TEL during the three months ended March 31, 2022 and 2021 .

Additionally, we paid approximately $ 0.2 million and less than $ 0.1 million to TEL for leases of revenue equipment during each of the 

three months ended March 31, 2022 and 2021 , respectively.

We recognized a net reversal of previously deferred gains totaling less than $ 0.1 million and net deferred gains totaling less than $0.1 million for the three months ended March 31, 2022 and 2021 , respectively, representing 49 % of the gains on units sold to TEL less any gains previously deferred and recognized when the equipment was subsequently sold to a third -party. Deferred gains, totaling $ 0.2 million and $ 0.3 million at 

March 31, 2022  and 2021 , respectively, are being carried as a reduction in our investment in TEL. At 

March 31, 2022  and 

December 31, 2021 , we had accounts receivable from TEL of $ 0.0 million and $ 1.0 million, respectively, related to cash disbursements made pursuant to our performance of certain back-office and maintenance functions on TEL’s behalf.

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 

2021 net income through September 30, 2021 , or $ 9.6 million. We received $ 2.0 million of equity distributions from TEL during the nine months ended September 30, 2021.

2022 net income through March 31, 2022 , or $ 6.8 million. We received 

no equity distributions from TEL during the three months ended March 31, 2022 .

Our accounts receivable from TEL and investment in TEL as of 

September 30, 2021  and December 31, 

March 31, 2022  and December 31, 

2021 are as follows (in thousands):

Balance Sheet Line Item:

September 30, 2021

March 31, 2022

December 31, 2021

7 unchanged sentences

(in thousands)

As of September 30,

As of March 31,

As of December 31,

7 unchanged sentences

(in thousands)

Three Months Ended  

Nine Months Ended  

September 30,

Three Months Ended

$ 32,336  

$ 22,903  

Cost of Sales

Operating Expenses

12,345  

13,905  

Cost of Sales

Operating Income

15,492  

Operating Expenses

$ 13,658  

$ 6,003  

Acquisition of AAT Carriers, Inc.

On February 9, 2022, we acquired 100 % of the outstanding stock of AAT Carriers, Inc.

("AAT") headquartered in Chattanooga, TN. AAT specializes in highly regulated, time-sensitive loads for the U.S.

The total cash consideration at closing was $ 38.8 million, not considering approximately $ 1.8 million of cash balances acquired. The Stock Purchase Agreement contains customary representations, warranties, covenants, and indemnification provisions.

The Stock Purchase Agreement includes an earnout component of up to an aggregate of $ 20.0 million 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 $ 35.0 million to $ 57.0 million depending on the results achieved by AAT.

AAT’s results have been included in the condensed consolidated financial statements since the date of acquisition and are reported within our Expedited reportable operating segment.

The allocation of the preliminary purchase price detailed below is subject to change based on finalization of the valuation of long-lived and intangible assets, as well as our ongoing evaluation of AAT’s accounting principles for consistency with ours.

February 9, 2022

(in thousands)

Cash paid pursuant to Stock Purchase Agreement

$ 38,796  

Cash acquired included in historical book value of AAT's assets and liabilities

Net cash paid

$ 37,000  

Operating Income

There are no deferred income taxes arising from the acquisition because of our 338 (h)( 10 ) election.

The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the acquisition date.

February 9, 2022

Cash and cash equivalents

$ 1,796  

Accounts receivable

Prepaid expenses

Other short-term assets

Net property and equipment

Total identifiable assets acquired

10,734  

Accounts payable

Accrued expenses

Finance lease obligations

Other long-term liabilities

Total liabilities assumed

Net identifiable assets acquired

29,488  

Net assets acquired

$ 38,796  

Goodwill and other intangible assets will change upon the completion of the valuation of the contingent consideration liability and intangible asset as part of the purchase accounting for the AAT acquisition.

The goodwill recognized is attributable primarily to expected cost synergies in the areas of fuel, purchases of revenue equipment, and recruiting.

The amounts of revenue and earnings of AAT included in the Company’s consolidated results of operations from the acquisition date to the period ended March 31, 2022 

are as follows:

(in thousands)

Three months ended

March 31, 2022

Total revenue

$ 4,166  

6 unchanged sentences

results are reported within our Managed Freight and Warehousing reportable segments.

There was no change to the gross amount of identifiable intangible assets during the 

nine months ended September 30, 2021 .

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

Amortization expense of $ 3.5  million and $ 3.9  million for the nine months ended September 30, 2021 and 2020 , respectively, was included in depreciation and amortization in the condensed consolidated statements of operations.

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

Amortization expense of $ 0.6 million and $ 1.2 million for the three months ended March 31, 2022 and 2021 , respectively, was included in depreciation and amortization in the condensed consolidated statements of operations.

A summary of other intangible assets as of 

September 30, 2021 and 

March 31, 2022 and 

December 31, 2021 is as follows:

(in thousands)

September 30, 2021

March 31, 2022

Gross intangible assets

14 unchanged sentences

Remaining life (months)

$ 2,402  

$ ( 1,204 )  

$ 1,198  

Managed Freight

( 501 )  

Total trade name

( 2,206 )  

Customer relationships:

14,072  

( 2,931 )  

11,141  

Managed Freight

( 354 )  

12,436  

( 2,591 )  

Total customer relationships:

28,200  

( 5,876 )  

22,324  

Total other intangible assets

$ 34,000  

$ ( 9,482 )  

$ 24,518  

The carrying amount of goodwill was $ 42.5 million at September 30, 2021 and December 31, 2020 , respectively.

On February 10, 2020, our Board approved the repurchase of up to $ 20.0 million of our outstanding Class A common stock.

The program was suspended on March 26, 2020, with approximately $ 2.5 million remaining authorized. On January 25, 2021, our Board approved the repurchase of up to $ 40.0 million of our outstanding Class A common stock.

Under such authorization, we repurchased 0.5 million shares of our Class A common stock for $ 8.4 million between January 2021 and April 2021.

The carrying amount of goodwill increased to $ 72.0 million at March 31, 2022 from $ 42.5 million at December 31, 2021 , as a result of the AAT acquisition.

The carrying amount of goodwill and other intangible assets for 2022 is subject to change upon the completion of the purchase accounting for the AAT acquisition.

On January 25, 2021, our Board approved the repurchase of up to $ 40.0 million of our outstanding Class A common stock.

Under such authorization, we repurchased 0.5 million shares of our Class A common stock for $ 8.1 million during the three months ended March 31, 2021.

On August 5, 2021, our Board increased such authorization to $ 40.0 million.

On August 9, 2021, we commenced a modified Dutch tender offer to purchase for cash shares of our Class A common stock for an aggregate purchase price of not more than $ 40.0 million and at a price per share of not less than $ 21.00 and not more than $ 23.00 per share.

The tender offer expired on September 

Through the tender offer, we accepted for purchase 86,132 shares of our Class A common stock at a purchase price of $ 23.00 per share for an aggregate purchase price of approximately $ 2.0 million, excluding fees and expenses.

The shares of Class A common stock purchased through the tender offer were immediately retired.

The excess purchase price over par value was recorded as a reduction of retained earnings on the unaudited condensed consolidated balance sheet as of September 30, 2021.

Including the tender offer, we repurchased 

0.6 million and 1.4 million shares for $ 10.3 million and $ 17.5 million during the nine months ended September 30, 2021 and 2020 , respectively.

We have the ability to repurchase up to $ 38.0 million of our outstanding Class A common stock under the current stock repurchase program as circumstances warrant based on market conditions, cash flow requirements, securities law limitations, and other factors.

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 $ 31.5 million and $ 14.4 million at September 30, 2021  and December 31, 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 September 30, 2021 , we had no  borrowings outstanding, undrawn letters of credit outstanding of approximately $ 29.5 million, and available borrowing capacity of $ 80.5 million under the Credit Facility.

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.

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, 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.

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 approximately $ 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 $ 25.3 million since December 31, 2020 and plan to continue to pay down debt as we are able.

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

As of January 1, 2022, there was approximately $ 38.0 million remaining under such authorization.

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.

Under such authorization, we repurchased 0.7  million shares of our Class A common stock for $ 14.8 million during the three months ended 

March 31, 2022. 

On January 26, 2022, our Board declared a cash dividend of $ 0.0625 per share, which was paid on March 25, 2022, to stockholders of record on March 4, 2022.

Subsequent Events

On May 4, 2022, we entered into an amendment to the Credit Facility (the "Nineteenth Amendment").

