What changed in this filing

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Item 1. Financial Statements

2023-08-09 compared with 2023-05-05 · 592 added, 229 removed, 925 unchanged (47% of the section changed)

4 unchanged sentences

(In thousands, except share data)

March 31, 2023

June 30, 2023

December 31, 2022

12 unchanged sentences

Assets held for sale

17,924  

Income taxes receivable

24 unchanged sentences

Current liabilities:

Checks outstanding in excess of bank balances

$ 2,096  

Accounts payable

31 unchanged sentences

Other long-term liabilities

12,204  

Long-term liabilities of discontinued operations

6 unchanged sentences

40,000,000 shares authorized;

16,125,786 shares issued and 10,681,770 outstanding as of March 31, 2023;

16,125,786 shares issued and 10,596,735 outstanding as of June 30, 2023;

and 16,125,786 shares issued and 11,207,570 outstanding as of December 31, 2022

6 unchanged sentences

Treasury stock at cost;

5,444,016 and 4,918,216 shares as of March 31, 2023 and December 31, 2022, respectively

5,529,051 and 4,918,216 shares as of June 30, 2023 and December 31, 2022, respectively

( 131,402 )  

14 unchanged sentences

FOR THE 

three months ended March 31, 2023 and 2022

three and six months ended June 30, 2023 and 2022

(In thousands, except per share data)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Freight revenue

22 unchanged sentences

Income from discontinued operations

Net income (1)

Net income per share

Diluted income per share:

1 unchanged sentence

Income from discontinued operations

Net income per share

Basic weighted average shares outstanding

Diluted weighted average shares outstanding

Total may not sum due to rounding.

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

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE three months ended March 31, 2023 and 2022

FOR THE three and six months ended June 30, 2023 and 2022

(Unaudited and in thousands )

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

$ 12,293  

$ 24,526  

$ 28,928  

$ 46,693  

Other comprehensive income:

Unrealized (loss) gain on effective portion of cash flow hedges, net of tax of $ 114 in 2023 and ($ 308 ) in 2022, respectively

Unrealized gain on effective portion of cash flow hedges, net of tax of ($ 158 ) and ($ 44 ) in 2023 and ($ 198 ) and ($ 506 ) in 2022, respectively

Reclassification of cash flow hedge losses (gains) into statement of operations, net of tax of $ 33 and $ 60 in 2023 and ($ 25 ) and ($ 61 ) in 2022, respectively

( 93 )  

Reclassification of cash flow hedge (gains) losses into statement of operations, net of tax of $ 27 in 2023 and ($ 36 ) in 2022, respectively

( 171 )  

Total other comprehensive (loss) income

Total other comprehensive income (loss)

( 44 )  

2 unchanged sentences

$ 25,179  

$ 28,884  

$ 48,352  

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

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE three months ended March 31, 2023 and 2022

FOR THE three and six months ended June 30, 2023 and 2022

(Unaudited and in thousands)

For the Three Months Ended

For the Three and Six Months Ended June 30, 2023

Comprehensive

10 unchanged sentences

( 1,466 )  

Share repurchase

( 20,805 )  

Other comprehensive income

( 403 )  

Stock-based employee compensation expense

Issuance of restricted shares, net

( 1,523 )  

Balances at March 31, 2023

$ 152,921  

$ ( 127,267 )  

$ 344,640  

$ 371,162  

12,293  

Cash dividend ($ 0.11 per common share)

( 1,442 )  

Share repurchase

( 4,683 )  

Other comprehensive income

Stock-based employee compensation expense

Exercise of stock options

Issuance of restricted shares, net

( 389 )  

Balances at March 31, 2023

Balances at June 30, 2023

$ 154,348  

2 unchanged sentences

$ 355,491  

For the Three Months Ended

$ 379,664  

For the Three and Six Months Ended June 30, 2022

Comprehensive

22 unchanged sentences

$ 358,882  

24,526  

Cash dividend ($ 0.0625 per common share)

( 975 )  

Other comprehensive loss

Share repurchase

( 28,565 )  

Stock-based employee compensation expense

Issuance of restricted shares, net

( 1,053 )  

Balances at June 30, 2022

$ 151,238  

$ ( 65,492 )  

$ 269,747  

$ 356,031  

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

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE  three months ended March 31, 2023 and 2022

FOR THE  six months ended June 30, 2023 and 2022

(Unaudited and in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

1 unchanged sentence

Provision for losses on accounts receivable

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

Reversal of gain on sales to equity method investee

Depreciation and amortization

12 unchanged sentences

Cash flows from investing activities:

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

Acquisition, net of cash acquired

Other investments

1 unchanged sentence

Proceeds from disposition of property and equipment

Net cash flows provided (used) by investing activities

Net cash flows used by investing activities

Cash flows from financing activities:

7 unchanged sentences

Payment of contingent consideration liability

Proceeds from exercise of stock options

Payment of minimum tax withholdings on stock compensation

Common stock repurchased

Net cash flows (used) provided by financing activities

Net cash flows provided (used) by financing activities

Net change in cash and cash equivalents

19 unchanged sentences

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

therefore, operating results for the three months ended March 31, 2023  are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 .

therefore, operating results for the six months ended June 30, 2023  are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 .

These condensed consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in our Form 10 -K for the year ended December 31, 2022 .

19 unchanged sentences

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 288,000  shares issuable upon conversion of unvested restricted shares for the three months ended March 31, 2023 , and 

167,000 shares issuable upon conversion of unvested restricted shares for the three months ended March 31, 2022 .

There were 

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

three months ended March 31, 2023 and 2022 .

There were approximately 235,000  and 

251,000 shares issuable upon conversion of unvested restricted shares for the three and six months ended June 30, 2023 , and 

237,000  and 252,000  shares issuable upon conversion of unvested restricted shares for the three and six months ended June 30, 2022 .

There were 

no and less than 

1,000  unvested shares excluded from the calculation of diluted earnings per share as anti-dilutive for the three and six months ended June 30, 2023 . There were 

no  unvested shares excluded from the calculation of diluted earnings per share as anti-dilutive for the three and six months ended June 30, 2022 . There were 

400,000  and 

365,000  shares issuable upon conversion of unvested employee stock options for the 

three months ended March 31, 2023  and no shares issuable upon conversion of unvested employee stock options for the three months ended March 31, 2022 .

three and six months ended June 30, 2023  and 10,000  and 

11,000 shares issuable upon conversion of unvested employee stock options for the three and six months ended June 30, 2022 .

There were 

51,000  unvested employee stock options excluded from the calculation of diluted earnings per share as anti-dilutive for the three months ended March 31, 2023  and no  unvested employee stock options excluded from the calculation of diluted earnings per share as anti-dilutive for the three months ended March 31, 2022 . Income per share is the same for both Class A and Class B shares.

35,000  unvested employee stock options excluded from the calculation of diluted earnings per share as anti-dilutive for the three and six months ended June 30, 2023  and 33,000  unvested employee stock options excluded from the calculation of diluted earnings per share as anti-dilutive for the three and six months ended June 30, 2022 . Income per share is the same for both Class A and Class B shares.

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

1 unchanged sentence

Three Months Ended

Six Months Ended

Income from continuing operations

1 unchanged sentence

$ 24,526  

$ 28,628  

$ 46,693  

Income from discontinued operations

1 unchanged sentence

$ 24,526  

$ 28,928  

$ 46,693  

Denominator for basic income per share –

2 unchanged sentences

15,514  

13,150  

16,058  

Effect of dilutive securities:

4 unchanged sentences

15,761  

13,766  

16,321  

Basic income per share:

2 unchanged sentences

$ 1.58  

$ 2.18  

$ 2.91  

Income from discontinued operations

Net income(1)

Net income per share(1)

$ 0.95  

$ 1.58  

$ 2.20  

$ 2.91  

Diluted income per share:

2 unchanged sentences

$ 1.56  

$ 2.08  

$ 2.86  

Income from discontinued operations

Net income per share

$ 0.91  

$ 1.56  

$ 2.10  

$ 2.86  

( 1 ) Total may not sum due to rounding.

3 unchanged sentences

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.

There were no fuel hedge derivatives outstanding as of March 31, 2023, or December 31, 2022.

There were no fuel hedge derivatives outstanding as of June 30, 2023 , or December 31, 2022.

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.

11 unchanged sentences

(in thousands)

March 31, 2023

June 30, 2023

December 31, 2022

3 unchanged sentences

( 17,023 )  

Our financial instruments not recorded at fair value in the accompanying financial statements consist primarily of cash and cash equivalents, certificates of deposit, accounts receivable, accounts payable, and debt.

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 

March 31, 2023 , as the weighted average interest rate on these notes approximates the market rate for similar debt.

June 30, 2023 , 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.

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

We acquired AAT in February 2022.

Contingent consideration arrangements require us to pay up to $ 20.0 million of additional consideration to AAT Carriers, Inc.'s ("AAT's") former shareholders based on AAT's results during the first two post-acquisition years and up to $ 30.0 million of additional consideration to Lew Thompson & Son Trucking, Inc.'s ("LTST's") former shareholders based on LTST's results during the first three post-acquisition years.

Refer to Note 12, "Acquisition of Lew Thompson & Son Trucking, Inc.", for additional information regarding the LTST acquisition.

