What changed in this filing

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Item 1. Financial Statements

2022-08-05 compared with 2022-05-06 · 574 added, 263 removed, 948 unchanged (47% of the section changed)

4 unchanged sentences

(In thousands, except share data)

March 31, 2022

June 30, 2022

December 31, 2021

10 unchanged sentences

10,085  

12,536  

Assets held for sale

36 unchanged sentences

Current maturities of long-term debt

10,404  

Current portion of finance lease obligations

31 unchanged sentences

40,000,000 shares authorized;

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

16,125,786 shares issued and 12,549,730 outstanding as of June 30, 2022;

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

6 unchanged sentences

Treasury stock at cost;

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

( 37,635 )  

Accumulated other comprehensive loss

3,576,056 and 1,711,627 shares as of June 30, 2022 and December 31, 2021, respectively

( 65,492 )  

Accumulated other comprehensive income (loss)

Retained earnings

12 unchanged sentences

FOR THE 

three months ended March 31, 2022 and 2021

three and six months ended June 30, 2022 and 2021

(In thousands, except per share data)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Freight revenue

1 unchanged sentence

$ 231,948  

$ 524,470  

$ 432,636  

Fuel surcharge revenue

1 unchanged sentence

24,376  

84,492  

44,577  

Total revenue

1 unchanged sentence

$ 256,324  

$ 608,962  

$ 477,213  

Operating expenses:

4 unchanged sentences

$ 171,062  

48,484  

26,372  

83,986  

49,194  

Operations and maintenance

1 unchanged sentence

14,294  

37,781  

29,013  

Revenue equipment rentals and purchased transportation

1 unchanged sentence

75,455  

165,338  

132,691  

Operating taxes and licenses

Insurance and claims

13,627  

22,806  

17,415  

Communications and utilities

General supplies and expenses

17,215  

15,934  

Depreciation and amortization

1 unchanged sentence

13,863  

27,377  

27,951  

Gain on disposition of property and equipment, net

( 399 )  

( 1,888 )  

( 566 )  

Total operating expenses

1 unchanged sentence

237,992  

558,242  

448,370  

Operating income

1 unchanged sentence

18,332  

50,720  

28,843  

Interest expense, net

1 unchanged sentence

( 7,076 )  

( 3,382 )  

( 13,861 )  

Income before income taxes

1 unchanged sentence

21,006  

63,260  

33,735  

Income tax expense

16,567  

Income from continuing operations, net of tax

24,526  

Income from discontinued operations, net of tax

15,436  

46,693  

24,019  

(Loss) income from discontinued operations, net of tax

( 19 )  

$ 24,526  

$ 15,417  

$ 46,693  

$ 26,559  

Basic income per share:

2 unchanged sentences

$ 0.92  

Income from discontinued operations

$ 2.91  

$ 1.42  

(Loss) income from discontinued operations

$ 1.58  

$ 0.92  

$ 2.91  

$ 1.58  

Diluted income per share:

2 unchanged sentences

$ 0.91  

Income from discontinued operations

$ 2.86  

$ 1.41  

(Loss) income from discontinued operations

$ 1.56  

$ 0.91  

$ 2.86  

$ 1.56  

Basic weighted average shares outstanding

1 unchanged sentence

16,765  

16,058  

16,858  

Diluted weighted average shares outstanding

1 unchanged sentence

17,022  

16,321  

17,052  

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

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE three months ended March 31, 2022 and 2021

FOR THE three and six months ended June 30, 2022 and 2021

(Unaudited and in thousands )

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

$ 24,526  

$ 15,417  

$ 46,693  

$ 26,559  

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

Unrealized gain (loss) on effective portion of cash flow hedges, net of tax of ($ 198 ) and ($ 506 ) in 2022 and $ 157 and ($ 235 ) in 2021, respectively

( 407 )  

Reclassification of cash flow hedge losses (gains) into statement of operations, net of tax of ($ 25 ) and ($ 61 ) in 2022 and ($ 45 ) and $ 6 in 2021, respectively

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

Total other comprehensive income

Total other comprehensive income (loss)

( 292 )  

Comprehensive income

1 unchanged sentence

$ 15,125  

$ 48,352  

$ 27,199  

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

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE three months ended March 31, 2022 and 2021

FOR THE three and six months ended June 30, 2022 and 2021

(Unaudited and in thousands)

For the Three Months Ended

For the Three and Six Months Ended June 30, 2022

Comprehensive

22 unchanged sentences

$ 358,882  

For the Three Months Ended

24,526  

Cash dividend ($ 0.0625 per common share)

( 975 )  

Other comprehensive income

Share repurchase

( 28,565 )  

Stock-based employee compensation expense

Issuance of restricted shares, net

( 1,053 )  

Balances at June 30, 2022

$ 151,238  

$ ( 65,492 )  

$ 269,747  

$ 356,031  

For the Three and Six Months Ended June 30, 2021

Comprehensive

6 unchanged sentences

Balances at March 31, 2021

Other comprehensive loss

Share repurchase

Stock-based employee compensation expense

Issuance of restricted shares, net

Balances at June 30, 2021

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

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE  three months ended March 31, 2022 and 2021

FOR THE  six months ended June 30, 2022 and 2021

(Unaudited and in thousands)

Three Months Ended March 31,

Six Months Ended June 30,  

Cash flows from operating activities:

$ 46,693  

$ 26,559  

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

Provision for losses on accounts receivable

( 26 )  

(Reversal) deferral of gain on sales to equity method investee

( 30 )  

