COVENANT LOGISTICS GROUP INC

DECEMBER 31, 2023 and 2022

Nature of Business

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

Principles of Consolidation

The consolidated financial statements include the accounts of Covenant Logistics Group, Inc., a holding company incorporated in the state of Nevada in1994, and its wholly owned subsidiaries: Covenant Transport, Inc., a Tennessee corporation; Star Transportation, LLC, a Tennessee limited liability company, each d/b/a Covenant Transport Services and Covenant Logistics; Southern Refrigerated Transport, LLC, an Arkansas limited liability company; Covenant Transport Solutions, LLC, a Nevada limited liability company; Covenant Logistics, Inc., a Nevada corporation; Covenant Asset Management, LLC, a Nevada limited liability company; CTG Leasing Company, a Nevada corporation; IQS Insurance Risk Retention Group, Inc., a Vermont corporation; Heritage Insurance, Inc., a Tennessee corporation; Landair Holdings, Inc., a Tennessee corporation (collectively "Landair"); Landair Transport, Inc., a Tennessee corporation; Landair Logistics, Inc., a Tennessee corporation; Landair Leasing, Inc., a Tennessee corporation; AAT Carriers, Inc., a Tennessee corporation ("AAT"), Lew Thompson & Son Trucking, Inc., an Arkansas corporation, Lew Thompson & Son Leasing, Inc., an Arkansas corporation, Lew Thompson & Son Dedicated Leasing Inc., an Arkansas corporation, Josh Thompson Trucking, Inc., an Arkansas corporation, Sims Transport Services LLC, a Georgia limited liability company, and Transport Management Services, LLC, a Tennessee limited liability company.

References in this report to "it," "we," "us," "our," the "Company," and similar expressions refer to Covenant Logistics Group, Inc. and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Ourfour reportable segments are:

The following table summarizes our revenue by ourfour reportable segments, at the service offering level, as used by our chief operating decision maker in making decisions regarding allocation of resources, etc., for the years ended* December 31, 2023*,2022, and2021:

Investment in Transport Enterprise Leasing, LLC

Transport Enterprise Leasing, LLC ("TEL") is a tractor and trailer equipment leasing company and used equipment reseller. We evaluated our investment in TEL to determine whether it should be recorded on a consolidated basis. Our percentage of ownership interest (49%), an evaluation of control, and whether a variable interest entity ("VIE") existed were all considered in our consolidation assessment. Based on the analysis, the Company isnot the primary beneficiary of TEL and TEL shouldnot be consolidated. We have accounted for our investment in TEL using the equity method of accounting given our49% ownership interest and ability to exercise significant influence over operating and financial policies. Under the equity method, the cost of our investment is adjusted for our share of equity in the earnings of TEL and reduced by distributions received and our proportionate share of TEL's net income is included in our earnings.

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On a periodic basis, we assess whether there are any indicators that the fair value of our investment in TEL* maybe impaired. The investment is impaired only if the estimate of the fair value of the investment is less than the carrying value of the investment, and such decline in value is deemed to be other than temporary. To the extent impairment has occurred, the loss would be measured as the excess of the carrying amount of the investment over the fair value of the investment. As a result of TEL's earnings,no impairment indicators were noted that would provide for impairment of our investment during the years ended December 31, 2023*,2022, and2021.

Risks and Uncertainties

Our insurance program includes multi-year policies with specific insurance limits that* maybe eroded over the course of the policy term. If that occurs, we will be operating with less liability coverage insurance at various levels of our insurance tower. For the policy period that ran from April 1, 2018to March 31, 2021,the aggregate limits available in the coverage layer $9.0 million in excess of $1.0 million were fully eroded based on claims expense accruals. We replaced our$9.0* million in excess of*$1.0* million layer with a new $7.0 million in excess of $3.0 million policy that runs from* January 28, 2021to April 1, 2024.Due to the erosion of the$9.0* million in excess of*$1.0* million layer, any adverse developments in claims filed between* April 1, 2018and March**31,* 2021, could result in additional expense accruals. Due to these developments, we* may*experience additional expense accruals, increased insurance and claims expenses, and greater volatility in our insurance and claims expenses, which could have a material adverse effect on our business, financial condition, and results of operations.

Revenue Recognition

Revenue, drivers' wages, and other direct operating expenses generated by our Expedited and Dedicated reportable segments are recognized proportionally as the transportation service is performed based on the percentage of miles completed as of the period end. Revenue is recognized on a gross basis at amounts charged to our customers because we control and are primarily responsible for the fulfillment of the promised service. Revenue includes transportation revenue, fuel surcharges, loading and unloading activities, equipment detention, and other accessorial services.

Revenue generated by our Managed Freight reportable segment is recognized proportionally as the services are provided based on the percentage of completion method using the estimated time elapsed as of the period end. Revenue is recorded on a gross basis, without deductingthird-party purchased transportation costs, as we act as a principal with substantial risks as primary obligor. Revenue for the Warehousing reportable segment is generally recognized as the service is performed, based upon a weekly rate.

There areno assets or liabilities recorded in conjunction with revenue recognized, other than accounts receivable and allowance for credit losses. We recognized in-process revenue of $1.1 million, $1.4 million, and $0.4 million for the years ended* December 31, 2023*,2022, and2021, respectively. We had accounts receivable, net of allowance for credit losses, of $142.5 million and $119.8 million at* December 31, 2023* and2022, respectively.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make decisions based upon estimates, assumptions, and factors we consider as relevant to the circumstances. Such decisions include the selection of applicable accounting principles and the use of judgment in their application, the results of which impact reported amounts and disclosures. Changes in future economic conditions or other business circumstances* may*affect the outcomes of our estimates and assumptions. Accordingly, actual results could differ from those anticipated.

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Cash and Cash Equivalents

We consider all highly liquid investments with a maturity ofthree months or less at acquisition to be cash equivalents. Additionally, we are also subject to concentrations of credit risk related to deposits in banks in excess of the Federal Deposit Insurance Corporation limits. At* December 31, 2023,*we had $1.5 million in excess of the Federal Deposit Insurance Corporation insured limits.

Accounts Receivable and Concentration of Credit Risk

We extend credit to our customers in the normal course of business, which are generally due within30-45 days of the services performed, however, we have extended terms of up to120 days with a small number of larger customers. We perform ongoing credit evaluations and generally donot require collateral. Trade accounts receivable are recorded at their invoiced amounts, net of allowance for credit losses. We evaluate the adequacy of our allowance for credit losses quarterly. Accounts outstanding longer than contractual payment terms are considered past due and are reviewed individually for collectability. We maintain reserves for potential credit losses based upon loss history, specific receivables aging analysis, and other factors, including those related to current market conditions and events. Receivable balances are written off when collection is deemed unlikely.

Accounts receivable are comprised of a diversified customer base that mitigates the level of concentration of credit risk. During2023,2022, and2021, our topten customers generated 44%,43%, and 53% of total revenue, respectively. There wasone customer in2023, andnone in2022 or2021 that accounted for more than10% of our consolidated revenue. The carrying amount reported in the consolidated balance sheet for accounts receivable approximates fair value based on the fact that the receivables collection averaged approximately49 days and40 days in2023 and2022, respectively.

The following table provides a summary (in thousands) of the activity in the allowance for credit losses for2023,2022, and2021:

Inventories and Supplies

Inventories and supplies consist of parts, tires, fuel, and supplies. Tires on new revenue equipment are capitalized as a component of the related equipment cost when the tractor or trailer is placed in service and recognized through depreciation over the life of the vehicle. Replacement tires and parts on hand at year end are recorded at the lower of cost or net realizable value with cost determined using thefirst-in,first-out (FIFO) method. Replacement tires are expensed when placed in service.