We acquired AAT in February 2022 and LTST in April 2023.

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 three  months ended March 31, 2023, we paid $ 10.0 million based on the results of the first post-acquisition year and the fair value of the remaining contingent consideration increased by $ 1.5 million.

Of the $10.0 million paid for the contingent consideration liability, $ 9.2 million was classified as financing cash flows and $0.2 million was classified as operating cash flows within the condensed consolidated statement of cash flows.

The fair value of the contingent liability was $ 8.5 million at March 31, 2023 and $ 17.0 million at December 31, 2022. 

During the three and six months ended June 30, 2023, we paid none and $ 10.0 million, respectively, based on AAT's results for the first post-acquisition year.

The fair value of the contingent consideration increased by $ 10.5 million and $ 1.5 million, for the three and six months ended June 30, 2023, respectively.

Of the $ 10.5 million increase, $ 10.0 million was related to the initial recognition of the LTST additional consideration arrangement and $ 0.5 million was due to a change in the fair value for the AAT contingent consideration arrangement. Of the $ 10.0 million paid for the contingent consideration liability during 2023, $ 9.2 million was classified as financing cash flows and $ 0.8 million was classified as operating cash flows within the condensed consolidated statement of cash flows.

The adjustment to the fair value of the contingent consideration liability was recorded as a component of general supplies and expenses within the condensed consolidated statements of operations.

The contingent consideration liability is included in accrued expenses in our condensed consolidated balance sheets. 

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

The following table provides a summary (in thousands) of the activity for the contingent consideration liability for 2023:

December 31, 2022  

Additions  

Adjustments to fair market value  

Payments  

June 30, 2023  

Contingent consideration  

 $ ( 17,023 )  

 $ ( 10,016 )  

 $ ( 1,992 )  

 $ 10,000  

 $ ( 19,031 )

Discontinued Operations

3 unchanged sentences

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

The following table summarizes the results of our discontinued operations for the three months ended March 31, 2023 and 2022 :

The following table summarizes the results of our discontinued operations for the three and six months ended June 30, 2023 and 2022 :

(in thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Reversal of contingent loss liability

$ ( 200 )  

$ ( 400 )  

Income before income taxes

1 unchanged sentence

Income from discontinued operations, net of tax

Reversal of contingent liability for the three  months ended March 31, 2023 relates to the reduced exposure of future indemnification by the Company to the purchaser of TFS, Triumph Bancorp, Inc.

Reversal of contingent liability for the three and six  months ended June 30, 2023 relates to the reduced exposure of future indemnification by the Company to the purchaser of TFS, Triumph Bancorp, Inc.

("Triumph"), as a result of the collection of covered receivables identified in the amended purchase agreement.

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

March 31, 2023 and December 31, 2022 :

June 30, 2023 and December 31, 2022 :

(in thousands)

March 31, 2023

June 30, 2023

December 31, 2022

11 unchanged sentences

$ 4,100  

There were no net cash flows related to discontinued operations for the three months ended March 31, 2023 and 2022 .

There were no net cash flows related to discontinued operations for the three and six months ended June 30, 2023 and 2022 .

Segment Information

15 unchanged sentences

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

The following table summarizes our total revenue by our four reportable segments, as used by our chief operating decision maker in making decisions regarding allocation of resources etc., for the three months ended March 31, 2023 and 2022 :

(in thousands)

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Managed Freight

8 unchanged sentences

11,783  

Three Months Ended March 31, 2022

Six Months Ended June 30, 2023

Managed Freight

9 unchanged sentences

10,390  

29,415  

Three Months Ended June 30, 2022

Managed Freight

Total revenue from external customers

$ 121,643  

$ 96,767  

$ 80,281  

$ 18,686  

$ 317,377  

Intersegment revenue

Operating income

14,610  

26,873  

Six Months Ended June 30, 2022

Managed Freight

Total revenue from external customers

$ 220,440  

$ 185,714  

$ 166,432  

$ 36,376  

$ 608,962  

Intersegment revenue

Operating income (loss)

23,941  

19,458  

50,720  

(in thousands)

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Total external revenues for reportable segments

1 unchanged sentence

$ 317,377  

$ 540,867  

$ 608,962  

Intersegment revenues for reportable segments

1 unchanged sentence

( 3,915 )  

( 1,006 )  

( 8,377 )  

Total consolidated revenues

1 unchanged sentence

$ 317,377  

$ 540,867  

$ 608,962  

Income tax expense in both 

3 unchanged sentences

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

This  per diem program increases our drivers' net pay per mile, after taxes, while decreasing gross pay, before taxes. As a result, salaries, wages, and related expenses are slightly lower and our effective income tax rate is higher than the statutory rate. Generally, as pre-tax income increases, the impact of the driver per diem program on our effective tax rate decreases, because aggregate per diem pay becomes smaller in relation to pre-tax income, while in periods where earnings are at or near breakeven the impact of the per diem program on our effective tax rate is significant.

This per diem program increases our drivers' net pay per mile, after taxes, while decreasing gross pay, before taxes. As a result, salaries, wages, and related expenses are slightly lower and our effective income tax rate is higher than the statutory rate. Generally, as pre-tax income increases, the impact of the driver per diem program on our effective tax rate decreases, because aggregate per diem pay becomes smaller in relation to pre-tax income, while in periods where earnings are at or near breakeven the impact of the per diem program on our effective tax rate is significant.

Due to the partially nondeductible effect of per diem pay, our tax rate will fluctuate in future periods based on fluctuations in earnings.

Our liability recorded for uncertain tax positions as of 

March 31, 2023 is unchanged since 

June 30, 2023 is unchanged since 

December 31, 2022 .

The net deferred tax liability of $ 98.7 million primarily relates to differences in cumulative book versus tax depreciation of property and equipment, partially off-set by net operating loss carryovers and insurance claims that have been reserved but not paid.

The carrying value of our deferred tax assets assumes that we will be able to generate, based on certain estimates and assumptions, sufficient future taxable income in certain tax jurisdictions to utilize these deferred tax benefits. If these estimates and related assumptions change in the future, we may be required to establish a valuation allowance against the carrying value of the deferred tax assets, which would result in additional income tax expense. On a periodic basis, we assess the need for adjustment of the valuation allowance. The Company has determined that a valuation allowance was not necessary at March 31, 2023 for its deferred tax assets since it is more likely than not they will be realized from the future reversals of temporary differences. If these estimates and related assumptions change in the future, we may be required to modify our valuation allowance against the carrying value of the deferred tax assets.

The carrying value of our deferred tax assets assumes that we will be able to generate, based on certain estimates and assumptions, sufficient future taxable income in certain tax jurisdictions to utilize these deferred tax benefits. If these estimates and related assumptions change in the future, we may be required to establish a valuation allowance against the carrying value of the deferred tax assets, which would result in additional income tax expense. On a periodic basis, we assess the need for adjustment of the valuation allowance. The Company has determined that a valuation allowance was not necessary at June 30, 2023 for its deferred tax assets since it is more likely than not they will be realized from the future reversals of temporary differences. If these estimates and related assumptions change in the future, we may be required to modify our valuation allowance against the carrying value of the deferred tax assets.

On March 11, 2021, President Biden signed the American Rescue Plan ("ARPA") into law. The law includes several provisions meant to stimulate the U.S.

12 unchanged sentences

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.

On May 11, 2023, the Tennessee Works Tax Act was signed into law by Governor Lee.

The most impactful change for the Company was the phase-in of a single-sales factor apportionment formula for the logistics and leasing companies that file in Tennessee.

The motor carriers already apply a single-sales factor.

This resulted in the Company recording a $ 1.0 million benefit during the quarter ended June 30, 2023.

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

March 31, 2023 and December 31, 2022 :

June 30, 2023 and December 31, 2022 :

(in thousands)

March 31, 2023

June 30, 2023

December 31, 2022

Borrowings under Credit Facility

$ 40,157  

Borrowings under the Draw Note

Revenue equipment installment notes;

weighted average interest rate of 4.9 % at March 31, 2023, and 4.7 % at December 31, 2022, due in monthly installments with final maturities at various dates ranging from May 2025 to August 2027, secured by related revenue equipment

weighted average interest rate of 4.9 % at June 30, 2023, and 4.7 % at December 31, 2022, due in monthly installments with final maturities at various dates ranging from October 2024 to June 2028, secured by related revenue equipment

25,194  

3 unchanged sentences

Real estate notes;

interest rate of 6.4 % at March 31, 2023 and 5.8 % at December 31, 2022 due in monthly installments with a fixed maturity at August 2035, secured by related real estate

interest rate of 6.9 % at June 30, 2023 and 5.8 % at December 31, 2022 due in monthly installments with a fixed maturity at August 2035, secured by related real estate

18,460  

25 unchanged sentences

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 no  borrowings outstanding under the Credit Facility as of March 31, 2023 , undrawn letters of credit outstanding of approximately $ 23.9 million, and available borrowing capacity of $ 86.1 million.

As of March 31, 2023 , there were 

no base rate and 

no  SOFR loans.

Based on availability as of March 31, 2023 and 2022 , there was no fixed charge coverage requirement.