Depreciation and amortization

27,377  

27,951  

Deferred income tax expense

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

( 40 )  

Stock-based compensation expense

Income from equity method investment

( 13,861 )  

Gain on disposition of property and equipment

( 566 )  

Gain on reversal of contingent loss of discontinued operations

2 unchanged sentences

Receivables and advances

21,450  

Prepaid expenses and other assets

Inventory and supplies

( 638 )  

Insurance and claims accrual

( 6,332 )  

Accounts payable and accrued expenses

( 3,566 )  

16,097  

Net cash flows provided by operating activities

76,903  

34,123  

Cash flows from investing activities:

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

( 37,324 )  

Other investment

( 12 )  

Purchase of available-for-sale securities

Acquisition of property and equipment

Purchase of property and equipment

( 27,560 )  

Proceeds from disposition of property and equipment

33,797  

Net cash flows (used) provided by investing activities

( 62,965 )  

19,780  

Cash flows from financing activities:

Change in checks outstanding in excess of bank balances

( 216 )  

Cash dividend

( 2,022 )  

Proceeds from issuance of notes payable

35,917  

Repayments of notes payable

( 3,526 )  

Repayments of finance lease obligations

( 4,295 )  

Proceeds under revolving credit facility

85,632  

446,978  

Repayments under revolving credit facility and draw note

( 85,632 )  

Payment of minimum tax withholdings on stock compensation

( 380 )  

Common stock repurchased

( 43,365 )  

Net cash flows provided (used) by financing activities

( 17,887 )  

Net change in cash and cash equivalents

( 3,949 )  

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

$ 4,463  

$ 4,966  

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

16 unchanged sentences

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

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 .

therefore, operating results for the six months ended June 30, 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 .

11 unchanged sentences

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 and a remaining contingent liability of $ 5.1 million.

As of June 30, 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.

19 unchanged sentences

Early adoption is permitted.

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

We are currently evaluating the impacts the adoption of this standard, but do not expect it to have a material impact on the consolidated financial statements.

Income Per Share

1 unchanged sentence

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 

There were approximately 237,000  and 

252,000 shares issuable upon conversion of unvested restricted shares for the three and six months ended 

June 30, 2022 , respectively, and 

257,000 and 

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

three months ended 

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

194,000 shares issuable upon conversion of unvested restricted shares for the three and 

six months ended 

June 30, 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 .

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

three and six months ended June 30, 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.

10,000  and 

11,000  shares issuable upon conversion of unvested employee stock options for the 

three and six months ended 

June 30, 2022  and no shares issuable upon conversion of unvested employee stock options for the three and six months ended 

June 30, 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.

33,000  unvested employee stock options excluded from the calculation of diluted earnings per share as anti-dilutive for the three and six months ended June 30, 2022  and no  unvested employee stock options excluded from the calculation of diluted earnings per share as anti-dilutive for the three and six months ended June 30, 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:

1 unchanged sentence

Three Months Ended

Six Months Ended

Income from continuing operations

1 unchanged sentence

$ 15,436  

Income from discontinued operations

$ 46,693  

$ 24,019  

(Loss) income from discontinued operations

( 19 )  

$ 24,526  

$ 15,417  

$ 46,693  

$ 26,559  

Denominator for basic income per share –

2 unchanged sentences

16,765  

16,058  

16,858  

Effect of dilutive securities:

4 unchanged sentences

17,022  

16,321  

17,052  

Basic income per share:

2 unchanged sentences

$ 0.92  

Income from discontinued operations

$ 2.91  

$ 1.42  

(Loss) income from discontinued operations

$ 1.58  

$ 0.92  

$ 2.91  

$ 1.58  

Diluted income per share:

2 unchanged sentences

$ 0.91  

Income from discontinued operations

$ 2.86  

$ 1.41  

(Loss) income from discontinued operations

$ 1.56  

$ 0.91  

$ 2.86  

$ 1.56  

Fair Value of Financial Instruments

5 unchanged sentences

These analyses reflect the contractual terms of the swap, including the period to maturity, and use observable market-based inputs, including interest rate curves and implied volatilities.

The fair value calculation also includes an amount for risk of non-performance of our counterparties using "significant unobservable inputs" such as estimates of current credit spreads to evaluate the likelihood of default, which we have determined to be insignificant to the overall fair value of our interest rate swap agreements.

The fair value of available-for-sale securities is based upon quoted prices in active markets.

The fair value of the contingent consideration arrangement is based on inputs that are not observable in the market and is estimated using a probability-weighted method.

A three -tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows:

Observable inputs such as quoted prices in active markets;

3 unchanged sentences

(in thousands)

Hedge derivatives

March 31, 2022

June 30, 2022

December 31, 2021

Net Fair Value of Derivative

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.

Interest rate swaps

( 1,808 )  

Contingent consideration

( 16,210 )  

There were no available-for-sale securities recorded as of 

June 30, 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 

March 31, 2022 , 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 March 31, 2022 .

June 30, 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 

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

June 30, 2022 was an approximately $ 0.5 million asset.

The contingent consideration arrangement requires us to pay up to $ 20.0 million of additional consideration to AAT's former shareholders based on AAT's results during the first two post-acquisition years. 

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.

