What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-02-28 compared with 2022-02-28 · 404 added, 496 removed, 1224 unchanged (42% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures to ensure that material information relating to us, including our consolidated subsidiaries, is made known to the officers who certify our financial reports and to other members of senior management and the Board of Directors.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operations of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act).

2 unchanged sentences

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

Management, including our Chief Executive Officer and Chief Financial Officer under the oversight of our Board of Directors, assessed the effectiveness of our internal control over financial reporting as of December 31, 2021.

Management, including our Chief Executive Officer and Chief Financial Officer under the oversight of our Board, assessed the effectiveness of our internal control over financial reporting as of December 31, 2022.

In making this assessment, our management used the criteria for effective internal control over financial reporting described in “Internal Control-Integrated Framework (2013),”

12 unchanged sentences

As a result of the inherent limitations in all internal control systems, no evaluation of controls can provide absolute assurance that all our control issues and instances of fraud, if any, have been detected.

We acquired AAT on February 9, 2022, and management excluded from its assessment of the effectiveness of internal control over financial reporting as of December 31, 2022, AAT’s internal control over financial reporting associated with total assets and total revenues representing approximately 7.2% and 2.7%, respectively, of the consolidated financial statements as of and for the year ended December 31, 2022.

The Company's internal control over financial reporting as of December 31, 2022, has been audited by Grant Thornton, LLP, an independent registered public accounting firm as stated in its report which is included herein.

5 unchanged sentences

DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

We incorporate by reference the information respecting executive officers and directors set forth under the captions "Proposal 1 - Election of Directors", "Corporate Governance –

Our Executive Officers", "Corporate Governance –

Code of Conduct and Ethics", “Corporate Governance –

The Board of Directors and Its Committees –

Committees of the Board of Directors –

The Nominating and Corporate Governance Committee”, "Corporate Governance –

The Board of Directors and Its Committees –

Committees of the Board of Directors –

The Audit Committee" and "Corporate Governance –

Delinquent Section 16(a) Reports" in our Proxy Statement for the 2022 annual meeting of stockholders, which will be filed with the Securities and Exchange Commission in accordance with Rule 14a-6 promulgated under the Securities Exchange Act of 1934, as amended (the "Proxy Statement");

provided, that the section entitled "Corporate Governance –

The Board of Directors and Its Committees –

Committees of the Board of Directors –

The Audit Committee –

Report of the Audit Committee" contained in the Proxy Statement is not incorporated by reference.

The information required by this Item will be included in the Company's definitive proxy statement to be filed with the SEC within 120 days after December 31, 2022, in connection with the solicitation of proxies for the Company's 2023 Annual Meeting of Stockholders (the "2023 Proxy Statement"), and is incorporated herein by reference.

EXECUTIVE COMPENSATION

We incorporate by reference the information set forth under the sections entitled "Executive Compensation", "Corporate Governance –

The Board of Directors and Its Committees –

Committees of the Board of Directors –

The Compensation Committee –

Compensation Committee Interlocks and Insider Participation", and "Corporate Governance –

The Board of Directors and Its Committees –

Committees of the Board of Directors –

The Compensation Committee" in the Proxy Statement;

provided, that the section entitled "Corporate Governance –

Committees of the Board of Directors –

The Compensation Committee –

Report of the Compensation Committee" contained in the Proxy Statement is not incorporated by reference.

The information required by this Item will be included in the 2023 Proxy Statement, and is incorporated herein by reference.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

10 unchanged sentences

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

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

The information required by this Item will be included in the 2023 Proxy Statement, and is incorporated herein by reference.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

We incorporate by reference the information set forth under the sections entitled "Corporate Governance –

The Board of Directors and Its Committees - Board of Directors" and "Certain Relationships and Related Transactions" in the Proxy Statement.

The information required by this Item will be included in the 2023 Proxy Statement, and is incorporated herein by reference.

PRINCIPAL ACCOUNTING FEES AND SERVICES

We incorporate by reference the information set forth under the section entitled "Relationships with Independent Registered Public Accounting Firm –

Principal Accountant Fees and Services" in the Proxy Statement.

The remaining information required by this Item will be included in the 2023 Proxy Statement, and is incorporated herein by reference.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

20 unchanged sentences

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

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

4.3 # Description of the Registrant's Securities

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

46 unchanged sentences

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

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

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

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

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

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

1 unchanged sentence

and Covenant Transport Solutions, LLC with TBK Bank, SSB as Lender and Agent, dated as of September 23, 2020 (Incorporated by reference to Exhibit 10.4 to the Company's Form 10-Q, filed November 3, 2020)

Nineteenth Amendment to Third Amended and Restated Credit Agreement, dated as of May 4, 2022, among Covenant Logistics Group, Inc., Covenant Transport, Inc., CTG Leasing Company, Covenant Asset Management, LLC, Southern Refrigerated Transport, LLC, Covenant Transport Solutions, LLC, Star Transportation, LLC, Covenant Logistics, Inc., Transport Management Services, LLC, Landair Holdings, Inc., Landair Transport, Inc., Landair Logistics, Inc., Landair Leasing, Inc., AAT Carriers, Inc., and Bank of America, N.A.

(Incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q, filed August 5, 2022)

10.34 * Covenant Logistics Group Supplemental Savings Plan, effective July 1, 2022 (Incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q, filed August 5, 2022)

List of Subsidiaries

3 unchanged sentences

Parker, the Company's Principal Executive Officer

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

Hogan, the Company's Principal Financial Officer

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

Grant, the Company's Principal Financial Officer

Certification pursuant to 18 U.S.C.

2 unchanged sentences

Certification pursuant to 18 U.S.C.

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

Hogan, the Company's Chief Financial Officer

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

Grant, the Company's Chief Financial Officer

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

12 unchanged sentences

Date: February 28, 2023

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

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

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

4 unchanged sentences

February 28, 2023

(principal financial officer)

February 28, 2022

Chief Accounting Officer

(principal accounting officer)

Executive Vice President and Chief Financial Officer

(principal financial officer and principal accounting officer)

/s/ Bradley A.

17 unchanged sentences

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

Board of Directors and Shareholders

Covenant Logistics Group, Inc.

3 unchanged sentences

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

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

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in the 2013 Internal Control —

11 unchanged sentences

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

Critical audit matters

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

Critical audit matter

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

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

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

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

Auto Liability Self-Insurance Reserves

1 unchanged sentence

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

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

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

4 unchanged sentences

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

We performed a retrospective review of prior year and current year reserves to validate that changes in estimated losses were appropriate and supported by current year claim development.

We performed a retrospective review of prior year and current year reserves to validate those changes in estimated losses were appropriate and supported by current year claim development.

/s/ Grant Thornton LLP

3 unchanged sentences

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

Board of Directors and Shareholders

Covenant Logistics Group, Inc.

15 unchanged sentences

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

Our audit of, and opinion on, the Company's internal control over financial reporting does not include the internal control over financial reporting of AAT Carriers, Inc., a wholly-owned subsidiary, whose financial statements reflect total assets and revenues constituting 7.2% and 2.7%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2022.