We had $ 40.2 million borrowings outstanding under the Credit Facility as of June 30, 2023 , undrawn letters of credit outstanding of approximately $ 21.6 million, and available borrowing capacity of $ 48.2 million.

As of June 30, 2023 , there were $ 40.0 million of base rate and $ 0.2 million of SOFR loans.

Based on availability as of June 30, 2023 and 2022 , there was no fixed charge coverage requirement.

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

3 unchanged sentences

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

May 2025  

to August 2027 .

October 2024  

to June 2028 .

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 $ 9.7 million are cross-defaulted with the Credit Facility.

11 unchanged sentences

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

During the second quarter of 2021 we repaid $ 31.0 million of the borrowings under the Draw Note and during the third quarter of 2021 we repaid the remaining balance. As of March 31, 2023 , there were no outstanding borrowings under the Draw Note.

During the second quarter of 2021 we repaid $ 31.0 million of the borrowings under the Draw Note and during the third quarter of 2021 we repaid the remaining balance. As of June 30, 2023, there were no outstanding borrowings under the Draw Note.

Lease Obligations

The finance leases in effect at 

March 31, 2023 terminate from 

June 30, 2023 terminate from 

August 2023 through 

November 2033 and contain guarantees of the residual value of the related equipment by us.

 A summary of our lease obligations at March 31, 2023 and 2022  are as follows:

 A summary of our lease obligations at June 30, 2023 and 2022  are as follows:

(dollars in thousands)

1 unchanged sentence

Three Months Ended

March 31, 2023

March 31, 2022

Six Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

Finance lease cost:

Amortization of right-of-use assets

$ 1,320  

Interest on lease liabilities

Operating lease cost

12,647  

Variable lease cost

2 unchanged sentences

$ 8,028  

$ 10,709  

$ 14,298  

Other information

2 unchanged sentences

Operating cash flows from operating leases

12,756  

Financing cash flows from finance leases

1 unchanged sentence

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

16,999  

17,052  

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

1 unchanged sentence

Weighted-average discount rate—finance leases

12.3 %  

Weighted-average discount rate—operating leases

March 31, 2023 , and December 31, 2022 , right-of-use assets of $ 51.8 million and $ 58.9 million for operating leases and $ 1.9 million and $ 5.3 million for finance leases, respectively, are included in net property and equipment in our condensed consolidated balance sheets.

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

Our future minimum lease payments as of March 31, 2023 , are summarized as follows by lease category:

June 30, 2023 , and December 31, 2022 , right-of-use assets of $ 52.0 million and $ 58.9 million for operating leases and $ 4.8 million and $ 5.3 million for finance leases, respectively, are included in net property and equipment in our condensed consolidated balance sheets.

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

Our future minimum lease payments as of June 30, 2023 , are summarized as follows by lease category:

(in thousands)

17 unchanged sentences

$ 39,278  

( 1 ) Excludes the three months ended March 31, 2023 .

$ 3,266  

( 1 ) Excludes the six months ended June 30, 2023 .

Stock -Based Compensation

1 unchanged sentence

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 (the "Board").

July 1, 2020, 

the stockholders, upon recommendation of the Board, approved the Second Amendment (the “Second Amendment”) to our Third Amended and Restated 

On May 17, 2023, 

the stockholders, upon recommendation of the Board, approved the Third Amendment (the “Third 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 

The Third Amendment (i) increased the number of shares of Class A common stock available for issuance under the Incentive Plan by an additional 575,000  shares, (ii) re-set the term of the plan to expire on May 1, 2033, and (iii) made other miscellaneous, administrative and conforming changes as necessary.

The Incentive Plan includes (i) 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 in cash, (vi) re-set the date through which awards 

be made under the Incentive Plan to 

June 1, 2030, 

and (vii) made other miscellaneous, administrative and conforming changes.

1.80  shares for every share granted, (ii) a double-trigger vesting requirement upon a change in control, and (iii) a maximum award granted or payable to any 

one  participant under the Incentive Plan for a calendar year of 

500,000  shares of Class A common stock or $ 4,000,000 , in the event the award is paid in cash.

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

March 31, 2023 , there were 

June 30, 2023 , there were 

1,271,739  shares remaining of the 4,775,000 shares available for award under the Incentive Plan. 

No awards may be made under the Incentive Plan after June 1, 2030.

No awards may be made under the Incentive Plan after May 1, 2033.

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

Included in salaries, wages, and related expenses within the condensed consolidated statements of operations is stock-based compensation expense of $ 1.6 million and $ 1.7 million for the  

three months ended March 31, 2023  and 

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

three months ended March 31, 2023  and 2022, respectively.

three months ended June 30, 2023  and 

2022 , respectively and expense of $ 3.0 million and $ 3.4 million for the six months ended June 30, 2023 , respectively. Included in general supplies and expenses within the condensed consolidated statements of operations is stock-based compensation expense for non-employee directors of $ 0.2 million and $ 0.2 million for the 

three months ended June 30, 2023  and 2022, respectively, and $ 0.3 million and $ 0.3 million for the six months ended June 30, 2023 and 2022.

Of the stock compensation expense recorded for the three months ended 

March 31, 2023  and March 31, 2022 , $ 0.5 million and $ 1.0 million relates to restricted shares, respectively, and $ 1.0 million and $ 0.7 million relates to unvested employee stock options, respectively.

June 30, 2023  and June 30, 2022 , $ 0.6 million and $ 1.0 million relates to restricted shares, respectively, and $ 1.0 million and $ 0.7 million relates to unvested employee stock options, respectively. Of the stock compensation expense recorded for the six months ended June 30, 2023  and June 30, 2022 , $ 1.1 million and $ 2.1 million relates to restricted shares, respectively, and $ 1.9 million and $ 1.4 million relates to unvested employee stock options, respectively.

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

To satisfy withholding requirements for shares that vested through March 31, 2023 , certain participants elected to forfeit receipt of an aggregate of 

To satisfy withholding requirements for shares that vested through June 30, 2023 , certain participants elected to forfeit receipt of an aggregate of 

43,771  shares of Class A common stock at a weighted average per share price of $ 34.72  based on the closing price of our Class A common stock on the dates the shares vested in 2023 , in lieu of the federal and state minimum statutory tax withholding requirements.

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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.

On February 11, 2021, a lawsuit was filed against Covenant Transport on behalf of Wesley Maas (a California resident and former driver) who was 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.

On April 3, 2023, the Parties entered into a stipulated dismissal of the class claims asserted in the action, therefore only the individual claims of Mr.

Covenant Transport intends to vigorously defend itself in this matter.

We had $ 23.9 million and $ 23.9 million of outstanding and undrawn letters of credit as of March 31, 2023  and December 31, 2022 .

We had $ 21.6 million and $ 23.9 million of outstanding and undrawn letters of credit as of June 30, 2023  and December 31, 2022 .

The letters of credit are maintained primarily to support our insurance programs. Additionally, we had $ 45.0 million of availability on a line of credit from Triumph solely to fund any indemnification owed to Triumph in relation to the sale of TFS.

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Transactions with TEL were not material for the 

three months ended March 31, 2023 and 2022.

three or six months ended June 30, 2023 and 2022.

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 

2023 net income through March 31, 2023 , or $ 5.9 million.

2023 net income through June 30, 2023 , or $ 11.3 million.

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

March 31, 2023  and December 31, 

June 30, 2023  and December 31, 

2022 are as follows (in thousands):

Balance Sheet Line Item:

March 31, 2023

June 30, 2023

December 31, 2022

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(in thousands)

As of March 31,

As of June 30,

As of December 31,

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Three Months Ended

Six Months Ended

$ 37,124  

$ 33,857  

$ 77,269  

$ 66,096  

Cost of Sales

10,330  

10,118  

Operating Expenses

1 unchanged sentence

11,754  

39,296  

24,028  

Operating Income

3 unchanged sentences

31,950  

$ 10,873  

$ 14,728  

$ 28,386  

Acquisition of Lew Thompson & Son Trucking, Inc.

On April 26, 2023, we acquired 100 % of the outstanding stock of LTST and related entities, headquartered in Huntsville, AR.

LTST is a dedicated contract carrier specializing in poultry feed and live haul transportation in Northwest Arkansas and surrounding areas and was acquired to expand the Dedicated reportable segment into this niche market.

The acquisition date fair value of the consideration transferred was $ 109.9 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 $ 30.0 million based on LTST's adjusted earnings before interest, taxes, depreciation, and amortization reported for the first, second, and third calendar years following closing.

The total purchase, including any earnout achieved, is expected to range from $ 109.9  million to $ 129.9 million depending on the results achieved by LTST.

LTST's results have been included in the condensed consolidated financial statements since the date of acquisition and are reported within our Dedicated reportable segment.

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

April 26, 2023

(in thousands)

Cash paid pursuant to Stock Purchase Agreement

$ 100,726  

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

Contingent consideration

10,016  

Net purchase price

$ 109,903  

The contingent consideration arrangement requires us to pay up to $ 30.0 million of additional consideration to LTST's former shareholders based on LTST's results during the first three calendar years following closing.

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

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

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

A determination on whether to make a 

338 (h) 10 election has not yet been made.