Among other changes, the Nineteenth Amendment:

(i) extended the maturity date from October 23, 2025 to May 4, 2027;

( ii) increased the maximum amount that eligible rolling stock can contribute to the borrowing base from $ 45.0 million to $ 65.0 million;

(iii) increased the borrowing “accordion”

feature, pursuant to which the Company can request and, at the lenders’

discretion, obtain an increase in the revolving credit facility commitments from an incremental $ 50.0 million to an incremental $ 75.0 million;

(iv) removed LIBOR as one of the reference rates on which the interest rate can be calculated and replaced it with the secured overnight financing rate or “SOFR,”

plus a SOFR related increase of 10 to 25 basis points depending on the term of SOFR selected by the Company;

(v) removed real estate and certain rolling stock that is not designated by the Company as being included in the borrowing base from the Agent’s collateral package;

and (vi) added AAT as a borrower and pledger of its assets under the Credit Facility.

We do not anticipate that transitioning from LIBOR to SOFR will have a material impact on our financial statements.

The Nineteenth Amendment also modified certain restrictions and minimum borrowing availability requirements to provide increased flexibility to finance and dispose of real estate and rolling stock and to engage in stock repurchases, dividends, acquisitions, and investments.

We repurchased an additional 0.6 million shares of our Class A common stock for $ 11.9 million from April 1, 2022 through May 4, 2022.

12 unchanged sentences

In this Form 10-Q, statements relating to future impact of  

accounting standards, future third-party transportation provider expenses, future tax rates, expenses, and deductions, expected freight demand and volumes and trucking industry conditions, potential results of a default and testing of our fixed charge covenant under the Credit Facility or other debt agreements, expected sources, as well as adequacy, of working capital and liquidity (including our mix of debt, finance leases, and operating leases as means of financing revenue equipment), future stock repurchases, if any, expected capital expenditures, allocations, and requirements, future customer relationships, expected debt reduction, including future interest expense, future driver market conditions, future use of independent contractors, expected cash flows, expected operating income, future investments in and growth of our segments and services, future market share, expected adjusted operating ratio, future trucking capacity, future rates and prices, future utilization, future depreciation and amortization, future salaries, wages, and related expenses, including driver compensation and the impact of our cost saving measures, expected net fuel costs, strategies for managing fuel costs, the effectiveness and impact of, and cash flows relating to, our fuel surcharge programs, future fluctuations in operations and maintenance expenses, expected effects and mix of our solo and team operations, future fleet size,  

management, and upgrades, availability of tractors and trailers, the market value of used equipment, including equipment subject to operating or finance leases relative to our payment obligations under such operating leases (including residual value guarantees and the proceeds from the sale thereof), the anticipated impact of our investment in TEL, the future impact of our restructuring activities, strategic plan, and other strategic initiatives, anticipated levels of and fluctuations relating to insurance, claims, and litigation expenses, including the erosion of available limits in our aggregate insurance policies, our disposition of the assets of TFS, including any future indemnification obligations related to the TFS Portfolio,  

and the anticipated impact of the COVID-19 outbreak or other similar outbreaks and related vaccination mandates, among others, are forward-looking statements.

accounting standards, future third-party transportation provider expenses, future tax rates, expenses, and deductions, expected freight demand, capacity, and volumes and trucking industry conditions, potential results of a default and testing of our fixed charge covenant under the Credit Facility or other debt agreements, the anticipated impact of transitioning from LIBOR to SOFR under the Credit Facility, expected sources, as well as adequacy, of working capital and liquidity (including our mix of debt, finance leases, and operating leases as means of financing revenue equipment), future stock repurchases and dividends, if any, expected capital expenditures, allocations, and requirements, future customer relationships, future interest expense, future driver market conditions, future use of independent contractors, expected cash flows, future investments in and growth of our segments and services, future margins of our segments, future market share, future rates and prices, future depreciation and amortization, future salaries, wages, and related expenses, including driver compensation, expected net fuel costs, strategies for managing fuel costs, the effectiveness and impact of, and cash flows relating to, our fuel surcharge programs, future fluctuations in operations and maintenance expenses, expected effects and mix of our solo and team operations, future fleet size,  

management, and upgrades, availability of tractors and trailers, the market value of used equipment, the anticipated impact of our investment in TEL, the future impact of our strategic plan and other strategic initiatives, anticipated levels of and fluctuations relating to insurance and claims expenses, including the erosion of available limits in our aggregate insurance policies, our disposition of the assets of TFS, including any future indemnification obligations related to the TFS Portfolio,  

the expected total purchase price of AAT, and the anticipated impact of the COVID-19 outbreak or other similar outbreaks, among others, are forward-looking statements.

Forward-looking statements may be identified by the use of terms or phrases such as "believe," "may," "could," "would," "will," "expects," "estimates," "projects," "anticipates," "plans," " outlook," "focus," "seek," "potential," "continue," "goal," "target," "objective," "intends," derivations thereof, and similar terms and phrases.

1 unchanged sentence

Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, which could cause future events and actual results to differ materially from those set forth in, contemplated by, or underlying the forward-looking statements.

Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the sections entitled "Item 1A.

Risk Factors," set forth in this Form 10-Q, our Form 10-Q for the quarter ended June 30, 2021, and our Form 10-K for the year ended December 31, 2020, as amended.

Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section entitled "Item 1A.

Risk Factors," set forth in our Form 10-K for the year ended December 31, 2021.

Readers should review and consider the factors discussed in "Item 1A.

Risk Factors," set forth  

in this Form 10-Q, our Form 10-Q for the quarter ended June 30, 2021, and our Form 10-K for the year ended December 31, 2020, as amended, along with various disclosures in our press releases, stockholder reports, and other filings with the Securities and Exchange Commission.

in our Form 10-K for the year ended December 31, 2021, along with various disclosures in our press releases, stockholder reports, and other filings with the Securities and Exchange Commission.

All such forward-looking statements speak only as of the date of this Form 10-Q.

2 unchanged sentences

Executive Overview

For the third quarter of 2021, we were pleased to report earnings per share of $0.97, which is the highest earnings for any quarter in the Company's history.

In the third quarter we experienced the continuation of an exceptionally strong freight market resulting from growing economic activity, low inventories, and supply chain disruptions, accompanied by constrained capacity due to an intensifying national driver shortage.

These conditions have continued into the fourth quarter. Based on our current run-rate, we expect to generate over $1 billion in revenue and the highest annual earnings per share in our history during 2021.

Despite these achievements, we remain focused on further improving our profitability, particularly in our Dedicated segment, which fell short of our expectations for the quarter.

Although we are pleased with these results, we recognize the opportunity for further improvement, particularly in our Dedicated segment.

We are continuing to work with our Dedicated customers on contract revisions and have given exit notice to certain customers where our efforts have been unsuccessful. 

We have a robust pipeline of opportunities for our Dedicated service offering and will continue to transition business to new customers in instances where we are unable to come to terms with existing customers. We expect sequential incremental improvement in our Dedicated service offering’s operating margin in the fourth quarter of 2021. 

Our Warehousing service offering fell short of our expectations from a profitability perspective as well. 

Building rent on a newly leased facility and increased labor costs resulting from the resurgence of the COVID-19 pandemic in the third quarter were the primary drivers of the decline in profitability. 

Going forward, we expect to partially offset these costs with new business and rate increases.

As of June 30, 2020, our Factoring segment was classified as discontinued operations as it:

(i) was a component of the entity, (ii) met the criteria as held for sale, and (iii) had a material effect on the Company's operations and financial results.

On July 8, 2020, we closed on the disposition of substantially all of the operations and assets of TFS, a division of Covenant Transport Solutions LLC, an indirect wholly owned subsidiary of the Company, which included substantially all of the assets and operations of our Factoring segment.

Beginning with the period ended June 30, 2020, we have reflected the former Factoring segment as discontinued operations in the condensed consolidated statements of operations for all periods presented.

Prior periods have been adjusted to conform to the current presentation.

Additional items of note for the 

third quarter of 

2021 include the following:

Total revenue of $274.6 million, an increase of 30.2% compared with the third quarter of 2020, and freight revenue (which excludes revenue from fuel surcharges) of $250.3 million, an increase of 

27.5% compared with the third quarter of 2020, despite our reduced tractor fleet;

Operating income of $20.1 million, compared with $6.8 million in the third quarter of 2020;

Net income of $16.4 million, or $0.97 per diluted share, compared with $7.5 million, or $0.43 per diluted share, in the third quarter of 2020.

Net income from continuing operations of $16.4 million, or $0.97 per diluted share, compared to $4.7 million or $0.27 per diluted share, in the third quarter of 2020. Net income from discontinued operations of $0.0 million, or $0.00 per diluted share, compared to $2.8 million, or $0.16 per diluted share, in the third quarter of 2020.