As indicated in Management's Report, AAT Carriers, Inc.

was acquired during 2022.

Management's assertion on the effectiveness of the Company's internal control over financial reporting of AAT Carriers, Inc.

Definition and limitations of internal control over financial reporting

21 unchanged sentences

Drivers' advances and other receivables, net of allowance of $ 585 in 2022 and $ 542 in 2021

13,624  

Inventory and supplies

3 unchanged sentences

Assets held for sale

15,007  

Income taxes receivable

24 unchanged sentences

Current liabilities:

Checks outstanding in excess of bank balances

$ 1,215  

Accounts payable

6 unchanged sentences

24,689  

10,708  

Current maturities of long-term debt

18,897  

Current portion of finance lease obligations

6 unchanged sentences

Other short-term liabilities

Current liabilities of discontinued operations, net

Total current liabilities

5 unchanged sentences

Long-term portion of finance lease obligations

10,756  

Long-term portion of operating lease obligations

9 unchanged sentences

Other long-term liabilities of discontinued operations

44,151  

Total liabilities

8 unchanged sentences

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

Class B common stock, $ .

01 par value;

Class B common stock, $ .01 par value;

5,000,000 shares authorized;

7 unchanged sentences

Accumulated other comprehensive loss

( 1,306 )  

Retained earnings

14 unchanged sentences

Freight revenue

$ 949,913  

$ 776,218  

Fuel surcharge revenue

96,090  

62,343  

Total revenue

$ 1,046,003  

$ 838,561  

Operating expenses:

Salaries, wages, and related expenses

350,246  

315,023  

103,641  

77,443  

Operations and maintenance

59,269  

48,368  

Revenue equipment rentals and purchased transportation

331,685  

222,705  

Operating taxes and licenses

10,899  

11,621  

Insurance and claims

38,788  

53,052  

Communications and utilities

General supplies and expenses

29,673  

34,143  

Depreciation and amortization

53,881  

65,472  

Gain on disposition of property and equipment, net

( 3,799 )  

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

26,569  

Total operating expenses

978,841  

852,588  

Operating income (loss)

67,162  

Operating income

Interest expense, net

Income from equity method investment

( 14,782 )  

Income (loss) from continuing operations

79,153  

Income tax expense (benefit)

20,962  

Income (loss) from continuing operations

58,191  

Income (loss) from discontinued operations, net of tax

Net income (loss)

$ 60,731  

Basic income (loss) per share:

Income (loss) from continuing operations

$ 3.46  

Income (loss) from discontinued operations

$ 0.15  

Net income (loss)

$ 3.61  

Diluted income (loss) per share:

Income (loss) from continuing operations

$ 3.42  

Income (loss) from discontinued operations

$ 0.15  

Net income (loss)

$ 3.57  

Income from continuing operations

Income tax expense

Income from continuing operations

Income from discontinued operations, net of tax

Basic income per share:

Income from continuing operations

Income from discontinued operations

Diluted income per share:

Income from continuing operations

Income from discontinued operations

Basic weighted average shares outstanding

16,803  

17,358  

Diluted weighted average shares outstanding

17,020  

17,358  

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

4 unchanged sentences

(In thousands)

Net income (loss)

$ 108,682  

Other comprehensive income (loss):

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

$ 60,731  

Other comprehensive income:

Unrealized gain on effective portion of cash flow hedges, net of tax of ($776) and ($263) in 2022 and 2021, respectively

Reclassification of cash flow hedge losses into statement of operations, net of tax of ($47) , and ($78) in 2022 and 2021, respectively

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

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

Total other comprehensive income

Comprehensive income

$ 111,074  

Total other comprehensive income (loss)

Comprehensive income (loss)

$ 61,676  

8 unchanged sentences

Balances at December 31, 2020

$ 141,885  

$ ( 1,014 )  

$ 209,043  

$ 350,111  

( 42,718 )  

Share repurchase

( 17,486 )  

Other comprehensive loss

( 1,237 )  

Other comprehensive income

Stock-based employee compensation expense

Issuance of restricted shares, net

( 717 )  

Balances at December 31, 2021

$ 143,438  

$ ( 17,067 )  

$ ( 2,251 )  

$ 166,325  

$ 290,642  

60,731  

Cash dividend

Share repurchase

( 8,367 )  

( 1,980 )  

Other comprehensive income

Stock-based employee compensation expense

Exercise of stock options

Issuance of restricted shares, net

( 11 )  

( 3,091 )  

Balances at December 31, 2022

$ 149,406  

$ ( 23,662 )  

$ ( 1,306 )  

$ 225,076  

$ 349,699  

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

5 unchanged sentences

Cash flows from operating activities:

Net (loss) income

$ 60,731  

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

Provision for losses on accounts receivable

Reversal of gain on sales to equity method investee, net

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

Depreciation and amortization

53,881  

65,480  

Impairment of property and equipment

26,569  

Amortization of deferred financing fees

Deferred income tax (benefit) expense

18,413  

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

( 334 )  

Deferred income tax benefit

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

Stock-based compensation expense

Equity in income of affiliate

( 14,782 )  

Return on investment in affiliated company

Gain on disposition of property and equipment

( 3,799 )  

(Gain) loss on disposition of reportable segment

( 3,412 )  

40,431  

Return on investment in available-for-sale securities

( 63 )  

Changes in operating assets and liabilities:

Receivables and advances

( 36,544 )  

Prepaid expenses and other assets

( 710 )  

Inventory and supplies

( 204 )  

Insurance and claims accrual

( 31,653 )  

32,203  

Accounts payable and accrued expenses

16,345  

19,831  

Net cash flows provided by operating activities

73,218  

63,040  

Cash flows from investing activities:

Investment in affiliated company

( 13 )  

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

Other investments

Redemption of available-for-sale securities

Acquisition of property and equipment

( 35,285 )  

Proceeds from disposition of reportable segment

108,375  

Proceeds from disposition of property and equipment

44,134  

122,278  

Net cash flows provided by investing activities

10,344  

138,046  

Net cash flows (used) provided by investing activities

Cash flows from financing activities:

Change in checks outstanding in excess of bank balances

( 1,215 )  

Cash dividend

Proceeds from issuance of notes payable

75,591  

Proceeds from exercise of stock options

Repayments of notes payable

( 14,397 )  

Repayments of finance lease obligations

( 5,626 )  

Proceeds under revolving credit facility

644,874  

1,341,678  

Repayments under revolving credit facility

( 695,513 )  

( 1,326,678 )

Payment of minimum tax withholdings on stock compensation

( 1,332 )  

Common stock repurchased

( 10,348 )  

Net cash flows used in financing activities

( 83,557 )  

Net change in cash and cash equivalents

Cash and cash equivalents at beginning of year

43,591  

Cash and cash equivalents at end of year

$ 8,412  

$ 8,407  

Supplemental disclosure of cash flow information:

1 unchanged sentence

Interest, net of capitalized interest

$ 2,762  

$ 7,365  

$ 10,236  

Non-cash transactions during the year for:

Equipment purchased under finance leases

$ 3,258  

Contingent liabilities

$ 44,151  

Equipment acquired under finance leases

Contingent consideration associated with acquisition

Other contingent liabilities

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

6 unchanged sentences

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

rinciples of Consolidation

Principles of Consolidation

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

8 unchanged sentences

Heritage Insurance, Inc., a Tennessee corporation;

Landair Holdings, Inc., a Tennessee corporation;

Landair Transport, Inc., a Tennessee corporation;

Landair Holdings, Inc., a Tennessee corporation (collectively "Landair"); Landair Transport, Inc., a Tennessee corporation;

Landair Logistics, Inc., a Tennessee corporation;

Landair Leasing, Inc., a Tennessee corporation;

and Transport Management Services, LLC, a Tennessee limited liability company.