Assets Held for Sale

Assets held for sale include property and revenue equipmentno longer utilized in continuing operations which are available and held for sale. Assets held for sale areno longer subject to depreciation, and are recorded at the lower of depreciated book value or fair market value less selling costs. We periodically review the carrying value of these assets for possible impairment. We expect to sell these assets withintwelve months.

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation. Depreciation for book purposes is determined using the straight-line method over the estimated useful lives of the assets. Depreciation of revenue equipment is our largest item of depreciation. We generally depreciate new tractors over five years to salvage values that range from 0% to 35% of their cost, depending on the reportable segment profile of the equipment. We generally depreciate new trailers over seven years for refrigerated trailers andten years for dry van trailers to salvage values of approximately 28% and 25% of their cost, respectively. We annually review the reasonableness of our estimates regarding useful lives and salvage values of our revenue equipment and other long-lived assets based upon, among other things, our experience with similar assets, conditions in the used revenue equipment market, and prevailing industry practice. Changes in the useful life or salvage value estimates, or fluctuations in market values that arenot reflected in our estimates, could have a material effect on our results of operations.

We lease certain revenue equipment under finance and operating leases with terms of approximately 48 to 84 months. Amortization of assets under finance and operating leases are included in depreciation and amortization expense and revenue and equipment rentals and purchased transportation, respectively.

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A portion of our tractors are protected by binding trade-back agreements with the manufacturers. The remainder of our tractors and substantially all of our owned trailers are subject to fluctuations in market prices for used revenue equipment. Moreover, our trade-back agreements are contingent upon reaching acceptable terms for the purchase of new equipment. Declines in the price of used revenue equipment or failure to reach agreement for the purchase of new tractors with the manufacturers issuing trade-back agreements could result in impairment of, or losses on the sale of, revenue equipment.

Goodwill and Other Intangible Assets

We classify intangible assets intotwo categories: (i) intangible assets with finite lives subject to amortization and (ii) goodwill. We test goodwill for impairment annually and whenever events or changes in circumstances indicate that impairment* mayhave occurred. We test intangible assets with finite lives for impairment if conditions exist that indicate the carrying value may**not* be recoverable. Such conditions* mayinclude an economic downturn in a geographic market or a change in the assessment of future operations. We record an impairment charge when the carrying value of the finite lived intangible asset isnot* recoverable by the cash flows generated from the use of the asset.

We determine the useful lives of our identifiable intangible assets after considering the specific facts and circumstances related to each intangible asset. Factors we consider when determining useful lives include the contractual term of any agreement, the history of the asset, our long-term strategy for the use of the asset, any laws or other local regulations which could impact the useful life of the asset, and other economic factors, including competition and specific market conditions. Intangible assets that are deemed to have finite lives are amortized, generally on a straight-line basis, over their remaining useful lives, ranging from 3 to 17 years.

Impairment of Long-Lived Assets

Pursuant to applicable accounting standards, revenue equipment and other long-lived assets are tested for impairment whenever an event occurs that indicates an impairment* may*exist. Expected future cash flows are used to analyze whether an impairment has occurred. If the sum of expected undiscounted cash flows is less than the carrying value of the long-lived asset, then an impairment loss is recognized. We measure the impairment loss by comparing the fair value of the asset less its disposal cost to its carrying value. Fair value is determined based on a discounted cash flow analysis or the appraised value of the assets, as appropriate.

Pursuant to applicable accounting standards, revenue equipment and other long-lived assets are tested for impairment whenever an event occurs that indicates impairment* mayexist. Expected future cash flows are used to analyze whether an impairment has occurred. If the sum of expected undiscounted cash flows is less than the carrying value of the long-lived asset, then an impairment loss is recognized. We measure the impairment loss by comparing the fair value of the asset to its carrying value. Fair value is determined based on a discounted cash flow analysis or the appraised value of the assets, as appropriate. There wereno* impairment events during thetwelve months ended* December 31, 2023*,2022, and2021.

Accrued Expenses

Accrued expenses as of* December 31, 2023,were $59.1 million of which $25.9 million related to accrued payroll and related items and $8.4 million related to accrued purchased transportation. As of December 31, 2022,*accrued expenses were $59.1 million of which $24.6 million related to accrued payroll and related items and $7.8 million related to accrued purchased transportation.

Insurance and Other Claims

The primary claims arising against us consist of auto liability (personal injury and property damage), workers' compensation, cargo, commercial liability, and employee medical expenses. At* December 31, 2023*, our insurance program involves self-insurance with the following risk retention levels (before giving effect to any commutation of an auto liability policy):

Due to our significant self-insured retention amounts, we have exposure to fluctuations in the number and severity of claims and to variations between our estimated and actual ultimate payouts. We record a liability for the estimated cost of the uninsured portion of pending claims and the estimated allocated loss adjustment expenses including legal and other direct costs associated with a claim. Estimates require judgments concerning the nature and severity of the claim, historical trends, advice fromthird-party administrators and insurers, the size of any potential damage award based on factors such as the specific facts of individual cases, the jurisdictions involved, the prospect of punitive damages, future medical costs, and inflation estimates of future claims development, and the legal and other costs to settle or defend the claims. We have significant exposure to fluctuations in the number and severity of claims. If there is an increase in the frequency or severity of claims, or we are required to accrue or pay additional amounts if the claims prove to be more severe than originally assessed, or any of the claims would exceed the limits of our insurance coverage, our profitability could be adversely affected.

In addition to estimates within our self-insured retention layers, we also must make judgments concerning claims where we havethird-party insurance and for claims outside our coverage limits. Upon settling claims and expenses associated with claims where we havethird-party coverage, we are generally required to initially fund payment to the claimant and seek reimbursement from the insurer. We had $0.8 million and $0.0 million receivables from insurers for claims and expenses we paid on behalf of insurers at* December 31, 2023* and2022, respectively which are included in drivers' advances and other receivables on our consolidated balance sheet. Additionally, we accrue claims above our self-insured retention and record a corresponding receivable for amounts we expect to collect from insurers upon settlement of such claims. We have $0.0 million and $0.7 million as other short-term assets and a corresponding accrual in the short-term portion of insurance and claims accruals and $1.3 million and $0.0 million as other long-term assets and as a corresponding accrual in the long-term portion of insurance and claims accruals on our consolidated balance sheet for claims above our self-insured retention for which we believe it is reasonably assured that the insurers will provide their portion of such claims at* December 31, 2023* and2022, respectively. We evaluate collectability of the receivables based on the credit worthiness and surplus of the insurers, along with our prior experience and contractual terms with each. If any claim occurrence were to exceed our aggregate coverage limits, we would have to accrue for the excess amount. Our critical estimates include evaluating whether a claim* may*exceed such limits and, if so, by how much.

We also make judgments regarding the ultimate benefit versus risk of commuting certain periods within our auto liability policy. If we commute a policy, we assume 100% risk for covered claims in exchange for a policy refund.

Our prior auto liability policies have sometimes included a release premium refund or commutation option that we have sometimes exercised, although we donot have either of these options in our current policies. Management cannot predict whether ornot future claims or the development of existing claims will justify a commutation of other policy periods, and accordingly,no related amounts were recorded at* December 31, 2023* or2022. We carry excess policy layers above the primary auto liability policy described above.

