UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended September 30, ~~2020~~2021


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

For the transition period from ________ to _________

DASEKE, INC.

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		001-37509 (Commission File Number)		47-3913221 (IRS Employer Identification No.)


15455 Dallas Parkway, Suite 550 Addison, Texas		75001
(Address of Principal Executive Offices)		(Zip Code)

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

Not applicable

~~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 ~~Capital~~ Stock Market LLC
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 þ No ◻☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).Yes þ 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	þ	 Accelerated filer
◻☐ Non-accelerated filer	☑	 Smaller reporting company
	☐ Emerging growth company

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

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

Common shares of the registrant outstanding at October ~~26, 2020~~22, 2021 were ~~65,023,174.~~

62,489,273.

Table of Contents

DASEKE, INC.

FORM 10-Q

For the Quarterly Period Ended September 30, ~~2020~~

~~INDEX~~2021

INDEX


		~~Page No.~~
		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 ~~Statement~~Statements of Changes in Stockholders' Equity		3
Consolidated Statements of Cash Flows		5
Notes to Consolidated Financial Statements		7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		3019
Item 3. Quantitative and Qualitative Disclosures About Market Risk		6035
Item 4. Controls and Procedures		6035
Part II. Other Information		6135
Item 1. Legal Proceedings		6135
Item 1A. Risk Factors		6135
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		36
Item 6. Exhibits Index		6337
Signatures		6438

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~~be identified by the use of words such as “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “believe,” “plan,” “should,” “could,” “would,” “forecast,” “seek,” “target,” “predict,” and “potential,” the negative of these terms, or other comparable terminology. Forward-looking statements may include statements about the Company’s goals; the Company’s financial strategy, liquidity and capital required for its business strategy and plans; the Company’s competition and government regulations; general economic conditions; and the Company’s future operating results.

These forward-looking statements are based on information available as of the date of this Report (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 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 the Company’s control) that could cause actual results to differ materially from the Company’s historical experience and our present expectations or projections. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, general economic and business risks, such as downturns in customers’ business cycles and disruptions in capital and credit 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~~owner operator contracted 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 key personnel; the Company’s ability to realize all of the intended benefits from recent or future acquisitions; the Company’s ability to complete recent or future divestitures successfully; seasonality and the impact of weather and other catastrophic events; fluctuations in the price or availability of diesel fuel; increased prices for, or decreases in the availability of, new revenue equipment and decreases in the value of used revenue equipment; the Company’s ability to generate sufficient cash to service all of the Company’s indebtedness and the Company’s ability to finance its capital requirements; restrictions in its existing and future debt agreements; increases in interest rates; changes in existing laws or regulations, including environmental and worker health safety laws and regulations and those relating to tax rates or taxes in general; the impact of governmental regulations and other governmental actions related to the Company and its operations; insurance and claims expenses; and litigation and governmental proceedings. For additional information regarding known material factors that could cause the Company’s actual results to differ from its projected results, please see the Company’s filings with the Securities and Exchange Commission (the SEC), particularly the section titled “Part I. Item 1A. Risk Factors” in the Company’s Annual Report on Form ~~10-K,~~10-K/A, filed with the SEC on ~~March 10, 2020, and “Part II. Item 1A. Risk Factors” in this Report.~~May 6, 2021.

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

(InDollars in millions, except per share data)

September 30,

December 31,

2020

2019
ASSETS

Current assets:




Cash and cash equivalents

$
189.8

$
95.7
Accounts receivable, net of allowance of $4.1 at September 30, 2020 and $3.5 at December 31, 2019

172.5

197.8
Drivers’ advances and other receivables

8.9

8.2
Parts supplies

3.1

3.5
Assets held for sale

0.4

—
Prepaid and other current assets

24.1

21.9
Total current assets

398.8

327.1

Property and equipment, net

379.0

439.0
Intangible assets, net

97.4

109.1
Goodwill

139.7

139.9
Right-of-use assets

127.7

95.9
Other long-term assets

33.0

29.6
Total assets

$
1,175.6

$
1,140.6

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:




Accounts payable

$
15.4

$
20.5
Accrued expenses and other liabilities

55.8

44.2
Accrued payroll, benefits and related taxes

39.9

28.2
Accrued insurance and claims

20.7

18.7
Current portion of long-term debt

55.4

59.4
Other current liabilities

52.2

48.8
Total current liabilities

239.4

219.8

Line of credit

—

1.7
Long-term debt, net of current portion

625.1

631.6
Deferred tax liabilities

69.6

69.9
Share-based payment liability

1.9

—
Other long-term liabilities

102.9

78.9
Total liabilities

1,038.9

1,001.9

Commitments and contingencies (Note 14)



Stockholders’ equity:




Series A convertible preferred stock, $0.0001 par value; 10,000,000 shares authorized; 650,000
shares issued with liquidation preference of $65.0 at September 30, 2020 and December 31, 2019

65.0

65.0
Common stock, par value $0.0001 per share; 250,000,000 shares authorized, 65,018,760 and
64,589,075 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively

—

—
Additional paid-in-capital

440.4

437.5
Accumulated deficit

(368.2)

(363.4)
Accumulated other comprehensive loss

(0.5)

(0.4)
Total stockholders’ equity

136.7

138.7
Total liabilities and stockholders’ equity

$
1,175.6

$
1,140.6


	September 30,			December 31,
	2021			2020
ASSETS
Current assets:
Cash and cash equivalents	$	143.6		$	176.2
Accounts receivable, net of allowance of $2.1 at September 30, 2021 and $3.0 at December 31, 2020		189.1			154.4
Drivers’ advances and other receivables		8.1			8.0
Other current assets		27.0			26.5
Total current assets		367.8			365.1

Property and equipment, net		394.2			402.7
Intangible assets, net		88.6			93.8
Goodwill		140.1			140.1
Right-of-use assets		114.5			121.1
Other non-current assets		4.5			4.1
Total assets	$	1,109.7		$	1,126.9

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	16.1		$	16.5
Accrued expenses and other liabilities		52.2			35.7
Accrued payroll, benefits and related taxes		38.1			29.9
Accrued insurance and claims		21.3			23.7
Current portion of long-term debt		55.7			54.0
Warrant liability		7.5			—
Operating lease liabilities		33.6			30.9
Total current liabilities		224.5			190.7

Long-term debt, net of current portion		536.2			618.6
Deferred tax liabilities		87.5			70.0
Non-current operating lease liabilities		87.7			96.0
Warrant liability		—			6.3
Other non-current liabilities		5.3			6.5
Total liabilities		941.2			988.1

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 $65.0 at September 30, 2021 and December 31, 2020		65.0			65.0
Common stock, par value $0.0001 per share; 250,000,000 shares authorized, 62,485,747 and 65,023,174 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		0			0
Additional paid-in-capital		386.2			401.6
Accumulated deficit		(282.6	)		(327.8	)
Accumulated other comprehensive loss		(0.1	)		—
Total stockholders’ equity		168.5			138.8
Total liabilities and stockholders’ equity	$	1,109.7		$	1,126.9

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

Table of Contents

DASEKE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME ~~(LOSS~~)(LOSS)

(Unaudited)

(InDollars in millions, except ~~share and~~ per share data)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019

									Three Months Ended						Nine Months Ended
									September 30,						September 30,
									2021			2020			2021			2020
Revenues:
Company freight	$	174.8	$	205.2	$	522.7	$	618.2	$	166.6		$	174.8		$	475.3		$	522.7
Owner operator freight		103.3		118.3		307.1		351.1		131.1			103.3			365.3			307.1
Brokerage		65.2		78.6		184.8		222.8		81.9			65.2			197.1			184.8
Logistics		9.9		13.5		28.8		39.0		9.7			9.9			28.9			28.8
Fuel surcharge		22.6		34.8		75.1		102.9		35.3			22.6			95.9			75.1
Total revenue		375.8		450.4		1,118.5		1,334.0		424.6			375.8			1,162.5			1,118.5


Operating expenses:
Salaries, wages and employee benefits		95.8		127.7		305.6		371.1		96.6			95.8			280.7			305.6
Fuel		20.2		34.1		67.1		105.3		26.8			20.2			79.1			67.1
Operations and maintenance		45.5		56.8		136.4		164.7		40.5			45.5			108.1			136.4
Communications		0.9		1.0		2.8		3.2		0.9			0.9			3.1			2.8
Purchased freight		127.9		155.5		374.3		458.5		167.5			127.9			444.2			374.3
Administrative expenses		12.6		21.4		50.0		54.7		17.0			12.6			46.2			50.0
Sales and marketing		0.3		1.3		1.3		3.8		0.5			0.3			1.5			1.3
Taxes and licenses		3.9		4.8		12.4		14.7		3.5			3.9			11.2			12.4
Insurance and claims		16.3		13.4		46.9		38.1		13.9			16.3			40.6			46.9
Depreciation and amortization		22.3		38.3		71.4		119.5		22.3			22.3			66.7			71.4
Gain on disposition of property and equipment		(3.1)		(1.0)		(3.9)		(2.1)		(5.4	)		(3.1	)		(13.1	)		(3.9	)
Impairment		—		306.8		13.4		306.8		0			0			0			13.4
Restructuring charges		5.1		6.9		8.6		6.9		0.1			5.1			0.2			8.6
Total operating expenses		347.7		767.0		1,086.3		1,645.2		384.2			347.7			1,068.5			1,086.3
Income (loss) from operations		28.1		(316.6)		32.2		(311.2)

Income from operations										40.4			28.1			94.0			32.2

Other expense (income):
Interest income		(0.1)		(0.3)		(0.5)		(0.7)		(0.1	)		(0.1	)		(0.2	)		(0.5	)
Interest expense		11.1		12.8		34.1		38.2		7.3			11.1			26.1			34.1
Write-off of deferred financing fees		—		2.0		—		2.0
Change in fair value of warrant liability										3.4			3.0			1.2			0.9
Other		(0.6)		—		(0.5)		(1.3)		0.2			(0.6	)		(0.6	)		(0.5	)
Total other expense		10.4		14.5		33.1		38.2		10.8			13.4			26.5			34.0


Income (loss) before income taxes		17.7		(331.1)		(0.9)		(349.4)		29.6			14.7			67.5			(1.8	)
Income tax expense (benefit)		2.0		(57.8)		0.2		(60.4)
Income tax expense										8.7			2.0			18.6			0.2
Net income (loss)		15.7		(273.3)		(1.1)		(289.0)		20.9			12.7			48.9			(2.0	)
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax of $0.0, $0.1, $(0.1) and $(0.2), respectively		0.2		(0.2)		(0.1)		0.3
Foreign currency translation adjustments, net of tax of $0.0, $0.1, $0.0 and $(0.1), respectively										(0.5	)		0.2			(0.1	)		(0.1	)
Comprehensive income (loss)	$	15.9	$	(273.5)	$	(1.2)	$	(288.7)	$	20.4		$	12.9		$	48.8		$	(2.1	)


Net income (loss)	$	15.7	$	(273.3)	$	(1.1)	$	(289.0)	$	20.9		$	12.7		$	48.9		$	(2.0	)
Less dividends to Series A convertible preferred stockholders		(1.2)		(1.2)		(3.7)		(3.7)		(1.2	)		(1.2	)		(3.7	)		(3.7	)
Net income (loss) attributable to common stockholders	$	14.5	$	(274.5)	$	(4.8)	$	(292.7)	$	19.7		$	11.5		$	45.2		$	(5.7	)
Net income (loss) per common share:
Income (loss) per common share:
Basic	$	0.22	$	(4.25)	$	(0.07)	$	(4.54)	$	0.31		$	0.17		$	0.70		$	(0.09	)
Diluted	$	0.22	$	(4.25)	$	(0.07)	$	(4.54)	$	0.30		$	0.17		$	0.68		$	(0.09	)
Weighted-average common shares outstanding:
Basic		64,823,973		64,583,275		64,692,039		64,525,777		62,583,115			64,823,973			64,159,551			64,692,039
Diluted		71,700,156		64,583,275		64,692,039		64,525,777		70,000,603			71,700,156			71,207,581			64,692,039
Dividends declared per Series A convertible preferred share	$	1.91	$	1.91	$	5.72	$	5.72	$	1.91		$	1.91		$	5.72		$	5.72

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

Table of Contents

DASEKE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

Nine Months Ended September 30, ~~2020~~

~~(Unaudited)~~

~~(In millions, except share data)~~2021

(Unaudited)

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

$
—

$
437.5

$
(363.4)

$
(0.4)

$
138.7
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

—

—

—

—

—

(17.3)

—

(17.3)
Balance at March 31, 2020

650,000

$
65.0

64,598,025

$
—

$
438.4

$
(381.9)

$
(0.9)

$
120.6
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

—

—

—

—

—

0.5

—

0.5
Balance at June 30, 2020

650,000

$
65.0

64,727,425

$
—

$
439.4

$
(382.7)

$
(0.7)

$
121.0
Vesting of restricted stock units

—

—

291,334

—

—

—

—

—
Exercise of warrant

—

—

1

—

—

—

—

—
Series A convertible preferred stock dividend

—

—

—

—

—

(1.2)

—

(1.2)
Stock-based compensation expense

—

—

—

—

1.0

—

—

1.0
Foreign currency translation adjustments

—

—

—

—

—

—

0.2

0.2
Net income

—

—

—

—

—

15.7

—

15.7
Balance at September 30, 2020

650,000

$
65.0

65,018,760

$
—

$
440.4

$
(368.2)

$
(0.5)

$
136.7

(Dollars in millions)

Series A Convertible

Accumulated

Preferred Stock

Common Stock

Other

Par

Additional

Accumulated

Comprehensive

Shares

Amount

Shares

Value

Paid-In Capital

Deficit

Income (Loss)

Total

Balance at January 1, 2021

650,000

$
65.0

65,023,174

$
—

$
401.6

$
(327.8
)

$
—

$
138.8

Exercise of options

—

—

149,545

—

0.6

—

—

0.6

Vesting of restricted stock units

—

—

5,737

—

(0.8
)

—

—

(0.8
)
Series A convertible preferred stock dividend

—

—

—

—

—

(1.2
)

—

(1.2
)
Stock-based compensation expense

—

—

—

—

1.4

—

—

1.4

Foreign currency translation adjustments

—

—

—

—

—

—

0.2

0.2

Net loss

—

—

—

—

—

(7.3
)

—

(7.3
)
Balance at March 31, 2021

650,000

$
65.0

65,178,456

$
—

$
402.8

$
(336.3
)

$
0.2

$
131.7

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

Exercise of options

—

—

8,000

—

(0.1
)

—

—

(0.1
)
Vesting of restricted stock units

—

—

155,690

—

(0.9
)

—

—

(0.9
)
Series A convertible preferred stock dividend

—

—

—

—

—

(1.2
)

—

(1.2
)
Common stock repurchased and retired

—

—

(1,482,377
)

—

(9.8
)

—

—

(9.8
)
Stock-based compensation expense

—

—

—

—

2.1

—

—

2.1

Foreign currency translation adjustments

—

—

—

—

—

—

(0.5
)

(0.5
)
Net income

—

—

—

—

—

20.9

—

20.9

Balance at September 30, 2021

650,000

$
65.0

62,485,747

$
—

$
386.2

$
(282.6
)

$
(0.1
)

$
168.5

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

Table of Contents

DASEKE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

Nine Months Ended September 30, ~~2019~~

~~(Unaudited)~~

~~(In millions, except share data)~~

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, 2019

650,000

$
65.0

64,455,174

$
—

$
433.9

$
(51.0)

$
(0.9)

$
447.0
Vesting of restricted stock units

—

—

14,498

—

—

—

—

—
Series A convertible preferred stock dividend

—

—

—

—

—

(1.2)

—

(1.2)
Stock-based compensation expense

—

—

—

—

1.0

—

—

1.0
Foreign currency translation adjustments

—

—

—

—

—

—

0.1

0.1
Net loss

—

—

—

—

—

(9.3)

—

(9.3)
Balance at March 31, 2019

650,000

$
65.0

64,469,672

$
—

$
434.9

$
(61.5)

$
(0.8)

$
437.6
Vesting of restricted stock units

—

—

110,321

—

(0.2)

—

—

(0.2)
Series A convertible preferred stock dividend

—

—

—

—

—

(1.3)

—

(1.3)
Stock-based compensation expense

—

—

—

—

0.9

—

—

0.9
Foreign currency translation adjustments

—

—

—

—

—

—

0.4

0.4
Net loss

—

—

—

—

—

(6.4)

—

(6.4)
Balance at June 30, 2019

650,000

$
65.0

64,579,993

$
—

$
435.6

$
(69.2)

$
(0.4)

$
431.0
Vesting of restricted stock units

—

—

3,282

—

—

—

—

—
Series A convertible preferred stock dividend

—

—

—

—

—

(1.2)

—

(1.2)
Stock-based compensation expense

—

—

—

—

1.0

—

—

1.0
Foreign currency translation adjustments

—

—

—

—

—

—

(0.2)

(0.2)
Net loss

—

—

—

—

—

(273.3)

—

(273.3)
Balance at September 30, 2019

650,000

$
65.0

64,583,275

$
—

$
436.6

$
(343.7)

$
(0.6)

$
157.3

2020

(Unaudited)

(Dollars in millions)

Series A Convertible

Accumulated

Preferred Stock

Common Stock

Other

Par

Additional

Accumulated

Comprehensive

Shares

Amount

Shares

Value

Paid-In Capital

Deficit

Income (Loss)

Total

Balance at January 1, 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

Vesting of restricted stock units

—

—

291,334

—

—

—

—

—

Exercise of warrant

—

—

1

—

—

—

—

—

Series A convertible preferred stock dividend

—

—

—

—

—

(1.2
)

—

(1.2
)
Stock-based compensation expense

—

—

—

—

1.0

—

—

1.0

Foreign currency translation adjustments

—

—

—

—

—

—

0.2

0.2

Net income

—

—

—

—

—

12.7

—

12.7

Balance at September 30, 2020

650,000

$
65.0

65,018,760

$
—

$
399.8

$
(332.7
)

$
(0.5
)

$
131.6

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

Table of Contents

DASEKE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in millions)


	Nine Months Ended
	September 30,
	2020		2019

					Nine Months Ended
					September 30,
					2021			2020
Cash flows from operating activities
Net loss	$	(1.1)	$	(289.0)
Adjustments to reconcile net loss to net cash provided by operating activities
Net income (loss)					$	48.9		$	(2.0	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation		65.9		107.1		61.5			65.9
Amortization of intangible assets		5.5		12.4		5.2			5.5
Amortization of deferred financing fees		3.2		2.4		1.4			3.2
Non-cash operating lease expense		0.2		19.7		1.0			0.2
Change in fair value of warrant liability						1.2			0.9
Write-off of deferred financing fees		—		2.0		1.2			0
Stock-based compensation expense		4.9		2.9		5.3			4.9
Deferred taxes		0.2		(60.4)		17.5			0.2
Bad debt expense		1.2		2.7
Bad debt (recovery) expense						(0.3	)		1.2
Gain on disposition of property and equipment		(3.9)		(2.1)		(13.1	)		(3.9	)
Impairment		13.4		306.8		0			13.4
Restructuring charges		0		6.9
Changes in operating assets and liabilities
Accounts receivable		23.8		(23.5)		(34.5	)		23.8
Drivers’ advances and other receivables		(0.7)		(2.4)		0.4			(0.7	)
Prepaid and other current assets		(8.9)		(2.3)
Other current assets						(0.7	)		(8.9	)
Accounts payable		(5.1)		1.8		(0.4	)		(5.1	)
Accrued expenses and other liabilities		23.8		4.4		21.1			23.8
Net cash provided by operating activities		122.4		89.4		115.7			122.4


Cash flows from investing activities
Purchases of property and equipment		(18.0)		(17.4)		(34.2	)		(18.0	)
Proceeds from sale of property and equipment		52.0		23.8		47.9			52.0
Net cash provided by investing activities		34.0		6.4		13.7			34.0


Cash flows from financing activities:
Advances on line of credit		1,111.2		980.8		1,202.1			1,111.2
Repayments on line of credit		(1,112.9)		(980.8)		(1,202.1	)		(1,112.9	)
Principal payments on long-term debt		(57.3)		(57.8)		(232.3	)		(57.3	)
Deferred financing fees		—		(0.4)
Proceeds from long-term debt						97.5			0
Payments of deferred financing fees						(3.4	)		0
Repurchases of common stock						(20.4	)		0
Exercise of options, net						0.4			0
Series A convertible preferred stock dividends		(3.7)		(3.7)		(3.7	)		(3.7	)
Net cash used in financing activities		(62.7)		(61.9)		(161.9	)		(62.7	)


Effect of exchange rates on cash and cash equivalents		0.4		(0.3)		(0.1	)		0.4

Net increase in cash and cash equivalents		94.1		33.6

Net increase (decrease) in cash and cash equivalents						(32.6	)		94.1
Cash and cash equivalents – beginning of period		95.7		46.0		176.2			95.7
Cash and cash equivalents – end of period	$	189.8	$	79.6	$	143.6		$	189.8

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

Table of Contents

DASEKE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS – (Continued)

(Unaudited)

(Dollars in millions)


	Nine Months Ended
	September 30,
	2020		2019

					Nine Months Ended
					September 30,
					2021		2020
Supplemental disclosure of cash flow information
Cash paid for interest	$	30.8	$	35.6	$	22.4	$	30.8
Cash paid for income taxes	$	3.0	$	1.6	$	4.7	$	3.0


Noncash investing and financing activities
Property and equipment acquired with debt or finance lease obligations	$	45.4	$	65.6	$	55.0	$	45.4
Property and equipment sold for notes receivable	$	0.3	$	0.4	$	0.5	$	0.3
Right-of-use assets acquired	$	53.5	$	33.5	$	21.4	$	53.5

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

Table of Contents

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

Nature of Operations

Daseke, Inc.’s (the Company or Daseke) wholly-owned subsidiary Daseke Companies, Inc., was incorporated in December 2008 and began operations on January 1, 2009. Daseke is ~~engaged in full service open-deck trucking that focuses primarily in~~the premier North American transportation solutions specialist dedicated to servicing challenging industrial end-markets through experienced people, a fleet of more than 4,500 tractors and 11,000 flatbed ~~truckload~~ and ~~heavy haul transportation of~~ specialized ~~items~~trailers, and has operations throughout the United States, Canada and Mexico. The Company also provides logistical planning and warehousing services to customers. The Company is subject to regulation by the Department of Transportation, the Department of Defense, the Department of Energy, and various state regulatory authorities in the United States. The Company is also subject to regulation by the Ministries of Transportation and Communications and various provincial regulatory authorities in Canada.

Basis of Presentation

These interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ~~(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 months ended September 30, ~~2020~~2021 are not necessarily indicative of the results that may be expected for the year ended December 31, ~~2020.~~2021.

The consolidated balance sheet as of December 31, ~~2019~~2020 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, ~~2019~~2020 as set forth in the Company’s ~~Annual Report on Form 10-K, filed with the SEC on March 10, 2020.~~

Amended 10-K.

Certain items have been reclassified for presentation purposes to conform to the accounting policies of the consolidated entity. These reclassifications had no material impact on income from operations, net income (loss) and comprehensive income (loss), the balance sheets or statements of cash flows.

~~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.

~~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, 2020 and December 31, 2019, the balance of deferred finance charges was $8.2 million and $11.4 million, respectively, which is included as a reduction of long-term debt, net of current portion in the consolidated balance sheets. Amortization expense was $1.1 million and $0.9 million for the three months ended September 30, 2020 and 2019, and $3.2 million and $2.4 million for the nine months ended September 30, 2020 and 2019, respectively. Amortization of deferred financing fees is included in interest expense in the consolidated statements of operations and comprehensive income (loss).

~~Impairment of Long-Lived Assets~~

Long-lived assets are reviewed for impairment at the asset group level whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If the sum of the expected future undiscounted cash flow is less than the carrying amount of the asset, an impairment is indicated. A loss is then recognized for the difference, if any, between the fair value of the asset (as estimated by management using its best judgment) and the carrying value of the asset. If actual market value is less favorable than that estimated by management, additional write-downs may be required. In the nine months ended September 30, 2020, the Company recognized asset impairments, which are more fully described in Note 3. In the nine months ended September 30, 2019, the Company recognized asset impairments, which are

~~Table of Contents~~

~~more fully described in Notes 2, 5 and 7.~~

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.

~~Contingent Consideration~~

The ~~contingent consideration liabilities, included in other current liabilities~~Company may be required, on a non-recurring basis, to adjust the ~~consolidated balance sheets, represent future payment obligations for certain EBITDA thresholds related to~~carrying value of the Company’s ~~acquisitions over a defined period of time.~~property and equipment, intangible assets and goodwill. 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 contingent consideration liabilities are~~Public Warrants is determined using ~~estimates based on discount rates that reflect~~ the ~~risk involved and the projected EBITDA~~closing price of the ~~acquired businesses, therefore~~warrants on the ~~liabilities are classified within Level 3~~NASDAQ market. The fair value of the Private Placement Warrants is determined using the Black-Scholes option pricing formula. The primary unobservable input utilized in determining the fair value ~~framework.~~of the Private Warrants is the expected volatility. The ~~balance~~expected volatility was estimated considering observable Daseke public warrant pricing, Daseke’s own historical volatility and the volatility of ~~contingent consideration as~~guideline public companies.

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


	Fair value as of September 30, 2021
Liabilities:	Level 1		Level 2		Level 3		Total
Warrant liability	$	4.3	$	—	$	3.2	$	7.5
Total fair value	$	4.3	$	—	$	3.2	$	7.5

Table of ~~September 30, 2020 and December 31, 2019 was $21.2 million and $21.5 million, respectively.~~ 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 table below is a summary of the changes in the fair value of ~~this~~the warrant liability within the Level 3 fair value hierarchy for the nine months ended September 30, ~~2020 and 2019~~2021 (in millions)~~. The balance as of September 30, 2020 relates to the Aveda earnout discussed in Note 1 and Note 4 of the Company’s 2019 Annual Report on Form 10-K.~~

Nine Months Ended

September 30,

2020

2019
Balance at beginning of period

$
21.5

$
21.9
Change in fair value

(0.3)

(0.4)
Balance at end of period

$
21.2

$
21.5

~~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 and comprehensive income (loss). 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. For equity-classified awards, expected volatility is calculated using an index of publicly traded peer companies. For liability-classified awards, expected volatility is calculated using split and dividend adjusted closing stock prices over a lookback period commensurate with the remaining term of each award.

Fair values of non-vested 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.

Fair values of performance stock units are estimated using the Monte Carlo valuation model in a risk-neutral framework to model future stock price movements based upon highly subjective assumptions, including historical volatility, risk-free rates of return and the stock price simulated over the performance period. The risk-free interest rate is based on the interpolated constant maturity treasury curve for the

~~Table of Contents~~

~~performance period. Expected volatility is calculated using annualized historical volatility with a lookback period equal to the remaining performance period.~~

~~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 had 12 operating segments as of September 30, 2020 and 16 operating segments as of September 30, 2019 that are aggregated into 2 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 income (loss).

~~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 (Topic 815). The Company classifies as equity any contract that (i) requires 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 contract that (i) requires 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.~~

~~Foreign Currency Gains and Losses~~

The functional currency for all operations except Canada is the U.S. dollar. 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. 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 and comprehensive income (loss) of the foreign operating company as a component of foreign exchange gain or loss.

~~Revenue and Expense Recognition~~

The Company’s revenue and related costs are recognized when the Company satisfies its performance obligation(s) transferring goods or services to the customer and the customer obtains control of such goods and services. With respect to freight, brokerage, logistics and fuel surcharge revenue, these conditions are met, and the Company recognizes company freight, owner operator freight, brokerage and fuel surcharge revenue, over time, and logistics revenue, as the services are provided. While the Company may enter into master service agreements with its customers, a contract is not established until the customer specifically requests the Company’s services and the Company accepts.

The Company evaluates each contract for distinct performance obligations. In the Company’s business, a typical performance obligation is the transportation of a load including any highly interrelated ancillary services.

~~Table of Contents~~

The Company predominantly estimates the standalone selling price of its services based upon observable evidence, market conditions and other relevant inputs. The Company allocates the total transaction price to each distinct performance obligation based upon the relative standalone selling prices.

The Company’s customers simultaneously receive and consume the benefits of the Company’s contracts; therefore, revenue is recognized over time. This is a faithful depiction of the satisfaction of the performance obligation, as the customer does not need to re-perform the transportation services the Company has provided to date.

~~Generally, the Company’s customers are billed upon delivery of the freight or monthly and remit payment according to the approved payment terms.~~

~~Freight Revenue~~

Freight revenue is generated by hauling customer freight using company owned equipment (company freight) and owner-operator equipment (owner-operator freight). Freight revenue is the product of the number of revenue-generating miles driven and the rate per mile received from customers plus accessorial charges, such as loading and unloading freight, cargo protection, fees for detained equipment or fees for route planning and supervision.

