Table of Contents

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 SeptemberJune 30, 20172021

OR

☐

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

For the transition period from ________ to _________

img164954244_0.jpg

DASEKE, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or Other Jurisdictionother jurisdiction of Incorporation)incorporation or organization)

001-37509
(Commission
File Number)

47-3913221
(IRS Employer
Identification No.)

15455 Dallas Parkway, Suite 550
Addison, Texas

75001

15455 Dallas Parkway, Suite 440
Addison, Texas

75001

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s Telephone Number, Including Area Code: (972) 248-0412

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

Registrant’s Telephone Number, Including Area Code: (972) 248-0412

Not applicable

(Former name, former address and former fiscal year, if changed since last report)Warrants, each exercisable for one half of a share of Common Stock at an exercise price of $5.75 per half share

DSKEW

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).Yes  ☒. Yes No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 (Do not check if a smaller reporting company)

Smaller reporting company

☐ 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 6, 2017July 30, 2021 were 44,392,349.62,323,709.

Table of Contents

DASEKE, INC.

FORM 10-Q

For the Quarterly Period Ended SeptemberJune 30, 20172021

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 (Loss)

2

Consolidated StatementStatements of Changes in Stockholders' Equity

3

Consolidated Statements of Cash Flows

4

5

Notes to Consolidated Financial Statements

6

7

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

30

19

Item 3. Quantitative and Qualitative Disclosures About Market Risk

51

34

Item 4. Controls and Procedures

51

35

Part II. Other Information

35

Item 1. Legal Proceedings

53

35

Item 1A. Risk Factors

53

35

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

53

35

Item 6. Exhibits Index

54

36

Signatures

55

37

Table of Contents

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, including those made by the management of the Company, other than statements of historical fact, are forward-looking statements. These forward-looking statements are based on management’s estimates, projections and assumptions as of the date hereof. Forward-looking statements may contain words such as “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “believe,” “plan,” “should,” “could,” “would,” “expect,” “plan,” “estimate,” “project,” “forecast,” “seek,” “target,” “anticipate,” “believe,” “estimate,” “predict,” “potential” and “continue,“potential,” the negative of these terms, or other comparable terminology. Examples of forward-lookingForward-looking statements may include statements regardingabout the Company’s goals; 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 financial results, operating results, business strategies, projected costs, management’s plans and objectives for future acquisitions, and industry trends.results.

These forward-looking statements are based on information available as of the date of this Report (or, in the case of forward-looking statements incorporated herein by reference, as of the date of the applicable filed document), 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 we anticipate.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. Accordingly, 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 ourthe Company’s control) that could cause actual results to differ materially from ourthe 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, (suchsuch as downturns in customers’ business cycles and disruptions in capital and credit markets),markets; impact to the Company’s business and operations resulting from the COVID-19 pandemic; the Company’s ability to adequately address downward pricing and other competitive pressures; driver shortages and increases in driver compensation or owner-operator contracted rates,rates; the Company’s ability to execute and realize all of the expected benefits of its integration, business improvement and comprehensive restructuring plans; loss of senior management or key operating personnel, ourpersonnel; the Company’s ability to identify and executerealize all of the intended benefits from recent or future acquisitions successfully,acquisitions; the Company’s ability to complete recent or future divestitures successfully; seasonality and the impact of weather and other catastrophic events,events; fluctuations in the price or availability of diesel fuel,fuel; increased prices for, or decreases in the availability of, new revenue equipment and decreases in the value of used revenue equipment, ourequipment; the Company’s ability to generate sufficient cash to service all of ourthe Company’s indebtedness and the Company’s ability to finance its capital requirements; restrictions in ourits existing and future debt agreements,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,operations; insurance and claims expenses; and litigation and governmental proceedings, and insurance and claims expenses.proceedings. For additional information regarding known material factors that could cause ourthe Company’s actual results to differ from ourits projected results, please see the Company’s filings with the Securities and Exchange Commission (the SEC), particularly the section titled “Risk“Part I. Item 1A. Risk Factors” in the Company’s CurrentAnnual Report on Form 8-K,10-K/A, filed with the SEC on March 3, 2017, as amendedMay 6, 2021.

All forward-looking statements, expressed or implied, attributed to the Company or persons acting on March 16, 2017 and May 4, 2017.its behalf are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that the Company or persons acting on its behalf may issue.

Table of Contents

Part I – FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

DASEKE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands,Dollars in millions, except share and per share data)

 

 

 

 

 

 

    

September 30, 

    

December 31, 

 

June 30,

 

 

December 31,

 

 

2017

 

2016

 

2021

 

 

2020

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

  

 

 

  

 

 

 

 

 

 

Cash and cash equivalents

 

$

112,510

 

$

3,695

 

$

111.7

 

$

176.2

 

Accounts receivable, net of allowance of $382 and $321 at September 30, 2017 and December 31, 2016, respectively

 

 

106,081

 

 

54,177

Accounts receivable, net of allowance of $2.0 at June 30, 2021 and $3.0 at December 31, 2020

 

189.8

 

154.4

 

Drivers’ advances and other receivables

 

 

2,809

 

 

2,632

 

8.0

 

8.0

 

Current portion of net investment in sales-type leases

 

 

6,022

 

 

3,516

Parts supplies

 

 

4,365

 

 

1,467

Income tax receivable

 

 

111

 

 

719

Prepaid and other current assets

 

 

20,321

 

 

13,504

Other current assets

 

 

25.1

 

 

26.5

 

Total current assets

 

 

252,219

 

 

79,710

 

334.6

 

365.1

 

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

369,199

 

 

318,747

 

393.8

 

402.7

 

Intangible assets, net

 

 

77,541

 

 

71,653

 

90.4

 

93.8

 

Goodwill

 

 

139,889

 

 

89,035

 

140.4

 

140.1

 

Other long-term assets

 

 

18,573

 

 

11,090

Right-of-use assets

 

124.5

 

121.1

 

Other non-current assets

 

 

4.4

 

 

4.1

 

Total assets

 

 

857,421

 

 

570,235

 

$

1,088.1

 

$

1,126.9

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

  

 

 

  

 

 

 

 

 

 

Checks outstanding in excess of bank balances

 

 

1,479

 

 

1,166

Accounts payable

 

 

12,493

 

 

4,788

 

$

16.2

 

$

16.5

 

Accrued expenses and other liabilities

 

 

24,660

 

 

16,104

 

53.8

 

35.7

 

Accrued payroll, benefits and related taxes

 

 

12,027

 

 

7,835

 

35.2

 

29.9

 

Accrued insurance and claims

 

 

10,248

 

 

9,840

 

19.6

 

23.7

 

Current portion of long-term debt

 

 

26,514

 

 

52,665

 

55.4

 

54.0

 

Warrant liability

 

4.1

 

—

 

Operating lease liabilities

 

 

34.0

 

 

30.9

 

Total current liabilities

 

 

87,421

 

 

92,398

 

218.3

 

190.7

 

 

 

 

 

 

 

 

 

 

 

 

 

Line of credit

 

 

 —

 

 

6,858

Long-term debt, net of current portion

 

 

395,841

 

 

208,372

 

530.8

 

618.6

 

Deferred tax liabilities

 

 

114,900

 

 

92,815

 

80.2

 

70.0

 

Other long-term liabilities

 

 

1,342

 

 

286

Subordinated debt

 

 

 —

 

 

66,443

Non-current operating lease liabilities

 

95.4

 

96.0

 

Warrant liability

 

—

 

6.3

 

Other non-current liabilities

 

 

5.4

 

 

6.5

 

Total liabilities

 

 

599,504

 

 

467,172

 

 

930.1

 

 

988.1

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 15)

 

 

  

 

 

  

Commitments and contingencies (Note 9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

  

 

 

  

 

 

 

 

 

 

Series A convertible preferred stock, $0.0001 par value; 10,000,000 shares authorized; 650,000 shares issued with liquidation preference of $65,000

 

 

65,000

 

 

 —

Series B convertible preferred stock, $0.01 par value; 75,000 shares authorized; zero and 64,500 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively

 

 

 —

 

 

 1

Common stock, par value $0.0001 per share; 250,000,000 shares authorized, 44,480,232 and 20,980,961 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively

 

 

 4

 

 

 1

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 June 30, 2021 and December 31, 2020

 

65.0

 

65.0

 

Common stock, par value $0.0001 per share; 248,482,377 shares authorized, 63,804,434 and 65,023,174 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

 

0

 

0

 

Additional paid-in-capital

 

 

222,102

 

 

117,807

 

394.9

 

401.6

 

Accumulated deficit

 

 

(30,221)

 

 

(14,694)

 

(302.3

)

 

(327.8

)

Accumulated other comprehensive income (loss)

 

 

1,032

 

 

(52)

Accumulated other comprehensive income

 

 

0.4

 

 

—

 

Total stockholders’ equity

 

 

257,917

 

 

103,063

 

 

158.0

 

 

138.8

 

Total liabilities and stockholders’ equity

 

$

857,421

 

$

570,235

 

$

1,088.1

 

$

1,126.9

 

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

1

1

Table of Contents

DASEKE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands,Dollars in millions, except share and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

Three Months Ended

 

 

Six Months Ended

 

 

September 30, 

 

September 30, 

 

June 30,

 

 

June 30,

 

    

2017

    

2016

    

2017

    

2016

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenues:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

Freight

 

$

171,245

 

$

135,415

 

$

446,454

 

$

398,466

Company freight

 

$

163.6

 

$

167.0

 

$

308.7

 

$

347.9

 

Owner operator freight

 

129.1

 

96.0

 

234.2

 

203.8

 

Brokerage

 

 

34,198

 

 

25,977

 

 

83,723

 

 

68,358

 

66.7

 

57.9

 

115.2

 

119.6

 

Logistics

 

 

7,871

 

 

 —

 

 

10,571

 

 

 —

 

10.7

 

8.8

 

19.2

 

18.9

 

Fuel surcharge

 

 

18,008

 

 

12,756

 

 

48,331

 

 

34,562

 

 

33.9

 

 

22.0

 

 

60.6

 

 

52.5

 

Total revenue

 

 

231,322

 

 

174,148

 

 

589,079

 

 

501,386

 

404.0

 

351.7

 

737.9

 

742.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and employee benefits

 

 

64,955

 

 

49,298

 

 

174,253

 

 

149,861

 

93.4

 

99.4

 

184.1

 

209.8

 

Fuel

 

 

24,734

 

 

17,296

 

 

64,423

 

 

49,076

 

27.0

 

18.2

 

52.4

 

46.9

 

Operations and maintenance

 

 

35,132

 

 

27,874

 

 

86,332

 

 

72,933

 

37.3

 

45.3

 

67.6

 

90.9

 

Communications

 

 

539

 

 

370

 

 

1,491

 

 

1,208

 

1.1

 

0.9

 

2.2

 

1.9

 

Purchased freight

 

 

61,598

 

 

42,541

 

 

148,945

 

 

120,501

 

155.3

 

112.2

 

276.7

 

246.4

 

Administrative expenses

 

 

8,619

 

 

5,221

 

 

24,019

 

 

17,711

 

12.7

 

17.2

 

29.2

 

37.4

 

Sales and marketing

 

 

488

 

 

435

 

 

1,425

 

 

1,280

 

0.5

 

0.3

 

1.1

 

1.0

 

Taxes and licenses

 

 

2,963

 

 

2,268

 

 

7,855

 

 

6,946

 

3.8

 

4.0

 

7.7

 

8.5

 

Insurance and claims

 

 

6,351

 

 

5,065

 

 

15,516

 

 

13,648

 

9.9

 

15.6

 

26.7

 

30.6

 

Acquisition-related transaction expenses

 

 

773

 

 

 —

 

 

2,255

 

 

18

Depreciation and amortization

 

 

19,805

 

 

16,998

 

 

53,758

 

 

50,515

 

22.2

 

22.8

 

44.4

 

49.1

 

(Gain) loss on disposition of revenue property and equipment

 

 

(339)

 

 

(495)

 

 

(513)

 

 

158

Impairment of revenue property and equipment

 

 

 —

 

 

1,195

 

 

 —

 

 

1,195

(Gain) loss on disposition of property and equipment

 

(4.6

)

 

0.4

 

(7.7

)

 

(0.8

)

Impairment

 

0

 

0

 

0

 

13.4

 

Restructuring charges

 

 

0.1

 

 

3.0

 

 

0.1

 

 

3.5

 

Total operating expenses

 

 

225,618

 

 

168,066

 

 

579,759

 

 

485,050

 

 

358.7

 

 

339.3

 

 

684.5

 

 

738.6

 

Income from operations

 

 

5,704

 

 

6,082

 

 

9,320

 

 

16,336

 

45.3

 

12.4

 

53.4

 

4.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (income) expense:

 

 

  

 

 

  

 

 

  

 

 

  

Other expense (income):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(76)

 

 

(4)

 

 

(130)

 

 

(40)

 

(0.1

)

 

(0.1

)

 

(0.2

)

 

(0.4

)

Interest expense

 

 

8,624

 

 

6,724

 

 

21,064

 

 

17,521

 

7.6

 

11.0

 

18.7

 

23.0

 

Write-off of unamortized deferred financing fees

 

 

 —

 

 

 —

 

 

3,883

 

 

 —

Change in fair value of warrant liability

 

(7.8

)

 

(1.1

)

 

(2.2

)

 

(2.1

)

Other

 

 

(32)

 

 

(64)

 

 

(247)

 

 

(266)

 

 

(0.4

)

 

 

(1.1

)

 

 

(0.8

)

 

 

0.1

 

Total other expense

 

 

8,516

 

 

6,656

 

 

24,570

 

 

17,215

Total other expense (income)

 

 

(0.7

)

 

 

8.7

 

 

15.5

 

 

20.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before provision (benefit) for income taxes

 

 

(2,812)

 

 

(574)

 

 

(15,250)

 

 

(879)

Provision (benefit) for income taxes

 

 

(2,862)

 

 

683

 

 

(3,448)

 

 

607

Income (loss) before income taxes

 

46.0

 

3.7

 

37.9

 

(16.5

)

Income tax expense (benefit)

 

 

10.7

 

 

2.1

 

 

9.9

 

 

(1.8

)

Net income (loss)

 

 

50

 

 

(1,257)

 

 

(11,802)

 

 

(1,486)

 

35.3

 

1.6

 

28.0

 

(14.7

)

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized income (loss) on interest rate swaps

 

 

 —

 

 

61

 

 

52

 

 

(1)

Foreign currency translation adjustments

 

 

526

 

 

 —

 

 

1,032

 

 

 —

Foreign currency translation adjustments, net of tax of $0.0, $0.1, $0.0 and $(0.1), respectively

 

 

0.2

 

 

0.2

 

 

0.4

 

 

(0.3

)

Comprehensive income (loss)

 

 

576

 

 

(1,196)

 

 

(10,718)

 

 

(1,487)

 

$

35.5

 

$

1.8

 

$

28.4

 

$

(15.0

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

50

 

 

(1,257)

 

 

(11,802)

 

 

(1,486)

 

$

35.3

 

$

1.6

 

$

28.0

 

$

(14.7

)

Less dividends to Series A convertible preferred stockholders

 

 

(1,225)

 

 

 —

 

 

(2,919)

 

 

 —

 

 

(1.3

)

 

 

(1.3

)

 

 

(2.5

)

 

 

(2.5

)

Less dividends to Series B convertible preferred stockholders

 

 

 —

 

 

(1,243)

 

 

(806)

 

 

(3,729)

Net loss attributable to common stockholders

 

$

(1,175)

 

$

(2,500)

 

$

(15,527)

 

$

(5,215)

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share:

 

 

  

 

 

  

 

 

  

 

 

  

Basic and Diluted

 

$

(0.03)

 

$

(0.12)

 

$

(0.45)

 

$

(0.25)

Net income (loss) attributable to common stockholders

 

$

34.0

 

$

0.3

 

$

25.5

 

$

(17.2

)

Income (loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.52

 

$

0.00

 

$

0.39

 

$

(0.27

)

Diluted

 

$

0.49

 

$

0.00

 

$

0.38

 

$

(0.27

)

Weighted-average common shares outstanding:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted

 

 

39,359,523

 

 

20,980,961

 

 

34,790,861

 

 

20,980,961

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

64,842,620

 

 

64,173,164

 

 

64,960,833

 

 

64,625,347

 

Diluted

 

 

71,866,303

 

 

64,711,210

 

 

66,154,571

 

 

64,625,347

 

Dividends declared per Series A convertible preferred share

 

$

1.91

 

$

 —

 

$

2.59

 

$

 —

 

$

1.91

 

$

1.91

 

$

3.81

 

$

3.81

 

Dividends declared per Series B convertible preferred share

 

$

 —

 

$

18.75

 

$

12.50

 

$

18.75

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

2

2

Table of Contents

DASEKE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

NineSix Months Ended SeptemberJune 30, 20172021

(Unaudited)

(In thousands, except share data)Dollars in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A Convertible

 

Series B Convertible

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

Preferred Stock

 

Preferred Stock

 

Common Stock

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

Par

 

 

 

Par

 

Additional

 

Accumulated

 

Comprehensive

 

 

 

 

    

Shares

    

Amount

    

Shares

    

Value

    

Shares

    

Value

    

Paid- In Capital

    

Deficit

    

Income (Loss)

    

Total

Balance, January 1, 2017 as previously reported

 

 —

 

$

 —

 

64,500

 

$

 1

 

145,495

 

$

 1

 

$

117,807

 

$

(14,694)

 

$

(52)

 

$

103,063

Effect of reverse acquisition

 

 —

 

 

 —

 

 —

 

 

 —

 

20,835,466

 

 

 1

 

 

 —

 

 

 —

 

 

 —

 

 

 1

Balance at January 1, 2017

 

 —

 

 

 —

 

64,500

 

 

 1

 

20,980,961

 

 

 2

 

 

117,807

 

 

(14,694)

 

 

(52)

 

 

103,064

Income on interest rate swaps

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

52

 

 

52

Series B convertible preferred stock dividend

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(806)

 

 

 —

 

 

(806)

Repurchase of common shares

 

 —

 

 

 —

 

 —

 

 

 —

 

(3,616,781)

 

 

(1)

 

 

(36,167)

 

 

 —

 

 

 —

 

 

(36,168)

Conversion of Series B convertible preferred stock to common shares

 

 —

 

 

 —

 

(64,500)

 

 

(1)

 

9,301,150

 

 

 1

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Shares assumed by legal acquirer

 

 —

 

 

 —

 

 —

 

 

 —

 

11,050,630

 

 

 1

 

 

83,639

 

 

 —

 

 

 —

 

 

83,640

Settlement of legal acquirer transaction costs

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

(19,063)

 

 

 —

 

 

 —

 

 

(19,063)

Issuance of Series A convertible preferred stock

 

650,000

 

 

65,000

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

65,000

Issuance of common stock

 

 —

 

 

 —

 

 —

 

 

 —

 

6,764,272

 

 

 1

 

 

74,685

 

 

 —

 

 

 —

 

 

74,686

Series A convertible preferred stock dividend

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(2,919)

 

 

 —

 

 

(2,919)

Stock-based compensation expense

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

1,201

 

 

 —

 

 

 —

 

 

1,201

Foreign currency translation adjustments

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

1,032

 

 

1,032

Net loss

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(11,802)

 

 

 —

 

 

(11,802)

Balance at September 30, 2017

 

650,000

 

$

65,000

 

 —

 

$

 —

 

44,480,232

 

$

 4

 

$

222,102

 

$

(30,221)

 

$

1,032

 

$

257,917

 

 

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

 

Exercise of options

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

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

 

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

3

3

Table of Contents

DASEKE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTSSTATEMENT OF CASH FLOWSCHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)Six Months Ended June 30, 2020

(Unaudited)

(Dollars in thousands)millions)

 

 

 

 

 

 

 

 

 

Nine months ended

 

 

September 30, 

 

    

2017

    

2016

Cash flows from operating activities

 

 

  

 

 

  

Net loss

 

$

(11,802)

 

$

(1,486)

Adjustments to reconcile net loss to net cash provided by operating activities

 

 

 

 

 

  

Depreciation

 

 

49,109

 

 

45,973

Amortization of intangible assets

 

 

4,649

 

 

4,542

Amortization of deferred financing fees

 

 

1,330

 

 

934

Write-off of deferred financing fees

 

 

3,883

 

 

 —

Stock-based compensation expense

 

 

1,201

 

 

 —

Deferred taxes

 

 

(4,849)

 

 

(245)

Bad debt expense

 

 

347

 

 

176

Non-cash interest expense

 

 

92

 

 

805

(Gain) loss on disposition of property and equipment

 

 

(513)

 

 

158

Deferred gain recognized on sales-type leases

 

 

(793)

 

 

(532)

Impairment of revenue equipment

 

 

 —

 

 

1,195

Changes in operating assets and liabilities

 

 

 

 

 

  

Accounts receivable

 

 

(28,567)

 

 

(7,156)

Drivers’ advances and other receivables

 

 

547

 

 

(274)

Payments received on sales-type leases

 

 

3,774

 

 

2,776

Other current assets

 

 

(339)

 

 

3,524

Accounts payable

 

 

2,911

 

 

894

Accrued expenses and other liabilities

 

 

5,478

 

 

(2,176)

Net cash provided by operating activities

 

 

26,458

 

 

49,108

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

  

 

 

  

Purchase of property and equipment

 

 

(15,565)

 

 

(3,143)

Proceeds from sale of property and equipment

 

 

5,252

 

 

4,424

Cash paid in acquisitions, net of cash acquired

 

 

(91,133)

 

 

 —

Net cash provided by (used in) investing activities

 

 

(101,446)

 

 

1,281

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

  

 

 

  

Checks outstanding in excess of bank balances

 

 

313

 

 

317

Advances on line of credit

 

 

543,404

 

 

528,664

Repayments on line of credit

 

 

(550,261)

 

 

(528,603)

Principal payments on and payoff of long-term debt

 

 

(231,817)

 

 

(59,656)

Proceeds from Term Loan Facility

 

 

350,000

 

 

14,188

Deferred financing fees

 

 

(14,411)

 

 

(1,788)

Pay off of subordinated debt

 

 

(66,715)

 

 

 —

Issuance of common stock

 

 

128,184

 

 

 —

Repurchase of common stock

 

 

(36,168)

 

 

 —

Issuance of Series A convertible preferred stock

 

 

65,000

 

 

 —

Series A convertible preferred stock dividends

 

 

(1,680)

 

 

 —

Series B convertible preferred stock dividends

 

 

(2,016)

 

 

(3,628)

Net cash provided by (used in) financing activities

 

 

183,833

 

 

(50,506)

 

 

 

 

 

 

 

Effect of exchange rates on cash and cash equivalents

 

 

(30)

 

 

 —

 

 

 

 

 

 

 

Net increase (decrease) in cash  and cash equivalents

 

 

108,815

 

 

(117)

Cash and cash equivalents – beginning of period

 

 

3,695

 

 

4,886

Cash and cash equivalents – end of period

 

$

112,510

 

$

4,769

 

 

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, 2020

 

 

650,000

 

 

$

65.0

 

 

 

64,589,075

 

 

$

—

 

 

$

396.9

 

 

$

(327.0

)

 

$

(0.4

)

 

$

134.5

 

Vesting of restricted stock units

 

 

—

 

 

 

—

 

 

 

8,950

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Series A convertible preferred stock dividend

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1.2

)

 

 

—

 

 

 

(1.2

)

Stock-based compensation expense

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

0.9

 

 

 

—

 

 

 

—

 

 

 

0.9

 

Foreign currency translation adjustments

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(0.5

)

 

 

(0.5

)

Net loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(16.3

)

 

 

—

 

 

 

(16.3

)

Balance at March 31, 2020

 

 

650,000

 

 

$

65.0

 

 

 

64,598,025

 

 

$

—

 

 

$

397.8

 

 

$

(344.5

)

 

$

(0.9

)

 

$

117.4

 

Vesting of restricted stock units

 

 

—

 

 

 

—

 

 

 

129,400

 

 

 

—

 

 

 

(0.1

)

 

 

—

 

 

 

—

 

 

 

(0.1

)

Series A convertible preferred stock dividend

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1.3

)

 

 

—

 

 

 

(1.3

)

Stock-based compensation expense

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1.1

 

 

 

—

 

 

 

—

 

 

 

1.1

 

Foreign currency translation adjustments

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

0.2

 

 

 

0.2

 

Net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1.6

 

 

 

—

 

 

 

1.6

 

Balance at June 30, 2020

 

 

650,000

 

 

$

65.0

 

 

 

64,727,425

 

 

$

—

 

 

$

398.8

 

 

$

(344.2

)

 

$

(0.7

)

 

$

118.9

 

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

4

4

Table of Contents

DASEKE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS – (Continued)

(Unaudited)

(Dollars in thousands)millions)

 

 

 

 

 

 

 

 

 

Nine months ended

 

 

September 30, 

 

    

2017

    

2016

Supplemental disclosure of cash flow information

 

 

 

 

 

 

Cash paid for interest

 

$

20,916

 

$

15,637

Cash paid for income taxes

 

$

629

 

$

942

 

 

 

 

 

 

 

Noncash investing and financing activities

 

 

 

 

 

 

Property and equipment acquired with debt or capital lease obligations

 

$

13,609

 

$

32,517

Property and equipment sold for notes receivable

 

$

412

 

$

408

Property and equipment transferred to sales-type lease

 

$

7,042

 

$

6,193

Assets held for sale returned to property and equipment

 

$

 —

 

$

351

Sales-type lease returns to property and equipment

 

$

724

 

$

1,188

Sales-type lease assets sold for notes receivable

 

$

21,488

 

$

18,609

Sales-type lease returns to sales-type lease assets

 

$

13,795

 

$

12,026

Common stock issued in acquisitions

 

$

11,079

 

$

 —

Accrued Series A convertible preferred dividends

 

$

1,239

 

$

 —

Accrued Series B convertible preferred dividends

 

$

 —

 

$

1,378

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

Net income (loss)

 

$

28.0

 

 

$

(14.7

)

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

 

 

 

 

 

 

Depreciation

 

 

40.9

 

 

 

45.5

 

Amortization of intangible assets

 

 

3.5

 

 

 

3.6

 

Amortization of deferred financing fees

 

 

1.1

 

 

 

2.1

 

Non-cash operating lease expense

 

 

(0.8

)

 

 

2.7

 

Change in fair value of warrant liability

 

 

(2.2

)

 

 

(2.1

)

Write-off of deferred financing fees

 

 

1.1

 

 

 

0

 

Stock-based compensation expense

 

 

3.2

 

 

 

2.6

 

Deferred taxes

 

 

9.8

 

 

 

(1.8

)

Bad debt (recovery) expense

 

 

(0.3

)

 

 

1.3

 

Gain on disposition of property and equipment

 

 

(7.7

)

 

 

(0.8

)

Impairment

 

 

0

 

 

 

13.4

 

Changes in operating assets and liabilities

 

 

 

 

 

 

Accounts receivable

 

 

(34.8

)

 

 

34.0

 

Drivers’ advances and other receivables

 

 

0.6

 

 

 

(1.2

)

Other current assets

 

 

1.1

 

 

 

(4.6

)

Accounts payable

 

 

(0.3

)

 

 

(2.3

)

Accrued expenses and other liabilities

 

 

14.9

 

 

 

5.2

 

Net cash provided by operating activities

 

 

58.1

 

 

 

82.9

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

Purchases of property and equipment

 

 

(18.0

)

 

 

(14.9

)

Proceeds from sale of property and equipment

 

 

26.6

 

 

 

36.4

 

Net cash provided by investing activities

 

 

8.6

 

 

 

21.5

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Advances on line of credit

 

 

747.2

 

 

 

736.4

 

Repayments on line of credit

 

 

(747.2

)

 

 

(738.1

)

Principal payments on long-term debt

 

 

(212.4

)

 

 

(39.1

)

Proceeds from long-term debt

 

 

97.5

 

 

 

0

 

Payments of deferred financing fees

 

 

(3.4

)

 

 

0

 

Repurchases of common stock

 

 

(10.5

)

 

 

0

 

Exercise of options, net

 

 

0.4

 

 

 

0

 

Series A convertible preferred stock dividends

 

 

(2.5

)

 

 

(2.5

)

Net cash used in financing activities

 

 

(130.9

)

 

 

(43.3

)

 

 

 

 

 

 

 

Effect of exchange rates on cash and cash equivalents

 

 

(0.3

)

 

 

0.5

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

(64.5

)

 

 

61.6

 

Cash and cash equivalents – beginning of period

 

 

176.2

 

 

 

95.7

 

Cash and cash equivalents – end of period

 

$

111.7

 

 

$

157.3

 

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

5

5

Table of Contents

DASEKE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS – (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)

(Unaudited)(Dollars in millions)

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2021

 

 

2020

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

Cash paid for interest

 

$

15.1

 

 

$

20.8

 

Cash paid for income taxes

 

$

3.4

 

 

$

1.3

 

 

 

 

 

 

 

 

Noncash investing and financing activities

 

 

 

 

 

 

Property and equipment acquired with debt or finance lease obligations

 

$

29.2

 

 

$

30.0

 

Property and equipment sold for notes receivable

 

$

0

 

 

$

0.1

 

Right-of-use assets acquired

 

$

16.5

 

 

$

26.8

 

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

6

Table of Contents

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

Nature of Operations

The registrant was originally formed in April 2015 as a special purpose acquisition company (SPAC) under the name Hennessy Capital Acquisition Corp. II (Hennessy). As a SPAC, Hennessy had no operations and its purpose was to go public with the intention of merging with or acquiring an operating company with the proceeds of the SPAC’s initial public offering (the IPO).

On February 27, 2017, Hennessy consummated the Business Combination (as defined and described in Note 2) with Daseke, Inc. Upon consummation of the Business Combination, Daseke, Inc. changed its name to’s (the Company or Daseke) wholly-owned subsidiary Daseke Companies, Inc. and Hennessy changed its name to Daseke, Inc.

Daseke, Inc., was formedincorporated in December 2008 and began operations on January 1, 2009. Daseke is engaged in full service open-deck trucking that specializesfocuses primarily in flatbed truckload and heavy haul transportation of specialized items throughout the United States, and Canada and into Mexico with trailers.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. Additionally, due toauthorities in the recent acquisition of R&R Trucking Holdings, LLC (see Note 3), theUnited States. The Company is also subject to regulationsregulation by the DepartmentMinistries of DefenseTransportation and the Department of Energy.

Unless expressly stated otherwise, references to the Company or Daseke refers to Daseke, Inc.Communications and its wholly owned subsidiaries, Hennessy refers to the registrant prior to the closing of the Business Combination, and Private Daseke refers to Daseke, Inc. and its subsidiaries prior to the closing of the Business Combination.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 of America (GAAP)(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 month periodssix months ended SeptemberJune 30, 20172021 are not necessarily indicative of the results that may be expected for the year ended December 31, 2017.2021.

The consolidated balance sheet as of December 31, 20162020 has been derived from the audited consolidated financial statements at that date. On May 6, 2021, the Company filed an Amended Annual Report on Form 10-K/A (Amended 10-K) in order to restate the financial statements to reflect warrants as a liability and changes in fair value recorded as non-cash income or expense.  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, 20162020 as set forth in the Company’s Current Report on Form 8-K/A, filed with the SEC on March 16, 2017.

Principles of Consolidation

The consolidated financial statements include the accounts of Daseke, Inc. and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Amended 10-K.

6

Table of Contents

DASEKE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (Continued)

Deferred Financing Fees

In conjunction with obtaining long-term debt, the Company incurred financing costs which are being amortized using the straight-line method, which approximates the effective interest rate method, over the terms of the obligations. As of September 30, 2017 and December 31, 2016, the balance of deferred financing fees was $13.3 million and $4.1 million, respectively, which is included as a reduction of long-term debt, net of current portion in the consolidated balance sheets. Amortization expense was $0.5 million and $0.3 million for the three months ended September 30, 2017 and 2016, respectively, and $1.3 million and $0.9 million for the nine months ended September 30, 2017 and 2016, respectively, which is included in interest expense. In February 2017, in conjunction with new term loan financing discussed in Note 9, the Company incurred deferred financing costs of $14.2 million and expensed unamortized deferred financing fees totaling $3.9 million.

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.   The fair value of the Company’s interest rate swapsPublic Warrants is determined using cash flow computer models with unobservable inputs, therefore the liability for interest rate swaps is classified within Level 3closing price of the warrants on the NASDAQ market. The fair value framework. In conjunction withof the Business Combination discussedPrivate Placement Warrants is determined using the Black-Scholes option pricing formula. The primary unobservable input utilized in Note 2, the Company’s lone interest rate swap was terminated. At December 31, 2016,determining the fair value of this liabilitythe Private Warrants is the expected volatility. The expected volatility was $51,871estimated considering observable Daseke public warrant pricing, Daseke’s own historical volatility and is classified in accrued expensesthe volatility of guideline public companies.

The following table sets forth by level within the fair value hierarchy the Company’s assets and other liabilities on the consolidated balance sheets. that were accounted for at fair value (in millions):

 

 

Fair value as of June 30, 2021

 

Liabilities:

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Warrant liability

 

$

2.3

 

 

$

—

 

 

$

1.8

 

 

$

4.1

 

Total fair value

 

$

2.3

 

 

$

—

 

 

$

1.8

 

 

$

4.1

 

Table of Contents

 

 

Fair value as of December 31, 2020

 

Liabilities:

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Warrant liability

 

$

3.6

 

 

$

—

 

 

$

2.7

 

 

$

6.3

 

Total fair value

 

$

3.6

 

 

$

—

 

 

$

2.7

 

 

$

6.3

 

The tablestable below areis a summary of the changes in the fair value of thisthe warrant liability within the Level 3 fair value hierarchy for the three and ninesix months ended SeptemberJune 30, 2017 and 20162021 (in thousands)millions):

2016

Balance at January 1, 2016

$

(124)

Change in fair value

(63)

Balance at June 30, 2016

(187)

Change in fair value

72

Balance at September 30, 2016

$

(115)

2017

Balance at January 1, 2017

$

(52)

Change in fair value

52

Balance at June 30, 2017

 —

Change in fair value

 —

Balance at September 30, 2017

$

 —

 

 

Six Months Ended

 

 

 

June 30, 2021

 

Balance at beginning of period

 

$

2.7

 

Change in fair value

 

 

(0.9

)

Balance at end of period

 

$

1.8

 

7

Table of Contents

DASEKE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (Continued)

Stock-Based Compensation

Awards of equity instruments issued to employees and directors are accounted for under the fair value method of accounting and recognized in the consolidated statements of operations. Compensation cost is measured for all stock-based awards at fair value on the date of grant and recognized using the straight-line method over the service period over which the awards are expected to vest.

Fair value of all time-vested options as of the date of grant is estimated using the Black-Scholes option valuation model, which was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Since the Company does not have a sufficient history of exercise behavior, expected term is calculated using the assumption that the options will be exercised ratably from the date of vesting to the end of the contractual term for each vesting tranche of awards. The risk-free interest rate is based on the U.S. Treasury yield curve for the period of the expected term of the stock option. Expected volatility is calculated using an index of publicly traded peer companies.

Fair values of nonvested stock awards (restricted stock units) are equal to the market value of the common stock on the date of the award with compensation costs amortized over the vesting period of the award.