AAT Carriers, Inc., a Tennessee corporation ("AAT"), and Transport Management Services, LLC, a Tennessee limited liability company.

References in this report to "it," "we," "us," "our," the "Company," and similar expressions refer to Covenant Logistics Group, Inc.

1 unchanged sentence

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

four reportable operating segments, which include:

four reportable segments, which include:

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

2 unchanged sentences

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

The following table summarizes our revenue by our four reportable operating segment, at the service offering level, as used by our chief operating decision maker in making decisions regarding allocation of resources, etc., for the years ended December 31, 2021  and 

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

The following table summarizes our revenue by our four reportable segments, at the service offering level, as used by our chief operating decision maker in making decisions regarding allocation of resources, etc., for the years ended December 31, 2022  and 

Year ended December 31,

26 unchanged sentences

Local, state and national governments continue to emphasize the importance of transportation and have designated it as an essential service.

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

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

5 unchanged sentences

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.

 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.

31, 2021, could result in additional expense accruals. Due to these developments, we may experience additional expense accruals, increased insurance and claims expenses, and greater volatility in our insurance and claims expenses, which could have a material adverse effect on our business, financial condition, and results of operations.

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

41 unchanged sentences

No customers in 

2021  and one customer in 

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

2022  or 

2021  accounted for more than 10% of our consolidated revenue. The carrying amount reported in the consolidated balance sheet for accounts receivable approximates fair value based on the fact that the receivables collection averaged approximately 

40  days and 

13 unchanged sentences

$ 4,112  

$ 2,992  

Inventories and Supplies

8 unchanged sentences

We expect to sell these assets within twelve months.

Change in Estimates

The Company reviews the estimated useful lives and salvage values of its assets on an ongoing basis, based upon, among other things, our experience with similar assets, conditions in the used revenue equipment market, and prevailing industry practice. During the second quarter of 2020, the Company adjusted the useful lives of certain intangible finite-lived assets, including the Landair trade name and non-compete agreement, and certain revenue equipment held under operating leases as the result of management changes, a change in the branding of the organization, and the forward looking use of these assets. These changes are being treated as a change in accounting estimate, which during the twelve  months ended December 31, 2020, resulted in an increase in depreciation and amortization expense of approximately $ 3.2 million, or a $ 2.5  million, or $ 0.14 , per diluted share decrease to net income. 

Property and Equipment

13 unchanged sentences

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

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

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

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

There were no impairment events during the twelve months ended December 31, 2022 or 2021.

A portion of our tractors are protected by non-binding indicative trade-in values or binding trade-back agreements with the manufacturers.

30 unchanged sentences

We have significant exposure to fluctuations in the number and severity of claims.

If there is an increase in the frequency and severity of claims, or we are required to accrue or pay additional amounts if the claims prove to be more severe than originally assessed, or any of the claims would exceed the limits of our insurance coverage, our profitability could be adversely affected.

If there is an increase in the frequency or severity of claims, or we are required to accrue or pay additional amounts if the claims prove to be more severe than originally assessed, or any of the claims would exceed the limits of our insurance coverage, our profitability could be adversely affected.

In addition to estimates within our self-insured retention layers, we also must make judgments concerning claims where we have third party insurance and for claims outside our coverage limits.

3 unchanged sentences

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

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

We have $ 0.7 million and $ 0.9 million as other short-term assets and a corresponding accrual in the short-term portion of insurance and claims accruals and $ 0.0 million and $ 7.3 million as other long-term assets and as a corresponding accrual in the long-term portion of insurance and claims accruals on our consolidated balance sheet for claims above our self-insured retention for which we believe it is reasonably assured that the insurers will provide their portion of such claims at December 31, 2022  and 2021 , respectively. We evaluate collectability of the receivables based on the credit worthiness and surplus of the insurers, along with our prior experience and contractual terms with each.

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

2 unchanged sentences

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

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

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

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

We decided not to commute this policy.

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

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

Our prior auto liability policies have sometimes included a release premium refund or commutation option that we have sometimes exercised.

The most recent policy we commuted ran from October 1, 2014 through March 31, 2018, and resulted in a premium release of $ 7.3 million.

Management cannot predict whether or not future claims or the development of existing claims will justify a commutation of other policy periods, and accordingly, no related amounts were recorded at December 31, 2022.

We carry excess policy layers above the primary auto liability policy described above.

1 unchanged sentence

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

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

Capitalized interest was $ 0.3 million in 

2022 and less than $ 0.1 million in 2021 .

Fair Value of Financial Instruments

4 unchanged sentences

Additionally, certain investments intended to serve the purposes of capital preservation and to fund insurance losses are designated as available-for-sale and are valued based on quoted prices in active markets.

The fair value of our interest rate swap agreements is determined using the market-standard methodology of netting the discounted future fixed-cash payments and the discounted expected variable-cash receipts.

The fair value of our interest rate swap agreement is determined using the market-standard methodology of netting the discounted future fixed-cash payments and the discounted expected variable-cash receipts.

The variable-cash receipts are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.

32 unchanged sentences

The shares of Class A and B common stock are substantially identical except that the Class B shares are entitled to two votes per share and immediately convert to Class A shares if beneficially owned by anyone other than our Chief Executive Officer or certain members of his immediate family, while Class A shares are entitled to one vote per share.

The terms of any future issuances of preferred shares will be set by our Board of Directors.

The terms of any future issuances of preferred shares will be set by our Board.

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

December 31, 2021 and 2020, respectively.

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

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

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

December 31, 2021 and 2020, respectively.

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

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

There were approximately 358,000  shares and 

217,000 shares issuable upon conversion of unvested restricted shares for the years ended 

December 31, 2022 and 

2021 , respectively.

There were no  unvested shares excluded from the calculation of diluted earnings per share as the effect of any assumed exercise of the related awards would not have been anti-dilutive for the years ended December 31, 2022 and 

There were approximately 161,000  shares and 

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

December 31, 2022 and 

2021 , respectively.

There were 

104 and 124,000  unvested options excluded from the calculation of diluted earnings per share since the effect of any assumed exercise of the related awards would be anti-dilutive for the years ended December 31, 2022 and 

2021 , respectively.