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

The following table summarizes the results of our discontinued operations for the three and six months ended June 30, 2022 and 2021 :

(in thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Total revenue

1 unchanged sentence

Operating income

( 25 )  

Reversal of contingent loss liability

1 unchanged sentence

Income before income taxes

( 25 )  

Income tax expense

1 unchanged sentence

$ ( 19 )  

Reversal of contingent liability for the three months ended March 2021 

$ 2,540  

Reversal of contingent liability for the six months ended June 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 

March 31, 2022 and December 31, 2021 :

June 30, 2022 and December 31, 2021 :

(in thousands)

March 31, 2022

June 30, 2022

December 31, 2021

11 unchanged sentences

$ 5,100  

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

There were no net cash flows related to discontinued operations for the three and six months ended June 30, 2022 and 2021 .

Refer to Note 1, “Significant Accounting Policies”

7 unchanged sentences

five  years in length.

Equipment is either owned or leased by the Company. Many of our Dedicated contract customers are automotive companies or shippers of produce, where the nature of the product we ship requires high service standards.

Equipment is either owned or leased by the Company.

Managed Freight:

7 unchanged sentences

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 months ended March 31, 2022 and 2021 :

(in thousands)

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

Managed Freight

Total revenue from external customers

$ 121,643  

$ 96,767  

$ 80,281  

$ 18,686  

$ 317,377  

Intersegment revenue

Operating income

Three Months Ended March 31, 2021

14,610  

26,873  

Six Months Ended June 30, 2022

Managed Freight

Total revenue from external customers

$ 220,440  

$ 185,714  

$ 166,432  

$ 36,376  

$ 608,962  

Intersegment revenue

Operating income

23,941  

19,458  

50,720  

Three Months Ended June 30, 2021

Managed Freight

Total revenue from external customers

$ 87,369  

$ 81,868  

$ 71,635  

$ 15,452  

$ 256,324  

Intersegment revenue

Operating income (loss)

10,225  

( 191 )  

18,332  

Six Months Ended June 30, 2021

Managed Freight

Total revenue from external customers

$ 165,849  

$ 157,314  

$ 123,032  

$ 31,018  

$ 477,213  

Intersegment revenue

Operating income (loss)

16,436  

( 1,990 )  

12,261  

28,843  

(in thousands)

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Total external revenues for reportable segments

$ 317,377  

$ 256,324  

$ 608,962  

$ 477,213  

Intersegment revenues for reportable segments

Elimination of intersegment revenues

( 1,006 )  

( 1,734 )  

( 1,897 )  

Total consolidated revenues

$ 317,377  

$ 256,324  

$ 608,962  

$ 477,213  

Income tax expense in both 

6 unchanged sentences

Our liability recorded for uncertain tax positions as of 

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

June 30, 2022 has increased by less than $ 0.1 million since December 31, 2021 .

The net deferred tax liability of $ 84.6 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. 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.

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 June 30, 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, 

7 unchanged sentences

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

March 31, 2022 and December 31, 2021 :

June 30, 2022 and December 31, 2021 :

(in thousands)

March 31, 2022

June 30, 2022

December 31, 2021

Borrowings under Credit Facility

$ 23,132  

Borrowings under the Draw Note

Revenue equipment installment notes;

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

weighted average interest rate of 3.7 % at June 30, 2022, and 1.2 % at December 31, 2021, due in monthly installments with final maturities at various dates ranging from September 2022 to May 2025, secured by related revenue equipment

28,326  

Real estate notes;

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

interest rate of 2.8 % at June 30, 2022 and 1.8 % at December 31, 2021 due in monthly installments with a fixed maturity at August 2035, secured by related real estate

19,727  

2 unchanged sentences

48,053  

20,347  

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

12 unchanged sentences

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 $ 75.0 million subject to Lender acceptance of the additional funding commitment.

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 %.

Borrowings under the Credit Facility are classified as either "base rate loans" or "SOFR 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 SOFR for a one month period as of such day, plus an applicable margin ranging from 0.25 % to 0.75%;

while SOFR loans accrued interest at SOFR, 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, 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.

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.

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;

We had no  borrowings outstanding under the Credit Facility as of June 30, 2022 , undrawn letters of credit outstanding of approximately $ 24.3 million, and available borrowing capacity of $ 85.7 million.

As of June 30, 2022 , there were 

no base rate and 

no  SOFR loans.

Based on availability as of June 30, 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 

April 2022  

to November 2022 .

September 2022  

to May 2025 .

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 $ 14.7 million are cross-defaulted with the Credit Facility.

11 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 March 31, 2022, 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 June 30, 2022 , there were no outstanding borrowings under the Draw Note.

Lease Obligations

The finance leases in effect at 

March 31, 2022 terminate from 

May 2022 through 

June 30, 2022 terminate from 

August 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:

 A summary of our lease obligations at June 30, 2022 and 2021  are as follows:

(dollars in thousands)

1 unchanged sentence

Three Months Ended

March 31, 2022

March 31, 2021

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Finance lease cost:

Amortization of right-of-use assets

$ 1,320  

$ 1,922  

Interest on lease liabilities

Operating lease cost

12,647  

11,764  

Variable lease cost

Total lease cost

$ 8,028  

$ 6,955  

$ 14,298  

$ 14,110  

Other information

2 unchanged sentences

Operating cash flows from operating leases

12,756  

11,855  

Financing cash flows from finance leases

1 unchanged sentence

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

16,999  

17,052  

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

2 unchanged sentences

Weighted-average discount rate—operating leases

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.