Segment Reporting

The Company determines its operating segments based on the information utilized by the chief operating decision maker to allocate resources and assess performance. Based on this information, the Company has determined it has twelve operating segments as of September 30, 2017 and eight operating segments as of September 30, 2016 that are aggregated into two reportable segments: Flatbed Solutions, which delivers its services using primarily flatbed transportation equipment to meet the needs of high-volume, time-sensitive shippers, and Specialized Solutions, which delivers transportation and logistics solutions for super heavy haul, high-value customized and over-dimensional loads, many of which require engineering and customized equipment.

Earnings (Loss) Per Share

Basic earnings (loss) per common share is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share reflect the potential dilution of earnings per share 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 (loss).

For the three and nine months ended September 30, 2017, 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 loss per share as their effects were anti-dilutive. For the three and nine months ended September 30, 2017 and 2016, shares of Private Daseke’s Series B Convertible Preferred Stock (Series B Preferred Stock)were not included in the computation of diluted earnings per share as their effects were anti-dilutive. For the three and nine months ended September 30, 2017, there was no dilutive effect from the Merger Agreement earn-out provision (see Note 2) or the outstanding warrants to purchase shares of the Company’s common stock (the common stock purchase warrants).

Common Stock Purchase Warrants

The Company accounts for the issuance of common stock purchase warrants in connection with equity offerings in accordance with the provisions of the Accounting Standards Codification (ASC) 815, Derivatives and Hedging (ASC 815). The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) gives the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside the control of the Company) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). See Note 11 for additional details on the common stock purchase warrants.

The Company assessed the classification of its common stock purchase warrants and determined that such instruments meet the criteria for equity classification at the time of issuance.

8

Table of Contents

DASEKE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (Continued)

Foreign Currency Gains and Losses

The local currency is the functional currency for the Company’s operations in Canada. For these operations, assets and liabilities are translated at the rates of exchange on the consolidated balance sheet date, while income and expense items are translated at average rates of exchange during the period. The resulting gains or losses arising from the translation of accounts from the functional currency into U.S. dollars are included as a separate component of stockholders’ equity in accumulated other comprehensive income (loss) until a partial or complete liquidation of the Company’s net investment in the foreign operation.

From time to time, the Company’s foreign operations may enter into transactions that are denominated in a currency other than their functional currency (U.S. dollars). These transactions are initially recorded in the functional currency of the operating company based on the applicable exchange rate in effect on the date of the transaction. Monthly, these transactions are remeasured to an equivalent amount of the functional currency based on the applicable exchange rate in effect on the remeasurement date. Any adjustment required to remeasure a transaction to the equivalent amount of functional currency is recorded in the consolidated statements of operations of the foreign operating company as a component of foreign exchange gain or loss.

Assets Held for Sale

Assets held for sale is comprised of revenue equipment in our lease purchase program and is recorded as a component of prepaid and other current assets on the consolidated balance sheets. Assets held for sale at September 30, 2017 and December 31, 2016, totaled $7.1 million and $2.8 million, respectively. Assets held for sale are not subject to depreciation, and are recorded at the lower of depreciated carrying value or fair market value less selling costs. The Company expects to sell these assets in its lease purchase program within twelve months of being classified as assets held for sale. 

NewRecently Issued Accounting Pronouncements

In July 2017,August 2020, the Financial Accounting Standards Board (FASB)FASB issued Accounting Standards Update (ASU) 2017-11, Earnings per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480)ASU 2020-06 – Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging (Topic 815). ASU 2017-11 provides– 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 accountingcalculating earnings per share, requiring use of the if-converted method for financialall convertible instruments with down round features and clarifyrescinding an entity’s ability to rebut the deferralpresumption of certain provisionsshare settlement for instruments that may be settled in Topic 480. ASU 2017-11 will becomecash or other assets. The amendments are effective for annual periods beginning after December 15, 2018 and interim periods within those periods. Thethe Company is currently evaluating the impact of adopting this guidance.

In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718). ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award requires the application of modification accounting. Modification accounting will apply unless the fair value of the modified award is the same as the original award, the vesting conditions of the modified award are the same as the original award and the classification of the modified award as an equity instrument or liability instrument is the same as the original award. ASU 2017-09 will become effective for annual periods beginning after December 15, 2017 and interim periods within those periods. Early adoption is permitted. The Company does not expect ASU 2017-09 to have a material impact on its consolidated results of operations, financial condition, cash flows, or financial statement disclosures.

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350). ASU 2017-04 removes the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for fiscal years beginning December 15, 2019, with early adoption permitted for interim and annual goodwill impairment tests performed on testing dates after January 1, 2017, and applied prospectively. The Company does not expect ASU 2017-04 to have a material impact on its consolidated results of operations, financial condition, cash flows, or financial statement disclosures.

9

Table of Contents

DASEKE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (Continued)

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230). ASU 2016-15 provides new guidance intended to reduce diversity in practice in how certain cash receipts and payments are classified in the statement of cash flows, including debt prepayment or extinguishment costs, the settlement of contingent liabilities arising from a business combination, proceeds from insurance settlements, and distributions from certain equity method investees. ASU 2016-05 will become effective for fiscal years beginning after December 15, 2018 and interim periods within2021. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The guidance must be adopted as of the beginning of the fiscal year of adoption. ASU 2020-06 is not expected to 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 U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. 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, 2019.2022. 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 amendments in ASU2019-12will become effective for the Company on January 1, 2022. Early adoption is permitted. permitted, including adoption in any interim period.  ASU 2016-15 requires application using2019-12 is not expected to have a retrospective transition method. The Company is currently evaluatingmaterial impact on the impact of adopting this guidance.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 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the impact of adopting this guidance.

In March 2016, the FASB issued ASU 2016-09, Stock Compensation (Topic 718). ASU 2016-09sets forth a “current expected credit loss” (CECL) model which requires the recognitionCompany 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 the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional paid in capital pools. ASU 2016-09 also allowscredit losses on financial assets, including trade receivables. The new standard will become effective for the Company to repurchase more ofbeginning with the Company’s shares for tax withholding purposes without triggering liability accounting. In addition, ASU 2016-09 allows for a policy electionfirst quarter 2023 and is not expected to account for forfeitures as they occur rather than on an estimated basis. ASU 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, with early adoption permitted. The Company adopted this pronouncement on April 1, 2017 and election to account for forfeitures as they occur did not have a material impact on the Company’s consolidated results of operations, financial condition, cash flows or financial statement disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 amends various aspects of existing guidance for leases. ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. The main difference between previous GAAP and the amended standard is the recognition of lease assets and lease liabilities of lessees on the balance sheet for those leases classified as operating leases under previous GAAP. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the effect this ASU will have on its consolidated financial position and results of operations.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued updated guidance with ASU 2015-14 and deferred the effective date of ASU 2014-09 by one year. The guidance in ASU 2014-09 is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods.

In March 2016, the FASB issued an ASU that further clarifies guidance under ASU 2014-09 with respect to principal versus agent considerations in revenue from contracts with customers. In the second quarter of 2016, the FASB issued two ASUs that provide additional guidance when identifying performance obligations and licenses as well as allowing for certain narrow scope improvements and practical expedients. In May 2017, the FASB issued an ASU that provides guidance on the identification of the customer in a service concession arrangement. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (modified retrospective). The Company plans to adopt this new guidance in the first quarter of 2018 and would apply the modified retrospective method, which may result in a cumulative-effect adjustment to opening retained earnings with an insignificant change to revenue on a go-forward basis. The Company has completed its review of a sample of revenue contracts for all revenue sources and has concluded that the new guidance will not have a material impact on its revenue recognition practices, business processes, systems and controls. The new guidance will result in changes to the timing of recognition for certain revenue streams, namely freight revenue, where a contract has not been completed by the end of a reporting period. Based on a review of our customer shipping arrangements, we currently believe the implementation of this standard will change our revenue recognition policy from recognizing revenue upon shipment completion to recognizing revenue over time based on the progress toward completion of shipments in transit at each period end.

statements.

10

Table of ContentsLease Income

DASEKE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 2 – BUSINESS COMBINATION

On February 27, 2017, Hennessy consummated the merger of Hennessy’s wholly-owned subsidiary with and into Daseke, Inc., with Daseke, Inc. surviving as a direct wholly-owned subsidiary of Hennessy (the Business Combination) pursuant to the Agreement and Plan of Merger, dated December 22, 2016 (the Merger Agreement). The aggregate consideration received by Private Daseke stockholders upon closing was $266.7 million, consisting of newly issued shares of common stock at a value of $10.00 per share. The Merger Agreement contains an earn-out provision through which Private Daseke stockholders could receive up to 15 million additional shares of common stock (with up to 5 million shares payable annually with respect to 2017, 2018 and 2019 performance). The full 15 million shares are only payable if (i) the annualized Adjusted EBITDA (giving effect to acquisitions and as defined in the Merger Agreement) for 2017, 2018 and 2019 is at least $140.0 million, $170.0 million and $200.0 million, respectively, and (ii) the closing share price of the Company’s common stock is at least $12.00, $14.00 and $16.00 for any 20 trading days in a consecutive 30 trading day period in 2017, 2018 and 2019, respectively. For each year, the 5 million earn-out shares will be prorated to the extent the annualized Adjusted EBITDA (giving effect to acquisitions and as defined in the Merger Agreement) exceeds 90% but represents less than 100%, of the applicable earn-out target.

Following the consummation of the Business Combination on February 27, 2017 (the Closing), there were 37,715,960 shares of common stock issued and outstanding, consisting of (i) 26,665,330 shares issued to Private Daseke stockholders pursuant to the Merger Agreement, (ii) 419,669 shares issued in a private placement that closed in conjunction with the Business Combination, (iii) 2,288,043 shares originally issued to Hennessy Capital Partners II LLC (the Sponsor) in a private placement that closed simultaneously with the consummation of the IPO, and (iv) 8,342,918 shares, following redemptions, which shares were originally issued in the IPO. In connection with the Business Combination, $65.0 million of Series A Preferred Stock (650,000 shares) were issued in a private placement.

In conjunction with the Closing, the Company entered into (i) a $350.0 million term loan credit facility (the Term Loan Facility), which consists of a $250.0 million term loan funded on the closing date of the Term Loan Facility and up to $100.0 million of term loans to be funded from time to time under a delayed draw term loan facility, and (ii) an asset-based revolving credit facility (the ABL Facility), in an aggregate maximum credit amount equal to $70.0 million (subject to availability under a borrowing base). See Note 9 for more information regarding the Term Loan Facility and the ABL Facility. Prior to the Closing, the Company had a credit facility consisting of a term loan (Senior Term Loan) and a revolving line of credit (Line of Credit).

11

Table of Contents

DASEKE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 2 – BUSINESS COMBINATION – (Continued)

The following table is a summary of cash proceeds and utilization of proceeds in the Business Combination (in thousands):

 

 

 

 

Proceeds

 

 

 

 

 

 

 

Public share proceeds(1)

 

$

83,429

Issuance of Series A Preferred Stock

 

 

65,000

Term Loan Facility

 

 

250,000

Cash(2)

 

 

3,209

Total proceeds

 

 

401,638

 

 

 

 

Use of Proceeds

 

 

 

 

 

 

 

Repayment of Line of Credit(3)

 

 

16,717

Repayment of Senior Term Loan(4)

 

 

122,724

Repayment of equipment loans(5)

 

 

89,488

Repayment of subordinated debt(6)

 

 

67,460

Payment of deferred financing fees(7)

 

 

14,148

Repurchase Main Street and Prudential shares(8)

 

 

36,168

Hennessy transaction costs

 

 

19,063

Daseke transaction costs(9)

 

 

1,204

Total use of proceeds

 

 

366,972

 

 

 

 

Net cash received

 

$

34,666

(1) - 8,342,918 public shares outstanding valued at $10.00 per share

(2) - Daseke cash utilized for payment of deferred financing fees and transaction costs

(3) - includes payment of $59 accrued interest recognized in interest expense

(4) - includes payment of $422 accrued interest recognized in interest expense

(5) - includes payment of $731 accrued interest recognized in interest expense

(6) - includes payment of $745 accrued interest recognized in interest expense

(7) - excludes $81 paid subsequent to the Closing

(8) - Hennessy repurchased Private Daseke shares held by Main Street Capital II, LP, Main Street Mezzanine Fund, LP, Main Street Capital Corporation, Prudential Capital Partners IV, L.P., Prudential Capital Partners (Parallel Fund) IV, L.P. and Prudential Capital Partners Management Fund IV, L.P.

(9) - $0.8 million and $0.4 million expensed in fourth quarter 2016 and first quarter 2017, respectively

The Business Combination was accounted for as a reverse merger in accordance with GAAP. Under this method of accounting, Hennessy is treated as the “acquired” company. This determination was primarily based on Private Daseke comprising the ongoing operations of the combined company, Private Daseke’s senior management comprising the senior management of the combined company, and Private Daseke stockholders having a majority of the voting power of the combined company. For accounting purposes, Private Daseke is deemed to be the accounting acquirer in the transaction and, consequently, the transaction is treated as a recapitalization of Private Daseke (i.e., a capital transaction involving the issuance of stock by Hennessy for the stock of Private Daseke). Accordingly, the consolidated assets, liabilities and results of operations of Private Daseke are the historical financial statements of the combined company, and Hennessy’s assets, liabilities and results of operations are consolidated with Private Daseke beginning on the acquisition date.

In connection with the Closing, Daseke, Inc. changed its name to Daseke Companies, Inc. and Hennessy Capital Acquisition Corp. II changed its name to Daseke, Inc. Daseke, Inc.’s common stock and warrants began trading under the ticker symbols DSKE and DSKEW, respectively, on February 28, 2017.

12

Table of Contents

DASEKE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 3 – ACQUISITIONS

The Company is a leading consolidator of the open-deck freight market in North America. From its inception in late 2008, the Company has successfully acquired twelve open-deck trucking companies. Negotiations and discussions with potential targets are an integral part of the Company’s operations, and the Company may be in varying stages of the acquisition process, from infancy to very mature, at any point in time.

The following is a summary of the preliminary allocation of the purchase price paid to the fair values of the net assets of the Company’s recent acquisitions (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

(all amounts in U.S. dollars)

 

 

 

 

 

 

 

 

 

    

 

 

 

 

R&R

 

 

Steelman

 

 

Schilli

 

Big Freight

Accounts receivable

 

$

5,129

 

$

4,383

 

$

8,798

 

$

4,914

Parts supplies

 

 

149

 

 

90

 

 

1,681

 

 

 —

Prepaid and other current assets

 

 

1,515

 

 

2,296

 

 

4,701

 

 

576

Property and equipment

 

 

16,887

 

 

11,100

 

 

41,423

 

 

11,492

Goodwill & Intangibles

 

 

22,560

 

 

14,318

 

 

12,989

 

 

10,551

Other long-term assets

 

 

156

 

 

5,013

 

 

 —

 

 

121

Deferred tax liabilities

 

 

(5,238)

 

 

(2,763)

 

 

(14,598)

 

 

(3,571)

Accounts payable and other liabilities

 

 

(2,920)

 

 

(15,612)

 

 

(27,634)

 

 

(6,294)

Total

 

$

38,238

 

$

18,825

 

$

27,360

 

$

17,789

The aggregate purchase price noted above was allocated to the major categories of assets acquired and liabilities assumed at estimated fair values as of the acquisition date, which were based, in part, upon outside preliminary appraisals for certain assets and subject to change when additional information concerning final asset and liability values is obtained.

The Company has not completed its assessments of the fair value of purchased intangible assets for the R&R and Steelman acquisitions, and no value has been allocated to them at this time. The Company has completed its assessments for the Schilli and Big Freight acquisitions and allocated the resulting fair values to intangible assets. The final purchase price allocations may result in adjustments to certain assets and liabilities, including the residual amount allocated to goodwill.

R&R Trucking Holdings, LLC

On September 1, 2017 the Company acquired 100% of the outstanding stock of R&R Trucking Holdings, LLC (R&R), based in Duenweg, Missouri. Total consideration paid was $38.4 million, consisting of $24.6 million in cash and the Company assumed and repaid of $13.8 million of long-term debt. The cash consideration was funded through a delayed draw on September 1, 2017 under the Term Loan Facility. The acquisition was a stock purchase, therefore the values assigned to the intangible assets and goodwill are not deductible for tax purposes. Approximately $0.4 million of transaction expenses were incurred in the acquisition, which are not deductible for tax purposes.

The Steelman Companies

On July 1, 2017, the Company acquired 100% of the outstanding stock of The Steelman Companies (Steelman), based in Springfield, Missouri, for consideration of $18.8 million, consisting of $11.2 million in cash and 746,170 shares of Daseke common stock valued at $7.6 million. The fair value of the 746,170 shares issued was determined based on the closing price of the stock on the acquisition close date. The cash consideration was funded through cash on hand. The acquisition was a stock purchase under GAAP. A Section 338(h)(10) election is being filed for certain of the entities acquired which will deem those acquisitions as an asset purchase for tax purposes, therefore approximately $13.0 million of the values assigned to the intangible assets and goodwill are expected to be deductible for tax purposes. Approximately $0.3 million of transaction expenses were incurred in the acquisition, which are not deductible for tax purposes.

13

Table of Contents

DASEKE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 3 – ACQUISITIONS – (Continued)

Schilli Transportation Services, Inc.

On May 1, 2017, the Company acquired 100% of the outstanding stock of Schilli Transportation Services, Inc. and certain of its affiliates (Schilli), based in Remington, Indiana. Total consideration paid was $27.4 million, consisting of $21.0 million in cash, 232,885 shares of Daseke common stock valued at $2.3 million and $4.0 million of long-term debt refinanced by the Company. The fair value of the 232,885 shares issued was determined based on the closing price of the stock on the acquisition close date. The cash consideration was funded through a delayed draw on May 1, 2017 under the Term Loan Facility. The acquisition was a stock purchase, therefore the values assigned to the intangible assets and goodwill are not deductible for tax purposes. Approximately $0.4 million of transaction expenses were incurred in the acquisition, which are not deductible for tax purposes.

Big Freight Systems, Inc.

On May 1, 2017, the Company acquired 100% of the outstanding stock of Big Freight Systems, Inc. (Big Freight), based in Steinbach, Manitoba. Total consideration paid was $16.7 million consisting of $12.4 million in cash, 109,248 shares of Daseke common stock valued at $1.1 million and, the Company assumed approximately $3.2 million of outstanding debt. The fair value of the 109,248 shares issued was determined based on the closing price of the stock on the acquisition close date. Big Freight’s purchase agreement also contains an earn-out for additional cash consideration to be paid on the excess of each of 2017, 2018 and 2019’s earnings before interest, taxes, depreciation and amortization (EBITDA Amount) over 2016’s EBITDA Amount (as defined in the purchase agreement), multiplied by 0.4. A contingent liability of $1.1 million was included in the allocation of the purchase price for this earn-out. The cash consideration was funded through a delayed draw on May 1, 2017 under the Term Loan Facility and cash on hand. The acquisition was a stock purchase, therefore the values assigned to the intangible assets and goodwill are not deductible for tax purposes. Approximately $0.6 million of transaction expenses were incurred in the acquisition, which are not deductible for tax purposes.

Supplemental Pro Forma Information (Unaudited)

The following supplemental pro forma financial information reflects the R&R, Steelman, Schilli and Big Freight acquisitions as if they occurred on January 1, 2016. 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, 2016. Further, the pro forma financial information does not purport to project the future operating results of the consolidated company.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 

 

Nine Months Ended September 30, 

(in thousands)

    

2017

    

2016

 

2017

    

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma revenue

 

$

241,135

 

$

230,092

 

$

690,449

 

$

666,014

Pro forma net income (loss)

 

$

285

 

$

(1,167)

 

$

(11,323)

 

$

810

NOTE 4 – PREPAID AND OTHER CURRENT ASSETS

The components of prepaid expenses and other current assets are as follows as of September 30, 2017 and December 31, 2016 (in thousands).

 

 

 

 

 

 

 

 

    

2017

    

2016

Assets held for sale

 

$

7,112

 

$

2,812

Other assets

 

 

2,529

 

 

3,546

Insurance

 

 

4,564

 

 

2,246

Other prepaids

 

 

1,562

 

 

1,104

Licensing, permits and tolls

 

 

3,031

 

 

2,772

Highway and fuel taxes

 

 

1,523

 

 

1,024

 

 

$

20,321

 

$

13,504

14

Table of Contents

DASEKE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 5 – GOODWILL AND INTANGIBLE ASSETS

Goodwill represents the excess of the purchase price of all acquisitions over the estimated fair value of the net assets acquired. The Company performs an impairment test of goodwill annually as of October 31 or when impairment indicators arise. There was no goodwill impairment identified for the three and nine months ended September 30, 2017. The preliminary summary of changes in goodwill follows for the nine months ended September 30, 2017 (in thousands).

 

 

 

 

 

 

 

 

 

 

 

    

Flatbed

    

Specialized

    

Total

Goodwill balance at December 31, 2016

 

 

46,660

 

 

42,375

 

 

89,035

Goodwill acquired and adjustments to previously recorded goodwill

 

 

 —

 

 

50,207

 

 

50,207

Foreign currency translation adjustment

 

 

 —

 

 

647

 

 

647

Goodwill balance at September 30, 2017

 

$

46,660

 

$

93,229

 

$

139,889

Intangible assets consisted of the following at September 30, 2017 and December 31, 2016 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of September 30, 2017

 

As of December 31, 2016

 

    

Intangible

    

Accumulated

    

Intangible

    

Intangible

    

Accumulated

    

Intangible

 

 

Assets

 

Amortization

 

Assets, net

 

Assets

 

Amortization

 

Assets, net

Non-competition agreements

 

$

10,900

 

$

(5,175)

 

$

5,725

 

$

8,350

 

$

(3,929)

 

$

4,421

Customer relationships

 

 

59,190

 

 

(22,471)

 

 

36,719

 

 

56,210

 

 

(19,078)

 

 

37,132

Trade names

 

 

34,780

 

 

 —

 

 

34,780

 

 

30,100

 

 

 —

 

 

30,100

Foreign currency translation adjustment

 

 

 —

 

 

317

 

 

317

 

 

 —

 

 

 —

 

 

 —

Total intangible assets

 

$

104,870

 

$

(27,329)

 

$

77,541

 

$

94,660

 

$

(23,007)

 

$

71,653

As of September 30, 2017, non-competition agreements and customer relationships had weighted average remaining useful lives of 2.63 and 7.81 years, respectively.

Amortization expense for intangible assets with definite lives was $1.8 million and $1.5 million for the three months ended September 30, 2017 and 2016, respectively, and $4.6 million and $4.5 million for the nine months ended September 30, 2017 and 2016, respectively. Projected amortization expense for the next five fiscal years ending December 31, 2017, 2018, 2019, 2020 and 2021 will be $6.3 million, $6.5 million, $6.4 million, $5.6 million and $5.1 million, respectively.

NOTE 6 – PROPERTY AND EQUIPMENT

The components of property and equipment are as follows at September 30, 2017 and December 31, 2016 (in thousands):

 

 

 

 

 

 

 

 

    

2017

    

2016

Revenue equipment

 

$

474,544

 

$

398,394

Buildings and improvements

 

 

50,546

 

 

43,000

Furniture and fixtures, office and computer equipment and vehicles

 

 

17,292

 

 

14,421

 

 

 

542,382

 

 

455,815

Accumulated depreciation

 

 

(173,183)

 

 

(137,068)

 

 

$

369,199

 

$

318,747

Depreciation expense on property and equipment was $18.0 million and $15.5 million for the three months ended September 30, 2017 and 2016, respectively, and $49.1 million and $46.0 million for the nine months ended September 30, 2017 and 2016, respectively.

15

Table of Contents

DASEKE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 7 – SALES-TYPE LEASES

The Company leases revenue equipmenttractors and trailers to certain of its owner-operators and accounts for these transactions as sales-typeoperating leases. These leases typically have terms of 30 to 72 months and are collateralized by a security interest in the related revenue equipment. A minimum lease receivable is recorded, net of unearned interestThe Company recognizes income and deferred gain on sale of the equipment. The gain is recognizedfor these leases as payments are collected, rather than in the periodreceived over the lease is recorded dueterm, which are reported in purchased freight on the consolidated statements of operations and comprehensive income (loss). 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 uncertaintyend of collection.the lease term. When an asset reaches the end of its useful economic life, the Company disposes of the asset.

8

Table of Contents

Lease income from lease payments related to these operating leases for the three and six months ended June 30, 2021 was $7.0 million and $13.0 million, respectively. Lease income from lease payments related to these operating leases for the three and six months ended June 30, 2020 was $6.2 million and $12.4 million, respectively.

NOTE 2 – OTHER CURRENT ASSETS

The components of the net investment in sales-type leasesother current assets are as follows at Septemberas of June 30, 20172021 and December 31, 20162020 (in thousands)millions):

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Insurance

 

$

8.0

 

 

$

12.0

 

Licensing, permits and tolls

 

 

5.2

 

 

 

4.9

 

Parts supplies

 

 

3.5

 

 

 

3.1

 

Highway and fuel taxes

 

 

3.4

 

 

 

1.1

 

Other prepaids

 

 

1.7

 

 

 

3.2

 

Other assets

 

 

1.7

 

 

 

0.6

 

Income tax receivable

 

 

1.6

 

 

 

1.6

 

 

 

$

25.1

 

 

$

26.5

 

 

 

 

 

 

 

 

 

    

2017

    

2016

Minimum lease receivable

 

$

35,120

 

$

21,055

Deferred gain

 

 

(7,092)

 

 

(3,049)

Net minimum lease receivable

 

 

28,028

 

 

18,006

Unearned interest income

 

 

(3,848)

 

 

(3,671)

 

 

 

 

 

 

 

Net investment in sales-type leases

 

 

24,180

 

 

14,335

Current portion

 

 

(6,022)

 

 

(3,516)

 

 

$

18,158

 

$

10,819

NOTE 3 – INTEGRATION AND RESTRUCTURING

On July 30, 2019, the Company internally announced a plan to integrate 3 operating segments with 3 other operating segments (Project Synchronize or the Plan), which reduced the number of operating segments from 16 to 13. On September 4, 2019, the Company announced a comprehensive restructuring plan (Project Pivot) intended to reduce its cost base, right size its organization and management team and increase and accelerate its previously announced operational improvement goals.  The long-term portionintegration and restructuring costs consist of sales-type leases is classifiedasset impairments, 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 long-term assets onmiscellaneous expenditures associated with the consolidated balance sheets at September 30, 2017 and December 31, 2016.

Gainintegration or loss on disposition of revenue equipment leased to owner-operators is includedrestructuring activities, which are expensed as a component of purchased freightincurred. Costs are reported in restructuring charges in the consolidated statements of operations.operations and comprehensive income (loss). The gains totaled approximately $0.5obligation related to employee separation costs is included in other current liabilities in the consolidated balance sheets.

During the first quarter of 2020, the Company made the decision to close certain of the Aveda terminals and wind down those operations, which was completed during the fourth quarter of 2020. As a result of the planned divestiture of Aveda, impairment charges of $13.4 million were recorded for the three months ended March 31, 2020 consisting of property and equipment of $4.0 million, right-of-use assets of $3.2 million and $0.2tradename intangible assets of $6.2 million.

On March 10, 2020, the Company announced a plan to integrate 3 operating segments with 3 other operating segments (Phase II of the Plan). Phase II of the Plan was initially expected to be significantly completed by June 30, 2020, however, due to uncertainties and changes in focus caused by the COVID-19 pandemic, the Company delayed and reevaluated Phase II of the Plan and reduced the planned number of integrations from 3 to 2 operating segments.  As of June 30, 2021, 1 of these integrations had been completed, and the Company expects to complete the remaining integration in late 2021.

The Company recorded $0.1 million and $3.0 million of integration and restructuring expenses in connection with the Plan and Project Pivot in the three months ended June 30, 2021 and 2020, respectively. The Company recorded $0.1 million and $3.5 million of integration and restructuring expenses in connection with the Plan and Project Pivot in the six months ended June 30, 2021 and 2020, respectively. As of June 30, 2021, we have incurred a cumulative total of $9.8 million in integration and restructuring costs since inception of the Plan.

9

Table of Contents

The following table summarizes the integration and restructuring costs as of June 30, 2021 (in millions):

 

 

Severance

 

 

Operating

 

 

 

 

 

 

 

 

 

and

 

 

Lease

 

 

 

 

 

 

 

 

 

Other Payroll

 

 

Termination

 

 

Other

 

 

Total

 

Balance at December 31, 2020

 

$

0.1

 

 

$

—

 

 

$

—

 

 

$

0.1

 

Specialized Solution

 

 

 

 

 

 

 

 

 

 

 

 

Costs accrued

 

 

—

 

 

 

—

 

 

 

0.1

 

 

 

0.1

 

Amounts paid or charged

 

 

—

 

 

 

—

 

 

 

(0.1

)

 

 

(0.1

)

Specialized Solution balance at June 30, 2021

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Flatbed Solution

 

 

 

 

 

 

 

 

 

 

 

 

Costs accrued

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Amounts paid or charged

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Flatbed Solution balance at June 30, 2021

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Corporate

 

 

 

 

 

 

 

 

 

 

 

 

Costs accrued

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Amounts paid or charged

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Adjustments

 

 

(0.1

)

 

 

—

 

 

 

 

 

 

(0.1

)

Corporate balance at June 30, 2021

 

 

(0.1

)

 

 

—

 

 

 

—

 

 

 

(0.1

)

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

Costs accrued

 

 

—

 

 

 

—

 

 

 

0.1

 

 

 

0.1

 

Amounts paid or charged

 

 

—

 

 

 

—

 

 

 

(0.1

)

 

 

(0.1

)

Adjustments

 

 

(0.1

)

 

 

—

 

 

 

—

 

 

 

(0.1

)

Consolidated balance at June 30, 2021

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

NOTE 4 – PROPERTY AND EQUIPMENT

The components of property and equipment are as follows as of June 30, 2021 and December 31, 2020 (in millions):

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Revenue equipment

 

$

516.4

 

 

$

546.7

 

Assets leased and available for lease to owner-operators

 

 

110.8

 

 

 

87.1

 

Buildings and improvements

 

 

56.4

 

 

 

57.0

 

Furniture and fixtures, office and computer equipment and vehicles

 

 

33.4

 

 

 

31.9

 

 

 

 

717.0

 

 

 

722.7

 

Accumulated depreciation

 

 

(323.2

)

 

 

(320.0

)

Property and equipment, net

 

$

393.8

 

 

$

402.7

 

Depreciation expense on property and equipment was $20.4 million and $21.0 million for the three months ended SeptemberJune 30, 20172021 and 2016, respectively,2020, respectively. Depreciation expense on property and $0.8equipment was $40.9 million and $0.5$45.5 million for the ninesix months ended SeptemberJune 30, 20172021 and 2016,2020, respectively.

NOTE 85 – ACCRUED EXPENSES AND OTHER LIABILITIES

The components of accrued expenses and other liabilities are as follows at Septemberas of June 30, 20172021 and December 31, 20162020 (in thousands)millions):

 

 

 

 

 

 

 

June 30,

 

 

December 31,

 

    

2017

    

2016

 

2021

 

 

2020

 

Brokerage and escorts

 

$

6,732

 

$

3,559

 

$

17.1

 

$

11.9

 

Unvouchered payables

 

 

4,892

 

 

2,587

 

12.8

 

6.1

 

Owner-operator deposits

 

10.2

 

7.8

 

Other accrued expenses

 

 

5,339

 

 

3,956

 

8.6

 

6.8

 

Owner-operator deposits

 

 

4,779

 

 

2,032

Fuel and fuel taxes

 

1.8

 

1.1

 

Accrued property taxes and sales taxes payable

 

1.7

 

1.5

 

Interest

 

 

255

 

 

1,705

 

 

1.6

 

 

0.5

 

Dividends

 

 

1,239

 

 

1,209

Fuel

 

 

995

 

 

711

Fuel taxes

 

 

429

 

 

345

 

$

24,660

 

$

16,104

 

$

53.8

 

$

35.7

 

10

16

Table of Contents

DASEKE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 96 – LONG-TERM DEBT

Long-term debt consists of the following at Septemberas of June 30, 20172021 and December 31, 20162020 (in thousands)millions):

 

 

 

 

 

 

 

 

    

2017

    

2016

Senior debt

 

 

 

 

 

 

 

 

 

 

 

 

 

Line of credit

 

$

 —

 

$

6,858

Term loan facility

 

 

348,462

 

 

 —

Senior term loan

 

 

 —

 

 

125,682

Equipment term loans

 

 

82,668

 

 

111,882

Real estate term loan

 

 

 —

 

 

13,772

Capital leases

 

 

4,540

 

 

13,818

 

 

 

435,670

 

 

272,012

Less current portion

 

 

(26,514)

 

 

(52,665)

Less unamortized debt issuance costs

 

 

(13,315)

 

 

(4,117)

Long-term portion

 

 

395,841

 

 

215,230

 

 

 

 

 

 

 

Subordinated debt

 

 

 

 

 

 

 

 

 

 

 

 

 

Main Street Capital Corporation

 

 

 —

 

 

21,660

Prudential Capital Partners

 

 

 —

 

 

21,492

LST Seller notes

 

 

 —

 

 

22,000

DTR Seller notes

 

 

 —

 

 

1,000

BHE Seller notes

 

 

 —

 

 

291

Total subordinated debt

 

 

 —

 

 

66,443

 

 

 

 

 

 

 

Total long-term debt

 

$

395,841

 

$

281,673

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Term loan facility

 

$

399.0

 

 

$

483.5

 

Equipment term loans

 

 

163.6

 

 

 

164.9

 

Finance leases

 

 

31.8

 

 

 

31.3

 

 

 

594.4

 

 

 

679.7

 

Less current portion

 

 

(55.4

)

 

 

(54.0

)

Less unamortized debt issuance costs

 

 

(8.2

)

 

 

(7.1

)

Total long-term debt

 

$

530.8

 

 

$

618.6

 

Term Loan Facility

In conjunction withOn March 9, 2021, the closeCompany and Daseke Companies, Inc., a wholly-owned subsidiary of the Business Combination on February 27, 2017, the Company (the Term Loan Borrower), entered into the $350.0 milliona Refinancing Amendment (Amendment No. 3 to Term Loan Facility underAgreement) (the Term Loan Amendment) with JPMorgan Chase Bank, N.A., as successor administrative agent and collateral agent and a loan agreement withreplacement lender, Credit Suisse AG, Cayman Islands Branch, as predecessor administrative agent and collateral agent, the lendersother loan parties party thereto and the other financial institutions party thereto. ThePursuant to the Term Loan Amendment, the Company prepaid, refinanced and replaced all of its issued and outstanding term loans under its Term Loan Facility consists(as defined below) in an aggregate principal amount of approximately $483.5 million (the Prior Term Loans) utilizing proceeds from (i) replacement term loans in aggregate principal amount of $400.0 million (the Replacement Term Loans) and (ii) approximately $83.5 million from its cash balance.

The terms of the Replacement Term Loans are governed by a $250.0$400.0 million term loan funded on the closing date of thefacility (the Term Loan Facility (the Closing DateFacility) evidenced by a Term Loan) and up to $100.0 millionLoan Agreement dated as of term loans to be fundedFebruary 27, 2017 (as amended, restated, supplemented or otherwise modified from time to time, under a delayed draw feature available until February 27, 2018.