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

(in thousands except per share data)

Income (loss) from continuing operations

Income from continuing operations

$ 107,932  

Income (loss) from discontinued operations, net of tax

Net income (loss)

$ 58,191  

Income from discontinued operations, net of tax

$ 108,682  

$ 60,731  

Denominator for basic income per share –

8 unchanged sentences

17,020  

Basic income (loss) per share:

Income (loss) from continuing operations

Basic income per share:

Income from continuing operations

$ 7.19  

Income (loss) from discontinued operations

$ 3.46  

Net income (loss)

Income from discontinued operations

$ 0.05  

Diluted income (loss) per share:

Income (loss) from continuing operations

$ 0.15  

Income (loss) from discontinued operations

$ 7.24  

Net income (loss)

$ 3.61  

Diluted income per share:

Income from continuing operations

$ 6.95  

$ 3.42  

Income from discontinued operations

$ 0.05  

$ 0.15  

$ 7.00  

$ 3.57  

Stock-Based Employee Compensation

We issue several types of stock-based compensation, including awards that vest based on service, market, and performance conditions or a combination of the conditions.

Performance-based and market-based awards vest contingent upon meeting certain performance or market criteria, respectively, established by the Compensation Committee of the Board of Directors.

Performance-based and market-based awards vest contingent upon meeting certain performance or market criteria, respectively, established by the Compensation Committee of the Board.

All awards require future service.

2 unchanged sentences

Awards that are only subject to time vesting provisions are amortized using the straight-line method.

Reclassifications

An adjustment has been made to the consolidated statements of cash flows for the year ended December 31, 2021, to identify the non cash expense for the reduction of the contingent liability of $ 3.4 million.

This change in classification does not affect previously reported cash flows from operating activities in the Consolidated Statements of Cash 

Flows or our previously reported consolidated results of operations.

Recent Accounting Pronouncements

3 unchanged sentences

Under this update, on initial recognition and at each reporting period, an entity will be required to recognize an allowance that reflects the entity’s current estimate of credit losses expected to be incurred over the life of the financial instrument.

This update will be effective for us for our annual reporting period beginning January 1, 2023, including interim periods within that reporting period.

Early adoption is permitted.

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

This update became effective for us for our annual reporting period beginning January 1, 2023, including interim periods within that reporting period.

The adoption of this standard will have an immaterial impact on our consolidated financial statements.

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

9 unchanged sentences

Twelve months ended December 31,

Total revenue

$ 5,397  

Operating expenses

Gain on disposal

(Reversal of) loss contingency

( 1,000 )  

44,151  

Operating income (loss)

Interest expense

Income (loss) before income taxes

Income tax expense (benefit)

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

Operating income

Income before income taxes

Income tax expense

Net income from discontinued operations, net of tax

$ 2,540  

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

Operating income for the year ended December 31, 2022 and 2021,  relates to the gain on the reversal of our contingent loss liability in the amount of $ 1.0 million and $ 3.4 million, respectively.

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

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

The following table summarizes the major classes of assets and liabilities included as discontinued operations as of December 31, 2022 and 2021 :

11 unchanged sentences

Contingent liabilities

44,151  

Total liabilities from discontinued operations

1 unchanged sentence

$ 5,100  

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

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

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

(in thousands)

Twelve months ended December 31,

Total revenue

$ 1,046,003  

$ 838,561  

Income (loss) from continuing operations

58,191  

Income (loss) per basic share from continuing operations

$ 3.46  

Income (loss) per diluted share from continuing operations

$ 3.42  

There were no net cash flows related to discontinued operations for the years ended December 31, 2022 or 2021.

Refer to Note 1, "Significant Accounting Policies" of the accompanying consolidated financial statements for further information about the amended TFS purchase agreement.

RESTRUCTURING AND COST SAVINGS INITIATIVES

Since the first quarter of 2020, we made significant changes to our operational business units, overhead structure and branding strategy in an effort to streamline our business in a manner that we believe will allow us to significantly lower our fixed costs, pay down debt and produce consistent acceptable margins. These changes include (i) a reduction in our fleet of tractors and refrigerated trailers, which have historically produced unacceptable or unprofitable operating income, (ii) reallocation of our operating fleet toward our more profitable expedited, dedicated and irregular route operations, (iii) the sale of our Hutchins, Texas terminal and discontinued use of our Texarkana, Arkansas terminal, (iv) changes to key management and reductions to headcount, (v) the closure and early termination of our leased office space in Chattanooga, Tennessee that our brokerage group occupied, (vi) the installation of new operational processes allowing us to abandon or discontinue the use of a number of peripheral information technology infrastructure and applications and (vii) a change in our branding strategy to focus on one  company name, phasing out the use of the Landair trade name.

Although the significant majority of restructuring and cost savings initiatives were completed in the second quarter of 2020, we incurred additional costs in the third and fourth quarters of 2020 as we continued to optimize our fleet profile and management team.

In the second quarter of 2020 we discontinued the use of a significant amount of property and equipment, including assets owned and held under operating leases. We adjusted the carrying value of the owned property and equipment down to fair market value less estimated costs of disposal and classified them as available held for sale as of June 30, 2020.

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

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

There were no such charges in 2021.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

Accordingly, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability.

The fair value of the commodity contracts, including our former fuel hedges, is determined based on quotes from the counterparty which were verified by comparing them to the exchange on which the related futures are traded, adjusted for counterparty credit risk.

The variable-cash receipts are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.

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.

The significant unobservable inputs used in the fair value of the contingent consideration liability include the financial projections over the earn-out period, the volatility of the underlying financial metrics, and estimated discount rates. 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;

Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly;

Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Financial Instruments Measured at Fair Value on a Recurring Basis

(in thousands)

Twelve months ended December 31,

Segment(s) Impacted

Value Determination

Revenue equipment

$ 16,779  

Expedited and Dedicated

Third Party Market Appraisal

Terminal facility, leasehold improvements, and equipment, Texarkana, AR

Expedited and Dedicated

Third Party Market Appraisal

Leased office facility, Chattanooga, TN

Managed Freight

Loss on ROU Asset and Leasehold Improvements

Training and orientation center, Chattanooga, TN

Expedited and Dedicated

Quoted Market Price

Impairment of right-of use asset, long lived properties, and equipment

$ 26,569  

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

There were no such activities in 2021.

December 31, 2022

December 31, 2021  

Interest rate swaps

Contingent consideration

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

December 31, 2022 or December 31, 2021.

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

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

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

December 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 December 31, 2022.

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.

The fair value of the contingent consideration is adjusted at each reporting period based on changes to the expected cash flows and related assumptions.

During the year ended 

December 31, 2022, the fair value of the contingent consideration increased to $ 17.0 million from $ 0.0 million at December 31, 2021.

Of the $ 17.0 million increase, $ 16.2 million relates to the initial valuation of the contingent consideration arrangement and the remaining increase of $ 0.8 million is the result of the subsequent adjustment to fair market value. The adjustment to the fair value of the contingent consideration liability was recorded as a component of general supplies and expenses within the consolidated statements of operations.