June 30, 2022 , and December 31, 2021 , right-of-use assets of $ 43.3 million and $ 35.7 million for operating leases and $ 5.6 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 March 31, 2022 , are summarized as follows by lease category:

Our future minimum lease payments as of June 30, 2022 , are summarized as follows by lease category:

(in thousands)

2022 (1)  

$ 9,817  

$ 5,054  

14,333  

14,346  

Total minimum lease payments

$ 56,423  

$ 7,580  

amount representing interest

( 11,547 )  

Present value of minimum lease payments

$ 44,876  

$ 6,986  

current portion

( 15,265 )  

Lease obligations, long-term

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

$ 29,611  

$ 2,231  

( 1 ) Excludes the six months ended June 30, 2022 .

Stock -Based Compensation

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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.

March 31, 2022 , there were 

June 30, 2022 , there were 

872,509  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 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.

Included in salaries, wages, and related expenses within the condensed consolidated statements of operations is stock-based compensation expense of $ 1.7 million and $ 2.3 million for the  

three months ended June 30, 2022  and 

2021 , respectively, and expense of $ 3.4 million and $ 3.8 million for the six months ended June 30, 2022 and 2021 , respectively. Included in general supplies and expenses within the condensed consolidated statements of operations is stock-based compensation expense for non-employee directors of $ 0.2 million and less than $ 0.1 million for the 

three months ended June 30, 2022 , respectively, and $ 0.3 million and less than $ 0.1 million for the 

six months ended June 30, 2022 and 2021 , respectively.

Of the stock compensation expense recorded for the three months ended 

June 30, 2022  and June 30, 2021, 

$ 1.0 million and $ 1.6 million relates to restricted shares, respectively, and $ 0.7 million and $ 0.7 million relates to unvested employee stock options, respectively. Of the stock compensation expense recorded for the 

six months ended June 30, 2022 and 2021 , $ 2.1 million and $ 2.5 million, respectively, relates to restricted shares and $ 1.4 million and $ 1.2 million, respectively, relates to unvested employee stock options.

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 March 31, 2022 , certain participants elected to forfeit receipt of an aggregate of 

To satisfy withholding requirements for shares that vested through June 30, 2022 , certain participants elected to forfeit receipt of an aggregate of 

19,754  shares of Class A common stock at a weighted average per share price of $ 19.24  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.

We remitted $ 0.4 million to the proper taxing authorities in satisfaction of the employees' minimum statutory withholding requirements.

Commitments and Contingencies

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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. 

Our accruals related to this claim as of June 30, 2022 were sufficient to cover this settlement.

The Court dismissed this lawsuit on June 20, 2022.

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

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

The Court dismissed this lawsuit on June 20, 2022.

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

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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.

Our accruals related to this claim as of 

June 30, 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.

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.

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 that the recent resolution and dismissal of a prior class action lawsuit alleging similar claims, 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 June 30, 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 $ 25.2 million and $ 26.4 million of outstanding and undrawn letters of credit as of March 31, 2022  and December 31, 2021 .

We had $ 24.3 million and $ 26.4 million of outstanding and undrawn letters of credit as of June 30, 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.

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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 $ 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 sold tractors and trailers to TEL for $ 0.0 million and $ 1.0 million during the six months ended June 30, 2022 and 2021 , respectively, and we received $ 0.4 million and $ 0.4 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 six months ended June 30, 2022 and 2021 .

Additionally, we paid approximately $ 2.2 million and $ 0.1 million to TEL for leases of revenue equipment during each of the 

six months ended June 30, 2022 and 2021 , respectively.

We recognized a net reversal of previously deferred gains totaling less than $ 0.1 million for the six months ended June 30, 2022 and 2021 , 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 

June 30, 2022  and 2021 , respectively, are being carried as a reduction in our investment in TEL. At 

June 30, 2022  and 

December 31, 2021 , we had accounts receivable from TEL of $ 0.1 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 and operating lease obligations to TEL of $ 1.4 million and $ 0.0 million, respectively.

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 

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 .

2022 net income through June 30, 2022 , or $ 13.9 million. We received 

no equity distributions from TEL during the six months ended June 30, 2022 .

Our accounts receivable from TEL and investment in TEL as of 

March 31, 2022  and December 31, 

June 30, 2022  and December 31, 

2021 are as follows (in thousands):

Balance Sheet Line Item:

March 31, 2022

June 30, 2022

December 31, 2021

4 unchanged sentences

44,196  

Operating lease obligations

Current portion of operating lease obligations

Our accounts receivable from TEL related to cash disbursements made pursuant to our performance of certain back-office and maintenance functions on TEL’s behalf.

1 unchanged sentence

(in thousands)

As of March 31,

As of June 30,

As of December 31,

8 unchanged sentences

Three Months Ended

Six Months Ended

$ 33,857  

$ 25,534  

$ 66,096  

$ 48,438  

Cost of Sales

10,118  

Operating Expenses

1 unchanged sentence

15,036  

24,028  

28,942  

Operating Income

2 unchanged sentences

16,263  

$ 14,728  

$ 6,615  

$ 28,386  

$ 12,619  

Acquisition of AAT Carriers, Inc.

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("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 acquisition date fair value of the consideration transferred was $ 54.8 million. 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.

1 unchanged sentence

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.

The acquisition date fair value of the consideration transferred consisted of the following:

February 9, 2022

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

Net cash paid

Measurement period adjustments

Contingent consideration

16,210  

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

Net purchase price

$ 54,711  

The contingent consideration arrangement requires us to pay up to $ 20.0 million of additional consideration to AAT's former shareholders based on AAT's results during the first two post-acquisition years.

We estimated the fair value of the contingent consideration using a probability-weighted model.

This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement.