31% of consolidated total revenue was in our more volatile Expedited reportable segment, as compared to 37% in the second quarter of 2020;

Our Managed Freight reportable segment’s total revenue increased to $90.1 million in the 2021 quarter from $47.6 million in the 2020 quarter and the segment had an operating income of $9.3 million in the 2021 quarter compared to $2.1 million in the 2020 quarter; 

Our equity investment in TEL has fully recovered from the soft equipment market and provided $3.2 million of pre-tax earnings in the third quarter of 2021 compared to $1.2 million in the third quarter of 2020;

Since December 31, 2020, total indebtedness, net of cash, decreased by $39.1 million to $62.8 million, and with available borrowing capacity of $80.5 million under our Credit Facility at September 30, 2021, we do not expect to be required to test our fixed charge covenant in the foreseeable future;

Stockholders' equity and tangible book value at September 30, 2021, were $329.9 million and $266.3 million, respectively.

For the balance of 2021, our short-term focus will be to continue to improve the profitability of our Dedicated segment and continue working to solidify longer term agreements with certain of our key Expedited and Brokerage customers.

The freight environment and our new business pipeline are both currently robust, which we believe will support our commercial plan and offer growth opportunities.

Potential headwinds include inefficiencies from re-engineering or replacing certain contracts, driver availability and cost, accident experience, the cost and volatility of claims, general inflation, and supply and demand factors for our customers and our industry.

Over time, we expect our Managed Freight segment’s margin to gravitate toward the mid-single digits and Dedicated's to gravitate toward the mid to high single digits and ultimately double digits.

Directionally the margin changes may offset each other to some extent as the freight and driver markets return to more balanced levels.

For the longer term, we expect to continue the execution of our strategic plan, which consists of steadily and intentionally growing the percentage of our business generated by Dedicated, Managed Freight, and Warehousing segments, reducing unnecessary overhead, and improving our safety, service, and productivity.

This will be a gradual process of diversifying our customer base with less seasonal and cyclical exposure, implementing more consistent contracts, and investing in systems, technology, and people to support the growth of these previously under-invested areas.

In addition, we will continue to evaluate organic and acquisition growth opportunities that deliver the required returns.

With diligence and accountability, we expect to grow our market share and make consistent progress and be a stronger, more profitable, and more predictable business with the opportunity for significant and sustained value creation.

For the first quarter of 2022, we had diluted earnings per share of $1.32, which is the highest earnings for any quarter in the Company's history.

In addition to record earnings for such quarter, we acquired AAT Carriers Inc.

("AAT") in February 2022 and repurchased 0.7 million shares of outstanding Class A common stock and initiated the payment of the Company's first dividend payment during the quarter.

The first quarter yielded strong results from each of our four operating segments, including sequential improvement in our Dedicated truckload segment.

Despite economic indicators pointing to a slowing freight economy, the first quarter’s freight environment remained robust as a result of strong economic activity, low inventories, and supply chain disruptions, accompanied by constrained capacity due to a national driver and equipment shortage.

Our asset-based segments, Expedited and Dedicated, contributed approximately 64% of total revenue in the quarter and performed well in an environment characterized by strong freight demand, an extremely competitive driver market, workforce volatility due to the resurgence of the COVID-19 pandemic through the omicron variants early in the quarter, and rising costs.

Our Expedited segment grew revenue and improved adjusted margins compared to the first quarter last year.

The addition of AAT and improved pricing were able to overcome a smaller fleet, and significant cost increases from driver pay, fuel, parts and maintenance.

Our Dedicated segment improved year-over-year and sequentially by producing higher revenue and better adjusted margins, continued progress towards our targeted returns.

Our asset-light segments, Managed Freight and Warehousing, contributed approximately 36% of total revenue in the quarter and combined to generate favorable margins and returns. Managed Freight continued to exceed expectations as a result of strong execution and effective coordination with our Expedited and Dedicated segments.

Warehousing was able to grow revenue but had diminished margins primarily as a result of labor inefficiencies associated with the resurgences and variant developments in the COVID-19 pandemic and a competitive labor market.

Additional items of note for the first quarter of 2022 include the following:

Total revenue of $291.6 million, an increase of 32.0% compared with the first quarter of 2021, and freight revenue (which excludes revenue from fuel surcharges) of $257.6 million, an increase of 28.4% compared with the first quarter of 2021;

Operating income of $23.8 million, compared with $10.5 million in the first quarter of 2021;

Net income of $22.2 million, or $1.32 per diluted share, compared with $11.1 million, or $0.65 per diluted share, in the first quarter of 2021.

Net income from continuing operations of $22.2 million, or $1.32 per diluted share, compared to $8.6 million or $0.50 per diluted share, in the first quarter of 2020. Net income from discontinued operations of $0.0 million, or $0.00 per diluted share, compared to $2.6 million, or $0.15 per diluted share, in the first quarter of 2021.

34% of consolidated total revenue was in our more volatile Expedited reportable segment, as compared to 36% in the first quarter of 2021;

Our Managed Freight reportable segment’s total revenue increased to $86.2 million in the 2022 quarter from $51.4 million in the 2021 quarter and the segment had an operating income of $10.8 million in the 2022 quarter compared to $4.9 million in the 2021 quarter; 

Our equity investment in TEL provided $6.8 million of pre-tax earnings in the first quarter of 2022 compared to $3.0 million in the first quarter of 2021;

We distributed a total of $1.0 million to stockholders through dividends;

Since December 31, 2021, total indebtedness, comprised of total debt and finance leases, net of cash, increased by $22.1 million to $50.6 million, and with available borrowing capacity of $61.7 million under our Credit Facility at March 31, 2022, primarily due to repurchasing $14.8 million of our outstanding Class A Common Stock under the stock repurchase program and the net cash payment related to the acquisition of AAT for $37.1 million.

We do not expect to be required to test our fixed charge covenant in the foreseeable future;

Leverage ratio (ending total indebtedness, comprised of debt and finance leases, net of cash, divided by the sum of operating income, depreciation and amortization, gain on disposition of property and equipment, net, and impairment of long lived property and equipment) was 0.39;

Stockholders' equity at March 31, 2022, was $358.9 million;

Tangible book value at March 31, 2022, was $266.8 million.

We are optimistic about continuing to make operational progress during 2022.

For at least the first half of 2022, we anticipate a strong freight market accompanied by constrained capacity due to a national driver and equipment shortage.

During this period, we expect a continuation of significant increases in pricing and operating costs, and we expect to continue to improve the margin expectation in certain Dedicated contracts and the duration of fleet commitments in certain Expedited contracts. Later in the year, we expect demand to become more balanced as supply chains gain fluidity, economic growth potentially slows, and consumer spending on services rebounds.

We expect cost pressure to persist even if freight demand moderates.

From wages and insurance, to equipment and parts, to fuel prices and interest rates, the costs of our business is increasing.

Overall, absent a substantial, near-term deterioration in market forces, we expect a combination of pricing gains, improvement in our Dedicated segment, revenue growth, and continued focus on cost control, to support 2022 operating results in excess of 2021, although the timing of various market factors and the speed of our execution could cause a range of possible results.

Regardless of the outside variables at play, we are committed to remaining disciplined and focused on the operational activities which we can influence and control.

With diligent execution and teamwork we believe the power of our operating model will speak for itself throughout economic and freight market cycles.

For the longer term, we intend to steadily and intentionally grow the percentage of our revenue generated by Dedicated, Managed Freight, and Warehousing segments, while selectively investing to optimize the Expedited segment to remain a leader in that sector.

At the same time, we will continue to diligently pursue reducing unnecessary overhead, improving our safety, service, and productivity, diversifying our customer base with less seasonal and cyclical exposure, improving customer contracts, and investing in systems, technology, and people to support the growth of these previously under-invested areas. 

Over time, we expect Expedited and Dedicated to generate high single-digit to low double-digit operating margins, and Managed Freight and Warehousing to generate mid-to-high single-digit operating margins.

Based on our expected asset intensity, these operating margins should produce double-digit returns on invested capital.

With diligence and accountability, we expect to grow our market share organically, continue to improve our operations, and be a stronger, more profitable, and more predictable business with the opportunity for significant and sustained value creation.

Based on our anticipated cash flow generation profile, we anticipate being able to continue our dividend program and evaluate a full range of capital allocation alternatives, including debt paydown, organic growth, acquisition and disposition opportunities, and stock repurchases.