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Interest

We capitalize interest on major projects during construction. Interest is capitalized based on the average interest rate on related debt. Capitalized interest was $0.3 million, $0.3 million, and less than $0.1 million in2023,2022, and2021, respectively.

Fair Value of Financial Instruments

Our financial instruments consist primarily of cash and cash equivalents, accounts receivable, available-for-sale securities, accounts payable, debt, and interest rate swaps. The carrying amount of cash and cash equivalents, accounts receivable, accounts payable, and current debt approximates their fair value because of the short-term maturity of these instruments. Interest rates that are currently available to us for issuance of long-term debt with similar terms and remaining maturities are used to estimate the fair value of our long-term debt, which primarily consists of revenue equipment installment notes. The fair value of our revenue equipment installment notes approximated the carrying value at* December 31, 2023*, as the weighted average interest rate on these notes approximates the market rate for similar debt. Borrowings under our revolving Credit Facility approximate fair value due to the variable interest rate on the facility. The fair value of our interest rate swap agreement is determined using the market-standard methodology of netting the discounted future fixed-cash payments and the discounted expected variable-cash receipts. The variable-cash receipts are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. These analyses reflect the contractual terms of the swap, including the period to maturity, and use observable market-based inputs, including interest rate curves and implied volatilities. The fair value calculation also includes an amount for risk of non-performance of our counterparties using "significant unobservable inputs" such as estimates of current credit spreads to evaluate the likelihood of default, which we have determined to be insignificant to the overall fair value of our interest rate swap agreements.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We have reflected the net liability after offsetting our deferred tax assets and liabilities in the deferred income taxes line in the accompanying consolidated balance sheets. We believe the future tax deductions will be realized principally through future reversals of existing taxable temporary differences and future taxable income, except for when a valuation allowance has been provided as discussed in Note12.

In the ordinary course of business there is inherent uncertainty in quantifying our income tax positions. We assess our income tax positions and record tax benefits for all years subject to examination based upon management's evaluation of the facts, circumstances, and information available at the reporting dates. For those tax positions where it is more likely thannot that a tax benefit will be sustained, we have recorded the largest amount of tax benefit with a greater than50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it isnot more likely thannot that a tax benefit will be sustained,no tax benefit has been recognized in the financial statements. Potential accrued interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense.

Our policy is to recognize income tax benefit arising from the exercise of stock options and restricted share vesting based on the ordering provisions of the tax law as prescribed by the Internal Revenue Code, including indirect tax effects, if any.

Lease Accounting

At the commencement date of a new lease agreement with contractual terms longer thantwelve months, we recognize an asset and a lease liability on the balance sheet and categorize the lease as either finance or operating. Certain lease agreements have lease and non-lease components, and we have elected to account for these components separately.

Right-of-use assets and lease liabilities are initially recorded based on the present value of lease payments over the term of the lease. When the rate implicit in the lease is readily determinable, this rate is used for calculating the present value of remaining lease payments; otherwise, our incremental borrowing rate is used. The incremental borrowing rate represents an estimate of the interest rate we would incur at the lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease. Right-of-use assets also include prepaid lease expenses and initial direct costs of executing the leases, which are reduced by landlord incentives. Options to extend or terminate a lease agreement are included in or excluded from the lease term, respectively, when those options are reasonably certain to be exercised. Right-of-use assets are tested for impairment in the same manner as long-lived assets.

Finance lease obligations are utilized to finance a portion of our revenue equipment and are entered into with certain finance companies who arenot parties to our Credit Facility and* maycontain guarantees of the residual value of the related equipment by us. As such, the residual guarantees are included in the related debt balance as a balloon payment at the end of the related term as well as included in the future minimum finance lease payments. These lease agreements require us to pay personal property taxes, maintenance, and operating expenses. Our operating lease obligations donot* typically include residual value guarantees or material restrictive covenants.

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Right-of-use assets are included in net property and equipment. For finance leases, right-of-use assets are amortized on a straight-line basis over the shorter of the expected useful life or the lease term, and the carrying amount of the lease liability is adjusted to reflect interest expense, which is recorded in interest expense, net. Operating lease right-of-use assets are amortized over the lease term on a straight-line basis, and the lease liability is measured at the present value of the remaining lease payments. Variable lease paymentsnot included in the lease liability for mileage charges on leased revenue equipment are expensed as incurred. Operating lease costs are recognized on a straight-line basis over the term of the lease within operating expenses.

Capital Structure

The shares of Class A and B common stock are substantially identical except that the Class B shares are entitled totwo votes per share and immediately convert to Class A shares if beneficially owned by anyone other than our Chief Executive Officer or certain members of his immediate family, while Class A shares are entitled toone vote per share. The terms of any future issuances of preferred shares will be set by our Board.

Income Per Share

Basic income per share excludes dilution and is computed by dividing earnings available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted income per share reflects the dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in our earnings. There were approximately 245,000 shares,358,000 shares, and 217,000 shares issuable upon conversion of unvested restricted shares for the years ended* December 31,2023,2022, and2021, respectively. There wereno unvested shares excluded from the calculation of diluted earnings per share as the effect of any assumed exercise of the related awards wouldnot have been anti-dilutive for the years ended December 31,2023,2022, and2021. There were approximately 541,000 shares,161,000 shares, andno shares issuable upon conversion of unvested employee stock options for the years ended December 31,2023,2022, and2021, respectively. There wereno,104, and 124,000 unvested options excluded from the calculation of diluted earnings per share since the effect of any assumed exercise of the related awards would be anti-dilutive for the years ended December 31,*2023,2022, and2021, respectively.

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

Stock-Based Employee Compensation

We issue several types of stock-based compensation, including awards that vest based on service, market, and performance conditions or a combination of the conditions. Performance-based and market-based awards vest contingent upon meeting certain performance or market criteria, respectively, established by the Compensation Committee of the Board. All awards require future service. For performance-based awards, determining the appropriate amount to expense in each period is based on likelihood and timing of achieving the stated targets for performance-based awards and requires judgment, including forecasting future financial results. The estimates are revised periodically based on the probability and timing of achieving the required performance and adjustments are made as appropriate. Awards that are only subject to time vesting provisions are amortized using the straight-line method.

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Recent Accounting Pronouncements

Accounting Standardsnot* yet adopted*

In* November 2023,the Financial Accounting Standards Board (“FASB”) issued ASUNo.* 2023-07, Improvements to Reportable Segment Disclosures (Topic280). This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment's profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for annual periods beginning after* December 15, 2023,and interim periods within fiscal years beginning after December 15, 2024.Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements. Early adoption is also permitted. This ASU will likely result in us including the additional required disclosures when adopted. We are currently evaluating the provisions of this ASU and expect to adopt them for the year ending December 31, 2024.*

In* December 2023,the FASB issued ASU2023*-09, Improvements to Income Tax Disclosures. This new guidance is designed to enhance the transparency and decision usefulness of income tax disclosures. The amendments of this update are related to the rate reconciliation and income taxes paid, requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. ASU2023-09 is effective for fiscal years beginning after* December 15, 2024.*Early adoption is permitted. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements.

Accounting Standards adopted

In* June 2016,FASB issued ASU2016*-13, Financial Instruments - Measurement of Credit Losses on Financial Instruments, which will require an entity to measure credit losses for certain financial instruments and financial assets, including trade receivables. Under this update, on initial recognition and at each reporting period, an entity will be required to recognize an allowance that reflects the entity’s current estimate of credit losses expected to be incurred over the life of the financial instrument. This update became effective for us for our annual reporting period beginning* January 1, 2023,*including interim periods within that reporting period. The adoption of this standard had an immaterial impact on our consolidated financial statements.