~~Brokerage Revenue~~

The Company regularly engages third-party capacity providers to haul loads. The Company is primarily responsible for fulfilling the promise to provide load transportation services, and has discretion in setting prices, along with the risk to fulfill the contract to the customer. Based upon this evaluation, the Company has determined that it is the principal and therefore, records gross revenues and expenses for brokerage services.

~~Logistics Revenue~~

~~Fuel Surcharge~~

Fuel surcharge revenue compensates the Company for fuel costs above a certain cost per gallon base. Generally, the Company receives fuel surcharges on the miles for which it is compensated by customers.

~~Practical expedients~~

~~The Company has designated the following preference and practical expedients:~~

●

To not disclose remaining performance obligations when the expected performance obligation duration is one year or less. The vast majority of the Company’s services transfer control within a month of the inception of the contract with select specialized loads taking several months to allow for increased planning and permitting.

●

~~Recognize the incremental costs of obtaining or fulfilling a contract as an expense when incurred, as the amortization period of a potential asset would be recognized in one year or less.~~

●

~~Exclude taxes collected on behalf of government authorities from the Company’s measurement of transaction prices. Tax amounts are not included within net income (loss) or cost of sales.~~

~~Table of Contents~~


	Nine Months Ended
	September 30, 2021
Balance at beginning of period	$	2.7
Change in fair value		0.5
Balance at end of period	$	3.2

~~Lease Accounting~~

~~Lessee~~

The Company has capitalized operating and finance leases for various real estate including corporate offices, trucking facilities and terminals, warehouses, and tractor parking as well as various types of equipment including tractors, trailers, forklifts, and office equipment. New real estate lease agreements will typically have ~~initialterms~~ ~~between 3 to 15 years and new equipment lease agreements will typically~~ ~~have~~ ~~initial~~ ~~terms~~ of 3 to 9 years. Leases with an initial term of 12 months or less (short term leases) across all asset classes are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term.

~~Some of the Company’s leases include one or more options to renew, with renewals that can extend the~~ ~~lease~~ ~~term~~ ~~from~~ 1 to 5 years. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The exercise of lease renewal options is at the Company’s sole discretion. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Rights and obligations related to lease agreements the Company has signed but that have not yet commenced are not material. The Company has certain lease agreements related to its revenue equipment that contain residual value guarantees. These residual value guarantees require the Company to return the revenue equipment at the end of the lease term in a certain condition as specified by the lessor in the lease agreement.

The Company determines whether an arrangement is classified as a lease at inception. The right-of-use assets and lease liabilities relating to operating leases are included in right-of-use assets, other current liabilities, and other long-term liabilities on the Company's consolidated balance sheets. The right-of-use assets and lease liabilities relating to finance leases are included in other long-term assets, current portion of long-term debt, and long-term debt, net of current portion on the Company's consolidated balance sheets. The Company's right-of-use assets represent its right to use the underlying assets for the lease term and the Company's right-of-use liabilities represent its obligation to make lease payments arising from the leases. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company's capitalized operating lease agreements generally do not provide an implicit rate. The Company developed an incremental borrowing rate based on the information available at the commencement date regarding the interest rate applicable to collateralized borrowings for a period similar to the original lease period. The incremental borrowing rates were used in determining the present value of lease payments which is reflected as the lease liability.

~~Lessor~~

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

The Company recorded depreciation expense of $4.4 million and $5.7 million for the three months ended September 30, 2020 and 2019, $12.7 million and $16.4 million for the nine months ended September 30, 2020 and 2019 on its assets leased under operating leases, respectively. Lease income from lease payments related to the Company's operating leases for the three months ended September 30, 2020 and 2019, was $6.1 million and $6.5 million, and for the nine months ended September 30, 2020 and 2019 was $18.5 million and $18.0 million, respectively.

~~The Company has designated the following preferences and practical expedients:~~

●

~~Adopt the land easement practical expedient;~~

●

~~To not separate the non-lease components of a contract from the lease component for its office equipment asset class;~~

●

~~To not apply the recognition requirements to leases with terms of twelve months or less; and~~

●

~~To apply the portfolio approach in determination of the incremental borrowing rate.~~

~~Table of Contents~~

~~New~~Recently Issued Accounting Pronouncements

In August 2020, the FASB issued ASU 2020-06 – Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The guidance simplifies the accounting for convertible debt and convertible preferred stock by removing the requirements to separately present certain conversion features in equity. In addition, the amendments also simplify the guidance in ASC Subtopic 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity, by removing certain criteria that must be satisfied in order to classify a contract as equity, which is expected to decrease the number of freestanding instruments and embedded derivatives accounted for as assets or liabilities. Finally, the amendments revise the guidance on calculating earnings per share, requiring use of the if-converted method for all convertible instruments and rescinding an entity’s ability to rebut the presumption of share settlement for instruments that may be settled in cash or other assets. The amendments are effective for the Company for fiscal years beginning after December 15, 2021. 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. ~~The Company~~ ASU 2020-06 is ~~currently evaluating~~not expected to have a material impact on the ~~impact of this new guidance.~~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, 2022. ~~The Company~~ ASU 2020-04 is ~~currently evaluating its contracts and~~not expected to have a material impact on the ~~optional expedients provided by the new standard.~~

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 2019-12eliminate 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 2019-12also 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~~.2022. Early adoption is permitted, including adoption in any interim period. ~~The Company~~ ASU 2019-12 is ~~currently evaluating~~not expected to have a material 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 sets forth a “current expected credit loss” (CECL) model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets, including trade receivables. The new standard will become effective for the Company beginning with the first quarter 2023 and is not expected to have a material impact on the Company’s consolidated financial statements.

12Lease Income

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

Table of Contents

~~NOTE 2 – LEASES~~

~~Lessee~~

~~The following table reflects~~Lease income from lease payments related to these operating leases for the ~~Company’s components of~~three and nine months ended September 30, 2021 was $7.6 million and $20.7 million, respectively. Lease income from lease ~~expenses~~payments related to these operating leases for the three and nine months ended September 30, 2020 was $6.1 million and ~~2019 (in millions):~~$18.5 million, respectively.

NOTE 2 – OTHER CURRENT ASSETS

Three Months Ended September 30,

Nine Months Ended September 30,

Classification

2020

2019

2020

2019
Operating lease cost

Revenue equipment

Operations and maintenance

$
6.5

$
2.8

$
19.5

$
16.3
Real estate

Administrative expense

4.1

1.1

11.6

10.2
Total operating lease cost

$
10.6

$
3.9

$
31.1

$
26.5

Finance lease cost

Amortization of right-of-use assets

Depreciation and amortization

$
1.5

$
1.5

$
4.5

$
3.9
Interest on lease liabilities

Interest expense

0.4

0.2

0.9

0.7
Total finance lease cost

$
1.9

$
1.7

$
5.4

$
4.6

Total lease cost^(a)

$
12.5

$
5.6

$
36.5

$
31.1

~~(a)~~

~~Short-term lease expense and variable lease expense are immaterial.~~

The Company follows ASC 360, “Impairment or Disposal of Long-Lived Assets” guidance to determine whether right-of-use assets relating to operating and finance leases are impaired. The Company recorded impairment charges of $3.2 million to right-of-use assets relating to operating leases for the nine months ended September 30, 2020 in connection with the planned divestiture of Aveda Transportation and Energy Services Inc. (Aveda). See Note 3 for details. The Company recorded impairment charges of $10.0 million to right-of-use assets relating to operating leases and $0.7 million to right-of-use assets relating to finance leases for the three and nine months ended September 30, 2019. See Note 5 for discussion on impairment charges.

The components of ~~assets and liabilities for operating and finance leases are as follows as of September 30, 2020 and December 31, 2019 (in millions):~~

September 30,

December 31,

Classification

2020

2019
Assets

Capitalized operating lease right-of-use assets

Right-of-use assets

$
127.7

$
95.9
Finance lease right-of-use assets

Other long-term assets

28.7

25.3
Total lease assets

$
156.4

$
121.2

Liabilities

Capitalized operating lease liabilities:

Current

Other current liabilities

$
31.0

$
27.3
Non-current

Other long-term liabilities

102.9

77.8
Total capitalized operating lease liabilities

$
133.9

105.1

Finance lease liabilities:

Current

Current portion of long-term debt

$
7.6

6.2
Non-current

Long-term debt, net of current portion

22.2

19.3
Total finance lease liabilities

$
29.8

25.5

Total lease liabilities

$
163.7

$
130.6

~~Table of Contents~~

~~The following table is a summary of supplemental cash flows related to leases for the nine months ended September 30, 2020 and 2019 (in millions):~~

Nine Months Ended September 30,

2020

2019
Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from capitalized operating leases

$
(28.7)

$
(26.0)
Operating cash flows from finance leases

(0.9)

(0.6)
Financing cash flows from finance leases

(5.1)

(4.4)
Right-of-use assets obtained in exchange for lease obligations:

Capitalized operating lease right-of-use assets

$
53.5

$
33.5
Finance lease right-of-use assets

7.5

10.8

~~The following table is the future payments on leases as of September 30, 2020 (in millions):~~

Capitalized

Operating

Finance

Year ending December 31,

leases

leases

Total
2020⁽¹⁾

$
9.3

$
3.6

$
12.9
2021

35.8

8.5

44.3
2022

31.9

6.5

38.4
2023

26.0

7.0

33.0
2024

15.0

4.3

19.3
Thereafter

36.2

2.0

38.2
Total lease payments

154.2

31.9

186.1
Less: interest

(20.3)

(2.1)

(22.4)
Present value of lease liabilities

$
133.9

$
29.8

$
163.7

~~(1)~~

~~Three months ending December 31, 2020~~

~~The following table is a summary of weighted average lease terms and discount rates for leases as of September 30, 2020 and December 31, 2019:~~

September 30,

December 31,


2020

2019

Weighted-average remaining lease term (years)

Capitalized operating leases

5.71

5.01

Finance leases

3.63

3.83

Weighted-average discount rate

Capitalized operating leases

5.05
%

5.54
%
Finance leases

4.39
%

4.51
%

~~Lessor~~

~~The following table is the future minimum receipts on leases as of September 30, 2020 (in millions):~~

Twelve months ending September 30,

Amount
2021

$
23.2
2022

18.0
2023

11.5
2024

6.3
2025

3.2
Thereafter

0.7
Total minimum lease receipts

$
62.9

~~Table of Contents~~

~~NOTE 3 – PLANNED DIVESTITURE OF AVEDA~~

As part of the overall operational and cost improvement plan of the Company, management and the board of directors evaluated how the Aveda business fits into the overall business strategy. In March 2020, the Company’s board of directors approved a plan for the sale of certain Aveda terminals located in Texas and Oklahoma.

The planned divestiture does not meet the quantitative and qualitative criteria to be classified as discontinued operations. As a result, the Aveda operations will continue to be reported in the Specialized Solutions segment results until the sale is finalized.

Effective with the designation as held for sale on March 31, 2020, the Company discontinued recording depreciation on property and equipment of this business and performed an impairment analysis of long-lived assets, as required by ASC 350 and 360. As a result of the analysis, 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 tradename intangible assets of $6.2 million.

During the second quarter of 2020, the Company sold the majority of the assets that were previously classified as held for sale for $24.6 million and recognized a loss on the sale of $1.2 million, which is included in gain (loss) on disposition of property and equipment. During the third quarter of 2020, the Company recognized a loss on the sale of $0.1 million, which is included in gain (loss) on disposition of property and equipment. The Company had $0.4 million of property and equipment classified as held for sale at September 30, 2020.

~~NOTE 4 – PREPAID AND OTHER CURRENT ASSETS~~

~~The components of prepaid expenses and~~ other current assets are as follows as of September 30, ~~2020~~2021 and December 31, ~~2019 (in millions):~~

September 30,

December 31,

2020

2019
Insurance

$
13.3

$
10.1
Licensing, permits and tolls

4.7

5.4
Other assets

2.1

3.1
Other prepaids

2.0

1.7
Highway and fuel taxes

2.0

1.6

$
24.1

$
21.9

~~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 1 or when impairment indicators arise. NaN goodwill impairments were recorded during the nine months ended September 30, 2020. During the third quarter of 2019, the Company identified a triggering event following the announcement of Project Synchronize, BIP, Project Pivot and the decline of the Company’s stock price. As a result, the Company completed goodwill impairment and assets impairment analyses as of September 30, 2019 (~~see Note 7 for additional details)~~. The result of the goodwill impairment analysis prepared in the third quarter of 2019 was a non-cash goodwill impairment charge of $112.8 million, of which $105.0 million is not deductible for tax purposes. Goodwill impairment is recorded in impairment in the consolidated statements of operations and comprehensive income (loss).

~~The summary of changes in goodwill follows for the nine months ended September 30,~~ 2020 (in millions):

Flatbed

Specialized

Total
Goodwill balance at December 31, 2019

$
59.3

$
80.6

$
139.9
Foreign currency translation adjustment

—

(0.2)

(0.2)
Goodwill balance at September 30, 2020

$
59.3

$
80.4

$
139.7


	September 30,		December 31,
	2021		2020
Insurance	$	7.9	$	12.0
Licensing, permits and tolls		4.7		4.9
Parts supplies		3.5		3.1
Highway and fuel taxes		5.7		1.1
Other prepaids		1.9		3.2
Other assets		1.7		0.6
Income tax receivable		1.6		1.6
	$	27.0	$	26.5

~~Table of Contents~~

~~Intangible assets consisted of the following as of September 30, 2020 and December 31, 2019 (in millions):~~

As of September 30, 2020

As of December 31, 2019


Intangible

Accumulated

Intangible

Intangible

Accumulated

Intangible

Assets

Amortization

Assets, net

Assets

Amortization

Assets, net
Non-competition agreements

$
21.7

$
(19.5)

$
2.2

$
21.7

$
(18.4)

$
3.3
Customer relationships

88.9

(46.6)

42.3

88.9

(42.2)

46.7
Trade names

52.9

—

52.9

59.1

—

59.1
Total intangible assets

$
163.5

$
(66.1)

$
97.4

$
169.7

$
(60.6)

$
109.1

For the nine months ended September 30, 2020, the Company recorded an impairment charge to intangible assets of $6.2 million for the trade names category of intangible assets. See Note 3 for details. During the third quarter of 2019, the Company recorded an impairment charge to intangible assets of $85.6 million for non-competition agreements, customer relationships and trade names categories of intangible assets. Intangible asset impairment is recorded in impairment in the consolidated statements of operations and comprehensive income (loss).

~~As of September 30, 2020, non-competition agreements and customer relationships had weighted average remaining useful lives of 2.2 and 9.4 years, respectively.~~

Amortization expense for intangible assets with definite lives was $1.9 million and $4.2 million for the three months ended September 30, 2020 and 2019, and $5.5 million and $12.4 million for the nine months ended September 30, 2020 and 2019 respectively.

~~Future estimated amortization expense is as follows (in millions):~~

Non-competition

Customer
Year ending December 31,

Agreements

Relationships
2020⁽¹⁾

$
0.3

$
1.4
2021

1.0

5.9
2022

0.9

5.9
2023

—

5.9
2024

—

4.1
Thereafter

—

19.1
Total

$
2.2

$
42.3

~~(1)~~

~~Three months ending December 31, 2020~~

NOTE 63 – INTEGRATION AND RESTRUCTURING

On July 30, 2019, the Company internally announced a plan to integrate ~~three~~3 operating segments with ~~three~~3 other operating segments (Project Synchronize, or the ~~Plan or Phase I)~~Plan), which reduced the number of operating segments from 16 to 13. The Plan was implemented to streamline and reduce the Company’s cost structure, improve asset utilization and capitalize on operational synergies. Additionally, the Company announced the planned implementation of Business Improvement Plans (BIP), which is expected to increase profitability by right-sizing trailer-to-tractor ratios, yielding management capacity allocations, and improving maintenance execution. 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. ~~As part of Project Pivot, the Company executed a new management restructuring and substantial corporate cost reduction plan.~~

~~The Company implemented Project Synchronize and Project Pivot which resulted in recording of integration and restructuring costs.~~ The integration and restructuring costs consist of asset impairments, employee-related costs, and other transition and termination costs related to restructuring activities. Employee-related costs include severance, tax preparation, and relocation ~~costs. Severance and relocation~~ costs, which are ~~expensed~~accounted for in accordance with ASC ~~420.~~420 Exit or Disposal Cost Obligations. Other transition and termination costs include fixed asset-related charges, contract and lease termination costs, professional fees, and other miscellaneous expenditures associated with the integration or restructuring activities, which are expensed as incurred. Costs are reported in restructuring charges in the consolidated statements of operations and comprehensive income (loss). The obligation 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 tradename intangible assets of $6.2 million.

On March 10, 2020, the Company announced a plan to integrate ~~three~~3 operating segments with ~~three~~3 other operating segments (Phase II of the Plan)~~, which will further reduce~~. Phase II of the ~~number of operating segments from 13 to 10. Phase II~~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 ~~now expects Phase II to be completed by early 2021. The Company is in the process of determining the estimated impact of Phase II on the financial statements. Upon completion of~~delayed and reevaluated Phase II of the Plan and reduced the ~~finalization~~planned number of ~~the Aveda divestiture, our~~integrations from 3 to 2 operating ~~segments will be reduced to 9.~~

~~Table~~segments. As of ~~Contents~~

~~During the first quarter~~September 30, 2021, 1 of ~~2020,~~these integrations had been completed, and the Company ~~made~~expects to complete the ~~decision to close certain of the Aveda terminals and wind down those operations. The Company recorded $4.5 million and $7.7 million of restructuring and exit costs~~remaining integration in connection with the closure of these terminals in the three and nine months ended September 30, 2020, respectively. As of September 30, 2020, we have incurred a cumulative total of $7.7 million in restructuring and exit costs in connection with the closure of the Aveda terminals.

2022.

The Company recorded ~~$0.6~~$0.1 million and ~~$0.9 of integration and restructuring expenses in connection with~~ $~~Phase II of the Plan~~ ~~for the three and nine months ended September 30, 2020, respectively. The Company recorded $6.9~~5.1 million of integration and restructuring expenses in connection with Phase II of the Plan and Project Pivot in the three months ended September 30, 2021 and 2020, respectively. The Company recorded $0.2 million and $8.6 million of integration and restructuring expenses in connection with Phase II of the Plan and Project Pivot in the nine months ended September 30, ~~2019.~~2021 and 2020, respectively. As of September 30, ~~2020,~~2021, we have incurred a cumulative total of ~~$9.3~~$9.9 million in integration and restructuring costs since inception ~~of Phase I and II~~ of the Plan.

Table of Contents

The following table summarizes the integration and restructuring costs ~~for Project Synchronize and Project Pivot~~ as of September 30, ~~2020~~2021 (in millions):


	Severance		Operating
	and		Lease
	Other Payroll		Termination		Other		Total
Balance, December 31, 2019	$	1.8	$	—	$	—	$	1.8

									Severance			Operating
									and			Lease
									Other Payroll			Termination		Other			Total
Balance at December 31, 2020									$	0.1		$	—	$	—		$	0.1
Specialized Solution
Costs accrued		0.3		—		0.3		0.6		—			—		0.2			0.2
Amounts paid or charged		—		—		(0.3)		(0.3)		—			—		(0.2	)		(0.2	)
Specialized Solution balance at September 30, 2020		0.3		—		—		0.3
Specialized Solution balance at September 30, 2021										—			—		—			—
Flatbed Solution
Costs accrued		0.3		—		—		0.3		—			—		—			—
Amounts paid or charged		(0.3)		—		—		(0.3)		—			—		—			—
Flatbed Solution balance at September 30, 2020		—		—		—		—
Flatbed Solution balance at September 30, 2021										—			—		—			—
Corporate
Costs accrued		—		—		—		—		—			—		—			—
Amounts paid or charged		(1.1)		—		—		(1.1)		—			—		—			—
Corporate balance at September 30, 2020		(1.1)		—		—		(1.1)
Adjustments										(0.1	)		—					(0.1	)
Corporate balance at September 30, 2021										(0.1	)		—		—			(0.1	)
Consolidated
Costs accrued		0.6		—		0.3		0.9		—			—		0.2			0.2
Amounts paid or charged		(1.4)		—		(0.3)		(1.7)		—			—		(0.2	)		(0.2	)
Consolidated balance at September 30, 2020	$	1.0	$	—	$	—	$	1.0
Adjustments										(0.1	)		—		—			(0.1	)
Consolidated balance at September 30, 2021									$	—		$	—	$	—		$	—

~~The following table summarizes the restructuring and exit costs for the Aveda closed terminals as of September 30, 2020 (in millions):~~

Severance

Operating

and

Lease

Other Payroll

Termination

Other

Total
Specialized Solution

Costs accrued

$
4.2

$
2.7

$
0.8

$
7.7
Amounts paid or charged

(2.9)

(2.7)

(0.8)

(6.4)
Specialized Solution balance at September 30, 2020

$
1.3

$
—

$
—

$
1.3

NOTE 74 – PROPERTY AND EQUIPMENT

In accordance with ASC 360, “Impairment or Disposal of Long-Lived Assets,” the Company reviews its definite lived long-lived assets whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If the carrying amount of an asset or group of assets exceeds its net realizable value, the asset will be written down to its fair value and ~~the amount recognized for impairment is equal to the difference between the carrying value and the asset’s fair value.~~

~~During the first quarter of 2020, the Company~~ ~~recorded an impairment charge of $4.0 million to state property and equipment at fair value which related to the~~ Specialized Solutions segment. The impairment charge is included in impairment in the consolidated statements of operations and comprehensive income (loss). See Note 3 for details. During the third quarter of 2019, the Company ~~recorded an impairment charge of $97.6 million to state property and equipment at fair value, which related to the~~ Specialized Solutions segment of $58.6 million and the Flatbed Solutions segment of $39.0 million. The impairment charge is included in impairment in the consolidated statements of operations and comprehensive income (loss).

~~Table of Contents~~

The components of property and equipment are as follows ~~as of September 30, 2020 and December 31, 2019~~ (in millions):

September 30,

December 31,

2020

2019
Revenue equipment

$
510.6

$
597.0
Assets leased and available for lease to owner-operators

81.6

64.3
Buildings and improvements

57.4

59.9
Furniture and fixtures, office and computer equipment and vehicles

31.9

40.2

681.5

761.4
Accumulated depreciation

(302.5)

(322.4)

$
379.0

$
439.0


	September 30,			December 31,
	2021			2020
Revenue equipment	$	513.4		$	546.7
Assets leased and available for lease to owner operators		119.4			87.1
Buildings and improvements		56.9			57.0
Furniture and fixtures, office and computer equipment and vehicles		34.0			31.9
		723.7			722.7
Accumulated depreciation		(329.5	)		(320.0	)
Property and equipment, net	$	394.2		$	402.7

Depreciation expense on property and equipment was ~~$16.2~~$20.6 million ~~and $34.1 million~~ for both the three months ended September 30, ~~2020~~2021 and ~~2019, respectively,~~2020. Depreciation expense on property and ~~$53.3~~equipment was $61.5 million and ~~$107.1~~$66.0 million for the nine months ended September 30, 2021 and 2020, ~~and 2019,~~ respectively. Depreciation expense and accumulated depreciation on assets leased and available for lease to owner-operators was $4.4 million and $5.7 million for the three months ended September 30, 2020 and 2019, respectively, and $12.7 million and $16.4 million for the nine months ended September 30, 2020 and 2019, respectively.

NOTE 85 – ACCRUED EXPENSES AND OTHER LIABILITIES

The components of accrued expenses and other liabilities are as follows as of September 30, ~~2020~~2021 and December 31, ~~2019~~2020 (in millions):

September 30,

December 31,

2020

2019
Brokerage and escorts

$
21.0

$
16.9
Other accrued expenses

13.0

10.6
Unvouchered payables

10.0

6.1
Owner-operator deposits

7.7

7.1
Sales and local taxes payable

2.1

1.7
Fuel and fuel taxes

1.4

1.3
Interest

0.6

0.5

$
55.8

$
44.2


	September 30,		December 31,
	2021		2020
Brokerage and escorts	$	20.5	$	11.9
Owner operator deposits		11.2		7.8
Unvouchered payables		7.6		6.1
Other accrued expenses		4.9		6.8
Fuel and fuel taxes		4.9		1.1
Accrued property taxes and sales taxes payable		1.9		1.5
Interest		1.2		0.5
	$	52.2	$	35.7

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NOTE 96 – LONG-TERM DEBT

Long-term debt consists of the following as of September 30, ~~2020~~2021 and December 31, ~~2019~~2020 (in millions):

September 30,

December 31,

2020

2019
Line of credit

$
—

$
1.7
Term loan facility

484.8

488.5
Equipment term loans

174.1

188.4
Finance and capital leases

29.8

25.5

688.7

704.1
Less current portion

(55.4)

(59.4)
Less unamortized debt issuance costs

(8.2)

(11.4)
Total long-term debt

$
625.1

$
633.3


	September 30,			December 31,
	2021			2020
Term loan facility	$	398.0		$	483.5
Equipment term loans		171.1			164.9
Finance leases		30.6			31.3
		599.7			679.7
Less current portion		(55.7	)		(54.0	)
Less unamortized debt issuance costs		(7.8	)		(7.1	)
Total long-term debt	$	536.2		$	618.6

Term Loan Facility

~~The~~On March 9, 2021, the Company ~~has~~and Daseke Companies, Inc., a ~~$500.0 million term loan facility under~~wholly-owned subsidiary of the Company (the Term Loan Borrower), entered into a ~~loan agreement~~Refinancing Amendment (Amendment No. 3 to Term Loan Agreement) (the Term Loan Amendment) with JPMorgan Chase Bank, N.A., as successor administrative agent and collateral agent and a replacement lender, Credit Suisse AG, Cayman Islands Branch, as predecessor administrative agent and collateral agent, the ~~lenders~~other loan parties party thereto and the other financial institutions party thereto. Pursuant to the Term Loan Amendment, the Company prepaid, refinanced and replaced all of its issued and outstanding term loans under its Term Loan Facility (as defined below) in an aggregate principal amount of approximately $483.5 million 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 $400.0 million term loan facility (the Term Loan Facility) evidenced by a Term Loan Agreement dated as of February 27, 2017 (as amended, restated, supplemented or otherwise modified from time to time, the Term Loan Agreement), 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 party thereto with a scheduled maturity date of ~~February 27, 2024.~~March 9, 2028. The Replacement Term ~~loans under the Term Loan Facility~~Loans 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 ~~4.00%~~3.00% per annum and LIBOR (subject to a ~~1.00%~~0.75% floor) plus ~~5.00%~~4.00% per annum. AtDuring the three months ended September 30, 2021 and 2020, the weighted average interest rate on the Term Loan Facility was ~~6.2%.~~4.1% and 6.0%, respectively. During the nine months ended September 30, 2021 and 2020, the weighted average interest rate on the Term Loan Facility was 5.0% and 6.2%, respectively.

~~Table of Contents~~

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

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 4.00 to 1.00, stepping down to 3.75 to 1.00 on March 31, 2021. 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, 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 voluntary 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 Facility~~Loans 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 Adjusted EBITDA, including, among other things, deductions for (i) the amount of certain voluntary prepayments of the Replacement Term ~~Loan Facility~~Loans 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%~~50%, ~~25%~~25% or 0%0% for excess cash flow periods for the year ending December 31, ~~2019~~2018 and beyond, 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.

As of September 30, 2021, the Company was 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 $100.0 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.~~thereto (the ABL Agent).

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 the 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 from February 27, 2025 to April 29, 2026. The ABL ~~Facility’s maximum credit amount~~Amendment also, among other things, (a) increased the Maximum Revolving Advance Amount (as defined therein) from $100 million to $150 million, (b) provides that the Maximum Revolving Advance Amount may be increased ~~by $30.0~~further from $150 million ~~pursuant~~ to $200 million (the ABL Amendment did not result in such an ~~uncommitted accordion.~~ increase), (c) removed the ABL Borrowers’ total leverage financial covenant, which had been tested on 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. The ABL Facility matures on February 27, 2022.~~$40 million. As of September 30, ~~2020,~~2021, the Company had ~~a debit balance of $0.8 million which is included in cash and cash equivalents, $16.2~~0 borrowings, $23.3 million in letters of credit outstanding, and could incur ~~approximately $82.4~~approximately $117.7 million of additional indebtedness under the ABL ~~Facility.~~Facility, based on current qualified collateral.

~~Borrowings under~~At September 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 ratio 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 to 1.00

1.25
%
2.25
%
Greater than or equal to 1.75 to 1.00

0.75
%
1.75
%

~~The ABL Facility margins are adjusted to the applicable rates set forth in the following table corresponding to the~~ average RLOC Utilization for the trailing 12 month period on the last day of the most recently completed fiscal quarter. 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, each as defined in the credit agreement.~~Amount.