Non-GAAP Reconciliation

10 unchanged sentences

Operating Ratio

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

GAAP Operating Ratio:

1 unchanged sentence

Total operating expenses

Operating income (loss)

Operating income

Adjusted Operating Ratio:

6 unchanged sentences

Amortization of intangibles

Bad debt expense associated with customer bankruptcy and high credit risk customers

Insurance policy erosion

Strategic restructuring adjusting items:

Gain on disposal of terminals, net

Impairment of real estate and related tangible assets

Impairment of revenue equipment and related charges

Restructuring related severance and other

Abandonment of information technology infrastructure

Contract exit costs and other restructuring

Adjusted operating expenses

Adjusted operating income (loss)

Adjusted operating income

Revenue and Expenses

12 unchanged sentences

The Warehousing segment provides day-to-day warehouse management services to customers who have chosen to outsource this function.

We also provide shuttle and switching services related to shuttling containers and trailers in or around freight yards and to/from warehouses.

In our Expedited and Dedicated reportable segments, we primarily generate revenue by transporting freight for our customers.

1 unchanged sentence

We enhance our truckload revenue by charging for tractor and trailer detention, loading and unloading activities, and other specialized services, as well as through the collection of fuel surcharges to mitigate the impact of increases in the cost of fuel.

The main factors that could affect our Expedited revenue are the revenue per mile we receive from our customers, the percentage of miles for which we are compensated, and the number of shipments and miles we generate.

The main factors that could affect our Dedicated revenue are the rates and utilization under the contracts with our Dedicated customers.

AAT’s results are reported within our Expedited reportable segment.

The main factors that could affect our Expedited and Dedicated revenue are the revenue per mile we receive from our customers, the percentage of miles for which we are compensated, and the number of shipments and miles we generate.

These factors relate, among other things, to the general level of economic activity in the United States, inventory levels, specific customer demand, the level of capacity in the trucking industry, and driver availability.

21 unchanged sentences

Revenue Equipment

At September 30, 2021, we operated 2,348 tractors and 5,346 trailers.

Of such tractors, 1,540 were owned, 670 were financed under operating leases, and 138 were provided by independent contractors, who provide and drive their own tractors. Of such trailers, 4,628 were owned, 622 were financed under finance type leases, and 96 were held under short-term operating leases. We finance a small portion of our trailer fleet and larger portion of our tractor fleet with operating leases, which generally run for a period of three to five years for tractors and five to seven years for trailers. At September 30, 2021, our fleet had an average tractor age of 2.0 years and an average trailer age of 4.9 years.

At March 31, 2022, we operated 2,318 tractors and 5,455 trailers.

Of such tractors, 1,604 were owned, 590 were financed under operating leases, and 124 were provided by independent contractors, who provide and drive their own tractors. Of such trailers, 4,965 were owned, 376 were financed under finance type leases, and 114 were held under short-term operating leases. We finance a small portion of our trailer fleet and larger portion of our tractor fleet with operating leases, which generally run for a period of three to five years for tractors and five to seven years for trailers. At March 31, 2022, our fleet had an average tractor age of 2.3 years and an average trailer age of 5.3 years.

Independent contractors provide a tractor and a driver and are responsible for all operating expenses in exchange for a fixed payment per mile. We do not have the capital outlay of purchasing or leasing the tractor. The payments to independent contractors and the financing of equipment under operating leases are recorded in revenue equipment rentals and purchased transportation. Expenses associated with owned equipment, such as interest and depreciation, and expenses associated with employee drivers, including driver compensation, fuel, and other expenses, are not incurred with respect to independent contractors. Obtaining equipment from independent contractors and under operating leases effectively shifts financing expenses from interest to "above the line" operating expenses, and as such, we evaluate our efficiency using net income margin, as well as operating ratio.

RESULTS OF CONSOLIDATED OPERATIONS

COMPARISON OF three and nine months ended September 30, 2021 TO three and nine months ended September 30, 2020

COMPARISON OF three months ended March 31, 2022 TO three months ended March 31, 2021

The following tables set forth the percentage relationship of certain items to total revenue and freight revenue (total revenue less fuel surcharge revenue) for the periods indicated, where applicable (dollars in thousands):

Three Months Ended

Nine Months Ended

September 30,

Freight revenue

1 unchanged sentence

Total revenue

The increase in total revenue resulted from a $42.5 million, $8.4 million, $1.9 million, and $1.2 million increase in Managed Freight, Dedicated, Warehousing, and Expedited freight revenue, respectively, for the three months ended September 30, 2021 and a $100.4 million, $12.4 million, and $9.1 million increase in Managed Freight, Dedicated, and Warehousing freight revenue, respectively, partially offset by a $4.5 million decrease in Expedited freight revenue for the nine months ended September 30, 2021.

The increase in total revenue primarily resulted from a $34.8 million, $11.4 million, $8.8 million, and $2.0 million increase in Managed Freight, Expedited, Dedicated, and Warehousing freight revenue, respectively, for the three months ended March 31, 2022.

See results of segment operations section for discussion of fluctuations.

3 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Salaries, wages, and related expenses

1 unchanged sentence

% of freight revenue

Salaries, wages, and related expenses for the three and nine months ended 

September 30, 2021 , increased on a dollars basis primarily as the result of substantial cents per mile driver pay increases made effective throughout 2021, management incentive compensation attributable to favorable 2021 results, and increases in contract labor that are primarily the result of the resurgence of the COVID-19 pandemic.

Salaries, wages, and related expenses for the three months ended 

March 31, 2022 , increased on a dollars basis primarily as the result of driver and non-driver pay increases since the first quarter of 2021 partially offset by lower total miles compared to the 2021 quarter .

The decreases on a percentage basis are due to increased revenue over which to spread those costs.

We believe salaries, wages, and related expenses will continue to increase as a result of driver pay changes put in place in the tight freight market, partially offset by fewer drivers as a result of our change in business model and our smaller fleet.

Additionally, we expect salaries, wages, and related expenses to continue to increase period over period as the result of reinstatement of the 401(k) match, wage inflation, and, in certain periods, increased incentive compensation due to improved performance.

Driver compensation headwinds are expected to continue for the foreseeable future as a result of the tight driver market being experienced across our industry.

Salaries, wages, and related expenses will fluctuate to some extent based on the percentage of revenue generated by independent contractors and our Managed Freight reportable segment, for which payments are reflected in the purchased transportation line item.

We believe salaries, wages, and related expenses will continue to increase going forward as a result of driver pay changes put in place in the tight freight market.

Additionally, we expect salaries, wages, and related expenses to continue to increase as the result of wage inflation, higher healthcare costs, and, in certain periods, increased incentive compensation due to better performance. We have continued to put driver pay increases in place as necessary to address driver market pressure.

If freight market rates increase further, we would expect to, as we have historically, pass a portion of those rate increases on to our professional drivers.

Salaries, wages, and related expenses will fluctuate to some extent based on the percentage of revenue generated by independent contractors and our Managed Freight segment, for which payments are reflected in the purchased transportation line item.

Three Months Ended

Nine Months Ended

September 30,

% of total revenue

11 unchanged sentences

In periods of declining prices, the opposite is true.

Fuel prices as measured by the DOE wer e $0.94 per g allon higher for the quarter ended September 30, 2021 compared with the same quarter in 2020.

Fuel prices as measured by the DOE wer e $1.40 per g allon, or 48%, higher for the quarter ended March 31, 2022 compared with the same quarter in 2021.

To measure the effectiveness of our fuel surcharge program, we subtract fuel surcharge revenue (other than the fuel surcharge revenue we reimburse to independent contractors and other third parties which is included in purchased transportation) from our fuel expense. The result is referred to as net fuel expense. Our net fuel expense as a percentage of freight revenue is affected by the cost of diesel fuel net of fuel surcharge revenue, the percentage of miles driven by company tractors, our fuel economy, our percentage of deadhead miles, for which we do not receive material fuel surcharge revenues, and the net impact of fuel hedging gains and losses.

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30,

Total fuel surcharge

5 unchanged sentences

% of freight revenue

Net fuel expense for the three months ended September 30, 2021, decreased primarily due to higher fuel surcharge recovery, partially offset by slightly higher fuel prices.

There were no diesel fuel hedge gains or losses for the quarter compared to $0.1 million of losses for the same 2020 quarter. Also, as a result of the change in our business mix our fleet was more fuel efficient due to less idling and less temperature-controlled freight thus reducing refrigerated trailer fuel expense. As of September 30, 2021, we had no remaining fuel hedging contracts.