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

April 26, 2023

Accounts receivable

$ 5,135  

Driver advances and other receivables

Inventory and supplies

Prepaid expenses

Net property and equipment

43,121  

Other assets, net

Other intangibles, net

52,870  

Total identifiable assets acquired

103,616  

Accounts payable

Accrued expenses

Current portion of operating lease obligations

Current portion of insurance and claims accrual

Long-term portion of operating lease obligations

Total liabilities assumed

Net identifiable assets acquired

99,174  

10,729  

Net assets acquired

$ 109,903  

Goodwill and other intangible assets 

may change upon the finalization of the valuation of the contingent consideration liability and intangible assets as part of the purchase accounting for the LTST acquisition.

The goodwill recognized is attributable primarily to expected cost synergies in the areas of fuel, purchases of revenue equipment, and may change as a result of our ongoing evaluation of LTST’s accounting principles for consistency with ours.

Refer to Note 14, "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 LTST included in the Company’s consolidated results of operations from the acquisition date to the periods ended June 30, 2023 

are as follows:

(in thousands)

Three months ended

Six months ended

June 30, 2023

Total revenue

$ 10,809  

$ 1,878  

The following unaudited pro forma consolidated results of operations for the three and six months ended June 30, 2023 and 2022 assume that the acquisition of LTST occurred as of January 1, 2022:

(in thousands)  

Three months ended  

Six months ended  

June 30,  

Total revenue  

$ 279,421  

$ 333,441  

$ 562,485  

$ 641,090  

Net income  

$ 12,976  

$ 26,430  

$ 31,659  

$ 50,500  

Basic net income per share  

$ 1.00  

$ 1.70  

$ 2.41  

$ 3.14  

Diluted net income per share  

$ 0.96  

$ 1.68  

$ 2.30  

$ 3.09  

The pro forma financial information for all periods presented above has been calculated after adjusting the results of LTST to reflect the business combination accounting effects resulting from this acquisition, including the amortization expense from acquired intangible assets as though the acquisition occurred as of the beginning of the Company’s fiscal year 2022.

As noted above, the allocation is preliminary and changes to the value of the contingent consideration and finalization of our valuation could result in changes to the amount of amortization expense from acquired intangible assets included in the pro forma financial information presented above.

The Company's historical condensed consolidated financial statements have been adjusted in the pro forma combined financial statements to give effect to pro forma events that are directly attributable to the business combination and factually supportable.

The pro forma financial information is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the Company’s fiscal 2022.

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.

Refer to Note 3,  "Fair Value of Financial Instruments" for information regarding changes in the contingent consideration arrangement.

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  

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  

15,699  

Net assets acquired

$ 54,711  

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

Refer to Note 14, "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 periods ended June 30, 2023 and 2022  are as follows:

(in thousands)  

Three months ended  

Six months ended  

June 30,  

Total revenue  

$ 9,500  

$ 8,421  

$ 20,299  

$ 12,587  

Net income  

$ 2,059  

$ 2,866  

$ 6,244  

$ 4,853  

Goodwill and Other Assets

AAT's results have been included in the consolidated financial statements since the date of acquisition, February 2022, within our Expedited reportable segment. 

The Landair Holdings, Inc.

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

Amortization expense of $ 1.1 million and $ 0.6 million for the three months ended March 31, 2023 and 2022 , respectively, was included in depreciation and amortization in the condensed consolidated statements of operations.

Amortization expense of $ 2.9 million and $ 2.1 million for the six months ended June 30, 2023 and 2022 , respectively, was included in depreciation and amortization in the condensed consolidated statements of operations.

A summary of other intangible assets as of 

March 31, 2023 and 

June 30, 2023 and 

December 31, 2022 is as follows:

(in thousands)

March 31, 2023

June 30, 2023

Gross intangible assets

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Remaining life (months)

$ 4,502  

$ ( 2,165 )  

$ 2,337  

Managed Freight

( 885 )  

Total trade name

( 3,935 )  

Non-Compete agreement:

( 195 )  

Total non-compete agreement

( 195 )  

Customer relationships:

60,172  

( 6,315 )  

53,857  

Managed Freight

( 705 )  

12,436  

( 5,182 )  

Total customer relationships:

74,300  

( 12,202 )  

62,098  

Credentialing:

32,000  

( 3,022 )  

28,978  

Total credentialing

32,000  

( 3,022 )  

28,978  

Total other intangible assets

$ 117,470  

$ ( 19,354 )  

$ 98,116  

(in thousands)

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Remaining life (months)

$ 2,402  

$ ( 2,130 )  

Managed Freight

( 885 )  

Total trade name

( 3,900 )  

Customer relationships:

14,072  

( 5,277 )  

Managed Freight

( 635 )  

12,436  

( 4,663 )  

Total customer relationships:

28,200  

( 10,575 )  

17,625  

Credentialing:

32,000  

( 1,956 )  

30,044  

Total credentialing

32,000  

( 1,956 )  

30,044  

Total other intangible assets

$ 64,600  

$ ( 16,431 )  

$ 48,169  

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

(in thousands)

( 1 ) Excludes the three months ended March 31, 2023 .

There were no changes to the carrying amount of goodwill since 

December 31, 2022 .

59,817  

( 1 ) Excludes the six months ended June 30, 2023 .

The carrying amount of goodwill and other intangible assets for 2023 is subject to change upon the completion of the purchase accounting for the LTST acquisition.

The carrying amount of goodwill increased to $ 68.9 million at June 30, 2023 from $ 58.2 million at December 31, 2022 .

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

(in thousands)

June 30, 2023

Managed Freight

Balance at December 31, 2022

$ 15,699  

$ 15,320  

$ 5,448  

$ 21,750  

Acquired goodwill for LTST

10,729  

$ 15,699  

$ 26,049  

$ 5,448  

$ 21,750  

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

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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 0.1 million shares of our Class A common stock through May 3, 2023 , for a total of 2.7 million shares repurchased since May 2022. 

Since May 2022, we have repurchased a total of 2.7 million shares of our Class A common stock.

There were no additional repurchases made through August 7, 2023 . 

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.

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 February 15, 2023, our Board declared a cash dividend of $ 0.11  per share, which was paid on March 31, 2023, to stockholders of record on March 3, 2023.

Subsequent Events

We repurchased an additional 0.1 million shares of our Class A common stock for $ 4.5  million from April 1, 2023 through May 3, 2023.

On April 26, 2023, the Company completed the acquisition of Lew Thompson & Son Trucking, Inc.

and related entities (“Lew Thompson & Son”), of Huntsville, Arkansas.

Lew Thompson & Son specializes in poultry related feed and live haul freight and will be consolidated within the Company’s Dedicated truckload results. 

Under the terms of the agreement, the Company purchased 100 % of the outstanding stock of Lew Thompson & Son in exchange for a closing enterprise value of approximately $ 100 million plus an earnout of up to $ 30 million depending on the results achieved by the business over the three following calendar years.

The closing price was funded by cash on hand of approximately $ 45 million and approximately $ 55 million of borrowings from the Credit Facility.  

The transaction includes the option for the Company to elect a Code Section 338 (h)( 10 ) election subject to a purchase price adjustment.

On May 17, 2023, our Board declared a cash dividend of $ 0.11 per share which was paid on June 30, 2023, to stockholders of record on June 2, 2023.

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

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

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

the contingent consideration related to our 

purchase of AAT, and the future impact of our acquisition of Lew Thompson & Son, among others, are forward-looking statements.

purchase of AAT and LTST, and the future impact of our acquisition of Lew Thompson & Son, among others, are forward-looking statements.

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

2 unchanged sentences

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

Risk Factors," set forth in this Form 10-Q and our Form 10-K for the year ended December 31, 2022.

Risk Factors," set forth in the Form 10-Q for the quarter ended March 31, 2023 and our Form 10-K for the year ended December 31, 2022.

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

Risk Factors," set forth  

in this Form 10-Q and our Form 10-K for the year ended December 31, 2022, along with various disclosures in our press releases, stockholder reports, and other filings with the Securities and Exchange Commission.

in the Form 10-Q for the quarter ended March 31, 2023 and our Form 10-K for the year ended December 31, 2022, along with various disclosures in our press releases, stockholder reports, and other filings with the Securities and Exchange Commission.

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

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Executive Overview

Given the softness in the freight environment, we are pleased with our first quarter earnings of $1.20 per diluted share and how our team responded in a market that quickly transitioned.

Compared to a year ago, consolidated freight revenue was down 9%.

This decline was expected and related primarily to less overflow freight handled by our Managed Freight segment due to lower overall demand.

The Dedicated segment also experienced reductions in freight revenue, primarily as a result of our efforts to carve out underperforming contractual business. Our asset-light reportable segments, Managed Freight and Warehousing, experienced significant deterioration in margin compared to the prior year quarter as a result of reductions in brokerage volumes and rates associated with overflow freight from our asset-based segments and cost headwinds, respectively.

The freight market, consisting of a combination of freight rates and volumes, remained challenging throughout the second quarter.

While the 2023 results of $0.91 per diluted share fall short of our 2022 results, we are pleased with both our results and the resiliency of our model in what we believe to be the trough of the freight cycle.

Additionally, on April 26, 2023, we acquired Lew Thompson & Son Trucking, Inc.

and related entities ("LTST").