The size of the Term Loan Facility could increaseAgreement), among the Company, the Term Loan Borrower, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (the Term Loan Agent), and the other lenders from time to time pursuant to an uncommitted incremental facility in an aggregate amount for all such incremental loans and commitments up to the sum of (a) $65.0 million and (b) an uncapped amount based on the maximum first lien, secured and total leverage ratio-based formulas depending upon the security and ranking of the relevant incremental facility. The proceeds from the Closing Date Term Loan were used to partially refinance certain of the Company’s capital leases, purchase money debt, equipment and real estate financings and to pay transaction costs associatedparty thereto with the Business Combination and refinance the Line of Credit and the Senior Term Loan.

The Term Loan Facility has a scheduled maturity date of February 27, 2024.March 9, 2028. The Replacement Term loans under the Term Loan FacilityLoans are, at the Company’s election from time to time, comprised of alternate base rate loans (an ABR Borrowing) or adjusted LIBOR loans (a Eurodollar Rate Borrowing), with the applicable margins of interest being an alternate base rate (subject to a 2.00%1.75% floor) plus 4.50%3.00% per annum for ABR Borrowings and LIBOR (subject to a 1.00%0.75% floor) plus 5.50%4.00% per annum for Eurodollar Rate Borrowings. At Septemberannum. During the three months ended June 30, 2017,2021 and 2020, the weighted average interest rate on the Term Loan Facility was 6.6%.4.8% and 6.0%, respectively. During the six months ended June 30, 2021 and 2020, the weighted average interest rate on the Term Loan Facility was 5.1% and 6.3%, respectively.

The Term Loan Facility is secured by substantially all assets of the Company, exceptexcluding those assets collateralizing certain equipment and certain real estate lenders debt and subject to certainother customary exceptions.

17

Table of Contents

DASEKE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 9 – LONG-TERM DEBT – (Continued)

As amended on August 16, 2017, the Term Loan Facility contains a financial covenant requiring the Company to maintain a consolidated total leverage ratio as of the last day of any fiscal quarter of less than or equal to 4.25 to 1.00 commencing on June 30, 2017, stepping up to 4.75 to 1.00 on September 30, 2017, stepping down to 4.25 to 1.00 on March 31, 2018, stepping down to 4.00 to 1.00 on March 31, 2019 and stepping down to 3.75 to 1.00 on March 31, 2021. Additionally, as amended on August 16, 2017, the Term Loan Facility contains a pro forma total leverage ratio of less than or equal to 4.25 to 1.00 for term loans funded from the delayed draw feature. The consolidated total leverage ratio is defined as the ratio of (i) consolidated total debt minus unrestricted cash and cash equivalents and cash and cash equivalents restricted in favor of the administrative agent and the lenders not to exceed $5 million, to (ii) consolidated adjusted EBITDA for the trailing 12 month period (with customary add-backs permitted to consolidated adjusted EBITDA, including in respect of synergies and cost-savings reasonably identifiable and factually supportable that are anticipated to be realized in an aggregate amount not to exceed 25% of consolidated adjusted EBITDA and subject to other customary limitations).

The Term Loan Facility permits voluntarilyvoluntary prepayments of borrowings. In certain circumstances (subject to exceptions, exclusions and, in the case of excess cash flow, step-downs described below), the Company may also be required to make an offer to prepay the Replacement Term Loan FacilityLoans if it receives proceeds as a result of certain asset sales, debt issuances, casualty or similar events of loss, or if it has excess cash flow (defined as an annual amount calculated using a customary formula based on consolidated adjustedAdjusted EBITDA, including, among other things, deductions for (i) the amount of certain voluntary prepayments of the Replacement Term Loan FacilityLoans and (ii) the amount of certain capital expenditures, acquisitions, investments and restricted payments). The percentage of excess cash flow that must be applied as a mandatory prepayment is 50% with respect to the initial50%, 25% or 0% for excess cash flow period (the fiscalperiods for the year ending on December 31, 2018)2018 and will be 50%, 25% or 0% for future excess cash flow periodsbeyond, depending upon the first lien leverage ratio.

The Term Loan Facility contains (i) certain customary affirmative covenants that, among other things, require compliance with applicable laws, periodic financial reporting and notices of material events, payment of taxes and other obligations, maintenance of property and insurance, and provision of additional guarantees and collateral, and (ii) certain customary negative covenants that, among other things, restrict the incurrence of additional indebtedness, liens on property, sale and leaseback transactions, investments, mergers, consolidations, liquidations and dissolutions, asset sales, acquisitions, the payment of distributions, dividends, redemptions and repurchases of equity interests, transactions with affiliates, prepayments and redemptions of certain other indebtedness, burdensome agreements, holding company limitations, changes in fiscal year and modifications of organizational documents.

ABL Facility

Also, in conjunction with the Closing on February 27, 2017, As of June 30, 2021, the Company entered intowas in compliance with all covenants contained in the Term Loan Facility.

ABL Facility

The Company has a five-year, senior secured asset-based revolving line of credit with an aggregate maximum credit amount equal to $70.0 million (subject to availability under a borrowing base equal to 85% of the Company’s eligible accounts receivable, 80% of the Company’s eligible unbilled accounts receivable and 50% of parts supplies)(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. The sizethereto (the ABL Agent).

11

Table of Contents

On April 29, 2021, the Company, Daseke Companies, Inc., a wholly-owned subsidiary of the Company, and the Company’s other domestic subsidiaries party thereto (together with Daseke Companies, Inc., the ABL Borrowers) entered into the Fifth Amendment to Fifth Amended and Restated Revolving Credit and Security Agreement (the ABL Amendment) with the financial institutions party thereto as lenders and the ABL Agent), which amends certain terms of the ABL Credit Agreement.

Principally, the ABL Amendment extended the scheduled maturity date of the ABL Facility could increase from timeFebruary 27, 2025 to time pursuant to an uncommitted accordion by an aggregate amount for all such increases of up to $30 million.April 29, 2026. The ABL Facility maturesAmendment also, among other things, (a) increased the Maximum Revolving Advance Amount from $100 million to $150 million, (b) provides that the Maximum Revolving Advance Amount (as defined therein) may be increased further from $150 million to $200 million (the ABL Amendment did not result in such an increase), (c) removed the ABL Borrowers’ total leverage financial covenant, which had been tested on February 27, 2022. a quarterly basis and (d) provided additional covenant flexibility in the form of increased debt, lien, investment, disposition and restricted payment baskets.

The ABL Facility also provides for the issuance of letters of credit subject to certain restrictions and a sublimit of $20 million, as defined in the credit agreement.$40 million.  As of SeptemberJune 30, 2017,2021, the Company had no0 borrowings, and $8.9$23.7 million in letters of credit outstanding, under the ABL Facility and could incur approximately $70.0approximately $119.3 million of additional indebtedness under the ABL Facility.Facility, based on current qualified collateral.

Borrowings underAt June 30, 2021, the interest rate on the ABL Facility bear interest at rates based upon the Company’s fixed charge coverage ratio and, at the Company’s election from time to time, either a base rate plus an applicable margin or an adjusted LIBOR rate plus an applicable margin.was 3.75%. Margins on the ABL Facility are adjusted, if necessary, to the applicable rates set forth in the following table corresponding to the fixed charge coverage ratioaverage RLOC Utilization for the trailing 12 month period on the last day of the most recently completed fiscal quarter.

 

 

 

 

 

 

Fixed Charge Coverage Ratio

 

Base Rate Margins

 

LIBOR Rate Margins

 

Less than 1.25 to 1.00

 

2.25

%  

3.25

%

Greater than or equal to 1.25 to 1.00, but less than 1.50 to 1.00

 

1.75

%  

2.75

%

Greater than or equal to 1.50 to 1.00, but less than 1.75

 

1.25

%  

2.25

%

Greater than or equal to 1.75 to 1.00

 

0.75

%  

1.75

%

RLOC Utilization at a particular date shall mean an amount equal to (a)(i) outstanding amount of Revolving Advances plus (ii) the outstanding amount of the Swing Loans plus (iii) the aggregate Maximum Undrawn Amount of all outstanding Letters of Credit, divided by (b) Maximum Revolving Advance Amount.

18

RLOC Utilization

 

Base Rate Margins

 

 

LIBOR Rate Margins

 

Less than 33.3%

 

 

0.50

%

 

 

1.50

%

Greater than or equal to 33.3%, but less than 66.6%

 

 

0.75

%

 

 

1.75

%

Greater than or equal to 66.6%

 

 

1.00

%

 

 

2.00

%

Table of Contents

DASEKE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 9 – LONG-TERM DEBT – (Continued)

The ABL Facility is secured by all of the Company’s U.S. basedU.S.-based accounts receivable, parts supplies, cash and cash equivalents excluding proceeds of Term Loan Facility, securities and deposit accounts and other general assets not included in the Term Loan Facility collateral.

The ABL Facility contains (i) a financial covenant similar to the consolidated total leverage ratio required under the Term Loan Facility (but, as amended on August 31, 2017, in any event requiring a leverage ratio of less than or equal to 4.75 to 1.00 for the fiscal quarter ended September 30, 2017, stepping down to 3.75 to 1.00 on March 31, 2021, in the same increments as the Term Loan Facility noted above) and (ii)such that during any period after a default or event of default or after excess availability falling below the greater of (x) $15.0 million and (y) 20%17.5% of the maximum credit amount, continuing until such time as no default or event of default has existed and excess availability has exceeded such amounts for a period of 60 consecutive days, a financial covenant requiring the Company to maintain a minimum consolidated fixed charge coverage ratio of 1.00x,1.00x, tested on a quarterly basis. The Company’s fixed charge coverage ratio is defined as the ratio of (1) consolidated adjustedAdjusted EBITDA minus unfinanced capital expenditures, cash taxes and cash dividends or distributions, to (2) the sum of all funded debt payments for the four quarterfour-quarter period then ending (with customary add-backs permitted to consolidated adjustedAdjusted EBITDA).

The ABL Facility contains affirmative and negative covenants similar to those in the Term Loan Facility, together with such additional terms as are customary for a senior secured asset-based revolving credit facility.

As of SeptemberJune 30, 2017,2021, the Company was in compliance with all covenants contained in the Term Loan and ABL Facilities.Facility.

Line of Credit and Senior Term Loan

Prior to the Closing, the Company had a credit facility under a credit agreement with PNC, as agent, and other lenders party thereto (the PNC Credit Agreement), which included a revolving line of credit and a term loan. In August 2016, the PNC Credit Agreement was amended, increasing the borrowing capacity to an aggregate $212.1 million from $150.0 million, consisting of a $75.0 million revolving line of credit and a $137.1 million senior term loan. In conjunction with the amendment, the Company refinanced $73.0 million of equipment notes with various lenders under the PNC Credit Agreement. The line of credit was subject to a borrowing base equal to 85% of the Company’s eligible accounts receivable, 80% of the Company’s eligible unbilled accounts receivable and 50% of parts supplies.

As of December 31, 2016, borrowings on the line of credit bore interest at either (a) the Libor Rate (as defined in the credit agreement), plus a margin of 3.25%, or (b) the Base Rate (as defined in the credit agreement), plus a margin of 2.25%. The PNC revolving credit facility also provided for the issuance of up to $10 million in letters of credit. As of December 31, 2016, the Company had outstanding letters of credit thereunder totaling $4.1 million. Total availability under the line of credit was $33.0 million as of December 31, 2016. At December 31, 2016, the average interest rate on the line of credit was 4.5%.

As of December 31, 2016, the Senior Term Loan was due in monthly installments of $1,690,154, plus applicable interest at either (a) the Libor Rate (as defined in the credit agreement), plus a margin of 4.00%, or (b) the Base Rate (as defined in the PNC Credit Agreement), plus a margin of 3.00%. At December 31, 2016, the average interest rate on the Senior Term Loan was 4.4%.

Prior to the amendment in August 2016, debt on the Senior Term Loan had interest rates of either (a) the Libor Rate (as defined in the credit agreement), plus a margin of 3.75%, or (b) the Base Rate (as defined in the credit agreement), plus a margin of 2.75%.

Margins on the line of credit and Senior Term Loan were adjusted, if necessary to the applicable rates set forth in the following table corresponding to the fixed charge coverage ratio for the trailing twelve month period on the last day of the most recently completed fiscal quarter.

 

 

 

 

 

 

 

 

 

 

 

 

Base Rate Margins

 

LIBOR Rate Margins

 

Fixed Charge Coverage Ratio

    

Line of Credit

    

Senior Term Loan

    

Line of Credit

    

Senior Term Loan

 

Less than 1.25 to 1.00

 

2.25

%  

3.00

%  

3.25

%  

4.00

%

Greater than or equal to 1.25 to 1.00, but less than 1.50 to 1.00

 

1.75

%  

2.50

%  

2.75

%  

3.50

%

Greater than or equal to 1.50 to 1.00, but less than 1.75

 

1.25

%  

2.00

%  

2.25

%  

3.00

%

Greater than or equal to 1.75 to 1.00

 

0.75

%  

1.50

%  

1.75

%  

2.50

%

19

Table of Contents

DASEKE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 9 – LONG-TERM DEBT – (Continued)

The PNC Credit Agreement also contained a subjective acceleration clause, which permitted the lender to demand payment in the event of a material adverse change. Only the scheduled principal payments are being presented in the current portion of long-term obligations as the lender did not exercise the acceleration clause.

Borrowings under the PNC Credit Agreement were secured by all assets of the Company, except those assets collateralizing equipment and certain real estate lenders debt. The PNC Credit Agreement contained certain financial covenants, including a minimum fixed charge coverage ratio, a senior secured debt to consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) ratio and a funded debt to consolidated EBITDA ratio.

Additionally, the PNC Credit Agreement contained negative covenants limiting, among other things, additional indebtedness, transactions with affiliates, additional liens, sales of assets, dividends, investments and advances, prepayments of debt, mergers and acquisitions, and other matters customarily restricted in such agreements. As of December 31, 2016, the Company was in compliance with all covenants contained in the PNC Credit Agreement.

The PNC Credit Agreement contained a required principal payment based on excess cash flow (as defined) beginning in fiscal 2016 and due 15 days following the delivery of the audited financial statements to PNC. No excess cash flow payment was required prior to refinancing in conjunction with the Business Combination.

Equipment Term Loans and Mortgages

As of SeptemberJune 30, 2017,2021, the Company had term loans collateralized by equipment in the aggregate amount of $79.0$161.2 million with thirty(30)16 lenders (Equipment Term Loans). The Equipment Term Loans bear interest at rates ranging from 1.5%2.6% to 6.8%5.9%, require monthly payments of principal and interest and mature at various dates through July 2024.2027. The weighted average interest rate for the three months ended June 30, 2021 and 2020 was 3.9% and 3.8%, respectively.  The weighted average interest rate for the six months ended June 30, 2021 and 2020 was 4.1% and 4.4%, respectively. Certain of the Equipment Term Loans contain conditions, covenants, representations and warranties, events of default, and indemnification provisions applicable to the Company and certain of its subsidiaries that are customary for equipment financings, including, but not limited to, limitations on the incurrence of additional debt and the prepayment of existing indebtedness, certain payments (including dividends and other distributions to persons not party to its credit facility) and transfers of assets.

The Company had a construction loan with a balance of $8.8 million incurred to finance the construction of a new headquarters and terminal in Arlington, Washington which was repaid in February 2017 in conjunction with the Business Combination. See Note 2 for additional details on the Business Combination. The construction loan was collateralized by such property and buildings. The initial principal amount on February 19, 2015 of $7.8 million was increased on April 26, 2016 to $8.8 million. The construction loan earned interest at 3.25% payable monthly.

As of SeptemberJune 30, 2017,2021, the Company has a bank mortgage loan with a balance of $3.7$2.4 million incurred to finance the construction of the headquarters and terminal in Redmond, Oregon. The mortgage loan is collateralized by such property and buildings. The mortgage is payable in monthly installments of $15,776,approximately $15,000, including interest at 3.7% through November 2017.

The interest rate3.7%, and monthly payments will be adjusted on November 1, 2017 and 2020 to a rateballoon payment of 2.5%, plus the three-year advance rate published by the Federal Home Loan Bank of Seattle in effect 45 days prior to November 1, 2017 and 2020 (which will not be less than 3.7%).approximately $2.1 million at maturity date. The bank mortgage loan matures November 1, 2023.

Real Estate Term Loan

In April 2016, the Company refinanced $14.2 million of its Line of Credit with bank debt (Real Estate Term Loan) utilizing nine wholly-owned real estate assets which previously served as collateral on the PNC Term Loan. The Real Estate Term Loan was subordinate to the PNC Credit Agreement and Equipment Term Loans and was due in monthly installments of $59,109 (based on 20 year amortization schedule), plus applicable interest at either (a) the Libor Rate (as defined in the loan agreement), plus a margin of 2.75%, or (b) the Default Rate (as defined in the loan agreement). The Company incurred debt issuance costs of $0.4 million, which were being amortized to interest expense over five years using the straight-line method. In conjunction with the Business Combination, the Real Estate Term Loan was repaid and all unamortized debt issuance costs written off to interest expense. See Note 2 for additional details on the Business Combination.

12

20

Table of Contents

DASEKE, INC. AND SUBSIDIARIESNOTE 7 – INCOME TAXES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 9 – LONG-TERM DEBT – (Continued)

Capital Leases

The Company leases certain equipment under long-term capital lease agreements that expire on various dates through June 2024. As of September 30, 2017 and December 31, 2016, the book value of the property and equipment recorded under capital leases was $5.6 million and $24.1 million, net of accumulated depreciation of $5.0 million and $17.0 million, respectively. Depreciation expense related to leased equipment was $0.6 million and $1.8 millioneffective tax rates for the three months ended SeptemberJune 30, 20172021 and 2016, respectively,2020 were 23.3% and $1.8 million and $5.3 million56.8%, respectively. The effective tax rates for the ninesix months ended SeptemberJune 30, 20172021 and 2016,2020 were 26.1% and 10.9%, respectively.

Main Street Capital Corporation

In 2013, Main Street Capital Corporation (Main Street) loaned The difference between the Company $20.0 million under a senior subordinated secured term loan (the Main Street Loan). The Main Street Loan was subordinate toCompany’s effective tax rate and the PNC Credit Agreement and Equipment Term Loans. Interest payments were due monthly through maturity atfederal statutory rate primarily results from the ratejurisdictional mix of 12% per annum. Paid-in kind (PIK) interest, at a rateearnings, combined with the unfavorable impact of 2.5% per annum, could have been paid monthly or accrued and added tonondeductible expenses, including the principal balance quarterly, at the optioneffect of the Company. For the nine months ended September 30, 2017 and year ended December 31, 2016, $0.1 million and $0.5 million, respectively, of accrued PIK interest was added to the principal balance and accrued PIK interest of $0.1 million was recorded in accrued expenses as of December 31, 2016. In conjunction with Business Combination, the Main Street Loan was repaid in February 2017. See Note 2per diem pay structure for additional details on the Business Combination.

Prudential Capital Partners

In 2013, the Company issued senior secured subordinated promissory notes in the initial aggregate principal amount of $20.0 million (PCP Subordinated Notes) to Prudential Capital Partners IV, L.P., Prudential Capital Partners (Parallel Fund) IV, L.P. and Prudential Capital Partners Management Fund IV, L.P. (collectively, the PCP Investors) pursuant to the Securities Purchase Agreement, dated as of November 12, 2013, by and among the Company, certain of its subsidiariesdrivers and the PCP Investors. The PCP Subordinated Notes were subordinate to the PNC Credit Agreement and Equipment Term Loans. Interest payments were due monthly through maturity at the ratechange in fair value of 12% per annum. PIK interest, at a rate of 2.5% per annum, could have been paid monthly or accrued and added to the principal balance quarterly, at the option of the Company. For the nine months ended September 30, 2017 and year ended December 31, 2016, $0.1 million and $0.5 million, respectively, of accrued PIK interest was added to the principal balance and $0.1 million accrued PIK interest was recorded in accrued expenses as of December 31, 2016. In conjunction with Business Combination, the PCP Subordinated Notes were repaid in February 2017. See Note 2 for additional details on the Business Combination.

The Main Street Loan and the PCP Subordinated Notes (Subordinated Debt) were collateralized by all assets of the Company, except those assets collateralizing the Equipment Term Loans. The Main Street Loan and the PCP Subordinated Notes contained certain financial covenants, including a minimum fixed charge coverage ratio, a senior secured debt to consolidated EBITDA ratio and a funded debt to consolidated EBITDA ratio. Additionally, they contained negative covenants limiting, among other things, additional indebtedness, capital expenditures, transactions with affiliates, additional liens, sales of assets, dividends, investments and advances, prepayments of debt, mergers and acquisitions, and other matters customarily restricted in such agreements. The Main Street Loan and the PCP Subordinated Notes were subject to a make-whole payment of 5.0% of the prepayment amount if such prepayment was made before the third anniversary of the agreements.

LST Seller

As part of the consideration paid to the seller of Lone Star Transportation, LLC and affiliates (LST), Daseke Lone Star, Inc. (a subsidiary of the Company) issued $22.0 million of subordinated notes (the LST Seller Notes). The LST Seller Notes bore interest at 10% payable monthly and were subordinate to the PNC Credit Agreement, Main Street Loan and PCP Subordinated Notes. In conjunction with the Business Combination, the LST Seller Notes were repaid in February 2017. See Note 2 for additional details on the Business Combination.

21

Table of Contents

DASEKE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 9 – LONG-TERM DEBT – (Continued)

DTR Sellers

As part of the consideration paid to the sellers of Davenport Transport & Rigging, LLC, LST issued $1.0 million of subordinated notes (the DTR Seller Notes). The DTR Seller Notes bore interest at 5% payable monthly and were subordinate to the PNC Credit Agreement, Main Street Loan and PCP Subordinated Notes. In conjunction with Business Combination, the DTR Seller Notes were repaid in February 2017. See Note 2 for additional details on the Business Combination.

BHE Sellers

As part of the consideration paid to the sellers of Bulldog Hiway Express (BHE), the Company issued $2.0 million of subordinated notes (the BHE Seller Notes). The BHE Seller Notes bore interest at 7% payable monthly. On December 19, 2016, a portion of the outstanding principal amount under the BHE Seller Notes was forgiven in exchange for the payment by the Company of certain pension liabilities of BHE. The BHE Seller Notes were subordinate to the PNC Credit Agreement and the Main Street Loan and the PCP Subordinated Notes. In conjunction with Business Combination, the BHE Seller Notes were repaid in February 2017. See Note 2 for additional details on the Business Combination.

Future Payments

Future principal payments on long-term debt as of September 30, 2017 are as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Term Loan Facility

    

Equipment Term Loans

 

Capital
Leases

    

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

2017

 

$

3,485

 

$

20,875

 

$

2,387

 

$

26,747

2018

 

 

3,485

 

 

20,802

 

 

1,410

 

 

25,697

2019

 

 

3,485

 

 

17,226

 

 

822

 

 

21,533

2020

 

 

3,485

 

 

11,516

 

 

152

 

 

15,153

2021

 

 

3,485

 

 

5,037

 

 

61

 

 

8,583

Thereafter

 

 

331,037

 

 

7,212

 

 

81

 

 

338,330

 

 

 

 

 

 

 

 

 

 

 

 

 

Total minimum lease payments

 

 

 

 

 

 

 

 

4,913

 

 

 

Loan amount attributable to interest

 

 

 

 

 

 

 

 

(373)

 

 

(373)

 

 

 

 

 

 

 

 

 

 

 

 

 

Total (Present value of minimum lease payments on capital leases)

 

$

348,462

 

$

82,668

 

 

4,540

 

$

435,670

Less current portion

 

 

 

 

 

 

 

 

(2,154)

 

 

 

Long-term capital leases

 

 

 

 

 

 

 

$

2,386

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOTE 10 – INCOME TAXES

The Company’s statutory federal tax rate is 35%.warrant liability. State tax rates vary among states and typically range from approximately 1%1% to 6%6%, although some state rates are higher and a small number of states do not impose an income tax. The effective tax ratesrate for the three months ended SeptemberJune 30, 2017 and 2016 were 101.8% and (119.0%), respectively, and 22.6% and (69.1%) for2021 differs from the nine months ended September 30, 2017 and 2016, respectively. The difference between the Company’s effective tax rate andfor the federal statutorysame period in 2020 primarily due to the decision to use the actual effective tax rate in the first quarter of 2020 as the annual effective tax rate method did not provide a reliable estimate of the income tax benefit. The effective tax rate for the six months ended June 30, 2021 differs from the effective tax rate for the same period in 2020 primarily results from statedue to the impact of permanent differences in relation to forecasted earnings before income taxes and nondeductible expenses, including the effect of the per diem pay structure for drivers, transaction expenses and withdrawn Private Daseke IPO expenses. each period.

There were no changes in uncertain tax positions during the three and ninesix months ended SeptemberJune 30, 2017. As a result of the Business Combination, the Company had an Internal Revenue Code of 1986, as amended, section 382 ownership change, which will not impair the Company’s ability to utilize the net operating losses.

2021.

22

Table of Contents

DASEKE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 11 – STOCKHOLDERS’ EQUITY

Common Stock

On September 19, 2017, the Company and certain stockholders of the Company (the Selling Stockholders) entered into an underwriting agreement (the Underwriting Agreement) with Stifel, Nicolaus & Company, Incorporated and Cowen and Company, LLC, as representatives of the several underwriters named therein (collectively, the Underwriters), in connection with an underwritten public offering (the Offering) of 5,292,000 shares of the Company’s common stock, par value $0.0001 per share, including 4,882,167 shares of common stock to be sold by the Company and 409,833 shares of common stock to be sold by the Selling Stockholders, at a price to the public of $12.00 per share ($11.34 per share net of underwriting discounts and commissions). Pursuant to the Underwriting Agreement, the Company granted the Underwriters a 30-day option to purchase up to an additional 793,800 shares of common stock, which was exercised in full on September 20, 2017 and closed simultaneously with the Offering on September 22, 2017. Net proceeds received by the Company from its sale of 5,675,967 shares of common stock were approximately $63.6 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. As described in the prospectus supplement, dated September 19, 2017, filed with the SEC on September 20, 2017, the Company intends to use the net proceeds from the Offering for general corporate purposes, which may include, among other things, working capital, capital expenditures, debt repayment or refinancing or the financing of possible future acquisitions.

Preferred Stock

At the Closing, the Company issued 650,000 shares of Series A Preferred Stock for cash of $65.0 million. Proceeds from the sales were part of the consideration received as part of a recapitalization and reverse acquisition completed in the Business Combination. See Note 2 for additional details about the Business Combination. The par value of Series A Preferred Stock is $0.0001 per share. Additional features of this preferred stock are as follows:

Under the Certificate of Designations, Preferences, Rights and Limitations of the Series A Preferred Stock (the Certificate of Designations), each share of Series A Preferred Stock will be convertible, at the holder’s option at any time, initially into approximately 8.6957 shares of the Company’s common stock (assuming a conversion price of approximately $11.50 per share), subject to specified adjustments as set forth in the Certificate of Designations. If any holder elects to convert its Series A Preferred Stock after the seven-year anniversary of the issue date, if the then-current Conversion Price (as defined in the Certificate of Designations) exceeds the Weighted Average Price (as defined in the Certificate of Designations) for the common stock during any ten consecutive Trading Days (as defined in the Certificate of Designations), at its option by delivery of a Notice of Conversion in accordance with Section 8(b) of the Certificate of Designations no later than five business days following such tenth consecutive Trading Day, to convert any or all of such holder’s shares of Series A Preferred Stock into, at the Company’s sole discretion, either common stock, cash or a combination of common stock and cash; provided, that the Company shall provide such converting holder notice of its election within two Trading Days of receipt of the Notice of Conversion; provided further, that in the event the Company elects to issue common stock for all or a portion of such conversion, the Conversion Rate for such conversion (subject to the limitations set forth in Section 11 of the Certificate of Designations) shall mean the quotient of the Liquidation Preference (as defined in the Certificate of Designations) divided by the average Weighted Average Price for the common stock during the 20 consecutive Trading Days commencing on the Trading Day immediately following the Trading Day on which the Company provided such notice. If the Company does not elect a settlement method prior to the deadline set forth in the Certificate of Designations, the Company shall be deemed to have elected to settle the conversion entirely in common stock. Based on the assumed conversion rate, a total of 5,652,171 shares of Series A Preferred Stock would be issuable upon conversion of all of the currently outstanding shares of Series A Preferred Stock.

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DASEKE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 11 – STOCKHOLDERS’ EQUITY – (Continued)

On or after the third anniversary of the initial issuance date but prior to the fifth anniversary of the initial issuance date, the Company will have the right, at its option, to give notice of its election to cause all outstanding shares of the Series A Preferred Stock to be automatically converted into shares of the Company’s common stock at the then-effective conversion rate, if the Weighted Average Price of Company’s common stock equals or exceeds 140% of the then-current conversion price for at least 20 trading days (whether or not consecutive) in a period of 30 consecutive trading days. On or after the fifth anniversary of the initial issuance date but prior to the seventh anniversary of the initial issuance date, the Company will have the right, at its option, to give notice of its election to cause all outstanding shares of the Series A Preferred Stock to be automatically converted into shares of Company’s common stock at the then-effective conversion rate, if the Weighted Average Price of Company’s common stock equals or exceeds 115% of the then-current conversion price for at least 20 trading days (whether or not consecutive) in a period of 30 consecutive trading days. On or after the seventh anniversary of the initial issuance date, the Company will have the right, at its option, to give notice of its election to cause all outstanding shares of the Series A Preferred Stock to be automatically converted into shares of Company’s common stock at the then-effective conversion rate, if the Weighted Average Price of Company’s common stock equals or exceeds the then-current conversion price for at least 10 consecutive trading days. If the Company undergoes certain fundamental changes (as more fully described in the Certificate of Designations but including, among other things, certain change-in-control transactions, recapitalizations, asset sales and liquidation events), each outstanding share of Series A Preferred Stock may, within 15 days following the effective date of such fundamental change and at the election of the holder, be converted into Company’s common stock at a conversion rate (subject to certain adjustments) equal to (i) the greater of (A) the sum of the conversion rate on the effective date of such fundamental change plus the additional shares received by holders of Series A Preferred Stock following such fundamental change (as set forth in the Certificate of Designations) and (B) the quotient of (x) $100.00, divided by (y) the greater of (1) the applicable holder stock price and (2) 66 2/3% of the closing sale price of the Company’s common stock on the issue date plus (ii) the number of shares of Company’s common stock that would be issued if any and all accumulated and unpaid dividends were paid in shares of Company’s common stock.

The Series A Preferred Stock contains limitations that prevent the holders thereof from acquiring shares of the Company’s common stock upon conversion that would result in (i) the number of shares beneficially owned by such holder and its affiliates exceeding 9.99% of the total number of shares of the Company’s common stock then outstanding or (ii) the Series A Preferred Stock being converted into more than 19.99% of the shares of the Company’s common stock outstanding on the initial issue date of the Series A Preferred Stock (subject to appropriate adjustment in the event of a stock split, stock dividend, combination or other similar recapitalization) without, in the latter instance, stockholder approval of such issuance.

Additional features of the Series A Preferred Stock are as follows:

a.

Liquidation – In the event of liquidation, holders of Series A Preferred Stock have preferential rights to liquidation payments over holders of common stock. Holders of Series A Preferred Stock shall be paid out of the assets of the Company at an amount equal to $100 per share plus all accumulated and unpaid dividends.

b.

Dividends – Dividends on the Series A Preferred Stock are cumulative at the Dividend Rate. The “Dividend Rate” is the rate per annum of 7.625% per share of Series A Preferred Stock on the liquidation preference ($100 per share). Dividends are payable quarterly in arrears in cash or, at the Company’s election and subject to the receipt of the necessary shareholder approval (to the extent necessary), in shares of the Company’s common stock. The Company’s board of directors declared quarterly dividends of $0.68 per share on April 24, 2017, and $1.91 per share on July 18, 2017, which were both then paid on July 28, 2017. As of September 30, 2017, accrued dividends of $1.2 million were recorded in accrued expenses and other liabilities.

c.

Voting rights – Except as required by Delaware law, holders of the Series A Preferred Stock will have no voting rights except with respect to the approval of any material and adverse amendment to the Company’s certificate of incorporation, and certain significant holders of Series A Preferred Stock may have approval rights with respect to certain key economic terms of the Series A Preferred Stock, as set forth in the Certificate of Designations.

24

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DASEKE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 11 – STOCKHOLDERS’ EQUITY – (Continued)

As of December 31, 2016, 64,500 shares of Series B Preferred Stock were issued and outstanding. Private Daseke’s board of directors declared quarterly dividends on the Series B Preferred Stock of $18.75 per share on October 13, 2016 and $12.50 per share on February 21, 2017. Both the October 13, 2016 and February 21, 2017 dividends were paid on February 27, 2017. As of December 31, 2016, accrued dividends of $1.2 million were recorded in accrued expenses and other liabilities.

In February 2017, in connection with, and immediately prior to, the Closing, the Series B Preferred Stock were converted into 9,301,150 shares of Private Daseke’s common stock.

Warrants

At September 30, 2017, there were a total of 35,040,664 warrants outstanding to purchase 17,520,332 shares of the Company’s common stock.

Hennessy has issued warrants to purchase its common stock which were originally issued as part of units in the IPO (the Public Warrants). There are 19,959,908 Public Warrants outstanding. Hennessy has also issued 15,080,756 warrants (the Private Placement Warrants) to Sponsor in a private placement that closed simultaneously with the consummation of the IPO.

Each warrant entitles the registered holder to purchase one-half of one share of the Company’s common stock at a price of $5.75 per one-half of one share ($11.50 per whole share), subject to adjustment. The warrants may be exercised only for a whole number of shares of the Company’s common stock. No fractional shares will be issued upon exercise of the warrants. The warrants will expire on February 27, 2022, five years after the completion of the Business Combination, or earlier upon redemption or liquidation. The Warrants are listed on the NASDAQ market under the symbol DSKEW.

The Company may call the Public Warrants for redemption at a price of $0.01 per warrant if, and only if, the reported last sale price of the Company’s common stock equals or exceeds $24.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date the Company sends the notice of redemption to the Public Warrant holders.

NOTE 128 – STOCK-BASED COMPENSATION

On February 27, 2017, the Company and Hennessy’s common stockholders approvedUnder the 2017 Omnibus Incentive Plan (the(as amended from time to time, the Plan), whereby the Company may grant awards of stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-based awards and performance awards. UnderOn June 18, 2021, at the Company's 2021 annual meeting of stockholders, the Company’s stockholders approved an amendment and restatement (the Restatement) of the Plan. The Restatement Plan increased the number of shares that may be granted as awards thereunder by 4.0 million and extended the scheduled expiration date of the Plan from February 27, 2027 to June 18, 2031.

As of June 30, 2021, the Company is authorized to issue up to 4.5has 3.2 million shares of common stock. Allstock available for issuance under the Plan. Equity awards to non-directors under the Plan generally vest annually on a pro-rata basis over a three to five-year period on the anniversary of each grant date. The Company also grants equity awards to our directors under the Plan. The awards granted to directors vest ratably over periods of one to five years annually on the anniversary of each grant date.