There areno other new accounting pronouncements that are expected to have a significant impact on our consolidated financial statements.

As of* June 30, 2020,our previously identified Factoring reportable segment was classified as discontinued operations as it: (i) was a component of the entity, (ii) met the criteria as held for sale, and (iii) had a material effect on the Company's operations and financial results. On July 8, 2020,*we closed on the disposition of substantially all of the operations and assets of TFS, which included substantially all of the assets and operations of our Factoring reportable segment. The sale consisted primarily of $103.3 million of net accounts receivable, which included $108.7 million of gross accounts receivable, less advances and rebates of $5.4 million.

We have reflected the former Factoring reportable segment as discontinued operations in the consolidated statements of operations for all periods presented. Prior periods have been adjusted to confirm to the current presentation.

The following table summarizes the results of our discontinued operations for thetwelve months ended* December 31,*2023,2022, and2021:

Operating income for the years ended* December 31,*2023,2022, and2021, relates to the gain on the reversal of our contingent loss liability in the amount of $0.8 million, $1.0 million, and $3.4 million, respectively. Reversal of contingent loss liability relates to the reduced exposure of future indemnification by the Company to Triumph Bancorp, Inc. ("Triumph") as a result of the collection of covered receivables identified in the amended purchase agreement.

The following table summarizes the major classes of assets and liabilities included as discontinued operations as of* December 31, 2023* and2022:

There was $1.7 million of operating cash outflows related to the $1.7 million payment on the indemnification obligation to Triumph for the year ended* December 31, 2023andno net cash flows related to discontinued operations for the years ended December 31, 2022or2021.*

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Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Accordingly, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability.

The fair value of the commodity contracts, including our former fuel hedges, is determined based on quotes from the counterparty which were verified by comparing them to the exchange on which the related futures are traded, adjusted for counterparty credit risk. There wereno fuel hedge derivatives outstanding as of* December 31,*2023 or2022.

The fair value of our interest rate swap agreements is determined using the market-standard methodology of netting the discounted future fixed-cash payments and the discounted expected variable-cash receipts. The variable-cash receipts are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. These analyses reflect the contractual terms of the swap, including the period to maturity, and use observable market-based inputs, including interest rate curves and implied volatilities. The fair value calculation also includes an amount for risk of non-performance of our counterparties using "significant unobservable inputs" such as estimates of current credit spreads to evaluate the likelihood of default, which we have determined to be insignificant to the overall fair value of our interest rate swap agreements. The fair value of available-for-sale securities is based upon quoted prices in active markets. There wereno available-for-sale securities recorded as of* December 31, 2023or December 31, 2022.*

The fair value of the contingent consideration arrangement is based on inputs that arenot observable in the market and is estimated using a probability-weighted method. The significant unobservable inputs used in the fair value of the contingent consideration liability include the financial projections over the earn-out period, the volatility of the underlying financial metrics, and estimated discount rates. Athree-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows:

Financial Instruments Measured at Fair Value on a Recurring Basis

Contingent consideration arrangements require us to pay up to $20.0 million of additional consideration to AAT's former shareholders based on AAT's results during thefirst two post-acquisition years, up to $30.0 million of additional consideration to Lew Thompson & Son Trucking, Inc.'s ("LTST's") former shareholders based on LTST's results during thefirst three calendar years following closing, and up to $12.0 million of additional consideration to Sims Transport Services LLC's ("Sims") former shareholders based on Sims' results during thefirst four calendar years following closing. Refer to Note7, "Acquisition of Lew Thompson & Son Trucking, Inc.", for additional information regarding the LTST acquisition and Note6, "Acquisition of Sims Transport Services LLC", for additional information regarding the Sims acquisition.

The fair value of the contingent consideration is adjusted at each reporting period based on changes to the expected cash flows and related assumptions. During the year ended* December 31, 2023,the fair value of the contingent consideration increased to $21.8 million from $17.0 million at December 31, 2022.Of the $4.8 million increase, $10.0 million and $1.8 million relates to the initial valuation of the contingent consideration arrangements for LTST and Sims, respectively, and $3.0 million is the result of the subsequent adjustment to fair market value. These increases were partially offset by $10.0 million paid based on AAT's results for thefirst* post-acquisition year. Of the $10.0 million paid for the contingent consideration liability during2023, $9.2 million was classified as financing cash flows and $0.8 million was classified as operating cash flows within our consolidated statement of cash flows. The adjustment to the fair value of the contingent consideration liability was recorded as a component of general supplies and expenses within the consolidated statements of operations. The contingent consideration liability is included in accrued expenses and other long-term liabilities in our consolidated balance sheets.

The following table provides a summary (in thousands) of the activity for the contingent consideration liability for2023:

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Our Third Amended and Restated2006 Omnibus Incentive Plan, as amended (the "Incentive Plan") governs the issuance of equity awards and other incentive compensation to management and members of the Board of Directors (the "Board"). On* May 17, 2023,the stockholders, upon recommendation of the Board, approved the Third Amendment (the “Third Amendment”) to our Third Amended and Restated2006* Omnibus Incentive Plan (the "Incentive Plan"). The Third Amendment (i) increased the number of shares of Class A common stock available for issuance under the Incentive Plan by an additional 575,000 shares, (ii) re-set the term of the plan to expire on* May 1, 2033,and (iii) made other miscellaneous, administrative and conforming changes as necessary. The Incentive Plan includes (i) a fungible share reserve feature, under which shares subject to stock options and stock appreciation rights will be counted asone share for every share granted and shares subject to all other awards will be counted as 1.80 shares for every share granted, (ii) a double-trigger vesting requirement upon a change in control, and (iii) a maximum award granted or payable to anyone* participant under the Incentive Plan for a calendar year of 500,000 shares of Class A common stock or $4,000,000, in the event the award is paid in cash.

The Incentive Plan permits annual awards of shares of our Class A common stock to executives, other key employees, non-employee directors, and eligible participants under various types of options, restricted share awards, or other equity instruments. At* December 31, 2023*,1,271,739 of the 4,775,000 shares noted above were available for award under the Incentive Plan.No awards* maybe made under the Incentive Plan after May 1, 2033.*To the extent available, we have issued treasury stock to satisfy all share-based incentive plans.

Included in salaries, wages, and related expenses within the consolidated statements of operations is stock-based compensation expense of $6.5 million, $6.0 million, and $7.5 million in2023,2022, and2021, respectively. Included in general supplies and expenses within the consolidated statements of operations is stock-based compensation expense for non-employee directors of $0.6 million, $0.6 million, and $0.4 million in2023,2022, and2021, respectively. All the stock compensation expense recorded in2023,2022, and2021 relates to restricted shares granted, other than $3.9 million, $2.2 million, and $2.4 million in2023,2022, and2021, respectively, which relates to stock options. Associated with stock compensation expense was $2.2 million and $0.4 million, of income tax benefit in2023,2022, respectively, and $0.3 million of income tax expense in2021, related to the exercise of restricted share vesting. We received $0.2 million, $0.4 million, and $0.0 million related to the exercise of stock options during2023,2022, and2021. Associated with the exercise of stock options during2023,2022, and2021 was $0.1 million, $0.1 million, and $0.0 million of income tax benefit, respectively. Forfeitures are recognized as they're incurred.