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~~

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
%

~~At September 30, 2020, the interest rate on the ABL Facility was 3.75%.~~

The ABL Facility is secured by all of the Company’s U.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 requiring a leverage ratio of less than or equal to 4.00 to 1.00 for the fiscal quarter, stepping down to 3.75 to 1.00 on March 31, 2021 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 Adjusted EBITDA minus unfinanced capital expenditures, cash taxes and cash dividends or distributions, to (2) the sum of all funded debt payments for the four-quarter period then ending (with customary add-backs permitted to consolidated Adjusted 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 September 30, ~~2020,~~2021, the Company was in compliance with all covenants contained in the ~~Term Loan and~~ ABL ~~Facilities.~~

Facility.

Equipment Term Loans and Mortgages

As of September 30, ~~2020,~~2021, the Company had term loans collateralized by equipment in the aggregate amount of ~~$171.7~~$168.8 million with 3216 lenders (Equipment Term Loans). The Equipment Term Loans bear interest at rates ranging from ~~1.5%~~2.6% to ~~10.7%~~5.9%, require monthly payments of principal and interest and mature at various dates through ~~January 2028.~~July 2027. The weighted average interest rate for the three months ended September 30, 2021 and 2020 was 3.8% and 3.9%, respectively. The weighted average interest rate for the nine months ended September 30, 2021 and 2020 was 3.9% and 4.3%, 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.

As of September 30, ~~2020,~~2021, the Company has a bank mortgage loan with a balance of ~~$2.4~~$2.3 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 2020~~3.7%, and ~~will drop to $15,462 per month starting December 1, 2020. The interest rate and monthly payments is adjusted on November 1, 2020 to~~ a ~~rate~~balloon payment of ~~3.7%, which is based on an index value of 0.53% plus margin of 2.5% rounded up to the nearest 0.125%.~~approximately $2.1 million at maturity date. The bank mortgage loan matures November 1, 2023.

~~Future Payments~~

~~Future principal payments on long-term debt (excluding future payments on capital leases which are disclosed in Note 2) as of September 30, 2020 are as follows (in millions):~~

Twelve months ending September 30,
Term Loan Facility

Equipment Term Loans

Total

2021
$
5.0

$
42.8

$
47.8
2022

2.5

40.7

43.2
2023

2.5

32.8

35.3
2024

474.2

34.8

509.0
2025

0.6

16.0

16.6
Thereafter

—

7.0

7.0
Total long-term debt
$
484.8

$
174.1

$
658.9

2012

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NOTE 107 – INCOME TAXES

The effective tax rates for the three months ended September 30, 2021 and 2020 were 29.4% and ~~2019 were 11.3% and 17.4%~~13.6%, ~~respectively, and (22.2%) and 17.3%~~respectively. The effective tax rates for the nine months ended September 30, 2021 and 2020 were 27.6% and ~~2019,~~11.1%, respectively. The difference between the Company’s effective tax rate and the federal statutory rate primarily results from the mix of earnings with state ~~income taxes and~~jurisdictions, combined with the unfavorable impact of nondeductible expenses, including the effect of the per diem pay structure for ~~drivers.~~drivers and nondeductible executive compensation. 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 rate for the three months ended September 30, 2021 differs from the effective tax rate for the same period in 2020 primarily due to the impact in 2020 of nontaxable income and permanent differences in relation to forecasted pretax book income. The effective tax rate for the nine months ended September 30, 2021 differs from the effective tax rate for the same period in 2020 primarily due to the impact of permanent differences in relation to forecasted earnings before income taxes each period.

There were no changes in uncertain tax positions during the three and nine months ended September 30, ~~2020 and 2019.~~

~~NOTE 11 – STOCKHOLDERS’ EQUITY~~

~~Common Stock~~

~~Common stock has voting rights – 1 vote for each share of common stock.~~

As of September 30, 2020, the Company has 0 common stock reserved for future issuances of stock options and restricted stock units under the Company’s 2017 Omnibus Incentive Plan. See Note 12 for additional details about the Company’s stock-based compensation plan and liability classification for the awards for which sufficient shares are not available for issuance.

~~Preferred Stock~~

The Company has issued and outstanding 650,000 shares of Series A Preferred Stock with a redemption value of $65.0 million. 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 5,652,173 shares of common stock would be issuable upon conversion of all of the currently outstanding shares of Series A Preferred Stock.

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 such2021.

~~Table of Contents~~

~~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:~~

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.

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. On February 27, 2020 the Company’s board of directors declared a quarterly dividend of $1.91 per share, which was ~~paid~~ ~~on March 15, 2020. On May 20, 2020, the Company’s board of directors declared a second quarterly dividend of $1.91 per share, which was~~ ~~paid~~ ~~on June 15, 2020. On August 26, 2020 the Company’s board of directors declared a third quarterly dividend of $1.91 per share, which was~~ ~~paid~~ ~~on September 15, 2020. On February 27, 2019 the Company’s board of directors declared a quarterly dividend of $1.91 per share, which was~~ ~~paid~~ ~~on March 15, 2019. On May 21, 2019, the Company’s board of directors declared a second quarterly dividend of $1.91 per share, which was~~ ~~paid~~ ~~on June 15, 2019. On August 20, 2019 the Company’s board of directors declared a third quarterly dividend of $1.91 per share, which was~~ ~~paid~~ ~~on September 15, 2019.~~

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.

~~Warrants~~

~~At September 30, 2020, there were a total of 35,040,656 warrants outstanding to purchase 17,520,328 shares of the Company’s common stock.~~

The Company issued warrants (the Public Warrants) to purchase its common stock which were originally issued as part of units in the initial public offering (the IPO) of Hennessy (as defined below). There are 19,959,902 Public Warrants outstanding. The Company also issued 15,080,756 warrants (the Private Placement Warrants) to the 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. NaN 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 merger with Hennessy, 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

Under the 2017 Omnibus Incentive Plan ~~(the~~(as amended from time to time, the Incentive Plan), the Company may grant awards of stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-based awards and performance awards. ~~Under~~On 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 Incentive Plan. The Restatement increased the number of shares that may be granted as awards thereunder by 4.0 million and extended the scheduled expiration date of the Incentive Plan from February 27, 2027 to June 18, 2031.

As of September 30, 2021, the Company ~~is authorized to issue up to 4.5~~has 2.5 million shares of common ~~stock. As of September 30, 2020, the Company has 0 common~~ stock ~~reserved~~available for ~~future issuances of stock options and restricted stock units~~issuance under the ~~Company’s 2017 Omnibus~~ Incentive Plan. ~~During~~Equity awards to non-directors under the ~~nine months ended September 30, 2020,~~

~~Table of Contents~~

~~the Company issued 901,200 of stock options and 2,037,300 of performance stock units (“PSUs”)~~ classified as a liability due to the lack of shares available to be issued and can ultimately be cash-settled through the grant of cash-settled restricted stock units or stock appreciation rights if there is not a sufficient number of shares available. Equity awardsIncentive Plan generally vest annually on a pro-rata basis over a three to ~~five~~five-year~~-year~~ period on the anniversary of each grant date. The Company also grants equity awards to our directors under the Incentive Plan. The awards granted to directors vest ratably over periods of one to five years annually on the anniversary of each grant date.

Stock-based compensation cost with equity classification 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 are recorded as a cumulative adjustment to stock-based compensation expense in the period forfeitures occur. Aggregate stock-based compensation charges, net of forfeitures, were ~~$1.0~~$2.1 million and ~~$1.0~~$2.3 million ~~during~~for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$3.0~~$5.3 million and ~~$2.9~~$4.9 million ~~during~~for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~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 September 30, ~~2020,~~2021, there was ~~$3.3~~$2.7 million, $2.7 million, and ~~$3.0~~$7.6 million of unrecognized stock-based compensation expense related to stock options, ~~and~~ restricted stock units (RSUs) and performance stock units (PSUs), respectively. This expense will be recognized over the weighted average periods of ~~2.2~~1.4 years for stock options, ~~and 1.7~~1.8 years for restricted stock ~~units.~~

~~Stock-based compensation cost with liability classification is recognized on a straight-line basis over the vesting period~~units and revalued on each balance sheet date with the corresponding adjustment to stock-based compensation recorded in the consolidated statements of operations and comprehensive income (loss). As of September 30, 2020, the total fair value of the liability-classified stock options and PSU’s was $4.0 million and $10.2 million, respectively. As of September 30, 2020, share-based payment liability was $0.5 million and $1.4 million1.9 years for ~~liability-classified stock options and PSUs, respectively.~~PSUs.

Stock Options

The following table summarizes stock option grants:



Grantee Type	# of Options Granted	Issued and Outstanding*	Vesting Period	Weighted Average Exercise Price		Weighted Average Grant Date Fair Value (Per Option)		# of Options Granted		Issued and Outstanding		Vesting Period	Weighted Average Exercise Price		Weighted Average Grant Date Fair Value (Per Option)

Director Group	150,000	100,000	5 years	$	9.98	$	4.36		150,000		75,000	5 years	$	9.98	$	4.36
Employee Group	4,596,030	4,097,122	3-5 years	$	5.58	$	2.45		4,682,630		2,541,622	3-5 years	$	5.60	$	3.08
Total		4,197,122									2,616,622

*Included 901,200 stock option classified as liability granted to employee group.

The Company’s calculations of the fair value of stock options granted as equity classification during the nine months ended September 30, ~~2020~~2021 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:


Weighted average expected life		6.5 years
~~Weighted average expected life~~Risk-free interest rates		~~6.0 years~~1.56%
~~Risk-free interest rate~~Expected volatility		~~0.43%~~38.1%
Expected ~~volatility~~dividend yield		~~41.04%~~
~~Expected dividend yield~~	0.00	~~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. 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. For equity-classified awards, expected volatility is calculated using an index of publicly traded peer companies. For liability-classified awards, expected volatility is calculated using split and dividend adjusted closing stock prices over a lookback period commensurate with the remaining term of each award.

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During the nine months ended September 30, 2020, the Company issued 901,200 of stock options classified as liability and the fair value was calculated using Black-Scholes option-pricing model. The following inputs and assumptions were used to calculate the fair value of the liability classification of the options outstanding:


		~~As of~~
		~~September 30, 2020~~
~~Weighted average expected life~~		~~2.6 years~~
~~Risk-free interest rate~~		~~0.15%~~
~~Expected volatility~~		~~86.8% to 89.3%~~
~~Expected dividend yield~~		~~0.00%~~

A summary of option activity as of September 30, ~~2020~~2021 and changes during the nine months ~~then~~ ended September 30, 2021 are as follows:

Shares

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Terms
(Years)

Aggregate
Intrinsic
Value (in
millions)
Outstanding as of January 1, 2020

2,308,924

$
8.39

8.0

$
0.2
Granted

1,963,300

1.57

Forfeited or expired

(75,102)

11.10

Outstanding as of September 30, 2020

4,197,122

$
5.15

8.3

$
8.8

Exercisable as of September 30, 2020

1,061,329

$
9.17

6.9

$
0.4
Vested and expected to vest as of September 30, 2020

4,197,122

$
5.15

8.3

$
8.8


	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
Granted		20,000			2.39
Exercised		(157,545	)		3.00
Forfeited or expired		(360,764	)		7.11
Outstanding as of September 30, 2021		2,616,622		$	6.23		7.1	$	9.4

Exercisable as of September 30, 2021		1,507,483		$	7.85		6.5	$	3.2
Vested and expected to vest as of September 30, 2021		2,616,622		$	6.23		7.1	$	9.4

The stock options’ maximum contract term is ten ~~years.~~ years. The total weighted average fair value of options granted during the nine months ended September 30, 2021 and 2020 was $0.0 million and ~~2019 was $1.5 million and $0.8~~$1.5 million, respectively.

Restricted Stock Units

~~Restricted stock units~~RSUs are nontransferable until ~~vested and~~vested. The Plan Committee (as defined in the ~~holders are entitled to receive dividends~~Incentive Plan) 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~~RSUs are not entitled to vote the shares. ~~Restricted stock unit awards~~RSUs typically vest in equal annual increments over the vesting period.

The following table summarizes ~~restricted stock unit grants~~RSUs granted under the Incentive Plan:



Grantee Type	# of Restricted Stock Units Granted	Issued and Outstanding	Vesting Period	Weighted Average Grant Date Fair Value (Per Unit)		# of Restricted Stock Units Granted		Issued and Outstanding		Vesting Period	Weighted Average Grant Date Fair Value (Per Unit)

Director Group	893,996	358,498	1-2 years	$	2.75		933,237		39,241	1-2 years	$	2.96
Employee Group	1,568,655	273,451	5 years	$	10.59		1,832,106		389,708	3-5 years	$	10.07
Total		631,949							428,949

~~Table of Contents~~

A summary of ~~restricted stock unit awards~~RSUs activity under the Incentive Plan as of September 30, ~~2020~~2021 and changes during the nine months ~~then~~ ended September 30, 2021 are as follows:

Units

Weighted
Average Grant
Date Fair
Value
(Per Unit)

Non-vested as of January 1, 2020

1,180,882

$
5.44
Granted

108,498

2.77
Vested

(594,339)

3.95
Forfeited

(63,092)

10.71
Non-vested as of September 30, 2020

631,949

$
5.85


	Units			Weighted Average Grant Date Fair Value (Per Unit)
Non-vested as of January 1, 2021		594,801		$	5.72
Granted		302,692			7.04
Vested		(433,117	)		3.98
Forfeited		(35,427	)		10.14
Non-vested as of September 30, 2021		428,949		$	8.05

Performance Stock Units

PSUs become eligible for vesting in shares upon the achievement of specific performance and market-based conditions and subject to final vesting based on the participant’s continued employment through the end of 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 September 30, 2021, the Company had 1,890,178 total PSUs outstanding. There are 1,495,000 PSUs in which the vesting occurs upon the achievement of specific market-based conditions based on the performance of per share price of the Company’s common stock and subject to final vesting based on the participant’s continued employment through the end of the requisite service periods.~~The grant date fair value~~

In addition, there are 395,178 PSUs in which the vesting occurs upon the achievement of ~~PSUs was determined using~~specific performance-based conditions related to the Company's financial performance over a ~~Monte Carlo probability model~~three year period, modified based on the Company's Relative Total Shareholder Return and ~~recognize~~

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subject to final vesting based on the ~~compensation expense ratably over~~participant’s continued employment through the end of the requisite service periods. The amount of awards that will ultimately vest for these 395,178 PSUs can range from 0% to 200% based on the Company’s Relative Total Shareholder Return calculated over a three year period ~~with a corresponding liability.~~beginning January 1 of the year each grant was made. The ~~liability is remeasured on each balance sheet date with corresponding adjustment to stock-based compensation recorded in the consolidated statements of operations and comprehensive income (loss)~~Company currently expects that these PSUs will vest at 133%.

During the nine months ended September 30, 2020, the Company issued 2,037,300 PSUs classified as a liability and the fair value was calculated using Monte Carlo probability model. During the nine months ended September 30, 2020, the Company issued 388,500 PSU’s classified as equity, and the fair value was calculated using Black-Scholes option-pricing model. The following inputs and assumptions were used to calculate the fair value of the ~~PSUs:~~PSUs for the shares granted during the nine months ended September 30, 2021:

As of September 30, 2020

Liability-classified

Equity-classified
Term

2.2 to 2.8 years

3 years
Risk-free interest rate

0.14% to 0.15%

0.26%
Expected volatility

86.3% to 96.7%

76.8%
Expected dividend yield

0.00%

0.00%


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 performance stock unit awards activity as of September 30, ~~2020~~2021 and changes during the nine months ~~then~~ ended September 30, 2021 are as follows:

Units

Weighted
Average Grant
Date Fair
Value
(Per Unit)

Non-vested as of January 1, 2020

—

$
—
Granted

2,425,800

1.05
Vested

—

—
Forfeited

—

—
Non-vested as of September 30, 2020

2,425,800

$
1.05

~~NOTE 13 – DEFINED CONTRIBUTION PLAN~~


	Units			Weighted Average Grant Date Fair Value (Per Unit)
Non-vested as of January 1, 2021		1,716,100		$	1.38
Granted		395,178			7.84
Forfeited		(221,100	)		6.30
Non-vested as of September 30, 2021		1,890,178		$	5.44

The Company sponsors the Daseke, Inc. 401(k) Retirement Plan (the Retirement Plan). The Retirement Plan is a defined contribution plan and intended to qualify under the Internal Revenue Code provisions of Section 401(k). Under the safe harbor matching requirements, the Company made contributions to the Retirement Plan of $1.3 million and $1.4 million for the three months ended September 30, 2020 and 2019, respectively, and $3.9 million and $4.2 million for the nine months ended September 30, 2020 and 2019, respectively.

~~Table of Contents~~

NOTE 149 – COMMITMENTS AND CONTINGENCIES

Letters of Credit

The Company had outstanding letters of credit as of September 30, ~~2020~~2021 totaling approximately ~~$18.1~~$25.7 million, including those disclosed in Note 9.6. These letters of credit are related to liability and workers compensation insurance claims.

Contingencies

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

NOTE 10 – COMMON STOCK REPURCHASE PROGRAM

On March 22, 2021, the Company’s Board of Directors authorized the repurchase of up to 3,000,000 shares of the Company’s common stock. Shares are effectively retired at the time of purchase. As of July 31, 2021, the Company had repurchased and retired all 3,000,000 shares, at an aggregate cost of $20.4 million, and accordingly, no additional shares may be repurchased under this Stock Repurchase Program.

NOTE 1511 – 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~~certain 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 ~~$1.4~~$1.5 million, $3.3 million, $1.4 million and ~~$2.9~~$4.9 million for the three ~~months ended September 30, 2020~~ and ~~2019, respectively, and $4.9 million and $7.5 million for the~~ nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Intersegment revenues and expenses for the Specialized Solutions segment totaled ~~$2.4~~$1.7 million, $6.0 million, $2.4 million and ~~$4.7~~$9.9 million ~~for the three months ended September 30, 2020 and 2019, respectively, and $9.9 million and $8.8 million for the nine months ended September 30, 2020 and 2019, respectively.~~

Certain insurance costs have been allocated to the operating segments beginning January 1, 2020, which were included in the corporate segment in 2019 within the operating income (loss) and income (loss) before income tax line items. Insurance costs included in the corporate segment for the three and nine months ended September 30, ~~2019 were $0.3 million~~2021 and ~~$2.5 million, respectively, for the Flatbed Solutions segment and $5.1 million and $11.0 million, respectively, for the Specialized Solutions segment.~~

2020, respectively.

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The following tables reflect certain financial data of the Company’s reportable segments for the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 (in millions):


	Flatbed		Specialized
	Solutions		Solutions		Corporate/		Consolidated
	Segment		Segment		Eliminations		Total

									Flatbed		Specialized
									Solutions		Solutions			Corporate/			Consolidated
									Segment		Segment			Eliminations			Total
Three Months Ended September 30, 2021
Total revenue									$	184.0	$	244.0		$	(3.4	)	$	424.6
Company freight										45.1		123.9			(2.4	)		166.6
Owner operator freight										89.2		42.6			(0.7	)		131.1
Brokerage										30.4		51.5			0			81.9
Logistics										1.1		8.6			0			9.7
Fuel surcharge										18.2		17.4			(0.3	)		35.3
Operating income (loss)										21.1		29.5			(10.2	)		40.4
Depreciation										7.9		12.3			0.4			20.6
Amortization of intangible assets										0.8		1.0			(0.1	)		1.7
Restructuring										0		0.1			0			0.1
Non-cash operating lease expense										1.1		0.7			0			1.8
Interest expense										0.9		1.2			5.2			7.3
Income (loss) before income tax										20.3		28.2			(18.9	)		29.6
Capital expenditures										4.7		25.8			11.5			42.0

Three Months Ended September 30, 2020
Total revenue	$	144.5	$	235.2	$	(3.9)	$	375.8	$	144.5	$	235.2		$	(3.9	)	$	375.8
Company freight		47.1		129.7		(2.0)		174.8		47.1		129.7			(2.0	)		174.8
Owner operator freight		67.2		37.7		(1.6)		103.3		67.2		37.7			(1.6	)		103.3
Brokerage		17.6		47.8		(0.2)		65.2		17.6		47.8			(0.2	)		65.2
Logistics		0.7		9.1		0.1		9.9		0.7		9.1			0.1			9.9
Fuel surcharge		11.9		10.9		(0.2)		22.6		11.9		10.9			(0.2	)		22.6
Operating income (loss)		9.3		31.1		(12.3)		28.1		9.3		31.1			(12.3	)		28.1
Depreciation		8.4		11.8		0.2		20.4		8.4		11.8			0.2			20.4
Amortization of intangible assets		0.9		1.0		—		1.9		0.9		1.0			0			1.9
Restructuring		0.2		4.9		—		5.1		0.2		4.9			0			5.1
Non-cash operating lease expense		2.2		(4.7)		—		(2.5)		2.2		(4.7	)		0			(2.5	)
Interest expense		2.3		2.9		5.9		11.1		2.3		2.9			5.9			11.1
Income (loss) before income tax		7.0		28.8		(18.1)		17.7		7.0		28.8			(21.1	)		14.7
Total assets		336.5		608.1		231.0		1,175.6
Capital expenditures		7.2		11.3		—		18.5		7.2		11.3			0			18.5

Three Months Ended September 30, 2019
Total revenue	$	169.8	$	288.0	$	(7.4)	$	450.4
Company freight		55.2		155.4		(5.4)		205.2
Owner operator freight		71.1		49.1		(1.9)		118.3
Brokerage		23.6		54.5		0.5		78.6
Logistics		0.7		12.9		(0.1)		13.5
Fuel surcharge		19.2		16.1		(0.5)		34.8
Operating loss		(107.9)		(187.6)		(21.1)		(316.6)
Depreciation		12.7		21.1		0.3		34.1
Amortization of intangible assets		1.5		2.7		—		4.2
Impairment		113.2		193.6		—		306.8
Restructuring		0.9		3.5		2.5		6.9
Non-cash operating lease expense		1.7		4.6		0.1		6.4
Interest expense		2.8		3.2		6.8		12.8
Loss before income tax		(110.6)		(191.0)		(29.5)		(331.1)
Total assets		376.1		730.9		83.1		1,190.1
Capital expenditures		7.5		15.0		0.5		23.0

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	Flatbed		Specialized
	Solutions		Solutions			Corporate/			Consolidated
	Segment		Segment			Eliminations			Total
Nine Months Ended September 30, 2021
Total revenue	$	518.3	$	653.8		$	(9.6	)	$	1,162.5
Company freight		137.5		345.1			(7.3	)		475.3
Owner operator freight		249.1		117.9			(1.7	)		365.3
Brokerage		77.8		119.6			(0.3	)		197.1
Logistics		3.6		25.0			0.3			28.9
Fuel surcharge		50.3		46.2			(0.6	)		95.9
Operating income (loss)		55.0		69.1			(30.1	)		94.0
Depreciation		24.2		36.5			0.8			61.5
Amortization of intangible assets		2.3		2.9			0			5.2
Restructuring		0		0.2			0			0.2
Non-cash operating lease expense		0.9		0.1			0			1.0
Interest expense		3.5		4.6			18.0			26.1
Income (loss) before income tax		51.8		65.0			(49.3	)		67.5
Capital expenditures		21.4		49.9			17.9			89.2

Nine Months Ended September 30, 2020
Total revenue	$	436.8	$	697.2		$	(15.5	)	$	1,118.5
Company freight		147.3		383.5			(8.1	)		522.7
Owner operator freight		193.5		118.7			(5.1	)		307.1
Brokerage		52.6		133.7			(1.5	)		184.8
Logistics		2.2		26.4			0.2			28.8
Fuel surcharge		41.2		34.9			(1.0	)		75.1
Operating income (loss)		28.6		39.1			(35.5	)		32.2
Depreciation		25.3		39.9			0.7			65.9
Amortization of intangible assets		2.5		3.0			0			5.5
Impairment		0		13.4			0			13.4
Restructuring		0.3		8.3			0			8.6
Non-cash operating lease expense		4.3		(4.1	)		0			0.2
Interest expense		7.2		8.7			18.2			34.1
Income (loss) before income tax		21.7		30.5			(54.0	)		(1.8	)
Capital expenditures		24.2		39.2			0			63.4

Flatbed

Specialized




Solutions

Solutions

Corporate/

Consolidated

Segment

Segment

Eliminations

Total
Nine Months Ended September 30, 2020

Total revenue

$
436.8

$
697.2

$
(15.5)

$
1,118.5
Company freight

147.3

383.5

(8.1)

522.7
Owner operator freight

193.5

118.7

(5.1)

307.1
Brokerage

52.6

133.7

(1.5)

184.8
Logistics

2.2

26.4

0.2

28.8
Fuel surcharge

41.2

34.9

(1.0)

75.1
Operating income (loss)

28.6

39.1

(35.5)

32.2
Depreciation

25.3

39.9

0.7

65.9
Amortization of intangible assets

2.5

3.0

—

5.5
Impairment

—

13.4

—

13.4
Restructuring

0.3

8.3

—

8.6
Non-cash operating lease expense

4.3

(4.1)

—

0.2
Interest expense

7.2

8.7

18.2

34.1
Income (loss) before income tax

21.7

30.5

(53.1)

(0.9)
Capital expenditures

24.2

39.2

—

63.4

Nine Months Ended September 30, 2019

Total revenue

$
512.7

$
838.3

$
(17.0)

$
1,334.0
Company freight

165.3

463.8

(10.9)

618.2
Owner operator freight

213.1

142.4

(4.4)

351.1
Brokerage

74.7

148.3

(0.2)

222.8
Logistics

2.0

37.1

(0.1)

39.0
Fuel surcharge

57.6

46.7

(1.4)

102.9
Operating loss

(98.5)

(168.8)

(43.9)

(311.2)
Depreciation

38.1

68.5

0.5

107.1
Amortization of intangible assets

4.5

7.9

—

12.4
Impairment

113.2

193.6

—

306.8
Restructuring

0.9

3.5

2.5

6.9
Non-cash operating lease expense

7.2

12.2

0.3

19.7
Interest expense

8.1

9.8

20.3

38.2
Loss before income tax

(106.3)

(177.8)

(65.3)

(349.4)
Capital expenditures

38.0

43.5

1.5

83.0

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NOTE 1612 – 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 nine months ended September 30, 2020, ~~and the three and nine months ended September 30, 2019,~~ shares of the Company’s ~~7.625%~~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. Additionally, for the three and nine months ended September 30, 2020 and 2019, there was 0 dilutive effect from the Merger Agreement earn-out provision found in the Agreement and Plan of Merger, dated December 22, 2016, in which a wholly-owned subsidiary of Hennessy Capital Acquisition Corp. II (Hennessy) merged with and into Daseke, with Daseke surviving as a direct wholly-owned subsidiary of Hennessy, (the Merger Agreement) or the outstanding warrants to purchase shares of the Company’s common stock (the common stock purchase warrants).

The following table sets forth the computation of basic and diluted earnings per share under the two-class ~~method, which is applicable for the three months ended September 30, 2020:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,
(in millions, except per share data)

2020

2019

2020

2019

Numerator:

Net income (loss)

$
15.7

$
(273.3)

$
(1.1)

$
(289.0)
Less Series A preferred dividends

(1.2)

(1.2)

(3.7)

(3.7)
Net income (loss) attributable to common stockholders

14.5

(274.5)

(4.8)

(292.7)
Allocation of earnings to non-vested participating restricted stock units

(0.2)

—

—

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

$
14.3

$
(274.5)

$
(4.8)

$
(292.7)

Effect of dilutive securities:

Add back Series A preferred dividends

$
1.2

$
—

$
—

$
—
Add back allocation earnings to participating securities

0.2

—

—

—
Reallocation of earnings to participating securities considering potentially dilutive securities

(0.2)

—

—

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

$
15.5

$
(274.5)

$
(4.8)

$
(292.7)

Denominator:

Denominator for basic EPS - weighted-average shares

64.8

64.6

64.7

64.5

Effect of dilutive securities:

Stock options

1.2

—

—

—
Convertible preferred stock

5.7

—

—

—
Denominator for diluted EPS - weighted-average shares

71.7

64.6

64.7

64.5

Basic earnings (loss) per share

$
0.22

$
(4.25)

$
(0.07)

$
(4.54)
Diluted earnings (loss) per share

$
0.22

$
(4.25)

$
(0.07)

$
(4.54)

method:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in millions, except per share data)	2021			2020			2021			2020

Numerator:
Net income (loss)	$	20.9		$	12.7		$	48.9		$	(2.0	)
Less Series A preferred dividends		(1.2	)		(1.2	)		(3.7	)		(3.7	)
Net income (loss) attributable to common stockholders		19.7			11.5			45.2			(5.7	)
Allocation of earnings to non-vested participating restricted stock units		(0.2	)		(0.2	)		(0.4	)		0
Numerator for basic EPS - income (loss) available to common stockholders - two class method	$	19.5		$	11.3		$	44.8		$	(5.7	)

Effect of dilutive securities:
Add back Series A preferred dividends	$	1.2		$	0		$	3.7		$	0
Add back allocation earnings to participating securities		0.2			0.2			0.4			0
Reallocation of earnings to participating securities considering potentially dilutive securities		(0.2	)		(0.2	)		(0.4	)		0
Numerator for diluted EPS - income (loss) available to common shareholders - two class method	$	20.7		$	11.3		$	48.5		$	(5.7	)

Denominator:
Denominator for basic EPS - weighted-average shares		62.6			64.8			64.2			64.7

Effect of dilutive securities:
Stock options and performance share units		1.7			1.2			1.3			0
Convertible preferred stock		5.7			5.7			5.7			0
Denominator for diluted EPS - weighted-average shares		70.0			71.7			71.2			64.7

Basic earnings (loss) per share	$	0.31		$	0.17		$	0.70		$	(0.09	)
Diluted earnings (loss) per share	$	0.30		$	0.17		$	0.68		$	(0.09	)

~~NOTE 17 – SUBSEQUENT EVENTS~~

On October 21, 2020, the Company and the representative of the former Aveda shareholders agreed to an earnout payment of $7.4 million as the result of an arbitration process, which is approximately $13.8 million less than the contingent consideration liability at September 30, 2020 and will be recognized in the fourth quarter of 2020.