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

Because of our 

338 (h) 10 election, all goodwill related to the acquisition is deductible for tax purposes, and there are no deferred income taxes arising from the acquisition.

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

2 unchanged sentences

Net property and equipment

Credentialing intangible asset

32,000  

Total identifiable assets acquired

7 unchanged sentences

39,012  

15,699  

Net assets acquired

$ 54,711  

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 

During the quarter ended June 30, 2022, we recognized measurement period adjustments which reduced goodwill recognized for AAT by $ 13.8 million from $ 29.5 million as of 

March 31, 2022 to $ 15.7 million as of June 30, 2022. 

These adjustments primarily relate to the preliminary valuation of the AAT credentialing intangible asset partially offset by the preliminary estimated fair value of the contingent consideration.

Goodwill and other intangible assets 

may change upon the finalization 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 may change as a result of our ongoing evaluation of AAT’s accounting principles for consistency with ours.

Refer to Note 13, "Goodwill and Other Assets" for a summary of changes to goodwill during the period as well as information related to the identifiable intangible asset acquired.

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 June 30, 2022 

are as follows:

1 unchanged sentence

Three months ended

March 31, 2022

Six months ended

June 30, 2022

Total revenue

1 unchanged sentence

$ 12,587  

$ 2,866  

$ 4,853  

Goodwill and Other Assets

On July 3, 2018, we acquired 100 % of the outstanding stock of Landair Holdings, Inc., a Tennessee corporation (“Landair”). Landair is a dedicated and for-hire truckload carrier, as well as a supplier of transportation management, warehousing and logistics inventory management services.

Landair’s results have been included in the consolidated financial statements since the date of acquisition.

Landair’s trucking operations’

results are reported within our Dedicated reportable segment, while Landair’s logistics operations’

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

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.

On February 9, 2022, 

we acquired 100 % of the outstanding stock of AAT, which specializes in highly regulated, time-sensitive loads for the U.S.

AAT's results have been included in the consolidated financial statements since the date of acquisition within our Expedited reportable segment. 

The Landair Holdings, Inc.

("Landair") trade name has a residual value of $ 0.5 million.

Amortization expense of $ 2.1 million and $ 2.3 million for the six months ended June 30, 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 

March 31, 2022 and 

June 30, 2022 and 

December 31, 2021 is as follows:

(in thousands)

March 31, 2022

June 30, 2022

Gross intangible assets

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Remaining life (months)

$ 2,402  

$ ( 2,130 )  

Managed Freight

( 885 )  

Total trade name

( 3,900 )  

Customer relationships:

14,072  

( 4,691 )  

Managed Freight

( 564 )  

12,436  

( 4,145 )  

Total customer relationships:

28,200  

( 9,400 )  

18,800  

Credentialing:

32,000  

( 889 )  

31,111  

Total credentialing

32,000  

( 889 )  

31,111  

Total other intangible assets

$ 64,600  

$ ( 14,189 )  

$ 50,411  

(in thousands)

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Remaining life (months)

$ 2,402  

$ ( 2,130 )  

Managed Freight

( 885 )  

Total trade name

( 3,900 )  

Customer relationships:

14,072  

( 4,104 )  

Managed Freight

( 494 )  

12,436  

( 3,627 )  

Total customer relationships:

28,200  

( 8,225 )  

19,975  

Total other intangible assets

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.

$ 32,600  

$ ( 12,125 )  

$ 20,475  

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

(in thousands)

$ 2,242  

29,737  

( 1 ) Excludes the six months ended June 30, 2022 .

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.

The carrying amount of goodwill increased to $ 58.2 million at June 30, 2022 from $ 42.5 million at December 31, 2021 , as a result of the AAT acquisition.

A summary of the changes in carrying amount of goodwill is as follows:

(in thousands)

June 30, 2022

Managed Freight

Balance at December 31, 2021

$ 15,320  

$ 5,448  

$ 21,750  

Acquired goodwill for AAT

15,699  

$ 15,699  

$ 15,320  

$ 5,448  

$ 21,750  

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

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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.

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 then 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 common stock for $ 15.2 million during the second quarter of 2022,  completing the repurchase program in May 2022 with a total of 1.4 million shares of our Class A common stock repurchased for $ 30.0 million.

On May 18, 2022 our Board approved a new stock repurchase authorization of up to $ 75.0 million of our Class A common stock, with any remaining amount available under prior authorizations being excluded and no longer available.

Under such authorization, we repurchased 0.6 million shares of our Class A common stock for $ 13.4 million during the three months ended June 30, 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. 

On May 18, 2022, our Board declared a cash dividend of $ 0.0625 per share, which was paid on June 24, 2022, to stockholders of record on June 3, 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.

We repurchased an additional 0.5 million shares of our Class A common stock for $ 12.2 million from July 1, 2022 through August 3, 2022.

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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, 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.

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, 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 inflation, future stock repurchases and dividends, if any, future earnings per share, 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, upgrades, and age, 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 sale of our California based terminal, 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.

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Executive Overview

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;

For the second quarter of 2022, we had diluted earnings per share of $1.56 and non-GAAP adjusted earnings per share of $1.63, which is the highest earnings for any quarter in the Company's history.

These results were achieved despite unprecedented cost inflation, unusually high insurance costs, minimal gain on sale of used equipment and a softening in the freight market.

In addition to record earnings for such quarter, we completed our $30.0 million stock repurchase plan that was initiated during the first quarter of 2022 and we repurchased approximately 1.3 million shares of outstanding Class A common stock under the $75.0 million stock repurchase plan initiated during the second quarter of 2022. We expect both cost inflation and softening of the freight market to continue in the second half of the year.

