Daseke, Inc. - Quarter Report: 2022 September (Form 10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to _________

Commission File Number: 001-37509

DASEKE, INC.

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)				47-3913221 (IRS Employer Identification No.)


15455 Dallas Parkway, Suite 550 Addison, Texas		75001
(Address of principal executive offices)		(Zip Code)

(972) 248-0412

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	DSKE	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


☐ Large accelerated filer				 Accelerated filer
☐ Non-accelerated filer				☐ Smaller reporting company
				☐ Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No 

Common shares of the registrant outstanding at November 3, 2022 were 62,807,816.

Table of Contents

DASEKE, INC.

FORM 10-Q

For the Quarterly Period Ended September 30, 2022

INDEX



		Page No.
Part I. Financial Information		1
Item 1. Financial Statements (Unaudited)		1
Consolidated Balance Sheets		1
Consolidated Statements of Operations and Comprehensive Income		2
Consolidated Statements of Changes in Stockholders' Equity		3
Consolidated Statements of Cash Flows		5
Notes to Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3. Quantitative and Qualitative Disclosures About Market Risk		33
Item 4. Controls and Procedures		33
Part II. Other Information		34
Item 1. Legal Proceedings		34
Item 1A. Risk Factors		34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		34
Item 6. Exhibits		35
Signatures		37

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Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (this Report) of Daseke, Inc. (Daseke or the Company) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Except as otherwise indicated by the context, references in this Report to “we,” “us” and “our” are to the consolidated business of the Company. All statements in this Report, other than statements of historical fact, are forward-looking statements. Forward-looking statements may be identified by the use of words such as “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “believe,” “plan,” “should,” “could,” “would,” “forecast,” “seek,” “target,” “predict,” and “potential,” the negative of these terms, or other comparable terminology. Forward-looking statements may include statements about the Company’s goals; the Company’s business strategy and plans; the Company’s financial strategy, liquidity and capital required for its business strategy and plans; the Company’s competition and government regulations; general economic conditions; and the Company’s future operating results.

These forward-looking statements are based on information available as of the date of this Report, and current expectations, forecasts and assumptions. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that the Company anticipates. Accordingly, forward-looking statements should not be relied upon as representing the Company’s views as of any subsequent date, and the Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. Readers are cautioned not to place undue reliance on the forward-looking statements.

Forward-looking statements are subject to risks and uncertainties (many of which are beyond the Company’s control) that could cause actual results to differ materially from the Company’s historical experience and our present expectations or projections. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, general economic and business risks, such as downturns in customers’ business cycles, disruptions in capital and credit markets, and inflationary cost pressures; the Company’s ability to adequately address downward pricing and other competitive pressures; the Company’s insurance or claims expense; driver shortages and increases in driver compensation or owner operator contracted rates; fluctuations in the price or availability of diesel fuel; increased prices for, or decreases in the availability of, new revenue equipment and decreases in the value of used revenue equipment; impact to the Company’s business and operations resulting from the COVID-19 pandemic; seasonality and the impact of weather and other catastrophic events; the Company’s ability to secure the services of third-party capacity providers on competitive terms; loss of key personnel; a failure of the Company’s information systems, including disruptions or failures of services essential to our operations or upon which our information technology platforms rely, data or other security breach, or cybersecurity incidents; the Company’s ability to execute and realize all of the expected benefits of its integration, business improvement and comprehensive restructuring plans; the Company’s ability to realize all of the intended benefits from acquisitions and investments; the Company’s ability to complete divestitures successfully; the Company’s ability to generate sufficient cash to service all of the Company’s indebtedness and the Company’s ability to finance its capital requirements; restrictions in its existing and future debt agreements; increases in interest rates; changes in existing laws or regulations, including environmental and worker health safety laws and regulations and those relating to tax rates or taxes in general; the impact of governmental regulations and other governmental actions related to the Company and its operations; and litigation and governmental proceedings. For additional information regarding known material factors that could cause the Company’s actual results to differ from its projected results, please see the Company’s filings with the Securities and Exchange Commission (the SEC), particularly the section titled “Part I. Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K, filed with the SEC on February 23, 2022. Additional risks or uncertainties that are not currently known to us, that we currently deem to be immaterial, or that could apply to any company could also materially adversely affect our business, financial condition, or future results.

All forward-looking statements, expressed or implied, attributed to the Company or persons acting on its behalf are expressly qualified in their entirety by this cautionary statement.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

DASEKE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in millions, except per share data)


	September 30,			December 31,
	2022			2021
ASSETS
Current assets:
Cash and cash equivalents	$	188.3		$	147.5
Accounts receivable, net of allowance of $2.5 and $2.1 at September 30, 2022 and December 31, 2021, respectively		208.4			172.3
Drivers’ advances and other receivables		8.3			7.7
Other current assets		28.2			22.6
Total current assets		433.2			350.1

Property and equipment, net		456.2			397.7
Intangible assets, net		83.8			86.9
Goodwill		137.2			140.1
Right-of-use assets		108.7			108.3
Other non-current assets		3.7			4.3
Total assets	$	1,222.8		$	1,087.4

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	18.1		$	14.7
Accrued expenses and other liabilities		54.5			43.9
Accrued payroll, benefits and related taxes		37.1			32.9
Accrued insurance and claims		46.0			26.8
Current portion of long-term debt		68.8			55.5
Warrant liability		—			4.7
Current operating lease liabilities		33.9			33.7
Total current liabilities		258.4			212.2

Line of credit		—			—
Long-term debt, net of current portion		562.6			531.4
Deferred tax liabilities		86.9			85.1
Non-current operating lease liabilities		81.2			81.1
Other non-current liabilities		2.1			1.6
Total liabilities		991.2			911.4

Commitments and contingencies (Note 10)

Stockholders’ equity:
Series A convertible preferred stock, $0.0001 par value; 10,000,000 shares authorized; 650,000 shares issued with liquidation preference of $65.0 at September 30, 2022 and December 31, 2021		65.0			65.0
Common stock, par value $0.0001 per share; 250,000,000 shares authorized, 63,551,566 and 62,489,278 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		—			—
Additional paid-in-capital		404.3			387.8
Accumulated deficit		(237.2	)		(276.8	)
Accumulated other comprehensive loss		(0.5	)		—
Total stockholders’ equity		231.6			176.0
Total liabilities and stockholders’ equity	$	1,222.8		$	1,087.4

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

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DASEKE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

(Dollars in millions, except per share data)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021
Revenues:
Company freight	$	168.6		$	166.6		$	492.4		$	475.3
Owner operator freight		130.0			131.1			397.7			365.3
Brokerage		85.3			81.9			255.4			197.1
Logistics		13.8			9.7			39.2			28.9
Fuel surcharge		65.1			35.3			180.4			95.9
Total revenue		462.8			424.6			1,365.1			1,162.5

Operating expenses:
Salaries, wages and employee benefits		104.6			96.6			299.3			280.7
Fuel		40.0			26.8			120.4			79.1
Operations and maintenance		43.1			40.5			117.6			108.1
Communications		0.7			0.9			2.6			3.1
Purchased freight		180.3			167.5			548.9			444.2
Administrative		17.6			17.0			51.6			46.2
Sales and marketing		0.2			0.5			1.2			1.5
Taxes and licenses		3.9			3.5			11.6			11.2
Insurance and claims		20.0			13.9			61.0			40.6
Acquisition-related transaction expenses		0.4			—			3.7			—
Depreciation and amortization		23.9			22.3			68.2			66.7
Gain on disposition of property and equipment		(4.9	)		(5.4	)		(14.0	)		(13.1	)
Impairment		—			—			7.8			—
Restructuring charges		0.8			0.1			2.0			0.2
Total operating expenses		430.6			384.2			1,281.9			1,068.5
Income from operations		32.2			40.4			83.2			94.0

Other expense (income):
Interest income		(0.7	)		(0.1	)		(1.5	)		(0.2	)
Interest expense		9.2			7.3			23.8			26.1
Change in fair value of warrant liability		—			3.4			(4.7	)		1.2
Other		1.2			0.2			1.3			(0.6	)
Total other expense		9.7			10.8			18.9			26.5

Income before income taxes		22.5			29.6			64.3			67.5
Income tax expense		9.9			8.7			21.0			18.6
Net income		12.6			20.9			43.3			48.9
Other comprehensive loss:
Foreign currency translation adjustments		(0.4	)		(0.5	)		(0.5	)		(0.1	)
Comprehensive income	$	12.2		$	20.4		$	42.8		$	48.8

Net income	$	12.6		$	20.9		$	43.3		$	48.9
Less dividends to Series A convertible preferred stockholders		(1.3	)		(1.2	)		(3.7	)		(3.7	)
Net income attributable to common stockholders	$	11.3		$	19.7		$	39.6		$	45.2
Earnings per common share:
Basic	$	0.18		$	0.31		$	0.62		$	0.70
Diluted	$	0.17		$	0.30		$	0.60		$	0.68
Weighted-average common shares outstanding:
Basic		63,535,897			62,583,115			63,301,446			64,159,551
Diluted		66,270,641			70,000,603			66,266,666			71,207,581
Dividends declared per Series A convertible preferred share	$	1.91		$	1.91		$	5.72		$	5.72

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

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DASEKE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

Three and Nine Months Ended September 30, 2022

(Unaudited)

(Dollars in millions)


	Series A Convertible														Accumulated
	Preferred Stock				Common Stock										Other
							Par		Additional			Accumulated			Comprehensive
	Shares		Amount		Shares		Value		Paid-In Capital			Deficit			Loss			Total
Balance at January 1, 2022		650,000	$	65.0		62,489,278	$	—	$	387.8		$	(276.8	)	$	—		$	176.0
Exercise of options		—		—		91,425		—		0.8			—			—			0.8
Exercise of warrants		—		—		817,648		—		9.4			—			—			9.4
Vesting of restricted stock units		—		—		43,450		—		—			—			—			—
Series A convertible preferred stock dividend		—		—		—		—		—			(1.2	)		—			(1.2	)
Stock-based compensation expense		—		—		—		—		2.2			—			—			2.2
Net income		—		—		—		—		—			13.0			—			13.0
Balance at March 31, 2022		650,000	$	65.0		63,441,801	$	—	$	400.2		$	(265.0	)	$	—		$	200.2
Exercise of options		—		—		—		—		—			—			—			—
Vesting of restricted stock units		—		—		62,217		—		(0.2	)		—			—			(0.2	)
Series A convertible preferred stock dividend		—		—		—		—		—			(1.2	)		—			(1.2	)
Stock-based compensation expense		—		—		—		—		2.3			—			—			2.3
Foreign currency translation adjustments		—		—		—		—		—			—			(0.1	)		(0.1	)
Net income		—		—		—		—		—			17.7			—			17.7
Balance at June 30, 2022		650,000	$	65.0		63,504,018	$	—	$	402.3		$	(248.5	)	$	(0.1	)	$	218.7
Exercise of options		—		—		—		—		—			—			—			—
Vesting of restricted stock units		—		—		47,548		—		(0.1	)		—			—			(0.1	)
Series A convertible preferred stock dividend		—		—		—		—		—			(1.3	)		—			(1.3	)
Stock-based compensation expense		—		—		—		—		2.1			—			—			2.1
Foreign currency translation adjustments		—		—		—		—		—			—			(0.4	)		(0.4	)
Net income		—		—		—		—		—			12.6			—			12.6
Balance at September 30, 2022		650,000	$	65.0		63,551,566	$	—	$	404.3		$	(237.2	)	$	(0.5	)	$	231.6

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

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DASEKE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

Three and Nine Months Ended September 30, 2021

(Unaudited)

(Dollars in millions)


	Series A Convertible															Accumulated
	Preferred Stock				Common Stock											Other
								Par		Additional			Accumulated			Comprehensive
	Shares		Amount		Shares			Value		Paid-In Capital			Deficit			Income (Loss)			Total
Balance at January 1, 2021		650,000	$	65.0		65,023,174		$	—	$	401.6		$	(327.8	)	$	—		$	138.8
Exercise of options		—		—		149,545			—		0.6			—			—			0.6
Vesting of restricted stock units		—		—		5,737			—		(0.8	)		—			—			(0.8	)
Series A convertible preferred stock dividend		—		—		—			—		—			(1.2	)		—			(1.2	)
Stock-based compensation expense		—		—		—			—		1.4			—			—			1.4
Foreign currency translation adjustments		—		—		—			—		—			—			0.2			0.2
Net loss		—		—		—			—		—			(7.3	)		—			(7.3	)
Balance at March 31, 2021		650,000	$	65.0		65,178,456		$	—	$	402.8		$	(336.3	)	$	0.2		$	131.7
Vesting of restricted stock units		—		—		143,601			—		(0.3	)		—			—			(0.3	)
Series A convertible preferred stock dividend		—		—		—			—		—			(1.3	)		—			(1.3	)
Common stock repurchased and retired		—		—		(1,517,623	)		—		(10.5	)		—			—			(10.5	)
Stock-based compensation expense		—		—		—			—		2.9			—			—			2.9
Foreign currency translation adjustments		—		—		—			—		—			—			0.2			0.2
Net income		—		—		—			—		—			35.3			—			35.3
Balance at June 30, 2021		650,000	$	65.0		63,804,434		$	—	$	394.9		$	(302.3	)	$	0.4		$	158.0
Exercise of options		—		—		8,000			—		(0.1	)		—			—			(0.1	)
Vesting of restricted stock units		—		—		155,690			—		(0.9	)		—			—			(0.9	)
Series A convertible preferred stock dividend		—		—		—			—		—			(1.2	)		—			(1.2	)
Common stock repurchased and retired		—		—		(1,482,377	)		—		(9.8	)		—			—			(9.8	)
Stock-based compensation expense		—		—		—			—		2.1			—			—			2.1
Foreign currency translation adjustments		—		—		—			—		—			—			(0.5	)		(0.5	)
Net income		—		—		—			—		—			20.9			—			20.9
Balance at September 30, 2021		650,000	$	65.0		62,485,747		$	—	$	386.2		$	(282.6	)	$	(0.1	)	$	168.5