For the nine months ended September 30, 2021, net fuel expense decreased primarily due to higher fuel surcharge recovery, partially offset by slightly higher fuel prices. A dditio nally, there were $0.4 million of diesel fuel hedge gains for the year-to-date period, compared to $0.4 million of losses for the same 2020 period. Also, as a result of the change in our business mix our fleet was more fuel efficient due to less idling and less temperature-controlled freight thus reducing refrigerated trailer fuel expense. 

Net fuel expense for the three months ended March 31, 2022, decreased primarily due to higher fuel surcharge recovery, partially offset by higher fuel prices and fewer total miles.

There were no diesel fuel hedge gains or losses for the quarter compared to $0.4 million of gains for the same 2021 quarter.

As of March 31, 2022, we had no remaining fuel hedging contracts.

We expect to continue managing our idle time and tractor speeds, investing in more fuel-efficient tractors to improve our miles per gallon, locking in fuel hedges when deemed appropriate, and partnering with customers to adjust fuel surcharge programs that are inadequate to recover a fair portion of fuel costs.

Going forward, our net fuel expense is expected to fluctuate as a percentage of revenue based on factors such as diesel fuel prices, percentage recovered from fuel surcharge programs, percentage of uncompensated miles, percentage of revenue generated by team-driven tractors (which tend to generate higher miles and lower revenue per mile, thus proportionately more fuel cost as a percentage of revenue), percentage of revenue generated by refrigerated operations (which uses diesel fuel for refrigeration but usually does not recover fuel surcharges on refrigeration fuel), percentage of revenue generated from independent contractors, and the success of fuel efficiency initiatives.

Going forward, our net fuel expense is expected to fluctuate as a percentage of revenue based on factors such as diesel fuel prices, percentage recovered from fuel surcharge programs, percentage of uncompensated miles, percentage of revenue generated by team-driven tractors (which tend to generate higher miles and lower revenue per mile, thus proportionately more fuel cost as a percentage of revenue), percentage of revenue generated from independent contractors, and the success of fuel efficiency initiatives.

Operations and maintenance

Three Months Ended

Nine Months Ended

September 30,

Operations and maintenance

1 unchanged sentence

% of freight revenue

The increases in operations and maintenance on a dollar basis for the three months and nine months ended September 30, 2021 were primarily related to an additio nal $1.7 million and $5.1 million in costs related to the recruitment and onboarding of drivers, respec tively, when compared to the prior year periods, despite having a smaller fleet in 2021.

This increase is attributable to the extremely tight driver market and our focused effort to seat more of our tractors.

Additionally, maintenance costs, including parts and labor, have increased as compared to the prior year periods as a result of the global supply chain disruptions.

This was partially offset by a reduction in tolls, cargo damage, and other costs associated with temperature-controlled freight that was exited in the second quarter of 2020 as a result of our business restructuring.

The increase in operations and maintenance on a dollar basis for the three months ended March 31, 2022 was primarily related to an increase in maintenance costs, including parts and labor, as compared to the prior year quarter as a result of the global supply chain disruptions.

Additionally, as a result of the tight driver market, 

recruitment and onboarding of drivers  has increased when compared to the prior year quarter. These increases are partially offset by having a smaller fleet in 2022.

Going forward, we believe this category will increase based on several factors, including the condition of the driver market and our ability to hire and retain drivers, our continued ability to maintain a relatively young fleet, accident severity and frequency, weather, the reliability of new and untested revenue equipment models, and the global disruption of the supply chain. For 2022, due to the relatively new age of our tractor fleet and remaining unexpired warranty coverage for most of our tractors, we do not expect the percentage of our equipment being operated outside of warranty coverage to increase in any material respect even if delays occur;

however, operations and maintenance costs may increase regardless due to wage and parts inflation.

Revenue equipment rentals and purchased transportation

Three Months Ended

Nine Months Ended

September 30,

Revenue equipment rentals and purchased transportation

1 unchanged sentence

% of freight revenue

The increases in revenue equipment rentals and purchased transportation for the three and nine months ended September 30, 2021, were primarily the result of a more competitive market for sourcing third-party capacity and growth in the Managed Freight reportable segment, partially offset by a reduction in the percentage of the total miles run by independent contractors from 11.1% for the three months ended September 30, 2020 to 7.8% for the same 2021 period and from 11.4% for the nine months ended September 30, 2020 to 8.4% for the same 2021 period.

When compared year-over-year, we expect revenue equipment rentals to decrease going forward as a result of the reduction of our tractor fleet.

However, we expect purchased transportation to increase as we seek to grow the Managed Freight reportable segment.

The increases in revenue equipment rentals and purchased transportation for the three months ended March 31, 2022, were primarily the result of a more competitive market for sourcing third-party capacity and growth in the Managed Freight reportable segment, partially offset by a reduction in the percentage of the total miles run by independent contractors from 8.9% for the three months ended March 31, 2022 to 6.7% for the same 2022 period.

We expect revenue equipment rentals to decrease going forward as we transition from tractors held under operating leases to owned equipment in 2022.

However, we expect purchased transportation to fluctuate as volumes in our Managed Freight reportable segment may be volatile.

In addition, if fuel prices increase, it would result in a further increase in what we pay third party carriers and independent contractors.

5 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Operating taxes and licenses

1 unchanged sentence

% of freight revenue

The decreases in operating taxes and licenses as a percentage of revenue for the three and nine months ended September 30, 2021 are primarily due to increased revenue over which to spread those costs.

For the period presented, the change in operating taxes and licenses is insignificant both as a percentage of total revenue and freight revenue.

Insurance and claims

Three Months Ended

Nine Months Ended

September 30,

Insurance and claims

1 unchanged sentence

% of freight revenue

Insurance and claims per mile cost decreased to 16.0 cents per mile for the three months ended 

September 30, 2021  compared to 17.6 cents per mile for the same 2020 quarter and 13.1 cents per mile for the nine months ended September 30, 2021 compared to 

17.4 cents per mile for the same 2020 period.

The decrease for the three months ended September 30, 2021 is primarily a result of additional premiums in the third of quarter of 2020 as a result of the erosion of our excess insurance coverage layer $9.0 million in excess of $1.0 million.

The decrease for the nine months ended September 30, 2021 is primarily a result of the occurrence and development of large claims in the 2020 period partially offset by the 2020 refund of $7.3 million of previously expensed premiums from our commutation of the April 10, 2015 through March 31, 2018 policy for our primary auto liability insurance.

Additionally, incident rates during the 2021 periods have decreased as compared to the same 2020 periods. 

The auto liability policy contains a feature whereby we are able to retroactively obtain a partial refund of the premium in exchange for taking on the liability for incidents that occurred during the period and releasing the insurers.

This is referred to as "commuting" the policy or "policy commutation." In the second quarter of 2020, as well as in several past periods we have commuted the policy, which has lowered our insurance and claims expense.

We intend to evaluate our ability to execute the policy release premium refund or commutation option for the auto liability policy for the three years ended March 31, 2021, which could reduce insurance and claims expense by up to $14.0 million, less any future amounts paid on claims by the insurer.

A decision with respect to commutation of the policy has not yet been made.

Management cannot predict whether or not future claims or the development of existing claims will justify a commutation of the policy period, and accordingly, no related amounts were recorded at September 30, 2021 .

Our auto liability (personal injury and property damage), cargo, and general liability insurance programs include significant self-insured retention amounts.

We are also self-insured for physical damage to our equipment.

Because of these significant self-insured exposures, insurance and claims expense may fluctuate significantly from period-to-period.

Any increase in frequency or severity of claims, or any increases to then-existing reserves, could adversely affect our financial condition and results of operations.

We periodically evaluate strategies to efficiently reduce our insurance and claims expense.

Our current policy for the $7.0 million in excess of $3.0 million layer 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 of our prior policy, any adverse developments in claims filed between April 1, 2018 and March 31, 2021, could result in additional expense accruals.

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.

The Company expects insurance and claims expense to continue to be volatile over the long-term.

 Recently, the trucking industry has experienced a decline in the number of carriers and underwriters that write insurance policies or that are willing to provide insurance for trucking companies.

 These factors caused the Company’s insurance premiums to increase during the April 2020 renewal.

Insurance and claims per mile cost increased to 14.1 cents per mile for the three months ended 

March 31, 2022  compared to 11.2 cents per mile for the same 2021 quarter.

The increase is primarily a result of increased fixed premium expense due to 

an extremely difficult insurance market for the industry . 

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 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 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, 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.

We maintained our retention and limits set in place during the prior renewal cycle. 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. 

We expect insurance and claims expense to continue to be volatile over the long-term.

Recently the trucking industry has experienced a decline in the number of carriers and underwriters that write insurance policies or that are willing to provide insurance for trucking companies. 