LTST is a dedicated contract carrier specializing in poultry feed and live haul transportation in Northwest Arkansas and surrounding areas. We believe the acquisition is another strong step toward building a more diversified and resilient operating model.

Our asset-based reportable segments, Expedited and Dedicated, contributed approximately 68% of total revenue, 93% of operating income, 63% of total freight revenue, and 88% of adjusted operating income in the quarter.

Our Expedited reportable segment grew revenue modestly, but experienced diminished margins compared to the first quarter last year.

Our Dedicated reportable segment experienced reduced revenue with approximately 14% fewer tractors and improved margins year over year. 

Our asset-light reportable segments contributed approximately 32% of total revenue, 7% of operating income, 37% of total freight revenue, and 12% of adjusted operating income in the quarter. 

Compared to a year ago, Managed Freight experienced significant reductions in both revenue and profitability with little to no project related freight in the current quarter. 

Warehousing was able to grow revenue through new customer startups but had diminished margins primarily due to incremental cost headwinds associated with investments in capacity for future growth in this reportable segment as well as inflationary cost headwinds with existing customers.

Freight revenue for our Expedited reportable segment declined compared to the second quarter of last year as we intentionally reduced the fleet size in response to reduced volumes of available freight with expedited service requirements.

Our Dedicated reportable segment also experienced reduced revenue with approximately 14.8% fewer tractors year over year as we continue to exit underperforming business, partially offset by the addition of approximately 144 weighted average tractors as a result of the acquisition of LTST.

Our asset-light reportable segments contributed approximately 32% of total revenue, 7% of operating income, 37% of total freight revenue, and 12% of adjusted operating income in the quarter. Compared to a year ago, Managed Freight experienced significant reductions in both revenue and profitability as a result of reduced volumes of high-margin overflow freight from both the Expedited and Dedicated reportable segments compared to the second quarter of 2022. Warehousing was able to grow revenue through new customer startups while margins remained relatively even compared to the second quarter of 2022.

We are working to increase the operating income and related margins in each of these reportable segments through focused sales efforts within managed freight and proposed customer rate increases with existing customers within Warehousing.

On April 26, 2023, we acquired Lew Thompson & Son a dedicated contract carrier specializing in poultry feed and live haul transportation in Northwest Arkansas and surrounding areas. 

We believe the acquisition is another strong step toward building a more diversified and resilient operating model.

Additional items of note for the first quarter of 2023 include the following:

Total revenue of $266.9 million, a decrease of 8.5% compared with the first quarter of 2022, and freight revenue (which excludes revenue from fuel surcharges) of $233.4 million, a decrease of 9.4% compared with the first quarter of 2022;

Operating income of $17.6 million, compared with $23.9 million in the first quarter of 2022;

Net income of $16.6 million, or $1.20 per diluted share, compared with $22.2 million, or $1.32 per diluted share, in the first quarter of 2022.

Net income from continuing operations of $16.5 million, or $1.19 per diluted share, compared to $22.2 million or $1.32 per diluted share, in the first quarter of 2022. Net income from discontinued operations of $0.2 million, or $0.01 per diluted share, compared to $0.0 million, or $0.00 per diluted share, in the first quarter of 2022;

38% of consolidated total revenue was in our Expedited reportable segment, as compared to 34% in the first quarter of 2022;

Additional items of note for the second quarter of 2023 include the following:

Total revenue of $274.0 million, a decrease of 13.7% compared with the second quarter of 2022, and freight revenue (which excludes revenue from fuel surcharges) of $243.7 million, a decrease of 8.7% compared with the second quarter of 2022;

Operating income of $11.8 million, compared with $26.9 million in the second quarter of 2022;

Net income of $12.3 million, or $0.91 per diluted share, compared with $24.5 million, or $1.56 per diluted share, in the second quarter of 2022.

Net income from continuing operations of $12.1 million, or $0.90 per diluted share, compared to $24.5 million or $1.56 per diluted share, in the second quarter of 2022. Net income from discontinued operations of $0.2 million, or $0.01 per diluted share, compared to $0.0 million, or $0.00 per diluted share, in the second quarter of 2022;

38% of consolidated total revenue was in our Expedited reportable segment, as compared to 38% in the second quarter of 2022;

Our Managed Freight reportable segment’s total revenue decreased to $63.3 million in the 2023 quarter from $80.3 million in the 2022 quarter and the reportable segment had an operating income of $2.0 million in the 2023 quarter compared to $8.6 million in the 2022 quarter; 

Our equity investment in TEL provided $5.9 million of pre-tax earnings in the first quarter of 2023 compared to $6.8 million in the first quarter of 2022;

We distributed a total of $1.5 million to stockholders through dividends;

Since December 31, 2022, total indebtedness, comprised of total debt and finance leases, net of cash, increased by $3.8 million to $32.2 million, primarily due to repurchasing $20.8 million of our outstanding Class A Common Stock under the stock repurchase program.

With available borrowing capacity of $86.1 million under our Credit Facility at March 31, 2023 we do not expect to be required to test our fixed charge covenant in the foreseeable future;

Leverage ratio (ending total indebtedness, comprised of debt and finance leases, net of cash, divided by the sum of operating income, depreciation and amortization, gain on disposition of property and equipment, net, and impairment of long lived property and equipment) as of March 31, 2023 was  0.40 (following our acquisition of Lew Thompson & Son, as of April 27, 2023, our pro-forma leverage ratio was approximately 1.2);

Stockholders' equity at March 31, 2023, was $371.2 million;

Tangible book value at March 31, 2023, was $265.9 million.

While we are pleased with our first quarter’s results, we also see opportunities to improve upon them and are working diligently to do so.

In this environment, we are intensely focused on cost savings to improve our operating cost profile.

However, our primary focus remains on the long term, by continuing to invest in areas that provide opportunities for us to make forward progress on our strategic plan, our investments in new revenue generating equipment, people and technology are examples of this.

For the remainder of the year, we expect market headwinds from a softer market as well as continued inflationary pressures.

However, based on company specific factors we expect less earnings volatility than in prior periods of economic weakness.

We have worked hard to strategically shift our customer base to less cyclical industries through our full-service logistics focus.

Even with a weak freight market, we expect our cash generation, moderate leverage, and available liquidity to continue to provide a full range of capital allocation opportunities to benefit our stockholders.

Our equity investment in TEL provided $5.4 million of pre-tax earnings in the second quarter of 2023 compared to $7.1 million in the second quarter of 2022;

We distributed a total of $1.4 million to stockholders through dividends;

Since December 31, 2022, total indebtedness, comprised of total debt and finance leases, net of cash, increased by $140.9 million to $187.2 million, primarily due to the approximately $99.9 million net cash paid in the acquisition of LTST, acquisition of new revenue equipment, and repurchasing $25.3 million of our outstanding Class A Common Stock under the stock repurchase program.

With available borrowing capacity of $48.2 million under our Credit Facility at June 30, 2023 we do not expect to be required to test our fixed charge covenant in the foreseeable future;

Stockholders' equity at June 30, 2023, was $379.7 million;

Tangible book value at June 30, 2023, was $212.6 million.

We are optimistic about the future but remain cautious about the pace of recovery in the freight market.

Our team is intensely focused on capital allocation and cost control across our entire enterprise.

We believe our more resilient operating model, together with the steps we are taking to reduce costs and inefficiencies, will continue to mitigate a portion of our historical volatility throughout economic and freight market cycles.

Overall, I am pleased with our current position, which features a moderately-leveraged balance sheet, ample liquidity and a reduction of approximately 14% of the diluted weighted average shares outstanding compared to a year ago.

We will remain focused on growing our market share, continuing to improve our operations, and becoming a stronger, more profitable, and more predictable business with the opportunity for significant and sustained value creation.

Non-GAAP Reconciliation

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Operating Ratio

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

GAAP Operating Ratio:

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Contingent consideration liability adjustment

Transaction and executive retirement

Adjusted operating expenses

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

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

AAT’s results are reported within our Expedited reportable segment and LTST's results are reported within our Dedicated reportable segment.

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

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Revenue Equipment

At March 31, 2023, we operated 2,040 tractors and 5,237 trailers.

Of such tractors, 1,723 were owned, 203 were financed under operating leases, and 114 were provided by independent contractors, who provide and drive their own tractors. Of such trailers, 5,059 were owned, 57 were financed under finance type leases, and 121 were held under short-term operating leases. We finance a small portion of our trailer fleet and larger portion of our tractor fleet with operating leases, which generally run for a period of three to five years for tractors and five to seven years for trailers. At March 31, 2023, our fleet had an average tractor age of 2.2 years and an average trailer age of 6.4 years.

At June 30, 2023, we operated 2,132 tractors and 5,855 trailers.

Of such tractors, 1,795 were owned, 223 were financed under operating leases, and 114 were provided by independent contractors, who provide and drive their own tractors. Of such trailers, 5,577 were owned, 57 were financed under finance type leases, and 221 were held under short-term operating leases. We finance a small portion of our trailer fleet and larger portion of our tractor fleet with operating leases, which generally run for a period of three to five years for tractors and five to seven years for trailers. At June 30, 2023, our fleet had an average tractor age of 2.2 years and an average trailer age of 6.0 years.