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

DASEKE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in millions)


	Nine Months Ended
	September 30,
	2022			2021
Cash flows from operating activities
Net income	$	43.3		$	48.9
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		63.0			61.5
Amortization of intangible assets		5.2			5.2
Amortization of deferred financing fees		0.9			1.4
Non-cash operating lease expense		—			1.0
Change in fair value of warrant liability		(4.7	)		1.2
Write-off of deferred financing fees		—			1.2
Stock-based compensation expense		8.8			5.3
Deferred taxes		2.6			17.5
Bad debt expense		0.7			(0.3	)
Gain on disposition of property and equipment		(14.0	)		(13.1	)
Impairment		7.8			—
Changes in operating assets and liabilities
Accounts receivable		(34.1	)		(34.5	)
Drivers’ advances and other receivables		(3.1	)		0.4
Other current assets		(3.7	)		(0.7	)
Accounts payable		3.5			(0.4	)
Accrued expenses and other liabilities		30.5			21.1
Net cash provided by operating activities		106.7			115.7

Cash flows from investing activities
Purchases of property and equipment		(33.4	)		(34.2	)
Proceeds from sale of property and equipment		28.0			47.9
Cash paid for acquisitions, net of cash received		(19.1	)		—
Net cash (used in) provided by investing activities		(24.5	)		13.7

Cash flows from financing activities:
Advances on line of credit		1,356.9			1,202.1
Repayments on line of credit		(1,356.9	)		(1,202.1	)
Principal payments on long-term debt		(49.0	)		(232.3	)
Proceeds from long-term debt		—			97.5
Payments of deferred financing fees		—			(3.4	)
Repurchase of common stock		—			(20.4	)
Exercise of stock options, net		0.8			0.4
Exercise of warrants		9.4			—
Series A convertible preferred stock dividends		(3.7	)		(3.7	)
Net cash used in financing activities		(42.5	)		(161.9	)

Effect of exchange rates on cash and cash equivalents		1.1			(0.1	)

Net increase (decrease) in cash and cash equivalents		40.8			(32.6	)
Cash and cash equivalents – beginning of period		147.5			176.2
Cash and cash equivalents – end of period	$	188.3		$	143.6

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

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DASEKE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS – (Continued)

(Unaudited)

(Dollars in millions)


	Nine Months Ended
	September 30,
	2022		2021
Supplemental disclosure of cash flow information
Cash paid for interest	$	23.1	$	22.4
Cash paid for income taxes	$	19.8	$	4.7

Noncash investing and financing activities
Property and equipment acquired with debt or finance lease obligations	$	93.7	$	55.0
Property and equipment sold for notes receivable	$	—	$	0.5
Right-of-use assets acquired	$	27.8	$	21.4

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

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NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Daseke is a premier North American transportation solutions specialist dedicated to servicing challenging industrial end-markets through experienced people and a fleet of more than 4,500 tractors and 11,000 flatbed and specialized trailers, and has operations throughout the United States, Canada and Mexico. The Company also provides logistical planning and warehousing services to customers. The Company is subject to regulation by the Department of Transportation, the Department of Defense, the Department of Energy, and various state regulatory authorities in the United States. The Company is also subject to regulation by the Ministries of Transportation and Communications and various provincial regulatory authorities in Canada.

Basis of Presentation

These interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (US GAAP) for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ended December 31, 2022.

The consolidated balance sheet as of December 31, 2021 has been derived from the audited consolidated financial statements at that date. For additional information, including the Company’s significant accounting policies, refer to the consolidated financial statements and related footnotes for the year ended December 31, 2021 as set forth in the Company’s Annual Report on Form 10-K, filed with the SEC on February 23, 2022.

Fair Value Measurements

The Company follows the accounting guidance for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements on a recurring basis. Fair value guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It also establishes a framework for measuring fair value and expands disclosures about fair value measurements. The three levels of the fair value framework are as follows:

Level 1 – Quoted market prices in active markets for identical assets or liabilities.

Level 2 – Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3 – Unobservable inputs reflecting the reporting entity’s own assumptions or external inputs from inactive markets.

A financial asset or liability’s classification within the framework is determined based on the lowest level of input that is significant to the fair value measurement.

The Company may be required, on a non-recurring basis, to adjust the carrying value of the Company’s property and equipment, intangible assets, goodwill and contingent consideration. When necessary, these valuations are determined by the Company using Level 3 inputs. These assets are subject to fair value adjustments in certain circumstances, such as when there is evidence that impairment may exist.

The Company’s warrant liabilities are included within the Level 1 and Level 3 fair value hierarchy. There was no warrant liability as of September 30, 2022. The following table sets forth by level within the fair value hierarchy the Company’s warrant liability that were accounted for at fair value as of December 31, 2021 (in millions):


	Fair value as of December 31, 2021
Liabilities:	Level 1		Level 2		Level 3		Total
Warrant liability	$	2.7	$	—	$	2.0	$	4.7
Total fair value	$	2.7	$	—	$	2.0	$	4.7

The table below is a summary of the changes in the fair value of the warrant liability within the Level 3 fair value hierarchy for the nine months ended September 30, 2022 (in millions):


	Nine Months Ended
	September 30, 2022
Balance at beginning of period	$	2.0
Change in fair value		(2.0	)
Balance at end of period	$	—

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Common Stock Purchase Warrants

The Company’s common stock purchase warrants expired in accordance with their terms on February 27, 2022 and are no longer exercisable. During 2022, prior to their expiration, there were 1,635,296 warrants exercised for 817,648 shares of the Company’s common stock in exchange for $9.4 million in proceeds to the Company.

Recently Issued Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (the FASB) issued ASU 2020-06 – Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The guidance simplifies the accounting for convertible debt and convertible preferred stock by removing the requirements to separately present certain conversion features in equity. In addition, the amendments also simplify the guidance in ASC Subtopic 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity, by removing certain criteria that must be satisfied in order to classify a contract as equity, which is expected to decrease the number of freestanding instruments and embedded derivatives accounted for as assets or liabilities. Finally, the amendments revise the guidance on calculating earnings per share, requiring use of the if-converted method for all convertible instruments and rescinding an entity’s ability to rebut the presumption of share settlement for instruments that may be settled in cash or other assets. The Company adopted this guidance as of January 1, 2022. The adoption did not have a material impact on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04 – Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying US GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The provisions of this update are effective for all entities as of March 20, 2020 through December 31, 2022 and apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. In addition, in January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848) – Scope, to clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. ASU 2020-04 is not expected to have a material impact on the Company’s consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12 – Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in the accounting standards. The amendments in ASU 2019-12 eliminate certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also clarifies and simplifies other aspects of the accounting for income taxes. The Company adopted this guidance as of January 1, 2022. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Accounting for Credit Losses (Topic 326). ASU 2016-13 requires the use of an “expected loss” model on certain types of financial instruments. The ASU sets forth a “current expected credit loss” model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets, including trade receivables. In addition, in March 2022, the FASB issued ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures to improve the decision usefulness of information provided to investors concerning certain loan refinancings, restructurings and writeoffs. The new standard will become effective for the Company beginning with the first quarter of 2023 and is not expected to have a material impact on the Company’s consolidated financial statements.

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Lease Income

The Company leases tractors and trailers to certain of its owner operators and accounts for these transactions as operating leases. These leases typically have terms of 30 to 72 months and are collateralized by a security interest in the related revenue equipment. The Company recognizes income for these leases as payments are received over the lease term, which are reported in purchased freight on the consolidated statements of operations and comprehensive income. The Company's equipment leases may include options for the lessee to purchase the equipment at the end of the lease term or terminate the lease prior to the end of the lease term. When an asset reaches the end of its useful economic life, the Company disposes of the asset.

Lease income from lease payments related to these operating leases for the three and nine months ended September 30, 2022 was $8.4 million and $24.2 million, respectively. Lease income from lease payments related to these operating leases for the three and nine months ended September 30, 2021 was $7.6 million and $20.7 million, respectively.

NOTE 2 – ACQUISITIONS

On March 3, 2022, the Company acquired 100% of the outstanding stock of SJ Transportation Co., Inc. (SJ Transportation) for consideration net of cash acquired of $19.1 million, which was funded with cash on hand. The acquisition was a stock purchase under US GAAP. A Section 338(h)(10) election was filed for the entity acquired which will deem the acquisition as an asset purchase for tax purposes; therefore approximately $7.9 million of the values assigned to goodwill and intangibles are expected to be deductible for tax purposes. Approximately $0.5 million of transaction expenses were incurred in the acquisition, which are not deductible for tax purposes.

The following is a summary of the preliminary allocation of the purchase price paid to the fair values of the net assets, net of cash acquired (in millions):


	SJ Transportation
Accounts receivable	$	3.4
Other current assets		1.8
Property and equipment		10.0
Goodwill and intangibles		7.9
Accounts payable and other liabilities		(4.0	)
Total	$	19.1

For the three months ended September 30, 2022, revenue and net income of the acquired company, post-acquisition date, was $7.0 million and $0.7 million, respectively, and for the nine months ended September 30, 2022, $15.7 million and $1.3 million, respectively.

Supplemental Pro Forma Information (Unaudited)

The following supplemental pro forma financial information reflects the SJ Transportation acquisition as if it occurred on January 1, 2021 (in millions). This pro forma financial information has been presented for illustrative purposes only and is not necessarily indicative of the operating results that would have been achieved had the pro forma events taken place on January 1, 2021. Further, the pro forma financial information does not purport to project the future operating results of the consolidated company.


	Three Months Ended					Nine Months Ended
		September 30,					September 30,
(in millions, except per share amounts)		2022		2021			2022		2021
Pro forma revenue		$	462.8	$	430.3		$	1,369.0	$	1,180.2
Pro forma net income		$	12.6	$	21.1		$	43.5	$	50.3
Pro forma earnings per common share:
Basic		$	0.18	$	0.31		$	0.63	$	0.72
Diluted		$	0.17	$	0.30		$	0.60	$	0.70

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NOTE 3 – OTHER CURRENT ASSETS

The components of other current assets are as follows as of September 30, 2022 and December 31, 2021 (in millions):


	September 30,		December 31,
	2022		2021
Prepaid insurance	$	9.0	$	7.5
Prepaid licensing, permits and tolls		6.5		4.8
Parts supplies		4.9		3.5
Other prepaids		2.4		2.6
Income tax receivable		1.9		1.9
Prepaid software		1.7		1.1
Prepaid highway and fuel taxes		1.3		1.1
Prepaid taxes		0.5		0.1
Total	$	28.2	$	22.6

NOTE 4 – INTEGRATION AND RESTRUCTURING

During the first quarter of 2022, the Company internally announced a phased integration and restructuring plan (Transformation Plan or the Plan), with the first phase integrating five operating segments into three other operating segments, which will reduce the number of overall operating segments from eleven to six. The second phase of the Plan will integrate those six operating segments into four or five operating segments. As of September 30, 2022, we had nine operating segments. The Transformation Plan is intended to reduce the Company’s cost base, right size its organization and management team and increase and accelerate its previously announced operational improvement goals. In addition, the Company anticipates additional revenue opportunities driven by synergies from optimizing a consolidated operation, including empty mile reduction, pricing improvements, and additional seated truck contribution. The integration and restructuring costs consist of employee-related costs and other transition and termination costs related to restructuring activities. Employee-related costs include severance, tax preparation, and relocation costs, which are accounted for in accordance with ASC 420 Exit or Disposal Cost Obligations. Other transition and termination costs include fixed asset-related charges, contract and lease termination costs, professional fees, and other miscellaneous expenditures associated with the integration or restructuring activities, which are expensed as incurred. Costs are reported in restructuring charges in the consolidated statements of operations and comprehensive income. The obligation related to employee separation costs is included in other current liabilities in the consolidated balance sheets.

The Company recorded $0.8 million and $2.0 million of integration and restructuring expenses in connection with the Plan in the three and nine months ended September 30, 2022, respectively. As of September 30, 2022, we have incurred a cumulative total of $2.0 million in integration and restructuring costs since inception of the Plan.

The Company completed the previously announced internal restructuring (Project Pivot) and integration (Project Synchronize) plans as of December 31, 2021 and does not expect any future material restructuring costs associated with those prior plans. As of December 31, 2021, the Company had incurred a cumulative total of $9.9 million in integration and restructuring costs related to Project Pivot and Project Synchronize.

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The following table summarizes the integration and restructuring costs as of September 30, 2022 (in millions):


	Severance		Operating
	and		Lease
	Other Payroll		Termination		Other			Total
Balance at December 31, 2021	$	—	$	—	$	—		$	—
Specialized Solution
Costs accrued		—		—		0.2			0.2
Amounts paid or charged		—		—		(0.2	)		(0.2	)
Specialized Solution balance at September 30, 2022		—		—		—			—
Flatbed Solution
Costs accrued		—		—		—			—
Amounts paid or charged		—		—		—			—
Flatbed Solution balance at September 30, 2022		—		—		—			—
Corporate
Costs accrued		—		—		1.8			1.8
Amounts paid or charged		—		—		(1.8	)		(1.8	)
Corporate balance at September 30, 2022		—		—		—			—
Consolidated
Costs accrued		—		—		2.0			2.0
Amounts paid or charged		—		—		(2.0	)		(2.0	)
Consolidated balance at September 30, 2022	$	—	$	—	$	—		$	—

Impairments

During the second quarter of 2022, the Company made a decision to no longer use the trade name of an operating segment within the Specialized Solutions segment that had been integrated into another operating segment as part of the Plan. In addition, there were no remaining customer relationships associated with this integrated operating segment. As such, the Company determined there were indicators of impairment regarding this operating segment’s trade name intangibles, customer relationships intangibles, and goodwill. The Company determined there was no fair value associated with this integrated operating segment’s intangibles. As such, the Company recorded an impairment charge of $7.8 million in the Specialized Solutions segment during the second quarter of 2022, consisting of $1.9 million of trade name intangibles, $0.2 million of customer relationships, and $5.7 million of goodwill. The impairment charge is included in impairment in the consolidated statements of operations and comprehensive income.