Table of Contents

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

~~Overview~~

~~Introductory Note~~Overview

Daseke is the premier North American transportation solutions specialist dedicated to servicing challenging industrial end-markets through experienced people, a ~~leading provider~~fleet of more than 4,500 tractors and ~~consolidator of transportation and logistics solutions focused exclusively on~~11,000 flatbed and specialized ~~(open-deck) freight in North America.~~trailers, and has operations throughout the continental United States, Canada and Mexico. The Company ~~believes it~~also provides ~~one of the most comprehensive transportation~~logistical planning and ~~logistics solution offerings in the open-deck industry.~~ warehousing services to customers.

The Company delivers aits diverse offering of transportation and logistics solutions to its approximately ~~6,300~~6,700 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 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~~owner operator transportation, freight brokerage and 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.

~~Third Quarter Operational Overview~~

●

Total revenue of $375.8 million, a decrease of 16.6%, company freight of $174.8 million, a decrease of 14.8%, owner operator freight of $103.3 million, a decrease of 12.7% and brokerage freight of $65.2 million, a decrease of 17.0% compared to third quarter of 2019;

●

Rate per mile for the three months ended September 30, 2020 was $1.94 for Flatbed Solutions segment and $3.28 for Specialized Solutions segment compared to $1.90 for Flatbed Solutions segment and $3.54 for Specialized Solutions segment for the three months ended September 30, 2019;

●

~~Operating income of $28.1 million, compared with operating loss of $316.6 million in third quarter of 2019;~~

●

~~Improved operating ratio to 92.5% compared with 170.3% in the third quarter of 2019;~~

●

~~Net income of $15.7 million, or $0.22 per basic and diluted share, compared with net loss of $273.3 million, or $4.25 per basic and diluted share, in the third quarter of 2019;~~

●

~~Total liquidity available at September 30, 2020 increased by $43.7 million to $297.2 million from $253.5 million at December 31, 2019; and~~

●

~~Debt excluding financing fees at September 30, 2020 decreased by $15.4 million to $688.7 million from $704.1 at December 31, 2019.~~

~~Recent Developments~~

On July 30, 2019, the Company internally announced a plan to integrate three operating segments with three other operating segments, Project Synchronize (Phase I or the Plan), which reduced the number of operating segments from 16 to 13. As a result of the Plan, Builders Transportation merged into Hornady Transportation, Moore Freight Service into E.W. Wylie, and the Schilli Companies into Lone Star Transportation. The Plan was implemented to streamline and reduce the Company’s cost structure, improve asset utilization and capitalize on operational synergies. Additionally, the Company announced the implementation of Business Improvement Plans, which increased profitability by yield management capacity allocation, right-sizing trailer-to-tractor ratios, and improving maintenance execution.

On September 4, 2019, the Company announced a comprehensive restructuring plan (Project Pivot) to reduce its cost base, right size its organization and management team and increase and accelerate its previously announced operational improvement goals.

On March 10, 2020, the Company announced a plan to integrate three operating segments with three other operating segments (Phase II of the Plan), which will further reduce the number of operating segments from 13 to 10.

~~Table of Contents~~

In March 2020, the Company’s board of directors approved a plan for the sale of certain Aveda terminals located in Texas and Oklahoma, and during the second quarter of 2020, substantial progress was made, including collection of approximately $47.7 million in proceeds from the sale of property and equipment, and reduction in net working capital. The divestiture process is substantially complete as of September 30, 2020, and the Company currently believes it will be finalized before the completion of the fourth quarter of 2020. Upon completion, the Company’s exposure to the oil and gas end market will decrease significantly. Upon completion of Phase II of the Plan and the finalization of the Aveda divestiture, our operating segments will be reduced to 9.

Recent Developments

~~COVID-19: Impact and Outlook~~

The novel coronavirus, or COVID-19, which surfaced in late 2019 and declared a pandemic by the World Health Organization in March 2020, continues to spread throughout the United States and around the world. In response to the COVID-19 pandemic, the governments of many countries, states, cities and other geographic regions have taken and are continuing to take preventative or reactive actions, such as imposing restrictions on travel and business operations, increasing border and port controls and closures throughout the United States and other parts of the world, and advising or requiring individuals to limit or forego time outside of their homes. The uncertainty regarding the impact of the COVID-19 pandemic, and various governmental actions taken to mitigate its impact, have resulted in a severely depressed economic environment.

As an essential business under the guidelines issued by each of the Company’s states of operations, the Company has been allowed to continue to operate its business through the COVID-19 pandemic. The Company has permitted some personnel to work from home and has taken additional precautions to ensure the safety of its workforce, customers and the communities in which it operates. In general, the Company has experienced limited operational impacts, in the first half of 2020, as a result of COVID-19 directly. A substantial majority of its operating sites have remained open and operating, although some of the nation’s ports that the Company serves have experienced reduced hours of operation and reduced volumes.

Beginning in the last half of March 2020, the Company experienced a decline in demand due to the COVID-19 pandemic, as sectors of the economy began to shut down. Towards the end of April 2020, the Company experienced a significant decline in freight volumes and rates as stay-at-home orders across the country led to a halt in overall industrial production. In May and June 2020, the rate environment started to slowly improve and the Company’s volumes progressively increased nearly every week, albeit off the lower base, and during the third quarter of 2020, the Company observed a strong sequential rebound in demand for freight across both its Flatbed and Specialized segments, as well as improving strength in freight rates. Nonetheless, overall, the Company’s results of operations and financial condition were significantly impacted by the COVID-19 pandemic in the second and third quarters of 2020, and the Company expects that its results of operations and financial condition will continue to be adversely impacted for the remainder of 2020, as levels of activity in the Company’s business have historically been positively correlated to broad measures of economic activity and to measures of industrial production ~~since~~because many of the Company’s customers are in the manufacturing and industrial segments. In ~~particular, shelter-in-place mandates,~~ the ~~closing~~first nine months of ~~manufacturing facilities~~2021, the Company saw improvement in industrial demand, which had previously been pressured by the COVID-19 pandemic, and ~~the overall depressed economic environment have significantly affected demand for many of the Company’s customers, including those that manufacture aircraft parts and those~~ in the ~~energy sector. However, given~~second and third quarters of 2021, the ~~diversity~~industrial end-market in various verticals (particularly in construction and steel and other metals) appeared to have returned to pre-pandemic levels. As a result, in the third quarter of 2021, the ~~Company’s customer base~~Flatbed Solutions segment experienced a significantly improved rate environment, with rates 32.5% higher than the third quarter of 2020. During the third quarter of 2021, the Specialized Solutions segment also benefitted from continued strong demand and the various end markets that Daseke serves, not all of the Company’s customers have been as affected, and demand for the Company’s services by customers in certain end markets, such as wind energy, defense projects andfreight rates, primarily serving construction, high security cargo ~~have increased, partially offsetting softness in other end markets.~~and glass.

~~The Company believes that a significant portion~~As the coronavirus pandemic continues to evolve, we believe the extent of its cost structure is variable, and the Company has taken and will continue to take aggressive actions to adjust its expenses to reflect changes in demand for its services. These actions, which have been supported by the operational integrations and business improvement plans that the Company began to implement in 2019, have included reduced use of contractors, reduced employee hours, furloughs, layoffs and voluntary use of paid time off, consistent with local regulations. Although the Company does not expect to be able to fully offset the effects of significantly reduced volumes on its results of operations, the actions that the Company is taking, combined with the variable components of its cost structure, has, and should continue to, partially mitigate the impact ~~of the pandemic on its~~to our business, operating results, of operations. The Company also expects to reduce its net capital expenditures this year. Conversely, however, the Company is taking additional measures and incurring additional expense to protect the health and safety of its workforce and its customers. In addition, the Company could incur restructuring and other costs as it modifies and right-sizes its operations for declines and/or surges in demand, and may incur incremental interest expense this year as a result of steps it may take in order to further strengthen its liquidity.

We currently expect the COVID-19 pandemic to continue to negatively impact the Company for the remainder of 2020, and the Company’s 2020 results thus far and operating trends may not provide any meaningful indication as to what our financial results may be in the last quarter of this year. We have a diverse customer base with exposure to a wide array of industrial end markets, each of which are experiencing their own respective growth and economic recovery patterns. The effect of the COVID-19 pandemic may remain prevalent for a significant period of time and may continue to adversely affect the Company’s business, results of operationscash flows, liquidity and financial condition ~~even after the COVID-19 pandemic has subsided and “stay at home” mandates have been lifted. The extent to which the COVID-19 pandemic impacts the Company~~ will ~~depend on numerous evolving factors and future developments that we are not able to predict, including:~~be primarily driven by the severity and duration of the ~~pandemic; governmental, business and other actions in response to the~~coronavirus pandemic, ~~(which could include limitations on the~~

~~Table of Contents~~

Company’s operations or mandates to provide services in a specified manner); the impact of the pandemic on economic activity; the response of the overall economy and the financial markets; the extent and duration of the effect on consumer confidence and spending; the health of and the effect on our workforce and our ability to meet staffing needs; any impairment in the value of our tangible or intangible assets which could be recordedincluding as a result of ~~a weaker economic conditions;~~the 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 ~~potential effects on~~timing, scope and effectiveness of federal, state and local governmental responses to the pandemic. Those primary drivers are beyond our ~~internal controls, including those over financial reporting, as a result of changes in working environments, such as shelter-in-place~~knowledge and ~~similar orders that are applicable to our employees~~control, and ~~business partners, among others. There~~there are no comparable recent events that provide guidance as to the effect the COVID-19 global pandemic may ~~have, and as~~have. As a result, the ultimate impact of the pandemic is highly uncertain and subject to change. See ~~“Part II. Item~~“Item 1A. Risk ~~Factors”~~Factors—Risks Relating to the COVID-19 Pandemic” in ~~this~~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.

~~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 and Adjusted EBITDA Margin, Free Cash Flow, Adjusted Operating Expenses, Adjusted Operating Income (Loss), Adjusted Operating Ratio and Adjusted Net Income (Loss), and its key drivers of revenue quality, growth, expense control and operating efficiency. Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Adjusted Operating Expenses, Adjusted Operating Income (Loss), Adjusted Operating Ratio and Adjusted Net Income (Loss) 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 (loss), 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 use of these non-GAAP measures, as well as a description of the computation and reconciliation of the Company’s Adjusted EBITDA, Adjusted EBITDA Margin to net income (loss) margin, Free Cash Flow, Adjusted Net Income (Loss) to net income (loss), Adjusted Operating Expenses to Operating Expenses, Adjusted Operating Income (loss) to Operating Income (loss) and Adjusted Operating Ratio to operating ratio.

~~Revenue~~

The Company records four types of revenue: freight (company and owner operator), 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 miles in the most direct route between pick-up and delivery locations and other ancillary services the Company provides. Freight revenue is the product of the number of revenue-generating miles driven 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.

The Company’s brokerage revenue is generated 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 value-added warehousing, loading and unloading, vehicle maintenance and repair, preparation and packaging, fuel management, and other fleet management solutions. Logistics revenue is primarily driven by specific customer requirements for additional services and may fluctuate depending on customers’ utilization of these services due to changes in cargo specifications, delivery staging and fluctuations in North American economic activity.

Fuel surcharges are designed to compensate the Company for fuel costs above a certain cost per gallon base. Generally, the Company receives fuel surcharges on the miles for which it is compensated by customers. However, the Company continues to have exposure to increasing fuel costs related to empty miles, fuel efficiency due to engine idle time and other factors and to the extent the surcharge paid by the customer is insufficient. The main factors that affect fuel surcharge revenue are the price of diesel fuel and the number of loaded miles. In general, a declining energy and fuel price environment negatively affects 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 billed on a delayed basis, meaning it typically bills customers in the current week based on a previous week’s applicable index. Therefore, in times 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 change and when the change is reflected in fuel surcharge revenue.

Table of Contents

~~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 comprehensive income (loss) and fuel. Driver-related expenses vary with miles traveled, however the Company currently expects its expenses relating to driver wages to remain stable in the near-term as a result of driver wage increases implemented in the second half of 2018 to address the shortage of qualified drivers in the general trucking industry, compared to demand at that time. The expectation of stable driver wages paid per mile are due to current market conditions caused by shippers’ downward pressure on rates resulting in some easing of capacity 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.

~~Table of Contents~~

Results of Operations

The following table sets forth certain operating statistics for the three months ended September 30, 2021 and 2020 as well as items derived from the Company’s consolidated statements of operations ~~and comprehensive income (loss)~~ for the three months ended September 30, ~~2020~~2021 and ~~2019 in dollars~~2020. Rate per mile is the period’s revenue less fuel surcharge, brokerage and ~~as a percentage~~logistics revenues divided by total number of ~~total revenue~~company and ~~the increase or decrease~~owner operator miles driven in the ~~dollar amounts~~period. 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,

2020

2019

Increase (Decrease)
(Dollars in millions)

$

%

$

%

$

%

REVENUE:












Company freight

$
174.8

46.5

$
205.2

45.6

$
(30.4)

(14.8)
Owner operator freight

103.3

27.5

118.3

26.3

(15.0)

(12.7)
Brokerage

65.2

17.3

78.6

17.5

(13.4)

(17.0)
Logistics

9.9

2.6

13.5

3.0

(3.6)

(26.7)
Fuel surcharge

22.6

6.1

34.8

7.6

(12.2)

(35.1)
Total revenue

375.8

100.0

450.4

100.0

(74.6)

(16.6)

OPERATING EXPENSES:





Salaries, wages and employee benefits

95.8

25.5

127.7

28.4

(31.9)

(25.0)
Fuel

20.2

5.4

34.1

7.6

(13.9)

(40.8)
Operations and maintenance

45.5

12.1

56.8

12.6

(11.3)

(19.9)
Communications

0.9

0.2

1.0

0.2

(0.1)

(10.0)
Purchased freight

127.9

34.0

155.5

34.5

(27.6)

(17.7)
Administrative expenses

12.6

3.4

21.4

4.8

(8.8)

(41.1)
Sales and marketing

0.3

0.1

1.3

0.3

(1.0)

(76.9)
Taxes and licenses

3.9

1.0

4.8

1.1

(0.9)

(18.8)
Insurance and claims

16.3

4.3

13.4

3.0

2.9

21.6
Depreciation and amortization

22.3

5.9

38.3

8.5

(16.0)

(41.8)
Gain on disposition of property and equipment

(3.1)

(0.8)

(1.0)

(0.2)

(2.1)

210.0
Impairment

—

—

306.8

68.1

(306.8)

(100.0)
Restructuring charges

5.1

1.4

6.9

1.5

(1.8)

(26.1)
Total operating expenses

347.7

92.5

767.0

170.3

(419.3)

(54.7)
Operating ratio

92.5%

170.3%

Adjusted operating ratio⁽¹⁾

90.9%

97.0%

INCOME (LOSS) FROM OPERATIONS

28.1

7.5

(316.6)

(70.3)

344.7

(108.9)

Other expense (income):





Interest income

(0.1)

—

(0.3)

(0.1)

(0.2)

(66.7)
Interest expense

11.1

3.0

12.8

2.8

(1.7)

(13.3)
Write-off of unamortized deferred financing fees

—

—

2.0

0.4

(2.0)

(100.0)
Other

(0.6)

(0.2)

—

—

(0.6)

*
Total other expense

10.4

2.8

14.5

3.2

(4.1)

(28.3)

Income (loss) before benefit for income taxes

17.7

4.7

(331.1)

(73.5)

348.8

(105.3)
Income tax expense (benefit)

2.0

0.5

(57.8)

(12.8)

59.8

(103.5)
Net income (loss)

$
15.7

4.2

$
(273.3)

(60.7)

$
289.0

105.7

OPERATING STATISTICS:

Company miles

62.0

71.0

(9.0)

(12.7)
Owner operator miles

47.8

53.2

(5.4)

(10.2)
Total miles (in millions)⁽²⁾

109.8

124.2

(14.4)

(11.6)

Company-operated tractors, as of quarter-end

2,979

3,736

(757)

(20.3)
Owner-operated tractors, as of quarter-end

2,100

2,413

(313)

(13.0)
Number of trailers, as of quarter-end

11,607

13,208

(1,601)

(12.1)

Company-operated tractors, average for the quarter

3,035

3,744

(709)

(18.9)
Owner-operated tractors, average for the quarter

2,104

2,395

(291)

(12.2)
Total tractors, average for the quarter

5,139

6,139

(1,000)

(16.3)


	Three Months Ended September 30,
	2021						2020						Increase (Decrease)
(Dollars in millions, except Rate per mile and Revenue per tractor)	$			%			$			%			$			%
REVENUE:
Company freight	$	166.6			39.2		$	174.8			46.5		$	(8.2	)		(4.7	)
Owner operator freight		131.1			30.9			103.3			27.5			27.8			26.9
Brokerage		81.9			19.3			65.2			17.3			16.7			25.6
Logistics		9.7			2.3			9.9			2.6			(0.2	)		(2.0	)
Fuel surcharge		35.3			8.3			22.6			6.1			12.7			56.2
Total revenue		424.6			100.0			375.8			100.0			48.8			13.0

OPERATING EXPENSES:
Salaries, wages and employee benefits		96.6			22.8			95.8			25.5			0.8			0.8
Fuel		26.8			6.3			20.2			5.4			6.6			32.7
Operations and maintenance		40.5			9.5			45.5			12.1			(5.0	)		(11.0	)
Communications		0.9			0.2			0.9			0.2			—			—
Purchased freight		167.5			39.4			127.9			34.0			39.6			31.0
Administrative expenses		17.0			4.0			12.6			3.4			4.4			34.9
Sales and marketing		0.5			0.1			0.3			0.1			0.2			66.7
Taxes and licenses		3.5			0.8			3.9			1.0			(0.4	)		(10.3	)
Insurance and claims		13.9			3.3			16.3			4.3			(2.4	)		(14.7	)
Depreciation and amortization		22.3			5.3			22.3			5.9			—			—
Gain on disposition of revenue property and equipment		(5.4	)		(1.2	)		(3.1	)		(0.8	)		(2.3	)		74.2
Restructuring charges		0.1			—			5.1			1.4			(5.0	)		(98.0	)
Total operating expenses		384.2			90.5			347.7			92.5			36.5			10.5

INCOME FROM OPERATIONS		40.4			9.5			28.1			7.5			12.3			43.8

Other expense (income):
Interest income		(0.1	)		—			(0.1	)		—			—			—
Interest expense		7.3			1.7			11.1			3.0			(3.8	)		(34.2	)
Change in fair value of warrant liability		3.4			0.8			3.0			0.8			0.4			13.3
Other		0.2			—			(0.6	)		(0.2	)		0.8			(133.3	)
Total other expense		10.8			2.5			13.4			3.6			(2.6	)		(19.4	)

Income before income taxes		29.6			7.0			14.7			3.9			14.9			101.4
Income tax expense		8.7			2.0			2.0			0.5			6.7			335.0
Net income	$	20.9			4.9		$	12.7			3.4		$	8.2			64.6

OPERATING STATISTICS:
Company miles		54.4						62.0						(7.6	)		(12.3	)
Owner operator miles		46.7						47.8						(1.1	)		(2.3	)
Total miles (in millions)		101.1						109.8						(8.7	)		(7.9	)

Rate per mile	$	2.94					$	2.53					$	0.41			16.2
Revenue per tractor	$	62,500					$	54,100					$	8,400			15.5

Company-operated tractors, at period-end		2,641						2,979						(338	)		(11.3	)
Owner-operated tractors, at period-end		2,077						2,100						(23	)		(1.1	)
Number of trailers, at period-end		11,266						11,607						(341	)		(2.9	)

Company-operated tractors, average for the period		2,672						3,035						(363	)		(12.0	)
Owner-operated tractors, average for the period		2,095						2,104						(9	)		(0.4	)
Total tractors, average for the period		4,767						5,139						(372	)		(7.2	)

Table of Contents

*	~~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.

~~(2)~~

~~Miles are estimated based on information received as of the date of filing. Miles may change quarter to quarter when final information is received from each operating segment.~~

~~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 for the three months ended September 30, 2020 and 2019 in dollars and as a percentage of its Specialized Solutions segment’s total revenue and the increase or decrease in the dollar amounts of those items. The following table also sets forth certain operating statistics ~~for~~of the Company’s Specialized Solutions segment for the three months ended September 30, 2021 and 2020, ~~and 2019.~~

~~SPECIALIZED SOLUTIONS~~

Three Months Ended September 30,


2020

2019

Increase (Decrease)
(Dollars in millions)

$

%

$

%

$

%

REVENUE⁽¹⁾:












Company freight

$
129.7

55.1

$
155.4

54.0

$
(25.7)

(16.5)
Owner operator freight

37.7

16.0

49.1

17.0

(11.4)

(23.2)
Brokerage

47.8

20.3

54.5

18.9

(6.7)

(12.3)
Logistics

9.1

3.9

12.9

4.5

(3.8)

(29.5)
Fuel surcharge

10.9

4.7

16.1

5.6

(5.2)

(32.3)
Total revenue

235.2

100.0

288.0

100.0

(52.8)

(18.3)

OPERATING EXPENSES⁽¹⁾:





Salaries, wages and employee benefits

60.3

25.6

82.6

28.7

(22.3)

(27.0)
Fuel

13.0

5.5

21.7

7.5

(8.7)

(40.1)
Operations and maintenance

34.4

14.6

43.3

15.0

(8.9)

(20.6)
Purchased freight

64.6

27.5

85.2

29.6

(20.6)

(24.2)
Depreciation and amortization

12.8

5.4

23.8

8.3

(11.0)

(46.2)
Impairment

—

—

193.6

67.2

(193.6)

(100.0)
Restructuring

4.9

2.1

3.5

1.2

1.4

40.0
Other operating expenses

14.1

6.0

21.9

7.6

(7.8)

(35.6)
Total operating expenses

204.1

86.8

475.6

165.1

(271.5)

(57.1)
Operating ratio

86.8%

165.1%

Adjusted operating ratio⁽²⁾

85.2%

93.9%

INCOME (LOSS) FROM OPERATIONS

$
31.1

13.2

$
(187.6)

(65.1)

$
218.7

(116.6)

OPERATING STATISTICS:

Company miles

38.9

43.2

(4.3)

(10.0)
Owner operator miles

12.1

14.6

(2.5)

(17.1)
Total miles (in millions)⁽³⁾

51.0

57.8

(6.8)

(11.8)

Company-operated tractors, at quarter-end

1,960

2,472

(512)

(20.7)
Owner-operated tractors, at quarter-end

510

699

(189)

(27.0)
Number of trailers, at quarter-end

7,278

8,280

(1,002)

(12.1)

Company-operated tractors, average for the quarter

1,958

2,479

(521)

(21.0)
Owner-operated tractors, average for the quarter

523

694

(171)

(24.6)
Total tractors, average for the quarter

2,481

3,173

(692)

(21.8)

~~(1)~~

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

~~(2)~~

~~(3)~~

~~Miles are estimated based on information received as of the date of filing. Miles may change quarter to quarter when final information is received from each operating segment.~~

~~Table of Contents~~

~~The following table sets forth the Company’s Flatbed Solutions segment’s~~ revenue, operating expenses ~~operating ratio, Adjusted Operating Ratio~~ and ~~operating~~ income (loss) from operations for the three months ended September 30, ~~2020~~2021 and ~~2019 in dollars~~2020. Rate per mile is the period’s revenue less fuel surcharge, brokerage and ~~as a percentage~~logistics revenues divided by total number of ~~its Flatbed Solutions segment’s total revenue~~company and ~~the increase or decrease~~owner operator miles driven in the ~~dollar amounts~~period. 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 September 30,
	2021				2020				Increase (Decrease)
(Dollars in millions, except Rate per mile and Revenue per tractor)	$		%		$		%		$			%
REVENUE(1):
Company freight	$	123.9		50.8	$	129.7		55.1	$	(5.8	)		(4.5	)
Owner operator freight		42.6		17.5		37.7		16.0		4.9			13.0
Brokerage		51.5		21.1		47.8		20.3		3.7			7.7
Logistics		8.6		3.5		9.1		3.9		(0.5	)		(5.5	)
Fuel surcharge		17.4		7.1		10.9		4.7		6.5			59.6
Total revenue		244.0		100.0		235.2		100.0		8.8			3.7

OPERATING EXPENSES(1):
Salaries, wages and employee benefits		61.3		25.1		60.3		25.6		1.0			1.6
Fuel		18.4		7.5		13.0		5.5		5.4			41.3
Operations and maintenance		29.3		12.0		34.4		14.6		(5.1	)		(14.9	)
Purchased freight		75.1		30.8		64.6		27.5		10.5			16.3
Depreciation and amortization		13.3		5.4		12.8		5.4		0.5			3.6
Restructuring		0.1		—		4.9		2.1		(4.8	)		(98.1	)
Other operating expenses		16.9		7.1		14.1		6.0		2.8			20.2
Total operating expenses		214.4		87.9		204.1		86.8		10.3			5.0

INCOME FROM OPERATIONS	$	29.6		12.1	$	31.1		13.2	$	(1.5	)		(4.8	)

OPERATING STATISTICS:
Company miles		36.6				38.9				(2.3	)		(5.9	)
Owner operator miles		12.2				12.1				0.1			0.8
Total miles (in millions)		48.8				51.0				(2.2	)		(4.3	)

Rate per mile	$	3.41			$	3.28			$	0.13			4.0
Revenue per tractor	$	70,300			$	67,500			$	2,800			4.1

Company-operated tractors, at period-end		1,835				1,960				(125	)		(6.4	)
Owner-operated tractors, at period-end		497				510				(13	)		(2.5	)
Number of trailers, at period-end		7,059				7,278				(219	)		(3.0	)

Company-operated tractors, average for the period		1,865				1,958				(93	)		(4.7	)
Owner-operated tractors, average for the period		504				523				(19	)		(3.6	)
Total tractors, average for the period		2,369				2,481				(112	)		(4.5	)

(1)

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

Table of Contents

The following table ~~also~~ sets forth certain operating statistics ~~for~~of the Company’s Flatbed Solutions segment for the three months ended September 30, 2021 and 2020, as well as revenue, operating expenses and ~~2019.~~

income (loss) from operations for three months ended September 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

Three Months Ended September 30,

2020

2019

Increase (Decrease)
(Dollars in millions)

$

%

$

%

$

%

REVENUE⁽¹⁾:












Company freight

$
47.1

32.6

$
55.2

32.5

$
(8.1)

(14.7)
Owner operator freight

67.2

46.5

71.1

41.9

(3.9)

(5.5)
Brokerage

17.6

12.2

23.6

13.9

(6.0)

(25.4)
Logistics

0.7

0.5

0.7

0.4

—

—
Fuel surcharge

11.9

8.2

19.2

11.3

(7.3)

(38.0)
Total revenue

144.5

100.0

169.8

100.0

(25.3)

(14.9)

OPERATING EXPENSES⁽¹⁾:





Salaries, wages and employee benefits

29.9

20.7

35.0

20.6

(5.1)

(14.6)
Fuel

7.2

5.0

12.5

7.4

(5.3)

(42.4)
Operations and maintenance

11.0

7.6

13.2

7.8

(2.2)

(16.7)
Purchased freight

67.3

46.6

77.8

45.8

(10.5)

(13.5)
Depreciation and amortization

9.3

6.4

14.2

8.4

(4.9)

(34.5)
Impairment

—

—

113.2

66.7

(113.2)

(100.0)
Restructuring

0.2

0.1

0.9

0.5

(0.7)

(77.8)
Other operating expenses

10.3

7.1

10.9

6.4

(0.6)

(5.5)
Total operating expenses

135.2

93.6

277.7

163.5

(142.5)