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

RESULTS OF CONSOLIDATED OPERATIONS

COMPARISON OF three months ended March 31, 2023 TO three months ended March 31, 2022

COMPARISON OF three and six months ended June 30, 2023 TO three and six months ended June 30, 2022

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

Three Months Ended

Six Months Ended

Freight revenue

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Total revenue

The decrease in total revenue primarily resulted from a $25.3 million and $7.0 million decrease in Managed Freight and Dedicated freight revenue, respectively, partially offset by a $1.0 million and  $7.1 million increase in Expedited and Warehousing freight revenue, respectively, for the three months ended March 31, 2023 compared to the 2022 period.

The decrease in total revenue primarily resulted from a $17.0 million, $6.8 million, and $6.2 million decrease in Managed Freight, Expedited, and Dedicated freight revenue, respectively, partially offset by a $6.8 million increase in Warehousing freight revenue, for the three months ended June 30, 2023 and a $42.3 million, $13.2 million, and $5.7 million decrease in Managed Freight, Dedicated, and Expedited freight revenue, respectively, partially offset by a $13.9 million increase in Warehousing freight revenue for the six months ended June 30, 2023.

See results of reportable segment operations section for discussion of fluctuations.

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Three Months Ended

Six Months Ended

Salaries, wages, and related expenses

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% of freight revenue

Salaries, wages, and related expenses for the three months ended March 31, 2023, increased on a dollars basis primarily as the result of driver and non-driver, including shop technicians, pay and benefits increases, partially offset by reduced miles  since the same 

Salaries, wages, and related expenses for the three and six months ended June 30, 2023, increased on a dollars basis primarily as the result of driver and non-driver, including shop technicians, pay and benefits increases, as well as executive retirement costs, partially offset by reduced miles  since the same 

2022 periods.

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

Driver pay may also fluctuate based on the number of miles driven. We expect salaries, wages, and related expenses may continue to increase as the result of wage inflation, higher healthcare costs, and, in certain periods, increased incentive compensation due to better performance. While driver pay remains stable at the present time, we have historically put driver pay increases in place as necessary to address driver market pressure and will continue to do so in the future as necessary.

We believe salaries, wages, and related expenses will continue to increase on a year-over-year basis for the remainder of 2023 as a result of driver pay changes put in place when the driver market was tight.

Driver pay may also fluctuate based on the number of miles driven. While driver pay remains stable at the present time, we have historically put driver pay increases in place as necessary to address driver market pressure and will continue to do so in the future as necessary.

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

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Three Months Ended

Six Months Ended

% of total revenue

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In periods of declining prices, the opposite is true.

Fuel prices as measured by the DOE wer e $0.05 per g allon, or 1.1%, higher for the quarter ended March 31, 2023 compared with the same quarter in 2022.

Fuel prices as measured by the DOE wer e $1.60 per g allon, or 29.0%, lower for the quarter ended June 30, 2023 compared with the same quarter in 2022.

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

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Three Months Ended

Six Months Ended

Total fuel surcharge

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% of freight revenue

For the period presented, the change in net fuel expense is insignificant as a percentage of freight revenue.

There were no diesel fuel hedge gains or losses for the quarter ended March 31, 2023 or 2022. As of March 31, 2023, we had no remaining fuel hedging contracts.

For the periods presented, net fuel expense increased as a percentage of freight revenue primarily due to lower fuel surcharge recovery partially offset by lower fuel prices.

There were no diesel fuel hedge gains or losses for the quarter ended June 30, 2023 or 2022. As of June 30, 2023, we had no remaining fuel hedging contracts.

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

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Three Months Ended

Six Months Ended

Operations and maintenance

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% of freight revenue

The decrease in operations and maintenance on a dollar basis for the three months ended March 31, 2023  was primarily related to having fewer new drivers and a smaller average fleet in 2023, partially offset by increased maintenance costs as a result of an increase in the average age of equipment, and inflationary increases in the costs of parts and labor, as compared to the prior year period.

The decreases in operations and maintenance for the three and six months ended June 30, 2023  were primarily related to having fewer new drivers, a smaller average fleet in 2023, and reduced maintenance costs as a result of a decrease in the average age of equipment as compared to the prior year periods.

Going forward, we believe this category will fluctuate based on several factors, including the condition of the driver market and our ability to hire and retain drivers, our continued ability to maintain a relatively young fleet, accident severity and frequency, weather, the reliability of new and untested revenue equipment models, and the global disruption of the supply chain, however, such increases may be offset by reductions in the age of our fleet due to our replacement plan between now and the end of 2023.

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Three Months Ended

Six Months Ended

Revenue equipment rentals and purchased transportation

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% of freight revenue

The decrease in revenue equipment rentals and purchased transportation for the three months ended March 31, 2023 was primarily the result of a reduction in purchased transportation costs as a result of the softening freight market. Additionally, the percentage of the total miles run by independent contractors increased from 6.7% for the three months ended March 31, 2022 to 6.9% for the same 2023 period partially offsetting this decrease.

The decreases in revenue equipment rentals and purchased transportation for the three and six months ended June 30, 2023 were primarily the result of a reduction in purchased transportation costs as a result of the softening freight market, as well as a reduction in leased revenue equipment compared to the prior periods as the result of largely transitioning from tractors held under operating leases to owned tractors in 2022. Additionally, the percentage of the total miles run by independent contractors increased from 6.6% for the three months ended June 30, 2022 to 7.4% for the same 2023 period and from 6.7% for the six months ended June 30, 2022 to 6.9% for the same 2023 period partially offsetting this decrease.

We expect revenue equipment rentals to decrease compared to 2022 as we largely transitioned from tractors held under operating leases to owned tractors in 2022.

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Three Months Ended

Six Months Ended

Operating taxes and licenses

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% of freight revenue

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

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

Insurance and claims

Three Months Ended

Six Months Ended

Insurance and claims

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% of freight revenue

Insurance and claims per mile cost increased to 20.5 cents per mile for the three months ended 

March 31, 2023  compared to 14.1 cents per mile for the same 2022  quarter .

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

Insurance and claims per mile cost decreased to 16.5 cents per mile for the three months ended 

June 30, 2023  compared to 19.8 cents per mile for the same 2022  quarter and increased to 18.4 cents per mile for the six months ended June 30, 2023 compared to 16.1 cents per mile for the same 2022 period .

The decrease for the quarter is the result of improved claims experience compared to the same 2022 quarter while the increase for the six months ended June 30, 2023 are primarily the result of a small number of prior period claims, as well as claims experienced during the first quarter of 2023.

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

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Three Months Ended

Six Months Ended

Communications and utilities

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% of freight revenue

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

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

General supplies and expenses

Three Months Ended

Six Months Ended

General supplies and expenses

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The increases in general supplies and expenses for the 

three months ended March 31, 2023 were primarily the result of the new leased spaces for our Warehousing reportable segment and the increase in the contingent consideration liability since the 2022 period.

three and six months ended June 30, 2023 were primarily the result of acquisition costs, new leased spaces for our Warehousing reportable segment, and the increase in the contingent consideration liability since the 2022 periods.

Depreciation and amortization

Three Months Ended

Six Months Ended

Depreciation and amortization

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

Depreciation expense increased $0.6 million to $13.5 million for the three months ended March 31, 2023 , compared to $12.9 million in the same 2022 period as a result of increased costs on new equipment partially offset by reduced total tractor count. Amortization of intangible assets was $1.1 million and $0.6 million for the three months ended March 31, 2023  and 2022, respectively.

The increase for the three months ended March 31, 2023  is due to the amortization of the intangible asset related to the AAT acquisition. 

We expect depreciation and amortization to increase compared to 2022 as the cost of new equipment increases and we implement our 2023 revenue equipment replacement plan, and we largely transitioned from tractors held under operating leases to tractors owned in 2022.

Depreciation expense increased $4.7 million and $5.3 million to $17.1 million and $30.6 million for the three and six months ended June 30, 2023 , respectively, compared to $12.5 million and $25.3 million in the same 2022 periods as a result of increased costs on new equipment partially offset by reduced total tractor count. Amortization of intangible assets was $1.8 million and $2.9 million for 

three and six months ended June 30, 2023 , respectively, compared to $1.5 million and $2.1 million for the same 2022 periods.

The increase for the three and six months ended June 30, 2023  is due to the amortization of the intangible asset related to the AAT and LTST acquisitions. 

We expect depreciation and amortization to increase compared to 2022 as the cost of new equipment increases and we implement our 2023 revenue equipment replacement plan, we largely transitioned from tractors held under operating leases to tractors owned in 2022, and as a result of the year-over-year impact of the LTST acquisition.

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

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Three Months Ended

Six Months Ended

Gain on disposition of property and equipment, net

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% of freight revenue

The increases in gain on disposition of property and equipment, net for the three months ended March 31, 2023 are primarily the result of the $7.6 million gain on sale of a Tennessee terminal in the first quarter of 2023 and an increase in the sale of used equipment compared to the 2022 period. 

The increases in gain on disposition of property and equipment, net for the three and six months ended June 30, 2023 are primarily the result of an increase in the sale of used equipment compared to the 2022 period and, for the six months ended June 30, 2023, the $7.6 million gain on sale of a Tennessee terminal in the first quarter of 2023.