NOTE 5 – PROPERTY AND EQUIPMENT

The components of property and equipment are as follows (in millions):


	September 30,			December 31,
	2022			2021
Revenue equipment	$	580.6		$	520.5
Revenue equipment leased and available for lease to owner operators		151.6			123.4
Buildings and improvements		58.8			58.0
Furniture and fixtures, office and computer equipment, vehicles and capitalized software development		37.6			33.3
Property and equipment, gross		828.6			735.2
Accumulated depreciation		(372.4	)		(337.5	)
Property and equipment, net	$	456.2		$	397.7

Depreciation expense on property and equipment was $22.1 million and $20.6 million for the three months ended September 30, 2022 and 2021, respectively. Depreciation expense on property and equipment was $63.0 million and $61.5 million for the nine months ended September 30, 2022 and 2021, respectively.

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NOTE 6 – ACCRUED EXPENSES AND OTHER LIABILITIES

The components of accrued expenses and other liabilities are as follows as of September 30, 2022 and December 31, 2021 (in millions):


	September 30,		December 31,
	2022		2021
Brokerage and escorts	$	17.9	$	15.6
Unvouchered payables		10.9		8.7
Owner operator deposits		10.4		11.3
Other accrued expenses		7.3		3.7
Fuel and fuel taxes		5.2		1.2
Accrued property taxes and sales taxes payable		2.0		2.3
Interest		0.8		1.1
	$	54.5	$	43.9

NOTE 7 – LONG-TERM DEBT

Long-term debt consists of the following as of September 30, 2022 and December 31, 2021 (in millions):


	September 30,			December 31,
	2022			2021
Term Loan Facility	$	394.0		$	397.0
ABL Facility		—			—
Equipment and real estate term loans		220.7			169.0
Finance lease liabilities		23.4			28.5
Total debt and finance lease liabilities		638.1			594.5
Less current portion		(68.8	)		(55.5	)
Less unamortized deferred financing fees		(6.7	)		(7.6	)
Long-term debt and finance lease liabilities, less current portion and unamortized deferred financing fees	$	562.6		$	531.4

Term Loan Facility

On March 9, 2021, the Company and Daseke Companies, Inc., a wholly-owned subsidiary of the Company (the Term Loan Borrower), entered into a Refinancing Amendment (Amendment No. 3 to Term Loan Agreement) (the Term Loan Amendment) with JPMorgan Chase Bank, N.A., as successor administrative agent and collateral agent and a replacement lender, Credit Suisse AG, Cayman Islands Branch, as predecessor administrative agent and collateral agent, the other lenders party thereto and the other financial institutions party thereto. Pursuant to the Term Loan Amendment, the Company prepaid, refinanced and replaced all of the then-issued and outstanding term loans, which had an aggregate principal amount of $484 million, with cash on hand and new replacement terms loans in an aggregate principal amount of $400 million (the Replacement Term Loans). The Replacement Term Loans have a scheduled maturity date of March 9, 2028. At September 30, 2022 and December 31, 2021, the interest rate on the Replacement Term Loans was 7.06% and 4.75%, respectively. As of September 30, 2022, the Company was in compliance with all covenants contained in the agreement governing the Replacement Term Loans.

ABL Facility

The Company has a senior secured asset-based revolving line of credit (the ABL Facility) under a credit agreement (as amended, restated, supplemented or otherwise modified from time to time, the ABL Credit Agreement) with PNC Bank, National Association, as administrative agent and the lenders party thereto.

As of September 30, 2022, the Company had no borrowings, $22.5 million in letters of credit outstanding, and could incur approximately $123.4 million of additional indebtedness under the ABL Facility, based on current qualified collateral. As of September 30, 2022, the interest rate on the ABL Facility was 6.75%. As of September 30, 2022, the Company was in compliance with all covenants contained in the ABL Credit Agreement.

Equipment and Real Estate Term Loans

As of September 30, 2022, the Company had term loans collateralized by equipment in the aggregate amount of $218.4 million with 16 lenders (Equipment Term Loans). The Equipment Term Loans bear interest at rates ranging from 2.6% to 6.6%, require monthly payments of principal and interest and mature at various dates through July 2029. As of September 30, 2022, the weighted average interest rate was 4.4%.

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As of September 30, 2022, the Company has a bank mortgage loan with a balance of $2.3 million incurred to finance the construction of certain facilities in Redmond, Oregon.

NOTE 8 – INCOME TAXES

The effective tax rates for the three months ended September 30, 2022 and 2021 were 44.0% and 29.4%, respectively. The effective tax rates for the nine months ended September 30, 2022 and 2021 were 32.7% and 27.6%, respectively. The Company's effective tax rate differs from the federal statutory rate due to state income taxes, nontaxable income stemming from the change in fair value of the warrant liability, and certain nondeductible expenses related to executive compensation and goodwill impairment. State tax rates vary among states and typically range from 1% to 6%, although some state rates are higher and a small number of states do not impose an income tax. The effective tax rate for the three and nine months ended September 30, 2022 differs from the effective tax rate for the same period in 2021 primarily due to the permanent disallowance of goodwill impairment in the second quarter of 2022 and larger disallowances related to executive compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (IRC).

There were no changes in uncertain tax positions during the three and nine months ended September 30, 2022.

NOTE 9 – STOCK-BASED COMPENSATION

Under the 2017 Omnibus Incentive Plan (as amended from time to time, the Incentive Plan), the Company may grant awards of stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-based awards and performance awards. As of September 30, 2022, the Company had approximately 1.0 million shares of common stock available for issuance under the Incentive Plan, assuming the maximum potential number of shares that may be issued from outstanding awards.

Aggregate stock-based compensation charges, net of forfeitures, were $2.4 million and $2.1 million for the three months ended September 30, 2022 and 2021, respectively, and $8.8 million and $5.3 million for the nine months ended September 30, 2022 and 2021, respectively. As of September 30, 2022, there was $0.8 million, $3.7 million, and $6.3 million of unrecognized stock-based compensation expense related to stock options, restricted stock units (RSUs) and performance stock units (PSUs) (both equity and liability awards), respectively. This expense will be recognized over the weighted average periods of 0.6 years for stock options, 1.4 years for RSUs and 1.0 years for PSUs.

During the nine months ended September 30, 2022, there were 208,386 RSUs awarded to participants that are classified as equity. In addition, during the nine months ended September 30, 2022, there were 235,393 PSUs awarded to participants that are classified as liabilities. During the nine months ended September 30, 2022, there were no stock options granted.

Restricted Stock Units

The following table summarizes RSU grants under the Incentive Plan:


Grantee Type	# of RSUs Granted		Issued and Outstanding		Vesting Period	Weighted Average Grant Date Fair Value (Per Unit)
Director Group		835,543		76,336	< 1 year -1 year	$	10.96
Employee Group		2,393,066		544,270	1 year -5 years	$	9.54
Total				620,606

A summary of RSU awards activity under the Incentive Plan as of September 30, 2022, and the changes during the nine months ended September 30, 2022 are as follows:


	Units			Weighted Average Grant Date Fair Value (Per Unit)
Non-vested as of January 1, 2022		673,830		$	8.56
Granted		208,386			12.05
Vested		(200,982	)		8.17
Forfeited		(60,628	)		10.07
Non-vested as of September 30, 2022		620,606		$	9.72

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The weighted average grant date fair value of RSUs granted during the nine months ended September 30, 2022 and 2021 was $12.05 and $7.04, respectively. The total fair value of RSUs vested during the nine months ended September 30, 2022 and 2021 was $1.6 million and $3.8 million, respectively.

Performance Stock Units

As of September 30, 2022, the Company had 2,579,897 PSUs outstanding, of which 1,356,500 were classified as equity and 1,223,397 were classified as liabilities.

A summary of equity-classified performance stock unit awards activity as of September 30, 2022, and the changes during the nine months ended September 30, 2022 are as follows:


	Units			Weighted Average Grant Date Fair Value (Per Unit)
Non-vested equity-classified as of January 1, 2022		1,745,000		$	4.93
Granted		—			—
Vested		—			—
Forfeited		(388,500	)		0.59
Non-vested equity-classified as of September 30, 2022		1,356,500		$	6.17

As of September 30, 2022, there were 548,397 PSUs classified as liabilities in which the vesting occurs upon the achievement of specific performance-based conditions related to the Company’s financial performance over a three-year period, modified based on the Company’s Relative Total Shareholder Return (TSR) and subject to final vesting based on the participant’s continued employment through the end of the requisite service periods. The ultimate amount to vest may be downwardly adjusted by the Compensation Committee of the Company’s Board of Directors if the TSR is negative. The amount of awards that will ultimately vest for these PSUs can range from 0% to 200% based on the TSR calculated over a three-year period beginning January 1 of the year each grant was made. The Company currently expects that these PSUs will vest between 96% and 129%. The fair value of these PSUs will be remeasured at each period-end until the earlier of the date they are reclassified to equity or the vesting date. The inputs and assumptions used to calculate the fair value ranged from a remaining term of 1.25 to 2.25 years, risk-free interest rate of 2.11% to 2.39%, expected volatility of 58.2% to 89.3%, and an expected dividend yield of 0.0%.

In addition, there are 675,000 PSUs classified as liabilities in which the vesting occurs upon the achievement of specific performance-based conditions related to the Company’s financial performance over a two-year period, subject to various subjective individual performance goals and subject to final vesting based on the participant’s continued employment through the end of the requisite service periods. The fair value of these PSUs will be remeasured at each period-end until the earlier of the date they are reclassified to equity or the vesting date. The Company currently expects that these PSUs will vest at 100%. The fair value is equal to the market value of the common stock at each period-end.

As of September 30, 2022, the total fair value of liability-classified awards was approximately $7.6 million, of which $2.0 million was recorded as a liability within accrued payroll, benefits and related taxes on the consolidated balance sheet and $1.6 million was recorded as a liability within other non-current liabilities on the consolidated balance sheet. As of September 30, 2022, the unrecognized stock-based compensation expense related to liability-classified PSUs was $4.0 million.

NOTE 10 – COMMITMENTS AND CONTINGENCIES

Letters of Credit

The Company had outstanding letters of credit as of September 30, 2022 and December 31, 2021 totaling approximately $24.9 million and $25.7 million, respectively, including those disclosed in Note 7. These letters of credit are related to liability and workers’ compensation insurance claims.

Contingencies

The Company is involved in certain claims and pending litigation arising in the normal course of business. These proceedings primarily involve claims for personal injury or property damage incurred in the transportation of freight or for personnel matters. The Company maintains liability insurance to cover liabilities arising from these matters but is responsible to pay self-insurance and deductibles on such matters up to a certain threshold before the insurance is applied.

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NOTE 11 – COMMON STOCK REPURCHASE PROGRAM

On September 30, 2022, the Company announced that the Board of Directors has authorized the repurchase of up to $40.0 million of the Company’s outstanding common stock. As of September 30, 2022, the Company had not repurchased any shares under the program.

NOTE 12 – REPORTABLE SEGMENTS

The Company evaluates the performance of the segments primarily based on their respective revenues and operating income. Accordingly, certain non-operating items are not reported in segment results. The Company has disclosed a corporate segment, which is not an operating segment and includes acquisition transaction expenses, corporate salaries, interest expense and other corporate administrative expenses and intersegment eliminations. In addition, the corporate segment, from time to time when advantageous to do so, purchases and resells certain revenue equipment. During the three months ended September 30, 2022, the corporate segment did not purchase and resell any revenue equipment. During the nine months ended September 30, 2022, the corporate segment purchased $6.7 million in revenue equipment, which it resold for $7.1 million. This resulted in gains of $0.4 million for the nine months ended September 30, 2022 and was recognized within Gain on disposition of property and equipment on the consolidated statements of operations and comprehensive income. During the three and nine months ended September 30, 2021, the corporate segment did not purchase or resell any revenue equipment.

The corporate segment also purchases revenue equipment to lease to the Company’s operating segments. Such leases are generally billed at estimated market rates, and the intersegment expenses included within operating income (loss) are eliminated in the Company’s consolidated results. Intersegment lease expenses for the Specialized Solutions segment totaled $1.1 million and $1.2 million for the three and nine months ended September 30, 2022, respectively. There were no intersegment lease expenses for the Flatbed Solutions segment for the three and nine months ended September 30, 2022. There were no intersegment lease expenses in any reportable segments for the three and nine months ended September 30, 2021.

The Company’s operating segments also provide transportation and related services for one another. Such services are generally billed at cost, and no profit is earned. Such intersegment revenues and expenses are eliminated in the Company’s consolidated results. Intersegment transportation and related services revenues and expenses for the Flatbed Solutions segment totaled $0.5 million and $2.3 million for the three and nine months ended September 30, 2022, respectively. Intersegment transportation and related services revenues and expenses for the Flatbed Solutions segment totaled $1.5 million and $3.3 million for the three and nine months ended September 30, 2021, respectively. Intersegment transportation and related services revenues and expenses for the Specialized Solutions segment totaled $1.9 million and $6.4 million for the three and nine months ended September 30, 2022, respectively. Intersegment transportation and related services revenues and expenses for the Specialized Solutions segment totaled $1.7 million and $6.0 million for the three and nine months ended September 30, 2021, respectively.