The Incentive Plan allows participants to pay the federal and state minimum statutory tax withholding requirements related to awards that vest or allows the participant to deliver to us shares of Class A common stock having a fair market value equal to the minimum amount of such required withholding taxes. To satisfy withholding requirements for shares that vested, certain participants elected to deliver to us $114,828, $55,306, and $60,752 Class A common stock shares, which were withheld at weighted average per share prices of $41.72, $29.03, and $21.87, respectively, based on the closing prices of our Class A common stock on the dates the shares vested in2023,2022, and2021, respectively, in lieu of the federal and state minimum statutory tax withholding requirements. We remitted $4.8 million, $1.6 million, and $0.5 million in2023,2022, and2021, respectively, to the proper taxing authorities in satisfaction of the employees' minimum statutory withholding requirements. The payment of minimum tax withholdings on stock compensation are reflected within the issuances of restricted shares from treasury stock in the accompanying consolidated statement of stockholders' equity.

The following table summarizes our restricted share award activity for the fiscal years ended* December 31,*2023,2022, and2021:

The unvested shares at* December 31, 2023* will vest based on when and if the related vesting criteria are met for each award. All awards require continued service to vest. Unrecognized compensation expense for outstanding shares was $4.7 million as of* December 31, 2023*, which is probable to be recognized over a weighted average period of approximately 2.1 years. The fair value of restricted share awards that vested in2023,2022, and2021 was approximately $6.3 million, $3.4 million, and $4.9 million respectively.

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The following table summarizes our stock option activity for the fiscal year ended* December 31,*2023,2022, and2021:

Unrecognized compensation cost for outstanding options was $0.6 million at* December 31, 2023* which is probable to be recognized over a weighted average period of approximately 0.2 years.

A summary of property and equipment, at cost, as of* December 31, 2023* and2022 is as follows:

Depreciation expense was $62.4 million, $53.2 million, and $49.8 million in2023,2022, and2021, respectively. This depreciation expense excludes net gains on the sale of property and equipment totaling $12.6 million, $40.3 million, and $3.8 million in2023,2022, and2021, respectively.

We lease certain revenue equipment under finance and operating leases with terms of approximately 48 to 84 months. At* December 31, 2023* and2022, property and equipment included finance and operating leases. Our finance leases had capitalized costs of $7.6 million and $12.7 million and accumulated amortization of $1.2 million and $7.4 million at* December 31, 2023* and2022, respectively. Amortization of these leased assets is included in depreciation and amortization expense in the consolidated statement of operations and totaled $0.7 million, $2.3 million, and $3.6 million during2023,2022, and2021, respectively. See Note11, "Leases" for additional information about our finance and operating leases.

On* August 18, 2023,we acquired 100% of the equity interests of Sims, a specialized brokerage company, headquartered in Maysville, GA. The acquisition date fair value of the consideration transferred was $9.8 million. The Stock Purchase Agreement contains customary representations, warranties, covenants, and indemnification provisions. The Stock Purchase Agreement includes an earnout component of up to an aggregate of $12.0 million based on Sims' adjusted earnings before interest, taxes, depreciation, and amortization reported for thefirst* throughfourth calendar years following closing. The total purchase price, including any earnout achieved, is expected to range from $9.8 million to $20.0 million depending on the results achieved by Sims.

Sims' results have been included in the consolidated financial statements since the date of acquisition and are reported within our Managed Freight reportable segment.

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

The contingent consideration arrangement requires us to pay a total of up to $12.0 million of additional consideration to Sim's former equity-holders based on Sim's results during thefirst four calendar years following closing. We estimated the fair value of the contingent consideration using a probability-weighted model. This fair value measurement is based on significant inputsnot observable in the market and thus represents a Level3 measurement. Refer to Note3, "Fair Value of Financial Instruments" for information regarding changes in the contingent consideration arrangement.

Goodwill related to the acquisition isnot tax deductible. A deferred tax liability of $1.6 million was recorded arising from the intangible assets related to the acquisition.

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

The goodwill recognized is attributable primarily to expected cost synergies as a result of overhead support. Refer to Note9, "Goodwill and Other Assets" for a summary of changes to goodwill during the period as well as information related to the identifiable intangible asset acquired.

The amounts of revenue and earnings of Sims included in the Company’s consolidated results of operations from the acquisition date to the period ended* December 31, 2023*are as follows:

On* April 26, 2023,we acquired 100% of the outstanding stock of LTST and related entities, headquartered in Huntsville, AR. LTST is a dedicated contract carrier specializing in poultry feed and live haul transportation in Northwest Arkansas and surrounding areas and was acquired to expand the Dedicated reportable segment into this niche market. The acquisition date fair value of the consideration transferred was $109.9 million. The Stock Purchase Agreement contains customary representations, warranties, covenants, and indemnification provisions. The Stock Purchase Agreement includes an earnout component of up to an aggregate of $30.0 million based on LTST's adjusted earnings before interest, taxes, depreciation, and amortization reported for the first, second, andthird* calendar years following closing. The total purchase, including any earnout achieved, is expected to range from $109.9 million to $129.9 million depending on the results achieved by LTST.

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

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

The contingent consideration arrangement requires us to pay a total of up to $30.0 million of additional consideration to LTST's former shareholders based on LTST's results during thefirst three calendar years following closing. We estimated the fair value of the contingent consideration using a probability-weighted model. This fair value measurement is based on significant inputsnot observable in the market and thus represents a Level3 measurement. Refer to Note3, "Fair Value of Financial Instruments" for information regarding changes in the contingent consideration arrangement. The allocation of the preliminary purchase price is subject to change based on finalization of the valuation of long-lived intangible assets and contingent consideration, as well as our ongoing evaluation of LTST's accounting policies for consistency with ours.

Because of our338(h)10 election, all goodwill related to the acquisition is deductible for tax purposes, and there areno deferred income taxes arising from the acquisition.

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

Since acquisition we recognized measurement period adjustments which increased goodwill recognized for LTST by $1.7 million to $12.4 million as of* December 31, 2023.Goodwill and other intangible assets maychange upon the finalization of the valuation of the contingent consideration liability and intangible assets as part of the purchase accounting for the LTST acquisition. The goodwill recognized is attributable primarily to expected cost synergies in the areas of fuel and purchases of revenue equipment, and maychange as a result of our ongoing evaluation of LTST’s accounting principles for consistency with ours. Refer to Note9,* "Goodwill and Other Assets" for a summary of changes to goodwill during the period as well as information related to the identifiable intangible asset acquired.

The amounts of revenue and earnings of LTST included in the Company’s consolidated results of operations from the acquisition date to the period ended* December 31, 2023*are as follows:

The following unaudited pro forma consolidated results of operations assume that the acquisition of LTST occurred as of* January 1, 2022:*

The pro forma financial information for all periods presented above has been calculated after adjusting the results of LTST to reflect the business combination accounting effects resulting from this acquisition, including the amortization expense from acquired intangible assets as though the acquisition occurred as of the beginning of the Company’s fiscal year2022. As noted above, the allocation is preliminary and changes to the value of the contingent consideration and finalization of our valuation could result in changes to the amount of amortization expense from acquired intangible assets included in the pro forma financial information presented above. The Company's historical consolidated financial statements have been adjusted in the pro forma combined financial statements to give effect to pro forma events that are directly attributable to the business combination and factually supportable. The pro forma financial information is for informational purposes only and isnot indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the Company’s fiscal2022.