Aggregate stock-based compensation charges, net of forfeitures, were authorized under$0.8 million and $1.1 million for the Plan.three months ended June 30, 2021 and 2020, respectively, and $3.2 million and $2.0 million for the six months ended June 30, 2021 and 2020, respectively. These expenses are included as a component of salaries, wages and employee benefits on the accompanying consolidated statements of operations and comprehensive income (loss).

Stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized on a straight-line basis over the employees’ requisite service period. Forfeitures are recorded as a cumulative adjustment to stock-based compensation expense in the period forfeitures occur. As of June 30, 2021, there was $3.2 million, $2.0 million, and $5.3 million of unrecognized stock-based compensation expense related to stock options, restricted stock units and performance stock units (PSUs), respectively. This expense will be recognized over the weighted average periods of 1.6 years for stock options, 1.1 years for restricted stock units and 1.8 years for PSUs.

Stock Options

The following table summarizes stock option grants under the Plangrants:

Grantee Type

 

# of
Options
Granted

 

 

Issued and
Outstanding

 

 

Vesting
Period

 

Weighted
Average
Exercise
Price

 

 

Weighted Average
Grant Date
Fair Value
(Per Option)

 

Director Group

 

 

150,000

 

 

 

75,000

 

 

5 years

 

$

9.98

 

 

$

4.36

 

Employee Group

 

 

4,662,630

 

 

 

2,571,557

 

 

3-5 years

 

$

5.60

 

 

$

3.08

 

Total

 

 

 

 

 

2,646,557

 

 

 

 

 

 

 

 

 

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Table of Contents

A summary of option activity as of June 30, 2021 and changes during the ninesix months then ended are as follows:

 

 

Shares

 

 

Weighted
Average
Exercise
Price

 

 

Weighted
Average
Remaining
Contractual
Terms (Years)

 

 

Aggregate
Intrinsic
Value (in
millions)

 

Outstanding as of January 1, 2021

 

 

3,114,931

 

 

$

6.19

 

 

 

7.9

 

 

$

5.9

 

Exercised

 

 

(149,545

)

 

 

2.96

 

 

 

 

 

 

 

Forfeited or expired

 

 

(318,829

)

 

 

6.66

 

 

 

 

 

 

 

Outstanding as of June 30, 2021

 

 

2,646,557

 

 

$

6.32

 

 

 

7.3

 

 

$

5.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable as of June 30, 2021

 

 

1,539,985

 

 

$

7.90

 

 

 

6.8

 

 

$

2.0

 

Vested and expected to vest as of June 30, 2021

 

 

2,646,557

 

 

$

6.32

 

 

 

7.3

 

 

$

5.9

 

The stock options’ maximum contract term is ten years. The Company did not grant any stock options during the six months ended SeptemberJune 30, 2017:2021.

 

 

 

 

 

 

 

 

 

 

 

 

 

Grantee Type

    

# of
Options
Granted

    

Issued and
Outstanding

    

Vesting
Period

    

Weighted
Average
Exercise
Price

    

Weighted Average
Grant Date
Fair Value

 

 

 

 

 

 

 

 

 

 

 

 

 

Director Group

 

150,000

 

150,000

 

5 years

 

$

9.98

 

$

654,000

Employee Group

 

1,305,500

 

1,296,500

 

5 years

 

$

9.99

 

$

5,652,740

Total

 

 

 

1,446,500

 

 

 

 

 

 

 

 

25

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DASEKE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 12 – STOCK-BASED COMPENSATION – (Continued)

The Company’s calculations of the fair value of stock options granted during the nine months ended September 30, 2017 were made using the Black-Scholes option-pricing model. The fair value of the Company’s stock option grants was estimated utilizing the following assumptions for the nine months ended September 30, 2017:

Weighted average expected life

6.5 years

Risk-free interest rate

1.95% to 2.09%

Expected volatility

40.4% to 40.6%

Expected dividend yield

0.00%

Since the Company does not have a sufficient history of exercise behavior, expected term is calculated using the assumption that the options will be exercised ratably from the date of vesting to the end of the contractual term for each vesting tranche of awards. Risk-free interest rate is based on the U.S. Treasury yield curve for the period of the expected term of the stock option. Expected volatility is calculated using an index of publicly traded peer companies.

Restricted Stock Units

Restricted stock units are nontransferable until vested andvested. The Plan Committee (as defined in the holders are entitled to receive dividendsPlan) may, in its sole discretion, grant dividend or dividend equivalents with respect to the non-vested units. Prior to vesting, the grantees of restricted stock units are not entitled to vote the shares. Restricted stock unit awards typically vest in equal annual increments over the vesting period.

The following table summarizes restricted stock unit grants under the Plan during the nine months ended September 30, 2017:Plan:

 

 

 

 

 

 

 

Grantee Type

    

# of
Restricted Stock
Units Granted

    

Vesting
Period

    

Grant Date
Fair Value

 

# of
Restricted Stock
Units Granted

 

Issued and Outstanding

 

Vesting
Period

 

Weighted Average Grant Date Fair Value (Per Unit)

 

 

 

 

 

 

 

 

Director Group

 

933,237

 

289,241

 

1-2 years

 

$

2.96

 

Employee Group

 

876,123

 

5 years

 

$

8,340,691

 

1,647,461

 

 

212,920

 

3-5 years

 

$

10.40

 

Total

 

 

 

 

 

502,161

 

 

 

 

 

All stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized on a straight-line basis as expense over the employees’ requisite service period. Forfeitures will be recorded as a cumulative adjustment to stock-based compensation expense in the period forfeitures are incurred.

Stock Options

A summary of option activity under the Plan as of September 30, 2017 and changes during the nine months then ended are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

    

Shares

    

Weighted
Average
Exercise
Price

    

Weighted
Average
Remaining
Contractual
Terms
(Years)

    

Aggregate
Intrinsic
Value (in
thousands)

 

 

 

 

 

 

 

 

 

 

 

Outstanding as of January 1, 2017

 

 —

 

$

 —

 

 —

 

$

 —

Granted

 

1,455,500

 

 

9.99

 

10.0

 

 

 —

Exercised

 

 —

 

 

 —

 

 —

 

 

 —

Forfeited or expired

 

(9,000)

 

 

9.98

 

 —

 

 

20

Outstanding as of September 30, 2017

 

1,446,500

 

 

9.99

 

9.4

 

 

4,425

 

 

 

 

 

 

 

 

 

 

 

Exercisable as of September 30, 2017

 

 —

 

$

 —

 

 —

 

$

 —

26

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DASEKE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 12 – STOCK-BASED COMPENSATION – (Continued)

Restricted Stock Units

A summary of restricted stock unit awards activity under the Plan as of SeptemberJune 30, 20172021 and changes during the ninesix months then ended are as follows:

 

 

 

 

 

    

Units

    

Weighted
Average Grant
Date Fair
Value
(Per Unit)

 

Units

 

Weighted
Average Grant
Date Fair Value
(Per Unit)

 

 

 

 

 

 

Outstanding as of January 1, 2017

 

 —

 

$

 —

Non-vested as of January 1, 2021

 

 

594,801

 

 

$

5.72

 

Granted

 

876,123

 

 

9.52

 

 

118,047

 

 

 

6.92

 

Vested

 

 —

 

 

 —

 

 

(180,549

)

 

 

6.35

 

Forfeited

 

(155,334)

 

 

9.66

 

 

(30,138

)

 

 

10.08

 

Outstanding as of September 30, 2017

 

720,789

 

$

9.49

Non-vested as of June 30, 2021

 

 

502,161

 

 

$

5.52

 

Performance Stock Units

Aggregate stock-based compensation charges were $0.7 millionPSUs become eligible for vesting in shares upon the achievement of specific performance and $1.2 million during the threemarket-based conditions and nine months ended September 30, 2017 and included as a component of salaries, wages and employee benefitssubject to final vesting based on the accompanying consolidated statementsparticipant’s continued employment through the end of operations. the requisite service periods. The grant date fair value of PSUs was determined using a Monte Carlo probability model and compensation cost is recognized ratably over the requisite service period.

As of SeptemberJune 30, 2017, there was $5.6 million of unrecognized stock-based compensation expense related to stock options which will be recognized over a weighted average period of 4.4 years.

NOTE 13 – DEFINED CONTRIBUTION PLAN

On January 1, 2015, the Company established the Daseke, Inc. 401(k) Retirement Plan (the Retirement Plan) and merged six separate plans into the Retirement Plan. The Retirement Plan is a defined contribution plan and intended to qualify under ERISA provisions of 401(k). Under the safe harbor matching requirements,2021, the Company had expenses1,613,210 total PSUs outstanding. There are 1,495,000 PSUs in which the vesting occurs upon the achievement of $0.6 millionspecific market-based conditions based on the performance of per share price of the Company’s common stock and $0.5 millionsubject to final vesting based on the participant’s continued employment through the end of the requisite service periods.

In addition, there are 118,210 PSUs in which the vesting occurs upon the achievement of specific performance-based conditions based on the Company's financial performance over a three year performance period and modified based on the Company's Relative Total Shareholder Return and subject to final vesting based on the participant’s continued employment through the end of the requisite service periods. The

14

Table of Contents

amount of awards that will ultimately vest for these 118,210 PSUs can range from 0% to 200% based on the Company’s Relative Total Shareholder Return calculated over a three months ended September 30, 2017 and 2016 and $1.8 million and $1.7 million foryear period beginning January 1 of the nine months ended September 30, 2017 and 2016, respectively. Matching contributions for 401(k) defined contribution plans not yet merged into the Retirement Plan totaled approximately $47,000 for both the three and nine months ended September 30, 2017.

NOTE 14 – INTEREST RATE SWAP

year each grant was made. The Company from timecurrently expects that these PSUs will vest at 100%.

The following inputs and assumptions were used to time, uses interest rate swaps to manage risks related to interest rate movements. These interest rate swaps are reported at fair value on the consolidated balance sheets in accrued expenses and other liabilities.

The Company had an interest rate swap agreement which qualified for hedge accounting and accordingly was designated as a cash flow hedge. For this interest rate swap, the change in fair value on the effective portion of the hedge was recognized as a component of other comprehensive income. In conjunction with the Business Combination discussed in Note 2, this interest rate swap was terminated. At December 31, 2016,calculate the fair value of this interest rate swap was a liabilitythe PSUs for the shares granted during the six months ended June 30, 2021:

Weighted average expected life

2.5 years

Risk-free interest rate

0.38%

Expected volatility

93.80%

Expected dividend yield

0.00%

A summary of $51,871.

The termsperformance stock unit awards activity as of June 30, 2021 and changes during the interest rate swap designated as a cash flow hedge at December 31, 2016 weresix months ended are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

    

Notional

    

Termination

    

Interest Rate

    

Interest Rate

 

Effective Date

 

Amount

 

Date

 

Received

 

Paid

 

11/12/2013

 

$

12,000,000

 

4/30/2018

 

0.6

%

3.63

%

 

 

Units

 

 

Weighted
Average Grant
Date Fair
Value
(Per Unit)

 

Non-vested as of January 1, 2021

 

 

1,716,100

 

 

$

1.38

 

Granted

 

 

118,210

 

 

 

7.45

 

Vested

 

 

0

 

 

 

0

 

Forfeited

 

 

(221,100

)

 

 

6.30

 

Non-vested as of June 30, 2021

 

 

1,613,210

 

 

$

2.28

 

27

Table of Contents

DASEKE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 159 – COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases certain office building facilities, terminal locations and revenue equipment under non-cancelable operating leases. Building and terminal rent expense under operating leases was $2.1 million and $0.7 million for the three months ended September 30, 2017 and 2016, respectively, and $4.5 million and $2.0 million for the nine months ended September 30, 2017 and 2016, respectively. Tractor, trailer and other revenue equipment rent expense under operating leases was $4.7 million and $3.5 million for the three months ended September 30, 2017 and 2016, respectively, and $12.7 million and $9.2 million for the nine months ended September 30, 2017 and 2016, respectively.

Letters of Credit

The Company had outstanding letters of credit at Septemberas of June 30, 20172021 totaling approximately $11.1$26.1 million, including those disclosed in Note 9.6. These letters of credit coverare related to liability and workers compensation insurance claims.

Contingencies

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 forto pay self-insurance and deductibles on such matters up to a certain threshold before the insurance is applied.

NOTE 10 – COMMON STOCK REPURCHASE PROGRAM

On March 22, 2021, the Company’s Board of Directors authorized the repurchase of up to 3 million shares of the Company’s common stock. Shares are effectively retired at the time of purchase. As of and during the three months ended June 30, 2021, the Company repurchased and retired 1,517,623 shares, at an aggregate price of $10.5 million.

NOTE 1611 – REPORTABLE SEGMENTS

The Company evaluates the performance of the reportable segments primarily based on their respective revenues and operating income. Accordingly, interest expense and other non-operating items are not reported in segment results. In addition, 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.

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 revenues and expenses for the Flatbed Solutions segment totaled $0.7$0.9 million and $0.8$1.8 million for the three months ended SeptemberJune 30, 20172021 and 2016, respectively, and $2.4 million and $1.5 million for the nine months ended September 30, 2017 and 2016,2020, respectively.

Intersegment revenues and expenses for the Specialized Solutions segment totaled $1.2$2.0 million and $0.5$4.8 million for the three months ended SeptemberJune 30, 20172021 and 2016, respectively2020, respectively. Intersegment revenues and $2.6expenses for the Flatbed Solutions segment totaled $1.8 million and $2.0$3.5 million for the ninesix months ended SeptemberJune 30, 20172021 and 2016.2020, respectively. Intersegment revenues and expenses for the Specialized Solutions segment totaled $4.3 million and $7.5 million for the six months ended June 30, 2021 and 2020, respectively.

15

28

Table of Contents

DASEKE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 16 – REPORTABLE SEGMENTS– (Continued)

The following tables reflect certain financial data of the Company’s reportable segments for the three and ninesix months ended SeptemberJune 30, 20172021 and 20162020 (in thousands)millions):

 

 

Flatbed

 

 

Specialized

 

 

 

 

 

 

 

 

 

Solutions

 

 

Solutions

 

 

Corporate/

 

 

Consolidated

 

 

 

Segment

 

 

Segment

 

 

Eliminations

 

 

Total

 

Three Months Ended June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

$

180.9

 

 

$

226.1

 

 

$

(3.0

)

 

$

404.0

 

Company freight

 

 

47.7

 

 

 

118.3

 

 

 

(2.4

)

 

 

163.6

 

Owner operator freight

 

 

88.9

 

 

 

40.7

 

 

 

(0.5

)

 

 

129.1

 

Brokerage

 

 

25.3

 

 

 

41.5

 

 

 

(0.1

)

 

 

66.7

 

Logistics

 

 

1.3

 

 

 

9.3

 

 

 

0

 

 

 

10.7

 

Fuel surcharge

 

 

17.7

 

 

 

16.3

 

 

 

(0.1

)

 

 

33.9

 

Operating income (loss)

 

 

22.9

 

 

 

29.0

 

 

 

(6.6

)

 

 

45.3

 

Depreciation

 

 

8.1

 

 

 

12.1

 

 

 

0.2

 

 

 

20.4

 

Amortization of intangible assets

 

 

0.8

 

 

 

1.0

 

 

 

0

 

 

 

1.8

 

Restructuring

 

 

0

 

 

 

0.1

 

 

 

0

 

 

 

0.1

 

Non-cash operating lease expense

 

 

(0.1

)

 

 

(0.3

)

 

 

0

 

 

 

(0.4

)

Interest expense

 

 

0.9

 

 

 

1.3

 

 

 

5.4

 

 

 

7.6

 

Income (loss) before income tax

 

 

22.1

 

 

 

28.0

 

 

 

(4.1

)

 

 

46.0

 

Capital expenditures

 

 

7.7

 

 

 

13.5

 

 

 

6.4

 

 

 

27.6

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

$

137.2

 

 

$

221.5

 

 

$

(7.0

)

 

$

351.7

 

Company freight

 

 

48.9

 

 

 

121.6

 

 

 

(3.5

)

 

 

167.0

 

Owner operator freight

 

 

60.1

 

 

 

38.3

 

 

 

(2.4

)

 

 

96.0

 

Brokerage

 

 

15.5

 

 

 

43.1

 

 

 

(0.7

)

 

 

57.9

 

Logistics

 

 

0.7

 

 

 

8.1

 

 

 

0

 

 

 

8.8

 

Fuel surcharge

 

 

12.0

 

 

 

10.4

 

 

 

(0.4

)

 

 

22.0

 

Operating income (loss)

 

 

10.7

 

 

 

14.5

 

 

 

(12.8

)

 

 

12.4

 

Depreciation

 

 

8.5

 

 

 

12.2

 

 

 

0.3

 

 

 

21.0

 

Amortization of intangible assets

 

 

0.8

 

 

 

1.0

 

 

 

0

 

 

 

1.8

 

Restructuring

 

 

0.2

 

 

 

2.8

 

 

 

0

 

 

 

3.0

 

Non-cash operating lease expense

 

 

1.2

 

 

 

(1.4

)

 

 

0

 

 

 

(0.2

)

Interest expense

 

 

2.4

 

 

 

2.8

 

 

 

5.8

 

 

 

11.0

 

Income (loss) before income tax

 

 

8.5

 

 

 

12.5

 

 

 

(17.3

)

 

 

3.7

 

Capital expenditures

 

 

9.2

 

 

 

21.4

 

 

 

0

 

 

 

30.6

 

16

Table of Contents

 

 

Flatbed

 

 

Specialized

 

 

 

 

 

 

 

 

 

Solutions

 

 

Solutions

 

 

Corporate/

 

 

Consolidated

 

 

 

Segment

 

 

Segment

 

 

Eliminations

 

 

Total

 

Six Months Ended June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

$

334.4

 

 

$

409.8

 

 

$

(6.3

)

 

$

737.9

 

Company freight

 

 

92.4

 

 

 

221.1

 

 

 

(4.8

)

 

 

308.7

 

Owner operator freight

 

 

159.9

 

 

 

75.3

 

 

 

(1.0

)

 

 

234.2

 

Brokerage

 

 

47.5

 

 

 

68.1

 

 

 

(0.4

)

 

 

115.2

 

Logistics

 

 

2.5

 

 

 

16.5

 

 

 

0.2

 

 

 

19.2

 

Fuel surcharge

 

 

32.1

 

 

 

28.8

 

 

 

(0.3

)

 

 

60.6

 

Operating income (loss)

 

 

33.9

 

 

 

39.5

 

 

 

(20.0

)

 

 

53.4

 

Depreciation

 

 

16.1

 

 

 

24.2

 

 

 

0.6

 

 

 

40.9

 

Amortization of intangible assets

 

 

1.5

 

 

 

2.0

 

 

 

0

 

 

 

3.5

 

Restructuring

 

 

0

 

 

 

0.1

 

 

 

0

 

 

 

0.1

 

Non-cash operating lease expense

 

 

(0.2

)

 

 

(0.6

)

 

 

0

 

 

 

(0.8

)

Interest expense

 

 

2.6

 

 

 

3.4

 

 

 

12.7

 

 

 

18.7

 

Income (loss) before income tax

 

 

31.5

 

 

 

36.8

 

 

 

(30.4

)

 

 

37.9

 

Capital expenditures

 

 

16.7

 

 

 

24.1

 

 

 

6.4

 

 

 

47.2

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

$

292.4

 

 

$

461.9

 

 

$

(11.6

)

 

$

742.7

 

Company freight

 

 

100.2

 

 

 

253.7

 

 

 

(6.0

)

 

 

347.9

 

Owner operator freight

 

 

126.3

 

 

 

81.0

 

 

 

(3.5

)

 

 

203.8

 

Brokerage

 

 

35.0

 

 

 

86.0

 

 

 

(1.4

)

 

 

119.6

 

Logistics

 

 

1.5

 

 

 

17.3

 

 

 

0.1

 

 

 

18.9

 

Fuel surcharge

 

 

29.4

 

 

 

23.9

 

 

 

(0.8

)

 

 

52.5

 

Operating income (loss)

 

 

19.3

 

 

 

8.0

 

 

 

(23.2

)

 

 

4.1

 

Depreciation

 

 

16.8

 

 

 

28.1

 

 

 

0.6

 

 

 

45.5

 

Amortization of intangible assets

 

 

1.6

 

 

 

2.0

 

 

 

0

 

 

 

3.6

 

Impairment

 

 

0

 

 

 

13.4

 

 

 

0

 

 

 

13.4

 

Restructuring

 

 

0.2

 

 

 

3.3

 

 

 

0

 

 

 

3.5

 

Non-cash operating lease expense

 

 

2.1

 

 

 

0.6

 

 

 

0

 

 

 

2.7

 

Interest expense

 

 

4.9

 

 

 

5.9

 

 

 

12.2

 

 

 

23.0

 

Income (loss) before income tax

 

 

14.6

 

 

 

1.8

 

 

 

(32.9

)

 

 

(16.5

)

Capital expenditures

 

 

17.0

 

 

 

27.9

 

 

 

0

 

 

 

44.9

 

17

Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Flatbed

    

Specialized

    

 

 

    

 

 

 

 

Solutions

 

Solutions

 

Corporate/

 

Consolidated

 

 

Segment

 

Segment

 

Eliminations

 

Total

Three Months Ended September 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

$

85,592

 

$

147,631

 

$

(1,901)

 

$

231,322

Operating income

 

 

4,755

 

 

7,159

 

 

(6,210)

 

 

5,704

Depreciation

 

 

6,713

 

 

11,290

 

 

37

 

 

18,040

Amortization of intangible assets

 

 

437

 

 

1,328

 

 

 —

 

 

1,765

Income (loss) before income tax

 

 

2,997

 

 

5,060

 

 

(10,869)

 

 

(2,812)

Total assets

 

 

272,686

 

 

472,761

 

 

111,974

 

 

857,421

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2016

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

$

78,975

 

$

96,534

 

$

(1,361)

 

$

174,148

Operating income

 

 

3,794

 

 

5,739

 

 

(3,451)

 

 

6,082

Depreciation

 

 

7,161

 

 

8,303

 

 

40

 

 

15,504

Amortization of intangible assets

 

 

489

 

 

1,005

 

 

 —

 

 

1,494

Income (loss) before income tax

 

 

1,708

 

 

3,917

 

 

(6,199)

 

 

(574)

Total assets

 

 

295,286

 

 

304,623

 

 

8,946

 

 

608,855

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Flatbed

    

Specialized

    

 

 

    

 

 

 

 

Solutions

 

Solutions

 

Corporate/

 

Consolidated

 

 

Segment

 

Segment

 

Eliminations

 

Total

Nine Months Ended September 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

$

253,794

 

$

340,289

 

$

(5,004)

 

$

589,079

Operating income

 

 

14,955

 

 

12,756

 

 

(18,391)

 

 

9,320

Depreciation

 

 

20,619

 

 

28,375

 

 

115

 

 

49,109

Amortization of intangible assets

 

 

1,310

 

 

3,339

 

 

 —

 

 

4,649

Income (loss) before income tax

 

 

9,725

 

 

7,004

 

 

(31,979)

 

 

(15,250)

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2016

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

$

237,169

 

$

267,651

 

$

(3,434)

 

$

501,386

Operating income

 

 

14,041

 

 

14,689

 

 

(12,394)

 

 

16,336

Depreciation

 

 

21,219

 

 

24,637

 

 

117

 

 

45,973

Amortization of intangible assets

 

 

1,468

 

 

3,074

 

 

 —

 

 

4,542

Income (loss) before income tax

 

 

9,517

 

 

9,907

 

 

(20,303)

 

 

(879)

NOTE 12 – EARNINGS (LOSS) PER SHARE

ASC Topic 260, “Earnings Per Share”, provides that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. The Company’s outstanding non-vested restricted stock units 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 six months ended June 30, 2021, 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 loss per share as their effects were anti-dilutive. For the three and six months ended June 30, 2020, shares of the Company’s 7.625% Series A Convertible Cumulative Preferred Stock (Series A Preferred Stock) and shares of the Company’s outstanding stock options and performance share units were not included in the computation of diluted loss 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

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

(in millions, except per share data)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

35.3

 

 

$

1.6

 

 

$

28.0

 

 

$

(14.7

)

Less Series A preferred dividends

 

 

(1.3

)

 

 

(1.3

)

 

 

(2.5

)

 

 

(2.5

)

Net income (loss) attributable to common stockholders

 

 

34.0

 

 

 

0.3

 

 

 

25.5

 

 

 

(17.2

)

Allocation of earnings to non-vested participating restricted stock units

 

 

(0.3

)

 

 

—

 

 

 

(0.2

)

 

 

—

 

Numerator for basic EPS - income (loss) available to common stockholders - two class method

 

$

33.7

 

 

$

0.3

 

 

$

25.3

 

 

$

(17.2

)

 

 

 

 

 

 

 

 

 

 

 

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

Add back Series A preferred dividends

 

$

1.3

 

 

$

—

 

 

$

—

 

 

$

—

 

Add back allocation earnings to participating securities

 

 

0.3

 

 

 

—

 

 

 

0.2

 

 

 

—

 

Reallocation of earnings to participating securities considering potentially dilutive securities

 

 

(0.3

)

 

 

—

 

 

 

(0.2

)

 

 

—

 

Numerator for diluted EPS - income (loss) available to common shareholders - two class method

 

$

35.0

 

 

$

0.3

 

 

$

25.3

 

 

$

(17.2

)

 

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

Denominator for basic EPS - weighted-average shares

 

 

64.8

 

 

 

64.2

 

 

 

65.0

 

 

 

64.6

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

Stock options and performance share units

 

 

1.4

 

 

 

0.5

 

 

 

1.2

 

 

 

—

 

Convertible preferred stock

 

 

5.7

 

 

 

—

 

 

 

—

 

 

 

—

 

Denominator for diluted EPS - weighted-average shares

 

 

71.9

 

 

 

64.7

 

 

 

66.2

 

 

 

64.6

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per share

 

$

0.52

 

 

$

0.00

 

 

$

0.39

 

 

$

(0.27

)

Diluted earnings (loss) per share

 

$

0.49

 

 

$

0.00

 

 

$

0.38

 

 

$

(0.27

)

NOTE 1713 – SUBSEQUENT EVENTS

On October 17, 2017In July 2021, the Company’s boardCompany repurchased and retired 1,482,377 common shares at an aggregate price of directors declared a quarterly dividend of $1.91 per share on 650,000 shares of Series A Preferred Stock outstanding as of August 15, 2017, or $1.2$9.8 million which was paid on October 20, 2017.

under the common stock repurchase program.

18

29

Table of Contents

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

Overview

OverviewIntroductory Note

Daseke Inc. is a leading provider and consolidator of transportation and logistics solutions focused exclusively on open deckflatbed and specialized (open-deck) freight in North America. The Company believes it provides one of the most comprehensive transportation and logistics market is one of the largest industriessolution offerings in the United States. The open deck freight market represented an approximately $133 billion subset of the broader transportation and logistics market in 2016. The U.S. open deck freight market is expected to grow to approximately $150 billion in 2017-2018 and to approximately $174 billion in 2019.

The Company believes it is the largest owner of open deck equipment and the second largest provider of flatbed, open deck transportation and logistics solutions by revenue in North America.open-deck industry. The Company delivers a comprehensive and diverse offering of flatbed and specialized transportation and logistics solutions to approximately 4,8006,700 customers across the continental 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 principally include super heavy haul, high-value customized, over-dimensional, step deck and removable gooseneck trailer solutions.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 freight brokerage)logistics). The Company’s asset-based operations have the benefit of providing shippers with certainty of delivery and continuity of operations. 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. Approximately 62.0%

Recent Developments

COVID-19 Pandemic

The levels of freight, logistics and brokerage revenue for the nine months ended September 30, 2017 was derived from company-owned equipment and approximately 38.0% was derived from asset-light services.

Business Combination and Other Recent Developments

On February 27, 2017, Hennessy consummated the merger of Hennessy’s wholly-owned subsidiary with and into Private Daseke, with Private Daseke surviving as a direct wholly-owned subsidiary of Hennessy. The aggregate consideration received by Private Daseke stockholders upon closing was $266.7 million, consisting of newly issued shares of common stock at a value of $10.00 per share. The Merger Agreement contains an earn-out provision through which Private Daseke stockholders could receive up to 15 million additional shares of common stock (with up to 5 million shares payable annually with respect to 2017, 2018 and 2019 performance). See Note 2 of Notes to Consolidated Financial Statements for more information regarding the Business Combination.

On May 1, 2017, the Company completed mergers with two leading open-deck specialized transportation companies: the Schilli Companies (Schilli), headquarteredactivity in Remington, Indiana, and Big Freight Systems Inc. (Big Freight), headquartered in Steinbach, Manitoba. On July 1, 2017, the Company completed a merger with The Steelman Companies (Steelman), headquartered in Springfield, Missouri. On September 1, 2017, the Company completed a merger with R&R Trucking Holdings, LLC (R&R), based in Duenweg, Missouri.

How The Company Evaluates Its Operations

The Company uses a number of primary indicators to monitor its revenue and expense performance and efficiency, including Adjusted EBITDA, Adjusted EBITDAR, free cash flow and adjusted operating ratio, and its key drivers of revenue quality, growth, expense control and operating efficiency. Adjusted EBITDA, Adjusted EBITDAR, free cash flow and adjusted operating ratio are not recognized measures under GAAP and should not be considered alternatives to, or more meaningful than, net income (loss), cash flows from operating activities, operating income, operating ratio, operating margin or any other measure derived in accordance with GAAP. See “Non-GAAP Financial Measures” for more information on the Company’s usebusiness have historically been positively correlated to broad measures of these non-GAAPeconomic activity and to measures as well as a description of the computation and reconciliationindustrial production because many of the Company’s Adjusted EBITDA, Adjusted EBITDAR and free cash flow to net income (loss) and adjusted operating ratio to operating ratio.

Revenue

The Company records four types of revenue: freight, brokerage, logistics and fuel surcharge. Freight revenue is generated by hauling freight for the Company’s customers using its trucks or its owner-operators’ equipment. Generally, the Company’s customers pay for its services based on the number of milesare in the most direct route between pick-upmanufacturing and delivery locationsindustrial segments. In the first half of 2021, the Company saw improvement in industrial demand, which had previously been pressured by the COVID-19 pandemic, and in the second quarter of 2021, the industrial end-market in various verticals (particularly in construction and steel and other ancillary servicesmetals) appeared to have returned to near pre-pandemic levels. As a result, in the Company provides. Freight revenue issecond quarter of 2021, the productFlatbed Solutions segment experienced a significantly improved rate environment, with rates 38.9% higher than the second quarter of 2020. During the second quarter of 2021, the Specialized Solutions segment also benefitted from continued strong demand and freight rates, primarily serving construction, high security cargo and glass.

As the coronavirus pandemic continues to evolve, we believe the extent of the number of revenue-generating miles drivenimpact to our business, operating results, cash flows, liquidity and the rate per mile the Company receives from customers plus accessorial charges, such as loading and unloading freight for its customers, cargo protection, fees for detaining its equipment or fees for route planning and supervision. Freight revenue is affected by fluctuations in North American economic activity as well as changes in specific customer demand, the level of capacity in the industry and driver availability.

30

Table of Contents

The Company’s brokerage revenue is generated primarily by its use of third-party carriers when it needs capacity to move its customers’ loads. The main factor that affects brokerage revenue is the availability of the Company’s drivers and owner-operators (and hence the need for third-party carriers) and the rate for the load. Brokerage revenue is also affected by fluctuations in North American economic activity as well as changes in the level of capacity in the industry and driver availability.

Logistics revenue is generated from a range of services, including vehicle maintenance and repair, fuel management services, value-added warehousing and packaging, and other fleet management solutions. Logistics revenue isfinancial condition will be primarily driven by specific customer requirements for additional servicesthe severity and may fluctuate depending on customers’ utilizationduration of these services due to changes in cargo specifications, delivery staging and fluctuations in the North American economic activity. The Company began recording logistics revenuecoronavirus pandemic, including as a result of the Recent Acquisitions.emergence of new variants of the coronavirus; the development, acceptance and efficacy of treatments and vaccines; the pandemic’s impact on the U.S. and global economies; and the timing, scope and effectiveness of federal, state and local governmental responses to the pandemic. Those primary drivers are beyond our knowledge and control, and there are no comparable recent events that provide guidance as to the effect the COVID-19 global pandemic may have. As a result, the ultimate impact of the pandemic is highly uncertain and subject to change. See “Item 1A. Risk Factors—Risks Relating to the COVID-19 Pandemic” in our Annual Report on Form 10-K/A, filed with the SEC on May 6, 2021, for more information regarding risks relating to the COVID-19 pandemic.

Debt Refinancing and ABL Amendment

Fuel surcharges are designed to compensateOn March 9, 2021, the Company, for fuel costs aboveDaseke Companies, Inc., a certain cost per gallon base. Generally,wholly-owned subsidiary of the Company, receives fuel surcharges onand the miles for which it is compensated by customers. However,Company’s other domestic subsidiaries party thereto entered into the Term Loan Amendment. Pursuant to the Term Loan Amendment, the Company continues toprepaid, refinanced and replaced all of the issued and outstanding term loans, which had an aggregate principal amount of $483.5 million, under the Term Loan Agreement with $83.5 million in cash on hand and new replacement terms loans in an aggregate principal amount of $400 million. The Replacement Term Loans have exposure to increasing fuel costs related to empty miles, fuel efficiency due to engine idle timea scheduled maturity date of March 9, 2028 and an interest rate of LIBOR plus 4.00 percent (with a 0.75 percent LIBOR floor). The Prior Term Loans had a maturity date of February 27, 2024 and an interest rate of LIBOR plus 5.00 percent (with a 1.00 percent LIBOR floor). In addition, the Term Loan Amendment, among other factorsthings, (a) removed the total leverage financial covenant, which had been tested on a quarterly basis, and to(b) provided additional covenant flexibility in the extentform of increased debt, lien, investment, disposition and restricted payment baskets.

On April 29, 2021, the surcharge paid by the customer is insufficient. The main factors that affect fuel surcharge revenue are the price of diesel fuelCompany, Daseke Companies, Inc. and the numberCompany’s other domestic subsidiaries party thereto entered into the ABL Amendment, which extended the scheduled maturity date of loaded miles. In general, a declining energy and fuel price environment,the ABL Facility from February 27, 2025 to April 29, 2026. The ABL Amendment also, among other things, (a) increased the Maximum Revolving Advance Amount from $100 million to $150 million, (b) provides that the Maximum Revolving Advance Amount may be increased further from $150 million to $200 million (the ABL Amendment did not result in such as in 2015 and most of 2016, negatively affectsan increase), (c) removed the Company’s fuel surcharge revenues, and conversely, an environment with rising fuel and energy prices benefits its fuel surcharge revenues. Although the Company’s surcharge programs vary by customer, they typically involve a computation based on the change in national or regional fuel prices. The Company’s fuel surcharges are billedtotal leverage financial covenant, which had been tested on a laggingquarterly basis, meaning it typically bills customersand (d) provided additional covenant flexibility in the current week based on a previous week’s applicable index. Therefore, in timesform of increasing fuel prices, the Company does not recover as much as it is currently paying for fuel. In periods of declining prices, the opposite is true. Also, its fuel surcharge programs typically require a specified minimum change in fuel cost to prompt a change in fuel surcharge revenue. Therefore, many of these programs have a time lag between when fuel costs changeincreased debt, lien, investment, disposition and when the change is reflected in fuel surcharge revenue.restricted payment baskets.