Our asset-based segments, Expedited and Dedicated, contributed approximately 63% of total freight revenue in the quarter and performed well in an environment constrained by equipment shortages and sharp inflationary costs.

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

The addition of AAT in the first quarter of 2022 and improved pricing were able to overcome reduced utilization and significant cost increases from driver pay, fuel, insurance, parts and maintenance.

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

Our asset-light segments, Managed Freight and Warehousing, contributed approximately 37% of total freight 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 through new customer startups but had diminished margins primarily as a result of incurring temporary incremental costs around new business activities and continued constraints of a competitive labor market.

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

Total revenue of $317.4 million, an increase of 23.8% compared with the second quarter of 2021, and freight revenue (which excludes revenue from fuel surcharges) of $266.9 million, an increase of 15.0% compared with the second quarter of 2021;

Operating income of $26.9 million, compared with $18.3 million in the second quarter of 2021;

Net income of $24.5 million, or $1.56 per diluted share, compared with $15.4 million, or $0.91 per diluted share, in the second quarter of 2021.

38% of consolidated total revenue was in our Expedited reportable segment, as compared to 34% in the second quarter of 2021;

Our Managed Freight reportable segment’s total revenue increased to $80.3 million in the 2022 quarter from $71.6 million in the 2021 quarter and the segment had an operating income of $8.6 million in the 2022 quarter compared to $7.3 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;

Our equity investment in TEL provided $7.1 million of pre-tax earnings in the second quarter of 2022 compared to $3.4 million in the second 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.

Since December 31, 2021, total indebtedness, comprised of total debt and finance leases, net of cash, increased by $32.5 million to $61.0 million, and with available borrowing capacity of $85.7 million under our Credit Facility at June 30, 2022, primarily due to the net cash payment related to the acquisition of AAT for $37.4 million and repurchasing $43.4 million of our outstanding Class A Common Stock under the stock repurchase program.

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 0.43;

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.

Stockholders' equity at June 30, 2022, was $356.0 million;

Tangible book value at June 30, 2022, was $247.6 million.

For the second half of 2022 we expect softening freight demand, greater driver availability, and continuing cost inflation. Absent a substantial, near-term deterioration in market forces, we expect a combination of higher revenue, improvement in our Dedicated reportable segment, contribution of AAT, continued focus on cost control, and our ongoing stock repurchase program to generate adjusted earnings per diluted share for the second half of 2022 in excess of the same period for 2021, bringing the year to a minimum of $5.00 per share.

Beyond 2022, with diligent execution and teamwork we believe the power of our operating model will speak for itself throughout economic and freight market cycles. We expect to grow our market share, continue to improve our operations, and be a stronger, more profitable, and more predictable business with the opportunity for significant and sustained value creation.

Non-GAAP Reconciliation

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Operating Ratio

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

GAAP Operating Ratio:

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The Dedicated segment provides customers with committed truckload capacity over contracted periods with the goal of three to five years in length.

Equipment is either owned or leased by the Company.

Managed Freight:

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Revenue Equipment

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.

At June 30, 2022, we operated 2,358 tractors and 5,436 trailers.

Of such tractors, 1,678 were owned, 562 were financed under operating leases, and 118 were provided by independent contractors, who provide and drive their own tractors. Of such trailers, 5,103 were owned, 244 were financed under finance type leases, and 89 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 June 30, 2022, our fleet had an average tractor age of 2.4 years and an average trailer age of 5.7 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 months ended March 31, 2022 TO three months ended March 31, 2021

COMPARISON OF three and six months ended June 30, 2022 TO three and six months ended June 30, 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

Six Months Ended

Freight revenue

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Total revenue

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.

The increase in total revenue primarily resulted from a $34.3 million, $14.9 million, $8.6 million, and $3.2 million increase in Expedited, Dedicated, Managed Freight, and Warehousing freight revenue, respectively, for the three months ended June 30, 2022 and a $54.6 million, $43.4 million, $28.4 million, and $5.4 million increase in Expedited, Managed Freight, Dedicated, and Warehousing freight revenue, respectively, for the six months ended June 30, 2022.

See results of segment operations section for discussion of fluctuations.

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Three Months Ended

Six Months Ended

Salaries, wages, and related expenses

1 unchanged sentence

% of freight revenue

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.

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

June 30, 2022 , increased on a dollars basis primarily as the result of driver and non-driver, including shop technicians, pay and benefits increases since the first quarter of 2021 partially offset by reduced workers compensation costs compared to the 2021 periods.

 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 going forward as a result of driver pay changes put in place in the tight freight market.

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Three Months Ended

Six Months Ended

% of total revenue

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In periods of declining prices, the opposite is true.

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.

Fuel prices as measured by the DOE wer e $2.23 per g allon, or 69%, higher for the quarter ended June 30, 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.

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Three Months Ended

Six Months Ended

Total fuel surcharge

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% of freight revenue

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.

Net fuel expense for the three and six months ended June 30, 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 ended June 30, 2022 or 2021 and $0.4 million of gains for the six months ended June 30, 2021 compared to none for the same 2022 period.

As of June 30, 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 and auxiliary power units to improve our miles per gallon, locking in fuel hedges when deemed appropriate, partnering with customers to adjust fuel surcharge programs that are inadequate to recover a fair portion of fuel costs, and testing the latest technologies that reduce fuel consumption.

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.