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The following tables reflect certain financial data of the Company’s reportable segments for the three and nine months ended September 30, 2022 and 2021 (in millions):


	Flatbed		Specialized			Corporate/			Consolidated
	Solutions Segment		Solutions Segment			Eliminations			Total
Three Months Ended September 30, 2022
Total revenue	$	194.7	$	270.4		$	(2.3	)	$	462.8
Company freight		42.8		127.8			(2.0	)		168.6
Owner operator freight		81.5		48.7			(0.2	)		130.0
Brokerage		38.5		46.8			—			85.3
Logistics		0.9		12.8			0.1			13.8
Fuel surcharge		31.0		34.3			(0.2	)		65.1
Operating income (loss)		17.3		35.0			(20.1	)		32.2
Depreciation		9.1		11.7			1.3			22.1
Amortization of intangible assets		0.8		1.0			—			1.8
Restructuring		—		(0.3	)		1.1			0.8
Non-cash operating lease expense		0.1		(0.1	)		—			—
Interest expense		1.0		1.4			6.8			9.2
Capital expenditures		23.8		22.9			13.9			60.6

Three Months Ended September 30, 2021
Total revenue	$	184.0	$	244.0		$	(3.4	)	$	424.6
Company freight		45.1		123.9			(2.4	)		166.6
Owner operator freight		89.2		42.6			(0.7	)		131.1
Brokerage		30.4		51.5			—			81.9
Logistics		1.1		8.6			—			9.7
Fuel surcharge		18.2		17.4			(0.3	)		35.3
Operating income (loss)		21.1		29.5			(10.2	)		40.4
Depreciation		7.9		12.3			0.4			20.6
Amortization of intangible assets		0.8		1.0			(0.1	)		1.7
Restructuring		—		0.1			—			0.1
Non-cash operating lease expense		1.1		0.7			—			1.8
Interest expense		0.9		1.2			5.2			7.3
Capital expenditures		4.7		25.8			11.5			42.0


	Flatbed		Specialized			Corporate/			Consolidated
	Solutions Segment		Solutions Segment			Eliminations			Total
Nine Months Ended September 30, 2022
Total revenue	$	605.8	$	767.6		$	(8.3	)	$	1,365.1
Company freight		127.2		371.7			(6.5	)		492.4
Owner operator freight		259.9		139.1			(1.3	)		397.7
Brokerage		127.2		128.2			—			255.4
Logistics		2.9		36.2			0.1			39.2
Fuel surcharge		88.6		92.4			(0.6	)		180.4
Operating income (loss)		57.9		75.3			(50.0	)		83.2
Depreciation		26.0		35.0			2.0			63.0
Amortization of intangible assets		2.3		2.9			—			5.2
Restructuring		—		0.2			1.8			2.0
Non-cash operating lease expense		0.1		(0.1	)		—			—
Interest expense		2.6		3.8			17.4			23.8
Capital expenditures		44.2		50.8			32.1			127.1

Nine Months Ended September 30, 2021
Total revenue	$	518.3	$	653.7		$	(9.5	)	$	1,162.5
Company freight		137.5		345.0			(7.2	)		475.3
Owner operator freight		249.1		117.9			(1.7	)		365.3
Brokerage		77.8		119.6			(0.3	)		197.1
Logistics		3.6		25.0			0.3			28.9
Fuel surcharge		50.3		46.2			(0.6	)		95.9
Operating income (loss)		55.0		69.1			(30.1	)		94.0
Depreciation		24.2		36.5			0.8			61.5
Amortization of intangible assets		2.3		2.9			—			5.2
Restructuring		—		0.2			—			0.2
Non-cash operating lease expense		0.9		0.1			—			1.0
Interest expense		3.5		4.6			18.0			26.1
Capital expenditures		21.4		49.9			17.9			89.2

A measure of assets is not applicable, as segment assets are not regularly reviewed by the chief operating decision maker for evaluating performance or allocating resources.

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NOTE 13 – EARNINGS (LOSS) PER SHARE

Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are included in the computation of earnings per share pursuant to the two-class method. A portion of the Company’s outstanding non-vested RSUs are participating securities unless there is a net loss attributable to common stockholders. Accordingly, earnings per common share are computed using the two-class method.

Basic earnings per common share is calculated by dividing net income available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share reflect the potential 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 the Company’s earnings.

For the three and nine months ended September 30, 2022, shares of the Company’s 7.625% Series A Convertible Cumulative Preferred Stock (Series A Preferred Stock) were not included in the computation of diluted earnings per share as their effects were anti-dilutive.

The following table sets forth the computation of basic and diluted earnings per share under the two-class method:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in millions, except per share data)	2022			2021			2022			2021

Numerator:
Net income	$	12.6		$	20.9		$	43.3		$	48.9
Less Series A Preferred Stock dividends		(1.3	)		(1.2	)		(3.7	)		(3.7	)
Net income attributable to common stockholders		11.3			19.7			39.6			45.2
Allocation of earnings to non-vested participating RSUs		—			(0.2	)		(0.1	)		(0.4	)
Numerator for basic EPS - income available to common stockholders - two class method	$	11.3		$	19.5		$	39.5		$	44.8

Effect of dilutive securities:
Add back Series A Preferred Stock dividends	$	—		$	1.2		$	—		$	3.7
Add back allocation earnings to participating securities		—			0.2			0.1			0.4
Reallocation of earnings to participating securities considering potentially dilutive securities		—			(0.2	)		(0.1	)		(0.4	)
Numerator for diluted EPS - income available to common shareholders - two class method	$	11.3		$	20.7		$	39.5		$	48.5

Denominator:
Denominator for basic EPS - weighted-average shares		63,535,897			62,583,115			63,301,446			64,159,551

Effect of dilutive securities:
Non-participating outstanding share-based payment awards		2,734,744			1,765,315			2,965,220			1,395,857
Series A Preferred Stock		—			5,652,173			—			5,652,173
Denominator for diluted EPS - weighted-average shares		66,270,641			70,000,603			66,266,666			71,207,581

Basic earnings per share	$	0.18		$	0.31		$	0.62		$	0.70
Diluted earnings per share	$	0.17		$	0.30		$	0.60		$	0.68

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The Company believes it provides one of the most comprehensive transportation and logistics solutions offerings in the industry. The Company delivers its diverse offering of transportation and logistics solutions to thousands of customers across the United States, Canada and Mexico through two reportable segments: Flatbed Solutions and Specialized Solutions. The Flatbed Solutions segment focuses on delivering transportation and logistics solutions that principally require the use of flatbed and retractable-sided transportation equipment, and the Specialized Solutions segment focuses on delivering transportation and logistics solutions that require the use of specialized trailering transportation equipment.

Both of the Company’s reportable segments operate highly flexible business models comprised of company-owned tractors and trailers and asset-light operations (which consist of owner operator transportation, freight brokerage and logistics). The Company’s asset-based operations have the benefit of providing committed capacity and continuity of operations to meet shippers needs. Alternatively, the Company’s asset-light operations offer flexibility and scalability to meet customers’ dynamic needs and have lower capital expenditure requirements and fixed costs.

Recent Developments

Thus far in 2022, like others in our industry, we have experienced inflationary cost headwinds in driver pay, operations and maintenance, and insurance expenses. The U.S. inflation rate is the highest experienced in four decades. Inflation can have an impact on the Company’s operating costs. A prolonged period of inflation could cause interest rates, fuel, wages and other costs to increase, which would adversely affect the Company’s results of operations unless freight rates correspondingly increase. We have seen strong freight rates for much of 2022, which have been supported by our strategic alignment with niche end-markets in the industrial economy, as opposed to the commodity-oriented consumer retail markets. Although our flatbed segment rate per mile is higher in 2022 compared to 2021, we are beginning to experience softening in freight rates, which has negatively impacted our flatbed segment operating results in the midst of historic inflationary cost headwinds, which we expect to continue for the foreseeable future.

In addition to inflation, like others in our industry, we have observed ongoing delays in receiving new equipment as the supply chain disruptions persisted throughout the first half of 2022. We began to see improvements during the third quarter, and we are expecting to see additional improvement in receiving new equipment during the fourth quarter of 2022.

On September 30, 2022, the Company announced that its Board of Directors has approved a stock repurchase program, under which the Company is authorized to repurchase up to $40 million of its outstanding common stock. The Company intends to fund the repurchase program with cash on hand. The timing, number, and value of shares repurchased under the program will be at management’s discretion and will depend on a number of factors, including the market price of the Company’s common stock, general market and economic conditions and applicable legal requirements. The program may be suspended, modified or discontinued by the Board at any time without prior notice.

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Results of Operations

The following table sets forth revenue, operating expenses and income from operations (in dollars and as a percentage of total revenue), derived from the Company’s consolidated statements of operations, for the three months ended September 30, 2022 and 2021, as well as certain operating statistics for the same periods. In addition, the absolute and relative changes for each are presented. Rate per mile is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by total number of company and owner operator miles driven in the period. Miles are estimated based on information received as of the filing date and may change quarter to quarter when final information is received from each operating segment. Revenue per tractor is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by the average number of tractors in the period, including owner operator tractors.


	Three Months Ended September 30,
	2022							2021							Increase (Decrease)
(Dollars in millions, except Rate per mile and Revenue per tractor)	Amount			%				Amount			%				Absolute			Relative
REVENUE:
Company freight	$	168.6			36.4		%	$	166.6			39.2		%	$	2.0			1.2		%
Owner operator freight		130.0			28.1				131.1			30.9				(1.1	)		(0.8	)
Brokerage		85.3			18.4				81.9			19.3				3.4			4.2
Logistics		13.8			3.0				9.7			2.3				4.1			42.3
Fuel surcharge		65.1			14.1				35.3			8.4				29.8			84.4
Total revenue	$	462.8			100.0		%	$	424.6			100.0		%	$	38.2			9.0		%

OPERATING EXPENSES:
Salaries, wages and employee benefits	$	104.6			22.6		%	$	96.6			22.8		%	$	8.0			8.3		%
Fuel		40.0			8.6				26.8			6.3				13.2			49.3
Operations and maintenance		43.1			9.3				40.5			9.5				2.6			6.4
Communications		0.7			0.2				0.9			0.2				(0.2	)		(22.2	)
Purchased freight		180.3			39.0				167.5			39.4				12.8			7.6
Administrative		17.6			3.8				17.0			4.0				0.6			3.5
Sales and marketing		0.2			—				0.5			0.1				(0.3	)		(60.0	)
Taxes and licenses		3.9			0.8				3.5			0.8				0.4			11.4
Insurance and claims		20.0			4.3				13.9			3.3				6.1			43.9
Acquisition-related transaction expenses		0.4			0.1				—			—				0.4			100.0
Depreciation and amortization		23.9			5.2				22.3			5.3				1.6			7.2
Gain on disposition of revenue property and equipment		(4.9	)		(1.0	)			(5.4	)		(1.3	)			0.5			(9.3	)
Restructuring charges		0.8			0.2				0.1			—				0.7			700.0
Total operating expenses	$	430.6			93.0		%	$	384.2			90.5		%	$	46.4			12.1		%

INCOME FROM OPERATIONS	$	32.2			7.0		%	$	40.4			9.5		%	$	(8.2	)		(20.3	)	%

Other expense (income):
Interest income	$	(0.7	)		(0.2	)	%	$	(0.1	)		—		%	$	(0.6	)		600.0		%
Interest expense		9.2			2.0				7.3			1.7				1.9			26.0
Change in fair value of warrant liability		—			—				3.4			0.8				(3.4	)		(100.0	)
Other		1.2			0.3				0.2			—				1.0			500.0
Total other expense	$	9.7			2.1		%	$	10.8			2.5		%	$	(1.1	)		(10.2	)	%

Income before income taxes	$	22.5			4.9		%	$	29.6			7.0		%	$	(7.1	)		(24.0	)	%
Income tax expense		9.9			2.1				8.7			2.0				1.2			13.8
Net income	$	12.6			2.7		%	$	20.9			4.9		%	$	(8.3	)		(39.7	)	%

OPERATING STATISTICS:
Company miles		54.4							54.4							—			—		%
Owner operator miles		41.6							46.7							(5.1	)		(10.9	)
Total miles (in millions)		96.0							101.1							(5.1	)		(5.0	)	%

Rate per mile	$	3.11						$	2.94						$	0.17			5.8		%
Revenue per tractor	$	62,200						$	62,500						$	(300	)		(0.5	)	%

Company owned tractors, at quarter-end		2,799							2,641							158			6.0		%
Owner operator tractors, at quarter-end		2,042							2,077							(35	)		(1.7	)
Number of trailers, at quarter-end		11,028							11,266							(238	)		(2.1	)	%

Company owned tractors, average for the quarter		2,748							2,672							76			2.8		%
Owner operator tractors, average for the quarter		2,049							2,095							(46	)		(2.2	)
Total tractors, average for the quarter		4,797							4,767							30			0.6		%

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The following table sets forth revenue, operating expenses and income from operations (in dollars and as a percentage of total revenue) of the Company’s Specialized Solutions segment for the three months ended September 30, 2022 and 2021, as well as certain operating statistics for the same periods. In addition, the absolute and relative changes for each are presented. Rate per mile is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by total number of company and owner operator miles driven in the period. Miles are estimated based on information received as of the filing date and may change quarter to quarter when final information is received from each operating segment. Revenue per tractor is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by the average number of tractors in the period, including owner operator tractors.