Communications and utilities

Three Months Ended

Nine Months Ended

September 30,

Communications and utilities

1 unchanged sentence

% of freight revenue

For the periods presented, the changes in communications and utilities as a percentage of revenue for the three and nine months ended September 30, 2021 is primarily due to increased revenue over which to spread those costs.

For the period presented, the change in communications and utilities are insignificant both as a percentage of total revenue and freight revenue.

General supplies and expenses

Three Months Ended

Nine Months Ended

September 30,

General supplies and expenses

1 unchanged sentence

% of freight revenue

The decrease in general supplies and expenses for the three and nine months ended September 30, 2021 primarily relate to 2020 strategic planning and process improvement investments that were part of our organizational restructuring.

Additional reserves put in place during the same 2020 period for potentially uncollectible accounts receivable also contributed to the decrease for the nine months ended September 30, 2021.

The decreases in general supplies and expenses as a percentage of total revenue and freight revenue for the three months ended March 31, 2022 are 

due to increased revenue over which to spread those costs .

Depreciation and amortization

Three Months Ended

Nine Months Ended

September 30,

Depreciation and amortization

2 unchanged sentences

Depreciation and amortization consists primarily of depreciation of tractors, trailers, and other capital assets, as well as amortization of intangible assets.

Depreciation expense decreased $0.1 million and $9.5 million to $12.2 million and $37.9 million for the three and nine months ended September 30, 2021, respectively, compared to $12.3 million and $47.3 million in the same 2020 periods.

The decreases in depreciation expense are due to the mix change in the overall business that reduced total tractor count and increased utilization, along with reductions in terminals and other capital assets. Amortization of intangible assets was $1.2 million and $3.5 million for the three and nine months ended September 30, 2021, respectively, and $1.2 million and $3.9 million for the same 2020 periods.

The decrease is a result of the 2020 termination of the non-compete agreement with a former Landair executive partially offset by the revised remaining useful life of the Landair trade name to 15 months as of June 30, 2020, as a result of management changes, a change in the branding of the organization, and the expected use of the Landair trade name.

For the remainder of 2021, we expect our average operational fleet size to remain relatively flat at approximately 2,400 tractors.

Depreciation expense remained consistent at $12.9 million for the three months ended March 31, 2022 and 2021 as a result of reduced total tractor count offset by increased costs on new equipment. Amortization of intangible assets was $0.6 million for the three months ended March 31, 2022 and $1.2 million the same 2021 period.

The decrease is a result of the completion of the amortization of the Landair trade name to the $0.5 million residual value during the third quarter of 2021.

We expect depreciation and amortization to increase going forward as the cost of new equipment increases and as we transition from revenue equipment held under operating leases to more owned revenue equipment, especially during the second half of 2022.

Additionally, changes in the used tractor market could cause us to adjust residual values, increase depreciation, hold assets longer than planned, or experience increased losses on sale.

Gain on disposition of property and equipment, net

Three Months Ended

Nine Months Ended

September 30,

Gain on disposition of property and equipment, net

1 unchanged sentence

% of freight revenue

The decreases in gain on disposition of property and equipment, net for the three months ended September 30, 2021 are primarily the result of timing of the trade cycle of our equipment and the strategic reduction of our tractors that began during the second quarter of 2020.

The decreases for the nine months ended September 30, 2021 are primarily the result of the $5.7 million gain on a terminal in the second quarter of 2020, as part of the Company's restructuring plan, partially offset by the timing of the trade cycle of our equipment and the strategic reduction of our tractors that began during the second quarter of 2020. 

Impairment of long-lived property and equipment

Three Months Ended

Nine Months Ended

September 30,

Impairment of long-lived property and equipment

% of total revenue

% of freight revenue

During the second quarter of 2020, as part of our efforts to restructure the organization, we recognized impairment of $16.8 million on revenue equipment, $7.3 million on a terminal, related leasehold improvements, and equipment, $2.2 million on an office facility held under an operating lease, and $0.2 million on a training and orientation facility.

We've incurred no restructuring charges in 2021.

The decreases in gain on disposition of property and equipment, net for the three months ended March 31, 2022 are primarily the result of a reduction in on the sale of used equipment compared to the 2021 quarter. 

Interest expense, net

Three Months Ended

Nine Months Ended

September 30,

Interest expense, net

1 unchanged sentence

% of freight revenue

The decreases in interest expense, net for the three and nine months ended September 30, 2021 are primarily the result of the reduction of our total indebtedness since the same 2020 periods.

For the period presented, the change in interest expense, net is insignificant both as a percentage of total revenue and freight revenue.

This line item will fluctuate based on our decision with respect to purchasing revenue equipment with balance sheet debt versus operating leases, as well as our ability to continue to generate profitable results and reduce our leverage.

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30,

Income from equity method investment

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 or loss.

The increase in TEL's contributions to our results for the three and nine months ended September 30, 2021 is the result of constricted used equipment capacity in the transportation market.

We expect the impact on our earnings for the remaining quarter of 2021 to be consistent with the first nine months of 2021.

Income tax  expense (benefit)

The increase in TEL's contributions to our results for the three months ended March 31, 2022 is the result of constricted used equipment capacity in the transportation market that increased income from both equipment sales and leasing.

Income tax  expense

Three Months Ended

Nine Months Ended

September 30,

Income tax expense (benefit)

Income tax expense

% of total revenue

% of freight revenue

The changes in income tax expense (benefit) were primarily related to the $16.5 million and $84.9 million increases in pre-tax income in the three and nine months ended September 30, 2021, respectively, compared to the same 2020 periods, resulting from the increases in operating income and earnings on investment in TEL.

The effective tax rate is different from the expected combined tax rate due primarily to permanent differences related to our per diem pay structure for drivers.

Due to the partial nondeductible effect of the per diem payments, our tax rate will fluctuate in future periods as income fluctuates.

We are currently estimating our 2021 effective income tax rate to be approximately 27.1%.

The actual rate for our year-to-date results differs from the forecasted rate due to discrete items that are recorded directly to tax expense in the quarter incurred.

Examples of these discrete items recorded through September 30, 2021 include the impacts of vested stock awards and return to provision adjustments, including adjustments to our state blended rates used to value deferred tax assets and liabilities.

The changes in income tax expense were primarily related to the $17.4 million increase in pre-tax income in the three months ended March 31, 2022, compared to the same 2021 period, resulting from the increases in operating income and earnings on investment in TEL.

The effective tax rate is different from the expected combined tax rate due primarily to state tax expense and permanent differences, such as executive compensation disallowance in 2021.

The nondeductible effect of the per diem payments 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.

RESULTS OF SEGMENT OPERATIONS

We have four reportable segments, Expedited, Dedicated, Managed Freight, and Warehousing, each as described above.

COMPARISON O F three and nine months ended September 30, 2021 TO three and nine months ended September 30, 2020

COMPARISON O F three months ended March 31, 2022 TO three months ended March 31, 2021

The following table summarizes financial and operating data by reportable segment:

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30,

Managed Freight

3 unchanged sentences

Total operating income

The increase in Expedited revenue for the three months ended September 30, 2021 relates to an increase in average freight revenue per tractor per week of 20.8% and a $5.7 million increase in fuel surcharge revenue compared to the 2020 quarter, partially offset by a 156 (or 15.8%) average tractor decrease.

The increase in average freight revenue per tractor per week for the quarter ended September 30, 2021 is the result of a 6.2% increase in average miles per unit and a 24.0 cents per mile (or 13.7%) increase in average rate per total mile compared to the 2020 quarter.

Expedited team-driven tractors averaged 832 tractors in the third quarter of 2021, a decrease of approximately 7.2% from the average of 896 tractors in the third quarter of 2020.

For the nine months ended September 30, 2021, the change in Expedited revenue relates to an increase in average freight revenue per tractor per week of 33.4% compared to the same 2020 period, partially offset by a 307 (or 26.3%) average tractor decrease related to the exit of the solo-refrigerated business in the second quarter of 2020.

The increase in average freight revenue per tractor per week for the nine months ended September 30, 2021 is the result of a 23.5% increase in average miles per unit and a 14.0 cents per mile (or 7.8%) increase in average rate per total mile compared to the same 2020 period.

Expedited team-driven tractors averaged 857 tractors for the nine months ended September 30, 2021, a decrease of approximately 1.8% from the average of 872 tractors for the same 2020 period.

The increase in Dedicated revenue relates to an increase in average freight revenue per tractor per week compared to the 2020 quarter as the result of a 43.0 cents per mile (or 23.1%) increase in average rate per total mile compared to the 2020 quarter, as well as a $4.0 million increase in fuel surcharge revenue, partially offset by a 7.9% decrease in average miles per unit.