1 unchanged sentence

Three Months Ended

Six Months Ended

Operations and maintenance

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% of freight revenue

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.

The increases in operations and maintenance for the three and six months ended June 30, 2022 were primarily related to the increased maintenance costs as a result of an increase in the average age of equipment, as well as inflationary increases in the costs of parts and labor, as compared to the prior year periods 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 periods. 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;

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Three Months Ended

Six Months Ended

Revenue equipment rentals and purchased transportation

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% of freight revenue

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.

The increases in revenue equipment rentals and purchased transportation on a dollar basis for the three and six months ended June 30, 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 8.5% for the three months ended June 30, 2021 to 6.6% for the same 2022 period and from 8.7% for the six months ended June 30, 2021 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.

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Three Months Ended

Six Months Ended

Operating taxes and licenses

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Three Months Ended

Six Months Ended

Insurance and claims

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Insurance and claims per mile cost increased to 18.5 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 . 

June 30, 2022  compared to 12.8 cents per mile for the same 2021 quarter and 16.1 cents per mile for the six months ended June 30, 2022 compared to 11.8 cents per mile for the same 

These increases are primarily the result of unfavorable development of a small number of prior period claims, as well as claims experienced during the current quarter.

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

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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 have 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.

2 unchanged sentences

Three Months Ended

Six Months Ended

Communications and utilities

1 unchanged sentence

% of freight revenue

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

For the periods 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

Six Months Ended

General supplies and expenses

1 unchanged sentence

% of freight revenue

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 .

For the periods presented, the change in general supplies and expenses are insignificant both as a percentage of total revenue and freight revenue.

Depreciation and amortization

Three Months Ended

Six Months Ended

Depreciation and amortization

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

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.

Depreciation expense decreased $0.3 million and $0.3 million to $12.5 million and $25.3 million for the three and six months ended June 30, 2022, respectively, compared to $12.7 million and $25.7 million in the same 2021 periods as a result of reduced total tractor count offset by increased costs on new equipment. Amortization of intangible assets was $1.5 million and $1.2 million for the three and six months ended June 30, 2022, respectively, and $2.1 million and $2.3 million the same 2021 periods.

The decrease for the three and six months ended June 30, 2022 is due to the completion of the amortization of the Landair trade name to the $0.5 million residual value during the third quarter of 2021, partially offset by amortization of the intangible asset related to the AAT acquisition. 

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.

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Three Months Ended

Six Months Ended

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 March 31, 2022 are primarily the result of a reduction in on the sale of used equipment compared to the 2021 quarter. 

The decreases in gain on disposition of property and equipment, net for the six months ended June 30, 2022 are primarily the result of a reduction in the sale of used equipment compared to the 2021 periods. 

Interest expense, net

Three Months Ended

Six Months Ended

Interest expense, net

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Three Months Ended

Six Months Ended

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 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.

The increase in TEL's contributions to our results for the three and six months ended June 30, 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

Six Months Ended

Income tax expense

1 unchanged sentence

% of freight revenue

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 changes in income tax expense were primarily related to the $12.2 million and $29.5 million increase in pre-tax income in the three and six months ended June 30, 2022, compared to the same 2021 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 state tax expense and permanent differences, such as executive compensation disallowance in 2021.

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

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

COMPARISON O F three and six months ended June 30, 2022 TO three and six months ended June 30, 2021

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

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Three Months Ended

Six Months Ended

Managed Freight

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Total operating income

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.

The increase in Expedited revenue for the three months ended June 30, 2022 relates to an increase in average freight revenue per tractor per week of 17.7%, a $16.9 million increase in fuel surcharge revenue compared to the 2021 quarter, and a 40 (or 4.6%) average tractor increase.

The increase in average freight revenue per tractor per week for the quarter ended June 30, 2022 is the result of a 41.0 cents per mile (or 21.5%) increase in average rate per total mile partially offset by a 3.1% decrease in average miles per unit compared to the 2021 quarter.

Expedited team-driven tractors averaged 906 tractors in the second quarter of 2022, an increase of approximately 4.6% from the average of 866 tractors in the second quarter of 2021.

For the six months ended June 30, 2022, the change in Expedited revenue relates to a 120 (or 1.1%) average tractor increase as well as an increase in average freight revenue per tractor per week of 18.6% compared to the same 2021 period.

The increase in average freight revenue per tractor per week for the six months ended June 30, 2022 is the result of a 1.6% decrease in average miles per unit and a 39.0 cents per mile (or 20.4%) increase in average rate per total mile compared to the same 2021 period.

Expedited team-driven tractors averaged 886 for the six months ended June 30, 2022, an increase of approximately 1.7% from the average of 871 tractors for the same 2021 period.

The increase in Dedicated revenue for the three months ended June 30, 2022 relates to an increase in average freight revenue per tractor per week compared to the 2021 quarter as the result of a 51.0 cents per mile (or 24.5%) increase in average rate per total mile compared to the 2021 quarter, a $9.1 million increase in fuel surcharge revenue, and a 5.8% decrease in average miles per unit.

Average tractors decreased 120 tractors, or 7.6% as compared to the three months ended June 30, 2021.

For the six months ended June 30, 2022, the increase in Dedicated revenue relates to an increase in average freight revenue per tractor per week compared to the same 2021 period as the result of a 55.0 cents per mile (or 27.5%) increase in average rate per total mile, partially offset by a 3.4% decrease in average miles per unit as compared to the same 2021 period.

Additionally, fuel surcharge revenue increased $13.8 million compared to the 2021 period.