(51.3)
Operating ratio

93.6%

163.5%

Adjusted operating ratio⁽²⁾

92.8%

95.0%

INCOME (LOSS) FROM OPERATIONS

$
9.3

6.4

$
(107.9)

(63.5)

$
117.2

(108.6)

OPERATING STATISTICS:

Company miles

23.1

27.8

(4.7)

(16.9)
Owner operator miles

35.7

38.6

(2.9)

(7.5)
Total miles (in millions)⁽³⁾

58.8

66.4

(7.6)

(11.4)

Company-operated tractors, at quarter-end

1,019

1,264

(245)

(19.4)
Owner-operated tractors, at quarter-end

1,590

1,714

(124)

(7.2)
Number of trailers, at quarter-end

4,329

4,928

(599)

(12.2)

Company-operated tractors, average for the quarter

1,077

1,265

(188)

(14.9)
Owner-operated tractors, average for the quarter

1,581

1,701

(120)

(7.1)
Total tractors, average for the quarter

2,658

2,966

(308)

(10.4)


	Three Months Ended September 30,
	2021				2020				Increase (Decrease)
(Dollars in millions, except Rate per mile and Revenue per tractor)	$		%		$		%		$			%
REVENUE(1):
Company freight	$	45.1		24.5	$	47.1		32.6	$	(2.0	)		(4.2	)
Owner operator freight		89.2		48.5		67.2		46.5		22.0			32.7
Brokerage		30.4		16.5		17.6		12.2		12.8			72.7
Logistics		1.1		0.6		0.7		0.5		0.4			57.1
Fuel surcharge		18.2		9.9		11.9		8.2		6.3			52.9
Total revenue		184.0		100.0		144.5		100.0		39.5			27.3

OPERATING EXPENSES(1):
Salaries, wages and employee benefits		28.6		15.6		29.9		20.7		(1.3	)		(4.2	)
Fuel		8.4		4.6		7.2		5.0		1.2			16.6
Operations and maintenance		11.2		6.1		11.0		7.6		0.2			2.0
Purchased freight		95.7		52.0		67.3		46.6		28.4			42.2
Depreciation and amortization		8.8		4.8		9.3		6.4		(0.5	)		(5.5	)
Restructuring		—		—		0.2		0.1		(0.2	)		(100.0	)
Other operating expenses		10.1		5.4		10.3		7.1		(0.2	)		(1.8	)
Total operating expenses		162.9		88.5		135.2		93.6		27.7			20.5

INCOME FROM OPERATIONS	$	21.1		11.5	$	9.3		6.4	$	11.8			127.4

OPERATING STATISTICS:
Company miles		17.8				23.1				(5.3	)		(22.9	)
Owner operator miles		34.5				35.7				(1.2	)		(3.4	)
Total miles (in millions)		52.3				58.8				(6.5	)		(11.1	)

Rate per mile	$	2.57			$	1.94			$	0.63			32.5
Revenue per tractor	$	56,000			$	43,000			$	13,000			30.2

Company-operated tractors, at period-end		806				1,019				(213	)		(20.9	)
Owner-operated tractors, at period-end		1,580				1,590				(10	)		(0.6	)
Number of trailers, at period-end		4,207				4,329				(122	)		(2.8	)

Company-operated tractors, average for the period		807				1,077				(270	)		(25.1	)
Owner-operated tractors, average for the period		1,591				1,581				10			0.6
Total tractors, average for the period		2,398				2,658				(260	)		(9.8	)

(1)

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

~~(1)~~

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

~~(2)~~

~~(3)~~

~~Miles are estimated based on information received as of the date of filing. Miles may change quarter to quarter when final information is received from each operating segment.~~

~~Table of Contents~~

Revenue. Total revenue ~~decreased 16.6%~~increased 13.0% to ~~$375.8~~$424.6 million for the three months ended September 30, ~~2020~~2021 from ~~$450.4~~$375.8 million for the same period in ~~2019, primarily due to the decrease in miles driven and the exit of Aveda operation.~~2020. The ~~decrease~~increase in total revenue was due primarily to ~~decreases~~record freight rates in the Flatbed segment. Company freight revenue decreased $8.2 million, or 4.7%, to $166.6 million for the three months ended September 30, 2021 from $174.8 million for the same period in 2020. The decrease in company freight revenue was a result of a 12.3% decrease in company miles primarily due to the downsizing of company trucks partially offset by an 8.6% increase in rate per mile. Owner operator freight revenue increased $27.8 million, or 26.9%, due to a 29.9% increase in rate per mile, partially offset by a 2.3% decrease in owner operator miles driven. The increase in total freight revenue was primarily due to a 16.2% increase in rate per mile. Brokerage revenue increased $16.7 million, or 25.6%, to $81.9 million for the three months ended September 30, 2021 from $65.2 million for the same period in 2020 primarily due to increases in customer sales volumes and rate. Fuel surcharge revenue increased $12.7 million, or 56.2%, to $35.3 million for the three months ended September 30, 2021 from $22.6 million for the same period in 2020 due to increased fuel costs that led to higher fuel surcharges.

Table of Contents

The Company’s Specialized Solutions segment’s revenue increased 3.7% to $244.0 million for the three months ended September 30, 2021 from $235.2 million for the same period in 2020. The increase was primarily due to increases in fuel surcharge, owner operator freight, and brokerage revenue. Company freight revenue decreased ~~$30.4~~$5.8 million, or ~~14.8%~~4.5%, to ~~$174.8~~$123.9 million for the three months ended September 30, ~~2020~~2021 from ~~$205.2~~$129.7 million for the same period in ~~2019. Owner~~2020. The decrease in company freight revenue was a result of a 5.9% decrease in company miles due to the downsizing of company trucks compared to the same period in 2020, partially offset by a 1.5% increase in rate per mile. The increase in owner operator freight revenue ~~decreased $15.0~~was primarily a result of a 12.1% increase in rate per mile and a 0.8% increase in miles driven compared to the same period in 2020. Brokerage revenue increased $3.7 million, or ~~12.7%~~7.7%, to ~~$103.3~~$51.5 million for the three months ended September 30, ~~2020~~2021 from ~~$118.3~~$47.8 million for the same period in ~~2019. The decreases~~2020 primarily due to increases in ~~company freight~~customer sales volumes and ~~owner operator freight~~rate. Fuel surcharge revenue ~~were a result of a 2.7% decrease in rate per mile and a 11.6% decrease in total miles driven. Brokerage revenue decreased $13.4~~increased $6.5 million, or ~~17.0%~~59.6%, to ~~$65.2~~$17.4 million for the three months ended September 30, ~~2020~~2021 from ~~$78.6~~$10.9 million for the same period in ~~2019~~2020 due to ~~a decrease in customer sales volumes. During the third quarter of 2020, the Company observed a strong sequential rebound in demand for freight across both its~~increased fuel costs that led to higher fuel surcharges.

The Company’s Flatbed ~~and Specialized segments, as well as improving strength in freight rates. Logistics~~Solutions segment’s revenue ~~decreased $3.6~~increased $39.5 million, or ~~26.7%~~27.3%, to ~~$9.9~~$184.0 million for the three months ended September 30, 2021 from $144.5 million for the same period in 2020, ~~from $13.5~~which was primarily due to increases in owner operator freight and brokerage revenue. Company freight revenue decreased $2.0 million, or 4.2%, to $45.1 million for the three months ended September 30, ~~2019 as~~2021 from $47.1 million for the same period in 2020. The decrease in company freight revenue was a result of ~~decreases~~a 22.9% decrease in ~~logistics activities. Fuel surcharge~~company miles due to the downsizing of company trucks, partially offset by 24.3% increase in rate per mile. Owner operator freight revenue ~~decreased $12.2~~increased $22.0 million, or ~~35.1%~~32.7%, to ~~$22.6~~$89.2 million for the three months ended September 30, ~~2020~~2021 from ~~$34.8~~$67.2 million for the same period in ~~2019 due to a decrease in loaded miles and the decrease~~2020. The increase in the ~~price~~owner operator freight revenue was the result of ~~diesel fuel.~~

The Company’s Specialized Solutions segment’s revenue decreased 18.3% to $235.2 million for the three months ended September 30, 2020 from $288.0 million for the same period in 2019, which was primarily due to the decreasea 32.5% increase in rate per mile and miles driven, as well as, the wind down of Aveda operations. Company freight revenue decreased $25.7 million, or 16.5%, to $129.7 million for the three months ended September 30, 2020 from $155.4 million for the same period in 2019. Owner operator freight revenue decreased $11.4 million, or 23.2%, to $37.7 million for the three months ended September 30, 2020 from $49.1 million for the same period in 2019. The decrease in overall freight revenue was primarilypartially offset by a ~~result of a 7.3% decrease in rate per mile and a 11.8%~~11.1% decrease in total miles driven compared to the same period in ~~2019. The decrease in rate per mile was mainly driven by the exit of Aveda operation which historically had the highest rate per mile within the segment.~~2020. Brokerage revenue ~~decreased $6.7~~increased $12.8 million, or ~~12.3%~~72.7%, to ~~$47.8~~$30.4 million for the three months ended September 30, ~~2020~~2021 from ~~$54.5~~$17.6 million for the same period in ~~2019. During the third quarter of~~ 2020 ~~this segment saw an increase~~due to increases in customer sales volumes ~~in the wind energy, defense projects~~ and ~~high security cargo. Logistics revenue decreased $3.8 million, or 29.5% to $9.1 million from $12.9 million compared to the same period in 2019 as a result of decreases in logistics activities.~~rate. Fuel surcharge revenue ~~decreased $5.2~~increased $6.3 million, or ~~32.3%~~52.9%, to ~~$10.9~~$18.2 million for the three months ended September 30, ~~2020~~2021 from ~~$16.1~~$11.9 million for the same period in ~~2019~~2020 due to ~~a decrease in loaded miles and the decrease in the price of diesel fuel.~~increased fuel costs that led to higher fuel surcharges.

~~Table of Contents~~

The Company’s Flatbed Solutions segment’s revenue decreased $25.3 million, or 14.9%, to $144.5 million for the three months ended September 30, 2020 from $169.8 million for the same period in 2019, which was primarily due to a decrease in miles driven. Company freight revenue decreased $8.1 million, or 14.7%, to $47.1 million for the three months ended September 30, 2020 from $55.2 million for the same period in 2019. Owner operator freight revenue decreased $3.9 million, or 5.5%, to $67.2 million for the three months ended September 30, 2020 from $71.1 million for the same period in 2019. Brokerage revenue decreased $6.0 million, or 25.4%, to $17.6 million for the three months ended September 30, 2020 from $23.6 million for the same period in 2019 due to a decrease in customer volumes. The decreases in company freight and owner operator freight was a result of a 11.4% decrease in total miles driven compared to the same period in 2019, partially offset by a 2.1% increase in rate per mile. During the third quarter of 2020, the Company observed a strong sequential rebound in demand for freight across the segments, as well as improving strength in freight rates. Fuel surcharge revenue decreased $7.3 million, or 38.0%, to $11.9 million for the three months ended September 30, 2020 from $19.2 million for the same period in 2019 due to a decrease in loaded miles and the decrease in the price of diesel fuel.

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~~company drivers, the rate per mile paid to ~~Company~~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 25.0% to $95.8~~were generally consistent with prior period at $96.6 million for the three months ended September 30, ~~2020 from $127.7~~2021 compared to $95.8 million for the same period in ~~2019.~~ 2020.

The decrease in salaries, wages and employee benefits expense was primarily due to decreased employee headcount related to Project Pivot and Project Synchronize and driver pay due to the decrease in company miles compared to the same period in 2019. Temporary furloughs and recruiting pauses were put in place during the quarter to offset the impact of volume decreases due to the pandemic. Salaries, wages and employee benefits expense, as a percentage of consolidated revenue (excluding brokerage revenue), decreased 3.5%Company’s Specialized Solutions segment for the three months ended September 30, ~~2020 as compared to~~2021 was generally consistent with the same period in ~~2019.~~2020.

The Company’s ~~Specialized~~Flatbed Solutions segment had a ~~$22.3~~$1.3 million, or ~~27.0%~~4.2%, decrease in salaries, wages and employee benefits expense for the three months ended September 30, ~~2020~~2021 compared to the same period in ~~2019,~~2020, primarily as a result of the decreased employee headcount related to Project Synchronize and lower driver pay due to the decrease in company miles compared to the same period in 2019. Temporary furloughs and recruiting pauses were put in place during the quarter to offset the impact of volume decreases due to the pandemic. Salaries, wages and employee benefits expense, as a percentage of Specialized Solutions revenue (excluding brokerage revenue), decreased 3.2% for the three months ended September 30, 2020 as compared to the same period in 2019.

The Company’s Flatbed Solutions segment had a $5.1 million, or 14.6%, decrease in salaries, wages and employee benefits expense for the three months ended September 30, 2020 compared to the same period in 2019, 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 2019. Temporary furloughs and recruiting pauses were put in place during the quarter to offset the impact of volume decreases due to the pandemic.2020. Salaries, wages and employee benefits expense, as a percentage of Flatbed Solutions revenue (excluding brokerage revenue), decreased 4.9% for the three months ended September 30, ~~2020 was generally consistent with~~2021 as compared to the same period in ~~2019.~~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~~company drivers.

~~Table of Contents~~

Total fuel expense ~~decreased $13.9~~increased $6.6 million, or ~~40.8%~~32.7%, to ~~$20.2~~$26.8 million for the three months ended September 30, ~~2020~~2021 from ~~$34.1~~$20.2 million for the same period in ~~2019.~~2020. This ~~decrease~~increase was primarily due to a ~~19.7%~~38.4% increase in fuel price, partially offset by a 12.3% decrease in ~~average diesel prices period over period.~~company miles driven. The U.S. national average diesel fuel price, as published by the U.S. Department of Energy, was ~~$2.426~~$3.357 for the three months ended September 30, ~~2020,~~2021, compared to ~~$3.023~~$2.426 for the same period in ~~2019. Total Company miles driven decreased 12.7% for the three months ended September 30, 2020 as compared to the same period in 2019.~~2020.

The Company’s Specialized Solutions segment’s fuel expense ~~decreased 40.1%~~increased 41.3% to ~~$13.0~~$18.4 million for the three months ended September 30, ~~2020~~2021 from ~~$21.7~~$13.0 million for the same period in ~~2019,~~2020, primarily as a result of the increase in fuel price mentioned above and partially offset by a 5.9% decrease in ~~average diesel price and a decrease of 10.0% in Company~~company miles driven for the three months ended September 30, ~~2020~~2021 as compared to the same period in ~~2019.~~2020.

The Company’s Flatbed Solutions segment’s fuel expense ~~decreased 42.4%~~increased 16.6% to ~~$7.2~~$8.4 million for the three months ended September 30, ~~2020~~2021 from ~~$12.5~~$7.2 million for the same period in ~~2019,~~2020, primarily as a result of the increase in fuel price mentioned above and partially offset by a 22.9% decrease in ~~average diesel price and a decrease of 16.9% in Company~~company miles driven for the three months ended September 30, ~~2020~~2021 as compared to the same period in ~~2019.~~2020.

Table of Contents

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 decreased ~~20.4%~~11.0% to ~~$45.5~~$40.5 million for the three months ended September 30, ~~2020~~2021 from ~~$56.8~~$45.5 million for the same period in ~~2019~~2020 due to a decrease of ~~$5.2~~$1.2 million in maintenance costs such as repairs and tires, ~~$2.5 million in lease costs, $2.8~~$3.3 million in operation costs such as pilot car and permit fees, and ~~$2.3~~$0.5 million in other operations expenses. Operations and maintenance expense, as a percentage of consolidated revenue (excluding brokerage revenue), decreased 2.8% to 11.8% for the three months ended September 30, ~~2020 was generally consistent with~~2021 as compared to 14.6% in the same period in ~~2019.~~2020.

The Company’s Specialized Solutions segment’s operations and maintenance expense decreased ~~$8.9~~$5.1 million, or ~~20.6%~~14.9%, for the three months ended September 30, ~~2020~~2021 as compared to the same period in ~~2019~~2020 as a result of a decrease of ~~$3.9~~$1.1 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 ~~$2.9 million in lease costs and a decrease of $1.9~~$3.4 million in operation costs such as pilot car and permit ~~fees.~~fees and a decrease of $0.6 million in other operations expenses. Operations and maintenance expense, as a percentage of Specialized Solutions revenue (excluding brokerage revenue), decreased 3.2% to 15.2% for the three months ended September 30, ~~2020 was generally consistent with~~2021 as compared to 18.4% in the same period in ~~2019.~~2020.

The Company’s Flatbed Solutions segment’s operations and maintenance expense ~~decreased $2.2 million, or 16.7%,~~was generally consistent with prior period for the three months ended September 30, ~~2020~~2021 as compared to the same period in 2019, primarily as a result of a decrease of $1.3 million in maintenance expense such as repairs, washes and tires due to a reduction of tractors and trailers in the Company’s fleet and $0.9 million in operation costs such as pilot car and permit fees. Operations and maintenance expense, as a percentage of Flatbed Solutions revenue (excluding brokerage revenue), for the three months ended September 30, 2020 was generally consistent with the same period in 2019.2020.

Purchased Freight. Purchased freight expense consists of the payments to ~~owner-operators,~~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.

~~Table of Contents~~

Total purchased freight expense ~~decreased $27.6~~increased $39.6 million, or ~~17.7%~~31.0%, to ~~$127.9~~$167.5 million during the three months ended September 30, ~~2020~~2021 from ~~$155.5~~$127.9 million during the same period in ~~2019.~~2020. Purchased freight expense from ~~owner-operators decreased 17.5%~~owner operators increased 29.9% to ~~$82.3~~$106.9 million during the three months ended September 30, ~~2020~~2021 from ~~$99.7~~$82.3 million during the same period in ~~2019~~2020 as a result of a ~~9.2%~~29.9% increase in rate, partially offset by a 2.3% decrease in owner operator miles driven. Purchased freight expense from third-party capacity providers ~~decreased 18.0%~~increased 32.4% to ~~$45.7~~$60.5 million during the three months ended September 30, ~~2020~~2021 from ~~$55.7~~$45.7 million during the same period in ~~2019,~~2020, as a result of ~~lower rates and decreased~~increased utilization of third-party capacity providers. ~~Purchased freight expense, as a percentage of consolidated revenue, for the three months ended September 30, 2020 was generally consistent with the same period in 2019.~~

The Company’s Specialized Solutions segment’s purchased freight expense ~~decreased 24.2%~~increased 16.3% to ~~$64.6~~$75.1 million during the three months ended September 30, ~~2020~~2021 from ~~$85.2~~$64.6 million during the same period in ~~2019.~~2020. Purchased freight expense from ~~owner-operators decreased 30.2%~~owner operators increased 20.1% to ~~$26.4~~$31.7 million during the three months ended September 30, ~~2020~~2021 from ~~$37.9~~$26.4 million during the same period in ~~2019,~~2020 as a result of a ~~13.7% decrease~~12.1% increase in rate and a 0.8% increase in owner operator miles driven. Purchased freight expense from third-party capacity providers ~~decreased 19.3%~~increased 13.6% to ~~$38.2~~$43.4 million during the three months ended September 30, ~~2020~~2021 from ~~$47.3~~$38.2 million during the same period in ~~2019,~~2020 as a result of ~~a decrease~~an increase in utilization of third-party capacity providers. ~~Purchased freight expense, as a percentage of Specialized Solutions revenue, for the three months ended September 30, 2020 was generally consistent with the same period in 2019.~~

The Company’s Flatbed Solutions segment’s purchased freight expense ~~decreased 13.5%~~increased 42.2% to ~~$67.3~~$95.7 million for the three months ended September 30, ~~2020~~2021 from ~~$77.8~~$67.3 million for the same period in ~~2019.~~2020. Purchased freight expense from ~~owner-operators decreased 9.7%~~owner operators increased 34.8% to ~~$55.8~~$75.2 million for the three months ended September 30, ~~2020~~2021 from ~~$61.8~~$55.8 million for the same period in ~~2019,~~2020 as a result of a ~~7.5% decrease~~37.4% increase in rate paid to owner ~~operators’ miles driven.~~operators. Purchased freight expense from third-party capacity providers ~~decreased 27.5%~~increased 78.3% to ~~$11.5~~$20.5 million during the three months ended September 30, ~~2020~~2021 from ~~$15.9~~$11.5 million during the same period in ~~2019,~~2020, primarily as a result of ~~decreased~~increased utilization of third-party capacity providers. ~~Purchased freight expense, as a percentage of Flatbed Solutions revenue, for the three months ended September 30, 2020 was generally consistent with the same period in 2019.~~

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

Depreciation and amortization expense ~~decreased $16.0 million, or 41.8%, to~~was flat at $22.3 million during the three months ended September 30, ~~2020 from $38.3 million during the same period in 2019 as a result of a 18.9% decrease in average tractor count in the Company’s fleet~~2021 and ~~further reduced by the impact of $97.6 million of impairments recorded in the third quarter of 2019.~~2020.

The Company’s Specialized Solutions segment’s depreciation and amortization expense ~~decreased $11.0~~increased $0.5 million, or ~~46.2%~~3.6%, for the three months ended September 30, ~~2020~~2021 as compared to the same period in ~~2019~~2020 as a result of ~~a 21.0% decrease in average tractor count in the segment’s fleet and further reduced~~recent revenue equipment additions partially offset by ~~the impact~~disposals of ~~$58.6 million of impairments recorded in the third quarter of 2019.~~fully depreciated revenue equipment.

The Company’s Flatbed Solutions segment’s depreciation and amortization expense decreased ~~$4.9~~$0.5 million, or ~~34.5%~~5.5%, for the three months ended September 30, ~~2020~~2021 as compared to the same period in ~~2019~~2020 as a result of a ~~14.9%~~25.1% decrease in average tractor count in the segment’s fleet.

Table of Contents

Administrative Expenses. Administrative expenses consist of operating lease costs for real estate, professional fees and other expenses that are not directly associated with the Company’s fleet ~~and further reduced by~~services. Administrative expense increased $4.4 million for the ~~impact of a $39.0 million of impairments recorded~~three months ended September 30, 2021 as compared to the same period in 2020 primarily due to gains on lease terminations that occurred during the 2020 period that did not reoccur in the ~~third quarter~~2021 period. Administrative expenses, as a percentage of ~~2019.~~revenue, increased 0.6% 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 decreased ~~$0.9~~$0.4 million for the three months ended September 30, ~~2020.~~2021. Operating taxes and license expense, as a percentage of revenue, was generally consistent for the three months ended September 30, ~~2020~~2021 and ~~2019.~~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 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 ~~increase~~correlate with the miles the Company travels. Insurance and claims expense ~~increased 21.6%~~decreased 14.7% to ~~$16.3~~$13.9 million during the three months ended September 30, ~~2020~~2021 from ~~$13.4~~$16.3 million during the same period in ~~2019~~2020 due to ~~increases~~decreases in miles and decreases insurance claims and premiums. Insurance and claims, as a percentage of revenue, ~~increased 1.3%~~decreased 1.0% for the three months ended September 30, ~~2020~~2021 as compared to the ~~three months ended September 30, 2019.~~

~~Impairment.~~ ~~No impairment expense was recognized in the three months ended September 30, 2020 while $306.8 million was recognized in the~~ same period in 2019 related to goodwill, intangible assets, property and equipment and right-of-use assets. Impairment expense for the three months ended September 30, 2019 for the Specialized Solutions segment was $193.6 million and for the Flatbed Solutions segment was $113.2 million.2020.

~~Table of Contents~~

Restructuring Costs. Restructuring costs of $0.1 million and $5.1 million were recognized in the three months ended September 30, 2021 and 2020, respectively. The restructuring costs in ~~connection with~~the three months ended September 30, 2020 were primarily related to Phase II of Project Synchronize and the closure of certain Aveda terminals.~~Restructuring~~

Other (Income) Expense. Interest expense consists of cash interest, amortization and write-off of debt issuance costs ~~of $6.9~~and fees and prepayment penalties. Interest expense decreased 34.2% to $7.3 million ~~were recognized in the three months ended September 30, 2019~~ ~~in connection with Project Synchronize and Project Pivot. Restructuring costs~~ for the three months ended September 30, ~~2019 for the Specialized Solutions segment was $3.5~~2021 from $11.1 million ~~for the Flatbed Solutions segment was $0.9 million, and for the corporate office was $2.5 million.~~

~~Operating Income (Loss).~~ ~~Operating income was $28.1 million, or 7.5% of revenue, for the three months ended September 30, 2020 compared to operating loss $316.6 million, or 70.3% of revenue,~~ for the same period in 2019, primarily as a result of controlling expenses to navigate through the pandemic and the Company’s plans to integrate and restructure some of its operating segments during 2020 and a result of impairment and restructuring charges in 2019.

2020. The Company’s Specialized Solutions segment’s operating income was $31.1 million, or 13.2% of revenue, for the three months ended September 30, 2020 compared to operating loss of $187.6 million, or 65.1% of revenue, for the same period in 2019, primarily as a result of controlling expenses to navigate through the pandemic during 2020 and a result of impairment and restructuring charges in 2019. The change in operating income as a percent of revenue is primarily a result of a decrease in salaries, wages and employee benefits, fuel expense, maintenance expense, purchase freight and depreciation and amortization.

The Company’s Flatbed Solutions segment’s operating income was $9.3 million, or 6.4% of revenue, for the three months ended September 30, 2020 compared to operating loss $107.9 million, or 63.5% of revenue, for the same period in 2019, the increase primarily as a result of controlling expenses to navigate through the pandemic during 2020 and a result of impairment and restructuring charges in 2019.

~~Interest Expense.~~ Interest expense consists of cash interest, amortization of debt issuance costs, fees and prepayment penalties. Interest expense decreased 13.3% to $11.1 million during the three months ended September 30, 2020 from $12.8 million during the same period in 2019. This decrease was primarily attributable to lower interest rates on the Term Loan Facility and decreases in the balance outstanding on equipment term ~~loan and finance lease outstanding balances.~~

~~Income Tax.~~ ~~Income tax expense~~loans. Change in fair value of warrant liability was ~~$2.0~~a loss of $3.4 million for the three months ended September 30, ~~2020~~2021 compared to ~~income tax benefit~~a loss of ~~$57.8~~$3.0 million for the same period in ~~2019.~~2020. The ~~effective tax rate was 11.3%~~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 expense for the three months ended September 30, ~~2020,~~2021 was $0.2 million compared to ~~17.4%~~other income of $0.6 million for the same period in ~~2019.~~2020.

Income Tax. Income tax expense was $8.7 million for the three months ended September 30, 2021 compared to income tax expense of $2.0 million for the same period in 2020. The effective tax rate was 29.4% for the three months ended September 30, 2021, compared to 13.6% for the same period in 2020. The effective income tax rate varies from the federal statutory rate primarily due to the mix of earnings with state ~~income taxes and~~jurisdictions, combined with the unfavorable impact of nondeductible ~~permanent differences,~~expenses, including ~~driver~~the effect of the per ~~diems~~diem pay structure for drivers and ~~transaction expenses.~~nondeductible executive compensation.

Table of Contents

The following table sets forth certain operating statistics for the nine months ended September 30, 2021 and 2020 as well as items derived from the Company’s consolidated statements of operations ~~and comprehensive income (loss)~~ for the nine months ended September 30, ~~2020~~2021 and ~~2019 in dollars~~2020. Rate per mile is the period’s revenue less fuel surcharge, brokerage and ~~as a percentage~~logistics revenues divided by total number of ~~total revenue~~company and ~~the increase or decrease~~owner operator miles driven in the ~~dollar amounts~~period. 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.