Average tractors remained comparable to the three months ended September 30, 2020 at 1,538 tractors.

For the nine months ended September 30, 2021, the increase in Dedicated revenue relates to an increase in average freight revenue per tractor per week compared to the same 2020 period as the result of a 25.0 cents per mile (or 13.4%) increase in average rate per total mile, partially offset by a 5.0% decrease in average miles per unit as compared to the same 2020 period.

Additionally, fuel surcharge revenue increased $9.5 million compared to the 2020 period.

These increases were partially offset by a 23 (or 1.4%) average tractor decrease  

as a result of not renewing underperforming contracts.

Managed Freight total revenue increased as a result of a robust freight market and executing various spot rate opportunities in the quarter and year-to-date periods, as well as handling overflow freight from both Expedited and Dedicated truckload operations. 

Warehousing total revenue for the quarter and year-to-date periods increased as a result of new customer business that began operations during the third quarter of 2020.

In addition to the changes in revenue described above for the three and nine months ended September 30, 2021, the change in operating income for the three months ended September 30, 2021, resulted from a $35.3 million, $14.0 million, and $2.9 million increase in Managed Freight, Dedicated, and Warehousing operating expenses, respectively, partially offset by a $1.7 million decrease in Expedited operating expenses.

For the nine months ended September 30, 2021, the change in operating income resulted from a $78.0 million, $10.8 million, and $9.7 million increase in Managed Freight, Dedicated, and Warehousing operating expenses, respectively, partially offset by a $32.5 million decrease in Expedited operating expenses.

The decrease in Expedited operating expenses for the three months ended September 30, 2021, is primarily the result of a 15.8% average operating fleet reduction and 2020 restructuring costs, partially offset by higher variable costs associated with driver pay increases.

The decrease in Expedited operating expenses for the nine months ended September 30, 2021, is primarily the result of the restructuring costs incurred in 2020 related to downsizing our solo-driver refrigerated, one-way irregular routes, and other less profitable operations, as well as a decrease in insurance and claims expense and a 26.3% reduction in average operating fleet.

The increase in Dedicated operating expenses for the three and nine months ended September 30, 2021 primarily related to driver pay increases and increased driver recruiting costs, partially offset by the aforementioned 2020 restructuring costs.

The increase in Managed Freight operating expenses is the result of increased revenue driving an increase in variable expenses, primarily purchased transportation.

The increase for Warehousing was primarily driven by the new customer business that began operations during the latter portion the third quarter of 2020, as well as increased contract labor costs as a result of the resurgence of the COVID-19 pandemic and escalating real estate costs for a newly leased facility.

The increase in Expedited revenue for the three months ended March 31, 2022 relates to an increase in average freight revenue per tractor per week of 18.7% and an $8.9 million increase in fuel surcharge revenue compared to the 2021 quarter, partially offset by a 17 (or 1.9%) average tractor decrease.

The increase in average freight revenue per tractor per week for the quarter ended March 31, 2022 is the result of a 36.0 cents per mile (or 19.3%) increase in average rate per total mile partially offset by a 0.4% decrease in average miles per unit compared to the 2021 quarter.

Expedited team-driven tractors averaged 867 tractors in the first quarter of 2022, a decrease of approximately 1.0% from the average of 875 tractors in the first quarter of 2021.

The increase in Dedicated revenue relates to an increase in average freight revenue per tractor per week compared to the 2021 quarter as the result of a 57.0 cents per mile (or 29.1%) increase in average rate per total mile compared to the 2021 quarter, a $4.7 million increase in fuel surcharge revenue, and a 0.3% increase in average miles per unit.

Average tractors decreased 201 tractors, or 12.3% as compared to the three months ended March 31, 2021.

Managed Freight total revenue increased as a result of a robust freight market and executing various spot rate opportunities in the quarter, as well as handling overflow freight from both Expedited and Dedicated truckload operations. 

Warehousing total revenue for the quarter increased as a result of new customer business since the first quarter of 2021 as well as rate increases with existing customers.

In addition to the changes in revenue described above for the three months ended March 31, 2022, the change in operating income for the three months ended March 31, 2022, resulted from a $28.8 million, $17.2 million, $9.1 million, and $2.2 million increase in Managed Freight, Expedited, Dedicated, and Warehousing operating expenses, respectively. 

The increase in Expedited and Dedicated operating expenses for the three months ended March 31, 2022, is primarily the result of driver and non-driver pay increases since the 2021 quarter and an increase in maintenance costs, including parts and labor, as compared to the prior year quarter as a result of the global supply chain disruptions.

Additionally, as a result of the tight driver market, 

recruitment and onboarding of drivers  has increased when compared to the prior year quarter.

The increase in Managed Freight operating expenses is the result of increased revenue driving an increase in variable expenses, primarily purchased transportation.

Additionally, operating expenses for both Managed Freight and Warehousing increased as a result of non-driver pay increases since the 2021 quarter.

LIQUIDITY AND CAPITAL RESOURCES

2 unchanged sentences

Going forward, we expect revenue equipment acquisitions through purchases and finance leases to increase as a percentage of our fleet as we decrease our use of operating leases for revenue equipment.

Further, we expect to increase our capital allocation toward contract based operations to become the go-to partner for our customers’

Further, we expect to increase our capital allocation toward our Dedicated, Managed Freight, and Warehousing reportable segments to become the go-to partner for our customers’

most critical transportation and logistics needs.

We had working capital (total current assets less total current liabilities) of $31.5 million and $14.4 million at September 30, 2021 and December 31, 2020, respectively.

We had working capital (total current assets less total current liabilities) of $38.9 million and $45.8 million at March 31, 2022 and December 31, 2021, respectively.

Our working capital on any particular day can vary significantly due to the timing of collections and cash disbursements.

Based on our expected financial condition, net capital expenditures, results of operations, related net cash flows, installment notes, and other sources of financing, we believe our working capital and sources of liquidity will be adequate to meet our current and projected needs, and we do not expect to experience material liquidity constraints in the foreseeable future.

With an average fleet age of 2.0 years at September 30, 2021, we believe we have flexibility to manage our fleet, and we plan to regularly evaluate our tractor replacement cycle, new tractor purchase requirements, and purchase options.

With an average fleet age of 2.3 years at March 31, 2022, we believe we have flexibility to manage our fleet, and we plan to regularly evaluate our tractor replacement cycle, new tractor purchase requirements, and purchase options.

If we were to grow our independent contractor fleet, our capital requirements would be reduced.

As of September 30, 2021 and December 31, 2020 we had $85.0 million and $110.4 million in debt and lease obligations, respectively, consisting of the following:

No and $15.0 million outstanding borrowings under the Credit Facility, respectively;

No outstanding borrowings under the Draw Note;

$8.6 million and $17.8 million in revenue equipment installment notes, respectively;

$21.8 million and $22.7 million in real estate notes, respectively;

No deferred loan costs (which reduce long-term debt) as of September 30, 2021 and $0.1 million as of December 31, 2020;

$13.3 million and $16.4 million of the principal portion of financing lease obligations, respectively;

$41.4 million and $38.5 million of the operating lease obligations, respectively.

The decrease in our revenue equipment installment notes and financing lease obligations was primarily due to a strategic decision to reduce our debt and lease obligations through the third quarter of 2021.

The increase in operating lease obligations was primarily due to the addition of a leased property related to a specific customer, partially offset by amortization of the operating lease liability.

As of September 30, 2021, we had no borrowings outstanding, undrawn letters of credit outstanding of approximately $29.5 million, and available borrowing capacity of $80.5 million under the Credit Facility.

As of March 31, 2022 and December 31, 2021 we had $90.3 million and $74.3 million in debt and lease obligations, respectively, consisting of the following:

$23.1 million and no outstanding borrowings under the Credit Facility, respectively;

No outstanding borrowings under the Draw Note;

$3.4 million and $4.5 million in revenue equipment installment notes, respectively;

$21.2 million and $21.5 million in real estate notes, respectively;

No deferred loan costs (which reduce long-term debt) as of March 31, 2022 and December 31, 2021;

$10.0 million and $10.8 million of the principal portion of financing lease obligations, respectively;

$32.6 million and $37.4 million of the operating lease obligations, respectively.

The decrease in operating lease obligations was primarily due to our transition from tractors held under operating leases to owned equipment in 2022, as well as amortization of the operating lease liability.

As of March 31, 2022, we had $23.1 million borrowings outstanding, undrawn letters of credit outstanding of approximately $25.2 million, and available borrowing capacity of $61.7 million under the Credit Facility.