The contingent consideration liability is included in accrued expenses and other long-term liabilities in our consolidated balance sheets. 

The following table provides a summary (in thousands) of the activity for the contingent consideration liability for 2022 :

(in thousands)

Twelve months ended December 31,

Segment(s) Impacted

Gain on disposal of terminals, net

$ ( 4,740 ) Expedited and Dedicated

Restructuring related separation and other

Expedited, Dedicated, and Managed Freight

Abandonment of information technology infrastructure

Expedited and Dedicated

Change in useful life/abandonment of intangible assets

Dedicated, Managed Freight, and Warehousing

Abandonment of revenue equipment held under operating leases

Expedited and Dedicated

Contract exit costs and restructuring related costs and professional fees

Expedited and Dedicated

Total restructuring

December 31, 2021

Adjustments to fair market value

December 31, 2022

Contingent consideration

 $ -  

 $ ( 16,210 )  

 $ ( 813 )  

 $ ( 17,023 )

STOCK-BASED COMPENSATION

Our Third Amended and Restated 2006 Omnibus Incentive Plan, as amended (the "Incentive Plan") governs the issuance of equity awards and other incentive compensation to management and members of the Board of Directors.

On July 1, 2020, the stockholders, upon recommendation of the Board of Directors, approved the Second Amendment (the “Second Amendment”) to our Third Amended and Restated 2006 Omnibus Incentive Plan (the "Incentive Plan").

On July 1, 2020, the stockholders, upon recommendation of the Board, approved the Second Amendment (the “Second Amendment”) to our Third Amended and Restated 2006 Omnibus Incentive Plan (the "Incentive Plan").

The Second Amendment (i) increased the number of shares of Class A common stock available for issuance under the Incentive Plan by an additional 1,900,000 shares, (ii) added a fungible share reserve feature, under which shares subject to stock options and stock appreciation rights will be counted as one share for every share granted and shares subject to all other awards will be counted as 1.80 shares for every share granted, (iii) added a double-trigger vesting requirement upon a change in control, (iv) eliminated the Compensation Committee’s discretion to accelerate vesting, except in cases involving death or disability, (v) increased the maximum award granted or payable to any one participant under the Incentive Plan for a calendar year from 200,000 shares of Class A common stock or $ 2,000,000 , in the event the award is paid in cash, to 500,000 shares of Class A common stock or $ 4,000,000 , in the event the award is paid cash, (vi) re-set the date through which awards may be made under the Incentive Plan to June 1, 2030, and (vii) made other miscellaneous, administrative and conforming changes.

1 unchanged sentence

At December 31, 2022 , 

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

872,509 of the 4,200,000  shares noted above were available for award under the Incentive Plan.

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

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

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

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

Included in salaries, wages, and related expenses within the consolidated statements of operations is stock-based compensation expense of $ 6.0 million and $ 7.5 million, in 2022  and 

2021 , respectively.

Included in general supplies and expenses within the consolidated statements of operations is stock-based compensation expense for non-employee directors of $ 0.6 million and $ 0.4 million in 

2022  and 

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

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

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

2021 , respectively. All the stock compensation expense recorded in 2022  and 

2021  relates to restricted shares granted, other than $ 2.2 million and $ 2.4 million in 2022  and 

2021 , respectively, which relates to stock options.

Associated with stock compensation expense was $ 0.4 million and $ 0.3 million of income tax benefit in 2022  and expense in 

2021 , respectively, related to the exercise of restricted share vesting.

We received $ 0.4  million and $ 0.0 million related to the exercise of stock options during 2022  and 

Associated with the exercise of stock options during 2022  and 

2021  was $ 0.1 million and $ 0.0 million of income tax benefit, respectively. Forfeitures are recognized as they're incurred.

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

21 unchanged sentences

$ 13.94  

$ 15.31  

Unvested at December 31, 2022

2 unchanged sentences

December 31, 2022 will vest based on when and if the related vesting criteria are met for each award.

All awards require continued service to vest, and 

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

2021 and 2026 .

Performance based awards account for 

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

There were no unvested market based awards at 

December 31, 2021 .

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

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

14.2  months.

All awards require continued service to vest.

Unrecognized compensation expense for outstanding shares was $ 4.2 million as of 

December 31, 2022 , which is probable to be recognized over a weighted average period of approximately 

The fair value of restricted share awards that vested in 2022  and 

2021  was approximately $ 3.4 million and $ 4.9 million, respectively.

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

Forfeitures are recognized as they're incurred.

The following table summarizes our stock option activity for the fiscal year ended December 31, 2022  and 2021 :

1 unchanged sentence

Weighted average exercise price

Weighted average grant date fair value

Weighted average remaining contractual term

1 unchanged sentence

Outstanding at December 31, 2020

$ 15.77  

$ 7.26  

9.8 years  

Options granted

$ 21.24  

$ 9.85  

Options exercised

Options forfeited

( 60 )  

$ 15.77  

$ 7.26  

Outstanding at December 31, 2021

$ 17.99  

Options granted

$ 8.31  

9.0 years  

$ 9,382  

Options granted

Options exercised

Options forfeited

( 24 )  

$ 15.77  

$ 4.90  

Options forfeited

Outstanding at December 31, 2022

1 unchanged sentence

$ 8.39  

8.0 years  

$ 17,968  

Exercisable at December 31, 2022

$ 15.77  

$ 4.90  

7.9 years  

$ 2,649  

Unrecognized compensation cost for outstanding options was $ 4.5 million at 

10 unchanged sentences

5 - 10  

$ 4,257  

Land and improvements

12 unchanged sentences

$ 619,686  

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

$ 518,406  

Depreciation expense was $ 53.2 million and $ 49.8 million in 2022  and 2021 , respectively.

This depreciation expense excludes net gains on the sale of property and equipment totaling $ 40.3 million and $ 3.8 million in 2022  and 2021 , respectively.

3 unchanged sentences

Leases  for additional information about our finance and operating leases.

GOODWILL, OTHER INTANGIBLES, 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 inventory management services. Landair's results have been included in the consolidated financial statements since the date of acquisition.

The Company's only goodwill and other intangible assets are a result of the Landair 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.

As a result of management compensation structure changes and a change in the branding strategy of the organization, the Company revised the estimated remaining useful life of the Landair trade name to 

15  months as of 

June 30, 2020. 

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

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

second  quarter of 

 These changes resulted in additional amortization of $ 1.3  million during the year ended December 31, 2020, 

or a $ 1.0  million, or $ 0.06  per diluted share, decrease in net income. The remaining useful lives as adjusted are included in the summary of other intangible assets below.

A summary of indefinite-lived goodwill, by reportable operating segment as of 

December 31, 2021  and 

2020  is as follows:

ACQUISITION OF AAT CARRIERS, INC.

On February 9, 2022, we acquired 100 % of the outstanding stock of AAT headquartered in Chattanooga, TN. AAT specializes in highly regulated, time-sensitive loads for the U.S.

The acquisition date fair value of the consideration transferred was $ 54.7 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.