	Nine Months Ended September 30,
	2021						2020						Increase (Decrease)
(Dollars in millions, except Rate per mile and Revenue per tractor)	$			%			$			%			$			%
REVENUE:
Company freight	$	475.3			40.9		$	522.7			46.7		$	(47.4	)		(9.1	)
Owner operator freight		365.3			31.4			307.1			27.5			58.2			19.0
Brokerage		197.1			17.0			184.8			16.5			12.3			6.7
Logistics		28.9			2.5			28.8			2.6			0.1			0.3
Fuel surcharge		95.9			8.2			75.1			6.7			20.8			27.7
Total revenue		1,162.5			100.0			1,118.5			100.0			44.0			3.9

OPERATING EXPENSES:
Salaries, wages and employee benefits		280.7			24.1			305.6			27.3			(24.9	)		(8.1	)
Fuel		79.1			6.8			67.1			6.0			12.0			17.9
Operations and maintenance		108.1			9.3			136.4			12.2			(28.3	)		(20.7	)
Communications		3.1			0.3			2.8			0.3			0.3			10.7
Purchased freight		444.2			38.2			374.3			33.5			69.9			18.7
Administrative expenses		46.2			4.0			50.0			4.5			(3.8	)		(7.6	)
Sales and marketing		1.5			0.1			1.3			0.1			0.2			15.4
Taxes and licenses		11.2			1.0			12.4			1.1			(1.2	)		(9.7	)
Insurance and claims		40.6			3.5			46.9			4.2			(6.3	)		(13.4	)
Depreciation and amortization		66.7			5.7			71.4			6.4			(4.7	)		(6.6	)
Gain on disposition of revenue property and equipment		(13.1	)		(1.1	)		(3.9	)		(0.3	)		(9.2	)		235.9
Impairment		—			—			13.4			1.2			(13.4	)		(100.0	)
Restructuring charges		0.2			—			8.6			0.8			(8.4	)		(97.7	)
Total operating expenses		1,068.5			91.9			1,086.3			97.1			(17.8	)		(1.6	)

INCOME FROM OPERATIONS		94.0			8.1			32.2			2.9			61.8			191.9

Other expense:
Interest income		(0.2	)		—			(0.5	)		—			0.3			(60.0	)
Interest expense		26.1			2.2			34.1			3.0			(8.0	)		(23.5	)
Change in fair value of warrant liability		1.2			0.1			0.9			—			0.3			33.3
Other		(0.6	)		(0.1	)		(0.5	)		—			(0.1	)		20.0
Total other expense		26.5			2.3			34.0			3.0			(7.5	)		(22.1	)

Income (loss) before income taxes		67.5			5.8			(1.8	)		(0.3	)		69.3			(3,850.0	)
Income tax expense		18.6			1.6			0.2			—			18.4			9,200.0
Net income (loss)	$	48.9			4.2		$	(2.0	)		(0.2	)	$	50.9			(2,545.0	)

OPERATING STATISTICS:
Company miles		170.9						192.8						(21.9	)		(11.4	)
Owner operator miles		139.2						145.3						(6.1	)		(4.2	)
Total miles (in millions)		310.1						338.1						(28.0	)		(8.3	)

Rate per mile	$	2.71					$	2.45					$	0.26			10.6
Revenue per tractor	$	173,400					$	147,500					$	25,900			17.6

Company-operated tractors, at period-end		2,641						2,979						(338	)		(11.3	)
Owner-operated tractors, at period-end		2,077						2,100						(23	)		(1.1	)
Number of trailers, at period-end		11,266						11,607						(341	)		(2.9	)

Company-operated tractors, average for the period		2,742						3,417						(675	)		(19.7	)
Owner-operated tractors, average for the period		2,105						2,210						(105	)		(4.7	)
Total tractors, average for the period		4,848						5,627						(779	)		(13.8	)

Nine Months Ended September 30,

2020

2019

Increase (Decrease)
(Dollars in millions)

$

%

$

%

$

%

REVENUE:












Company freight

$
522.7

46.7

$
618.2

46.3

$
(95.5)

(15.4)
Owner operator freight

307.1

27.5

351.1

26.3

(44.0)

(12.5)
Brokerage

184.8

16.5

222.8

16.7

(38.0)

(17.1)
Logistics

28.8

2.6

39.0

2.9

(10.2)

(26.2)
Fuel surcharge

75.1

6.7

102.9

7.8

(27.8)

(27.0)
Total revenue

1,118.5

100.0

1,334.0

100.0

(215.5)

(16.2)

OPERATING EXPENSES:





Salaries, wages and employee benefits

305.6

27.3

371.1

27.8

(65.5)

(17.7)
Fuel

67.1

6.0

105.3

7.9

(38.2)

(36.3)
Operations and maintenance

136.4

12.2

164.7

12.3

(28.3)

(17.2)
Communications

2.8

0.3

3.2

0.2

(0.4)

(12.5)
Purchased freight

374.3

33.5

458.5

34.4

(84.2)

(18.4)
Administrative expenses

50.0

4.5

54.7

4.1

(4.7)

(8.6)
Sales and marketing

1.3

0.1

3.8

0.3

(2.5)

(65.8)
Taxes and licenses

12.4

1.1

14.7

1.1

(2.3)

(15.6)
Insurance and claims

46.9

4.2

38.1

2.9

8.8

23.1
Depreciation and amortization

71.4

6.4

119.5

9.0

(48.1)

(40.3)
Gain on disposition of revenue property and equipment

(3.9)

(0.3)

(2.1)

(0.2)

(1.8)

85.7
Impairment

13.4

1.2

306.8

23.0

(293.4)

(95.6)
Restructuring charges

8.6

0.8

6.9

0.5

1.7

24.6
Total operating expenses

1,086.3

97.1

1,645.2

123.3

(558.9)

(34.0)
Operating ratio

97.1%

123.3%

Adjusted operating ratio⁽¹⁾

94.2%

97.0%

INCOME (LOSS) FROM OPERATIONS

32.2

2.9

(311.2)

(23.3)

343.4

(110.3)

Other expense (income):





Interest income

(0.5)

—

(0.7)

(0.1)

(0.2)

(28.6)
Interest expense

34.1

3.0

38.2

2.9

(4.1)

(10.7)
Write-off of unamortized deferred financing fees

—

—

2.0

0.1

(2.0)

(100.0)
Other

(0.5)

—

(1.3)

(0.1)

0.8

(61.5)
Total other expense

33.1

3.0

38.2

2.9

(5.1)

(13.4)

Income (loss) before benefit for income taxes

(0.9)

(0.1)

(349.4)

(26.2)

348.5

(99.7)
Income tax expense (benefit)

0.2

—

(60.4)

(4.5)

60.6

(100.3)
Net loss

$
(1.1)

(0.1)

$
(289.0)

(21.7)

$
287.9

(99.6)

OPERATING STATISTICS:

Company miles

192.8

211.4

(18.6)

(8.8)
Owner operator miles

145.3

153.7

(8.4)

(5.5)
Total miles (in millions)⁽²⁾

338.1

365.1

(27.0)

(7.4)

Company-operated tractors, at period-end

2,979

3,736

(757)

(20.3)
Owner-operated tractors, at period-end

2,100

2,413

(313)

(13.0)
Number of trailers, at period-end

11,607

13,208

(1,601)

(12.1)

Company-operated tractors, average for the period

3,417

3,816

(399)

(10.5)
Owner-operated tractors, average for the period

2,210

2,339

(129)

(5.5)
Total tractors, average for the period

5,627

6,155

(528)

(8.6)

Table of Contents

~~(1)~~

~~(2)~~

~~Miles are estimated based on information received as of the date of filing. Miles may change quarter to quarter when final information is received from each operating segment.~~

~~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 for the nine months ended September 30, 2020 and 2019 in dollars and as a percentage of its Specialized Solutions segment’s total revenue and the increase or decrease in the dollar amounts of those items. The following table also sets forth certain operating statistics ~~for~~of the Company’s Specialized Solutions segment for the nine months ended September 30, 2021 and 2020, ~~and 2019.~~

~~SPECIALIZED SOLUTIONS~~

Nine Months Ended September 30,


2020

2019

Increase (Decrease)
(Dollars in millions)

$

%

$

%

$

%

REVENUE⁽¹⁾:










Company freight

$
383.5

55.0

$
463.8

55.3

$
(80.3)

(17.3)
Owner operator freight

118.7

17.0

142.4

17.0

(23.7)

(16.6)
Brokerage

133.7

19.2

148.3

17.7

(14.6)

(9.8)
Logistics

26.4

3.8

37.1

4.4

(10.7)

(28.8)
Fuel surcharge

34.9

5.0

46.7

5.6

(11.8)

(25.3)
Total revenue

697.2

100.0

838.3

100.0

(141.1)

(16.8)

OPERATING EXPENSES⁽¹⁾:





Salaries, wages and employee benefits

198.2

28.4

246.4

29.4

(48.2)

(19.6)
Fuel

42.8

6.1

67.5

8.1

(24.7)

(36.6)
Operations and maintenance

104.2

14.9

123.6

14.7

(19.4)

(15.7)
Purchased freight

193.2

27.7

237.8

28.4

(44.6)

(18.8)
Depreciation and amortization

42.9

6.2

76.4

9.1

(33.5)

(43.8)
Impairment

13.4

1.9

193.6

23.1

(180.2)

(93.1)
Restructuring

8.3

1.2

3.5

0.4

4.8

137.1
Other operating expenses

55.1

7.9

58.3

7.0

(3.2)

(5.5)
Total operating expenses

658.1

94.4

1,007.1

120.1

(349.0)

(34.7)
Operating ratio

94.4%

120.1%

Adjusted operating ratio⁽²⁾

90.9%

93.6%

INCOME (LOSS) FROM OPERATIONS

$
39.1

5.6

$
(168.8)

(20.1)

$
207.9

(123.2)

OPERATING STATISTICS:

Company miles

117.4

128.4

(11.0)

(8.6)
Owner operator miles

38.2

40.7

(2.5)

(6.1)
Total miles (in millions)⁽³⁾

155.6

169.1

(13.5)

(8.0)

Company-operated tractors, at period-end

1,960

2,472

(512)

(20.7)
Owner-operated tractors, at period-end

510

699

(189)

(27.0)
Number of trailers, at period-end

7,278

8,280

(1,002)

(12.1)

Company-operated tractors, average for the period

2,263

2,492

(229)

(9.2)
Owner-operated tractors, average for the period

646

674

(28)

(4.2)
Total tractors, average for the period

2,909

3,166

(257)

(8.1)

~~(1)~~

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

~~(2)~~

~~(3)~~

~~Miles are estimated based on information received as of the date of filing. Miles may change quarter to quarter when final information is received from each operating segment.~~

~~Table of Contents~~

~~The following table sets forth the Company’s Flatbed Solutions segment’s~~ revenue, operating expenses ~~operating ratio, Adjusted Operating Ratio~~ and ~~operating~~ income (loss) from operations for the nine months ended September 30, ~~2020~~2021 and ~~2019 in dollars~~2020. Rate per mile is the period’s revenue less fuel surcharge, brokerage and ~~as a percentage~~logistics revenues divided by total number of ~~its Flatbed Solutions segment’s total revenue~~company and ~~the increase or decrease~~owner operator miles driven in the ~~dollar amounts~~period. 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


	Nine Months Ended September 30,
	2021				2020				Increase (Decrease)
(Dollars in millions, except Rate per mile and Revenue per tractor)	$		%		$		%		$			%
REVENUE(1):
Company freight	$	345.1		52.8	$	383.5		55.0	$	(38.4	)		(10.0	)
Owner operator freight		117.9		18.0		118.7		17.0		(0.8	)		(0.7	)
Brokerage		119.6		18.3		133.7		19.2		(14.1	)		(10.5	)
Logistics		25.0		3.8		26.4		3.8		(1.4	)		(5.3	)
Fuel surcharge		46.2		7.1		34.9		5.0		11.3			32.4
Total revenue		653.8		100.0		697.2		100.0		(43.4	)		(6.2	)

OPERATING EXPENSES(1):
Salaries, wages and employee benefits		176.5		27.0		198.2		28.4		(21.7	)		(11.0	)
Fuel		54.1		8.3		42.8		6.1		11.3			26.3
Operations and maintenance		76.2		11.6		104.2		14.9		(28.0	)		(26.9	)
Purchased freight		190.7		29.2		193.2		27.7		(2.5	)		(1.3	)
Depreciation and amortization		39.4		6.0		42.9		6.2		(3.5	)		(8.1	)
Impairment		—		—		13.4		1.9		(13.4	)		(100.0	)
Restructuring		0.2		—		8.3		1.2		(8.1	)		(97.0	)
Other operating expenses		47.6		7.3		55.1		7.9		(7.5	)		(13.7	)
Total operating expenses		584.6		89.4		658.1		94.4		(73.5	)		(11.2	)

INCOME FROM OPERATIONS	$	69.2		10.6	$	39.1		5.6	$	30.1			77.0

OPERATING STATISTICS:
Company miles		112.8				117.4				(4.6	)		(3.9	)
Owner operator miles		36.3				38.2				(1.9	)		(5.0	)
Total miles (in millions)		149.1				155.6				(6.5	)		(4.2	)

Rate per mile	$	3.11			$	3.23			$	(0.12	)		(3.7	)
Revenue per tractor	$	194,200			$	172,600			$	21,600			12.5

Company-operated tractors, at period-end		1,835				1,960				(125	)		(6.4	)
Owner-operated tractors, at period-end		497				510				(13	)		(2.5	)
Number of trailers, at period-end		7,059				7,278				(219	)		(3.0	)

Company-operated tractors, average for the period		1,876				2,263				(387	)		(17.1	)
Owner-operated tractors, average for the period		507				646				(139	)		(21.4	)
Total tractors, average for the period		2,384				2,909				(525	)		(18.1	)

(1)

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

Table of Contents

The following table ~~also~~ sets forth certain operating statistics ~~for~~of the Company’s Flatbed Solutions segment for the nine months ended September 30, 2021 and 2020, as well as revenue, operating expenses and ~~2019.~~

income (loss) from operations for nine months ended September 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

Nine Months Ended September 30,

2020

2019

Increase (Decrease)
(Dollars in millions)

$

%

$

%

$

%

REVENUE⁽¹⁾:












Company freight

$
147.3

33.7

$
165.3

32.2

$
(18.0)

(10.9)
Owner operator freight

193.5

44.3

213.1

41.6

(19.6)

(9.2)
Brokerage

52.6

12.0

74.7

14.6

(22.1)

(29.6)
Logistics

2.2

0.5

2.0

0.4

0.2

10.0
Fuel surcharge

41.2

9.5

57.6

11.2

(16.4)

(28.5)
Total revenue

436.8

100.0

512.7

100.0

(75.9)

(14.8)

OPERATING EXPENSES⁽¹⁾:





Salaries, wages and employee benefits

94.0

21.5

104.4

20.4

(10.4)

(10.0)
Fuel

24.4

5.6

37.8

7.4

(13.4)

(35.4)
Operations and maintenance

32.0

7.3

40.5

7.9

(8.5)

(21.0)
Purchased freight

197.0

45.1

237.8

46.4

(40.8)

(17.2)
Depreciation and amortization

27.8

6.4

42.6

8.3

(14.8)

(34.7)
Impairment

—

—

113.2

22.1

(113.2)

(100.0)
Restructuring

0.3

0.1

0.9

0.2

(0.6)

(66.7)
Other operating expenses

32.7

7.5

34.0

6.6

(1.3)

(3.8)
Total operating expenses

408.2

93.5

611.2

119.2

(203.0)

(33.2)
Operating ratio

93.5%

119.2%

Adjusted operating ratio⁽²⁾

92.8%

95.7%

INCOME (LOSS) FROM OPERATIONS

$
28.6

6.5

$
(98.5)

(19.2)

$
127.1

(129.0)

OPERATING STATISTICS:

Company miles

75.4

83.0

(7.6)

(9.2)
Owner operator miles

107.1

113.0

(5.9)

(5.2)
Total miles (in millions)⁽³⁾

182.5

196.0

(13.5)

(6.9)

Company-operated tractors, at period-end

1,019

1,264

(245)

(19.4)
Owner-operated tractors, at period-end

1,590

1,714

(124)

(7.2)
Number of trailers, at period-end

4,329

4,928

(599)

(12.2)

Company-operated tractors, average for the period

1,154

1,324

(170)

(12.8)
Owner-operated tractors, average for the period

1,564

1,665

(101)

(6.1)
Total tractors, average for the period

2,718

2,989

(271)

(9.1)


	Nine Months Ended September 30,
	2021				2020				Increase (Decrease)
(Dollars in millions, except Rate per mile and Revenue per tractor)	$		%		$		%		$			%
REVENUE(1):
Company freight	$	137.5		26.5	$	147.3		33.7	$	(9.8	)		(6.7	)
Owner operator freight		249.1		48.1		193.5		44.3		55.6			28.7
Brokerage		77.8		15.0		52.6		12.0		25.2			47.9
Logistics		3.6		0.7		2.2		0.5		1.4			63.6
Fuel surcharge		50.3		9.7		41.2		9.5		9.1			22.1
Total revenue		518.3		100.0		436.8		100.0		81.5			18.7

OPERATING EXPENSES(1):
Salaries, wages and employee benefits		86.4		16.7		94.0		21.5		(7.6	)		(8.1	)
Fuel		25.1		4.8		24.4		5.6		0.7			2.8
Operations and maintenance		32.0		6.2		32.0		7.3		(0.0	)		(0.1	)
Purchased freight		263.3		50.8		197.0		45.1		66.3			33.7
Depreciation and amortization		26.5		5.1		27.8		6.4		(1.3	)		(4.8	)
Restructuring		—		—		0.3		0.1		(0.3	)		(100.0	)
Other operating expenses		30.2		5.8		32.7		7.5		(2.5	)		(7.8	)
Total operating expenses		463.3		89.4		408.2		93.5		55.1			13.5

INCOME FROM OPERATIONS	$	55.0		10.6	$	28.6		6.5	$	26.4			92.1

OPERATING STATISTICS:
Company miles		58.1				75.4				(17.3	)		(22.9	)
Owner operator miles		102.9				107.1				(4.2	)		(3.9	)
Total miles (in millions)		161.0				182.5				(21.5	)		(11.8	)

Rate per mile	$	2.40			$	1.87			$	0.53			28.3
Revenue per tractor	$	156,900			$	125,400			$	31,500			25.1

Company-operated tractors, at period-end		806				1,019				(213	)		(20.9	)
Owner-operated tractors, at period-end		1,580				1,590				(10	)		(0.6	)
Number of trailers, at period-end		4,207				4,329				(122	)		(2.8	)

Company-operated tractors, average for the period		866				1,154				(288	)		(24.9	)
Owner-operated tractors, average for the period		1,598				1,564				34			2.2
Total tractors, average for the period		2,464				2,718				(254	)		(9.3	)

(1)

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

~~(1)~~

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

~~(2)~~

~~(3)~~

~~Miles are estimated based on information received as of the date of filing. Miles may change quarter to quarter when final information is received from each operating segment.~~

Table of Contents

Revenue. Total revenue ~~decreased 16.2%~~increased $44.0 million, or 3.9% to ~~$1,118.5~~$1,162.5 million for the nine months ended September 30, ~~2020~~2021 from ~~$1,334.0~~$1,118.5 million for the same period in ~~2019, primarily due to~~2020. The exit of the ~~decrease~~Aveda operations, which was completed in ~~rate per mile and miles driven, as well as,~~ the ~~wind down~~fourth quarter of ~~Aveda operations.~~2020, resulted in a $51.8 million, or 4.5%, reduction in total revenue. The ~~decrease~~increase in total revenue was primarily due ~~primarily~~ to ~~decreases~~record freight rates in ~~company freight, owner operator freight, brokerage and fuel surcharge revenue.~~the Flatbed segment. Company freight revenue decreased ~~$95.5~~$47.4 million, or ~~15.4%~~9.1%, to ~~$522.7~~$475.3 million for the nine months ended September 30, ~~2020~~2021 from ~~$618.2~~$522.7 million for the same period in ~~2019. Owner~~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 11.4% decrease in miles due to the downsizing of company trucks, partially offset by a 2.6% increase in rate per mile. The increase in owner operator freight revenue ~~decreased $44.0~~was a result of a 24.2% increase in rate per mile, partially offset by $8.4 million reduction due to the exit of the Aveda operations and a 4.2% decrease in owner operator miles driven. Brokerage revenue increased $12.3 million, or ~~12.5%~~6.7%, to ~~$307.1~~$197.1 million for the nine months ended September 30, ~~2020~~2021 from ~~$351.1~~$184.8 million for the same period in ~~2019. The decreases~~2020 due to increases in ~~company freight~~customer sales and ~~owner operator freight~~rates in the Flatbed Solutions segment, partially offset by a $11.4 million reduction due to the exit of the Aveda operations. Fuel surcharge revenue ~~were primarily a result of a 7.5% decrease in rate per mile and a 7.4% decrease in total miles driven. Brokerage revenue decreased $38.0~~increased $20.8 million, or ~~17.1%~~27.7%, to ~~$184.8~~$95.9 million for the nine months ended September 30, ~~2020~~2021 from ~~$222.8~~$75.1 million for the same period in ~~2019~~2020 due to ~~a decrease in customer sales volumes. During the third quarter of 2020, the Company observed a strong sequential rebound in demand for freight across both its Flatbed and~~increased fuel costs that led to higher fuel surcharges.

The Company’s Specialized segments, as well as improving strength in freight rates. Nonetheless, overall, the Company’s results of operations and financial condition were significantly impacted by the COVID-19 pandemic in the second and third quarters. LogisticsSolutions segment’s revenue decreased ~~$10.2~~$43.4 million, or ~~26.2%,~~6.2% to ~~$28.8~~$653.8 million for the nine months ended September 30, ~~2020~~2021 from ~~$39.0~~$697.2 million for the same period in ~~2019 as~~2020. The exit of the Aveda operations resulted in a ~~result of decreases~~$51.8 million, or 7.9%, reduction in ~~logistics activities. Fuel surcharge~~the Specialized Solutions segment’s revenue. Company freight revenue decreased ~~$27.8~~$38.4 million, or ~~27.0%~~10.0%, to ~~$75.1~~$345.1 million for the nine months ended September 30, ~~2020~~2021 from ~~$102.9~~$383.5 million for the same period in ~~2019~~2020. The decrease in total freight revenue was primarily a result of a $40.0 million reduction due to ~~a decrease in loaded miles and~~ the ~~decrease in~~exit of the ~~price of diesel fuel.~~

~~The Company’s Specialized Solutions segment’s~~Aveda operations. Brokerage revenue decreased ~~$141.1~~$14.1 million, or ~~16.8%~~10.5%, to ~~$697.2~~$119.6 million for the nine months ended September 30, ~~2020~~2021 from ~~$838.3~~$133.7 million for the same period in ~~2019,which was~~2020 primarily due to ~~the decrease in company freight, owner operator freight, brokerage and logistics revenue as well as~~a $11.4 million reduction due to the exit of the Aveda ~~operations. Company freight~~operations combined with a decrease in customer sales volumes. Fuel surcharge revenue ~~decreased $80.3~~increased $11.3 million, or ~~17.3%~~32.4%, to ~~$383.5~~$46.2 million for the nine months ended September 30, ~~2020~~2021 from ~~$463.8~~$34.9 million for the same period in ~~2019. Owner operator freight~~2020 due to increased fuel costs that led to higher fuel surcharges.

The Company’s Flatbed Solutions segment’s revenue decreased to $118.7 for the nine months ended September 30, 2020 from $142.4 million for the same period in 2019. The decrease in overall freight revenue was primarily a result of a 9.8% decrease in rate per mile and a 8.0% decrease in total miles driven compared to the same period in 2019. The decrease in rate per mile ws mainly was driven by the exit of Aveda operation which historically had the highest rate per mile within the segment. Brokerage revenue decreased $14.6increased $81.5 million, or ~~9.8%~~18.7%, to ~~$133.7~~$518.3 million for the nine months ended September 30, ~~2020~~2021 from ~~$148.3~~$436.8 million for the same period in ~~2019. During the third quarter of~~ 2020, the Company observed a strong sequential rebound in demand for freight across the segment, as well as improving strength in freight rates. Nonetheless, overall, the Company’s results of operations and financial condition were significantly impacted by the COVID-19 pandemic in the second and third quarters, which was ~~partially offset by an increase~~primarily due to increases in ~~sales volumes in the wind energy, defense projects~~owner operator freight revenue and ~~high security cargo. Logistics~~brokerage revenue. Company freight revenue decreased ~~28.8% to $26.4 million from $37.1 million compared to the same period in 2019 as a result of decreases in logistics activities. Fuel surcharge revenue decreased $11.8~~$9.8 million, or ~~25.3%~~6.7%, to ~~$34.9~~$137.5 million for the nine months ended September 30, ~~2020~~2021 from ~~$46.7~~$147.3 million for the same period in ~~2019~~2020 due to a 22.9% decrease in ~~loaded~~ miles ~~and~~due to the ~~decrease~~downsizing of company trucks, partially offset by a 21.1% increase in ~~the price of diesel fuel.~~

~~Table of Contents~~

~~The Company’s Flatbed Solutions segment’s~~rate per mile. Owner operator freight revenue ~~decreased $75.9~~increased $55.6 million, or ~~14.8%~~28.7%, to ~~$436.8~~$249.1 million for the nine months ended September 30, ~~2020~~2021 from ~~$512.7~~$193.5 million for the same period in ~~2019, which was primarily~~2020 predominantly due to a 34.0% increase in rate per mile, partially offset by a 3.9% decrease in ~~company freight, owner operator freight and brokerage revenue. Company freight~~miles driven. Brokerage revenue ~~decreased $18.0~~increased $25.2 million, or ~~10.9%~~47.9%, to ~~$147.3~~$77.8 million for the nine months ended September 30, ~~2020~~2021 from ~~$165.3~~$52.6 million for the same period in ~~2019. Owner operator freight~~2020 due to increases in customer sales and in rate. Fuel surcharge revenue ~~decreased $19.6~~increased $9.1 million, or ~~9.2%~~22.1%, to ~~$193.5~~$50.3 million for the nine months ended September 30, ~~2020~~2021 from ~~$213.1~~$41.2 million for the same period in 2019. The decreases in company freight and owner operator freight was a result of a 3.1% decrease in rate per mile and a 6.9% decrease in total miles driven compared to the same period in 2019. Brokerage revenue decreased $22.1 million, or 29.6%, to $52.6 million for the nine months ended September 30, 2020 from $74.7 million for the same period in 2019. During the third quarter of 2020, the Company observed a strong sequential rebound in demand for freight across the segments, as well as improving strength in freight rates. Nonetheless, overall, the Company’s results of operations and financial condition were significantly impacted by the COVID-19 pandemic in the second and third quarters, which negatively impacted the steel and construction industries that the Company served. Fuel surcharge revenue decreased $16.4 million, or 28.5%, to $41.2 million for the nine months ended September 30, 2020 from $57.6 million for the same period in 2019 due to ~~a decrease in loaded miles and the decrease in the price of diesel fuel.~~increased fuel costs that led to higher fuel surcharges.

Salaries, wages and employee benefits expense decreased ~~17.7%~~8.1% to ~~$305.6~~$280.7 million for the nine months ended September 30, ~~2020~~2021 from ~~$371.1~~$305.6 million for the same period in ~~2019.~~2020. The decrease in salaries, wages and employee benefits expense was primarily due to decreased employee headcount related to Project ~~Pivot~~Synchronize and ~~Project Synchronize and~~lower driver pay due to the decrease in company miles compared to the same period in ~~2019. Temporary furloughs and recruiting pauses were put in place during the quarter to offset the impact of volume decreases due to the pandemic.~~2020. Salaries, wages and employee benefits expense, as a percentage of consolidated revenue (excluding brokerage revenue), decreased 3.6% for the nine months ended September 30, ~~2020 was generally consistent with~~2021 as compared to the same period in ~~2019.~~2020.

The Company’s Specialized Solutions segment had a ~~$48.2~~$21.7 million, or ~~19.6%~~11.0%, decrease in salaries, wages and employee benefits expense for the nine months ended September 30, ~~2020~~2021 compared to the same period in ~~2019,~~2020, primarily as a result of the decreased employee headcount related to Project Synchronize and lower driver pay due to the decrease in company miles compared to the same period in ~~2019. Temporary furloughs and recruiting pauses were put in place during the quarter to offset the impact of volume decreases due to the pandemic.~~2020. Salaries, wages and employee benefits expense, as a percentage of Specialized Solutions revenue (excluding brokerage revenue), decreased 2.2% for the nine months ended September 30, ~~2020 was generally consistent with~~2021 as compared to the same period in ~~2019.~~2020.

The Company’s Flatbed Solutions segment had a ~~$10.4~~$7.6 million, or ~~10.0%~~8.1%, decrease in salaries, wages and employee benefits expense for the nine months ended September 30, ~~2020~~2021 compared to the same period in ~~2019,~~2020, primarily as a result of the decreased employee headcount related to Project Synchronize and lower driver pay due to the decrease in company miles compared to the same period in ~~2019. Temporary furloughs and recruiting pauses were put in place during the quarter to offset the impact of volume decreases due to the pandemic.~~2020. Salaries, wages and employee benefits expense, as a percentage of Flatbed Solutions revenue (excluding brokerage revenue), decreased 4.9% for the nine months ended September 30, ~~2020 was generally consistent with~~2021 as compared to the same period in ~~2019.~~2020.

Table of Contents

Total fuel expense ~~decreased $38.2~~increased $12.0 million, or ~~36.3%~~17.9%, to ~~$67.1~~$79.1 million for the nine months ended September 30, ~~2020~~2021 from ~~$105.3~~$67.1 million for the same period in ~~2019.~~2020. This ~~decrease~~increase was primarily due to a ~~15.6%~~22.5% increase in fuel price, partially offset by a 11.4% decrease in ~~average diesel prices period over period.~~Company miles driven. The U.S. national average diesel fuel price, as published by the U.S. Department of Energy, was ~~$2.579~~$3.161 for the nine months ended September 30, ~~2020,~~2021, compared to ~~$3.055~~$2.579 for the same period in ~~2019. Total Company miles driven decreased 8.8% for the nine months ended September 30, 2020 as compared to the same period in 2019.~~2020.