19

Expenses

The Company’s most significant expenses vary with miles traveled and include driver wages, services purchased from owner-operators and other transportation providers (which are recorded on the “Purchased freight” line of the Company’s consolidated statements of operations) and fuel. Although driver-related expenses vary with miles traveled, the Company currently expects that its expenses relating to driver wages, as a percentage of operating revenues, will increase in the near-term, with or without changes in total miles, due to expected increases in average driver wages paid per mile in the general trucking industry. The expected increases in driver wages per mile are due to current market conditions caused by a lack of qualified drivers in the industry.

Maintenance and tire expenses and cost of insurance and claims generally vary with the miles the Company travels but also have a controllable component based on safety improvements, fleet age, efficiency and other factors. The Company’s primary fixed costs are depreciation of long-term assets (such as tractors, trailers and terminals), interest expense, rent and non-driver compensation.

The Company’s fuel surcharge programs help to offset increases in fuel prices but typically do not offset empty miles, idle time and out of route miles driven. As discussed above under “Revenue,” its fuel surcharge programs have a time lag between when fuel costs change and when the change is reflected in fuel surcharge revenue. Due to this time lag, the Company’s fuel expense, net of fuel surcharge, negatively impacts its operating income during periods of sharply rising fuel costs and positively impacts its operating income during periods of falling fuel costs. In general, due to the fuel surcharge programs, its operating income is less negatively affected by an environment with higher, stable fuel prices than an environment with lower fuel prices. In addition to its fuel surcharge programs, the Company believes the most effective protection against fuel cost increases is to maintain a fuel-efficient fleet by incorporating fuel efficiency measures. Also, the Company has arrangements with some of its significant fuel suppliers to buy the majority of its fuel at contracted pricing schedules that fluctuate with the market price of diesel fuel. The Company has not used derivatives as a hedge against higher fuel costs in the past but continues to evaluate this possibility.

Factors Affecting the Comparability of the Company’s Financial Results

Acquisitions

The Company has a long history of and intends to continue to acquire appropriate flatbed and specialized trucking companies. Negotiations and discussions with potential target companies are an integral part of the Company’s operations. These negotiations and discussions can be

31

Table of Contents

in varying stages from infancy to very mature. Therefore, investors in Daseke’s stock should assume the Company is always evaluating, negotiating and performing diligence on potential acquisitions.

The comparability of the Company’s results of operations among the periods presented is impacted by the acquisitions listed below, which were completed in the second and third quarters of 2017. Also, as a result of the below acquisitions, the Company’s historical results of operations may not be comparable or indicative of future results.

·

Schilli Acquisition – Effective as of May 1, 2017, the Company acquired all of the outstanding stock of Schilli to expand its presence in the Midwestern U.S. Schilli is part of the Company’s Specialized Solutions segment.

·

Big Freight Acquisition – Effective as of May 1, 2017, the Company acquired all of the outstanding stock of Big Freight to expand its presence into Canada and the power sports industry. Big Freight is part of the Company’s Specialized Solutions segment.

·

Steelman Acquisition – Effective as of July 1, 2017, the Company acquired all of the outstanding stock of Steelman to expand its presence in the Midwest and in both the power sports and heavy haul industries. Steelman is part of the Company’s Specialized Solutions segment.

·

R&R Acquisition – Effective as of September 1, 2017, the Company acquired all of the outstanding stock of R&R to expand the Company’s capabilities to include government and commercial arms, ammunition and explosives. R&R is part of the Company’s Specialized Solutions segment.

The Schilli, Big Freight, Steelman and R&R Acquisitions are collectively referred to as the Recent Acquisitions.

The Business Combination

The Company’s historical results of operations may not be comparable or indicative of results after the consummation of the Business Combination as a result of the following:

·

Decreased Leverage. As of December 31, 2016, after giving pro forma effect to the Business Combination, the Company would have had approximately $295.0 million of outstanding total indebtedness compared to the actual outstanding total indebtedness of $338.5 million, in each case, prior to debt issuance costs. For the year ended December 31, 2016, the Company’s pro forma interest expense would have been approximately $3.4 million lower than its historical interest expense.

·

Public Company Expenses. The Company incurred, and will continue to incur, direct, incremental general and administrative expenses as a result of being a publicly traded company, including, but not limited to, costs associated with annual and quarterly reports to stockholders, tax return preparation, independent auditor fees, investor relations activities, registrar and transfer agent fees, incremental director and officer liability insurance costs and independent director compensation. These direct, incremental general and administrative expenses, which the Company’s management estimates will total approximately $0.5 million annually, are not included in the Company’s historical financial results of operations.

·

Transaction Costs. During the nine months ended September 30, 2017, the Company expensed $2.0 million of transaction costs related to the Business Combination, compared to $0.3 million for the same period in 2016.

·

Deferred Financing Fees. During the first quarter of 2017, the Company expensed $3.9 million of unamortized deferred financing fees associated with debt refinanced in conjunction with the Business Combination. There were no such expenses for the nine months ended September 30, 2016.

32

Table of Contents

Results of Operations

The following table sets forth certain operating statistics for the three months ended June 30, 2021 and 2020 as well as items derived from the Company’s consolidated statements of operations for the three months ended SeptemberJune 30, 20172021 and 2016 in dollars2020. Rate per mile is the period’s revenue less fuel surcharge, brokerage and as a percentagelogistics revenues divided by total number of total revenuecompany and the increase or decreaseowner-operator miles driven in the dollar amountsperiod. Revenue per tractor is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by the average number of those items.tractors in the period, including owner-operator tractors.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 

 

 

 

 

 

 

 

2017

 

2016

 

Increase (Decrease)

(Dollars in thousands)

    

$

    

%

    

$

    

%

    

$

    

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUE:

 

 

  

 

  

 

 

  

 

  

 

 

  

 

  

Freight

 

$

171,245

 

74.0

 

$

135,415

 

77.8

 

$

35,830

 

26.5

Brokerage

 

 

34,198

 

14.8

 

 

25,977

 

14.9

 

 

8,221

 

31.6

Logistics

 

 

7,871

 

3.4

 

 

 —

 

*

 

 

7,871

 

*

Fuel surcharge

 

 

18,008

 

7.8

 

 

12,756

 

7.3

 

 

5,252

 

41.2

Total revenue

 

 

231,322

 

100.0

 

 

174,148

 

100.0

 

 

57,174

 

32.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES:

 

 

  

 

 

 

 

  

 

 

 

 

  

 

 

Salaries, wages and employee benefits

 

 

64,955

 

28.1

 

 

49,298

 

28.3

 

 

15,657

 

31.8

Fuel

 

 

24,734

 

10.7

 

 

17,296

 

9.9

 

 

7,438

 

43.0

Operations and maintenance

 

 

35,132

 

15.2

 

 

27,874

 

16.0

 

 

7,258

 

26.0

Communications

 

 

539

 

0.2

 

 

370

 

0.2

 

 

169

 

45.7

Purchased freight

 

 

61,598

 

26.6

 

 

42,541

 

24.4

 

 

19,057

 

44.8

Administrative expenses

 

 

8,619

 

3.7

 

 

5,221

 

3.0

 

 

3,398

 

65.1

Sales and marketing

 

 

488

 

0.2

 

 

435

 

0.2

 

 

53

 

12.2

Taxes and licenses

 

 

2,963

 

1.3

 

 

2,268

 

1.3

 

 

695

 

30.6

Insurance and claims

 

 

6,351

 

2.7

 

 

5,065

 

2.9

 

 

1,286

 

25.4

Acquisition-related transaction expenses

 

 

773

 

0.3

 

 

 —

 

*

 

 

773

 

*

Depreciation and amortization

 

 

19,805

 

8.6

 

 

16,998

 

9.8

 

 

2,807

 

16.5

Loss on disposition

 

 

(339)

 

(0.1)

 

 

(495)

 

(0.3)

 

 

156

 

(31.5)

Impairment

 

 

 —

 

*

 

 

1,195

 

0.7

 

 

(1,195)

 

(100.0)

Total operating expenses

 

 

225,618

 

97.5

 

 

168,066

 

96.5

 

 

57,552

 

34.2

Operating ratio

 

 

97.5%

 

 

 

 

96.5%

 

 

 

 

 

 

 

Adjusted operating ratio(1)

 

 

95.4%

 

 

 

 

94.1%

 

 

 

 

 

 

 

INCOME FROM OPERATIONS

 

 

5,704

 

2.5

 

 

6,082

 

3.5

 

 

(378)

 

(6.2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (income) expense:

 

 

  

 

 

 

 

  

 

 

 

 

  

 

 

Interest income

 

 

(76)

 

*

 

 

(4)

 

*

 

 

(72)

 

1,800.0

Interest expense

 

 

8,624

 

3.7

 

 

6,724

 

3.9

 

 

1,900

 

28.3

Write-off of unamortized deferred financing fees

 

 

 —

 

*

 

 

 —

 

*

 

 

 —

 

*

Other

 

 

(32)

 

*

 

 

(64)

 

*

 

 

32

 

(50.0)

Total other expense

 

 

8,516

 

3.7

 

 

6,656

 

3.8

 

 

1,860

 

27.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before provision for income taxes

 

 

(2,812)

 

(1.2)

 

 

(574)

 

(0.3)

 

 

(2,238)

 

389.9

Provision for income taxes

 

 

(2,862)

 

(1.2)

 

 

683

 

0.4

 

 

(3,545)

 

(519.0)

Net income (loss)

 

$

50

 

 -

 

$

(1,257)

 

(0.7)

 

$

1,307

 

(104.0)

 

 

Three Months Ended June 30,

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

Increase (Decrease)

 

(Dollars in millions, except Rate per mile and Revenue per tractor)

 

$

 

 

%

 

 

$

 

 

%

 

 

$

 

 

%

 

REVENUE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company freight

 

$

163.6

 

 

 

40.5

 

 

$

167.0

 

 

 

47.5

 

 

$

(3.4

)

 

 

(2.0

)

Owner operator freight

 

 

129.1

 

 

 

32.0

 

 

 

96.0

 

 

 

27.3

 

 

 

33.1

 

 

 

34.5

 

Brokerage

 

 

66.7

 

 

 

16.5

 

 

 

57.9

 

 

 

16.5

 

 

 

8.8

 

 

 

15.2

 

Logistics

 

 

10.7

 

 

 

2.6

 

 

 

8.8

 

 

 

2.5

 

 

 

1.9

 

 

 

21.6

 

Fuel surcharge

 

 

33.9

 

 

 

8.4

 

 

 

22.0

 

 

 

6.3

 

 

 

11.9

 

 

 

54.1

 

Total revenue

 

 

404.0

 

 

 

100.0

 

 

 

351.7

 

 

 

100.0

 

 

 

52.3

 

 

 

14.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and employee benefits

 

 

93.4

 

 

 

23.1

 

 

 

99.4

 

 

 

28.3

 

 

 

(6.0

)

 

 

(6.0

)

Fuel

 

 

27.0

 

 

 

6.7

 

 

 

18.2

 

 

 

5.2

 

 

 

8.8

 

 

 

48.4

 

Operations and maintenance

 

 

37.3

 

 

 

9.2

 

 

 

45.3

 

 

 

12.9

 

 

 

(8.0

)

 

 

(17.7

)

Communications

 

 

1.1

 

 

 

0.3

 

 

 

0.9

 

 

 

0.3

 

 

 

0.2

 

 

 

22.2

 

Purchased freight

 

 

155.3

 

 

 

38.4

 

 

 

112.2

 

 

 

31.9

 

 

 

43.1

 

 

 

38.4

 

Administrative expenses

 

 

12.7

 

 

 

3.1

 

 

 

17.2

 

 

 

4.9

 

 

 

(4.5

)

 

 

(26.2

)

Sales and marketing

 

 

0.5

 

 

 

0.1

 

 

 

0.3

 

 

 

0.1

 

 

 

0.2

 

 

 

66.7

 

Taxes and licenses

 

 

3.8

 

 

 

0.9

 

 

 

4.0

 

 

 

1.1

 

 

 

(0.2

)

 

 

(5.0

)

Insurance and claims

 

 

9.9

 

 

 

2.5

 

 

 

15.6

 

 

 

4.4

 

 

 

(5.7

)

 

 

(36.5

)

Depreciation and amortization

 

 

22.2

 

 

 

5.5

 

 

 

22.8

 

 

 

6.5

 

 

 

(0.6

)

 

 

(2.6

)

(Gain) loss on disposition of revenue property and equipment

 

 

(4.6

)

 

 

(1.1

)

 

 

0.4

 

 

 

0.1

 

 

 

(5.0

)

 

 

(1,250.0

)

Restructuring charges

 

 

0.1

 

 

 

—

 

 

 

3.0

 

 

 

0.9

 

 

 

(2.9

)

 

 

(96.7

)

Total operating expenses

 

 

358.7

 

 

 

88.8

 

 

 

339.3

 

 

 

96.5

 

 

 

19.4

 

 

 

5.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME FROM OPERATIONS

 

 

45.3

 

 

 

11.2

 

 

 

12.4

 

 

 

3.5

 

 

 

32.9

 

 

 

265.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expense (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(0.1

)

 

 

—

 

 

 

(0.1

)

 

 

—

 

 

 

—

 

 

 

—

 

Interest expense

 

 

7.6

 

 

 

1.9

 

 

 

11.0

 

 

 

3.1

 

 

 

(3.4

)

 

 

(30.9

)

Change in fair value of warrant liability

 

 

(7.8

)

 

 

(1.9

)

 

 

(1.1

)

 

 

(0.3

)

 

 

(6.7

)

 

 

609.1

 

Other

 

 

(0.4

)

 

 

(0.1

)

 

 

(1.1

)

 

 

(0.3

)

 

 

0.7

 

 

 

(63.6

)

Total other expense (income)

 

 

(0.7

)

 

 

(0.2

)

 

 

8.7

 

 

 

2.5

 

 

 

(9.4

)

 

 

(108.0

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

46.0

 

 

 

11.4

 

 

 

3.7

 

 

 

1.1

 

 

 

42.3

 

 

 

1,143.2

 

Income tax expense

 

 

10.7

 

 

 

2.6

 

 

 

2.1

 

 

 

0.6

 

 

 

8.6

 

 

 

409.5

 

Net income

 

$

35.3

 

 

 

8.7

 

 

$

1.6

 

 

 

0.5

 

 

$

33.7

 

 

 

2,106.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING STATISTICS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company miles

 

 

57.7

 

 

 

 

 

 

63.5

 

 

 

 

 

 

(5.8

)

 

 

(9.1

)

Owner operator miles

 

 

47.9

 

 

 

 

 

 

47.5

 

 

 

 

 

 

0.4

 

 

 

0.8

 

Total miles (in millions)

 

 

105.6

 

 

 

 

 

 

111.0

 

 

 

 

 

 

(5.4

)

 

 

(4.9

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rate per mile

 

$

2.77

 

 

 

 

 

$

2.37

 

 

 

 

 

$

0.40

 

 

 

16.9

 

Revenue per tractor

 

$

60,400

 

 

 

 

 

$

47,400

 

 

 

 

 

$

13,000

 

 

 

27.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company-operated tractors, at period-end

 

 

2,715

 

 

 

 

 

 

3,137

 

 

 

 

 

 

(422

)

 

 

(13.5

)

Owner-operated tractors, at period-end

 

 

2,112

 

 

 

 

 

 

2,104

 

 

 

 

 

 

8

 

 

 

0.4

 

Number of trailers, at period-end

 

 

11,266

 

 

 

 

 

 

11,855

 

 

 

 

 

 

(589

)

 

 

(5.0

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company-operated tractors, average for the period

 

 

2,723

 

 

 

 

 

 

3,376

 

 

 

 

 

 

(653

)

 

 

(19.3

)

Owner-operated tractors, average for the period

 

 

2,123

 

 

 

 

 

 

2,176

 

 

 

 

 

 

(53

)

 

 

(2.4

)

Total tractors, average for the period

 

 

4,846

 

 

 

 

 

 

5,552

 

 

 

 

 

 

(706

)

 

 

(12.7

)

*indicates not meaningful.

(1)

Adjusted operating ratio is not a recognized measure under GAAP. For a definition of adjusted operating ratio and reconciliation of adjusted operating ratio to operating ratio, see “Non-GAAP Financial Measures” below.

20

33

Table of Contents

The following table sets forth certain operating statistics of the Company’s FlatbedSpecialized Solutions segment’s revenue, operating expenses, operating ratio, adjusted operating ratio and operating incomesegment for the three months ended SeptemberJune 30, 20172021 and 2016 in dollars2020, as well as revenue, operating expenses and as a percentageincome (loss) from operations for the three months ended June 30, 2021 and 2020. Rate per mile is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by total number of its Flatbed Solutions segment’s total revenuecompany and the increase or decreaseowner-operator miles driven in the dollar amountsperiod. Revenue per tractor is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by the average number of those items. tractors in the period, including owner-operator tractors.

SPECIALIZED SOLUTIONS

 

 

Three Months Ended June 30,

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

Increase (Decrease)

 

(Dollars in millions, except Rate per mile and Revenue per tractor)

 

$

 

 

%

 

 

$

 

 

%

 

 

$

 

 

%

 

REVENUE(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company freight

 

$

118.3

 

 

 

52.3

 

 

$

121.6

 

 

 

54.9

 

 

$

(3.3

)

 

 

(2.7

)

Owner operator freight

 

 

40.7

 

 

 

18.0

 

 

 

38.3

 

 

 

17.3

 

 

 

2.4

 

 

 

6.3

 

Brokerage

 

 

41.5

 

 

 

18.4

 

 

 

43.1

 

 

 

19.5

 

 

 

(1.6

)

 

 

(3.7

)

Logistics

 

 

9.3

 

 

 

4.1

 

 

 

8.1

 

 

 

3.7

 

 

 

1.2

 

 

 

14.8

 

Fuel surcharge

 

 

16.3

 

 

 

7.2

 

 

 

10.4

 

 

 

4.7

 

 

 

5.9

 

 

 

56.7

 

Total revenue

 

 

226.1

 

 

 

100.0

 

 

 

221.5

 

 

 

100.0

 

 

 

4.6

 

 

 

2.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and employee benefits

 

 

58.6

 

 

 

25.9

 

 

 

63.7

 

 

 

28.8

 

 

 

(5.1

)

 

 

(8.0

)

Fuel

 

 

18.6

 

 

 

8.2

 

 

 

11.4

 

 

 

5.1

 

 

 

7.2

 

 

 

63.2

 

Operations and maintenance

 

 

26.9

 

 

 

11.9

 

 

 

35.1

 

 

 

15.8

 

 

 

(8.2

)

 

 

(23.4

)

Purchased freight

 

 

66.2

 

 

 

29.3

 

 

 

60.0

 

 

 

27.1

 

 

 

6.2

 

 

 

10.3

 

Depreciation and amortization

 

 

13.0

 

 

 

5.7

 

 

 

13.2

 

 

 

6.0

 

 

 

(0.2

)

 

 

(1.5

)

Restructuring

 

 

0.1

 

 

 

—

 

 

 

2.8

 

 

 

1.3

 

 

 

(2.7

)

 

 

(96.4

)

Other operating expenses

 

 

13.7

 

 

 

6.1

 

 

 

20.8

 

 

 

9.4

 

 

 

(7.1

)

 

 

(34.1

)

Total operating expenses

 

 

197.1

 

 

 

87.2

 

 

 

207.0

 

 

 

93.5

 

 

 

(9.9

)

 

 

(4.8

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME FROM OPERATIONS

 

$

29.0

 

 

 

12.8

 

 

$

14.5

 

 

 

6.5

 

 

$

14.5

 

 

 

100.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING STATISTICS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company miles

 

 

38.3

 

 

 

 

 

 

37.8

 

 

 

 

 

 

0.5

 

 

 

1.3

 

Owner operator miles

 

 

12.7

 

 

 

 

 

 

12.8

 

 

 

 

 

 

(0.1

)

 

 

(0.8

)

Total miles (in millions)

 

 

51.0

 

 

 

 

 

 

50.6

 

 

 

 

 

 

0.4

 

 

 

0.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rate per mile

 

$

3.12

 

 

 

 

 

$

3.16

 

 

 

 

 

$

(0.04

)

 

 

(1.3

)

Revenue per tractor

 

$

66,700

 

 

 

 

 

$

56,400

 

 

 

 

 

$

10,300

 

 

 

18.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company-operated tractors, at period-end

 

 

1,878

 

 

 

 

 

 

1,986

 

 

 

 

 

 

(108

)

 

 

(5.4

)

Owner-operated tractors, at period-end

 

 

511

 

 

 

 

 

 

555

 

 

 

 

 

 

(44

)

 

 

(7.9

)

Number of trailers, at period-end

 

 

7,059

 

 

 

 

 

 

7,280

 

 

 

 

 

 

(221

)

 

 

(3.0

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company-operated tractors, average for the period

 

 

1,871

 

 

 

 

 

 

2,205

 

 

 

 

 

 

(334

)

 

 

(15.1

)

Owner-operated tractors, average for the period

 

 

512

 

 

 

 

 

 

631

 

 

 

 

 

 

(119

)

 

 

(18.9

)

Total tractors, average for the period

 

 

2,383

 

 

 

 

 

 

2,836

 

 

 

 

 

 

(453

)

 

 

(16.0

)

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

21

Table of Contents

The following table also sets forth certain operating statistics forof the Company’s Flatbed Solutions segment for the three months ended SeptemberJune 30, 20172021 and 2016.

FLATBED SOLUTIONS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 

 

 

 

 

 

 

 

2017

 

2016

 

Increase (Decrease)

(Dollars in thousands)

    

$

    

%

    

$

    

%

    

$

    

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUE(1):

 

 

  

 

  

 

 

  

 

  

 

 

  

 

  

Freight

 

$

67,807

 

79.2

 

$

64,281

 

81.4

 

$

3,526

 

5.5

Brokerage

 

 

9,385

 

11.0

 

 

7,410

 

9.4

 

 

1,975

 

26.7

Logistics

 

 

 —

 

 -

 

 

 —

 

 -

 

 

 —

 

*

Fuel surcharge

 

 

8,400

 

9.8

 

 

7,284

 

9.2

 

 

1,116

 

15.3

Total revenue

 

 

85,592

 

100.0

 

 

78,975

 

100.0

 

 

6,617

 

8.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES(1):

 

 

  

 

 

 

 

  

 

 

 

 

  

 

 

Salaries, wages and employee benefits

 

 

23,538

 

27.5

 

 

23,233

 

29.4

 

 

305

 

1.3

Fuel

 

 

10,212

 

11.9

 

 

9,401

 

11.9

 

 

811

 

8.6

Operations and maintenance

 

 

9,584

 

11.2

 

 

8,710

 

11.0

 

 

874

 

10.0

Purchased freight

 

 

24,536

 

28.7

 

 

20,169

 

25.5

 

 

4,367

 

21.7

Depreciation and amortization

 

 

7,150

 

8.4

 

 

7,650

 

9.7

 

 

(500)

 

(6.5)

Impairment

 

 

 —

 

 -

 

 

 —

 

 -

 

 

 —

 

*

Other operating expenses

 

 

5,817

 

6.8

 

 

6,018

 

7.6

 

 

(201)

 

(3.3)

Total operating expenses

 

 

80,837

 

94.4

 

 

75,181

 

95.2

 

 

5,656

 

7.5

Operating ratio

 

 

94.4%

 

 

 

 

95.2%

 

 

 

 

 

 

 

Adjusted operating ratio(2)

 

 

93.5%

 

 

 

 

93.9%

 

 

 

 

 

 

 

INCOME FROM OPERATIONS

 

$

4,755

 

5.6

 

$

3,794

 

4.8

 

$

961

 

25.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING STATISTICS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total miles

 

 

36,646,345

 

 

 

 

37,767,726

 

 

 

 

(1,121,381)

 

(3.0)

Company-operated tractors

 

 

1,144

 

 

 

 

1,162

 

 

 

 

(18)

 

(1.5)

Owner-operated tractors

 

 

469

 

 

 

 

441

 

 

 

 

28

 

6.3

Number of trailers

 

 

2,881

 

 

 

 

2,842

 

 

 

 

39

 

1.4

*indicates not meaningful.

(1)

Includes intersegment revenues and expenses,2020, as well as applicable, which are eliminated in the Company’s consolidated results.

(2)

Adjusted operating ratio is not a recognized measure under GAAP. For a definition of adjusted operating ratio and reconciliation of adjusted operating ratio to operating ratio, see “Non-GAAP Financial Measures” below.

34

Table of Contents

The following table sets forth the Company’s Specialized Solutions segment’s revenue, operating expenses operating ratio, adjusted operating ratio and operating income (loss) from operations for the three months ended SeptemberJune 30, 20172021 and 2016 in dollars2020. Rate per mile is the period’s revenue less fuel surcharge, brokerage and as a percentagelogistics revenues divided by total number of its Specialized Solutions segment’s total revenuecompany and the increase or decreaseowner-operator miles driven in the dollar amountsperiod. Revenue per tractor is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by the average number of those items. The following table also sets forth certain operating statistics fortractors in the period, including owner-operator tractors.

FLATBED SOLUTIONS

 

 

Three Months Ended June 30,

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

Increase (Decrease)

 

(Dollars in millions, except Rate per mile and Revenue per tractor)

 

$

 

 

%

 

 

$

 

 

%

 

 

$

 

 

%

 

REVENUE(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company freight

 

$

47.7

 

 

 

26.4

 

 

$

48.9

 

 

 

35.6

 

 

$

(1.2

)

 

 

(2.5

)

Owner operator freight

 

 

88.9

 

 

 

49.1

 

 

 

60.1

 

 

 

43.8

 

 

 

28.8

 

 

 

47.9

 

Brokerage

 

 

25.3

 

 

 

14.0

 

 

 

15.5

 

 

 

11.3

 

 

 

9.8

 

 

 

63.2

 

Logistics

 

 

1.3

 

 

 

0.7

 

 

 

0.7

 

 

 

0.5

 

 

 

0.6

 

 

 

85.7

 

Fuel surcharge

 

 

17.7

 

 

 

9.8

 

 

 

12.0

 

 

 

8.7

 

 

 

5.7

 

 

 

47.5

 

Total revenue

 

 

180.9

 

 

 

100.0

 

 

 

137.2

 

 

 

100.0

 

 

 

43.7

 

 

 

31.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and employee benefits

 

 

29.1

 

 

 

16.1

 

 

 

30.7

 

 

 

22.4

 

 

 

(1.6

)

 

 

(5.2

)

Fuel

 

 

8.4

 

 

 

4.6

 

 

 

6.7

 

 

 

4.9

 

 

 

1.7

 

 

 

25.4

 

Operations and maintenance

 

 

10.5

 

 

 

5.8

 

 

 

10.2

 

 

 

7.4

 

 

 

0.3

 

 

 

2.9

 

Purchased freight

 

 

92.2

 

 

 

51.0

 

 

 

59.2

 

 

 

43.1

 

 

 

33.0

 

 

 

55.7

 

Depreciation and amortization

 

 

8.9

 

 

 

4.9

 

 

 

9.3

 

 

 

6.8

 

 

 

(0.4

)

 

 

(4.3

)

Restructuring

 

 

—

 

 

 

—

 

 

 

0.2

 

 

 

0.1

 

 

 

(0.2

)

 

 

(100.0

)

Other operating expenses

 

 

8.9

 

 

 

4.9

 

 

 

10.2

 

 

 

7.4

 

 

 

(1.3

)

 

 

(12.7

)

Total operating expenses

 

 

158.0

 

 

 

87.3

 

 

 

126.5

 

 

 

92.2

 

 

 

31.5

 

 

 

24.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME FROM OPERATIONS

 

$

22.9

 

 

 

12.7

 

 

$

10.7

 

 

 

7.8

 

 

$

12.2

 

 

 

114.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING STATISTICS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company miles

 

 

19.4

 

 

 

 

 

 

25.7

 

 

 

 

 

 

(6.3

)

 

 

(24.5

)

Owner operator miles

 

 

35.2

 

 

 

 

 

 

34.7

 

 

 

 

 

 

0.5

 

 

 

1.4

 

Total miles (in millions)

 

 

54.6

 

 

 

 

 

 

60.4

 

 

 

 

 

 

(5.8

)

 

 

(9.6

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rate per mile

 

$

2.50

 

 

 

 

 

$

1.80

 

 

 

 

 

$

0.70

 

 

 

38.9

 

Revenue per tractor

 

$

55,500

 

 

 

 

 

$

40,100

 

 

 

 

 

$

15,400

 

 

 

38.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company-operated tractors, at period-end

 

 

837

 

 

 

 

 

 

1,151

 

 

 

 

 

 

(314

)

 

 

(27.3

)

Owner-operated tractors, at period-end

 

 

1,601

 

 

 

 

 

 

1,549

 

 

 

 

 

 

52

 

 

 

3.4

 

Number of trailers, at period-end

 

 

4,207

 

 

 

 

 

 

4,575

 

 

 

 

 

 

(368

)

 

 

(8.0

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company-operated tractors, average for the period

 

 

852

 

 

 

 

 

 

1,171

 

 

 

 

 

 

(319

)

 

 

(27.2

)

Owner-operated tractors, average for the period

 

 

1,611

 

 

 

 

 

 

1,545

 

 

 

 

 

 

66

 

 

 

4.3

 

Total tractors, average for the period

 

 

2,463

 

 

 

 

 

 

2,716

 

 

 

 

 

 

(253

)

 

 

(9.3

)

(1)
Includes intersegment revenues and expenses, as applicable, which are eliminated in the Company’s Specialized Solutions segment for the three months ended September 30, 2017 and 2016.consolidated results.

22

Table of Contents

SPECIALIZED SOLUTIONS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 

 

 

 

 

 

 

    

2017

    

2016

    

Increase (Decrease)

(Dollars in thousands)

    

$

    

%

    

$

    

%

    

$

    

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUE(1):

 

 

  

 

  

 

 

  

 

  

 

 

  

 

  

Freight

 

$

105,137

 

71.2

 

$

72,367

 

75.0

 

$

32,770

 

45.3

Brokerage

 

 

24,852

 

16.8

 

 

18,579

 

19.2

 

 

6,273

 

33.8

Logistics

 

 

7,886

 

5.3

 

 

 —

 

 -

 

 

7,886

 

*

Fuel surcharge

 

 

9,756

 

6.6

 

 

5,588

 

5.8

 

 

4,168

 

74.6

Total revenue

 

 

147,631

 

100.0

 

 

96,534

 

100.0

 

 

51,097

 

52.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES(1):

 

 

  

 

 

 

 

  

 

 

 

 

  

 

 

Salaries, wages and employee benefits

 

 

39,507

 

26.8

 

 

24,714

 

25.6

 

 

14,793

 

59.9

Fuel

 

 

14,521

 

9.8

 

 

7,895

 

8.2

 

 

6,626

 

83.9

Operations and maintenance

 

 

25,180

 

17.1

 

 

18,927

 

19.6

 

 

6,253

 

33.0

Purchased freight

 

 

38,965

 

26.4

 

 

23,733

 

24.6

 

 

15,232

 

64.2

Depreciation and amortization

 

 

12,618

 

8.5

 

 

9,308

 

9.6

 

 

3,310

 

35.6

Impairment

 

 

 —

 

 -

 

 

1,195

 

1.2

 

 

(1,195)

 

(100.0)

Other operating expenses

 

 

9,681

 

6.6

 

 

5,023

 

5.2

 

 

4,658

 

92.7

Total operating expenses

 

 

140,472

 

95.2

 

 

90,795

 

94.1

 

 

49,677

 

54.7

Operating ratio

 

 

95.2%

 

 

 

 

94.1%

 

 

 

 

 

 

 

Adjusted operating ratio(2)

 

 

92.6%

 

 

 

 

91.2%

 

 

 

 

 

 

 

INCOME FROM OPERATIONS

 

$

7,159

 

4.8

 

$

5,739

 

5.9

 

$

1,420

 

24.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING STATISTICS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total miles

 

 

38,948,331

 

 

 

 

24,266,511

 

 

 

 

14,681,820

 

60.5

Company-operated tractors

 

 

1,638

 

 

 

 

1,109

 

 

 

 

529

 

47.7

Owner-operated tractors

 

 

408

 

 

 

 

236

 

 

 

 

172

 

72.9

Number of trailers

 

 

4,813

 

 

 

 

3,394

 

 

 

 

1,419

 

41.8

*indicates not meaningful.

(1)

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

(2)

Adjusted operating ratio is not a recognized measure under GAAP. For a definition of adjusted operating ratio and reconciliation of adjusted operating ratio to operating ratio, see “Non-GAAP Financial Measures” below.

Revenue. Total revenue increased 32.8%14.9% to $231.3$404.0 million for the three months ended SeptemberJune 30, 20172021 from $174.1$351.7 million for the same period in 2020. The exit of the Aveda operations resulted in a $9.8 million, or 2.8%, reduction in total revenue. The increase in total revenue was due primarily to increases in owner operator freight, fuel surcharge and brokerage revenue. Company freight revenue decreased $3.4 million, or 2.0%, to $163.6 million for the three months ended SeptemberJune 30, 2016,2021 from $167.0 million for the same period in 2020. The decrease in company freight revenue was a result of a 9.1% decrease in company miles driven primarily driven by downsizing of company trucks partially offset by an increase in rate per mile. Owner operator freight revenue increased $33.1 million, or 34.5%, and was a result of a 0.8% increase in owner operator miles driven and a 33.4% increase in rate per mile. The increase in total freight revenue was primarily due to the Recent Acquisitions. The changea 16.9% increase in totalrate per mile. Brokerage revenue excluding the effect of the Recent Acquisitions, was an increase ofincreased $8.8 million, or 5.1%15.2%, due to increases in freight revenue, fuel surcharge and brokerage revenue. Freight revenue, excluding the effect of the Recent Acquisitions, increased $5.7 million, or 4.2%, from $135.4$66.7 million for the three months ended SeptemberJune 30, 20162021 from $57.9 million for the same period in 2020 primarily due to $141.1an increase in customer sales volumes and rate. Fuel surcharge revenue, increased $11.9 million, or 54.1%, to $33.9 million for the three months ended SeptemberJune 30, 2017. Fuel surcharges, excluding2021 from $22.0 million for the effect of the Recent Acquisitions,same period in 2020 due to increased from $12.7fuel costs that led to higher fuel surcharges.

The Company’s Specialized Solutions segment’s revenue increased 2.1% to $226.1 million for the three months ended SeptemberJune 30, 20162021 from $221.5 million for the same period in 2020. The increase was primarily due to $14.9increases in owner operator freight and fuel surcharge. Company freight revenue decreased $3.3 million, or 2.7%, to $118.3 million for the three months ended SeptemberJune 30, 2017, an2021 from $121.6 million for the same period in 2020. The decrease in company freight revenue was primarily a result of a 4.0% decrease in rate per mile, partially offset by a 1.3% increase in company miles driven compared to the same period in 2020. The increase in owner operator freight revenue was primarily a result of 17.1%.a 7.1% increase in rate per mile, partially offset by a 0.8% decrease in miles driven compared to the same period in 2020. Brokerage revenue excluding the effect of the Recent Acquisitions, increased $0.9decreased $1.6 million, or 3.6%3.7%, from $26.0to $41.5 million for the three months ended SeptemberJune 30, 20162021 from $43.1 million for the same period in 2020 primarily due to $26.9the exit of the Aveda operations.