The total purchase price, including any earnout achieved, is expected to range from $ 38.5 million to $ 57.0 million depending on the results achieved by AAT.

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

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

February 9, 2022

(in thousands)

Cash paid pursuant to Stock Purchase Agreement

$ 40,347  

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

Contingent consideration

16,210  

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 following table provides a summary (in thousands) of the activity for the contingent consideration liability for 2022 :

(in thousands)

December 31, 2021

Adjustments to fair market value

December 31, 2022

Gross/net goodwill

Contingent consideration

 $ -  

 $ ( 16,210 )  

 $ ( 813 )  

 $ ( 17,023 )

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

Accounts receivable

Prepaid expenses

Other short-term assets

Net property and equipment

Credentialing intangible asset

32,000  

Managed Freight

Total identifiable assets acquired

40,888  

Accounts payable

Accrued expenses

Finance lease obligations

Other long-term liabilities

Total liabilities assumed

Net identifiable assets acquired

39,012  

Total goodwill

15,699  

Net assets acquired

$ 54,711  

A summary of other intangible assets, by reportable operating segment as of 

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

Refer to Note 7, "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 December 31, 2022 are as follows:

(in thousands)

December 31, 2022

Total revenue

$ 33,061  

$ 13,263  

GOODWILL AND OTHER ASSETS

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

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

Amortization expense of $ 4.3 million and $ 4.0 million for the years ended December 31, 2022  and 

2021 , respectively, was included in depreciation and amortization in the consolidated statements of operations.

A summary of other intangible assets, by reportable segment as of 

December 31, 2022  and 

24 unchanged sentences

17,625  

Credentialing:

32,000  

( 1,956 )  

30,044  

Total credentialing

32,000  

( 1,956 )  

30,044  

Total other intangible assets

10 unchanged sentences

$ ( 2,130 )  

$ 1,198  

Managed Freight

6 unchanged sentences

( 4,104 )  

11,141  

Managed Freight

13 unchanged sentences

102 months as of 

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

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

December 31, 2022  and 2021 , respectively.

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

1 unchanged sentence

$ 4,483  

25,254  

The assignment of goodwill and intangible assets to our reportable segments was not complete as of December 31, 2022.

The carrying amount of goodwill was $ 58.2 million at December 31, 2022, compared to $ 42.5 million at December 31, 2021, as a result of the AAT acquisition.

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

(in thousands)

December 31, 2021

December 31, 2022

Gross/net goodwill

Acquired goodwill for AAT

Accumulated impairment loss

Gross/net goodwill

$ 15,699  

15,320  

Managed Freight

21,750  

Total goodwill

$ 42,518  

$ 15,699  

$ 58,217  

A summary of other assets as of December 31, 2022  and 2021 is as follows:

4 unchanged sentences

Other long-term receivables

24,378  

Other assets, net

2 unchanged sentences

$ 52,384  

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

Other long-term receivables primarily represents amounts related to extended warranties on our revenue equipment on our consolidated balance sheet as of December 31, 2022, as well as amounts recorded as a receivable in other assets and as a corresponding accrual in the long-term portion of insurance and claims accruals on our consolidated balance sheet as of December 31, 2021, for claims above our self-insured retention for which we believe it is reasonably assured that the insurers will provide their portion of such claims.

The Company conducted its annual impairment assessments and tests of goodwill for each reporting unit as of October 1, 2022. 

3 unchanged sentences

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

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

As a result of the most recent goodwill impairment analysis performed ( October 1, 2022), the Company determined that it was not more likely than not that the fair value of a reporting unit is less than the reporting unit's carrying amount.

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

1 unchanged sentence

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

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

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

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

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

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

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

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

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

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

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

Current and long-term debt consisted of the following at December 31, 2021  and 2020 :

No such events were identified as of December 31, 2022.

Current and long-term debt and lease obligations consisted of the following at December 31, 2022  and 2021 :

(in thousands)

2 unchanged sentences

Borrowings under Credit Facility

$ 15,000  

Borrowings under the Draw Note

Revenue equipment installment notes;

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

weighted average interest rate of 4.7 % at December 31, 2022, and 1.2 % December 31, 2021, due in monthly installments with final maturities at various dates ranging from May 2025 to June 2027, secured by related revenue equipment

17,656  

71,267  

Real estate notes;

4 unchanged sentences

90,367  

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

20,347  

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

Principal portion of operating lease obligations, secured by related equipment

3 unchanged sentences

21,554  

Total debt and finance lease obligations

Total debt and lease obligations

$ 42,402  

2 unchanged sentences

$ 45,870  

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

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

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

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

The Credit Facility is a $ 110.0 million revolving credit facility (increased from $ 95.0 million by the Eighteenth Amendment), with an uncommitted accordion feature that, so long as no event of default exists, allows us to request an increase in the revolving credit facility of up to $ 50.0 million subject to Lender acceptance of the additional funding commitment. The Credit Facility includes a letter of credit sub facility in an aggregate amount of $ 105.0 million (increased from $ 95.0 million by the Eighteenth Amendment) and a swing line sub facility in an aggregate amount equal to the greater of $ 10.0 million or 10 % of the Lenders' aggregate commitments under the Credit Facility from time-to-time. The Credit Facility matures in October 2025 ( extended from September 2021 by the Eighteenth Amendment).

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

while LIBOR loans accrue interest at LIBOR, plus an applicable margin ranging from 1.25 % to 1.75 % (decreased from a range of 1.5 % to 2.0 % by the Eighteenth Amendment).

The Credit Facility is a $ 110.0 million revolving credit facility, with an uncommitted accordion feature that, so long as no event of default exists, allows us to request an increase in the revolving credit facility of up to $ 75.0 million subject to Lender acceptance of the additional funding commitment.

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

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 or revenue equipment pledged under other financing agreements, including revenue equipment installment notes and finance leases.

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

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

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

or (B) the sum of (i) 87.5 % (increased from 85 % by the Eighteenth Amendment) of eligible accounts receivable, plus (ii) the least of (a) 85 % of the appraised net orderly liquidation value of eligible revenue equipment, (b) 100 % (increased from 95 % by the Eighteenth Amendment) of the net book value of eligible revenue equipment, (c) 40.9 % (increased from 35 % by the Eighteenth Amendment) of the Lenders' aggregate revolving commitments under the Credit Facility, or (d) following the Eighteenth Amendment, $ 45.0 million, plus (iii) the lesser of (a) $ 10.4 million (as of the date of the Eighteenth Amendment) or (b) 80 % (increased from 75 % by the Eighteenth Amendment) of the appraised fair market value of eligible real estate, as reduced by a periodic amortization amount.

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.

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;

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) 60.0 % of the Lenders' aggregate revolving commitments under the Credit Facility, or (d) $ 65.0 million.

We had $ 0.0 million borrowings outstanding under the Credit Facility as of December 31, 2022 , undrawn letters of credit outstanding of approximately $ 23.9 million, and available borrowing capacity of $ 86.1 million. Based on availability as of December 31, 2022  and 2021 , there was no fixed charge coverage requirement.