SPECIALIZED SOLUTIONS


	Three Months Ended September 30,
	2022							2021					Increase (Decrease)
(Dollars in millions, except Rate per mile and Revenue per tractor)	Amount			%				Amount		%			Absolute			Relative
REVENUE(1):
Company freight	$	127.8			47.3		%	$	123.9		50.8	%	$	3.9			3.1		%
Owner operator freight		48.7			18.0				42.6		17.5			6.1			14.3
Brokerage		46.8			17.3				51.5		21.1			(4.7	)		(9.1	)
Logistics		12.8			4.7				8.6		3.5			4.2			48.8
Fuel surcharge		34.3			12.7				17.4		7.1			16.9			97.1
Total revenue	$	270.4			100.0		%	$	244.0		100.0	%	$	26.4			10.8		%

OPERATING EXPENSES(1):
Salaries, wages and employee benefits	$	65.1			24.1		%	$	61.3		25.1	%	$	3.8			6.2		%
Fuel		28.9			10.7				18.4		7.5			10.5			57.1
Operations and maintenance		32.1			11.9				29.3		12.0			2.8			9.6
Purchased freight		78.4			29.0				75.1		30.8			3.3			4.4
Depreciation and amortization		12.7			4.7				13.3		5.5			(0.6	)		(4.5	)
Restructuring charges		(0.3	)		(0.1	)			0.1		—			(0.4	)		(400.0	)
Other operating expenses		18.5			6.8				16.9		6.9			1.6			9.5
Total operating expenses	$	235.4			87.1		%	$	214.4		87.9	%	$	21.0			9.8		%

INCOME FROM OPERATIONS	$	35.0			12.9		%	$	29.6		12.1	%	$	5.4			18.2		%

OPERATING STATISTICS:
Company miles		38.2							36.6					1.6			4.4		%
Owner operator miles		10.0							12.2					(2.2	)		(18.0	)
Total miles (in millions)		48.2							48.8					(0.6	)		(1.2	)	%

Rate per mile	$	3.66						$	3.41				$	0.25			7.3		%
Revenue per tractor	$	74,000						$	70,300				$	3,700			5.3		%

Company owned tractors, at quarter-end		1,982							1,835					147			8.0		%
Owner operator tractors, at quarter-end		441							497					(56	)		(11.3	)
Number of trailers, at quarter-end		7,181							7,059					122			1.7		%

Company owned tractors, average for the quarter		1,942							1,865					77			4.1		%
Owner operator tractors, average for the quarter		442							504					(62	)		(12.3	)
Total tractors, average for the quarter		2,384							2,369					15			0.6		%

(1) Includes intersegment revenues and expenses, as applicable, which are eliminated in the Company’s consolidated results.

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The following table sets forth revenue, operating expenses and income from operations (in dollars and as a percentage of total revenue) of the Company’s Flatbed Solutions segment for the three months ended September 30, 2022 and 2021, as well as certain operating statistics for the same periods. In addition, the absolute and relative changes for each are presented. Rate per mile is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by total number of company and owner operator miles driven in the period. Miles are estimated based on information received as of the filing date and may change quarter to quarter when final information is received from each operating segment. Revenue per tractor is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by the average number of tractors in the period, including owner operator tractors.

FLATBED SOLUTIONS


	Three Months Ended September 30,
	2022					2021					Increase (Decrease)
(Dollars in millions, except Rate per mile and Revenue per tractor)	Amount		%			Amount		%			Absolute			Relative
REVENUE(1):
Company freight	$	42.8		22.0	%	$	45.1		24.5	%	$	(2.3	)		(5.1	)	%
Owner operator freight		81.5		41.9			89.2		48.5			(7.7	)		(8.6	)
Brokerage		38.5		19.8			30.4		16.5			8.1			26.6
Logistics		0.9		0.5			1.1		0.6			(0.2	)		(18.2	)
Fuel surcharge		31.0		15.8			18.2		9.9			12.8			70.3
Total revenue	$	194.7		100.0	%	$	184.0		100.0	%	$	10.7			5.8		%

OPERATING EXPENSES(1):
Salaries, wages and employee benefits	$	28.1		14.4	%	$	28.6		15.5	%	$	(0.5	)		(1.7	)	%
Fuel		11.0		5.6			8.4		4.6			2.6			31.0
Operations and maintenance		12.1		6.2			11.2		6.1			0.9			8.0
Purchased freight		104.4		53.6			95.7		52.0			8.7			9.1
Depreciation and amortization		9.9		5.1			8.8		4.8			1.1			12.5
Other operating expenses		11.9		6.1			10.2		5.5			1.7			16.7
Total operating expenses	$	177.4		91.1	%	$	162.9		88.5	%	$	14.5			8.9		%

INCOME FROM OPERATIONS	$	17.3		8.9	%	$	21.1		11.5	%	$	(3.8	)		(18.0	)	%

OPERATING STATISTICS:
Company miles		16.2					17.8					(1.6	)		(9.0	)	%
Owner operator miles		31.6					34.5					(2.9	)		(8.4	)
Total miles (in millions)		47.8					52.3					(4.5	)		(8.6	)	%

Rate per mile	$	2.60				$	2.57				$	0.03			1.2		%
Revenue per tractor	$	51,500				$	56,000				$	(4,500	)		(8.0	)	%

Company owned tractors, at quarter-end		817					806					11			1.4		%
Owner operator tractors, at quarter-end		1,601					1,580					21			1.3
Number of trailers, at quarter-end		3,847					4,207					(360	)		(8.6	)	%

Company owned tractors, average for the quarter		806					807					(1	)		(0.1	)	%
Owner operator tractors, average for the quarter		1,607					1,591					16			1.0
Total tractors, average for the quarter		2,413					2,398					15			0.6		%

(1) Includes intersegment revenues and expenses, as applicable, which are eliminated in the Company’s consolidated results.

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Revenue. Total revenue increased 9.0% for the three months ended September 30, 2022 as compared to the same period in 2021. The increase in total revenue was primarily attributed to increased fuel surcharges due to increased fuel costs. In addition, rate per mile increased 5.8%, whereas there was a 5.0% decrease in total miles driven. The increase in rate per mile was primarily due to the diversity of end markets, driven by strength within the Specialized Solutions segment.

The Company’s Specialized Solutions segment’s revenue increased 10.8% for the three months ended September 30, 2022 as compared to the same period in 2021, primarily due to higher fuel surcharge and strength in the freight environment, primarily in the high security cargo, agriculture and aerospace end-markets, which has offset lower wind energy volumes. Company freight increased 3.1% for the three months ended September 30, 2022 as compared to the same period in 2021 due to a 4.4% increase in miles driven, partially offset by a 1.2% decrease in company rate per mile. Owner operator freight increased 14.3% due to a 39.5% increase in owner operator rate per mile, partially offset by an 18.0% decrease in miles driven which was correlated to a 12.3% decrease in average owner operator tractors. Brokerage revenue decreased 9.1% for the three months ended September 30, 2022 as compared to the same period in 2021. In this segment, total brokerage loads were down 15%, primarily driven by a decrease in wind energy volumes and the brokerage revenue per load was up 7% due to higher rates during the three months ended September 30, 2022 as compared to the same period in 2021. Fuel surcharge revenue increased 97.1% for the three months ended September 30, 2022 as compared to the same period in 2021 due to increased fuel costs that triggered higher fuel surcharges to our customers.

Despite softening in the overall flatbed freight market, the Company’s Flatbed Solutions segment’s revenue increased 5.8% for the three months ended September 30, 2022 as compared to the same period in 2021, primarily due to higher fuel surcharge and higher rates driven by strength in the construction and manufacturing end markets, which has offset the decreases in the steel end markets. Company freight revenue decreased 5.1% due to a 6% decrease in miles per seated truck, in addition to a 2.5% worsening of unseated trucks due to supply chain delays in receiving and seating new revenue equipment which also contributed to the 9.0% decrease in miles, partially offset by a 4.3% increase in company rate per mile. Owner operator freight decreased 8.6% due to an 8.4% decrease in miles driven and a 0.2% decrease in owner operator rate per mile. The Company deployed company-owned assets into end-markets with higher rates and margins, and as such, some of the excess volumes, for which the Company was unable to utilize company-owned assets, were strategically captured through our brokerage service offering. This resulted in a 26.6% increase in brokerage revenue for the three months ended September 30, 2022 as compared to the same period in 2021. In this segment, total brokerage loads were up 15% and the brokerage revenue per load was up 10% due to higher rates during the three months ended September 30, 2022 as compared to the same period in 2021. Fuel surcharge revenue increased 70.3% due to increased fuel costs.

Salaries, Wages and Employee Benefits. Salaries, wages and employee benefits expense, which consists of compensation for all employees, is primarily affected by the number of miles driven by company drivers, the rate per mile paid to company drivers, employee benefits including, but not limited to, health care and workers’ compensation, and to a lesser extent, the number of, and compensation and benefits paid to, non-driver employees. In general, the Specialized Solutions segment drivers receive a higher driver pay per total mile than Flatbed Solutions segment drivers due to the former requiring a higher level of training and expertise.

Salaries, wages and employee benefits expense increased 8.3% for the three months ended September 30, 2022 as compared to the same period in 2021. The increase in salaries, wages and employee benefits expense was primarily due to higher driver pay, increased employee headcount related to the expansion of corporate functions in legal, accounting and risk management, and increased health insurance claims, partially offset by a decrease in accrued bonuses. Salaries, wages and employee benefits expense, as a percentage of consolidated revenue (excluding brokerage and owner operator revenue), decreased 3.4% for the three months ended September 30, 2022 as compared to the same period in 2021.

The Company’s Specialized Solutions segment’s salaries, wages and employee benefits expense increased 6.2% for the three months ended September 30, 2022 compared to the same period in 2021, primarily as a result of increased health insurance claims and higher driver and non-driver pay, partially offset by a decrease in accrued bonuses. The increased driver pay was due to a 6.7% increase in driver rate and a 4.4% increase in Company miles. Salaries, wages and employee benefits expense, as a percentage of Specialized Solutions revenue (excluding brokerage and owner operator revenue), decreased 3.7% for the three months ended September 30, 2022 as compared to the same period in 2021.

The Company’s Flatbed Solutions segment’s salaries, wages and employee benefits expense decreased 1.7% for the three months ended September 30, 2022 compared to the same period in 2021, primarily as a result of decreased health insurance claims, a decrease in accrued bonuses, reduced employee headcount, partially offset by higher driver pay. The increased driver pay was due to an 18.8% increase in driver rate, partially offset by a 9.0% decrease in Company miles. Salaries, wages and employee benefits expense, as a percentage of Flatbed Solutions revenue (excluding brokerage and owner operator revenue), decreased 6.8% for the three months ended September 30, 2022 as compared to the same period in 2021.

Fuel. Fuel expense consists primarily of diesel fuel expense for company-owned tractors and fuel taxes. The primary factors affecting fuel expense are the cost of diesel fuel, the miles per gallon realized with company equipment and the number of miles driven by company drivers.

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Total fuel expense increased 49.3% for the three months ended September 30, 2022 as compared to the same period in 2021. This increase was primarily due to a 53.5% increase in fuel price. The Company’s Specialized Solutions segment’s fuel expense increased 57.1% for the three months ended September 30, 2022 as compared to the same period in 2021, primarily as a result of the increase in fuel price and a 4.4% increase in Company miles driven for the three months ended September 30, 2022 as compared to the same period in 2021. The Company’s Flatbed Solutions segment’s fuel expense increased 31.0% for the three months ended September 30, 2022 as compared to the same period in 2021, as a result of the increase in fuel price, partially offset by a 9.0% decrease in Company miles driven for the three months ended September 30, 2022 as compared to the same period in 2021. The U.S. national average diesel fuel price, as published by the U.S. Department of Energy, was $5.152 for the three months ended September 30, 2022, compared to $3.357 for the same period in 2021.

Operations and Maintenance. Operations and maintenance expense consists primarily of ordinary vehicle repairs and maintenance, costs associated with preparing tractors and trailers for sale or trade-in, driver recruiting, training and safety costs, permitting and pilot car fees and other general operations expenses. Operations and maintenance expense is primarily affected by the age of company-owned tractors and trailers, the number of miles driven in a period and driver turnover.

Operations and maintenance expense increased 6.4% for the three months ended September 30, 2022 as compared to the same period in 2021 primarily due to a $3.4 million increase in repairs, tires, and preventive maintenance and upkeep of tractors and trailers. The Company’s Specialized Solutions segment’s operations and maintenance expense increased 9.6% for the three months ended September 30, 2022 as compared to the same period in 2021 primarily as a result of a $2.3 million increase in repairs and tires for tractors and trailers. The Company’s Flatbed Solutions segment’s operations and maintenance expense increased 8.0% for the three months ended September 30, 2022 as compared to the same period in 2021 primarily due to a $1.0 million increase in repairs and tires for tractors and trailers. Operations and maintenance expense, as a percentage of consolidated revenue (excluding brokerage revenue), was generally consistent for the three months ended September 30, 2022 as compared to the same period in 2021.

Purchased Freight. Purchased freight expense consists of the payments to owner operators, including fuel surcharge reimbursements, and payments to third-party capacity providers that haul loads brokered to them. Purchased freight expense generally takes into account changes in diesel fuel prices, resulting in higher payments during periods of increasing fuel prices.

Total purchased freight expense increased 7.6% during the three months ended September 30, 2022 as compared to the same period in 2021. Purchased freight expense from owner operators decreased $15.3 million, or 14.3%, during the three months ended September 30, 2022 as compared to the same period in 2021 as a result of 10.9% decrease in owner operator miles driven. Purchased freight expense from third-party capacity providers increased $28.1 million, or 46.4%, during the three months ended September 30, 2022 as compared to the same period in 2021, as a result of an increase in utilization of third-party capacity providers due to supply chain delays in receiving and seating new revenue equipment. In addition, the cost of diesel fuel increased by 53.5% during the three months ended September 30, 2022 as compared to the same period in 2021. Purchased freight expense, as a percentage of consolidated revenue, for the three months ended September 30, 2022, was generally consistent as compared to the same period in 2021.