The Company’s Flatbed Solutions segment’s revenue increased $43.7 million, or 31.9%, to $180.9 million for the three months ended SeptemberJune 30, 2017.

The Company’s Flatbed Solutions segment’s2021 from $137.2 million for the same period in 2020, which was primarily due to an increase in owner operator freight. Company freight revenue was $85.6decreased $1.2 million, or 2.5%, to $47.7 million for the three months ended SeptemberJune 30, 2017 and $79.02021 from $48.9 million for the same period in 2020. Owner operator freight revenue increased $28.8 million, or 47.9%, to $88.9 million for the three months ended SeptemberJune 30, 2016, an2021 from $60.1 million for the same period in 2020. The increase of 8.4%. This increasein the freight revenue was primarily athe result of increasesa 38.9% increase in rates, which produced increases of $3.5 million, or 5.5%,rate per mile partially offset by a 9.6% decrease in freight revenue and $2.0 million, or 26.7%, in brokerage revenues despite 1.1 million fewertotal miles driven compared to the same period in 2016. The $1.12020, primarily driven by downsizing of company trucks. Brokerage revenue increased $9.8 million, or 15.3%63.2%, increase in fuel surcharge revenue also contributed to the increase in the Flatbed Solutions segment’s revenue.

The Company’s Specialized Solutions segment’s revenue was $147.6$25.3 million for the three months ended SeptemberJune 30, 20172021 from $15.5 million for the same period in 2020 due to increase in customer sales volumes and $96.5rate. Fuel surcharge revenue increased $5.7 million, or 47.5%, to $17.7 million for the three months ended SeptemberJune 30, 2016, an increase of 52.9%, which was primarily due to the Recent Acquisitions. The

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increase in revenue, excluding the effect of the Recent Acquisitions, was an increase of $2.8 million, or 2.9%, primarily due to increases in freight revenue and fuel surcharge, partially offset by a slight decrease in brokerage revenues. Freight revenue, excluding the effect of the Recent Acquisitions, increased to $75.0 million for the three months ended September 30, 20172021 from $72.3$12.0 million for the same period in 2016, an increase of 3.7%. Fuel surcharges, excluding the effect of the Recent Acquisitions,2020 due to increased fuel costs that led to $6.7 million for the three months ended September 30, 2017 from $5.6 million for the same period in 2016, an increase of 19.6%. Brokerage revenue, excluding the effect of the Recent Acquisitions, decreased to $17.6 million for the three months ended September 30, 2017 from $18.6 million for the same period in 2016, a decrease of 5.5%.higher fuel surcharges.

In both segments, the increase in fuel surcharge revenue was the result of increases in fuel prices, which commenced in the fourth quarter of 2016 and continued through the third quarter of 2017 with only a less than 1% decrease in fuel prices in the second quarter of 2017.

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 companyCompany drivers, the rate per mile paid to companyCompany 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 31.8%decreased 6.0% to $65.0$93.4 million for the three months ended SeptemberJune 30, 20172021 from $49.3$99.4 million for the three months ended September 30, 2016, primarily due to the Recent Acquisitions.same period in 2020. The increasedecrease in salaries, wages and employee benefits expense excluding the effect of the Recent Acquisitions, was 5.5%, or $2.7 million, and was primarily due to increaseddecreased employee compensation, workers’ compensation premiums,headcount related to Project Synchronize and stock-based compensation, partially offset by adriver pay due to the decrease in workers’ compensation claims.

The Company’s Flatbed Solutions segment’s salaries,company miles compared to the same period in 2020. Salaries, wages and employee benefits expense, was relatively flatas a percentage of consolidated revenue (excluding brokerage revenue), decreased 6.1% for the three months ended SeptemberJune 30, 20172021 as compared to the three months ended September 30, 2016.same period in 2020.

The Company’s Specialized Solutions segment had a $14.8$5.1 million, or 59.9%8.0%, increasedecrease in salaries, wages and employee benefits expense for the three months ended SeptemberJune 30, 20172021 compared to the same period in 2020, primarily as a result of the decreased employee headcount related to Project Synchronize. Salaries, wages and employee benefits expense, as a percentage of Specialized Solutions revenue (excluding brokerage revenue), decreased 4.0% for the three months ended SeptemberJune 30, 2016,2021 as compared to the same period in 2020.

The Company’s Flatbed Solutions segment had a $1.6 million, or 5.2%, decrease in salaries, wages and employee benefits expense for the three months ended June 30, 2021 compared to the same period in 2020, primarily as a result of the decreased employee headcount related to Project Synchronize and driver pay due to the Recent Acquisitions. This increase, excludingdecrease in company miles compared to the effectsame period in 2020. Salaries, wages and employee benefits expense, as a percentage of Flatbed Solutions revenue (excluding brokerage revenue), decreased 6.5% for the Recent Acquisitions, was 7.5%, or $1.9 million, and was primarily duethree months ended June 30, 2021 as compared to increased employee compensation and stock-based compensation.the same period in 2020.

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 $7.4$8.8 million, or 43.0%48.4%, to $24.7$27.0 million for the three months ended SeptemberJune 30, 20172021 from $17.3$18.2 million for the three months ended September 30, 2016.same period in 2020. This increase was primarily due to a result of the Recent Acquisitions and higher32.2% increase in fuel prices. Excluding the effect of the Recent Acquisitions, fuel expense increased 11.3%, or $2.0 million.price, partially offset by a 9.1% decrease in company miles driven. The U.S. national average diesel fuel price, as published by the U.S. Department of Energy, was $2.615$3.212 for the three months ended SeptemberJune 30, 2017,2021, compared to $2.381$2.429 for the same period in 2016,2020.

The Company’s Specialized Solutions segment’s fuel expense increased 63.2% to $18.6 million for the three months ended June 30, 2021 from $11.4 million for the same period in 2020, as a 9.9% increase.result of a 1.3% increase in company miles driven and increase of fuel price mentioned above for the three months ended June 30, 2021 as compared to the same period in 2020.

The Company’s Flatbed Solutions segment’s fuel expense increased 8.6%25.4% to $10.2$8.4 million for the three months ended SeptemberJune 30, 20172021 from $9.4$6.7 million for the three months ended September 30, 2016, primarily as a result of higher fuel prices, partially offset by a 3.0% decreasesame period in total miles.

The Company’s Specialized Solutions segment’s fuel expense increased 83.9% to $14.5 million for the three months ended September 30, 2017 from $7.9 million for the three months ended September 30, 2016,2020, primarily as a result of the Recent Acquisitions, higher fuel prices and an increase in total miles. Excludingfuel price and partially offset by a 24.5% decrease in company miles driven for the effect ofthree months ended June 30, 2021 as compared to the Recent Acquisitions, fuel expensesame period in the Specialized Solutions segment increased 14.5% to $9.0 million and total miles increased 2.3%.2020.

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 26.0%decreased 17.7% to $35.1$37.3 million for the three months ended SeptemberJune 30, 20172021 from $27.9$45.3 million for the same period in 2020 due to a decrease of $0.6 million in maintenance costs such as repairs and tires, $6.8 million in operation costs such as pilot car and permit fees, and $0.6 million in other operations expenses. Operations and maintenance expense, as a percentage of consolidated revenue (excluding brokerage revenue), decreased 4.3% for the three months ended SeptemberJune 30, 2016, primarily2021 as compared to the same period in 2020.

The Company’s Specialized Solutions segment’s operations and maintenance expense decreased $8.2 million, or 23.4%, for the three months ended June 30, 2021 as compared to the same period in 2020 as a result of a decrease of $0.6 million in maintenance expense such as repairs, washes and tires due to a reduction of tractors and trailers in the Recent Acquisitions. OperatingCompany’s fleet, a decrease of $6.9 million in operation costs such as pilot car and permit fees and a decrease of $0.7 million in other operations expenses. Operations and maintenance expense, increased 4.7% after adjustingas a percentage of Specialized Solutions revenue (excluding brokerage revenue), decreased 5.1% for the effect ofthree months ended June 30, 2021 as compared to the Recent Acquisitions.same period in 2020.

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The Company’s Flatbed Solutions segment’s operations and maintenance expense increased $0.9$0.3 million, or 10.0%2.9%, for the three months ended SeptemberJune 30, 20172021 as compared to the three months ended September 30, 2016, primarily from increased maintenance and tire costs.

The Company’s Specialized Solutions segment’s operationssame period in 2020 due to miscellaneous increases. Operations and maintenance expense, increased $6.3 million, or 33.0%as a percentage of Flatbed Solutions revenue (excluding brokerage revenue), decreased 1.7% for the three months ended SeptemberJune 30, 20172021 as compared to the three months ended September 30, 2016, primarily as a result of the Recent Acquisitions. Excluding the effect of the Recent Acquisitions, operations and maintenance expense was relatively flat for the three months ended September 30, 2017 as compared to the three months ended September 30, 2016.same period in 2020.

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 lower payments during periods of declining fuel prices.

Total purchased freight expense increased 44.8% from $42.5$43.1 million, or 38.4%, to $155.3 million during the three months ended SeptemberJune 30, 20162021 from $112.2 million during the same period in 2020. Purchased freight expense from owner-operators increased 39.5% to $61.6$106.7 million during the three months ended SeptemberJune 30, 2017, primarily2021 from $76.5 million during the same period in 2020 as a result of the Recent Acquisitions. Excluding the effect of the Recent Acquisitions on purchased freight expense, total purchased freight expense increased 9.5% to $46.6 million for the three months ended September 30, 2017. Purchased freight expense from owner-operators, excluding the Recent Acquisitions, increased 13.1% from $23.0 million during the three months ended September 30, 2016 to $26.0 million during the three months ended September 30, 2017, primarily as a result of increases0.8% increase in fuel surcharge reimbursements made to owner-operators asowner operator miles driven and a result of higher fuel prices.33.4% increase in rate. Purchased freight expense from third-party capacity providers excluding the Recent Acquisitions, increased 6.3% from $18.936.1% to $48.6 million during the three months ended SeptemberJune 30, 20162021 from $35.7 million during the same period in 2020, as a result of increased utilization of third-party capacity providers.

The Company’s Specialized Solutions segment’s purchased freight expense increased 10.3% to $20.0$66.2 million during the three months ended SeptemberJune 30, 2017, primarily2021 from $60.0 million during the same period in 2020. Purchased freight expense from owner-operators increased 18.8% to $31.6 million during the three months ended June 30, 2021 from $26.6 million during the same period in 2020, as a result of thea 7.1% increase in rates on brokered loads.rate, partially offset by a 0.8% decrease in owner operator miles driven. Purchased freight expense from third-party capacity providers increased 3.6% to $34.6 million during the three months ended June 30, 2021 from $33.4 million during the same period in 2020, as a result of an increase in utilization of third-party capacity providers.

The Company’s Flatbed Solutions segment’s purchased freight expense increased 21.7%55.7% to $24.5$92.2 million for the three months ended SeptemberJune 30, 20172021 from $20.2$59.2 million for the same period in 2020. Purchased freight expense from owner-operators increased 50.7% to $75.2 million for the three months ended SeptemberJune 30, 2016, primarily due to higher utilization of owner-operators and third party capacity providers in the Company’s Flatbed Solutions segment. Purchased freight expense2021 from owner-operators increased 15.8% to $17.3$49.9 million for the three months ended September 30, 2017 from $14.9 million for the three months ended September 30, 2016 due to ansame period in 2020, as a result of a 45.8% increase in owner-operator loads.owner operators’ rate. Purchased freight expense from third-party capacity providers increased 43.8% from $4.782.8% to $17.0 million during the three months ended SeptemberJune 30, 2016 to $6.72021 from $9.3 million during the three months ended September 30, 2017, primarily as a result of the increasesame period in brokered loads in the Company’s Flatbed Solutions segment.

The Company’s Specialized Solutions segment’s purchased freight expense increased 64.2% to $39.0 million during the three months ended September 30, 2017 from $23.7 million during the three months ended September 30, 2016, primarily as a result of the Recent Acquisitions. Excluding the effect of the Recent Acquisitions on purchased freight expense, total purchased freight expense increased 1.0% to $24.0 million for the three months ended September 30, 2017. Purchased freight expense from owner-operators, excluding the Recent Acquisitions, increased 8.1% to $8.8 million for the three months ended September 30, 2017 from $8.1 million for the three months ended September 30, 2016. Purchased freight expense from third-party capacity providers, excluding the Recent Acquisitions, decreased 6.1% from $14.2 million during the three months ended September 30, 2016 to $13.3 million during the three months ended September 30, 2017,2020, primarily as a result of increased utilization of company drivers during the quarter.third-party capacity providers.

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

Depreciation and amortization expense increased 16.5%decreased $0.6 million, or 2.6%, to $19.8$22.2 million during the three months ended SeptemberJune 30, 20172021 from $17.0$22.8 million during the three months ended September 30, 2016, primarilysame period in 2020 as a result of a 19.3% decrease in average tractor count in the Recent Acquisitions. After adjusting for the effect of the Recent Acquisitions,Company’s fleet.

The Company’s Specialized Solutions segment’s depreciation and amortization expense decreased 7.0%$0.2 million, or 1.5%, primarilyfor the three months ended June 30, 2021 as compared to the same period in 2020 as a result of a 1.2% reduction15.1% decrease in company-owned tractors, excluding company-owned tractors ofaverage tractor count in the Recent Acquisitions, combined with an increasing shift in utilization of operating leases to finance capital expenditures.segment’s fleet.

The Company’s Flatbed Solutions segment had a 6.5% decrease insegment’s depreciation and amortization expense decreased $0.4 million, or 4.3%, for the three months ended SeptemberJune 30, 20172021 as compared to the three months ended September 30, 2016 primarilysame period in 2020 as a result of a 1.5% reduction27.2% decrease in company-owned tractors.average tractor count in the segment’s fleet.

TheAdministrative Expenses. Administrative expenses consists of operating lease cost for real estate, professional fees and other expenses that are not directly associated with the Company’s Specialized Solutions segment had a 35.6% increase in depreciation and amortizationfleet services. Administrative expense decreased $4.5 million for the three months ended SeptemberJune 30, 20172021 as compared to the three months ended September 30, 2016 primarilysame period in 2020 as a result of the Recent Acquisitions. After adjusting for the effect of the Recent Acquisitions, depreciation and amortization expense decreased 7.4%, primarilycost reduction initiatives. Administrative expenses, as a resultpercentage of a 0.9% reductionrevenue, decreased 1.8% from the same period in company-owned tractors, excluding company-owned tractors of the Recent Acquisitions, combined with an increasing shift in utilization of operating leases to finance capital expenditures.2020.

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Taxes and Licenses. Operating taxes and licenses expense primarily represents the costs of taxes and licenses associated with the Company’s fleet of equipment and will vary according to the size of its equipment fleet. Taxes and license expense increased from $2.3decreased $0.2 million for the three months ended SeptemberJune 30, 2016 to $3.0 million for the three months ended September 30, 2017. Excluding the effect of the Recent Acquisitions, operating2021. Operating taxes and license expense, as a percentage of revenue, was 1.2%generally consistent for the three months ended SeptemberJune 30, 20172021 and 1.3% for the three months ended September 30, 2016.2020.

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. The primary factorsfactor affecting the Company’s insurance and claims expense areis seasonality (the Company typically experiences higher accident frequency in winter months), 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 increase with the miles the Company travels. Insurance and claims expense increased 25.4%decreased 36.5% to $6.3$9.9 million during the three months ended SeptemberJune 30, 20172021 from $5.1$15.6 million during the three months ended September 30, 2016, primarily as a result of the Recent Acquisitions. Excluding the effect of the Recent Acquisitions,same period in 2020 due to decreases in insurance claims and premiums. Insurance and claims, as a percentage of revenue, was 2.8%decreased 1.9% for the three months ended SeptemberJune 30, 20172021 as compared to the same period in 2020.

Restructuring Costs. Restructuring costs of $0.1 million and 2.9% for$3.0 million were recognized in the three months ended SeptemberJune 30, 2016.2021 and 2020, respectively. The restructuring costs in the three months ended June 30, 2020 were primarily related to Phase II of Project Synchronize and the closure of certain Aveda terminals.

InterestOther (Income) Expense.Interest expense consists of cash interest, non-cash paid-in-kind interest, amortization and write-off of relateddebt issuance costs and fees and prepayment penalties. Interest expense increased 28.3%decreased 30.9% to $8.6$7.6 million duringfor the three months ended SeptemberJune 30, 20172021 from $6.7$11.0 million duringfor the three months ended September 30, 2016. This increasesame period in 2020.  It was primarily attributable to an increase in amortization of debt issuance costs and higherlower interest rates on the Term Loan Facility as compared to debtand decreases in equipment term loan outstanding balance.  Change in 2016 under the Senior Term Loan and Equipment Term Loans.

Income Tax. Provision for income taxes decreased from $0.7fair value of warrant liability was a gain of $7.8 million for the three months ended SeptemberJune 30, 20162021 compared to a benefitgain of $2.9$1.1 million for the same period in 2020. 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. Other income for the three months ended June 30, 2021 was $0.4 million compared to other income of $1.1 million for the same period in 2020 related to gain on disposal of assets.

Income Tax. Income tax expense was $10.7 million for the three months ended SeptemberJune 30, 2017. The decrease is primarily the result of the increase in loss before provision for2021 compared to income tax expense of $2.2$2.1 million for the same period in 2020. The effective tax rate was 23.3% for the three months ended SeptemberJune 30, 20172021, compared to 56.8% for the same period in 2016. The effective tax rate was 101.8% for the three months ended September 30, 2017, compared to (119.0%) for the three months ended September 30, 2016.2020. The effective income tax rate varies from the federal statutory rate of 35% primarily due to state income taxes and the jurisdictional mix of earnings, combined with the unfavorable impact of nondeductible permanent differences,expenses, including driverthe effect of the per diems, transaction expensesdiem pay structure for drivers and withdrawn Private Daseke IPO expenses.the change in fair value of warrant liability.

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The following table sets forth certain operating statistics for the six months ended June 30, 2021 and 2020 as well as items derived from the Company’s consolidated statements of operations for the ninesix months ended SeptemberJune 30, 20172021 and 2016 in dollars2020. Rate per mile is the period’s revenue less fuel surcharge, brokerage and as a percentagelogistics revenues divided by total number of total revenuecompany and the increase or decreaseowner-operator miles driven in the dollar amountsperiod. Revenue per tractor is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by the average number of those items.tractors in the period, including owner-operator tractors.

 

 

Six Months Ended June 30,

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

Increase (Decrease)

 

(Dollars in millions, except Rate per mile and Revenue per tractor)

 

$

 

 

%

 

 

$

 

 

%

 

 

$

 

 

%

 

REVENUE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company freight

 

$

308.7

 

 

 

41.8

 

 

$

347.9

 

 

 

46.8

 

 

$

(39.2

)

 

 

(11.3

)

Owner operator freight

 

 

234.2

 

 

 

31.7

 

 

 

203.8

 

 

 

27.4

 

 

 

30.4

 

 

 

14.9

 

Brokerage

 

 

115.2

 

 

 

15.6

 

 

 

119.6

 

 

 

16.1

 

 

 

(4.4

)

 

 

(3.7

)

Logistics

 

 

19.2

 

 

 

2.6

 

 

 

18.9

 

 

 

2.5

 

 

 

0.3

 

 

 

1.6

 

Fuel surcharge

 

 

60.6

 

 

 

8.2

 

 

 

52.5

 

 

 

7.1

 

 

 

8.1

 

 

 

15.4

 

Total revenue

 

 

737.9

 

 

 

100.0

 

 

 

742.7

 

 

 

100.0

 

 

 

(4.8

)

 

 

(0.6

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and employee benefits

 

 

184.1

 

 

 

24.9

 

 

 

209.8

 

 

 

28.2

 

 

 

(25.7

)

 

 

(12.2

)

Fuel

 

 

52.4

 

 

 

7.1

 

 

 

46.9

 

 

 

6.3

 

 

 

5.5

 

 

 

11.7

 

Operations and maintenance

 

 

67.6

 

 

 

9.2

 

 

 

90.9

 

 

 

12.2

 

 

 

(23.3

)

 

 

(25.6

)

Communications

 

 

2.2

 

 

 

0.3

 

 

 

1.9

 

 

 

0.3

 

 

 

0.3

 

 

 

15.8

 

Purchased freight

 

 

276.7

 

 

 

37.5

 

 

 

246.4

 

 

 

33.2

 

 

 

30.3

 

 

 

12.3

 

Administrative expenses

 

 

29.2

 

 

 

4.0

 

 

 

37.4

 

 

 

5.0

 

 

 

(8.2

)

 

 

(21.9

)

Sales and marketing

 

 

1.1

 

 

 

0.1

 

 

 

1.0

 

 

 

0.1

 

 

 

0.1

 

 

 

10.0

 

Taxes and licenses

 

 

7.7

 

 

 

1.0

 

 

 

8.5

 

 

 

1.1

 

 

 

(0.8

)

 

 

(9.4

)

Insurance and claims

 

 

26.7

 

 

 

3.6

 

 

 

30.6

 

 

 

4.1

 

 

 

(3.9

)

 

 

(12.7

)

Depreciation and amortization

 

 

44.4

 

 

 

6.0

 

 

 

49.1

 

 

 

6.6

 

 

 

(4.7

)

 

 

(9.6

)

Gain on disposition of revenue property and equipment

 

 

(7.7

)

 

 

(1.0

)

 

 

(0.8

)

 

 

(0.1

)

 

 

(6.9

)

 

 

862.5

 

Impairment

 

 

—

 

 

 

—

 

 

 

13.4

 

 

 

1.8

 

 

 

(13.4

)

 

 

(100.0

)

Restructuring charges

 

 

0.1

 

 

 

—

 

 

 

3.5

 

 

 

0.5

 

 

 

(3.4

)

 

 

(97.1

)

Total operating expenses

 

 

684.5

 

 

 

92.8

 

 

 

738.6

 

 

 

99.4

 

 

 

(54.1

)

 

 

(7.3

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME FROM OPERATIONS

 

 

53.4

 

 

 

7.2

 

 

 

4.1

 

 

 

0.6

 

 

 

49.3

 

 

 

1,202.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(0.2

)

 

 

—

 

 

 

(0.4

)

 

 

(0.1

)

 

 

0.2

 

 

 

(50.0

)

Interest expense

 

 

18.7

 

 

 

2.5

 

 

 

23.0

 

 

 

3.1

 

 

 

(4.3

)

 

 

(18.7

)

Change in fair value of warrant liability

 

 

(2.2

)

 

 

(0.3

)

 

 

(2.1

)

 

 

(0.3

)

 

 

(0.1

)

 

 

4.8

 

Other

 

 

(0.8

)

 

 

(0.1

)

 

 

0.1

 

 

 

—

 

 

 

(0.9

)

 

 

(900.0

)

Total other expense

 

 

15.5

 

 

 

2.1

 

 

 

20.6

 

 

 

2.8

 

 

 

(5.1

)

 

 

(24.8

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

37.9

 

 

 

5.1

 

 

 

(16.5

)

 

 

(2.2

)

 

 

54.4

 

 

 

(329.7

)

Income tax expense

 

 

9.9

 

 

 

1.3

 

 

 

(1.8

)

 

 

(0.2

)

 

 

11.7

 

 

 

(650.0

)

Net income

 

$

28.0

 

 

 

3.8

 

 

$

(14.7

)

 

 

(2.0

)

 

$

42.7

 

 

 

(290.5

)

 

 

 

��

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING STATISTICS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company miles

 

 

116.4

 

 

 

 

 

 

130.8

 

 

 

 

 

 

(14.4

)

 

 

(11.0

)

Owner operator miles

 

 

92.6

 

 

 

 

 

 

97.4

 

 

 

 

 

 

(4.8

)

 

 

(4.9

)

Total miles (in millions)

 

 

209.0

 

 

 

 

 

 

228.2

 

 

 

 

 

 

(19.2

)

 

 

(8.4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rate per mile

 

$

2.60

 

 

 

 

 

$

2.42

 

 

 

 

 

$

0.18

 

 

 

7.4

 

Revenue per tractor

 

$

111,100

 

 

 

 

 

$

98,000

 

 

 

 

 

$

13,100

 

 

 

13.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company-operated tractors, at period-end

 

 

2,715

 

 

 

 

 

 

3,137

 

 

 

 

 

 

(422

)

 

 

(13.5

)

Owner-operated tractors, at period-end

 

 

2,112

 

 

 

 

 

 

2,104

 

 

 

 

 

��

8

 

 

 

0.4

 

Number of trailers, at period-end

 

 

11,266

 

 

 

 

 

 

11,855

 

 

 

 

 

 

(589

)

 

 

(5.0

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company-operated tractors, average for the period

 

 

2,778

 

 

 

 

 

 

3,432

 

 

 

 

 

 

(654

)

 

 

(19.1

)

Owner-operated tractors, average for the period

 

 

2,110

 

 

 

 

 

 

2,198

 

 

 

 

 

 

(88

)

 

 

(4.0

)

Total tractors, average for the period

 

 

4,888

 

 

 

 

 

 

5,630

 

 

 

 

 

 

(742

)

 

 

(13.2

)

26

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 

 

 

 

 

 

 

 

2017

 

2016

 

Increase (Decrease)

(Dollars in thousands)

    

$

    

%

    

$

    

%

    

$

    

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUE:

 

 

  

 

  

 

 

  

 

  

 

 

  

 

  

Freight

 

$

446,454

 

75.8

 

$

398,466

 

79.5

 

$

47,988

 

12.0

Brokerage

 

 

83,723

 

14.2

 

 

68,358

 

13.6

 

 

15,365

 

22.5

Logistics

 

 

10,571

 

1.8

 

 

 —

 

*

 

 

10,571

 

*

Fuel surcharge

 

 

48,331

 

8.2

 

 

34,562

 

6.9

 

 

13,769

 

39.8

Total revenue

 

 

589,079

 

100.0

 

 

501,386

 

100.0

 

 

87,693

 

17.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES:

 

 

  

 

 

 

 

  

 

 

 

 

  

 

 

Salaries, wages and employee benefits

 

 

174,253

 

29.6

 

 

149,861

 

29.9

 

 

24,392

 

16.3

Fuel

 

 

64,423

 

10.9

 

 

49,076

 

9.8

 

 

15,347

 

31.3

Operations and maintenance

 

 

86,332

 

14.7

 

 

72,933

 

14.5

 

 

13,399

 

18.4

Communications

 

 

1,491

 

0.3

 

 

1,208

 

0.2

 

 

283

 

23.4

Purchased freight

 

 

148,945

 

25.3

 

 

120,501

 

24.0

 

 

28,444

 

23.6

Administrative expenses

 

 

24,019

 

4.1

 

 

17,711

 

3.5

 

 

6,308

 

35.6

Sales and marketing

 

 

1,425

 

0.2

 

 

1,280

 

0.3

 

 

145

 

11.3

Taxes and licenses

 

 

7,855

 

1.3

 

 

6,946

 

1.4

 

 

909

 

13.1

Insurance and claims

 

 

15,516

 

2.6

 

 

13,648

 

2.7

 

 

1,868

 

13.7

Acquisition-related transaction expenses

 

 

2,255

 

0.4

 

 

18

 

*

 

 

2,237

 

*

Depreciation and amortization

 

 

53,758

 

9.1

 

 

50,515

 

10.1

 

 

3,243

 

6.4

(Gain) loss on disposition

 

 

(513)

 

(0.1)

 

 

158

 

*

 

 

(671)

 

(424.7)

Impairment

 

 

 —

 

 

 

 

1,195

 

0.2

 

 

(1,195)

 

(100.0)

Total operating expenses

 

 

579,759

 

98.4

 

 

485,050

 

96.7

 

 

94,709

 

19.5

Operating ratio

 

 

98.4%

 

 

 

 

96.7%

 

 

 

 

 

 

 

Adjusted operating ratio(1)

 

 

96.2%

 

 

 

 

94.2%

 

 

 

 

 

 

 

INCOME FROM OPERATIONS

 

 

9,320

 

1.6

 

 

16,336

 

3.3

 

 

(7,016)

 

(42.9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (income) expense:

 

 

  

 

 

 

 

  

 

 

 

 

  

 

 

Interest income

 

 

(130)

 

*

 

 

(40)

 

*

 

 

(90)

 

225.0

Interest expense

 

 

21,064

 

3.6

 

 

17,521

 

3.5

 

 

3,543

 

20.2

Write-off of unamortized deferred financing fees

 

 

3,883

 

0.7

 

 

 —

 

*

 

 

3,883

 

*

Other

 

 

(247)

 

*

 

 

(266)

 

(0.1)

 

 

19

 

(7.1)

Total other expense

 

 

24,570

 

4.2

 

 

17,215

 

3.4

 

 

7,355

 

42.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before benefit for income taxes

 

 

(15,250)

 

(2.6)

 

 

(879)

 

(0.2)

 

 

(14,371)

 

1,634.9

Benefit for income taxes

 

 

(3,448)

 

(0.6)

 

 

607

 

0.1

 

 

(4,055)

 

(668.0)

Net loss

 

$

(11,802)

 

(2.0)

 

$

(1,486)

 

(0.3)

 

$

(10,316)

 

694.2

*indicates not meaningful.

(1)

Adjusted operating ratio is not a recognized measure under GAAP. For a definition of adjusted operating ratio and reconciliation of adjusted operating ratio to operating ratio, see “Non-GAAP Financial Measures” below.

39

Table of Contents

The following table sets forth certain operating statistics of the Company’s FlatbedSpecialized Solutions segment’ssegment for the six months ended June 30, 2021 and 2020, as well as revenue, operating expenses operating ratio, adjusted operating ratio and operating income (loss) from operations for the ninesix months ended SeptemberJune 30, 20172021 and 2016 in dollars2020. Rate per mile is the period’s revenue less fuel surcharge, brokerage and as a percentagelogistics revenues divided by total number of its Flatbed Solutions segment’s total revenuecompany and the increase or decreaseowner-operator miles driven in the dollar amountsperiod. Revenue per tractor is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by the average number of those items. tractors in the period, including owner-operator tractors.