Additionally, we had $45.0 million of remaining availability of a $45.0 million Draw Note from Triumph which is available solely to fund any indemnification owed to Triumph in relation to the TFS Settlement.

1 unchanged sentence

Refer to Note 7, “Debt”

of the accompanying condensed consolidated financial statements for further information about material debt agreements.

Our net capital expenditures for the nine months ended September 30, 2021 totaled $19.4 million of proceeds, as compared to $22.9 million of proceeds for the prior year period.

In the nine months ended September 30, 2021, we took delivery of approximately 193 new tractors and 27 new trailers, while disposing of approximately 344 used tractors and 496 used trailers.

Our current fleet plan for fiscal 2021 includes the delivery of an additional 98 new company replacement tractors and no additional new trailer deliveries.

For the remainder of 2021, we expect our average operational fleet size to remain relatively flat at approximately 2,400 tractors. Net gains on disposal of equipment and real estate in the nine months ended 2021 were $3.7 million compared to $7.0 million in the same prior year period.

and Note 15, "Subsequent Events" of the accompanying condensed consolidated financial statements for further information about material debt agreements.

Our net capital expenditures for the three months ended March 31, 2022 totaled $45.0 million of expenditures, as compared to $10.0 million of proceeds for the prior year period.

In the three months ended March 31, 2022, we took delivery of approximately 31 new tractors and no new trailers, while disposing of approximately 94 used tractors and 10 used trailers.

Our current fleet plan for fiscal 2022 includes the delivery of an additional 529 new company replacement tractors and no additional new trailer deliveries. Net gains on disposal of equipment and real estate in the three months ended March 31, 2022 were $0.2 million compared to $0.9 million in the same prior year period.

Global supply chain disruptions could impact the availability of tractors and trailers and lead to increased pricing.

We distributed a total of $1.0 million to stockholders in the first three months of 2022 through dividends.

For the balance of 2022 we are planning for a sizable increase in net capital expenditures as we return to a more normalized equipment replacement cycle.

This replacement effort is anticipated to occur against a backdrop of substantial price increases for new equipment, strong prices for used equipment, and industry-wide order cutbacks and deferrals by equipment manufacturers.

The timing, cost, and projected fleet net capital expenditures will depend on how these factors play out.

Our baseline expectation for the remainder of 2022 fleet net capital expenditures is a range of $50.0 million to $60.0 million.

We believe we have sufficient liquidity to satisfy our cash needs, however we continue to evaluate and act, as necessary, to maintain sufficient liquidity to ensure our ability to operate during these unprecedented times. The extent to which COVID-19 and its variants could impact our operations, financial condition, liquidity, results of operations, and cash flows is highly uncertain and will depend on future developments.

We will continue to evaluate the nature and extent of the potential short-term and long-term impacts to our business.

Net cash flows provided by operating activities increased to $68.2 million for the nine months ended September 30, 2021, compared to $25.0 million for the same 2020 period, primarily due to a $60.1 million increase in net income, partially offset by decreases to non-cash expenses compared to the prior year period. 

Net cash flows provided by investing activities were $22.0 million for the nine months ended September 30, 2021, compared to $131.0 million in the same 2020 period.

The change in net cash flows provided by investing activities was primarily the result of the 2020 disposal of substantially all of the operations and assets of TFS, which included substantially all of the assets and operations of our former Factoring reportable segment as well as the 2020 disposal of our Orlando and Hutchins properties.

The change is also due to the timing of our trade cycle whereby we took delivery of approximately 193 new company tractors and disposed of approximately 344 used tractors in the 2021 period compared to delivery and disposal of approximately 86 and 391 tractors, respectively in the same 2020 period.

Net cash flows used by financing activities were approximately $76.4 million for the nine months ended September 30, 2021, compared to $185.8 million in the same 2020 period.

The change in net cash flows used by financing activities was primarily a function of net repayments of $63.9 million in the 2021 period compared to $166.7 million in the 2020 period relating to notes payable, the Draw Note, and our Credit Facility.

Additionally, we repurchased $10.3 million and $17.5 million shares of our Class A common stock during the nine months ended September 30, 2021 and 2020, respectively.

On February 10, 2020, our Board approved the repurchase of up to $20.0 million of our Class A common stock. The program was suspended on March 26, 2020 with approximately $2.5 million remaining authorized. 

On January 25, 2021, our Board approved the repurchase of up to $40.0 million of our outstanding Class A common stock.

Under such authorization, we repurchased 0.5 million shares of our Class A common stock for $8.4 million between January 2021 and April 2021.

Net cash flows provided by operating activities increased to $39.4 million for the three months ended March 31, 2022, compared to $9.6 million for the same 2021 period, primarily due decreases in receivables and driver advances as a result of the timing of collections and an $11.0 million increase in net income, partially offset by decreases to non-cash expenses compared to the prior year period. 

Net cash flows used by investing activities were $45.0 million for the three months ended March 31, 2022, compared to $9.9 million provided in the same 2021 period.

The change in net cash flows used by investing activities was primarily the result of the February 2022 acquisition of AAT.

The change is also due to the timing of our trade cycle whereby we took delivery of approximately 31 new company tractors and disposed of approximately 94 used tractors in the 2022 period compared to delivery and disposal of approximately 6 new company tractors and 82 used tractors, respectively in the same 2021 period.

Net cash flows provided by financing activities were approximately $4.3 million for the three months ended March 31, 2022, compared to $23.2 million used in the same 2021 period.

The change in net cash flows provided by financing activities was primarily a function of net proceeds relating to notes payable, the Draw Note, and our Credit Facility of $20.4 million in the 2022 period compared to net repayments of $13.9 million in the 2021 period.

This difference between net proceeds and repayments was partially offset by the repurchase of $14.8 million of shares of our Class A common stock during the 2022 period compared to $8.1 million during the same 2021 period, as well as the payment of approximately $1.0 million in dividends during the 2022 period.

On January 25, 2021, our Board approved the repurchase of up to $40.0 million of our outstanding Class A common stock.

Under such authorization, we repurchased 0.5 million shares of our Class A common stock for $8.1 million during the three months ended March 31, 2021.

On August 5, 2021, our Board increased such authorization to $40.0 million.

On August 9, 2021 we commenced a modified Dutch tender offer to purchase for cash shares of our Class A common stock for an aggregate purchase price of not more than $40.0 million and at a price per share of not less than $21.00 and not more than $23.00 per share.

The tender offer expired on September 3, 2021.

Through the tender offer, we accepted for purchase 86,132 shares of our Class A common stock at a purchase price of $23.00 per share for an aggregate purchase price of approximately $2.0 million, excluding fees and expenses.

The shares of Class A common stock purchased through the tender offer were immediately retired.

The excess purchase price over par value was recorded as a reduction of retained earnings on the unaudited condensed consolidated balance sheet as of September 30, 2021.

Including the tender offer, we repurchased 0.6 million and 1.4 million shares for $10.3 million and $17.5 million during the nine months ended September 30, 2021 and 2020, respectively.

We have the ability to repurchase up to $38.0 million of the Company's outstanding Class A common stock under the current stock repurchase program as circumstances warrant based on market conditions, cash flow requirements, securities law limitations, and other factors.

Going forward, the disposition of our Factoring reportable segment is expected to continue to improve our cash flows used by financing activities.

However, on an ongoing basis, our cash flows may fluctuate depending on capital expenditures, future stock repurchases, strategic investments or divestitures, any indemnification calls related to the TFS Settlement, and the extent of future income tax obligations and refunds.

As of January 1, 2022, there was approximately $38.0 million remaining under such authorization.

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.

Under such authorization, we repurchased 0.7 million shares of our Class A common stock for $14.8 million during the three months ended March 31, 2022. We repurchased an additional 0.6 million shares of our Class A common stock through May 4, 2022, for a total of 1.3 million shares repurchased since January 2022.

Our cash flows may fluctuate depending on capital expenditures, future stock repurchases, dividends, strategic investments or divestitures, any indemnification calls related to the TFS Settlement, and the extent of future income tax obligations and refunds.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES  

4 unchanged sentences

Accordingly, actual results could differ from those anticipated.

There have been no material changes to our most critical accounting policies and estimates during the three and nine months ended September 30, 2021, compared to those disclosed in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in our 2020 Form 10-K, as amended, other than those discussed above.

There have been no material changes to our most critical accounting policies and estimates during the three months ended March 31, 2022, compared to those disclosed in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in our Form 10-K for the year ended December 31, 2021.

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-Q

Item 1. Financial Statements