The Company’s Specialized Solutions segment’s purchased freight expense increased 4.4% during the three months ended September 30, 2022 as compared to the same period in 2021. Purchased freight expense from owner operators increased $0.8 million, or 2.5%, during the three months ended September 30, 2022 as compared to the same period in 2021, as a result of a 39.5% increase in owner operators’ rate, partially offset by a 18.0% decrease in owner operator miles driven. Purchased freight expense from third-party capacity providers increased $2.5 million, or 5.8%, during the three months ended September 30, 2022 as compared to the same period in 2021, as a result of a change in the mix of freight, which resulted in a higher payout margin. As mentioned above, there was also an increase in the cost of diesel fuel during the three months ended September 30, 2022 as compared to the same period in 2021. Purchased freight expense, as a percentage of Specialized Solutions revenue, for the three months ended September 30, 2022, was generally consistent as compared to the same period in 2021.

The Company’s Flatbed Solutions segment’s purchased freight expense increased 9.1% for the three months ended September 30, 2022 as compared to the same period in 2021. Purchased freight expense from owner operators decreased $16.0 million, or 21.3%, for the three months ended September 30, 2022 as compared to the same period in 2021, as a result of a 8.4% decrease in owner operator miles driven and a 0.2% decrease in owner operators’ rate. Purchased freight expense from third-party capacity providers increased $24.7 million, or 120.5%, during the three months ended September 30, 2022 as compared to the same period in 2021, primarily as a result of increased utilization of third-party capacity providers due to supply chain delays in receiving and seating new revenue equipment. As mentioned above, there was also an increase in the cost of diesel fuel during the three months ended September 30, 2022 as compared to the same period in 2021. Purchased freight expense, as a percentage of Flatbed Solutions revenue, for the three months ended September 30, 2022, was generally consistent as compared to the same period in 2021.

Depreciation and Amortization. Depreciation and amortization expense consists primarily of depreciation for company-owned tractors and trailers and amortization of those financed with finance leases. The primary factors affecting these expense items include the size of the fleet and age of company-owned tractors and trailers and the cost of new equipment. Amortization of intangible assets is also included in this expense.

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Depreciation and amortization expense increased 7.2% for the three months ended September 30, 2022 as compared to the same period in 2021. The Company’s Specialized Solutions segment’s depreciation and amortization expense was generally consistent for the three months ended September 30, 2022 as compared to the same period in 2021. The Company’s Flatbed Solutions segment’s depreciation and amortization expense increased 12.5% for the three months ended September 30, 2022 as compared to the same period in 2021 as a result of recent revenue equipment additions.

Insurance and Claims. Insurance and claims expense consists of insurance premiums and the accruals the Company makes for estimated payments and expenses for claims for bodily injury, property damage, cargo damage and other casualty events. Factors affecting the Company’s insurance and claims expense are the frequency and severity of accidents, trends in the development factors used in its accruals and developments in large, prior-year claims. The frequency of accidents tends to correlate with the miles the Company travels; however, insurance and claims expense could increase in periods where there are claims in excess of the Company’s self-insured retention. Insurance and claims expense increased 43.9% during the three months ended September 30, 2022 as compared to the same period in 2021, primarily due to a $7.1 million increase in incurred but not recorded claims. These increases were partially offset by a $1.0 million decrease in certain insurance premiums.

Other (Income) Expense. Interest expense consists of cash interest, amortization and write-off of related issuance costs and fees. Interest expense increased 26.0% for the three months ended September 30, 2022 as compared to the same period in 2021 primarily due to higher interest rates on the Replacement Term Loans and Equipment Term Loans. The Company’s common stock purchase warrants expired in February 2022 and are no longer exercisable. Change in fair value of warrant liability was a loss of $3.4 million for the three months ended September 30, 2021.

Income Tax. Income tax expense was $9.9 million for the three months ended September 30, 2022 compared to income tax expense of $8.7 million for the same period in 2021. The effective tax rate was 44.0% for the three months ended September 30, 2022, compared to 29.4% for the same period in 2021. The difference between the Company’s effective tax rate and the federal statutory rate primarily results from the impact of the permanent disallowance of goodwill impairment in the second quarter of 2022 and disallowances of executive compensation pursuant to IRC Section 162(m).

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The following table sets forth revenue, operating expenses and income from operations (in dollars and as a percentage of total revenue), derived from the Company’s consolidated statements of operations, for the nine months ended September 30, 2022 and 2021, as well as certain operating statistics for the same periods. In addition, the absolute and relative changes for each are presented. Rate per mile is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by total number of company and owner operator miles driven in the period. Miles are estimated based on information received as of the filing date and may change quarter to quarter when final information is received from each operating segment. Revenue per tractor is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by the average number of tractors in the period, including owner operator tractors.


	Nine Months Ended September 30,
	2022							2021							Increase (Decrease)
(Dollars in millions, except Rate per mile and Revenue per tractor)	Amount			%				Amount			%				Absolute			Relative
REVENUE:
Company freight	$	492.4			36.1		%	$	475.3			40.9		%	$	17.1			3.6		%
Owner operator freight		397.7			29.1				365.3			31.4				32.4			8.9
Brokerage		255.4			18.7				197.1			17.0				58.3			29.6
Logistics		39.2			2.9				28.9			2.5				10.3			35.6
Fuel surcharge		180.4			13.2				95.9			8.2				84.5			88.1
Total revenue	$	1,365.1			100.0		%	$	1,162.5			100.0		%	$	202.6			17.4		%

OPERATING EXPENSES:
Salaries, wages and employee benefits	$	299.3			21.9		%	$	280.7			24.1		%	$	18.6			6.6		%
Fuel		120.4			8.8				79.1			6.8				41.3			52.2
Operations and maintenance		117.6			8.6				108.1			9.3				9.5			8.8
Communications		2.6			0.2				3.1			0.3				(0.5	)		(16.1	)
Purchased freight		548.9			40.2				444.2			38.2				104.7			23.6
Administrative		51.6			3.8				46.2			4.0				5.4			11.7
Sales and marketing		1.2			0.1				1.5			0.1				(0.3	)		(20.0	)
Taxes and licenses		11.6			0.8				11.2			1.0				0.4			3.6
Insurance and claims		61.0			4.5				40.6			3.5				20.4			50.2
Acquisition-related transaction expenses		3.7			0.3				—			—				3.7			100.0
Depreciation and amortization		68.2			5.0				66.7			5.7				1.5			2.2
Gain on disposition of revenue property and equipment		(14.0	)		(1.0	)			(13.1	)		(1.1	)			(0.9	)		6.9
Impairment		7.8			0.6				—			—				7.8			100.0
Restructuring charges		2.0			0.1				0.2			—				1.8			900.0
Total operating expenses	$	1,281.9			93.9		%	$	1,068.5			91.9		%	$	213.4			20.0		%

INCOME FROM OPERATIONS	$	83.2			6.1		%	$	94.0			8.1		%	$	(10.8	)		(11.5	)	%

Other expense:
Interest income	$	(1.5	)		(0.1	)	%	$	(0.2	)		—		%	$	(1.3	)		650.0		%
Interest expense		23.8			1.7				26.1			2.2				(2.3	)		(8.8	)
Change in fair value of warrant liability		(4.7	)		(0.3	)			1.2			0.1				(5.9	)		(491.7	)
Other		1.3			0.1				(0.6	)		(0.1	)			1.9			(316.7	)
Total other expense	$	18.9			1.4		%	$	26.5			2.3		%	$	(7.6	)		(28.7	)	%

Income before income taxes		64.3			4.7		%		67.5			5.8		%		(3.2	)		(4.7	)	%
Income tax expense		21.0			1.5				18.6			1.6				2.4			12.9
Net income	$	43.3			3.2		%	$	48.9			4.2		%	$	(5.6	)		(11.5	)	%

OPERATING STATISTICS:
Company miles		159.7							170.9							(11.2	)		(6.6	)	%
Owner operator miles		130.3							139.2							(8.9	)		(6.4	)
Total miles (in millions)		290.0							310.1							(20.1	)		(6.5	)	%

Rate per mile	$	3.07						$	2.71						$	0.36			13.3		%
Revenue per tractor	$	189,900						$	173,400						$	16,500			9.5		%

Company owned tractors, at quarter-end		2,799							2,641							158			6.0		%
Owner operator tractors, at quarter-end		2,042							2,077							(35	)		(1.7	)
Number of trailers, at quarter-end		11,028							11,266							(238	)		(2.1	)	%

Company owned tractors, average for the period		2,638							2,742							(104	)		(3.8	)	%
Owner operator tractors, average for the period		2,049							2,105							(56	)		(2.7	)
Total tractors, average for the period		4,687							4,847							(160	)		(3.3	)	%

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The following table sets forth revenue, operating expenses and income from operations (in dollars and as a percentage of total revenue) of the Company’s Specialized Solutions segment for the nine months ended September 30, 2022 and 2021, as well as certain operating statistics for the same periods. In addition, the absolute and relative changes for each are presented. Rate per mile is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by total number of company and owner operator miles driven in the period. Miles are estimated based on information received as of the filing date and may change quarter to quarter when final information is received from each operating segment. Revenue per tractor is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by the average number of tractors in the period, including owner operator tractors.

SPECIALIZED SOLUTIONS


	Nine Months Ended September 30,
	2022					2021					Increase (Decrease)
(Dollars in millions, except Rate per mile and Revenue per tractor)	Amount		%			Amount		%			Absolute			Relative
REVENUE(1):
Company freight	$	371.7		48.5	%	$	345.0		52.8	%	$	26.7			7.7		%
Owner operator freight		139.1		18.1			117.9		18.0			21.2			18.0
Brokerage		128.2		16.7			119.6		18.3			8.6			7.2
Logistics		36.2		4.7			25.0		3.8			11.2			44.8
Fuel surcharge		92.4		12.0			46.2		7.1			46.2			100.0
Total revenue	$	767.6		100.0	%	$	653.7		100.0	%	$	113.9			17.4		%

OPERATING EXPENSES(1):
Salaries, wages and employee benefits	$	190.9		24.9	%	$	176.5		27.0	%	$	14.4			8.2		%
Fuel		87.1		11.3			54.1		8.3			33.0			61.0
Operations and maintenance		85.3		11.1			76.2		11.7			9.1			11.9
Purchased freight		224.2		29.2			190.7		29.2			33.5			17.6
Depreciation and amortization		37.9		4.9			39.4		6.0			(1.5	)		(3.8	)
Impairment		7.8		1.0			—		—			7.8			100.0
Restructuring charges		0.2		—			0.2		—			—			—
Other operating expenses		58.9		7.7			47.5		7.3			11.4			24.0
Total operating expenses	$	692.3		90.2	%	$	584.6		89.4	%	$	107.7			18.4		%

INCOME FROM OPERATIONS	$	75.3		9.8	%	$	69.1		10.6	%	$	6.2			9.0		%

OPERATING STATISTICS:
Company miles		112.0					112.8					(0.8	)		(0.7	)	%
Owner operator miles		31.6					36.3					(4.7	)		(12.9	)
Total miles (in millions)		143.6					149.1					(5.5	)		(3.7	)	%

Rate per mile	$	3.56				$	3.10				$	0.46			14.8		%
Revenue per tractor	$	219,000				$	194,200				$	24,800			12.8		%

Company owned tractors, at quarter-end		1,982					1,835					147			8.0		%
Owner operator tractors, at quarter-end		441					497					(56	)		(11.3	)
Number of trailers, at quarter-end		7,181					7,059					122			1.7		%

Company owned tractors, average for the period		1,867					1,876					(9	)		(0.5	)	%
Owner operator tractors, average for the period		465					508					(43	)		(8.5	)
Total tractors, average for the period		2,332					2,384					(52	)		(2.2	)	%

(1)

Includes intersegment revenues and expenses, as applicable, which are eliminated in the Company’s consolidated results.

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The following table sets forth revenue, operating expenses and income from operations (in dollars and as a percentage of total revenue) of the Company’s Flatbed Solutions segment for the nine months ended September 30, 2022 and 2021, as well as certain operating statistics for the same periods. In addition, the absolute and relative changes for each are presented. Rate per mile is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by total number of company and owner operator miles driven in the period. Miles are estimated based on information received as of the filing date and may change quarter to quarter when final information is received from each operating segment. Revenue per tractor is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by the average number of tractors in the period, including owner operator tractors.

FLATBED SOLUTIONS


	Nine Months Ended September 30,
	2022					2021					Increase (Decrease)
(Dollars in millions, except Rate per mile and Revenue per tractor)	Amount		%			Amount		%			Absolute			Relative
REVENUE(1):
Company freight	$	127.2		21.0	%	$	137.5		26.5	%	$	(10.3	)		(7.5	)	%
Owner operator freight		259.9		42.9			249.1		48.1			10.8			4.3
Brokerage		127.2		21.0			77.8		15.0			49.4			63.5
Logistics		2.9		0.5			3.6		0.7			(0.7	)		(19.4	)
Fuel surcharge		88.6		14.6			50.3		9.7			38.3			76.1
Total revenue	$	605.8		100.0	%	$	518.3		100.0	%	$	87.5			16.9		%

OPERATING EXPENSES(1):
Salaries, wages and employee benefits	$	82.7		13.7	%	$	86.4		16.7	%	$	(3.7	)		(4.3	)	%
Fuel		33.3		5.5			25.1		4.8			8.2			32.7
Operations and maintenance		33.5		5.5			32.0		6.2			1.5			4.7
Purchased freight		333.4		55.0			263.3		50.8			70.1			26.6
Depreciation and amortization		28.3		4.7			26.5		5.1			1.8			6.8
Other operating expenses		36.7		6.1			30.0		5.8			6.7			22.3
Total operating expenses	$	547.9		90.4	%	$	463.3		89.4	%	$	84.6			18.3		%

INCOME FROM OPERATIONS	$	57.9		9.6	%	$	55.0		10.6	%	$	2.9			5.3		%

OPERATING STATISTICS:
Company miles		47.7					58.1					(10.4	)		(17.9	)	%
Owner operator miles		98.7					102.9					(4.2	)		(4.1	)
Total miles (in millions)		146.4					161.0					(14.6	)		(9.1	)	%

Rate per mile	$	2.64				$	2.40				$	0.24			10.0		%
Revenue per tractor	$	164,400				$	156,900				$	7,500			4.8		%

Company owned tractors, at quarter-end		817					806					11			1.4		%
Owner operator tractors, at quarter-end		1,601					1,580					21			1.3
Number of trailers, at quarter-end		3,847					4,207					(360	)		(8.6	)	%

Company owned tractors, average for the period		771					866					(95	)		(11.0	)	%
Owner operator tractors, average for the period		1,584					1,598					(14	)		(0.9	)
Total tractors, average for the period		2,355					2,464					(109	)		(4.4	)	%

(1)

Includes intersegment revenues and expenses, as applicable, which are eliminated in the Company’s consolidated results.