While we expect sales of used equipment to continue to be elevated through the remainder of 2023, we expect sequential reductions in the gain on disposition of equipment due to the soft used equipment market.

Interest expense, net

Three Months Ended

Six Months Ended

Interest expense, net

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% of freight revenue

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

Going forward, we expect interest expense, net to increase due to the approximately $55 million of borrowings under our Credit Facility related to our April 26, 2023 acquisition of Lew Thompson & Son.

For the periods presented, the changes in interest expense, net were insignificant both as a percentage of total revenue and freight revenue.

Going forward, we expect interest expense, net to increase due to an increase in borrowings under our Credit Facility related to our April 26, 2023 acquisition of LTST.

Additionally, this line item will fluctuate based on our decision with respect to purchasing revenue equipment with balance sheet debt versus operating leases, our revenue equipment replacement plan, and changing interest rates.

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Three Months Ended

Six Months Ended

Income from equity method investment

We have accounted for our investment in TEL using the equity method of accounting and thus our financial results include our proportionate share of TEL's net income or loss.

The decrease in TEL's contributions to our results for the three months ended March 31, 2023 is primarily the result of a reduction on gain on sale of revenue equipment compared to the 2022 quarter.

Due to TEL's business model, gains and losses on sale of equipment is a normal part of the business and can cause earnings to fluctuate from quarter to quarter and therefore our income from investment to similarly fluctuate.

We expect TEL to continue to meet or exceed expectations as it continues on its current growth trajectory.

The decreases in TEL's contributions to our results for the three and six months ended June 30, 2023 were primarily the result of a reduction on gain on sale of revenue equipment compared to the 2022 periods.

Due to TEL's business model, gains and losses on sale of equipment is a normal part of the business and can cause earnings to fluctuate from period to period and therefore our income from investment to similarly fluctuate.

We expect TEL's net income to decrease sequentially for the remainder of 2023 due to the soft used equipment market.

Income tax  expense

Three Months Ended

Six Months Ended

Income tax expense

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% of freight revenue

The decrease in income tax expense was primarily related to the $7.3 million decrease in pre-tax income in the three months ended March 31, 2023, compared to the same 2022 period, resulting from the aforementioned decreases in operating income and earnings on investment in TEL.

The decreases in income tax expense were primarily related to the $18.1 million and $25.4 million decrease in pre-tax income in the three and six months ended June 30, 2023, respectively, compared to the same 2022 periods, resulting from the aforementioned decreases in operating income and earnings on investment in TEL.

The effective tax rate is different from the expected combined tax rate due primarily to state tax expense and permanent differences, such as executive compensation disallowance in 2022.

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

COMPARISON O F three months ended March 31, 2023 TO three months ended March 31, 2022

COMPARISON O F three and six months ended June 30, 2023 TO three and six months ended June 30, 2022

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

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Three Months Ended

Six Months Ended

Managed Freight

Total revenues

Operating Income (Loss):

Operating Income:

Managed Freight

Total operating income

The increase in Expedited revenue for the three months ended March 31, 2023 relates to an increase in average freight revenue per tractor per week of 2.7%, a $1.1 million increase in fuel surcharge revenue compared to the 2022 quarter, and a 12 (or 1.4%) average tractor increase.

The increase in average freight revenue per tractor per week for the quarter ended March 31, 2023 is the result of a 4.0% increase in average miles per unit partially offset by a 3.0 cents per mile (or 1.3%) decrease in average rate per total mile compared to the 2022 quarter.

Expedited team-driven tractors averaged 746 tractors in the first quarter of 2023, an increase of approximately 1.9% from the average of 732 tractors in the first quarter of 2022.

The decrease in Dedicated revenue for the three months ended March 31, 2023 relates to a $1.7 million decrease in fuel surcharge revenue and a 0.6% decrease in average miles per unit, partially offset by an increase in average freight revenue per tractor per week compared to the 2022 quarter as the result of a 13.1 cents per mile (or 5.6%) increase in average rate per total mile compared to the 2022 quarter.

Average tractors decreased 194 tractors, or 13.5% as compared to the three months ended March 31, 2022, as a result of exiting underperforming contracts.

Managed Freight total revenue decreased primarily as a result of reduced volumes of overflow freight from both Expedited and Dedicated truckload operations.

The decrease in Expedited revenue for the three months ended June 30, 2023 relates to a decrease in average freight revenue per tractor per week of 1.7%, a $10.8 million decrease in fuel surcharge revenue compared to the 2022 quarter, and a 51 (or 5.7%) average tractor decrease.

The decrease in average freight revenue per tractor per week for the quarter ended June 30, 2023 is the result of a 24.0 cents per mile (or 10.3%) decrease in average rate per total mile, partially offset by a 9.5% increase in average miles per unit compared to the 2022 quarter.

Expedited team-driven tractors averaged 789 tractors in the second quarter of 2023 and 2022.

For the six months ended June 30, 2023, the decrease in Expedited revenue relates to a 33 (or 3.7%) average tractor decrease partially offset by an increase in average freight revenue tractor per week of 0.4% compared to the same 2022 period.

The increase in average freight revenue per tractor per week for the six months ended June 30, 2023 is the result of a 6.9% increase in average miles per unit and a 14.0 cents per mile (or 6.1%) increase in average rate per total mile compared to the same 2022 period.

Expedited team-driven tractors averaged 786 for the six months ended June 30, 2023, and 2022.

The decrease in Dedicated revenue for the three months ended June 30, 2023 relates to a $9.3 million decrease in fuel surcharge revenue and a 217, or 14.8% average tractor decrease, partially offset by a 4.7% increase in average miles per unit, partially offset by an increase in average freight revenue per tractor per week compared to the 2022 quarter as the result of a 7.4 cents per mile (or 2.7%) increase in average rate per total mile compared to the 2022 quarter.

Average tractors decreased 217 tractors, or 14.8% as compared to the three months ended June 30, 2022, as a result of exiting underperforming contracts.

For the six months ended June 30, 2023, the decrease in Dedicated revenue relates to a 205 (or 14.1%) average tractor decrease partially offset by an increase in average freight revenue tractor per week of 6.1% compared to the same 2022 period.

The increase in average freight revenue per tractor per week for the six months ended June 30, 2023 is the result of a 2.0% increase in average miles per unit and a 10.0 cents per mile (or 3.9%) increase in average rate per total mile compared to the same 2022 period.

For the three and six months ended June 30, 2023, Managed Freight total revenue decreased primarily as a result of reduced volumes of overflow freight from both Expedited and Dedicated truckload operations.

With the softening freight market, we anticipate the revenue attributable to overflow freight may continue to decline.

Warehousing total revenue for the quarter increased as a result of period-over-period new customer business.

The decrease operating income for the three months ended March 31, 2023, was the result of the decrease in total revenue described above for the three months ended March 31, 2023 , partially offset by a $15.7 million and a $13.2 million decrease in Managed Freight and Dedicated and operating expenses, respectively, partially offset by a $2.2 million and $8.2 million increase in Expedited and Warehousing operating expenses, respectively.

The increase in Expedited operating expenses for the 

three months ended March 31, 2023 is primarily the result of driver and non-driver pay increases and the increase in the contingent consideration liability since the 2022 period as well as claims experience during the current period.

The decrease in Dedicated operating expenses for the 

three months ended March 31, 2023 is primarily the result of averaging fewer drivers and tractors, resulting in lower driver salaries, wages, and benefits, as well as reduced use of third-party purchased transportation as compared to the 2022 period.

Additionally, Expedited and Dedicated operating expenses were reduced as a result of the sale of a Tennessee terminal.

The change in Managed Freight operating expenses is the result of the changes in revenue driving changes in variable expenses, primarily purchased transportation, partially offset by a 

small number of prior period claims . The increase in Warehousing operating expenses is a result of leased space for new business and pay increases, partially offset by a reduction in outsourced labor since the 2022 period.

For the three and six months ended June 30, 2023, Warehousing total revenue increased as a result of period-over-period new customer business.

The decrease in operating income for the three months ended June 30, 2023, was the result of the decrease in total revenue described above and a $6.8 million increase in Warehousing operating expenses, partially offset by a $15.9 million, $10.3 million, and $8.8 million decrease in Dedicated and Managed Freight and Expedited operating expenses, respectively.

For the six months ended June 30, 2023, the decrease in operating income was the result of the decrease in total revenue described above and a $15.0 million increase in Warehousing operating expenses, partially offset by a $29.1 million, $26.0 million, and $6.6 million decrease in Dedicated, Managed Freight, and Expedited operating expenses, respectively.

The decreases in Expedited operating income for the 

three and six months ended June 30, 2023  were primarily the result of the aforementioned decreases in revenue partially offset by decreases in Expedited operating expenses.

The decreases in Expedited operating expenses for the 

three and six months ended June 30, 2023  were primarily the result of decreased fuel costs, improved gain on sale of equipment, and decreased maintenance and parts costs partially offset by increases in depreciation expense as a result of our equipment trade cycle and increases in the contingent consideration liability since the 2022 periods.

Additionally for the six months ended June 30, 2023, the decrease in Expedited operating expenses is partially offset by an increase in driver and non-driver pay compared to the same 2022 period.

The increases in Dedicated operating income for the 

three and six months ended June 30, 2023 were primarily the result of a decrease in Dedicated operating expenses partially offset by the aforementioned decrease in revenue.