1 unchanged sentence

The Credit Facility contains certain restrictions and covenants relating to, among other things, debt, dividends, liens, acquisitions and dispositions outside of the ordinary course of business, and affiliate transactions.

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

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

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

January 2022 to 

November 2022 .

May 2025 to 

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 $ 83.4 million are cross-defaulted with the Credit Facility.

4 unchanged sentences

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

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

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

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

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

During the second quarter of 2021 we repaid $ 31.0 million of the borrowings under the Draw Note and during the third quarter of 2021 we repaid the remaining balance. As of December 31, 2022, there were no outstanding borrowings under the Draw Note.

As of December 31, 2022 , the scheduled principal payments of debt, excluding finance leases for which future payments are discussed in Note 9  are as follows:

2 unchanged sentences

21,626  

23,117  

13,579  

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

21 unchanged sentences

19,583  

Short-term lease cost

13,625  

Variable lease cost

5 unchanged sentences

Operating cash flows from finance leases

$ 1,003  

Operating cash flows from operating leases

5 unchanged sentences

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

$ 3,229  

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

5 unchanged sentences

Weighted-average discount rate—operating leases

During the year ended December 31, 2020, we recognized $ 2.2 million of impairment expense related to a leased office facility in Chattanooga, TN held under an operating lease and approximately $ 0.8 million of additional revenue equipment and purchased transportation expense related to the abandonment of revenue equipment held under an operating lease.

During the year ended December 31, 2022, we recognized $ 7.5 million of expense related to the early abandonment and disposal charges related to revenue equipment held under operating leases as the equipment was a source of significant operational headwinds throughout the year due to poor fuel economy, unusually high maintenance costs, and elevated downtime.

December 31, 2022  and 2021,  right-of-use assets of $ 58.9 million and $ 35.7 million for operating leases, respectively, and $ 5.3 million and $ 23.2 million for finance leases, are included in net property and equipment in our 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 consolidated statement of operations. Amortization of finance leased assets is included in depreciation and amortization expense in the consolidated statement of operations.

7 unchanged sentences

18,147  

11,719  

10,572  

Total minimum lease payments

10 unchanged sentences

$ 46,428  

$ 3,969  

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

9 unchanged sentences

$ 24,091  

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

Income tax expense for the years ended December 31, 2022 and 2021  is comprised of:

(in thousands)

1 unchanged sentence

$ 16,123  

$ 9,875  

Federal, deferred

12,774  

State, current

State, deferred

Income tax (benefit) expense

Income tax expense

$ 34,860  

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

$ 20,962  

Income tax expense for the years ended December 31, 2022 and 2021  is summarized below:

(in thousands)

1 unchanged sentence

$ 29,986  

$ 16,643  

State income taxes, net of federal income tax effect

831(b) election

Per diem allowances

Tax contingency accruals

2 unchanged sentences

( 379 )  

( 295 )  

Excess tax benefits on share-based compensation

3 unchanged sentences

Executive compensation disallowance

Income tax (benefit) expense

( 414 )  

Income tax expense

$ 34,860  

$ 20,962  

The amount of income tax expense (benefit) allocated to discontinued operations for TFS is $ 0.2 million expense and $ 0.8 million benefit for the years ended December 31, 2022 and 

2 unchanged sentences

2022  and 

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

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

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

2021 , to income before income taxes primarily due to state income taxes, net of federal income tax effect, adjusted for permanent differences.

The IRS has issued guidance that allows meals and entertainment per diem to be 100% deductible for tax years 2021 and 2022.

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

The temporary differences and the approximate tax effects that give rise to our net deferred tax liability at December 31, 2022  and 2021 are as follows:

5 unchanged sentences

Net operating loss carryovers

11,395  

Leased liability

16,292  

Finance lease obligation

Valuation allowance

Total deferred tax assets

10 unchanged sentences

481(a) - finance leases

( 2,177 )  

Prepaid expenses

4 unchanged sentences

$ ( 98,716 )  

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

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

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

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

The net deferred tax liability of $ 98.8 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 Company has determined that, based on forecasted taxable income resulting from the reversal of deferred tax liabilities, primarily generated by accelerated depreciation for tax purposes in prior periods, and tax planning strategies available to us, a valuation allowance was not necessary at December 31, 2022 for our deferred tax assets since it is more likely than not they will be realized from 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.

As of December 31, 2022 , we had a $ 0.4 million liability recorded for unrecognized tax benefits, which includes interest and penalties of less than $ 0.1 million.

We recognize interest and penalties accrued related to unrecognized tax benefits in tax expense.

3 unchanged sentences

Balance as of January 1,

Increases related to prior year tax positions

Decreases related to prior year positions

Increases related to current year tax positions

Decreases related to settlements with taxing authorities

Decreases related to lapsing of statute of limitations

6 unchanged sentences

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

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

Our federal net operating loss ("NOL") was fully consumed in 2021.

We have $ 1.0 million of federal tax credits available to offset future tax.

7 unchanged sentences

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

President Biden signed the Inflation Reduction Act (the "IRA") into law on August 16, 2022.

We do not anticipate the IRA will have a significant impact on income tax expense or on other taxes.

One of the most impactful provisions of the IRA includes the establishment of a Corporate Alternative Minimum Tax ("CAMT").

However, this tax only applies to corporations with three -year average earnings in excess of $1.0 billion.

We will continue to monitor the CAMT each year to determine if we will become an applicable corporation.

Additionally, the IRA enacted an excise tax on stock buybacks, which imposes a 1% tax on stock buybacks, subject to netting provisions regarding stock awarded to employees as part of their compensation.

We do not believe this will have a material impact on our active buyback program, but will continue to monitor IRS guidance and regulations on how the buyback tax will be imposed and administered.

EQUITY METHOD INVESTMENT

9 unchanged sentences

2022  or 

Additionally, we paid $ 0.6 million and 

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

Additionally, we paid $ 6.1 million and $ 0.8 million to TEL for leases of revenue equipment and maintenance in 2022  and 

2021 , respectively.

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

December 31, 2021  and 

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

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

December 31, 2022  and deferral of gains of approximately $ 0.1 million for the year ended 

December 31, 2021  representing 49 % of the gains on tractors and trailers sold to TEL less any gains previously deferred and recognized when the equipment was sold to a third party. Deferred gains totaling $ 0.2 million at December 31, 2022  and 2021 , respectively, are being carried as a reduction in our investment in TEL. 

We have accounted for our investment in TEL using the equity method of accounting and thus our financial results include our proportionate share of TEL's net income, which amounted to $ 25.2 million in 2022  and $ 14.8 million in 2021 .

2 unchanged sentences

2021 , which was distributed to each member based on its respective ownership percentage. 

Our accounts receivable from TEL and investment in TEL as of 

Our accounts receivable and payable from TEL and investment in TEL as of 

December 31, 2022  and 2021 , are as follows:

2 unchanged sentences

Driver advances and other receivables

Accounts payable to TEL

Accrued expenses

Investment in TEL

1 unchanged sentence

$ 44,196  

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

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

Our accounts payable to TEL related to operating lease payments owed to TEL.