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Revenue. Total revenue increased 17.4% for the nine months ended September 30, 2022 as compared to the same period in 2021. The increase in total revenue was primarily attributed to increases in fuel surcharge, growth in our brokerage service offering, and higher rates. In addition, rate per mile increased 13.3%; however, total miles driven decreased 6.5%.

The Company’s Specialized Solutions segment’s revenue increased 17.4% for the nine months ended September 30, 2022 as compared to the same period in 2021, primarily due to higher fuel surcharge and strength in the freight environment, primarily in the high security cargo, construction and manufacturing end-markets. Company freight increased 7.7% for the nine months ended September 30, 2022 as compared to the same period in 2021 due to an 8.5% increase in company rate per mile, partially offset by a 0.7% decrease in miles driven partially due to supply chain delays in receiving and seating new revenue equipment. Owner operator freight increased 18.0% due to a 35.5% increase in owner operator rate per mile, partially offset by a 12.9% decrease in miles driven primarily due to an 8.5% decrease in average owner operator tractors. Brokerage revenue increased 7.2% for the nine months ended September 30, 2022 as compared to the same period in 2021. This segment experienced a drop in brokerage volumes tied to wind activity, which was mostly offset by the increase in loads tied to capturing excess freight volumes, for which the Company was unable to utilize company owned-assets. This resulted in total brokerage loads dropping 1% while brokerage revenue per load was up 8% due to higher rates during the nine months ended September 30, 2022 as compared to the same period in 2021. Fuel surcharge revenue increased 100.0% for the nine months ended September 30, 2022 as compared to the same period in 2021 due to increased fuel costs that triggered higher fuel surcharges to our customers.

The Company’s Flatbed Solutions segment’s revenue increased 16.9% for the nine months ended September 30, 2022 as compared to the same period in 2021, primarily due to increases in brokerage revenue, fuel surcharge, and owner operator freight revenue. The Company deployed company-owned assets into end-markets with higher rates and margins, and as such, some of the excess volumes, for which the Company was unable to utilize company-owned assets, were strategically captured through our brokerage service offering. In addition, during the nine months ended September 30, 2022, we experienced delays in receiving new equipment due to supply chain disruptions, and as such, the Company utilized our brokerage service offering to capture excess volumes. This resulted in a 63.5% increase in brokerage revenue for the nine months ended September 30, 2022 as compared to the same period in 2021. In this segment, total brokerage loads were up 28% and the brokerage revenue per load was up 27% due to higher rates during the nine months ended September 30, 2022 as compared to the same period in 2021. Fuel surcharge revenue increased 76.1% due to increased fuel costs that triggered higher fuel surcharges to our customers. Owner operator freight increased 4.3% due to an 8.8% increase in owner operator rate per mile, partially offset by a 4.1% decrease in miles driven. Company freight revenue decreased 7.5% due to supply chain delays in receiving and seating new revenue equipment and softening in the overall flatbed freight market which led to a 17.9% decrease in miles, partially offset by a 12.7% increase in rate per mile. The increase in rate per mile was driven by strength in the construction, steel, and manufacturing industries.

Salaries, wages and employee benefits expense increased 6.6% for the nine months ended September 30, 2022 as compared to the same period in 2021. The increase in salaries, wages and employee benefits expense was primarily due to higher driver pay in the Specialized Solutions segment, increased health insurance claims, and increased employee headcount related to the expansion of corporate functions in legal, accounting and safety departments, partially offset by decreased accrued bonuses. Salaries, wages and employee benefits expense, as a percentage of consolidated revenue (excluding brokerage and owner operator revenue), decreased 4.8% for the nine months ended September 30, 2022 as compared to the same period in 2021.

The Company’s Specialized Solutions segment’s salaries, wages and employee benefits expense increased 8.2% for the nine months ended September 30, 2022 compared to the same period in 2021, primarily as a result of higher driver and non-driver pay and increased health insurance claims. The increased driver pay was due to an 8% increase in driver rate, slightly offset by a 0.7% decrease in Company miles. Salaries, wages and employee benefits expense, as a percentage of Specialized Solutions revenue (excluding brokerage and owner operator revenue), decreased 4.2% for the nine months ended September 30, 2022 as compared to the same period in 2021.

The Company’s Flatbed Solutions segment’s salaries, wages and employee benefits expense decreased 4.3% for the nine months ended September 30, 2022 compared to the same period in 2021, primarily as a result of the decreased employee headcount and lower driver pay due to a 17.9% decrease in Company miles, partially offset by a 17% increase in driver rate. Salaries, wages and employee benefits expense, as a percentage of Flatbed Solutions revenue (excluding brokerage and owner operator revenue), decreased 7.3% for the nine months ended September 30, 2022 as compared to the same period in 2021.

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Total fuel expense increased 52.2% for the nine months ended September 30, 2022 as compared to the same period in 2021. This increase was primarily due to a 57.0% increase in fuel price, partially offset by a 6.6% decrease in Company miles driven. The Company’s Specialized Solutions segment’s fuel expense increased 61.0% for the nine months ended September 30, 2022 as compared to the same period in 2021, primarily as a result of the increase in fuel price. The Company’s Flatbed Solutions segment’s fuel expense increased 32.7% for the nine months ended September 30, 2022 as compared to the same period in 2021, as a result of the increase in fuel price, partially offset by a 17.9% decrease in Company miles driven for the nine months ended September 30, 2022 as compared to the same period in 2021. The U.S. national average diesel fuel price, as published by the U.S. Department of Energy, was $4.961 for the nine months ended September 30, 2022, compared to $3.161 for the same period in 2021.

Operations and maintenance expense increased 8.8% for the nine months ended September 30, 2022 as compared to the same period in 2021 primarily due to a $5.8 million increase in maintenance and upkeep costs, a $1.1 million increase in lease costs and a $0.5 million increase in pilot car and permit fees. The Company’s Specialized Solutions segment’s operations and maintenance expense increased 11.9% for the nine months ended September 30, 2022 as compared to the same period in 2021 primarily as a result of a $4.5 million increase in maintenance and upkeep costs, a $0.8 million increase in pilot car and permit fees, and a $1.0 million increase in lease costs due to a shift from purchasing revenue equipment to leasing at some of our operating companies. The Company’s Flatbed Solutions segment’s operations and maintenance expense increased 4.7% for the nine months ended September 30, 2022 as compared to the same period in 2021 primarily due to a $1.3 million increase in maintenance and upkeep costs. Operations and maintenance expense, as a percentage of consolidated revenue (excluding brokerage revenue), was generally consistent for the nine months ended September 30, 2022 as compared to the same period in 2021.

Total purchased freight expense increased 23.6% during the nine months ended September 30, 2022 as compared to the same period in 2021. Purchased freight expense from owner operators increased $8.3 million, or 2.8%, during the nine months ended September 30, 2022 as compared to the same period in 2021 as a result of a 16.3% increase in owner operators’ rate, partially offset by a 6.4% decrease in owner operator miles driven. Purchased freight expense from third-party capacity providers increased $96.4 million, or 66.9%, during the nine months ended September 30, 2022 as compared to the same period in 2021, as a result of an increase in utilization of third-party capacity providers due to supply chain delays in receiving and seating new revenue equipment. In addition, the cost of diesel fuel increased by 57.0% during the nine months ended September 30, 2022 as compared to the same period in 2021. Purchased freight expense, as a percentage of consolidated revenue, for the nine months ended September 30, 2022, increased 2.0% as compared to the same period in 2021.

The Company’s Specialized Solutions segment’s purchased freight expense increased 17.6% during the nine months ended September 30, 2022 as compared to the same period in 2021. Purchased freight expense from owner operators increased $9.7 million, or 10.8%, during the nine months ended September 30, 2022 as compared to the same period in 2021, as a result of a 35.5% increase in owner operators' rate, partially offset by a 12.9% decrease in owner operator miles driven. Purchased freight expense from third-party capacity providers increased $23.8 million, or 23.6%, during the nine months ended September 30, 2022 as compared to the same period in 2021, as a result of a change in the mix of freight, which resulted in a higher payout margin. As mentioned above, there was also an increase in the cost of diesel fuel during the nine months ended September 30, 2022 as compared to the same period in 2021. Purchased freight expense, as a percentage of Specialized Solutions revenue, for the nine months ended September 30, 2022, was generally consistent as compared to the same period in 2021.

The Company’s Flatbed Solutions segment’s purchased freight expense increased 26.6% for the nine months ended September 30, 2022 as compared to the same period in 2021. Purchased freight expense from owner operators decreased $1.5 million, or 0.7%, for the nine months ended September 30, 2022 as compared to the same period in 2021, as a result of a 4.1% decrease in owner operator miles driven despite an 8.8% increase in owner operators’ rate. Purchased freight expense from third-party capacity providers increased $71.6 million, or 135.6%, during the nine months ended September 30, 2022 as compared to the same period in 2021, primarily as a result of increased utilization of third-party capacity providers due to supply chain delays in receiving and seating new revenue equipment. As mentioned above, there was also an increase in the cost of diesel fuel during the nine months ended September 30, 2022 as compared to the same period in 2021. Purchased freight expense, as a percentage of Flatbed Solutions revenue, for the nine months ended September 30, 2022, increased 4.2% as compared to the same period in 2021.

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Depreciation and amortization expense was generally consistent for the nine months ended September 30, 2022 as compared to the same period in 2021. The Company’s Specialized Solutions segment’s depreciation and amortization expense decreased 3.8% for the nine months ended September 30, 2022 as compared to the same period in 2021 as a result of a 0.5% decrease in average tractor count in the segment’s fleet. The Company’s Flatbed Solutions segment’s depreciation and amortization expense increased 6.8% for the nine months ended September 30, 2022 as compared to the same period in 2021 as a result of recent revenue equipment additions.

Impairment. Impairment expense was $7.8 million for the nine months ended September 30, 2022 related to goodwill, trade name intangibles, and customer relationships intangibles of an operating segment within the Company’s Specialized Solutions segment that had been integrated into another operating segment as part of the Plan. There was no impairment expense for the nine months ended September 30, 2021. The Company’s Specialized Solutions segment’s impairment expense was $7.8 million consisting of $5.7 million related to goodwill, $1.9 million related to trade name intangibles, and $0.2 million related to customer relationships intangibles for the nine months ended September 30, 2022. The Company’s Specialized Solutions segment had no impairment expense for nine months ended September 30, 2021. The Company’s Flatbed Solutions segment had no impairment expense for the nine months ended September 30, 2022 and 2021.

Insurance and Claims. Insurance and claims expense consists of insurance premiums and the accruals the Company makes for estimated payments and expenses for claims for bodily injury, property damage, cargo damage and other casualty events. Factors affecting the Company’s insurance and claims expense are frequency and severity of accidents, trends in the development factors used in its accruals and developments in large, prior-year claims. The frequency of accidents tends to correlate with the miles the Company travels; however, insurance and claims expense could increase in periods where there are claims in excess of the Company’s self-insured retention. Insurance and claims expense increased 50.2% during the nine months ended September 30, 2022 as compared to the same period in 2021. Claims increased $12.8 million primarily due to $10.5 million in development of claims in excess of the Company’s self-insured retention. The Company also recorded an $11.8 million increase in incurred but not recorded claims. These increases were partially offset by a $4.2 million decrease in certain insurance premiums.

Other (Income) Expense. Interest expense consists of cash interest, amortization and write-off of related issuance costs and fees. Interest expense decreased 8.8% for the nine months ended September 30, 2022 as compared to the same period in 2021. This decrease was primarily attributable to lower interest rates achieved through the successful refinancing of our Term Loan Facility (as defined below) in March 2021, and decreases in the balance outstanding on the Term Loan Facility. Change in fair value of warrant liability was a gain of $4.7 million for the nine months ended September 30, 2022 compared to a loss of $1.2 million for the same period in 2021. The change in fair value is directly related to the fair value of the warrant liability as of each period end as calculated using Level 1 and Level 3 inputs. The Company’s common stock purchase warrants expired in February 2022 and are no longer exercisable.

Income Tax. Income tax expense was $21.0 million for the nine months ended September 30, 2022 compared to income tax expense of $18.6 million for the same period in 2021. The effective tax rate was 32.7% for the nine months ended September 30, 2022, compared to 27.6% for the same period in 2021. The difference between the Company’s effective tax rate and the federal statutory rate primarily results from the mix of earnings with state jurisdictions, combined with the impact of nontaxable income, primarily related to the change in fair value of the warrant liability, and nondeductible expenses, primarily related to executive compensation and goodwill impairment.

Liquidity, Capital Resources and Capital Requirements

The Company had the following sources of liquidity available at September 30, 2022 and December 31, 2021 (in millions).