On* February 9, 2022,we acquired 100% of the outstanding stock of AAT headquartered in Chattanooga, TN. AAT specializes in highly regulated, time-sensitive loads for the U.S. government. The acquisition date fair value of the consideration transferred was $54.7 million. The Stock Purchase Agreement contains customary representations, warranties, covenants, and indemnification provisions. The Stock Purchase Agreement includes an earnout component of up to an aggregate of $20.0 million based on AAT's adjusted earnings before interest, taxes, depreciation, and amortization reported for thefirst* andsecond years following closing. The total purchase price, including any earnout achieved, is expected to range from $38.5 million to $57.0 million depending on the results achieved by AAT.

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

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

The contingent consideration arrangement requires us to pay up to $20.0 million of additional consideration to AAT's former shareholders based on AAT's results during thefirst two post-acquisition years. We estimated the fair value of the contingent consideration using a probability-weighted model. This fair value measurement is based on significant inputsnot observable in the market and thus represents a Level3 measurement. Refer to Note3, "Fair Value of Financial Instruments" for information regarding changes in the contingent consideration arrangement.

Because of our338(h)10 election, all goodwill related to the acquisition is deductible for tax purposes, and there areno deferred income taxes arising from the acquisition.

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

The goodwill recognized is attributable primarily to expected cost synergies in the areas of fuel, purchases of revenue equipment. Refer to Note9, "Goodwill and Other Assets" for a summary of changes to goodwill during the period as well as information related to the identifiable intangible asset acquired.

The amounts of revenue and earnings of AAT included in the Company’s consolidated results of operations from the acquisition date to the period ended* December 31, 2023*are as follows:

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

Amortization expense of $7.5 million, $4.3 million, and $4.0 million for the years ended* December 31,*2023,2022, and2021, respectively, was included in depreciation and amortization in the consolidated statements of operations.

A summary of other intangible assets, by reportable segment as of* December 31, 2023* and2022 is as follows:

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The above finite-lived intangible assets have a weighted average remaining life of 151 months and 138 months as of* December 31, 2023* and2022, respectively.

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

The assignment of goodwill and intangible assets to our reportable segments wasnot complete as of* December 31, 2023*. The carrying amount of goodwill was $75.7 million at* December 31, 2023*, compared to $58.2 million at* December 31,*2022, as a result of the LTST and Sims acquisitions. A summary of the changes in carrying amount of goodwill by reportable segment is as follows:

A summary of other assets as of* December 31, 2023* and2022 is as follows:

Other long-term receivables primarily represents amounts related to extended warranties on our revenue equipment on our consolidated balance sheet as of* December 31, 2023*, and2022, as well as amounts recorded as a receivable in other assets and as a corresponding accrual in the long-term portion of insurance and claims accruals on our consolidated balance sheet as of* December 31, 2023,*for claims above our self-insured retention for which we believe it is reasonably assured that the insurers will provide their portion of such claims.

The Company conducted its annual impairment assessments and tests of goodwill for each reporting unit as of* October 1,*2023. Thefirst step of the goodwill impairment test is the Company's assessment of qualitative factors to determine whether it is more likely thannot that the fair value of a reporting unit is less than the reporting unit's carrying amount, including goodwill. When performing the qualitative assessment, the Company considers the impact of factors including, butnot limited to, macroeconomic and industry conditions, overall financial performance of each reporting unit, litigation and new legislation. If based on the qualitative assessments, the Company believes it more likely thannot that the fair value of a reporting unit is less than the reporting unit's carrying amount, or periodically as deemed appropriate by management, the Company will prepare an estimation of the respective reporting unit's fair value utilizing a quantitative approach.

If the estimation of fair value indicates that impairment potentially exists, the Company will then measure the amount of the impairment, if any. Goodwill impairment exists when the estimated implied fair value of goodwill is less than its carrying value. Changes in strategy or market conditions could significantly impact these fair value estimates and require adjustments to recorded asset balances. As a result of the most recent goodwill impairment analysis performed (* October 1,*2023), the Company determined that it wasnot more likely thannot that the fair value of a reporting unit is less than the reporting unit's carrying amount.

Additionally, the Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount* may**not* be recoverable. Impairment is recognized on assets classified as held and used when the sum of undiscounted estimated cash flows expected to result from the use of the asset is less than the carrying value. If such measurement indicates a possible impairment, the estimated fair value of the asset is compared to its net book value to measure the impairment charge, if any.No such events were identified as of* December 31,*2023.

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Current and long-term debt and lease obligations consisted of the following at* December 31, 2023* and2022:

We and substantially all of our subsidiaries are parties to the Third Amended and Restated Credit Agreement (the "Credit Facility") with Bank of America, N.A., as agent (the "Agent") and JPMorgan Chase Bank, N.A. (together with the Agent, the "Lenders"). The Credit Facility is a $110.0 million revolving credit facility, with an uncommitted accordion feature that, so long asno event of default exists, allows us to request an increase in the revolving credit facility of up to $75.0 million subject to Lender acceptance of the additional funding commitment. The Credit Facility includes a letter of credit sub facility in an aggregate amount of $105.0 million and a swing line sub facility in an aggregate amount equal to the greater of $10.0 million or 10% of the Lenders' aggregate commitments under the Credit Facility from time-to-time. The Credit Facility matures in* May 2027.*

Borrowings under the Credit Facility are classified as either "base rate loans" or "SOFR loans." Base rate loans accrue interest at a base rate equal to the greater of the Agent’s prime rate, the federal funds rate plus 0.5%, or SOFR for aone month period as of such day, plus an applicable margin ranging from 0.25% to 0.75%; while SOFR loans accrued interest at SOFR, plus an applicable margin ranging from 1.25% to 1.75%. The applicable rates are adjusted quarterly based on average pricing availability. The unused line fee is the product of 0.25% times the average daily amount by which the Lenders' aggregate revolving commitments under the Credit Facility exceed the outstanding principal amount of revolver loans and the aggregate undrawn amount of all outstanding letters of credit issued under the Credit Facility. The obligations under the Credit Facility are guaranteed by us and secured by a pledge of substantially all of our assets, with the notable exclusion of any real estate, revenue equipment pledged under other financing agreements, including revenue equipment installment notes and finance leases, and revenue equipment that we donot designate as being included in the borrowing base.

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Borrowings under the Credit Facility are subject to a borrowing base limited to the lesser of (A)$110.0 million, minus the sum of the stated amount of all outstanding letters of credit; or (B) the sum of (i)87.5% of eligible accounts receivable, plus (ii) the least of (a)85% of the appraised net orderly liquidation value of eligible revenue equipment, (b)100% of the net book value of eligible revenue equipment, (c)60.0% of the Lenders' aggregate revolving commitments under the Credit Facility, or (d) $65.0 million. We had $11.6 million borrowings outstanding under the Credit Facility as of* December 31, 2023*, undrawn letters of credit outstanding of approximately $21.8 million, and available borrowing capacity of $76.6 million. Based on availability as of* December 31, 2023* and2022, there wasno fixed charge coverage requirement.

The Credit Facility includes usual and customary events of default for a facility of this nature and provides that, upon the occurrence and continuation of an event of default, payment of all amounts payable under the Credit Facility* maybe accelerated, and the Lenders' commitments may*be terminated. If an event of default occurs under the Credit Facility and the Lenders cause, or have the ability to cause, all of the outstanding debt obligations under the Credit Facility to become due and payable, this could result in a default under other debt instruments that contain acceleration or cross-default provisions. The Credit Facility contains certain restrictions and covenants relating to, among other things, debt, dividends, liens, acquisitions and dispositions outside of the ordinary course of business, and affiliate transactions. Failure to comply with the covenants and restrictions set forth in the Credit Facility could result in an event of default.