The Company’s Specialized Solutions segment’s fuel expense ~~decreased 36.6%~~increased 26.3% to ~~$42.8~~$54.1 million for the nine months ended September 30, ~~2020~~2021 from ~~$67.5~~$42.8 million for the same period in ~~2019,~~2020, primarily as a result of the increase in fuel price mentioned above, partially offset by a 3.9% decrease ~~in average diesel price and a decrease of 8.6%~~ in Company miles driven for the nine months ended September 30, ~~2020~~2021 as compared to the same period in ~~2019.~~2020.

The Company’s Flatbed Solutions segment’s fuel expense ~~decreased 35.4%~~increased 2.8% to ~~$24.4~~$25.1 million for the nine months ended September 30, ~~2020~~2021 from ~~$37.8~~$24.4 million for the same period in ~~2019, primarily~~2020, as a result of the increase in fuel price mentioned above, partially offset by a 22.9% decrease ~~in average diesel price and a decrease of 9.2%~~ in Company miles driven for the nine months ended September 30, ~~2020~~2021 as compared to the same period in ~~2019.~~2020.

Operations and maintenance expense decreased ~~17.2%~~20.7% to ~~$136.4~~$108.1 million for the nine months ended September 30, ~~2020~~2021 from ~~$164.7~~$136.4 million for the same period in ~~2019~~2020 due to a decrease of ~~$13.2~~$4.9 million in maintenance costs such as repairs ~~washes~~ and tires, ~~$4.3~~$18.3 million in ~~lease~~operation costs such as pilot car and ~~$9.2~~permit fees, and $5.1 million in other operations expenses. Operations and maintenance expense, as a percentage of consolidated revenue (excluding brokerage revenue), decreased 3.4% to 11.2% for the ~~three~~nine months ended September 30, ~~2020 was generally consistent with~~2021 as compared to 14.6% in the same period in ~~2019.~~2020.

The Company’s Specialized Solutions segment’s operations and maintenance expense decreased ~~$19.4~~$28.0 million, or ~~15.7%~~26.9%, for the nine months ended September 30, ~~2020~~2021 as compared to the same period in ~~2019~~2020 as a result of a decrease of ~~$7.9~~$4.8 million in maintenance ~~costs~~expense such as repairs ~~washes~~ and tires due to a reduction of tractors and trailers in the Company’s fleet, a decrease of ~~$5.0~~$18.4 million in ~~lease~~operation costs such as pilot car and permit fees and a decrease of ~~$5.5~~$4.7 million in other operations expenses. Operations and maintenance expense, as a percentage of Specialized Solutions revenue (excluding brokerage revenue), decreased 4.2% to 14.3% for the nine months ended September 30, ~~2020 was generally consistent with~~2021 as compared to 18.5% in the same period in ~~2019.~~2020.

The Company’s Flatbed Solutions segment’s operations and maintenance expense ~~decreased $8.5 million, or 21.0%,~~was generally consistent for the nine months ended September 30, ~~2020~~2021 as compared to the same period in 2019, primarily as a result of a decrease of $5.3 million in maintenance expense such as repairs, washes and tires due to a reduction of tractors and trailers in the Company’s fleet and a decrease of $3.9 million in other operations expenses.2020. Operations and maintenance expense, as a percentage of Flatbed Solutions revenue (excluding brokerage revenue), decreased 1.0% to 7.3% for the nine months ended September 30, ~~2020 was generally consistent with~~2021 as compared to 8.3% in the same period in ~~2019.~~2020.

Total purchased freight expense ~~decreased $84.2~~increased $69.9 million, or ~~18.4%~~18.7%, to ~~$374.3~~$444.2 million during the nine months ended September 30, ~~2020~~2021 from ~~$458.5~~$374.3 million during the same period in ~~2019.~~2020. Purchased freight expense from ~~owner-operators decreased 9.3%~~owner operators increased 20.9% to ~~$248.3~~$300.1 million during the nine months ended September 30, ~~2020~~2021 from ~~$273.8~~$248.3 million during the same period in ~~2019~~2020 as a result of a ~~5.1%~~20.9% increase in rate, partially offset by a 4.2% decrease in owner operator miles driven. Purchased freight expense from third-party capacity providers ~~decreased 31.8% 2019~~increased 14.3% to ~~$126.0~~$144.0 million during the nine months ended September 30, ~~2020~~2021 from ~~$184.6~~$126.0 million during the same period in ~~2019,~~2020, as a result of ~~lower rates and decreased~~an increase in utilization of third-party capacity ~~providers.~~providers in the Company's Flatbed Solutions segment. Purchased freight expense, as a percentage of consolidated revenue, for the nine months ended September 30, ~~2020 was generally consistent with~~2021, increased 4.7% for the as compared to the same period in ~~2019.~~2020.

~~Table of Contents~~

The Company’s Specialized Solutions segment’s purchased freight expense decreased ~~18.8%~~1.3% to ~~$193.2~~$190.7 million during the nine months ended September 30, ~~2020~~2021 from ~~$237.8~~$193.2 million during the same period in ~~2019.~~2020. Purchased freight expense from ~~owner-operators decreased 10.9%~~owner operators increased 4.9% to ~~$85.5~~$89.7 million during the nine months ended September 30, ~~2020~~2021 from ~~$95.9~~$85.5 million during the same period in ~~2019,~~2020, as a result of a ~~27.0%~~4.5% increase in rate, partially offset by a 5.0% decrease in owner operator miles driven. Purchased freight expense from third-party capacity providers decreased ~~24.1%~~6.2% to ~~$107.7~~$101.0 million during the nine months ended September 30, ~~2020~~2021 from ~~$141.9~~$107.7 million during the same period in ~~2019,~~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 nine months ended September 30, ~~2020 was generally consistent with~~2021, increased 1.5% as compared to the same period in ~~2019.~~2020.

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The Company’s Flatbed Solutions segment’s purchased freight expense ~~decreased 17.2%~~increased 33.7% to ~~$197.0~~$263.3 million for the nine months ended September 30, ~~2020~~2021 from ~~$237.8~~$197.0 million for the same period in ~~2019.~~2020. Purchased freight expense from ~~owner-operators decreased 8.5%~~owner operators increased 29.2% to ~~$162.9~~$210.5 million for the nine months ended September 30, ~~2020~~2021 from ~~$177.9~~$162.9 million for the same period in ~~2019,~~2020, as a result of a ~~7.2%~~34.0% increase in owner operators’ rate, partially offset by a 3.9% decrease in owner ~~operators’~~operator miles driven. Purchased freight expense from third-party capacity providers ~~decreased 43.0%~~increased 54.8% to ~~$34.1~~$52.8 million during the nine months ended September 30, ~~2020~~2021 from ~~$59.8~~$34.1 million during the same period in ~~2019,~~2020, primarily as a result of ~~decreased~~increased utilization of third-party capacity providers. Purchased freight expense, as a percentage of Flatbed Solutions revenue, for the nine months ended September 30, ~~2020 was generally consistent with~~2021, increased 5.7% as compared to the same period in ~~2019.~~2020.

Depreciation and amortization expense decreased ~~$48.1~~$4.7 million, or ~~40.3%~~6.6%, to ~~$71.4~~$66.7 million during the nine months ended September 30, ~~2020~~2021 from ~~$119.5~~$71.4 million during the same period in ~~2019~~2020 as a result of a ~~10.5%~~19.7% decrease in average tractor count in the Company’s ~~fleet and further reduced by the impact of $97.6 million of impairments recorded in the third quarter of 2019.~~fleet.

The Company’s Specialized Solutions segment’s depreciation and amortization expense decreased ~~$33.5~~$3.5 million, or ~~43.8%~~8.1%, for the nine months ended September 30, ~~2020~~2021 as compared to the same period in ~~2019~~2020 as a result of a ~~9.2%~~17.1% decrease in average tractor count in the segment’s ~~fleet and further reduced by the impact of $58.6 million of impairments recorded in the third quarter of 2019.~~fleet.

The Company’s Flatbed Solutions segment’s depreciation and amortization expense decreased ~~$14.8~~$1.3 million, or ~~34.7%~~4.8%, for the nine months ended September 30, ~~2020~~2021 as compared to the same period in ~~2019~~2020 as a result of a ~~12.8%~~24.9% decrease in average tractor count in the segment’s ~~fleet and further reduced by the impact of a $39.0 million of impairments recorded in the third quarter of 2019.~~fleet.

Administrative Expenses. Administrative expenses consist of operating lease costs for real estate, professional fees and other expenses that are not directly associated with the Company’s fleet services. Administrative expense decreased $3.8 million for the nine months ended September 30, 2021 as compared to the same period in 2020 as a result of cost reduction initiatives. Administrative expenses, as a percentage of revenue, decreased 0.5% 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 decreased ~~$2.3~~$1.2 million for the nine months ended September 30, ~~2020 as compared to the same period in 2019.~~2021. Operating taxes and license expense, as a percentage of revenue, was generally consistent ~~with~~for the ~~same period in 2019.~~nine months ended September 30, 2021 and 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 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 ~~increase~~correlate with the miles the Company travels. Insurance and claims expense ~~increased 23.1%~~decreased 13.4% to ~~$46.9~~$40.6 million during the nine months ended September 30, ~~2020~~2021 from ~~$38.1~~$46.9 million during the same period in ~~2019~~2020 due to ~~increases~~decreases in miles and decreases in insurance claims and premiums. Insurance and claims, as a percentage of revenue, decreased 0.7% for the nine months ended September 30, ~~2020 increased 1.3%~~2021 as compared to the same period in ~~2019.~~2020.

Impairment. ~~Impairment~~No impairment expense was ~~$13.4 million~~recognized during the nine months ended September 30, 2021. As a result of the then-planned divestiture of Aveda, impairment charges of $13.4 million were recorded for the same period in 2020 ~~related to Aveda’s intangible assets,~~ consisting of property and equipment of $4.0 million, right-of-use assets of $3.2 million and ~~right-of-use assets. Impairment expense~~tradename intangible assets of ~~$306.8~~$6.2 million.

Restructuring Costs. Restructuring costs of $0.2 million were recognized in the nine months ended September 30, ~~2019 related~~2021, compared to goodwill, intangible assets, property and equipment and right-of-use assets recognized under ASC 842. Impairment expense for the nine months ended September 30, 2019 for the Specialized Solutions segment was $193.6 million and for the Flatbed Solutions segment was $113.2 million.

~~Restructuring Costs.~~ ~~Restructuring costs was~~ $8.6 million ~~for~~in the same period of 2020. The restructuring costs in the nine months ended September 30, 2020 ~~which~~was primarily related to Phase I ~~of Project Synchronize, which was completed in the first quarter of 2020, Phase~~and II of Project Synchronize, and the closure of certain Aveda terminals.~~Restructuring~~

Other (Income) Expense. Interest expense consists of cash interest, amortization and write-off of related issuance costs ~~was $6.9~~and fees and prepayment penalties. Interest expense decreased 23.5% to $26.1 million ~~during the nine months ended September 30, 2019, which was related to~~ ~~Project Synchronize and Project Pivot. Restructuring costs~~ for the nine months ended September 30, ~~2019 for the Specialized Solutions segment was $3.5~~2021 from $34.1 million ~~for the Flatbed Solutions segment was $0.9 million and for the corporate office was $2.5 million.~~

~~Table of Contents~~

~~Operating Income (Loss).~~ ~~Operating income was $32.2 million, or 2.9% of revenue, for the nine months ended September 30, 2020 compared to operating loss $311.2 million, or 23.3% of revenue,~~ for the same period in 2019, primarily as a result of controlling expenses to navigate through the pandemic and the Company’s integration and restructuring of some of its operating segments during 2020 and a result of impairment and restructuring charges in 2019.

The Company’s Specialized Solutions segment’s operating income was $39.1 million, or 5.6% of revenue, for the nine months ended September 30, 2020 compared to operating loss of $168.8 million, or 20.1% of revenue, for the same period in 2019, primarily as a result of controlling expenses to navigate through the pandemic during 2020 and a result of impairment and restructuring charges in 2019. The change in operating income as a percent of revenue is primarily a result of a decrease in salaries, wages and employee benefits, fuel expense, maintenance expense, purchase freight and depreciation and amortization.

The Company’s Flatbed Solutions segment’s operating income was $28.6 million, or 6.5% of revenue, for the nine months ended September 30, 2020 compared to operating loss $98.5 million, or 19.2% of revenue, for the same period in 2019, the increase primarily as a result of controlling expenses to navigate through the pandemic during 2020 and a result of impairment and restructuring charges in 2019.

~~Interest Expense.~~ Interest expense consists of cash interest, amortization of debt issuance costs, fees and prepayment penalties. Interest expense decreased 10.7% to $34.1 million during the nine months ended September 30, 2020 from $38.2 million during the same period in 2019.2020. This decrease was primarily attributable to lower interest rates on the Term Loan Facility and decreases in the balance outstanding on equipment term ~~loan and finance lease outstanding balances.~~

~~Income Tax.~~ ~~Income tax expense~~loans. Change in fair value of warrant liability was ~~$0.2~~a loss of $1.2 million for the nine months ended September 30, ~~2020~~2021 compared to ~~income tax benefit~~a loss of ~~$60.4~~$0.9 million for the same period in ~~2019.~~2020. The ~~effective tax rate was (22.2%)~~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 nine months ended September 30, ~~2020,~~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 nine months ended September 30, 2021 was $0.6 million compared to ~~17.3%~~other income of $0.5 million for the same period in ~~2019.~~2020.

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Income Tax. Income tax expense was $18.6 million for the nine months ended September 30, 2021 compared to income tax expense of $0.2 million for the same period in 2020. The effective tax rate was 27.6% for the nine months ended September 30, 2021, compared to 11.1% for the same period in 2020. The effective income tax rate varies from the federal statutory rate primarily due to the mix of earnings with state ~~income taxes and~~jurisdictions, combined with the unfavorable impact of nondeductible ~~permanent differences,~~expenses, including ~~driver~~the effect of the per ~~diems~~diem pay structure for drivers and ~~transaction expenses.~~

nondeductible executive compensation.

~~Table of Contents~~

~~Non-GAAP Financial Measures~~

~~Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Adjusted Operating Expenses, Adjusted Operating Income (Loss), Adjusted Operating Ratio~~Liquidity, Capital Resources and ~~Adjusted Net Income (Loss)~~

Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Adjusted Operating Expenses, Adjusted Operating Income (Loss), Adjusted Operating Ratio and Adjusted Net Income (Loss) 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.

~~Adjusted EBITDA and Adjusted EBITDA Margin~~

The Company defines Adjusted EBITDA as net income (loss) plus (i) depreciation and amortization, (ii) interest expense, and other fees and charges associated with financings, 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) business transformation costs, (vi) non-cash impairment, (vii) restructuring charges, (viii) stock compensation expense and (ix) impaired lease termination. The Company defines Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of total revenue.

The Company’s board of directors and executive management team use Adjusted EBITDA and Adjusted EBITDA Margin as a key measure of its performance and for business planning. Adjusted EBITDA and Adjusted EBITDA Margin assists them in comparing its operating performance over various reporting periods on a consistent basis because it removes 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 EBITDA Margin also allows 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. The Company’s method of computing Adjusted EBITDA and Adjusted EBITDA Margin 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 EBITDA Margin is useful because it provides 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 EBITDA Margin 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 Adjusted EBITDA and Adjusted EBITDA Margin. Certain items excluded from Adjusted EBITDA and Adjusted EBITDA Margin are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital, tax structure and the historic costs of depreciable assets. Also, other companies in its industry may define Adjusted EBITDA differently than the Company does, and as a result, it may be difficult to use Adjusted EBITDA and Adjusted EBITDA Margin 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 EBITDA Margin should not be considered a measure 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 EBITDA Margin supplementally. A reconciliation of Adjusted EBITDA to net income (loss) and and Adjusted EBITDA Margin to net income (loss) margin for the three and nine months ended September 30, 2020 and 2019 is as follows:

Three Months Ended September 30,

Nine Months Ended September 30,
(Dollars in millions)

2020

2019

2020

2019

Net income (loss)

$
15.7

$
(273.3)

$
(1.1)

$
(289.0)
Depreciation and amortization

22.3

38.3

71.4

119.5
Interest income

(0.1)

(0.3)

(0.5)

(0.7)
Interest expense

11.1

12.8

34.1

38.2
Write-off of deferred financing fees

—

2.0

—

2.0
Income tax expense (benefit)

2.0

(57.8)

0.2

(60.4)
Business transformation costs

1.6

6.8

7.7

6.8
Impairment

—

306.8

13.4

306.8
Impaired lease termination

(2.4)

—

(2.4)

—
Restructuring

5.1

6.9

8.6

6.9
Stock based compensation

2.3

1.0

4.9

2.9
Adjusted EBITDA

$
57.6

$
43.2

$
136.3

$
133.0
Total revenue

$
375.8

$
450.4

$
1,118.5

$
1,334.0
Net income (loss) margin

4.2%

(60.7%)

(0.1%)

(21.7%)
Adjusted EBITDA Margin

15.3%

9.6%

12.2%

10.0%

~~Table of Contents~~

~~Free Cash Flow~~

The Company defines Free Cash Flow as net cash provided by operating activities less purchases of property and equipment, plus proceeds from sale of property and equipment as such amounts are shown on the face of the Statement of Cash Flows. The Company’s board of directors and executive management team use Free Cash Flow to assess the Company’s liquidity and ability to repay maturing debt, fund operations and make additional investments. The Company believes Free Cash Flow provides useful information to investors because it is an important indicator of the Company’s liquidity, including its ability to reduce net debt, make strategic investments, pay dividends to common shareholders and repurchase stock. The Company’s 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 cash provided by operating activities nor 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 the Company’s business or discretionary cash available to the Company 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.

~~A reconciliation of Free Cash Flow to cash flows from operating activities for the three and nine months ended September 30, 2020 and 2019 is as follows:~~

Three Months Ended September 30,

Nine Months Ended September 30,
(Dollars in millions)

2020

2019

2020

2019
Net cash provided by operating activities

$
39.5

$
34.5

$
122.4

$
89.4
Purchases of property and equipment

(3.1)

(5.3)

(18.0)

(17.4)
Proceeds from sale of property and equipment

15.6

7.3

52.0

23.8
Free Cash Flow

$
52.0

$
36.5

$
156.4

$
95.8

~~Adjusted Operating Expenses, Adjusted Operating Income (Loss) and Adjusted Operating Ratio~~

The Company uses Adjusted Operating Expenses, Adjusted Operating Income (Loss) and 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 Expenses as (a) total operating expenses (i) less, acquisition-related transaction expenses, non-cash impairment charges, unusual or non-regularly recurring expenses or recoveries, (ii) less, business transformation costs, (iii) adjusted for impaired lease termination and (iv) further adjusted for the net impact of the step-up in basis (such as increased depreciation and amortization expense) and amortization of identifiable intangible assets resulting from acquisitions. The Company defines Adjusted Operating Income (Loss) as (a) total revenue less (b) Adjusted Operating Expenses. The Company defines Adjusted Operating Ratio as (a) Adjusted Operating Expenses, as a percentage of (b) total revenue.

The Company’s board of directors and executive management team view Adjusted Operating Expenses, Adjusted Operating Income (Loss) and 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 excluding acquisition-related transaction expenses, additional depreciation and amortization expenses as a result of acquisitions, unusual or non-regularly recurring expenses or recoveries and non-cash impairment enhances the comparability of its performance between periods.

The Company believes its presentation of Adjusted Operating Expenses and Adjusted Operating Income (Loss) and 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 Expenses and Adjusted Operating Income (Loss) and Adjusted Operating Ratio is not a substitute for, or more meaningful than, operating expenses, operating income (Loss), 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 Expenses, Adjusted Operating Income (Loss) or Adjusted Operating Ratio. Although the Company believes that Adjusted Operating Expenses, Adjusted Operating Income (Loss) and Adjusted Operating Ratio can make an evaluation of its operating performance more accurately 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 Expenses, Adjusted Operating Income (Loss) and 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 GAAP measures and using Adjusted Operating Expenses, Adjusted Operating Income (Loss) and Adjusted Operating Ratio supplementally.

Capital Requirements

~~Table of Contents~~

A reconciliation of Adjusted Operating Expenses, Adjusted Operating Income (Loss) to Operating Income (Loss) and Adjusted Operating Ratio to operating ratio for each of the three and nine months ended September 30, 2020 and 2019 is as follows:

Three Months Ended September 30,

Nine Months Ended September 30,
(Dollars in millions)

2020

2019

2020

2019

Revenue

$
375.8

$
450.4

$
1,118.5

$
1,334.0
Salaries, wages and employee benefits

95.8

127.7

305.6

371.1
Fuel

20.2

34.1

67.1

105.3
Operations and maintenance

45.5

56.8

136.4

164.7
Purchased freight

127.9

155.5

374.3

458.5
Depreciation and amortization

22.3

38.3

71.4

119.5
Impairment

—

306.8

13.4

306.8
Restructuring

5.1

6.9

8.6

6.9
Other operating expenses

30.9

40.9

109.5

112.4
Operating expenses

347.7

767.0

1,086.3

1,645.2
Operating income (loss)

28.1

(316.6)

32.2

(311.2)
Operating ratio

92.5%

170.3%

97.1%

123.3%
Business transformation costs

1.6

6.8

7.7

6.8
Impairment

—

306.8

13.4

306.8
Restructuring

5.1

6.9

8.6

6.9
Amortization of intangible assets

1.9

4.2

5.5

12.4
Impaired lease termination

(2.4)

—

(2.4)

—
Net impact of step-up in basis of acquired assets

—

5.5

—

18.2
Adjusted operating expenses

341.5

436.8

1,053.5

1,294.1
Adjusted operating income

$
34.3

$
13.6

$
65.0

$
39.9
Adjusted operating ratio

90.9%

97.0%

94.2%

97.0%

A reconciliation of the Company’s Specialized Solutions segment’s Adjusted Operating Expenses, Adjusted Operating Income (Loss) to Operating Income (Loss) and Adjusted Operating Ratio to operating ratio for the three and nine months ended September 30, 2020 and 2019 is as follows:

Three Months Ended September 30,

Nine Months Ended September 30,
(Dollars in millions)

2020

2019

2020

2019

Revenue⁽¹⁾

$
235.2

$
288.0

$
697.2

$
838.3
Salaries, wages and employee benefits

60.3

82.6

198.2

246.4
Fuel

13.0

21.7

42.8

67.5
Operations and maintenance

34.4

43.3

104.2

123.6
Purchased freight

64.6

85.2

193.2

237.8
Depreciation and amortization

12.8

23.8

42.9

76.4
Impairment

—

193.6

13.4

193.6
Restructuring

4.9

3.5

8.3

3.5
Other operating expenses

14.1

21.9

55.1

58.3
Operating expenses

204.1

475.6

658.1

1,007.1
Operating income (loss)

31.1

(187.6)

39.1

(168.8)
Operating ratio

86.8%

165.1%

94.4%

120.1%
Business transformation costs

0.1

0.7

2.1

0.7
Impairment

—

193.6

13.4

193.6
Restructuring

4.9

3.5

8.3

3.5
Amortization of intangible assets

1.0

2.7

3.0

7.9
Impaired lease termination

(2.4)

—

(2.4)

—
Net impact of step-up in basis of acquired assets

—

4.8

—

16.6
Adjusted operating expenses

200.5

270.3

633.7

784.8
Adjusted operating income

$
34.7

$
17.7

$
63.5

$
53.5
Adjusted operating ratio

85.2%

93.9%

90.9%

93.6%

~~(1)~~

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

~~Table of Contents~~

A reconciliation of the Company’s Flatbed Solutions segment’s Adjusted Operating Expenses, Adjusted Operating Income (Loss) to Operating Income (Loss) and Adjusted Operating Ratio to operating ratio for the three and nine months ended September 30, 2020 and 2019 is as follows:

Three Months Ended September 30,

Nine Months Ended September 30,
(Dollars in millions)

2020

2019

2020

2019

Revenue⁽¹⁾

$
144.5

$
169.8

$
436.8

$
512.7
Salaries, wages and employee benefits

29.9

35.0

94.0

104.4
Fuel

7.2

12.5

24.4

37.8
Operations and maintenance

11.0

13.2

32.0

40.5
Purchased freight

67.3

77.8

197.0

237.8
Depreciation and amortization

9.3

14.2

27.8

42.6
Impairment

—

113.2

—

113.2
Restructuring

0.2

0.9

0.3

0.9
Other operating expenses

10.3

10.9

32.7

34.0
Operating expenses

135.2

277.7

408.2

611.2
Operating income (loss)

9.3

(107.9)

28.6

(98.5)
Operating ratio

93.6%

163.5%

93.5%

119.2%
Business transformation costs

—

0.1

0.1

0.1
Impairment

—

113.2

—

113.2
Restructuring

0.2

0.9

0.3

0.9
Amortization of intangible assets

0.9

1.5

2.5

4.5
Net impact of step-up in basis of acquired assets

—

0.7

—

1.6
Adjusted operating expenses

134.1

161.3

405.3

490.9
Adjusted operating income

$
10.4

$
8.5

$
31.5

$
21.8
Adjusted operating ratio

92.8%

95.0%

92.8%

95.7%

~~(1)~~

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

~~Adjusted Net Income (Loss)~~

The Company defines Adjusted Net Income (Loss) as net income (loss) adjusted for acquisition related transaction expenses, business transformation costs, non-cash impairments, restructuring charges, amortization of intangible assets, the net impact of step-up in basis of acquired assets and unusual or non-regularly recurring expenses or recoveries.

The Company’s board of directors and executive management team use Adjusted Net Income (Loss) as a key measure of its performance and for business planning. Adjusted Net Income (Loss) assists them in comparing its operating performance over various reporting periods on a consistent basis because it removes from operating results the impact of items that, in its opinion, do not reflect the Company’s core operating performance. Adjusted Net Income (Loss) also allows 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’ acquisition related items, such as acquisition-related transaction expenses, non-cash impairments, amortization of intangible assets and the net impact of the step up in basis of acquired assets, as well as removing the impact of unusual or non-regularly recurring expenses or recoveries.

The Company believes its presentation of Adjusted Net Income (Loss) is useful because it provides investors and industry analysts the same information that it uses internally for purposes of assessing its core operating performance. However, Adjusted Net Income (Loss) is not a substitute for, or more meaningful than, net income (loss) or any other measure derived solely from GAAP measures, and there are limitations to using non-GAAP measures such as Adjusted Net Income (Loss). Although the Company believes that Adjusted Net Income (Loss) 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 Net Income (Loss) differently than it does. As a result, it may be difficult to use Adjusted Net Income (Loss) 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 Net Income (Loss) supplementally.

~~Table of Contents~~

~~A reconciliation of Adjusted Net Income to net income (loss) for the three and nine months ended September 30, 2020 and 2019 is as follows:~~

Three Months Ended September 30,

Nine Months Ended September 30,
(Dollars in millions)

2020

2019

2020

2019

Net income (loss)

$
15.7

$
(273.3)

$
(1.1)

$
(289.0)
Business transformation costs

1.6

6.8

7.7

6.8
Impairment

—

306.8

13.4

306.8
Restructuring

5.1

6.9

8.6

6.9
Amortization of intangible assets

1.9

4.2

5.5

12.4
Impaired lease termination

(2.4)

—

(2.4)

—
Net impact of step-up in basis of acquired assets

—

5.5

—

18.2
Tax impact of impairments

—

(52.2)

(2.7)

(52.2)
Adjusted net income

$
21.9

$
4.7

$
29.0

$
9.9

~~Liquidity and Capital Resources~~

The Company had the following sources of liquidity available at September 30, ~~2020~~2021 and December 31, ~~2019.~~2020.



(Dollars in millions)	September 30, 2020		December 31, 2019		September 30, 2021		December 31, 2020


Cash	$	189.8	$	95.7	$	143.6	$	176.2
Working capital surplus		25.0		71.0
Availability under line of credit		82.4		86.8		117.7		83.2
Total	$	297.2	$	253.5	$	261.3	$	259.4

The Company’s primary sources of liquidity have been provided by operations, issuances of capital stock and borrowings under its credit facilities. Cash ~~increased~~decreased by ~~$94.1~~$32.6 million at September 30, ~~2020~~2021 as compared to December 31, ~~2019.~~2020. This ~~increase~~decrease primarily resulted from $161.9 million in net cash used in financing activities, partially offset by $115.7 million in net cash provided by operating activities. See below for more information. As of September 30, ~~2020,~~2021, the Company had ~~a debit balance of $0.8~~no borrowings, $23.3 million ~~which is included~~ in ~~cash and cash equivalents, $16.2 million in outstanding~~ letters of credit ~~(discussed below), leaving $82.4~~outstanding, and could incur approximately $117.7 million ~~available~~of additional indebtedness under the ABL ~~Facility.~~Facility, based on current qualified collateral.