	September 30, 2022		December 31, 2021
Cash	$	188.3	$	147.5
Availability under line of credit		123.4		107.8
Total	$	311.7	$	255.3

The Company’s primary sources of liquidity have been cash provided by operating activities, issuances of capital stock and borrowings under its credit facilities. The Company also receives cash from sales of equipment.

The Company’s business requires substantial amounts of cash for operating expenses, including salaries and wages paid to employees, contract payments to independent contractors, insurance and claims payments, tax payments, and others. The Company also uses large amounts of cash and credit for capital expenditures.

The Company believes it can finance its expected cash needs, including debt repayment, in the short-term with cash flows from operations, and borrowings available under the ABL Facility. The Company expects that the ABL Facility will provide sufficient credit availability to support its ongoing operations, fund debt service requirements, capital expenditures, and working capital needs. Over the long-term, the Company will continue to have significant capital requirements, and expects to devote substantial financial resources to grow its operations and fund its acquisition activities. As a result of these funding requirements, the Company likely will need to sell additional equity or debt securities or seek additional financing through additional borrowings, lease financing or equity capital. The availability of financing or

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equity capital will depend upon the Company’s financial condition and results of operations as well as prevailing market conditions. If such additional borrowings, lease financing or equity capital is not available at the time it needs to incur such expenditures, the Company may be required to extend the maturity of then outstanding indebtedness, rely on alternative financing arrangements or engage in asset sales.

Since its inception, the Company has acquired over twenty transportation companies. The primary reason for each acquisition was to add resources and services in geographic areas, customers and markets that the Company wants to serve. The Company will continue to evaluate potential acquisitions and any other sources of growth it considers in its best interest. Additionally, depending on the Company’s actual and anticipated sources and uses of liquidity, prevailing market conditions and other factors, the Company may from time to time seek to repay or repurchase outstanding debt or equity securities through cash purchases in the open market or privately negotiated transactions. The amounts involved in any such transactions may be material.

Capital Expenditures

The Company follows a dual strategy of both owning assets and employing asset-light activities, the latter of which reduces the capital expenditures required to operate the business. Asset-light activities are conducted utilizing tractors and trailers provided by owner operators and third-party carriers for significant portions of our flatbed and specialized services. Company-owned asset expenditures require substantial cash and financing (including finance and operating leases) to maintain a modern tractor fleet, refresh the trailer fleet, fund replacement and or growth in the revenue equipment fleet, and for the acquisition of real property and improvements to existing terminals and facilities.

Total property and equipment additions for the nine months ended September 30, 2022 and 2021 are shown below (in millions):


	Nine Months Ended September 30,
	2022		2021
Net cash capital expenditures (receipts)	$	5.4	$	(13.7	)
Property and equipment acquired with debt or finance lease obligations		93.7		55.0
Total net property and equipment additions	$	99.1	$	41.3

Total net property and equipment additions increased due to an increase in financed equipment purchases and a decrease in equipment sale proceeds during the nine months ended September 30, 2022.

The Company currently estimates its 2022 net capital expenditures to be $145 million to $155 million.

Operating leases

The Company entered into operating leases for revenue equipment with terms of one year to seven years and real property with terms of less than one year to twenty years having right-of-use asset values at lease inception of $10.5 million and $17.3 million, respectively, for the nine months ended September 30, 2022.

Material Debt

Overview

As of September 30, 2022, the Company had the following material debt:

•

the Term Loan Facility and the ABL Facility;

•

equipment and real estate term loans; and

•

finance lease liabilities.

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The amounts outstanding under such agreements were as follows (in millions):


	September 30,			December 31,
	2022			2021
Term Loan Facility	$	394.0		$	397.0
ABL Facility		—			—
Equipment and real estate term loans		220.7			169.0
Finance lease liabilities		23.4			28.5
Total debt and finance lease liabilities		638.1			594.5
Less current portion		(68.8	)		(55.5	)
Less unamortized deferred financing fees		(6.7	)		(7.6	)
Long-term debt and finance lease liabilities, less current portion and unamortized deferred financing fees	$	562.6		$	531.4

The Company regularly evaluates its capital structure and liquidity position. From time to time and as opportunities arise, the Company may access the debt capital markets and modify its debt arrangements to optimize its capital structure and liquidity position.

See Note 7 of the Notes to Consolidated Financial Statements included herein for information regarding the Company’s material debt.

ABL and Term Loan Facilities and Equipment Financing Agreements

As of September 30, 2022, the Company has (i) a $400.0 million senior secured term loan credit facility (the Term Loan Credit Facility), and (ii) an asset-based senior secured revolving credit facility with an aggregate maximum credit amount equal to $150.0 million (that may be increased to $200.0 million, subject to availability under a borrowing base).

As of September 30, 2022, the Company had $220.7 million of equipment and real estate loans and $23.4 million of finance leases collateralized primarily by revenue equipment, with the majority of the equipment loans and finance leases having terms of 48 to 60 months.

As of September 30, 2022, the Company had no borrowings outstanding on the ABL Facility, $22.5 million in outstanding letters of credit, and $123.4 million available under the ABL Facility, based on current qualified collateral. Under the terms of the ABL Facility, lenders may issue up to $40 million of standby letters of credit on our behalf. Outstanding letters of credit reduce the availability on the $150 million ABL Facility. Standby letters of credit are generally issued for the benefit of regulatory authorities, insurance companies and state departments of insurance for the purpose of satisfying certain collateral requirements, primarily related to automobile, workers’ compensation, and general insurances liabilities.

Cash Flows

The Company’s summary statements of cash flows information for the nine months ended September 30, 2022 and 2021 is set forth in the table below (in millions):


	Nine Months Ended September 30,
	2022			2021
Net cash provided by operating activities	$	106.7		$	115.7
Net cash (used in) provided by investing activities	$	(24.5	)	$	13.7
Net cash used in financing activities	$	(42.5	)	$	(161.9	)

Operating Activities. Cash provided by operating activities was $106.7 million during the nine months ended September 30, 2022 and consisted of $43.3 million of net income plus $70.3 million of non-cash items, consisting primarily of depreciation, amortization, deferred taxes, gain on disposition of property and equipment, stock-based compensation, and impairment, partially offset by $6.9 million of net cash used in working capital and other activities. Cash used in working capital and other activities during the nine months ended September 30, 2022 reflect an increase of $34.1 million in accounts receivable, an increase of $3.1 million in drivers’ advances and other receivables, and an increase of $3.7 million in other current assets, partially offset by an increase of $30.5 million in accrued expenses and other liabilities and an increase of $3.5 million in accounts payable.

The $9.0 million decrease in cash provided by operating activities during the nine months ended September 30, 2022, as compared with the nine months ended September 30, 2021, was the result of increases in net cash provided by working capital of $7.2 million, decreases in non-cash items of $10.6 million, and a $5.6 million reduction to net income.

Investing Activities. Cash used in investing activities was $24.5 million for the nine months ended September 30, 2022 as compared to cash provided by investing activities of $13.7 million for the nine months ended September 30, 2021. This change is primarily due to a $19.1 million cash payment for the SJ Transportation acquisition, a decrease of $19.9 million in cash receipts from sales of revenue equipment, and a decrease of $0.8 million in cash equipment purchases for the nine months ended September 30, 2022.

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Total net cash capital expenditures (receipts) for the nine months ended September 30, 2022 and 2021 are shown below (in millions):


	Nine Months Ended September 30,
	2022		2021
Revenue equipment (tractors, trailers and trailer accessories)	$	25.8	$	29.8
Buildings and building improvements		2.6		1.2
Other		5.0		3.2
Total cash capital expenditures		33.4		34.2
Less: Proceeds from sales of property and equipment		28.0		47.9
Net cash capital expenditures (receipts)	$	5.4	$	(13.7	)

Financing Activities. Cash used in financing activities decreased from $161.9 million for the nine months ended September 30, 2021 to $42.5 million for the nine months ended September 30, 2022. During the nine months ended September 30, 2022, we had approximately $89.2 million less net debt-related payments compared to same period in 2021, primarily as the result of the Company refinancing the Term Loan Facility during the nine months ended September 30, 2021. Also, during the nine months ended September 30, 2022, we received $9.4 million in proceeds from warrant exercises compared to none in the same period in 2021. In addition, during the nine months ended September 30, 2021, we repurchased $20.4 million in common stock compared to none in the same period in 2022.

Critical Accounting Estimates

The preparation of the Company’s consolidated financial statements in accordance with US GAAP requires it to make estimates and assumptions that impact the amounts reported in its consolidated financial statements and accompanying notes. Therefore, the reported amounts of assets, liabilities, revenue, expenses, and associated disclosures of contingent assets and liabilities are affected by these estimates and assumptions. The Company evaluates these estimates and assumptions on an ongoing basis, utilizing historical experience, consultation with experts and other methods considered reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from these estimates and assumptions, and it is possible that materially different amounts will be reported using differing estimates or assumptions.

The Company considers critical accounting estimates to be those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the Company's financial condition or results of operations. See “Critical Accounting Estimates” included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021, for a discussion of our critical accounting estimates; there have been no material changes to the Company’s critical accounting estimates as disclosed therein.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in the Company’s market risk since December 31, 2021. For further information on the Company’s market risk, refer to “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in the Company’s Annual Report on Form 10-K filed on February 23, 2022.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Report, the Company’s management conducted an evaluation, under the supervision and with the participation of the principal executive and principal financial officers, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities and Exchange Act of 1934 (the Exchange Act)). Based on this evaluation, the principal executive and principal financial officers concluded our disclosure controls and procedures were effective as of September 30, 2022.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) that occurred during the three months ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

The Company and its subsidiaries are involved in litigation and claims primarily arising in the normal course of business, which include claims for personal injury or property damage incurred in the transportation of freight. Based on its knowledge of the facts and, in certain cases, advice of outside counsel, the Company believes the resolution of claims and pending litigation will not have a material adverse effect on the Company’s financial position, results of operations or cash flows, and the Company and its subsidiaries are not currently a party to, nor is their property currently subject to, any material legal proceedings other than ordinary routine litigation incidental to the business, and we are not aware of any such proceedings contemplated by governmental authorities.

Item 1A. Risk Factors

There have been no material changes in the risks facing the Company as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information about our repurchases of common stock during the three months ended September 30, 2022:


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)		Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs(1)
07/01/2022 to 07/31/2022		—	$	—		—	$	—
08/01/2022 to 08/31/2022		—	$	—		—	$	—
09/01/2022 to 09/30/2022		—	$	—		—	$	40,000,000
Total		—	$	—		—

(1)

On September 30, 2022, the Company announced that our Board of Directors authorized a stock repurchase program (the Stock Repurchase Program) pursuant to which the Company is authorized to repurchase up to $40.0 million of our common stock.. Repurchases under the Stock Repurchase Program may be made, from time to time, in amounts and at prices the Company deems appropriate. The Stock Repurchase Program is effective until $40.0 million of our outstanding common stock has been repurchased or, if earlier, until our Board of Directors suspends or discontinues the Stock Repurchase Program, which could occur at any time without prior notice. As of September 30, 2022, no shares of Common Stock have been repurchased under the Stock Repurchase Program.

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Item 6. Exhibits

EXHIBIT INDEX



Exhibit No.	Exhibit

3.1	Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed by the registrant on March 3, 2017).

3.2	Charter Amendment to Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.2 to the Quarterly Report on Form 10-Q filed by the registrant on August 6, 2020).

3.3	By-Laws (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed by the registrant on May 25, 2018).

3.4	First Amendment to the By-Laws of Daseke, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed by the registrant on August 18, 2020).

3.5	Certificate of Designations, Preferences, Rights and Limitations of 7.625% Series A Convertible Cumulative Preferred Stock (incorporated by reference to Exhibit 3.2 to the registrant’s Current Report on Form 8-K filed by the registrant on March 3, 2017).

10.1+*	Employment Agreement, dated as of September 22, 2022, by and between Aaron Coley and the registrant.

10.2+	Performance Stock Unit Award Agreement, dated as of September 22, 2022, between Aaron Coley and the registrant (incorporated by reference to Exhibit 4.4 to the registrant’s Registration Statement on Form S-8 filed by the registrant on October 5, 2022).

10.3+	Restricted Stock Unit Award Agreement, dated as of September 22, 2022, between Aaron Coley and the registrant incorporated by reference to Exhibit 4.5 to the registrant’s Registration Statement on Form S-8 filed by the registrant on October 5, 2022).

10.4+	Restricted Stock Unit Award Agreement, dated as of September 22, 2022, between Aaron Coley and the registrant incorporated by reference to Exhibit 4.6 to the registrant’s Registration Statement on Form S-8 filed by the registrant on October 5, 2022).

10.5+*	Separation Agreement, dated as of September 22, 2022, by and between Jason Bates and the registrant.

31.1*	Chief Executive Officer certification under Section 302 of Sarbanes-Oxley Act of 2002.

31.2*	Chief Financial Officer certification under Section 302 of Sarbanes-Oxley Act of 2002.

32.1**	Chief Executive Officer certification under Section 906 of Sarbanes-Oxley Act of 2002.

32.2**	Chief Financial Officer certification under Section 906 of Sarbanes-Oxley Act of 2002.

101.INS*	Inline XBRL Instance Document.

101.SCH*	Inline XBRL Taxonomy Extension Schema Document.

101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104	Inline Cover Page Interactive Data File (embedded within the Inline XBRL document).

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*	Filed herewith.
**	Furnished herewith.
+	Management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Date: November 9, 2022	DASEKE, INC.

	By:	/s/ Aaron Coley
	Name:	Aaron Coley
	Title:	Chief Financial Officer
		(On behalf of the Registrant and as the Registrant’s Principal Financial Officer)