Pricing for the revenue equipment installment notes is quoted by the respective financial affiliates of our primary revenue equipment suppliers and other lenders at the funding of each group of equipment acquired and include fixed annual rates for new equipment under retail installment contracts. The notes included in the funding are due in monthly installments with final maturities at various dates ranging from* April 2028* to* December 2028*. The notes contain certain requirements regarding payment, insuring of collateral, and other matters, but donot have any financial or other material covenants or events of default except certain notes totaling $37.8 million are cross-defaulted with the Credit Facility. Additional borrowings from the financial affiliates of our primary revenue equipment suppliers and other lenders are expected to be available to fund new tractors expected to be delivered in2024, while any other property and equipment purchases, including trailers, are expected to be funded with a combination of available cash, notes, operating leases, finance leases, and/or from the Credit Facility.

In* August 2015,we financed a portion of the purchase of our corporate headquarters, a maintenance facility, and certain surrounding property in Chattanooga, Tennessee by entering into a $28.0 million variable rate note with athird*-party lender. Concurrently with entering into the note, we entered into an interest rate swap to effectively fix the related interest rate to 4.2%. The note contains certain restrictions and covenants that are usual and customary for a note of this nature. Failure to comply with the covenants and restrictions set forth in the note could result in an event of default. We expect to be in compliance with our debt covenants for the next12 months.

In connection with the settlement of a dispute related to the sale of TFS (the "TFS Settlement"), in* September 2020,TBK Bank, SSB, as lender and agent for Triumph (“TBK Bank”), provided the Company with a $45 million line of credit (the “Draw Note”), the proceeds of which are to be used solely to satisfy our indemnification obligations under the TFS Settlement. We mayborrow pursuant to the Draw Note until September 23, 2025.*

As of* December 31, 2023*, the scheduled principal payments of debt, excluding finance leases for which future payments are discussed in Note11 are as follows:

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Finance lease obligations are utilized to finance a portion of our revenue equipment and are entered into with certain finance companies who arenot parties to our Credit Facility. The leases in effect at* December 31, 2023* terminate in* June 2028* through* November 2033* and contain guarantees of the residual value of the related equipment by us. As such, the residual guarantees are included in the related debt balance as a balloon payment at the end of the related term as well as included in the future minimum finance lease payments. These lease agreements require us to pay personal property taxes, maintenance, and operating expenses. Our operating lease obligations donot typically include residual value guarantees or material restrictive covenants.

A summary of our lease obligations for thetwelve months ended* December 31,*2023,2022, and2021 are as follows:

During the year ended* December 31, 2022,we recognized $7.5 million of expense related to the early abandonment and disposal charges related to revenue equipment held under operating leases as the equipment was a source of significant operational headwinds throughout the year due to poor fuel economy, unusually high maintenance costs, and elevated downtime. At December 31, 2023* and2022, right-of-use assets of $41.2 million and $58.9 million for operating leases, respectively, and $6.4 million and $5.3 million for finance leases, are included in net property and equipment in our consolidated balance sheets. Operating lease right-of-use asset amortization is included in revenue equipment rentals and purchased transportation, communication and utilities, and general supplies and expenses, depending on the underlying asset, in the consolidated statement of operations. Amortization of finance leased assets is included in depreciation and amortization expense in the consolidated statement of operations.

Our future minimum lease payments as of* December 31, 2023*, summarized as follows by lease category:

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

Rental expense is summarized as follows for each of thethree years ended* December 31:*

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Income tax expense for the years ended* December 31,*2023,2022, and2021 is comprised of:

Income tax expense for the years ended* December 31,*2023,2022, and2021 is summarized below:

The amount of income tax expense (benefit) allocated to discontinued operations for TFS is $0.2 million expense for the years ended* December 31, 2023* and2022, respectively and $0.8 million benefit for the year ended* December 31, 2021.*

Income tax expense varies from the amount computed by applying the applicable federal corporate income tax rate of 21% for2023,2022, and2021, to income before income taxes primarily due to state income taxes, net of federal income tax effect, adjusted for permanent differences, the most significant of which are the effects of the per diem pay structure for drivers, executive compensation disallowance, and excess tax benefits on share-based compensation. Drivers who meet the requirements to receive per diem receive non-taxable per diem pay in lieu of a portion of their taxable wages. This per diem program increases our drivers' net pay per mile, after taxes, while decreasing gross pay, before taxes. As a result, salaries, wages, and benefits are slightly lower and our effective income tax rate is higher than the statutory rate. Generally, as pre-tax income increases, the impact of the driver per diem program on effective tax rate decreases, because aggregate per diem pay becomes smaller in relation to pre-tax income, while in periods where earnings are at or near breakeven, the impact of the per diem program on our effective tax rate is significant. Due to the partially nondeductible effect of per diem pay, our tax rate will fluctuate in future periods based on fluctuations in earnings.

The temporary differences and the approximate tax effects that give rise to our net deferred tax liability at* December 31, 2023* and2022 are as follows:

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The net deferred tax liability of $116.1 million primarily relates to differences in cumulative book versus tax depreciation of property and equipment, partially offset by net operating loss carryovers and insurance claims that have been reserved butnot paid. The carrying value of our deferred tax assets assumes that we will be able to generate, based on certain estimates and assumptions, sufficient future taxable income in certain tax jurisdictions to utilize these deferred tax benefits. If these estimates and related assumptions change in the future, we* maybe required to establish a valuation allowance against the carrying value of the deferred tax assets, which would result in additional income tax expense. On a periodic basis, we assess the need for adjustment of the valuation allowance. We determined that a valuation allowance wasnot* necessary at* December 31, 2023for our deferred tax assets since it is more likely thannot* they will be realized from future reversals of temporary differences. If these estimates and related assumptions change in the future, we* may*be required to modify our valuation allowance against the carrying value of the deferred tax assets.

As of* December 31, 2023*, we had a $0.1 million liability recorded for unrecognized tax benefits, which includes interest and penalties of less than $0.1 million. We recognize interest and penalties accrued related to unrecognized tax benefits in tax expense. As of* December 31, 2022*, we had a $0.4 million liability recorded for unrecognized tax benefits, which included interest and penalties of less than $0.1 million. Interest and penalties recognized for uncertain tax positions provided for de minimus expense in2023 and2022.

The following tables summarize the annual activity related to our gross unrecognized tax benefits (in thousands) for the years ended* December 31,*2023,2022, and2021:

If recognized, approximately $0.1 million, $0.4 million, and $0.6 million of unrecognized tax benefits would impact our effective tax rate as of* December 31,*2023,2022, and2021, respectively. Any prospective adjustments to our reserves for income taxes will be recorded as an increase or decrease to our provision for income taxes and would impact our effective tax rate.

Our2020 through2022 tax years remain subject to examination by the IRS for U.S. federal tax purposes, our major taxing jurisdiction. In the normal course of business, we are also subject to audits by state and local tax authorities. We donot anticipate total unrecognized tax benefits to materially change in the nexttwelve months.

We generated a federal net operating loss of $50.0 million in2023 which can be carried forward indefinitely. We have $0.4 million of federal tax credits available to carry back and offset tax in2022. Our state net operating loss carryforwards and state tax credits of $80.6 million and $0.4 million, respectively, expire beginning in2023 and2029 based on jurisdiction.

On* March 11, 2021,President Biden signed the American Rescue Plan Act of2021* (the "ARPA") into law. The new law includes several provisions meant to stimulate the U.S. economy. Of relevance to the Company, ARPA extended the reach of IRC Section162(m) to include compensation paid to theeight highest-paid individuals other than the chief executive officer and chief financial officer (rather than thethree highest), however, this change isnot effective until2027. There isno material impact to the financial statements at this time.