SPECIALIZED SOLUTIONS

 

 

Six Months Ended June 30,

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

Increase (Decrease)

 

(Dollars in millions, except Rate per mile and Revenue per tractor)

 

$

 

 

%

 

 

$

 

 

%

 

 

$

 

 

%

 

REVENUE(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company freight

 

$

221.1

 

 

 

54.0

 

 

$

253.7

 

 

 

54.9

 

 

$

(32.6

)

 

 

(12.8

)

Owner operator freight

 

 

75.3

 

 

 

18.4

 

 

 

81.0

 

 

 

17.5

 

 

 

(5.7

)

 

 

(7.0

)

Brokerage

 

 

68.1

 

 

 

16.6

 

 

 

86.0

 

 

 

18.6

 

 

 

(17.9

)

 

 

(20.8

)

Logistics

 

 

16.5

 

 

 

4.0

 

 

 

17.3

 

 

 

3.7

 

 

 

(0.8

)

 

 

(4.6

)

Fuel surcharge

 

 

28.8

 

 

 

7.0

 

 

 

23.9

 

 

 

5.2

 

 

 

4.9

 

 

 

20.5

 

Total revenue

 

 

409.8

 

 

 

100.0

 

 

 

461.9

 

 

 

100.0

 

 

 

(52.1

)

 

 

(11.3

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and employee benefits

 

 

115.2

 

 

 

28.1

 

 

 

137.9

 

 

 

29.9

 

 

 

(22.7

)

 

 

(16.5

)

Fuel

 

 

35.7

 

 

 

8.7

 

 

 

29.8

 

 

 

6.5

 

 

 

5.9

 

 

 

19.8

 

Operations and maintenance

 

 

46.9

 

 

 

11.4

 

 

 

69.8

 

 

 

15.1

 

 

 

(22.9

)

 

 

(32.8

)

Purchased freight

 

 

115.5

 

 

 

28.2

 

 

 

128.5

 

 

 

27.8

 

 

 

(13.0

)

 

 

(10.1

)

Depreciation and amortization

 

 

26.2

 

 

 

6.4

 

 

 

30.1

 

 

 

6.5

 

 

 

(3.9

)

 

 

(13.0

)

Impairment

 

 

—

 

 

 

—

 

 

 

13.4

 

 

 

2.9

 

 

 

(13.4

)

 

 

(100.0

)

Restructuring

 

 

0.1

 

 

 

—

 

 

 

3.3

 

 

 

0.7

 

 

 

(3.2

)

 

 

(97.0

)

Other operating expenses

 

 

30.7

 

 

 

7.5

 

 

 

41.1

 

 

 

8.9

 

 

 

(10.4

)

 

 

(25.3

)

Total operating expenses

 

 

370.3

 

 

 

90.4

 

 

 

453.9

 

 

 

98.3

 

 

 

(83.6

)

 

 

(18.4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME FROM OPERATIONS

 

$

39.5

 

 

 

9.6

 

 

$

8.0

 

 

 

1.7

 

 

$

31.5

 

 

 

393.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING STATISTICS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company miles

 

 

76.2

 

 

 

 

 

 

78.5

 

 

 

 

 

 

(2.3

)

 

 

(2.9

)

Owner operator miles

 

 

24.1

 

 

 

 

 

 

26.1

 

 

 

 

 

 

(2.0

)

 

 

(7.7

)

Total miles (in millions)

 

 

100.3

 

 

 

 

 

 

104.6

 

 

 

 

 

 

(4.3

)

 

 

(4.1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rate per mile

 

$

2.96

 

 

 

 

 

$

3.20

 

 

 

 

 

$

(0.24

)

 

 

(7.5

)

Revenue per tractor

 

$

124,000

 

 

 

 

 

$

116,100

 

 

 

 

 

$

7,900

 

 

 

6.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company-operated tractors, at period-end

 

 

1,878

 

 

 

 

 

 

1,986

 

 

 

 

 

 

(108

)

 

 

(5.4

)

Owner-operated tractors, at period-end

 

 

511

 

 

 

 

 

 

555

 

 

 

 

 

 

(44

)

 

 

(7.9

)

Number of trailers, at period-end

 

 

7,059

 

 

 

 

 

 

7,280

 

 

 

 

 

 

(221

)

 

 

(3.0

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company-operated tractors, average for the period

 

 

1,882

 

 

 

 

 

 

2,240

 

 

 

 

 

 

(358

)

 

 

(16.0

)

Owner-operated tractors, average for the period

 

 

509

 

 

 

 

 

 

643

 

 

 

 

 

 

(134

)

 

 

(20.8

)

Total tractors, average for the period

 

 

2,391

 

 

 

 

 

 

2,883

 

 

 

 

 

 

(492

)

 

 

(17.1

)

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

27

Table of Contents

The following table also sets forth certain operating statistics forof the Company’s Flatbed Solutions segment for the ninesix months ended SeptemberJune 30, 20172021 and 2016.2020, as well as revenue, operating expenses and income (loss) from operations for six months ended June 30, 2021 and 2020. 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. 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

 

 

Six Months Ended June 30,

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

Increase (Decrease)

 

(Dollars in millions, except Rate per mile and Revenue per tractor)

 

$

 

 

%

 

 

$

 

 

%

 

 

$

 

 

%

 

REVENUE(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company freight

 

$

92.4

 

 

 

27.6

 

 

$

100.2

 

 

 

34.3

 

 

$

(7.8

)

 

 

(7.8

)

Owner operator freight

 

 

159.9

 

 

 

47.8

 

 

 

126.3

 

 

 

43.2

 

 

 

33.6

 

 

 

26.6

 

Brokerage

 

 

47.5

 

 

 

14.2

 

 

 

35.0

 

 

 

12.0

 

 

 

12.5

 

 

 

35.7

 

Logistics

 

 

2.5

 

 

 

0.7

 

 

 

1.5

 

 

 

0.5

 

 

 

1.0

 

 

 

66.7

 

Fuel surcharge

 

 

32.1

 

 

 

9.6

 

 

 

29.4

 

 

 

10.1

 

 

 

2.7

 

 

 

9.2

 

Total revenue

 

 

334.4

 

 

 

100.0

 

 

 

292.4

 

 

 

100.0

 

 

 

42.0

 

 

 

14.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and employee benefits

 

 

57.7

 

 

 

17.3

 

 

 

64.2

 

 

 

22.0

 

 

 

(6.5

)

 

 

(10.1

)

Fuel

 

 

16.7

 

 

 

5.0

 

 

 

17.1

 

 

 

5.8

 

 

 

(0.4

)

 

 

(2.3

)

Operations and maintenance

 

 

20.8

 

 

 

6.2

 

 

 

21.0

 

 

 

7.2

 

 

 

(0.2

)

 

 

(1.0

)

Purchased freight

 

 

167.6

 

 

 

50.1

 

 

 

129.6

 

 

 

44.3

 

 

 

38.0

 

 

 

29.3

 

Depreciation and amortization

 

 

17.7

 

 

 

5.3

 

 

 

18.4

 

 

 

6.3

 

 

 

(0.7

)

 

 

(3.8

)

Restructuring

 

 

—

 

 

 

—

 

 

 

0.2

 

 

 

0.1

 

 

 

(0.2

)

 

 

(100.0

)

Other operating expenses

 

 

20.0

 

 

 

6.0

 

 

 

22.6

 

 

 

7.7

 

 

 

(2.6

)

 

 

(11.5

)

Total operating expenses

 

 

300.5

 

 

 

89.9

 

 

 

273.1

 

 

 

93.4

 

 

 

27.4

 

 

 

10.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME FROM OPERATIONS

 

$

33.9

 

 

 

10.1

 

 

$

19.3

 

 

 

6.6

 

 

$

14.6

 

 

 

75.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING STATISTICS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company miles

 

 

40.2

 

 

 

 

 

 

52.3

 

 

 

 

 

 

(12.1

)

 

 

(23.1

)

Owner operator miles

 

 

68.5

 

 

 

 

 

 

71.3

 

 

 

 

 

 

(2.8

)

 

 

(3.9

)

Total miles (in millions)

 

 

108.7

 

 

 

 

 

 

123.6

 

 

 

 

 

 

(14.9

)

 

 

(12.1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rate per mile

 

$

2.32

 

 

 

 

 

$

1.83

 

 

 

 

 

$

0.49

 

 

 

26.8

 

Revenue per tractor

 

$

101,000

 

 

 

 

 

$

82,500

 

 

 

 

 

$

18,500

 

 

 

22.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company-operated tractors, at period-end

 

 

837

 

 

 

 

 

 

1,151

 

 

 

 

 

 

(314

)

 

 

(27.3

)

Owner-operated tractors, at period-end

 

 

1,601

 

 

 

 

 

 

1,549

 

 

 

 

 

 

52

 

 

 

3.4

 

Number of trailers, at period-end

 

 

4,207

 

 

 

 

 

 

4,575

 

 

 

 

 

 

(368

)

 

 

(8.0

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company-operated tractors, average for the period

 

 

896

 

 

 

 

 

 

1,192

 

 

 

 

 

 

(296

)

 

 

(24.8

)

Owner-operated tractors, average for the period

 

 

1,601

 

 

 

 

 

 

1,555

 

 

 

 

 

 

46

 

 

 

3.0

 

Total tractors, average for the period

 

 

2,497

 

 

 

 

 

 

2,747

 

 

 

 

 

 

(250

)

 

 

(9.1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 

 

 

 

 

 

 

 

2017

 

2016

 

Increase (Decrease)

(Dollars in thousands)

    

$

    

%

    

$

    

%

    

$

    

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUE(1):

 

 

  

 

  

 

 

  

 

  

 

 

  

 

  

Freight

 

$

200,670

 

79.1

 

$

194,855

 

82.2

 

$

5,815

 

3.0

Brokerage

 

 

27,979

 

11.0

 

 

22,482

 

9.5

 

 

5,497

 

24.5

Logistics

 

 

 —

 

 -

 

 

 —

 

 -

 

 

 —

 

*

Fuel surcharge

 

 

25,145

 

9.9

 

 

19,832

 

8.4

 

 

5,313

 

26.8

Total revenue

 

 

253,794

 

100.0

 

 

237,169

 

100.0

 

 

16,625

 

7.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES(1):

 

 

  

 

 

 

 

  

 

 

 

 

  

 

 

Salaries, wages and employee benefits

 

 

71,723

 

28.3

 

 

71,325

 

30.1

 

 

398

 

0.6

Fuel

 

 

30,594

 

12.1

 

 

26,708

 

11.3

 

 

3,886

 

14.5

Operations and maintenance

 

 

27,475

 

10.8

 

 

24,599

 

10.4

 

 

2,876

 

11.7

Purchased freight

 

 

70,211

 

27.7

 

 

59,775

 

25.2

 

 

10,436

 

17.5

Depreciation and amortization

 

 

21,929

 

8.6

 

 

22,687

 

9.6

 

 

(758)

 

(3.3)

Impairment

 

 

 —

 

 -

 

 

 —

 

 -

 

 

 —

 

*

Other operating expenses

 

 

16,907

 

6.7

 

 

18,034

 

7.6

 

 

(1,127)

 

(6.2)

Total operating expenses

 

 

238,839

 

94.1

 

 

223,128

 

94.1

 

 

15,711

 

7.0

Operating ratio

 

 

94.1%

 

 

 

 

94.1%

 

 

 

 

 

 

 

Adjusted operating ratio(2)

 

 

93.1%

 

 

 

 

92.2%

 

 

 

 

 

 

 

INCOME FROM OPERATIONS

 

$

14,955

 

5.9

 

$

14,041

 

5.9

 

$

914

 

6.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING STATISTICS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total miles

 

 

112,318,418

 

 

 

 

114,115,490

 

 

 

 

(1,797,072)

 

(1.6)

Company-operated tractors

 

 

1,158

 

 

 

 

1,173

 

 

 

 

(15)

 

(1.3)

Owner-operated tractors

 

 

454

 

 

 

 

442

 

 

 

 

12

 

2.7

Number of trailers

 

 

2,916

 

 

 

 

2,877

 

 

 

 

39

 

1.4

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

*indicates not meaningful.

(1)

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

(2)

Adjusted operating ratio is not a recognized measure under GAAP. For a definition of adjusted operating ratio and reconciliation of adjusted operating ratio to operating ratio, see “Non-GAAP Financial Measures” below.

Revenue. Total revenue decreased 0.6% to $737.9 million for the six months ended June 30, 2021 from $742.7 million for the same period in 2020. The exit of the Aveda operations resulted in a $51.8 million, or 7.0%, reduction in total revenue. Company freight revenue decreased $39.2 million, or 11.3%, to $308.7 million for the six months ended June 30, 2021 from $347.9 million for the same period in 2020. The decrease in company freight revenue was a result of a $31.6 million reduction due to the exit of the Aveda operations in conjunction with a 11.0% decrease in miles driven. The increase in owner operator freight revenue was a result of a 20.9% increase in rate per mile, partially offset by $8.4 million reduction due to the exit of the Aveda operations. Brokerage revenue decreased $4.4 million, or 3.7%, to $115.2 million for the six months ended June 30, 2021 from $119.6 million for the same period in 2020 due to a $11.4 million reduction due to the exit of the Aveda operations, which was offset by $7.0 million in brokerage growth in the flatbed segment. Fuel surcharge revenue increased $8.1 million, or 15.4%, to $60.6 million for the six months ended June 30, 2021 from $52.5 million for the same period in 2020 due to increased fuel costs that led to higher fuel surcharges.

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Table of Contents

The following table sets forth the Company’s Specialized Solutions segment’s revenue operating expenses, operating ratio, adjusted operating ratio and operating incomedecreased 11.3% to $409.8 million for the ninesix months ended SeptemberJune 30, 2017 and 20162021 from $461.9 million for the same period in dollars and as2020. The exit of the Aveda operations resulted in a percentage of its$51.8 million, or 11.2%, reduction in the Specialized Solutions segment’s total revenuerevenue. The remaining decrease was primarily due to decreases in company freight and the increase orbrokerage revenue.

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Table of Contents

The decrease in total freight revenue was primarily a result of a $40.0 million reduction due to the dollar amountsexit of those items. The following table also sets forth certain operating statistics for the Company’s Specialized Solutions segment for the nine months ended September 30, 2017 and 2016.

SPECIALIZED SOLUTIONS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 

 

 

 

 

 

 

    

2017

    

2016

    

Increase (Decrease)

(Dollars in thousands)

    

$

    

%

    

$

    

%

    

$

    

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUE(1):

 

 

  

 

  

 

 

  

 

  

 

 

  

 

  

Freight

 

$

250,255

 

73.5

 

$

206,641

 

77.2

 

$

43,614

 

21.1

Brokerage

 

 

55,820

 

16.4

 

 

45,986

 

17.2

 

 

9,834

 

21.4

Logistics

 

 

10,594

 

3.1

 

 

 —

 

 -

 

 

10,594

 

*

Fuel surcharge

 

 

23,620

 

6.9

 

 

15,024

 

5.6

 

 

8,596

 

57.2

Total revenue

 

 

340,289

 

100.0

 

 

267,651

 

100.0

 

 

72,638

 

27.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES(1):

 

 

  

 

 

 

 

  

 

 

 

 

  

 

 

Salaries, wages and employee benefits

 

 

97,880

 

28.8

 

 

74,430

 

27.8

 

 

23,450

 

31.5

Fuel

 

 

33,829

 

9.9

 

 

22,368

 

8.4

 

 

11,461

 

51.2

Operations and maintenance

 

 

57,990

 

17.0

 

 

47,686

 

17.8

 

 

10,304

 

21.6

Purchased freight

 

 

83,704

 

24.6

 

 

64,161

 

24.0

 

 

19,543

 

30.5

Depreciation and amortization

 

 

31,714

 

9.3

 

 

27,711

 

10.4

 

 

4,003

 

14.4

Impairment

 

 

 —

 

 -

 

 

1,195

 

0.4

 

 

(1,195)

 

(100.0)

Other operating expenses

 

 

22,416

 

6.6

 

 

15,411

 

5.8

 

 

7,005

 

45.5

Total operating expenses

 

 

327,533

 

96.3

 

 

252,962

 

94.5

 

 

74,571

 

29.5

Operating ratio

 

 

96.3%

 

 

 

 

94.5%

 

 

 

 

 

 

 

Adjusted operating ratio(2)

 

 

94.0%

 

 

 

 

92.5%

 

 

 

 

 

 

 

INCOME FROM OPERATIONS

 

$

12,756

 

3.7

 

$

14,689

 

5.5

 

$

(1,933)

 

(13.2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING STATISTICS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total miles

 

 

94,967,882

 

 

 

 

74,273,172

 

 

 

 

20,694,710

 

27.9

Company-operated tractors

 

 

1,382

 

 

 

 

1,091

 

 

 

 

291

 

26.7

Owner-operated tractors

 

 

294

 

 

 

 

241

 

 

 

 

53

 

22.0

Number of trailers

 

 

4,100

 

 

 

 

3,332

 

 

 

 

768

 

23.0

*indicates not meaningful.

(1)

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

(2)

Adjusted operating ratio is not a recognized measure under GAAP. For a definition of adjusted operating ratio and reconciliation of adjusted operating ratio to operating ratio, see “Non-GAAP Financial Measures” below.

Revenue. TotalAveda operations. Brokerage revenue increased 17.5%decreased $17.9 million, or 20.8%, to $589.1$68.1 million for the ninesix months ended SeptemberJune 30, 20172021 from $501.4$86.0 million for the nine months ended September 30, 2016,same period in 2020 primarily asdue to a result$11.4 million reduction due to the exit of the Recent Acquisitions. The changeAveda operations combined with a decrease in total revenue, excluding the effect of the Recent Acquisitions, was an increase of $19.9 million, or 4.0%, due to increases in fuel surcharge, freight and brokerage revenue. Fuel surcharge revenue, excluding the effect of the Recent Acquisitions, increased from $34.6 million for the nine months ended September 30, 2016 to $43.9 million for the nine months ended September 30, 2017, an increase of 26.9%. Freight revenue, excluding the effect of the Recent Acquisitions, increased 1.6% to $404.7 million for the nine months ended September 30, 2017 from $398.5 million for the nine months ended September 30, 2016. Brokerage revenue, excluding the effect of the Recent Acquisitions, increased 6.3% to $72.7 million for the nine months ended September 30, 2017 from $68.3 million for the nine months ended September 30, 2016 due to less capacity.customer sales volumes.

The Company’s Flatbed Solutions segment’s revenue was $253.8increased $42.0 million, or 14.4%, to $334.4 million for the ninesix months ended SeptemberJune 30, 2017 and $237.22021 from $292.4 million for the nine months ended September 30, 2016, an increase of 7.0%. This increasesame period in 2020, which was primarily a result ofdue to increases in rates, which produced increases of $5.8 million, or 3.0%, inowner operator freight revenue and $5.5brokerage revenue. Company freight revenue decreased $7.8 million, or 24.5%7.8%, to $92.4 million for the six months ended June 30, 2021 from $100.2 million for the same period in brokerage revenues despite 1.82020 due to a 23.1% decrease in miles driven, partially offset by a 20.0% increase in rate per mile. Owner operator freight revenue increased $33.6 million, feweror 26.6%, to $159.9 million for the six months ended June 30, 2021 from $126.3 million for the same period in 2020 predominantly due to a 31.8% increase in rate per mile, partially offset by a 3.9% decrease in miles driven. Brokerage revenue increased $12.5 million, or 35.7%, to $47.5 million for the six months ended June 30, 2021 from $35.0 million for the same period in 2020 due to increase in rate. Fuel surcharge revenue increased $2.7 million, or 9.2%, to $32.1 million for the six months ended June 30, 2021 from $29.4 million for the same period in 2020 due to increased fuel costs that led to higher fuel surcharges.

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 decreased 12.2% to $184.1 million for the six months ended June 30, 2021 from $209.8 million for the same period in 2020. The decrease in salaries, wages and employee benefits expense was primarily due to decreased employee headcount related to Project Synchronize and driver pay due to the decrease in company miles compared to the same period in 2016. The $5.3 million, or 26.8%2020. Salaries, wages and employee benefits expense, as a percentage of consolidated revenue (excluding brokerage revenue), increase in fuel surcharge revenue also contributed to the increase in the Flatbed Solutions segment.

The Company’s Specialized Solutions segment’s revenue was $340.3 milliondecreased 4.1% for the ninesix months ended SeptemberJune 30, 2017 and $267.7 million for the nine months ended September 30, 2016, an increase of 27.1%, primarily2021 as a result of the Recent Acquisitions. The increase in revenue, excluding the effect of the Recent Acquisitions, was $4.8 million, or 1.8%, primarily due to increases in fuel surcharge. Fuel

41

Table of Contents

surcharges, excluding the effect of the Recent Acquisitions, increased 27.6% to $19.2 million for the nine months ended September 30, 2017 from $15.0 million for the same period in 2016. Freight revenue, excluding the effect of the Recent Acquisitions, increased less than 1.0% for the nine months ended September 30, 2017 compared to the same period in 2016 and brokerage revenue, excluding the effect of the Recent Acquisitions, decreased by 2.6% for the nine months ended September 30, 2017 compared to the same period in 2016.2020.

In both segments, the increase in fuel surcharge revenue was the result of increases in fuel prices which commenced in the fourth quarter of 2016 and continued through the third quarter of 2017, with only a less than 1% decrease in fuel prices in the second quarter of 2017.

Salaries, Wages and Employee Benefits. Salaries, wages and employee benefits expense increased 16.3% to $174.3 million for the nine months ended September 30, 2017 from $149.9 million for the nine months ended September 30, 2016, primarily as a result of the Recent Acquisitions. The increase in salaries, wages and employee benefits expense, excluding the effect of the Recent Acquisitions, was 3.2%, or $4.9 million, and was primarily due to increased employee compensation, workers’ compensation premiums, and stock-based compensation, partially offset by a decrease in workers’ compensation claims.

The Company’s Flatbed Solutions segment’s salaries, wages and employee benefits expense was relatively flat for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016.

The Company’s Specialized Solutions segment had a $23.5$22.7 million, or 31.5%16.5%, increasedecrease in salaries, wages and employee benefits expense for the ninesix months ended SeptemberJune 30, 20172021 compared to the nine months ended September 30, 2016,same period in 2020, primarily as a result of the Recent Acquisitions.decreased employee headcount related to Project Synchronize and driver pay due to the decrease in company miles compared to the same period in 2020. Salaries, wages and employee benefits expense, as a percentage of Specialized Solutions revenue (excluding brokerage revenue), decreased 3.0% for the six months ended June 30, 2021 as compared to the same period in 2020.

The Company’s Flatbed Solutions segment had a $6.5 million, or 10.1%, decrease in salaries, wages and employee benefits expense for the six months ended June 30, 2021 compared to the same period in 2020, primarily as a result of the decreased employee headcount related to Project Synchronize and driver pay due to the decrease in company miles compared to the same period in 2020. Salaries, wages and employee benefits expense, as a percentage of Flatbed Solutions revenue (excluding brokerage revenue), decreased 4.8% for the six months ended June 30, 2021 as compared to the same period in 2020.

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.

Total fuel expense increased $5.5 million, or 11.7%, to $52.4 million for the six months ended June 30, 2021 from $46.9 million for the same period in 2020. This increase excluding the effect of the Recent Acquisitions, was 5.3%, or $3.9 million, and was primarily due to increased employee compensation, workers’ compensation premiums, and stock-based compensation,a 15.3% increase in fuel price, partially offset by a 11.0% decrease in employee health insurance costs.

Fuel. Total fuel expense increased $15.3 million, or 31.3%, to $64.4 million for the nine months ended September 30, 2017 from $49.1 million for the nine months ended September 30, 2016. This increase was primarily a result of the Recent Acquisitions and higher fuel prices. Excluding the effect of the Recent Acquisitions, fuel expense increased 15.8% or $7.8 million.Company miles driven. The U.S. national average diesel fuel price, as published by the U.S. Department of Energy, was $2.578$3.062 for the ninesix months ended SeptemberJune 30, 2017,2021, compared to $2.250$2.656 for the same period in 2016, a 14.6% increase.2020.

The Company’s Flatbed Solutions segment’s fuel expense increased 14.5% to $30.6 million for the nine months ended September 30, 2017 from $26.7 million for the nine months ended September 30, 2016, primarily as a result of higher fuel prices and partially offset by a 1.6% decrease in total miles.

The Company’s Specialized Solutions segment’s fuel expense increased 51.2%19.8% to $33.8$35.7 million for the ninesix months ended SeptemberJune 30, 20172021 from $22.4$29.8 million for the nine months ended September 30, 2016, primarily as the result of the Recent Acquisitions and higher fuel prices. Excluding the effect of the Recent Acquisitions, fuel expensesame period in the Specialized Solutions segment increased 17.4% to $26.3 million as a result of higher fuel prices and an increase in total miles.

Operations and Maintenance. Operations and maintenance expense increased 18.4% to $86.3 million for the nine months ended September 30, 2017 from $72.9 million for the nine months ended September 30, 2016,2020, primarily as a result of increase in fuel price mentioned above, partially offset by a 2.9% decrease in Company miles driven for the Recent Acquisitions. Operatingsix months ended June 30, 2021 as compared to the same period in 2020.

The Company’s Flatbed Solutions segment’s fuel expense decreased 2.3% to $16.7 million for the six months ended June 30, 2021 from $17.1 million for the same period in 2020, primarily as a result of a 23.1% decrease in Company miles driven for the six months ended June 30, 2021 as compared to the same period in 2020, partially offset by the increase in fuel price mentioned above.

Operations and Maintenance. Operations and maintenance expense increased 6.9% after adjustingconsists 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.

29

Table of Contents

Operations and maintenance expense decreased 25.6% to $67.6 million for the effectsix months ended June 30, 2021 from $90.9 million for the same period in 2020 due to a decrease of $3.7 million in maintenance costs such as repairs and tires, $15.0 million in operation costs such as pilot car and permit fees, and $4.6 million in other operations expenses. Operations and maintenance expense, as a percentage of consolidated revenue (excluding brokerage revenue), decreased 3.7% for the Recent Acquisitions.six months ended June 30, 2021 as compared to the same period in 2020.

The Company’s Specialized Solutions segment’s operations and maintenance expense decreased $22.9 million, or 32.8%, for the six months ended June 30, 2021 as compared to the same period in 2020 as a result of a decrease of $3.7 million in maintenance expense such as repairs, washes and tires due to a reduction of tractors and trailers in the Company’s fleet, a decrease of $15.1 million in operation costs such as pilot car and permit fees and a decrease of $4.1 million in other operations expenses. Operations and maintenance expense, as a percentage of Specialized Solutions revenue (excluding brokerage revenue), decreased 4.9% for the six months ended June 30, 2021 as compared to the same period in 2020.

The Company’s Flatbed Solutions segment’s operations and maintenance expense increased $2.9decreased $0.2 million, or 11.7%1.0%, for the ninesix months ended SeptemberJune 30, 20172021 as compared to the nine months ended September 30, 2016, primarily as a result of increased shop supplies, road maintenance, tire replacements, and tractor lease costs as the Company’s utilization of operating leases to finance tractor purchases increasedsame period in 2017.

The Company’s Specialized Solutions segment’s operations2020. Operations and maintenance expense, increased $10.3 million, or 21.6%as a percentage of Flatbed Solutions revenue (excluding brokerage revenue), decreased 1.0% for the ninesix months ended SeptemberJune 30, 20172021 as compared to the nine months ended September 30, 2016, primarily as a resultsame period in 2020.

Purchased Freight. Purchased freight expense consists of the Recent Acquisitions. Excluding the effectpayments 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 lower payments during periods of the Recent Acquisitions, operations and maintenance expense increased $2.0 million, or 4.1%, for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, primarily as a result of increased tractor lease costs as the Company’s utilization of operating leases to finance tractor purchases increased in 2017 and higher pilot car expenses for alternative energy projects and other over-dimension loads, partially offset by decreases in in-house maintenance, road maintenance, and tire replacement costs.declining fuel prices.

Purchased Freight. Total purchased freight expense increased 23.6% from $120.5$30.3 million, or 12.3%, to $276.7 million during the ninesix months ended SeptemberJune 30, 2016 to $148.92021 from $246.4 million during the nine months ended September 30, 2017, primarily as a result of the Recent Acquisitions. Excluding the effect of the Recent Acquisitions on purchased freight expense, total purchased freight expense increased 7.0% to $128.9 million for the nine months ended September 30, 2017.same period in 2020. Purchased freight expense from owner-operators excluding the Recent Acquisitions, increased

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7.2% from $69.1 16.3% to $193.2 million during the ninesix months ended SeptemberJune 30, 2016 to $74.12021 from $166.1 million during the nine months ended September 30, 2017, primarilysame period in 2020 as a result of increasesa 20.9% increase in fuel surcharge reimbursements made to owner-operators asrate, partially offset by a result of higher fuel prices.4.9% decrease in owner operator miles driven. Purchased freight expense from third-party capacity providers excluding the Recent Acquisitions, increased 8.0% from $49.14.0% to $83.5 million during the ninesix months ended SeptemberJune 30, 2016 to $53.02021 from $80.3 million during the nine months ended September 30, 2017, primarilysame period in 2020, as a result of thean increase in rates on brokered loads.utilization of third-party capacity providers. Purchased freight expense, as a percentage of consolidated revenue, for the six months ended June 30, 2021, increased 4.3% for the as compared to the same period in 2020.

The Company’s Specialized Solutions segment’s purchased freight expense decreased 10.1% to $115.5 million during the six months ended June 30, 2021 from $128.5 million during the same period in 2020. Purchased freight expense from owner-operators decreased 1.9% to $57.9 million during the six months ended June 30, 2021 from $59.0 million during the same period in 2020, as a result of a 7.7% decrease in owner operator miles driven, offset by a 0.7% increase in rate. Purchased freight expense from third-party capacity providers decreased 17.1% to $57.6 million during the six months ended June 30, 2021 from $69.5 million during the same period in 2020, as a result of a decrease in utilization of third-party capacity providers. Purchased freight expense, as a percentage of Specialized Solutions revenue, for the six months ended June 30, 2021, increased 0.4% as compared to the same period in 2020.

The Company’s Flatbed Solutions segment’s purchased freight expense increased 17.5%29.3% to $70.2$167.6 million for the ninesix months ended SeptemberJune 30, 20172021 from $59.8$129.6 million for the nine months ended September 30, 2016, primarily due to increasessame period in total loads requiring higher utilization of owner-operators and third party capacity providers in the Company’s Flatbed Solutions segment.2020. Purchased freight expense from owner-operators increased 10.6%26.2% to $49.2$135.2 million for the ninesix months ended SeptemberJune 30, 20172021 from $44.4$107.1 million for the nine months ended September 30, 2016.same period in 2020, as a result of a 31.8% increase in owner operators’ rate. Purchased freight expense from third-party capacity providers increased 39.1% from $13.544.0% to $32.4 million during the ninesix months ended SeptemberJune 30, 2016 to $18.82021 from $22.5 million during the nine months ended September 30, 2017, primarily as a result of the increasesame period in brokered loads in the Company’s Flatbed Solutions segment.

The Company’s Specialized Solutions segment’s purchased freight expense increased 30.5% to $83.7 million during the nine months ended September 30, 2017 from $64.2 million during the nine months ended September 30, 2016, as a result of the Recent Acquisitions. Excluding the effect of the Recent Acquisitions on purchased freight expense, total purchased freight expense decreased slightly to $63.7 million for the nine months ended September 30, 2017. Purchased freight expense from owner-operators, excluding the Recent Acquisitions, was relatively flat, increasing only 1.0% from the nine months ended September 30, 2016 to the nine months ended September 30, 2017. Purchased freight expense from third-party capacity providers, excluding the Recent Acquisitions, decreased 4.0% from $35.5 million during the nine months ended September 30, 2016 to $34.1 million during the nine months ended September 30, 2017,2020, primarily as a result of increased utilization of company drivers duringthird-party capacity providers. Purchased freight expense, as a percentage of Flatbed Solutions revenue, for the current year.six months ended June 30, 2021, increased 5.8% as compared to the same period in 2020.

Depreciation and Amortization. Depreciation and amortization expense increased 6.4%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 and age of company-owned tractors and trailers and the cost of new equipment. Amortization of intangible assets is also included in this expense.

Depreciation and amortization expense decreased $4.7 million, or 9.6%, to $53.8$44.4 million during the ninesix months ended SeptemberJune 30, 20172021 from $50.5$49.1 million during the nine months ended September 30, 2016,same period in 2020 as a result of a 19.1% decrease in average tractor count in the Recent Acquisitions. After adjusting for the effect of the Recent Acquisitions,Company’s fleet.

The Company’s Specialized Solutions segment’s depreciation and amortization expense decreased 4.9%$3.9 million, or 13.0%, primarily as a result of an increasing shift in utilization of operating leases to finance capital expenditures.

The Company’s Flatbed Solutions segment had a 3.3% decrease in depreciation and amortization expense for the ninesix months ended SeptemberJune 30, 20172021 as compared to the nine months ended September 30, 2016 primarilysame period in 2020 as a result of a 1.3% reduction16.0% decrease in company-owned tractors.average tractor count in the segment’s fleet.

The Company’s SpecializedFlatbed Solutions segment had a 14.4% increase in depreciation and amortization expense for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016 as a result of the Recent Acquisitions. After adjusting for the effect of the Recent Acquisitions,segment’s depreciation and amortization expense decreased 6.1%$0.7 million, or 3.8%, primarilyfor the six months ended June 30, 2021 as compared to the same period in 2020 as a result of an increasing shifta 24.8% decrease in utilizationaverage tractor count in the segment’s fleet.

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Administrative Expenses. Administrative expenses consists of operating leaseslease cost for real estate, professional fees and other expenses that are not directly associated with the Company’s fleet services. Administrative expense decreased $8.2 million for the six months ended June 30, 2021 as compared to finance capital expenditures.the same period in 2020 as a result of cost reduction initiatives. Administrative expenses, as a percentage of revenue, decreased 1.0% from the same period in 2020.

Taxes and Licenses. Operating taxes and licenses expense primarily represents the costs of taxes and licenses associated with the Company’s fleet of equipment and will vary according to the size of its equipment fleet. Taxes and license expense increased from $6.9decreased $0.8 million for the ninesix months ended SeptemberJune 30, 2016 to $7.9 million for the nine months ended September 30, 2017. Excluding the effect of the Recent Acquisitions, operating2021. Operating taxes and license expense, as a percentage of revenue, was 1.3%generally consistent for the ninesix months ended SeptemberJune 30, 20172021 and 1.4% for the nine months ended September 30, 2016.2020.

Insurance and Claims. Insurance and claims expense increased 13.7%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. The primary factor affecting the Company’s insurance and claims expense is seasonality (the Company typically experiences higher accident frequency in winter months), 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 $15.5increase with the miles the Company travels. Insurance and claims expense decreased 12.7% to $26.7 million during the ninesix months ended SeptemberJune 30, 20172021 from $13.6$30.6 million during the ninesame period in 2020 due to decreases in insurance claims and premiums. Insurance and claims, as a percentage of revenue, decreased 0.5% for the six months ended SeptemberJune 30, 2016, primarily2021 as compared to the same period in 2020.

Impairment. No impairment expense was recognized during the six months ended June 30, 2021. As a result of the Recent Acquisitions. Excludingthen-planned divestiture of Aveda, impairment charges of $13.4 million were recorded for the effectsame period in 2020 consisting of property and equipment of $4.0 million, right-of-use assets of $3.2 million and tradename intangible assets of $6.2 million.

Restructuring Costs. Restructuring costs of $0.1 million were recognized in the Recent Acquisitions, insurancesix months ended June 30, 2021, compared to $3.5 million in the same period of 2020. The restructuring costs in the six months ended June 30, 2020 was primarily related to Phase I and claims increased 1.6%, or $0.2 million. This increase can be primarily attributed to an increase in insurance premium rates, partially offset by a marginal decrease in total milesII of 0.8% excluding miles fromProject Synchronize, and the Recent Acquisitions.closure of certain Aveda terminals.

InterestOther (Income) Expense.Interest expense consists of cash interest, non-cash paid-in-kind interest, amortization and write-off of related issuance costs and fees and prepayment penalties. Interest expense increased 20.2%decreased 18.7% to $21.1$18.7 million duringfor the ninesix months ended SeptemberJune 30, 20172021 from $17.5$23.0 million duringfor the nine months ended September 30, 2016.same period in 2020. This increasedecrease was primarily attributable to an increase in amortization of debt issuance costs and higherlower interest rates on the Term Loan Facility as compared to debtand decreases in equipment term loan outstanding balance.  Change in 2016 under the Senior Term Loan and Equipment Term Loans.

Income Tax. Income tax expense decreased from $0.6fair value of warrant liability was a gain of $2.2 million for the ninesix months ended SeptemberJune 30, 20162021 compared to a benefitgain of $3.4$2.1 million for the nine months ended September 30, 2017. Excluding the effect of the Recent Acquisitions, the increase was primarily the result of the increase in loss before provision (benefit) for income taxes of $13.4 million for the nine months ended September 30, 2017 compared to the same period in 2016.2020. 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. In addition, for the six months ended June 30, 2021, there was $1.5 million included in interest expense related to the write-off of unamortized debt issuance costs associated with the extinguishment of certain lenders in the debt refinancing. Other income for the six months ended June 30, 2021 was $0.8 million compared to other expense of $0.1 million for the same period in 2020 and related to gain or loss on disposal of non-revenue assets.

Income Tax. Income tax expense was $9.9 million for the six months ended June 30, 2021 compared to income tax benefit of $1.8 million for the same period in 2020. The effective tax rate was 22.6%26.1% for the ninesix months ended SeptemberJune 30, 2017,2021, compared to (69.1%)10.9% for the nine months ended September 30, 2016.same period in 2020. The effective income tax rate varies from the federal statutory rate of 35% primarily due to state income taxes and the jurisdictional mix of earnings, combined with the unfavorable impact of nondeductible permanent differences,expenses, including driver per diems, transaction expenses and withdrawn Private Daseke IPO expenses.

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Non-GAAP Financial Measures

Adjusted EBITDA, Adjusted EBITDAR and Free Cash Flow

Adjusted EBITDA, Adjusted EBITDAR and free cash flow are not recognized measures under GAAP. The Company uses these non-GAAP measures as supplements to its GAAP results in evaluating certain aspects of its business, as described below.

The Company defines Adjusted EBITDA as net income (loss) plus (i) depreciation and amortization, (ii) interest expense, including other fees and charges associated with indebtedness, net of interest income, (iii) income taxes, (iv) acquisition-related transaction expenses (including due diligence costs, legal, accounting and other advisory fees and costs, retention and severance payments and financing fees and expenses), (v) non-cash impairments, (vi) losses (gains) on sales of defective revenue equipment outthe effect of the normal replacement cycle, (vii) impairments related to defective revenue equipment sold out of the normal replacement cycle, (viii) initial public offering-related expenses (which offering Private Daseke withdrew at the end of 2015), (ix) expenses related to the Business Combination and related transactions, (x) non-cash stock and equity-compensation expense, and (xi) accounting charges resulting from accountingper diem pay structure for the possible earn-out pursuant to the Business Combination. The Company defines Adjusted EBITDAR as Adjusted EBITDA plus tractor operating lease charges.

The Company’s board of directors and executive management team use Adjusted EBITDA and Adjusted EBITDAR as key measures of its performance and for business planning. Adjusted EBITDA and Adjusted EBITDAR assist them in comparing its operating performance over various reporting periods on a consistent basis because they remove from the Company’s operating results the impact of items that, in their opinion, do not reflect the Company’s core operating performance. Adjusted EBITDA and Adjusted EBITDAR also allow the Company to more effectively evaluate its operating performance by allowing it to compare the results of operations against its peers without regard to its or its peers’ financing method or capital structure. Adjusted EBITDAR is used to view operating results before lease charges as these charges can vary widely among trucking companies due to differences in the way that trucking companies finance their fleet acquisitions. The Company’s method of computing Adjusted EBITDA is substantially consistent with that used in its debt covenants and also is routinely reviewed by its management for that purpose.