These increases were partially offset by a 160 (or 10.0%) average tractor decrease as a result of not renewing underperforming contracts.

Managed Freight total revenue increased as primarily a result of handling overflow freight from both Expedited and Dedicated truckload operations, growth in revenue per load, and effective purchasing of capacity in the current market.

Warehousing total revenue for the quarter and year-to-date periods increased as a result of period-over-period new customer business as well as rate increases with existing customers.

In addition to the changes in revenue described above for the three and six months ended June 30, 2022, the change in operating income for the three months ended June 30, 2022, resulted from a $29.9 million, $11.8 million, $7.3 million, and $3.5 million increase in Expedited, Dedicated, Managed Freight, and Warehousing operating expenses, respectively.

For the six months ended June 30, 2022, the change in operating income resulted from a $47.1 million, $36.2 million, $20.9 million, and $5.7 million increase in Expedited, Managed Freight, Dedicated, and Warehousing operating expenses, respectively.

The increase in Expedited and Dedicated operating expenses for the three and six months ended June 30, 2022, is primarily the result of driver and non-driver pay increases since the 2021 periods and increased maintenance costs as a result of an increase in the average age of equipment, as well as increases in the costs of parts and labor, as compared to the prior year periods 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.

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

The increase in Managed Freight operating expenses is the result of increased revenue driving an increase in variable expenses, primarily purchased transportation as well as increases in non-driver pay since the 2021 periods. The increase in Warehousing, operating expenses is a result of non-incurring temporary incremental costs associated with new startup business, a constrained labor market, and non-driver pay increases since the 2021 periods.

LIQUIDITY AND CAPITAL RESOURCES

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most critical transportation and logistics needs.

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.

We had working capital (total current assets less total current liabilities) of $22.5 million and $45.8 million at June 30, 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 2.3 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.

With an average fleet age of 2.4 years at June 30, 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 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;

As of June 30, 2022 and December 31, 2021 we had $110.3 million and $74.3 million in debt and lease obligations, respectively, consisting of the following:

No outstanding borrowings under the Credit Facility;

No outstanding borrowings under the Draw Note;

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$20.9 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;

No deferred loan costs (which reduce long-term debt) as of June 30, 2022 and December 31, 2021;

$7.0 million and $10.8 million of the principal portion of financing lease obligations, respectively;

$44.9 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.

The increase in operating lease obligations was primarily due to additional facilities for new Warehousing customers partially offset by amortization of the operating lease liability and our transition from tractors held under operating leases to owned equipment in 2022.

As of June 30, 2022, we had $0.0 million borrowings outstanding, undrawn letters of credit outstanding of approximately $24.3 million, and available borrowing capacity of $85.7 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.

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.

Refer to Note 7, “Debt”

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.

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 six months ended June 30, 2022 totaled $63.0 million of expenditures, as compared to $19.8 million of proceeds for the prior year period.

In addition to the February 2022 acquisition of AAT, during the six months ended June 30, 2022, we took delivery of approximately 115 new tractors and no new trailers, while disposing of approximately 35 used tractors and 15 used trailers.

Our current fleet plan for fiscal 2022 includes the delivery of an additional 384 new company replacement tractors and no additional new trailer deliveries. Net gains on disposal of equipment and real estate in the six months ended June 30, 2022 were $0.6 million compared to $2.8 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 $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.

We distributed a total of $2.0 million to stockholders in the first six months of 2022 through dividends.

Our baseline expectation for the remainder of 2022 fleet net capital expenditures is a range of $10.0 million to $20.0 million, assuming scheduled deliveries, strong but moderating sale prices for used equipment, and the sale of our California based terminal, which remains under negotiation.

These assumptions are subject to risk.

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 continue operating as designed.

Net cash flows provided by operating activities increased to $76.9 million for the six months ended June 30, 2022, compared to $34.1 million for the same 2021 period, primarily due to decreases in receivables and driver advances as a result of a decrease in our average receivable days outstanding and a $20.1 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 $63.0 million for the six months ended June 30, 2022, compared to $19.8 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 115 new company tractors and disposed of approximately 35 used tractors in the 2022 period compared to delivery and disposal of approximately 88 new company tractors and 249 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.

Net cash flows used by financing activities were approximately $17.9 million for the six months ended June 30, 2022, compared to $57.3 million used in the same 2021 period.

The change in net cash flows used by financing activities was primarily a function of net proceeds relating to notes payable, the Draw Note, and our Credit Facility of $32.4 million in the 2022 period compared to net repayments of $45.4 million in the 2021 period.

This difference between net proceeds and repayments was partially offset by the repurchase of $43.4 million of shares of our Class A common stock during the 2022 period compared to $8.4 million during the same 2021 period, as well as the payment of approximately $2.0 million in dividends during the 2022 period.

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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.

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 then current stock repurchase program authorizing the purchase of up to $38.0 million of our Class A common stock.

Under such authorization, we repurchased 1.4 million shares of our Class A common stock for $30.0 million completing the program in May 2022.

On May 18, 2022 our Board approved a new stock repurchase authorization of up to $75.0 million of our Class A common stock, with any remaining amount available under prior authorizations being excluded and no longer available.

Under such authorization, we repurchased 0.6 million shares of our Class A common stock for $13.4 million during the three months ended June 30, 2022.

We repurchased an additional 0.5 million shares of our Class A common stock through August 3, 2022, for a total of 2.5 million shares repurchased since February 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.

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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 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.

There have been no material changes to our most critical accounting policies and estimates during the three and six months ended June 30, 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