Our investment in TEL is comprised of $ 4.9 million cash investment and our equity in TEL's earnings since our investment, partially offset by dividends received since our investment for minimum tax withholdings as noted above.

Additionally, the abovementioned deferred gains on sales of equipment to TEL are carried as a reduction in our investment in TEL.

See TEL's summarized financial information below.

29 unchanged sentences

$ 30,078  

EMPLOYEE BENEFIT PLANS

Deferred Profit Sharing Employee Benefit Plan

1 unchanged sentence

Employees may contribute a percentage of their annual compensation up to the maximum amount allowed by the Internal Revenue Code.

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

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

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

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

We made contributions of $ 1.9 million in 2022  and 2021 , respectively, to the profit sharing and savings plan.

Nonqualified Deferred Compensation Plan

The Supplemental Savings Plan (the "SSP") is our nonqualified deferred compensation plan started during 2022 for the benefit of eligible key managerial employees whose contributions to our deferred profit sharing and savings plan are limited because of IRS regulations affecting highly compensated employees.

Under the terms of the SSP, participants may elect to defer compensation on a pre-tax basis within annual dollar limits we establish.

At December 31, 2022, there were 15 active participants in the SSP. We may make discretionary contributions as we so determine each year.

Each participant is fully vested in all deferred compensation and earnings;

however these amounts are subject to general creditor claims until distributed to the participant. Under current federal tax law, we are not allowed a current income tax deduction for the compensation deferred by participants, but we are allowed a tax deduction when a distribution payment is made to a participant from the SSP.

The accumulated benefit obligation was $ 0.2 million as of December 31, 2022 and is included in other long-term liabilities in the consolidated balance sheets.

We purchased life insurance policies with the intent to fund the future liability.

The aggregate market value of the life insurance policies was $ 0.2 million as of December 31, 2022, and was included in other non-current assets in the consolidated balance sheets.

The accumulated benefit obligation and aggregate market value of the life insurance policies were as follows (in thousands):

December 31, 2022

Accumulated benefit obligation

Aggregate market value

RELATED PARTY TRANSACTIONS

3 unchanged sentences

From time-to-time, we are a party to ordinary, routine litigation arising in the ordinary course of business, most of which involves claims for personal injury and/or property damage incurred in connection with the transportation of freight.

Our subsidiary Covenant Transport, Inc.

(“Covenant Transport”) is a defendant in a lawsuit filed on November 9, 2018, in the Superior Court of Los Angeles County, California. The lawsuit was filed on behalf of Richard Tabizon (a California resident and former driver) who is seeking to have the lawsuit certified as a class action. The complaint asserts that the time period covered by the lawsuit is from October 31, 2014 to the present and alleges claims for failure to properly pay drivers for rest breaks, failure to provide accurate itemized wage statements and/or reimbursement of business related expenses, unlawful deduction of wages, failure to pay proper minimum wage and overtime wages, failure to provide all wages due at termination, and other related wage and hour claims under the California Labor Code. Since the original filing date, the case has been removed from the Los Angeles Superior Court to the U.S.

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

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

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

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

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

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

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

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

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

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

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

Over the ensuing 18 –

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

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

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

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

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

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

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

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

December 31, 2021.

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 December 31, 2022.

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

In management's opinion, our potential exposure under pending legal proceedings is adequately provided for in the accompanying consolidated financial statements.

Refer to Note 1, "Significant Accounting Policies" of the accompanying consolidated financial statements for information about our insurance program. 

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

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

We had $ 23.9 million and $ 26.4 million of outstanding and undrawn letters of credit as of December 31, 2022  and 2021 , respectively.

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

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

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

We had commitments outstanding at December 31, 2022 , to acquire revenue equipment totaling approximately $ 156.6 million versus commitments at December 31, 2021 of approximately $ 73.8 million.

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

2 unchanged sentences

Our four reportable segments are:

The Expedited reportable operating segment primarily provides truckload services to customers with high service freight and delivery standards, such as 1,000 miles in 22 hours, or 15 -minute delivery windows.

The Expedited reportable segment primarily provides truckload services to customers with high service freight and delivery standards, such as 1,000 miles in 22 hours, or 15 -minute delivery windows.

Expedited services generally require two -person driver teams on equipment either owned or leased by the Company.

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. 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.

The Dedicated reportable 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:

The Managed Freight segment includes our brokerage and transport management services ("TMS").

The Managed Freight reportable segment includes our brokerage and transport management services ("TMS").

Brokerage services provide logistics capacity by outsourcing the carriage of customers' freight to third parties.

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

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

These changes impacted the Company’s reportable segments but did not impact the Company’s Consolidated Financial Statements.

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

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

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

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

Substantially all intersegment sales prices are market based.

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

The following table summarizes our segment information for 2021  and 

The following table summarizes our reportable segment information for 2022  and 

(in thousands)

8 unchanged sentences

Intersegment revenue

Operating income (loss)

Operating income

60,552  

16 unchanged sentences

Intersegment revenue

Operating income (loss)

33,064  

( 1,357 )  

Operating (loss) income

32,461  

10 unchanged sentences

Intersegment revenues for reportable segments

11,630  

Elimination of intersegment revenues

4 unchanged sentences

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

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

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

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

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

On February 10, 2022, our Board adopted a 10b5 - 1 plan for the purchase of up to $ 30.0 million in shares subject to defined trading parameters.

Under such authorization, we repurchased 0.7 million shares of our Class common stock for $ 15.2 million during the first 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 2.0  million shares of our Class A common stock for $ 54.7  million through December 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 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.

On August 17, 2022, our Board declared a cash dividend of $ 0.08  per share, which was paid on September 30, 2022, to stockholders of record on September 2, 2022. 

On November 16, 2022, our Board declared a cash dividend of $ 0.08  per share, which was paid on December 

30, 2022, to stockholders of record on December 2, 2022.

SUBSEQUENT EVENTS

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

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

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

("AAT") headquartered in Chattanooga, TN.

AAT will become a part of our Expedited reportable segment.

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

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

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

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

The initial accounting for the acquisition is incomplete.

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

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

On January 13, 2023, the Company sold a Tennessee based terminal property for approximately $ 12 million in cash net of transaction costs and expects to record a pretax gain on sale of property of approximately $ 8 million in the first quarter of 2023.

On February 15, 2023, our Board approved a quarterly cash dividend program of $ 0.11 per share, subject to quarterly approval by our Board.

Our Board has approved the dividend, which will be for stockholders of record as of March 3, 2023, and payable on March 31, 2023.

On January 30, 2023, the Board approved an amendment to the Company's stock repurchase program authorizing the purchase of up to an aggregate $ 55 million of our Class A common stock.

The amendment added an incremental approximately $ 37.5 million to the approximately $ 17.5 million that was then-remaining under the program.

We repurchased an additional 0.3  million shares of our Class A common stock for $ 10.8 million from January 1, 2023 through February 24, 2023.

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

What changed 10-K

Item 9A. Controls and Procedures