The decreases in Dedicated operating expenses for the 

three and six months ended June 30, 2023 is primarily the result of averaging fewer drivers and tractors, resulting in lower driver salaries, wages, and benefits, reduced use of third-party purchased transportation, and improved gain on sale of equipment as compared to the 2022 period.

These decreases were partially offset by acquisition costs and increased depreciation expense as a result of our equipment trade cycle.

Additionally, for the six months ended June 30, 2023, Expedited and Dedicated operating expenses were reduced as a result of the sale of a Tennessee terminal.

The decreases in operating income for Managed Freight for the 

three and six months ended June 30, 2023  were primarily the result of the aforementioned decreases in revenue partially offset by decreases in Managed Freight operating expenses. The decreases in Managed Freight operating expenses were primarily the result of the changes in revenue driving changes in variable expenses, primarily purchased transportation.

Additionally, the decrease in operating expenses for the six months ended June 30, 2023 was partially offset by a 

small number of prior period claims . The increases in Warehousing operating expenses for the three and six months ended June 30, 2023, were a result of leased space for new business and pay increases, partially offset by a reduction in outsourced labor since the 2022 periods.

In our asset-light reportable segments, we are prioritizing long-term growth, focusing on talent acquisition and technology enhancements.

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most critical transportation and logistics needs.

We had working capital (total current assets less total current liabilities) of $65.9 million and $66.5 million at March 31, 2023 and December 31, 2022, respectively.

We had working capital (total current assets less total current liabilities) of $44.9 million and $66.5 million at June 30, 2023 and December 31, 2022, respectively.

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

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

With an average fleet age of 2.2 years at March 31, 2023, we believe we have flexibility to manage our fleet, and we plan to regularly evaluate our tractor replacement cycle, new tractor purchase requirements, and purchase options.

With an average fleet age of 2.2 years at June 30, 2023, we believe we have flexibility to manage our fleet, and we plan to regularly evaluate our tractor replacement cycle, new tractor purchase requirements, and purchase options.

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

As of March 31, 2023 and December 31, 2022 we had $172.8 million and $179.6 million in debt and lease obligations, respectively, consisting of the following:

No outstanding borrowings under the Credit Facility;

As of June 30, 2023 and December 31, 2022 we had $248.6 million and $179.6 million in debt and lease obligations, respectively, consisting of the following:

$40.1 million and no outstanding borrowings under the Credit Facility;

No outstanding borrowings under the Draw Note;

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$53.5 million and $64.6 million of the operating lease obligations, respectively.

The increase in borrowings under the Credit Facility is due to the acquisition of LTST and repurchasing $25.3 million of our outstanding Class A Common Stock under the stock repurchase program.

The increase in revenue equipment installment notes is primarily due to replacing our older equipment with new equipment as part of our trade cycle.

The decrease in the finance lease and operating lease obligations was primarily due to amortization of the lease liability.

As of March 31, 2023, we had $0.0 million borrowings outstanding, undrawn letters of credit outstanding of approximately $23.9 million, and available borrowing capacity of $86.1 million under the Credit Facility.

As of June 30, 2023, we had $40.2 million borrowings outstanding, undrawn letters of credit outstanding of approximately $21.6 million, and available borrowing capacity of $48.2 million under the Credit Facility.

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

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

On April 26, 2023, we borrowed approximately $55 million under our Credit Facility related to acquisition of Lew Thompson & Son.

Refer to Note 7, “Debt” of the accompanying condensed consolidated financial statements for further information about material debt agreements.

Our net capital expenditures for the three months ended March 31, 2023 totaled $8.2 million of proceeds, as compared to $8.0 million of expenditures for the prior year period.

During the three months ended March 31, 2023, we took delivery of approximately 150 new tractors and 64 new trailers, while disposing of approximately 162 used tractors and 123 used trailers.

Our current fleet plan for fiscal 2023 includes the delivery of an additional 763 new company replacement tractors and 536 additional new trailer deliveries. Net gains on disposal of equipment and real estate in the three months ended March 31, 2023 were $9.8 million compared to $0.2 million in the same prior year period primarily due to the $7.6 million gain on a Tennessee terminal during the 2023 period.

Our net capital expenditures for the six months ended June 30, 2023 totaled $111.9 million of expenditures, as compared to $63.0 million of expenditures for the prior year period.

During the six months ended June 30, 2023, we took delivery of approximately 234 new tractors and 262 new trailers, while disposing of approximately 321 used tractors and 175 used trailers.

Our current fleet plan for fiscal 2023 includes the delivery of an additional 454 new company replacement tractors and 357 additional new trailer deliveries. Net gains on disposal of equipment and real estate in the six months ended June 30, 2023 were $11.8 million compared to $0.6 million in the same prior year period primarily due to the $7.6 million gain on a Tennessee terminal during the 2023 period and the aforementioned disposal of revenue equipment as part of our trade cycle.

For the balance of 2023, our baseline expectation for net capital expenditures is $45 million to $55 million.

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

We distributed a total of $1.5 million to stockholders in the first three months of 2023 through dividends.

We distributed a total of $2.9 million to stockholders in the first six months of 2023 through dividends.

We believe we have sufficient liquidity to satisfy our cash needs, and we will continue to evaluate the nature and extent of potential short-term and long-term impacts to our business.

Net cash flows provided by operating activities decreased to $7.3 million for the three months ended March 31, 2023, compared to $39.4 million for the same 2022 period, primarily due to an increase in receivables and driver advances as a result of an increase in our average receivable days outstanding and a $5.5 million decrease in net income, as well as decreases to non-cash expenses compared to the prior year period. 

Net cash flows provided by investing activities were $7.1 million for the three months ended March 31, 2023, compared to $45.0 million used in the same 2022 period.

The change in net cash flows provided by investing activities was primarily due to the timing of our trade cycle whereby we took delivery of approximately 150 new tractors and 64 new trailers, while disposing of approximately 162 used tractors and 123 used trailers during the 2023 period compared to delivery of 31 new tractors and no new trailers, while disposing of approximately 94 used tractors and 10 used trailers in the same 2022 period.

Net cash flows provided by operating activities decreased to $12.4 million for the six months ended June 30, 2023, compared to $76.9 million for the same 2022 period, primarily due to an increase in receivables and driver advances as a result of an increase in our average receivable days outstanding and a $17.8 million decrease in net income, as well as decreases to non-cash expenses compared to the prior year period. 

Net cash flows used by investing activities were $113.3 million for the six months ended June 30, 2023, compared to $63.0 million used in the same 2022 period.

The change in net cash flows used by investing activities was primarily due to the April 2023 acquisition of LTST and the timing of our trade cycle whereby we took delivery of approximately 234 new tractors and 262 new trailers, while disposing of approximately 321 used tractors and 175 used trailers during the 2023 period compared to delivery of 115 new tractors and no new trailers, while disposing of approximately 35 used tractors and no used trailers in the same 2022 period.

The 2022 period includes the February 2022 acquisition of AAT.

Net cash flows used by financing activities were approximately $28.4 million for the three months ended March 31, 2023, compared to $4.3 million provided in the same 2022 period.

The change in net cash flows used by financing activities was primarily a function of net proceeds relating to notes payable, the Draw Note, and our Credit Facility of $4.5 million in the 2023 period compared to net proceeds of $20.4 million in the 2022 period, the repurchase of $20.8 million of shares of our Class A common stock during the 2023 period compared to $14.8 million during the same 2022 period, as well as the payment of approximately $1.5 million in dividends during the 2023 period compared to $1.0 million during the same 2022 period.

Net cash flows provided by financing activities were approximately $40.1 million for the six months ended June 30, 2023, compared to $17.9 million used in the same 2022 period.

The change in net cash flows provided by financing activities was primarily a function of net proceeds relating to notes payable, and our Credit Facility of $76.9 million in the 2023 period compared to net proceeds of $32.4 million in the 2022 period, the repurchase of $25.4 million of shares of our Class A common stock during the 2023 period compared to $43.3 million during the same 2022 period, as well as the payment of approximately $2.9 million in dividends during the 2023 period compared to $2.0 million during the same 2022 period.

Net cash flows provided by operating activities and used by financing activities in the 2023 period also included payment of $0.8 million and $9.2 million, respectively, of contingent consideration liabilities related to the acquisition of AAT.

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 of Directors adopted a 10b5-1 plan for the purchase of up to $30.0 million in shares subject to defined trading parameters, under our then current stock repurchase program.

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

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

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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 0.1 million shares of our Class A common stock through May 3, 2023, for a total of 2.7 million shares repurchased since May 2022.

Since May 2022, we have repurchased a total of 2.7 million shares of our Class A common stock.

No additional shares were repurchased through August 7, 2023.

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

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Accordingly, actual results could differ from those anticipated.

There have been no material changes to our most critical accounting policies and estimates during the three months ended March 31, 2023, compared to those disclosed in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in our Form 10-K for the year ended December 31, 2022.

There have been no material changes to our most critical accounting policies and estimates during the three and six months ended June 30, 2023, compared to those disclosed in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in our Form 10-K for the year ended December 31, 2022.

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

What changed 10-Q

Item 1. Financial Statements