As of September 30, 2020 and December 31, 2019, the Company had a working capital surplus of $25.0 million and $71.0 million, respectively. The decrease in working capital surplus is due primarily to a decrease in accounts receivable of $25.3 million, an increase in assets held for sale of $0.4 million, an increase in prepaid and other current assets of $2.2 million and an increase in accounts payable and accrued liabilities of $20.2 million.

The Company has from time to time considered the possibility of a private offering of securities, which would not be registered under the Securities Act of 1933, as amended (the Securities Act), and which would be offered only to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to persons outside the United States pursuant to Regulation S under the Securities Act. The proceeds of such an offering may be used for general corporate purposes, including the repayment of all or a portion of the Company’s term loan credit facility, repayment of outstanding balances, if any, on the ABL facility and to support the Company’s strategic initiatives. Also, in connection with such offering, the Company’s credit facilities may be amended or refinanced. There can be no assurance that the Company will conduct or complete such an offering on favorable terms, or at all. The Company may also from time to time seek to retire, repay or repurchase its outstanding debt or equity securities through cash purchases in the open market or privately negotiated transactions, depending on the Company’s actual and anticipated sources and uses of liquidity, prevailing market conditions and other factors. The amounts involved in any such transactions may be material.

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 3,000,000 shares have been repurchased by the Company for approximately $20.4 million in cash through September 30, 2021. The Company also uses ~~or has historically used,~~ large amounts of cash and credit for ~~the following activities:~~

capital expenditures.

~~Table of Contents~~

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~~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. ~~The Company had net cash capital receipts of approximately $34.0 million and financed $45.4 million of non-cash~~

Total capital expenditures for the nine months ended September 30, ~~2020. The Company had the following capital assets activity in~~2021 and 2020 ~~and 2019:~~are shown below:

Nine Months Ended September 30,
(Dollars in millions)

2020

2019

Net cash capital receipts

$
(34.0)

$
(6.4)
Total financed capital expenditures

45.4

65.6
Property and equipment sold for notes receivable

(0.3)

(0.4)
Total net capital assets additions

$
11.1

$
58.8


	Nine Months Ended September 30,
(Dollars in millions)	2021			2020

Net cash capital receipts	$	(13.7	)	$	(34.0	)
Financed capital expenditures		55.0			45.4
Property and equipment purchases and sales	$	41.3		$	11.4

~~The~~Property and equipment purchases and sales increased primarily due to a decrease in ~~total~~ net cash capital ~~assets additions is due~~receipts which resulted from fewer sales of equipment compared to ~~timing of~~ the ~~Company’s replacement cycle for revenue equipment, the exit of Aveda operation and effort to right size the Company’s fleet.~~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 157 years having asset values at lease inception of ~~$39.4~~$17.1 million and ~~$14.1~~$4.0 million, respectively, for the nine months ended September 30, ~~2020.~~ 2021.

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Material Debt

Overview

As of September 30, 2021, the Company had the following material 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 September 30, 2021 (in millions):


Term Loan Facility	$	398.0
Equipment term loans		168.8
Finance lease obligations		30.6
Mortgages		2.3
Total long-term debt and finance leases		599.7
Less: current portion		(55.7	)
Long-term debt and finance leases obligations, less current portion	$	544.0

ABL and Term Loan Facilities and Equipment Financing Agreements

As of September 30, ~~2020,~~2021, the Company ~~had~~has (i) a ~~$500.0~~$400.0 million senior secured term loan credit ~~facility, consisting of a $250.0 million term loan, a $150 million tack-on loan and $100.0 million of term loans funded under a delayed draw term loan~~ facility, and (ii) an asset-based senior secured revolving credit facility ~~(ABL Facility)~~ with an aggregate maximum credit amount equal to ~~$100.0~~$150.0 million ~~(subject~~(that may be increased to $200.0 million, subject to availability under a borrowing base)~~, under which the Company has a debit balance of $0.8 million (which is included in cash and cash equivalents) and $16.2 million of letters of credit (discussed below)~~. See Note 96 of Notes to Consolidated Financial Statements for more information regarding the Term Loan Facility and the ABL ~~Facility.~~Facility, including the March 9, 2021 Term Loan refinancing and the April 29, 2021 ABL Amendment.

The Company had ~~$171.7~~$168.8 million of term loans and ~~$29.8~~$30.6 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 ABL Facility will provide sufficient credit availability to support its ongoing operations, fund debt service requirements, capital expenditures, and working capital needs. Over the long-term, the Company will continue to have significant capital requirements, and expects to devote substantial financial resources to grow its operations and fund its acquisition activities. As a result of these funding requirements, the Company may need to sell additional equity or debt securities or seek additional financing through additional borrowings, lease financing or equity 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, 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 ~~$20~~$40 million of standby letters of credit on our behalf. Outstanding letters of credit reduce the availability on the ~~$100~~$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.~~

Business combinations – The Company’s strategy has historically been to consolidate the open-deck transportation industry and it has used significant amounts of capital to acquire 20 businesses since Daseke Companies, Inc.’s inception in 2008. During 2019, the Company began to focus on organic growth, increasing free cash flow and margins, but will continue to evaluate potential tuck-in transactions of its subsidiaries and any other sources of growth it considers in the best interest of the Company.

~~Table of Contents~~

~~Debt excluding financing fees~~

liability insurances.

~~Overview~~

~~As of September 30, 2020, the Company had the following debt excluding financing fees:~~

●

~~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 were as follows as of September 30, 2020 (in millions):~~

Term Loan Facility

$
484.8
Mortgages

2.4
Equipment term loans

171.7
Finance lease obligations

29.8
Total long-term debt and capital leases

688.7
Less: current portion

(55.4)
Long-term debt and finance leases obligations, less current portion

$
633.3

~~See Note 2 and Note 9 of the Notes to Consolidated Financial Statements included herein for information regarding the Company’s debt and finance lease obligations, respectively.~~

Off-Balance Sheet Arrangements

Information about the Company’s standby letters of credit ~~and 17,520,328 shares of common stock issuable upon exercise of outstanding warrants~~ is included in Note ~~14 and Note 11, respectively,~~6 of the Notes to Consolidated Financial Statements included herein. See also Liquidity and Capital Resources above.

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Cash Flows

~~Cash Flows~~

The Company’s summary statements of cash flows information for the nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 is set forth in the table below:

Nine Months Ended September 30,
(Dollars in millions)

2020

2019

Net cash provided by operating activities

$
122.4

$
89.4
Net cash provided by investing activities

$
34.0

$
6.4
Net cash used in financing activities

$
(62.7)

$
(61.9)

Nine Months Ended September 30,

(Dollars in millions)

2021

2020

Net cash provided by operating activities

$
115.7

$
122.4

Net cash provided by investing activities

$
13.7

$
34.0

Net cash used in financing activities

$
(161.9
)

$
(62.7
)

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

Cash provided by operating activities was ~~$122.4~~$115.7 million during the nine months ended September 30, ~~2020~~2021 and consisted of ~~$1.1~~$48.9 million of net ~~loss~~income plus ~~$90.6~~$80.9 million of non-cash items, consisting primarily of depreciation, amortization, deferred taxes, gain on disposition of property and equipment, non-cash operating lease expense, ~~impairment~~change in fair value of warrant liability and stock-based compensation, plus ~~$32.9~~$14.1 million of net cash ~~provided by~~used in working capital and other activities. Cash ~~provided by~~used in working capital and other activities during the nine months ended September 30, ~~2020~~2021 reflect ~~a decrease~~an increase of ~~$23.8~~$34.5 million in accounts receivable, ~~and an increase of $23.8 million in accrued expenses and other liabilities; offset by~~ a ~~$8.9 million increase in prepaid and other current assets,~~ $0.7 million increase in ~~drivers’ advances~~other current assets, and ~~other receivables and $5.1~~a decrease ~~in accounts payable. Cash provided by operating activities was $89.4 million during the nine months ended September 30, 2019 and consisted~~ of $289.0 million of net loss plus $400.4 million of non-cash items, consisting primarily of depreciation, amortization, non-cash operating lease expense, write-off of deferred financing fees, impairment, restructuring costs and stock-based compensation, less $22.0 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, 2019 reflect increases of $23.5$0.4 million in accounts ~~receivable, $2.4 million in drivers’ advances and other receivables and $2.3 million in prepaid and other current assets,~~payable, which was partially offset by a ~~$1.8 million increase in accounts payable and $4.4~~$21.1 million increase in accrued expenses and other ~~liabilities.~~ liabilities and a $0.4 million decrease in drivers’ advances and other receivables.

~~Table of Contents~~

The ~~$33.0~~$6.7 million ~~increase~~decrease in cash provided by operating activities during the nine months ended September 30, ~~2020,~~2021, as compared with the nine months ended September 30, ~~2019,~~2020, was the result of ~~an $287.9~~a $50.9 million ~~decrease~~improvement in net ~~loss,~~income, reduced by decreases ~~of $41.2 million~~ in depreciation, $6.9 million in amortization of intangible assets, $19.5 million in non-cash operating lease expense, $2.0 million in write-off of deferred financing fees, $1.5 million in bad debt expense, $1.8 million increase in gain on disposition of property and equipment, $293.4 million in impairment, $6.9 million in restructuring charges, increased by $60.6 million in deferred taxes, $2.0 million in stock-based compensation expense and $0.8 million in amortization of intangible assets. Netnet cash provided by working capital ~~increased $54.9~~of $47.0 million and decreases in non-cash items of $10.6 million.

Investing Activities. Cash flows from investing activities ~~increased~~decreased from ~~$6.4~~$34.0 million provided by investing activities for the three months ended September 30, 2020 to $13.7 million provided by investing activities for the nine months ended September 30, ~~2019 to $34.0 million provided by investing activities for the nine months ended September 30, 2020~~2021 reflecting an increase of ~~$0.6~~$16.2 million in cash equipment purchases and ~~an increase~~a decrease of ~~$28.2~~$4.1 million in cash receipts from sales of revenue equipment for the nine months ended September 30, ~~2020.~~2021.

Total net cash capital expenditures (receipts) for the ~~three and~~ nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 are shown below:


	Nine Months Ended September 30,

					Nine Months Ended September 30,
(Dollars in millions)	2020		2019		2021			2020


Revenue equipment (tractors, trailers and trailer accessories)	$	16.4	$	13.0		29.8		$	16.4
Buildings and building improvements		0.9		1.5		1.2			0.9
Other		0.7		2.9		3.2			0.7
Total cash capital expenditures		18.0		17.4		34.2			18.0
Less: Proceeds from sales of property and equipment		52.0		23.8		47.9			52.0
Net cash capital expenditures (receipts)	$	(34.0)	$	(6.4)	$	(13.7	)	$	(34.0	)

Financing Activities. Cash flows from financing activities ~~increased~~changed from ~~$61.9 million used in financing activities for the nine months ended September 30, 2019 to~~ $62.7 million used in financing activities for the nine months ended September 30, ~~2020.~~2020 to $161.9 million used in financing activities for the nine months ended September 30, 2021. This ~~increase~~change was primarily a result of net debt payments of ~~$0.8 million.~~$79.2 million and $20.4 million in repurchases of common stock.

Inflation

~~Inflation~~

Inflation can have an impact on the Company’s operating costs. A prolonged period of inflation could cause interest rates, fuel, wages and other costs to increase, which would adversely affect the Company’s results of operations unless freight rates correspondingly increase. The Company attempts to limit the effects of inflation through increases in freight rates, certain cost control efforts and limiting the effects of fuel prices through fuel surcharges and measures intended to reduce the consumption of fuel. Over the past three fiscal years, the effect of inflation has been immaterial.

Seasonality

~~Seasonality~~

In the transportation industry, results of operations generally show a seasonal pattern. The Company’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 engine 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

Table of Contents

disrupt fuel supplies, increase fuel costs, disrupt freight shipments or routes, affect regional economies, destroy the Company’s assets, increase insurance costs or adversely affect the business or financial condition of its customers, any of which could adversely affect the Company’s results of operations or make such results more volatile.

Critical Accounting Policies

The Company’s significant accounting policies are described in Note 1 of Notes to Consolidated Financial Statements in the Company’s Annual Report on Form ~~10-K~~10-K/A filed on ~~March 10, 2020.~~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 Annual Report on Form ~~10-K~~10-K/A filed on ~~March 10, 2020.~~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

~~Table of Contents~~

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, ~~2019.~~2020. For further information on the Company’s market risk, refer to “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in the Company’s Annual Report on Form ~~10-K~~10-K/A filed on ~~March 10, 2020.~~May 6, 2021.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As 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 the principal executive and principal financial ~~officer,~~officers, of the effectiveness ~~of the design and operation~~ of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities and Exchange Act of 1934 (the Exchange Act)). Based on this evaluation, the principal executive and principal financial officers concluded ~~as of the end of the period,~~ our disclosure controls and procedures were not effective as of September 30, ~~2020~~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~~10-K/A for the fiscal year ended December 31, ~~2019.~~

2020.

~~Management’s Remediation~~

As previously described in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2019, we began implementing remediation plans to address the material weaknesses. The weaknesses will not be considered remediated, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that the remediation of these material weaknesses will be completed by the end of fiscal 2020.

Changes in Internal Control over Financial Reporting

~~Except as noted above, there~~There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) that occurred during the ~~third quarter of fiscal 2020~~three months ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company and its subsidiaries are involved in litigation and claims primarily arising in the normal course of business, which include claims for personal injury or property damage incurred in the transportation of freight. Based on its knowledge of the facts and, in certain cases, advice of outside counsel, the Company believes the resolution of claims and pending litigation will not have a material adverse effect on the Company’s financial position, results of operations or cash ~~flows.~~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

~~Other than the risk factor included below, there~~There have been no material changes in the risks facing the Company as described in Amendment No. 2 to the Company’s Annual Report on Form ~~10-K~~10-K/A for the year ended December 31, 2020.

The COVID-19 pandemic, and various governmental actions taken to mitigate its impact, have affected and may materially adversely affect, and any future outbreak of any other highly infectious or contagious diseases may materially adversely affect, our operations, financial performance and condition, operating results and cash flows.

The COVID-19 pandemic, and various governmental actions taken to mitigate its impact, has affected, and may materially adversely affect, our operations, financial performance and condition, operating results and cash flows. The severity, magnitude and duration of the current COVID-19 pandemic is uncertain, rapidly changing and hard to predict. Thus far in 2020, the COVID-19 pandemic has significantly impacted economic activity and markets around the world, and COVID-19 or another similar outbreak could negatively impact our business in numerous ways, including, but not limited to, the following:

●

our revenue has been reduced and may continue to be reduced to the extent the pandemic results in an economic downturn or recession, as many experts predict, which leads to a decrease in demand for our services or the transportation markets in general;

●

~~our operations may be disrupted or impaired, if a significant portion of our drivers or other employees are unable to work due to illness;~~

●

the pandemic has increased volatility and caused negative pressure in the capital markets; as a result, we may experience difficulty accessing the capital or financing needed to fund our operations, which have substantial capital requirements, on satisfactory terms or at all;

●

~~we may experience liquidity challenges, including impacts related to delayed customer payments and payment defaults associated with customer liquidity issues and bankruptcies;~~

●

~~customers, suppliers and other third parties may argue that their non-performance under our contracts with them is permitted as a result of force majeure or other reasons;~~

●

we may experience workforce rightsizing-related issues and incur severance payments as a result of adjusting our workforce to market conditions, and we may subsequently experience retention issues and driver shortages when market conditions improve;

●

our management may be distracted as they are focused on mitigating the effects of COVID-19 on our business operations while protecting the health of our workforce and customers, which has required, and will continue to require, a large investment of time and resources; and

●

~~we may be at greater risk for cybersecurity issues, as digital technologies may become more vulnerable and experience a higher rate of cyberattacks in the current environment of remote connectivity.~~

Table of Contents

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

The following table provides information about our repurchases of Common Stock during the ~~extent the COVID-19 pandemic adversely affects~~three months ended September 30, 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)
07/01/2021 to 07/31/2021		1,482,377	$	6.63		1,482,377		—
08/01/2021 to 08/31/2021		—				—		—
09/01/2021 to 09/30/2021		—				—		—
Total		1,482,377	$	6.63		1,482,377

(1)

On March 22, 2021, we announced that our ~~business and financial results, it may also have the effect~~Board of heightening many of the other risks set forth in “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, such as those relating to our financial performance and debt obligations. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19 on our business. The extentDirectors approved a stock repurchase program (the Stock Repurchase Program) pursuant to which the ~~COVID-19 pandemic impacts~~Company is authorized to repurchase up to three million shares of our common stock, par value $0.0001 per share (Common Stock). Repurchases under the Stock Repurchase Program may be made, from time to time, in amounts and at prices the Company ~~will depend on numerous evolving factors and future developments that we are not able to predict, including:~~deems appropriate. The Stock Repurchase Program is effective until all shares have been repurchased under the ~~severity and duration~~Stock Repurchase Program or, if earlier, until our Board of Directors suspends or discontinues the pandemic; governmental, business and other actions in response to the pandemic (which could include limitations on the Company’s operations or mandates to provide services in a specified manner); the impact of the pandemic on economic activity; the response of the overall economy and the financial markets; the extent and duration of the effect on consumer confidence and spending; the health of and the effect on our workforce and our ability to meet staffing needs; any impairment in the value of our tangible or intangible assetsStock Repurchase Program, which could ~~be recorded as a result~~occur at any time without prior notice. As of ~~a weaker economic conditions;~~July 31, 2021, all 3,000,000 shares of Common Stock have been repurchased under the Stock Repurchase Program and the potential effects on our internal controls, including those over financial reporting, as a result of changes in working environments, such as shelter-in-place and similar orders that are applicable to our employees and business partners, among others. There are no ~~comparable recent events that provide guidance as to the effect the COVID-19 global pandemic may have, and as a result, the ultimate impact of the pandemic is highly uncertain and subject to change.~~

~~The Company is dependent on computer and communications systems, and a systems failure, cyber-attack or data breach could cause a significant disruption to its business and cause financial losses.~~

The Company’s business depends on the efficient and uninterrupted operation of its computer and communications hardware systems and infrastructure, including operating and financial reporting systems, and on the effectiveness of the information and cybersecurity policies, procedures and capabilities the Company maintains to protect its systems and data. The Company’s computer and communications system is critical in meeting customer expectations, effectively tracking, maintaining and operating the Company’s equipment, directing and compensating the Company’s employees, and interfacing with the Company’s financial reporting system. The Company currently maintains its computer systems at multiple locations, including several of its offices and terminals and third-party data centers, along with computer equipment at each of its terminals. The Company’s operations and those of its technology and communications service providers are vulnerable to interruption by fire, earthquake, power loss, telecommunications failure, terrorist attacks, Internet failures, computer viruses, data breaches (including cyber-attacks or cyber intrusions over the Internet, malware and the like) and other events generally beyond its control.

~~Although the Company believes that it has robust information security procedures and other safeguards in place, as cyber threats continue to evolve, it~~additional shares may be ~~required to expend additional resources to continue to enhance its information security measures and investigate and remediate any information security vulnerabilities. Even with such measures,~~repurchased under the Company’s information technology and infrastructure are subject to attacks or misappropriation by hackers and may be, and have in the past been, breached due to inadequacy or ineffectiveness of the protective measures undertaken, employee errors or omissions, malfeasance or other disruptions. In the third quarter of 2020, one of the Company’s operating companies experienced a ransomware attack. Upon discovering that an unauthorized third party attempted to gain access to select servers, the Company took immediate action to stop the attack and remediate the systems. The Company also promptly launched an internal investigation with the assistance of third-party cybersecurity partners to determine the scope of the incident and any potential impacts. This cyber incident did not result in any disruptions in the operations of such operating company or of the Company or its other subsidiaries nor was there a material financial impact or ransom paid as a result of this cyber incident. In the future, however, another externally caused information security incident, such as a cyber-attack, a phishing scam, virus, ransomware attack or denial-of-service attack, could materially interrupt business operations or cause disclosure or modification of sensitive or confidential client or competitive information. In addition, the Company’s third-party vendors and other intermediaries with which it conducts business and transmit data could be subject to a successful cyber-attack or other information security event, and the Company cannot ensure that such third parties have all appropriate controls in place to protect the confidentiality of information in the custody of those third parties.

Stock Repurchase Program.

A significant natural disaster or cyber-attack incident, including system failure, security breach, disruption by malware or other damage, could interrupt or delay the Company’s operations, damage its reputation, cause a loss of customers, agents or third-party capacity providers, expose the Company to a risk of loss or litigation, or cause the Company to incur significant time and expense to remedy such an event. Furthermore, a security breach or privacy violation that leads to disclosure of customer, supplier or employee or contractor information (including personally identifiable information or protected health information) could harm the Company’s reputation, compel it to comply with disparate state and foreign breach notification laws and otherwise subject it to liability under laws that protect personal data, resulting in increased cost, loss of revenue and material adverse impacts on the Company’s results of operations and financial position.

Table of Contents

Item 6. Exhibits

~~EXHIBIT INDEX~~

EXHIBIT INDEX


~~Exhibit No.~~	~~Exhibit~~


Exhibit No.	Exhibit

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

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

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

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

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

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

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

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

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

101.INS*	Inline XBRL Instance Document.

101.SCH*	Inline XBRL Taxonomy Extension Schema Document.

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

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

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

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

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

~~_____________________________~~


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

Table of Contents

SIGNATURES

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


~~Date: November 4, 2020~~	~~DASEKE, INC.~~
Date: October 28, 2021			DASEKE, INC.
	~~By:~~	~~/s/ Jason Bates~~
	~~Name:~~By:	/s/ Jason Bates
	Name:	Jason Bates
	Title:	Chief Financial Officer
		~~(On behalf of the Registrant and as the Registrant’s Principal Financial~~
		~~Officer)~~


	September 30,		December 31,
	2020		2019
ASSETS
Current assets:
Cash and cash equivalents	$	189.8	$	95.7
Accounts receivable, net of allowance of $4.1 at September 30, 2020 and $3.5 at December 31, 2019		172.5		197.8
Drivers’ advances and other receivables		8.9		8.2
Parts supplies		3.1		3.5
Assets held for sale		0.4		—
Prepaid and other current assets		24.1		21.9
Total current assets		398.8		327.1

Property and equipment, net		379.0		439.0
Intangible assets, net		97.4		109.1
Goodwill		139.7		139.9
Right-of-use assets		127.7		95.9
Other long-term assets		33.0		29.6
Total assets	$	1,175.6	$	1,140.6

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	15.4	$	20.5
Accrued expenses and other liabilities		55.8		44.2
Accrued payroll, benefits and related taxes		39.9		28.2
Accrued insurance and claims		20.7		18.7
Current portion of long-term debt		55.4		59.4
Other current liabilities		52.2		48.8
Total current liabilities		239.4		219.8

Line of credit		—		1.7
Long-term debt, net of current portion		625.1		631.6
Deferred tax liabilities		69.6		69.9
Share-based payment liability		1.9		—
Other long-term liabilities		102.9		78.9
Total liabilities		1,038.9		1,001.9

Commitments and contingencies (Note 14)

Stockholders’ equity:
Series A convertible preferred stock, $0.0001 par value; 10,000,000 shares authorized; 650,000 shares issued with liquidation preference of $65.0 at September 30, 2020 and December 31, 2019		65.0		65.0
Common stock, par value $0.0001 per share; 250,000,000 shares authorized, 65,018,760 and 64,589,075 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively		—		—
Additional paid-in-capital		440.4		437.5
Accumulated deficit		(368.2)		(363.4)
Accumulated other comprehensive loss		(0.5)		(0.4)
Total stockholders’ equity		136.7		138.7
Total liabilities and stockholders’ equity	$	1,175.6	$	1,140.6


	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	$	—	$	437.5	$	(363.4)	$	(0.4)	$	138.7
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	—		—	—		—		—		(17.3)		—		(17.3)
Balance at March 31, 2020	650,000	$	65.0	64,598,025	$	—	$	438.4	$	(381.9)	$	(0.9)	$	120.6
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	—		—	—		—		—		0.5		—		0.5
Balance at June 30, 2020	650,000	$	65.0	64,727,425	$	—	$	439.4	$	(382.7)	$	(0.7)	$	121.0
Vesting of restricted stock units	—		—	291,334		—		—		—		—		—
Exercise of warrant	—		—	1		—		—		—		—		—
Series A convertible preferred stock dividend	—		—	—		—		—		(1.2)		—		(1.2)
Stock-based compensation expense	—		—	—		—		1.0		—		—		1.0
Foreign currency translation adjustments	—		—	—		—		—		—		0.2		0.2
Net income	—		—	—		—		—		15.7		—		15.7
Balance at September 30, 2020	650,000	$	65.0	65,018,760	$	—	$	440.4	$	(368.2)	$	(0.5)	$	136.7


	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
Exercise of options		—		—		8,000			—		(0.1	)		—			—			(0.1	)
Vesting of restricted stock units		—		—		155,690			—		(0.9	)		—			—			(0.9	)
Series A convertible preferred stock dividend		—		—		—			—		—			(1.2	)		—			(1.2	)
Common stock repurchased and retired		—		—		(1,482,377	)		—		(9.8	)		—			—			(9.8	)
Stock-based compensation expense		—		—		—			—		2.1			—			—			2.1
Foreign currency translation adjustments		—		—		—			—		—			—			(0.5	)		(0.5	)
Net income		—		—		—			—		—			20.9			—			20.9
Balance at September 30, 2021		650,000	$	65.0		62,485,747		$	—	$	386.2		$	(282.6	)	$	(0.1	)	$	168.5


		Three Months Ended September 30,				Nine Months Ended September 30,
	Classification	2020		2019		2020		2019
Operating lease cost
Revenue equipment	Operations and maintenance	$	6.5	$	2.8	$	19.5	$	16.3
Real estate	Administrative expense		4.1		1.1		11.6		10.2
Total operating lease cost		$	10.6	$	3.9	$	31.1	$	26.5

Finance lease cost
Amortization of right-of-use assets	Depreciation and amortization	$	1.5	$	1.5	$	4.5	$	3.9
Interest on lease liabilities	Interest expense		0.4		0.2		0.9		0.7
Total finance lease cost		$	1.9	$	1.7	$	5.4	$	4.6

Total lease cost^(a)		$	12.5	$	5.6	$	36.5	$	31.1


	Capitalized
	Operating		Finance
Year ending December 31,	leases		leases		Total
2020⁽¹⁾	$	9.3	$	3.6	$	12.9
2021		35.8		8.5		44.3
2022		31.9		6.5		38.4
2023		26.0		7.0		33.0
2024		15.0		4.3		19.3
Thereafter		36.2		2.0		38.2
Total lease payments		154.2		31.9		186.1
Less: interest		(20.3)		(2.1)		(22.4)
Present value of lease liabilities	$	133.9	$	29.8	$	163.7


Twelve months ending September 30,	Amount
2021	$	23.2
2022		18.0
2023		11.5
2024		6.3
2025		3.2
Thereafter		0.7
Total minimum lease receipts	$	62.9


	As of September 30, 2020						As of December 31, 2019
	Intangible		Accumulated		Intangible		Intangible		Accumulated		Intangible
	Assets		Amortization		Assets, net		Assets		Amortization		Assets, net
Non-competition agreements	$	21.7	$	(19.5)	$	2.2	$	21.7	$	(18.4)	$	3.3
Customer relationships		88.9		(46.6)		42.3		88.9		(42.2)		46.7
Trade names		52.9		—		52.9		59.1		—		59.1
Total intangible assets	$	163.5	$	(66.1)	$	97.4	$	169.7	$	(60.6)	$	109.1


	Non-competition		Customer
Year ending December 31,	Agreements		Relationships
2020⁽¹⁾	$	0.3	$	1.4
2021		1.0		5.9
2022		0.9		5.9
2023		—		5.9
2024		—		4.1
Thereafter		—		19.1
Total	$	2.2	$	42.3


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 to 1.00	1.25	%	2.25	%
Greater than or equal to 1.75 to 1.00	0.75	%	1.75	%

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	%


Twelve months ending September 30,	Term Loan Facility		Equipment Term Loans		Total

2021	$	5.0	$	42.8	$	47.8
2022		2.5		40.7		43.2
2023		2.5		32.8		35.3
2024		474.2		34.8		509.0
2025		0.6		16.0		16.6
Thereafter		—		7.0		7.0
Total long-term debt	$	484.8	$	174.1	$	658.9


	Units	Weighted Average Grant Date Fair Value (Per Unit)

Non-vested as of January 1, 2020	1,180,882	$	5.44
Granted	108,498		2.77
Vested	(594,339)		3.95
Forfeited	(63,092)		10.71
Non-vested as of September 30, 2020	631,949	$	5.85


	As of September 30, 2020
	Liability-classified	Equity-classified
Term	2.2 to 2.8 years	3 years
Risk-free interest rate	0.14% to 0.15%	0.26%
Expected volatility	86.3% to 96.7%	76.8%
Expected dividend yield	0.00%	0.00%