The Company believes its presentation of Adjusted EBITDA and Adjusted EBITDAR is useful because they provide investors and industry analysts the same information that the Company uses internally for purposes of assessing its core operating performance. However, Adjusted EBITDA and Adjusted EBITDAR are not substitutes for, or more meaningful than, net income (loss), cash flows from operating activities, operating income or any other measure prescribed by GAAP, and there are limitations to using non-GAAP measures such as Adjusted EBITDA and Adjusted EBITDAR. Certain items excluded from Adjusted EBITDA and Adjusted EBITDAR are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital, tax structuredrivers and the historic costschange in fair value of depreciable assets. Also, other companies in its industry may define Adjusted EBITDA and Adjusted EBITDAR differently than the Company does, and as a result, it may be difficult to use Adjusted EBITDA, Adjusted EBITDAR or similarly named non-GAAP measures that other companies may use to compare the performance of those companies to its performance. Because of these limitations, Adjusted EBITDA and Adjusted EBITDAR should not be considered measures of the income generated by the Company’s business or discretionary cash available to it to invest in the growth of its business. The Company’s management compensates for these limitations by relying primarily on the Company’s GAAP results and using Adjusted EBITDA and Adjusted EBITDAR supplementally.warrant liability.

The Company defines free cash flow as Adjusted EBITDA less net capital expenditures (capital expenditures less proceeds from equipment sales). Its board of directors and executive management team use free cash flow to assess its performance and ability to fund operations and make additional investments. Free cash flow represents the cash that its business generates from operations, before taking into account cash movements that are non-operational. The Company believes its presentation of free cash flow is useful because it is one of several indicators of its ability to service debt, make investments and/or return capital to its stockholders. The Company also believes that free cash flow is one of several benchmarks used by investors and industry analysts for comparison of performance in its industry, although its measure of free cash flow may not be directly comparable to similar measures reported by other companies. Furthermore, free cash flow is not a substitute for, or more meaningful than, net income (loss), cash flows from operating activities, operating income or any other measure prescribed by GAAP, and there are limitations to using non-GAAP measures such as free cash flow. Accordingly, free cash flow should not be considered a measure of the income generated by its business or discretionary cash available to it to invest in the growth of its business. The Company’s management compensates for these limitations by relying primarily on the Company’s GAAP results and using free cash flow supplementally.

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A reconciliation of Adjusted EBITDA, Adjusted EBITDAR and free cash flow to net income (loss) for the three and nine months ended September 30, 2017 and 2016 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 

 

Nine Months Ended September 30, 

(In thousands)

    

2017

    

2016

 

2017

    

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

50

 

$

(1,257)

 

$

(11,802)

 

$

(1,486)

Depreciation and amortization

 

 

19,805

 

 

16,998

 

 

53,758

 

 

50,515

Interest income

 

 

(76)

 

 

(4)

 

 

(130)

 

 

(40)

Interest expense

 

 

8,624

 

 

6,724

 

 

24,947

 

 

17,521

Income tax provision (benefit)

 

 

(2,862)

 

 

683

 

 

(3,448)

 

 

607

Acquisition-related transaction expenses

 

 

773

 

 

16

 

 

2,255

 

 

289

Impairment  

 

 

 —

 

 

1,195

 

 

 —

 

 

1,195

Stock based compensation

 

 

663

 

 

 —

 

 

1,201

 

 

 —

Withdrawn initial public offering-related expenses

 

 

 —

 

 

259

 

 

 —

 

 

3,050

Net losses on sales of defective revenue equipment out of the normal replacement cycle

 

 

 —

 

 

22

 

 

 —

 

 

718

Impairment on sales of defective revenue equipment out of the normal replacement cycle

 

 

 —

 

 

 —

 

 

 —

 

 

190

Expenses related to the Business Combination and related transactions

 

 

 —

 

 

344

 

 

2,034

 

 

344

Tractor operating lease charges

 

 

4,448

 

 

3,610

 

 

12,366

 

 

9,324

Adjusted EBITDAR

 

$

31,425

 

$

28,590

 

$

81,181

 

$

82,227

Less tractor operating lease charges

 

 

(4,448)

 

 

(3,610)

 

 

(12,366)

 

 

(9,324)

Adjusted EBITDA

 

$

26,977

 

$

24,980

 

$

68,815

 

$

72,903

Net capital expenditures

 

 

(14,930)

 

 

(10,549)

 

 

(23,922)

 

 

(31,236)

Free cash flow

 

$

12,047

 

$

14,431

 

$

44,893

 

$

41,667

Adjusted Operating Ratio

Adjusted operating ratio is not a recognized measure under GAAP. The Company uses adjusted operating ratio as a supplement to its GAAP results in evaluating certain aspects of its business, as described below. The Company defines adjusted operating ratio as (a) total operating expenses (i) less fuel surcharges, acquisition-related transaction expenses, non-cash impairment charges and initial public offering-related expenses (which offering Daseke withdrew at the end of 2015) and (ii) further adjusted for the net impact of the step-up in basis resulting from acquisitions (such as increased depreciation and amortization expense), as a percentage of (b) total revenue excluding fuel surcharge revenue.

The Company’s board of directors and executive management team view adjusted operating ratio, and its key drivers of revenue quality, growth, expense control and operating efficiency, as a very important measure of the Company’s performance. The Company believes fuel surcharge is often volatile and eliminating the impact of this source of revenue (by eliminating fuel surcharge from revenue and by netting fuel surcharge against fuel expense) affords a more consistent basis for comparing its results of operations between periods. The Company also believes excluding acquisition-related transaction expenses, additional depreciation and amortization expenses as a result of acquisitions, non-cash impairments and withdrawn initial public offering-related expenses enhances the comparability of its performance between periods.

The Company believes its presentation of adjusted operating ratio is useful because it provides investors and industry analysts the same information that it uses internally for purposes of assessing its core operating profitability. However, adjusted operating ratio is not a substitute for, or more meaningful than, operating ratio, operating margin or any other measure derived solely from GAAP measures, and there are limitations to using non-GAAP measures such as adjusted operating ratio. Although the Company believes that adjusted operating ratio can make an evaluation of its operating performance more consistent because it removes items that, in its opinion, do not reflect its core operations, other companies in its industry may define adjusted operating ratio differently than it does. As a result, it may be difficult to use adjusted operating ratio or similarly named non-GAAP measures that other companies may use to compare the performance of those companies to the Company’s performance. The Company’s management compensates for these limitations by relying primarily on its GAAP results and using adjusted operating ratio supplementally.

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A reconciliation of adjusted operating ratio to operating ratio for each of the three and nine months ended September 30, 2017 and 2016 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 

 

Nine Months Ended September 30, 

(Dollars in thousands)

2017

    

2016

 

2017

    

2016

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

$

231,322

 

$

174,148

 

$

589,079

 

$

501,386

Fuel surcharge

 

18,008

 

 

12,756

 

 

48,331

 

 

34,562

Operating revenue, net of fuel surcharge

$

213,314

 

$

161,392

 

$

540,748

 

$

466,824

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

$

225,618

 

$

168,066

 

$

579,759

 

$

485,050

Fuel surcharge

 

18,008

 

 

12,756

 

 

48,331

 

 

34,562

Acquisition-related transaction expenses

 

773

 

 

16

 

 

2,255

 

 

289

Impairment  

 

 —

 

 

1,195

 

 

 —

 

 

1,195

Withdrawn initial public offering-related expenses

 

 —

 

 

259

 

 

 —

 

 

3,050

Expenses related to the Business Combination and related transactions

 

 —

 

 

344

 

 

2,034

 

 

344

Net impact of step-up in basis of acquired assets

 

3,260

 

 

1,637

 

 

7,088

 

 

5,911

Adjusted operating expenses

$

203,577

 

$

151,859

 

$

520,051

 

$

439,699

 

 

 

 

 

 

 

 

 

 

 

 

Operating ratio

 

97.5%

 

 

96.5%

 

 

98.4%

 

 

96.7%

Adjusted operating ratio

 

95.4%

 

 

94.1%

 

 

96.2%

 

 

94.2%

A reconciliation of the Company’s Flatbed Solutions segment’s adjusted operating ratio to operating ratio for the three and nine months ended September 30, 2017 and 2016 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 

 

Nine Months Ended September 30, 

(Dollars in thousands)

    

2017

    

2016

 

2017

    

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue(1)

 

$

85,592

 

$

78,975

 

$

253,794

 

$

237,169

Fuel surcharge

 

 

8,400

 

 

7,284

 

 

25,145

 

 

19,832

Operating revenue, net of fuel surcharge

 

$

77,192

 

$

71,691

 

$

228,649

 

$

217,337

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

$

80,837

 

$

75,181

 

$

238,839

 

$

223,128

Fuel surcharge

 

 

8,400

 

 

7,284

 

 

25,145

 

 

19,832

Net impact of step-up in basis of acquired assets

 

 

227

 

 

596

 

 

888

 

 

2,835

Adjusted operating expenses

 

$

72,210

 

$

67,301

 

$

212,806

 

$

200,461

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating ratio

 

 

94.4%

 

 

95.2%

 

 

94.1%

 

 

94.1%

Adjusted operating ratio

 

 

93.5%

 

 

93.9%

 

 

93.1%

 

 

92.2%

(1)

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

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A  reconciliation of the Company’s Specialized Solutions segment’s adjusted operating ratio to Operating Ratio for the three and nine months ended September 30, 2017 and 2016 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 

 

Nine Months Ended September 30, 

(Dollars in thousands)

    

2017

    

2016

 

2017

    

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue(1)

 

$

147,631

 

$

96,534

 

$

340,289

 

$

267,651

Fuel surcharge

 

 

9,756

 

 

5,588

 

 

23,620

 

 

15,024

Operating revenue, net of fuel surcharge

 

$

137,875

 

$

90,946

 

$

316,669

 

$

252,627

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

$

140,472

 

$

90,795

 

$

327,533

 

$

252,962

Fuel surcharge

 

 

9,756

 

 

5,588

 

 

23,620

 

 

15,024

Impairment  

 

 

 —

 

 

1,195

 

 

 —

 

 

1,195

Net impact of step-up in basis of acquired assets

 

 

3,033

 

 

1,040

 

 

6,200

 

 

3,076

Adjusted operating expenses

 

$

127,683

 

$

82,972

 

$

297,713

 

$

233,667

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating ratio

 

 

95.2%

 

 

94.1%

 

 

96.3%

 

 

94.5%

Adjusted operating ratio

 

 

92.6%

 

 

91.2%

 

 

94.0%

 

 

92.5%

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

Liquidity, and Capital Resources and Capital Requirements

Overview

The Company’s business requires substantial amounts of cash to cover operating expenses as well as to fund items such as cash capital expenditures on its fleet and other assets, working capital changes, principal and interest payments on debt obligations, letters of credit to support insurance requirements and tax payments. The Company expects net capital expenditures to be approximately $35.0 million for 2017.had the following sources of liquidity available at June 30, 2021 and December 31, 2020.

(Dollars in millions)

 

June 30, 2021

 

 

December 31, 2020

 

 

 

 

 

 

 

 

Cash

 

$

111.7

 

 

$

176.2

 

Availability under line of credit

 

 

119.3

 

 

 

83.2

 

Total

 

$

231.0

 

 

$

259.4

 

The Company’s primary sources of liquidity have been provided by operations, issuances of capital stock and borrowings under its credit facility. facilities. Cash decreased by $64.5 million at June 30, 2021 as compared to December 31, 2020. This decrease primarily resulted from $130.9 million in net cash used in financing activities, partially offset by $58.1 million in net cash provided by operating activities. See below for more information. As of June 30, 2021, the Company had no borrowings, $23.7 million in letters of credit outstanding, and could incur approximately $119.3 million of additional indebtedness under the ABL Facility.

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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. On March 22, 2021, the Company’s Board of Directors authorized the repurchase of up to three million shares of the Company’s common stock, of which 1,517,623 shares have been repurchased by the Company for approximately $10.5 million in cash through June 30, 2021. The Company also uses large amounts of cash and credit for capital expenditures.

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 capital expenditures for the six months ended June 30, 2021 and 2020 are shown below:

 

 

Six Months Ended June 30,

 

(Dollars in millions)

 

2021

 

 

2020

 

 

 

 

 

 

 

 

Net cash capital receipts

 

$

(8.6

)

 

$

(21.5

)

Financed capital expenditures

 

 

29.2

 

 

 

30.0

 

Property and equipment purchases and sales

 

$

20.6

 

 

$

8.5

 

Property and equipment purchases and sales increased primarily due to a decrease in net cash capital receipts which resulted from fewer sales of equipment compared to the prior period.

Additionally, the Company entered into operating leases for revenue equipment with terms of 2 to 5 years and real property with terms of 3 to 7 years having asset values at lease inception of $12.5 million and $4.0 million, respectively, for the six months ended June 30, 2021.

Material Debt

Overview

As of June 30, 2021, the Company had the following sourcesmaterial debt:

the Term Loan Facility and the ABL Facility;
secured equipment loans and finance lease agreements; and
bank mortgage secured by real estate.

The amounts outstanding under such agreements, excluding financing fees, were as follows as of liquidity available at SeptemberJune 30, 20172021 (in millions):

Term Loan Facility

$

399.0

 

Mortgages

 

2.4

 

Equipment term loans

 

161.2

 

Finance lease obligations

 

31.8

 

Total long-term debt and finance leases

 

594.4

 

Less: current portion

 

(55.4

)

Long-term debt and finance leases obligations, less current portion

$

539.0

 

ABL and December 31, 2016.Term Loan Facilities and Equipment Financing Agreements

 

 

 

 

 

 

 

(In thousands)

    

September 30, 2017

    

December 31, 2016

 

 

 

 

 

 

 

Cash

 

$

112,510

 

$

3,695

Availability under line of credit

 

 

70,000

 

 

32,958

Total

 

$

182,510

 

$

36,653

Cash increased by $108.8 million from December 31, 2016 to September 30, 2017. This increase primarily resulted from proceeds of new debt financing and equities issued, net of debt repayments and share repurchases, in conjunction with the Business Combination. Net proceeds totaled $34.7 million. See Note 2 of Notes to Consolidated Financial Statements for more information. Additionally, on September 19, 2017, the Company raised $63.6 million from an offering of 5,675,967 shares of its common stock. See Note 11 of the Notes to the Consolidated Financial Statements for more information.

As of SeptemberJune 30, 2017,2021, the Company has (i) a $350.0$400.0 million senior secured term loan credit facility, consisting of a $250.0 million term loan and up to $100.0 million of term loans funded under a delayed draw term loan facility, and (ii) an asset-based senior secured revolving credit facility with an aggregate maximum credit amount equal to $70.0$150.0 million (subject(that may be increased to $200.0 million, subject to availability under a borrowing base). The delayed draw term loans are available to support the Company’s acquisition activities. See Note 96 of Notes to Consolidated Financial Statements for more information regarding the Term Loan Facility and the ABL Facility, including the SeniorMarch 9, 2021 Term Loan refinancing and the Line of Credit.April 29, 2021 ABL Amendment.  

32

On August 16, 2017, the Company obtained an amendment of the Term Loan Facility that increased the delayed draw incurrence condition relating to pro forma total leverage ratio to 4.25x from 3.50x, effective August 16, 2017 through the maturity of the delayed draw term loan facility in February 2018, which enabled the Company to access $60.5 million from the delayed draw term loan facility in the three months ended September 30, 2017. The Term Loan Facility amendment also increased the total leverage ratio covenant for the test periods ending September 30, 2017 and December 31, 2017 to 4.75x from 4.25x, with step-downs reverting to pre-amendment levels beginning in the test period ending March 31, 2018. On August 31, 2017, the Company obtained an amendment to the ABL Facility that, among other things, similarly modified the total leverage ratio covenant thereunder.

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Table of Contents

The Company had $161.2 million of term loans and $31.8 million of finance leases collateralized primarily by revenue equipment, with terms of 48 to 60 months. Certain of the term loans contain conditions, covenants, representations and warranties, events of default, and indemnification provisions applicable to the Company and certain of its subsidiaries that are customary for equipment financings, including, but not limited to, limitations on the incurrence of additional debt and the prepayment of existing indebtedness, certain payments (including dividends and other distributions to persons not party to its ABL Facility) and transfers of assets.

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 Term Loan Facility and ABL Facility will provide sufficient credit availability to support its ongoing operations, fund its new 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 willmay need to sell additional equity or debt securities or seek additional financing through additional borrowings, lease financing or equity capital.capital, though it is not likely that the Company will issue any common stock in the near term. The availability of financing or 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, then the Company may be required to extend the maturity of then outstanding indebtedness, rely on alternative financing arrangements or engage in asset sales.

Letters of credit – 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 insurance liabilities.

Off-Balance Sheet Arrangements

Information about the Company’s standby letters of credit is included in Note 6 of the Notes to Consolidated Financial Statements included herein. See also Liquidity and Capital Resources above.

Cash Flows

The Company’s summary statements of cash flows information for the ninesix months ended SeptemberJune 30, 20172021 and 20162020 is set forth in the table below:

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 

(In thousands)

    

2017

    

2016

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

26,458

 

$

49,108

Net cash provided by (used in) investing activities

 

$

(101,446)

 

$

1,281

Net cash provided by (used in) financing activities

 

$

183,833

 

$

(50,506)

 

 

Six Months Ended June 30,

 

(Dollars in millions)

 

2021

 

 

2020

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

58.1

 

 

$

82.9

 

Net cash provided by investing activities

 

$

8.6

 

 

$

21.5

 

Net cash used in financing activities

 

$

(130.9

)

 

$

(43.3

)

Operating Activities. Cash provided by the Company’s operating activities consists of net loss adjusted for certain non-cash items, including depreciation and amortization, deferred interest, gain/loss on disposal of property and equipment, deferred income taxes, deferred gain and interest recognized on sales-type leases, stock-based compensation, bad debt expense and the effect of changes in working capital and other activities.

Cash provided by operating activities was $26.5$58.1 million during the ninesix months ended SeptemberJune 30, 20172021 and consisted of $11.8$28.0 million of net lossincome plus $59.3$48.6 million of non-cash items, consisting primarily of depreciation, amortization, non-cash operating lease expense, change in fair value of warrant liability and stock-based compensation, partially offset by $4.8 million in deferred taxes, less $16.2plus $18.5 million of net cash used forin working capital and other activities. Cash used forin working capital and other activities during the ninesix months ended SeptemberJune 30, 2017 primarily2021 reflect a $28.6$1.1 million increasedecrease in accounts receivable, $3.8other current assets, $0.6 million decrease in payments received on sales-type leases, and a $8.4 million increase in accounts payable and accrued expenses. Cash provided by operating activities was $49.1 million during the nine months ended September 30, 2016 and consisted of $1.5 million of net loss plus $53.3 million of non-cash items, consisting primarily of depreciation and amortization, less $2.4 million of net cash used for working capital and other activities. Cash used for working capital and other activities during the nine months ended September 30, 2016 primarily reflect a $7.2 million increase in accounts receivable, driverdrivers’ advances and other receivables, and a $1.3decrease of $0.3 million decrease in accounts payable, and accrued expenses,partially offset by an increase of $34.8 million in accounts receivable and a $3.5$14.9 million decreaseincrease in prepaidaccrued expenses and other assets and $2.8 million in payments received on sales-type leases.liabilities. 

The $22.9$24.8 million decrease in cash provided by operating activities during the ninesix months ended SeptemberJune 30, 20172021, as compared with the ninesix months ended SeptemberJune 30, 2016, excluding the Recent Acquisitions,2020, was primarily the result of a $4.7$42.7 million improvement in net income, reduced by decreases of $13.4 million in impairment, $6.9 million increase in net loss, a $4.1gain on disposition of property and equipment, $4.6 million decreasein depreciation, $3.5 million in non-cash operating lease expense, $1.6 million in bad debt expense, $1.0 million in amortization of deferred financing fees, $0.1 million in amortization of intangible assets, and $0.1 million in change in fair value of warrant liability, increased by $11.6 million in deferred tax liabilities, a $2.2taxes, $1.1 million decrease in depreciation,write-off of deferred financing fees and a $10.9$0.6 million increase in netstock-based compensation expense. Net cash used forin working capital and other activities.decreased $24.8 million.

Investing Activities. Cash flows from investing activities decreased from $1.3$21.5 million provided by investing activities for the ninethree months ended SeptemberJune 30, 20162020 to $101.4$8.6 million used inprovided by investing activities for the ninesix months ended SeptemberJune 30, 2017 due to net2021 reflecting an increase of $3.1

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million in cash paid for acquisitions of $91.1 millionequipment purchases and an increasedecrease of $9.8 million in net purchasescash receipts from sales of revenue equipment of $11.6 million infor the ninesix months ended SeptemberJune 30, 2017 compared to the same period in 2016.2021.

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Table of Contents

Total net cash capital expenditures (receipts) for the ninesix months ended SeptemberJune 30, 20172021 and 20162020 are shown below:

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 

(In thousands)

    

2017

    

2016

 

 

 

 

 

 

 

Revenue equipment (tractors, trailers and trailer accessories)

 

$

14,391

 

$

1,904

Buildings and building improvements

 

 

174

 

 

401

Other

 

 

1,000

 

 

838

Total cash capital expenditures

 

$

15,565

 

$

3,143

Less: Proceeds from sales of property and equipment

 

 

5,252

 

 

4,424

Net cash capital (proceeds) expenditures(1)

 

$

10,313

 

$

(1,281)

(1)

The Company acquires property and revenue equipment with debt and capital lease obligations. For the nine months ended September 30, 2017 and 2016, the Company incurred $13.6 million and $32.5 million, respectively, of debt and capital lease obligations to acquire property and revenue equipment.

 

 

Six Months Ended June 30,

 

(Dollars in millions)

 

2021

 

 

2020

 

 

 

 

 

 

 

 

Revenue equipment (tractors, trailers and trailer accessories)

 

$

15.2

 

 

$

13.9

 

Buildings and building improvements

 

 

0.3

 

 

 

0.6

 

Other

 

 

2.5

 

 

 

0.4

 

Total cash capital expenditures

 

 

18.0

 

 

 

14.9

 

Less: Proceeds from sales of property and equipment

 

 

26.6

 

 

 

36.4

 

Net cash capital expenditures (receipts)

 

$

(8.6

)

 

$

(21.5

)

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Table of Contents

The following tables provide details on the cash and noncash components of gross capital expenditures for the Company’s reportable segments for the three and nine months ended September 30, 2017 and 2016 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Flatbed

    

Specialized

    

 

 

    

 

 

 

 

Solutions

 

Solutions

 

Corporate/

 

Consolidated

 

 

Segment

 

Segment

 

Eliminations

 

Total

Three Months Ended September 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

$

2,297

 

$

6,407

 

$

55

 

$

8,759

Proceeds from sale of property and equipment

 

 

(110)

 

 

(2,190)

 

 

 —

 

 

(2,300)

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncash investing and financing activities

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment acquired with debt or capital lease obligations

 

 

2,298

 

 

6,172

 

 

 —

 

 

8,470

Gross capital expenditures

 

$

4,485

 

$

10,389

 

$

55

 

$

14,929

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2016

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

$

326

 

$

1,029

 

$

19

 

$

1,374

Proceeds from sale of property and equipment

 

 

(164)

 

 

(281)

 

 

 —

 

 

(445)

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncash investing and financing activities

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment acquired with debt or capital lease obligations

 

 

7,698

 

 

1,922

 

 

 —

 

 

9,620

Gross capital expenditures

 

$

7,860

 

$

2,670

 

$

19

 

$

10,549

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Flatbed

    

Specialized

    

 

 

    

 

 

 

 

Solutions

 

Solutions

 

Corporate/

 

Consolidated

 

 

Segment

 

Segment

 

Eliminations

 

Total

Nine Months Ended September 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

$

2,521

 

$

12,941

 

$

103

 

$

15,565

Proceeds from sale of property and equipment

 

 

(707)

 

 

(4,545)

 

 

 —

 

 

(5,252)

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncash investing and financing activities

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment acquired with debt or capital lease obligations

 

 

4,839

 

 

8,770

 

 

 —

 

 

13,609

Gross capital expenditures

 

$

6,653

 

$

17,166

 

$

103

 

$

23,922

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2016

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

$

688

 

$

2,299

 

$

156

 

$

3,143

Proceeds from sale of property and equipment

 

 

(2,756)

 

 

(1,668)

 

 

 —

 

 

(4,424)

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncash investing and financing activities

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment acquired with debt or capital lease obligations

 

 

15,019

 

 

17,498

 

 

 —

 

 

32,517

Gross capital expenditures

 

$

12,951

 

$

18,129

 

$

156

 

$

31,236

Financing Activities. Cash flows from financing activities increasedchanged from $50.5$43.3 million used in financing activities for the ninesix months ended SeptemberJune 30, 20162020 to $183.8$130.9 million provided byused in financing activities for the ninesix months ended SeptemberJune 30, 2017.2021. This increasechange was primarily a result of a recapitalizationnet debt payments of $77.5 million and refinancing of outstanding long-term debt in conjunction with the Business Combination. The recapitalization included $64.6 million of proceeds upon issuance of common stock and $65.0 million of proceeds upon issuance of Series A Preferred Stock, partially offset by $36.2$10.5 million in repurchases of common stock. Cash inflows from the recapitalization and proceeds from a new $250.0 million term loan (discussed under Material Debt below) were utilized in part for repayments of $66.7 million in subordinated debt, $211.1 million in long-term debt, $16.7 million

Inflation

Inflation can have an impact on the lineCompany’s operating costs. A prolonged period of creditinflation could cause interest rates, fuel, wages and $14.2 million in financing fees. Excluding cash flows fromother costs to increase, which would adversely affect the Business Combination, cash flows from financing activities included $6.9 million net repayments on the line of credit, $100.0 million advance on the delayed draw term loan facility, net of $16.6 million in repayments of long-term debt, $3.7 million Series A and Series B Preferred Stock dividends and proceeds of $63.6 million for the September 2017 issuance of common stock.

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Table of Contents

Material Debt

Overview

As of September 30, 2017, the Company had the following material debt:

·

the Term Loan Facility and the ABL Facility;

·

secured equipment loans and capital lease agreements; and

·

bank mortgage secured by real estate

The amounts outstanding under such agreements were as follows as of September 30, 2017 (in thousands):

 

 

 

 

Term Loan Facility

 

$

348,462

Mortgages

 

 

3,730

Equipment term loans and capital leases

 

 

83,478

Total long-term debt and capital leases

 

 

435,670

Less: current portion

 

 

(26,514)

Long-term debt and capital leases, less current portion

 

$

409,156

See Note 9 of Notes to Consolidated Financial Statements for information regarding the Company’s material debt.

Off-Balance Sheet Arrangements

The Company’s financial condition, results of operations liquidity, capital expendituresunless freight rates correspondingly increase. The Company attempts to limit the effects of inflation through increases in freight rates, certain cost control efforts and capital resources are not materially affected by off-balance sheet transactions. Daseke had stand-by letterslimiting the effects of credit infuel prices through fuel surcharges and measures intended to reduce the amountconsumption of $11.1 million at September 30, 2017.fuel. Over the past three fiscal years, the effect of inflation has been immaterial.

Seasonality

In the transportation industry, results of operations generally show a seasonal pattern. The lettersCompany’s productivity decreases during the winter season because inclement weather impedes operations, end-users reduce their activity and certain shippers reduce their shipments during winter. At the same time, operating expenses increase and fuel efficiency decreases because of credit provide collateral primarily for liabilityengine idling and harsh weather creating higher accident frequency, increased claims and higher equipment repair expenditures. The Company also may suffer from weather-related or other events such as tornadoes, hurricanes, blizzards, ice storms, floods, fires, earthquakes and explosions. These events may disrupt fuel supplies, increase fuel costs, disrupt freight shipments or routes, affect regional economies, destroy the Company’s assets, increase insurance claims. Also,costs or adversely affect the Company leases certain revenue equipment, terminals and office building facilities under non-cancelable operating leases. Daseke’s rent expense under these leases forbusiness or financial condition of its customers, any of which could adversely affect the nine months ended September 30, 2017 was approximately $17.2 million.Company’s results of operations or make such results more volatile.

At September 30, 2017, there were 17,520,332 shares of common stock issuable upon exercise of outstanding warrants.

Critical Accounting Policies

The Company’s significant accounting policies are described in Note 1 of Notes to Consolidated Financial Statements in the Company’s CurrentAnnual Report on Form 8-K/10-K/A filed on March 16, 2017.May 6, 2021. The Company considers certain of these accounting policies to be “critical” to the portrayal of the Company’s financial position and results of operations, as they require the application of significant judgment by management. As a result, they are subject to an inherent degree of uncertainty. The Company identifies and discusses these “critical” accounting policies in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of the Company’s Current reportAnnual Report on Form 8-K/10-K/A filed on March 16, 2017.May 6, 2021. Management bases its estimates and judgments on historical experience and on various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, management evaluates its estimates and judgments, including those considered “critical.” Management has discussed the development, selection and evaluation of accounting estimates, including those deemed “critical,” and the associated disclosures in this Quarterly Report on Form 10-Q with the Audit Committee of the Company’s board of directors.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in the Company’s market risk since December 31, 2016.2020. For further information on the Company’s market risk, refer to “Item 2.01. Completion of Acquisition or Disposition of Assets—Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk—7A. Quantitative and Qualitative Disclosures About Market Risk” in the Company’s CurrentAnnual Report on Form 8-K/10-K/A filed March 16, 2017.on May 6, 2021.

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Table of Contents

Item 4. Controls and Procedures

On February 27, 2017, Hennessy consummated the merger of Hennessy’s wholly-owned subsidiary, HCAC Merger Sub, Inc., with and into Daseke, Inc., with Daseke, Inc. surviving as a direct wholly-owned subsidiary of Hennessy. Upon the closing of the Business Combination on February 27, 2017, the sole business conducted by the Company is the business conducted by Daseke. Also, as a result of the Business

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Table of Contents

Combination, the internal control over financial reporting utilized by Daseke prior to the Business Combination became the internal control over financial reporting of the Company.

Evaluation of Disclosure Controls and Procedures

The Company carried outAs of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s management conducted an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officerprincipal executive and Chief Financial Officer,principal financial officers, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that 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 not effective as of SeptemberJune 30, 2017.2021 due to material weaknesses in internal control over financial reporting that were disclosed in our Amendment No. 2 to our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2020. 

Changes in Internal Control over Financial Reporting

There werehave been no changes in the Company’sour internal control over financial reporting (as defined in RuleRules 13a-15(f) or 15d-15(f) of the Exchange Act) that occurred during the ninethree months ended SeptemberJune 30, 20172021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Table of Contents

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company is party to a variety of legal proceedingsand its subsidiaries are involved in litigation and claims primarily arising in the normal course of business. Whilebusiness, which include claims for personal injury or property damage incurred in the resultstransportation of these proceedings cannot be predicted with certainty,freight. Based on its knowledge of the final outcomefacts and, in certain cases, advice of these proceedings areoutside counsel, the Company believes the resolution of claims and pending litigation will not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows.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 Amendment No. 2 to the Company’s CurrentAnnual Report on Form 8-K filed on March 3, 2017, as amended on March 16, 2017 and May 4, 2017.10-K/A for the year ended December 31, 2020.

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

DuringThe following table provides information about our repurchases of Common Stock during the three months ended SeptemberJune 30, 2017, in connection with, and as partial consideration for, certain acquisitions,2021:

ISSUER PURCHASES OF EQUITY SECURITIES

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)

 

 

Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs(1)

 

04/01/2021 to 04/30/2021

 

 

—

 

 

$

—

 

 

 

—

 

 

 

3,000,000

 

05/01/2021 to 05/31/2021

 

 

452,793

 

 

$

6.74

 

 

 

452,793

 

 

 

2,547,207

 

06/01/2021 to 06/30/2021

 

 

1,064,830

 

 

$

7.04

 

 

 

1,064,830

 

 

 

1,482,377

 

Total

 

 

1,517,623

 

 

$

6.95

 

 

 

1,517,623

 

 

 

 

(1)
On March 22, 2021, we announced that our Board of Directors approved a stock repurchase program (the Stock Repurchase Program) pursuant to which the Company issuedis authorized to repurchase up to three million shares of our common stock, that were not registeredpar value $0.0001 per share (Common Stock). Repurchases under the Securities ActStock 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 all shares have been repurchased under the Stock Repurchase Program or, if earlier, until our Board of 1933, as amended (the Securities Act), in reliance onDirectors suspends or discontinues the private offering exemptionStock Repurchase Program, which could occur at any time without prior notice. As of Section 4(a)(2) of the Securities Act or the private offering safe harbor provision of Rule 506 of Regulation D promulgated thereunder based on the following factors: (i) the number of offerees or purchasers, as applicable, (ii) the absence of general solicitation, (iii) investment representations obtained from those receivingJune 30, 2021, 1,517,623 shares of Common Stock have been repurchased under the Company’s common stock, including with respect to their status as accredited investors, (iv)Stock Repurchase Program. As of July 30, 2021, all 3,000,000 shares of Common Stock have been repurchased under the provision of appropriate disclosure,Stock Repurchase Program and (v)no additional shares may be repurchased under the placement of restrictive legends on the certificates reflecting the securities. For additional information, see Note 3 of Notes to Consolidated Financial Statements.

53

Stock Repurchase Program.

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Table of Contents

Item 6. Exhibits

EXHIBIT INDEX

Exhibit No.

Exhibit

3.1

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).

3.3

10.1+

Bylaws (incorporated by reference to Exhibit 3.3 to the registrant’s registration statement on Form S-1 (File No. 333-205152) filed by the registrant on June 22, 2015).

10.1

Amendment No. 1 to Term Loan Agreement, dated as of August 16, 2017, among Daseke Companies, Inc., Daseke, Inc., Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the registrant on August 22, 2017).

10.2* 

FirstFifth Amendment to Fifth Amended and Restated Revolving Credit and Security Agreement, dated as of August 31, 2017,April 29, 2021, by and among Daseke, Inc.the registrant, Daseke Companies, Inc., and each of itsthe registrant’s other subsidiaries party thereto, the lendersfinancial institutions party thereto as lenders and PNC Bank, National Association.Association, as agent for the lenders (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed by the registrant on April 30, 2021).

10.2*

Daseke, Inc. 2017 Omnibus Incentive Plan, as amended and restated on June 18, 2021.

31.1*

10.3*

Form of Restricted Stock Unit Award Agreement of the registrant.

10.4*

Form of Performance Stock Unit Award Agreement of the registrant.

10.5*

Form of Restricted Stock Unit Award Agreement (Non-Employee Directors) of 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.

_____________________________

*

Filed herewith.

**104

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

*

Filed herewith.

**

Furnished herewith.

+

Schedules and similar attachments have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby undertakes to furnish supplementally copies of any of the omitted schedules and attachments upon request by the SEC; provided, however, that the Company may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any schedules and attachments so furnished.

36

54

Table of Contents

SIGNATURES

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: August 3, 2021

DASEKE, INC.

Date November 9, 2017

DASEKE, INC.

By:

/s/ Jason Bates

By:Name:

/s/ R. Scott WheelerJason Bates

Name:Title:

R. Scott Wheeler

Title:

Executive Vice President and Chief Financial Officer

(On behalf of the Registrant and as the Registrant’s Principal Financial

Officer)

37

55