President Biden signed the Inflation Reduction Act (the "IRA") into law on* August 16, 2022.We donot* anticipate the IRA will have a significant impact on income tax expense or on other taxes. One of the most impactful provisions of the IRA includes the establishment of a Corporate Alternative Minimum Tax ("CAMT"). However, this tax only applies to corporations withthree-year average earnings in excess of*$1.0* billion. We will continue to monitor the CAMT each year to determine if we will become an applicable corporation. Additionally, the IRA enacted an excise tax on stock buybacks, which imposes a1% tax on stock buybacks, subject to netting provisions regarding stock awarded to employees as part of their compensation. We donot believe this will have a material impact on our active buyback program, but will continue to monitor IRS guidance and regulations on how the buyback tax will be imposed and administered.

On* May 11, 2023,the Tennessee Works Act was signed into law by Governor Lee. The most impactful change for the Company was the phase-in of a single-sales factor apportionment formula for the logistics and leasing companies that file in Tennessee. The motor carriers already apply a single-sales factor. This resulted in the Company recording a $1.2 million benefit during2023* related to revaluing our deferred tax balances for this change.

We own a 49.0% interest in TEL, a tractor and trailer equipment leasing company and used equipment reseller. There isno loss limitation on our49.0% interest in TEL. We havenot guaranteed any of TEL's debt and haveno obligation to provide funding, services, or assets. There areno current put rights to purchase or sell with any owners. TEL’s majority owners are generally restricted from transferring their interests in TEL, other than to certain permitted transferees, without our consent. There areno third-party liquidity arrangements, guarantees, and/or other commitments that* mayaffect the fair value or risk of our interest in TEL. For the years ended December 31, 2023* and2022, we soldno tractors and trailers to TEL while for2021 we sold $0.3 million of tractors and trailers to TEL. We received $0.9 million, $0.8 million, and $0.9 million respectively, for providing various maintenance services, certain back-office functions, and for miscellaneous equipment. We purchased equipment from TEL for $4.1 million in2023 andnone in2022 or2021, respectively. Additionally, we paid $6.8 million, $6.1 million, and $0.8 million to TEL for leases of revenue equipment and maintenance in2023,2022, and2021, respectively.** We had operating lease liabilities with TEL of $4.1 million and $13.8 million at December 31, 2023 and2022, respectively, for revenue equipment leased from TEL. We recorded net reversal of gains of less than $0.1 million for the years ended* December 31, 2023* and2022 and deferral of gains of approximately $0.1 million for the year ended* December 31,2021, representing 49% of the gains on tractors and trailers sold to TEL less any gains previously deferred and recognized when the equipment was sold to athird-party. Deferred gains totaling $0.2 million at December 31, 2023* and2022, respectively, are being carried as a reduction in our investment in TEL.

We have accounted for our investment in TEL using the equity method of accounting and thus our financial results include our proportionate share of TEL's net income, which amounted to $21.4 million in2023, $25.2 million in2022, and $14.8 million in2021. We received an equity distribution from TEL for $9.8 million, and $14.7 million in2023 and2022, which was distributed to each member based on its respective ownership percentage.

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Our accounts receivable and payable from TEL and investment in TEL as of* December 31, 2023* and2022, are as follows:

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

See TEL's summarized financial information below.

Deferred Profit Sharing Employee Benefit Plan

We have a deferred profit sharing and savings plan under which all of our employees with at leastsix months of service are eligible to participate. Employees* maycontribute a percentage of their annual compensation up to the maximum amount allowed by the Internal Revenue Code. We maymake discretionary contributions as determined by a committee of our Board. We made contributions of $2.2 million, $1.9 million, and $1.9 million in2023*,2022, and2021, respectively, to the profit sharing and savings plan.

Nonqualified Deferred Compensation Plan

The Supplemental Savings Plan (the "SSP") is our nonqualified deferred compensation plan started during2022 for the benefit of eligible key managerial employees whose contributions to our deferred profit sharing and savings plan are limited because of IRS regulations affecting highly compensated employees. Under the terms of the SSP, participants* mayelect to defer compensation on a pre-tax basis within annual dollar limits we establish. At December 31,2023 and2022, there were15 active participants in the SSP, respectively. We maymake discretionary contributions as we so determine each year. Each participant is fully vested in all deferred compensation and earnings; however these amounts are subject to general creditor claims until distributed to the participant. Under current federal tax law, we arenot* allowed a current income tax deduction for the compensation deferred by participants, but we are allowed a tax deduction when a distribution payment is made to a participant from the SSP. The accumulated benefit obligation was $2.4 million and $0.2 million as of* December 31,2023 and2022, respectively, and is included in accrued expenses and other long-term liabilities in the consolidated balance sheets. We purchased life insurance policies with the intent to fund the future liability. The aggregate market value of the life insurance policies was $2.4 million and $0.2 million as of December 31,*2023 and2022, respectively, and was included in other non-current assets in the consolidated balance sheets.

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

Other than those associated with TEL, there areno material related party transactions. See Note13 for discussions of the related party transactions associated with TEL.

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

We maintain insurance to cover liabilities arising from the transportation of freight for amounts in excess of certain self-insured retentions. Refer to Note1 for information about our insurance program.

We had $21.8 million and $23.9 million of outstanding and undrawn letters of credit as of* December 31, 2023* and2022, respectively. The letters of credit are maintained primarily to support our insurance programs. Additionally, we had $45.0 million of availability on a line of credit from Triumph solely to fund any indemnification owed to Triumph in relation to the sale of TFS. As of* December 31, 2023,*the remaining contingent liability was $1.6 million.

We had commitments outstanding at* December 31, 2023*, to acquire revenue equipment totaling approximately $121.9 million versus commitments at* December 31, 2022* of approximately $156.6 million. These commitments are cancelable upon stated notice periods, subject to certain adjustments in the underlying obligations and benefits. These purchase commitments are expected to be financed by operating leases, finance leases, long-term debt, proceeds from sales of existing equipment, and/or cash flows from operations.

Ourfour reportable segments are (i) Expedited, (ii) Dedicated, (iii) Managed Freight, and (iv) Warehousing. Refer to Note1, for a description of each of our reportable segments.

The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. Substantially all intersegment sales prices are market based. We evaluate performance based on operating income of the respective business units.

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The following table summarizes our reportable segment information as used by our chief operating decision maker in making decisions regarding allocation of resources, etc., for2023,2022, and2021:

Balance sheet data by reportable segment isnot maintained by the Company.

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On* January 25, 2021,our Board approved the repurchase of up to $40.0 million of our outstanding Class A common stock. Under such authorization, we repurchased 0.5 million shares of our Class A common stock for $8.1 million during thethree* months ended* March 31, 2021.On August 5, 2021,our Board increased such authorization to $40.0 million. As of January 1, 2022,there was approximately $38.0 million remaining under such authorization. On February 10, 2022,our Board of Directors adopted a10b5*-1 plan for the purchase of up to $30.0 million in shares subject to defined trading parameters. Under such authorization, we completed the repurchase program in* May 2022*with a total of 1.4 million shares of our Class A common stock repurchased for $30.0 million.

On* May 18, 2022,our Board approved a new stock repurchase authorization of up to $75.0 million of our Class A common stock, with any remaining amount available under prior authorizations being excluded andno* longer available. Under such authorization, we repurchased 2.0 million shares of our Class A common stock for $54.7 million during2022. On* January 30, 2023,the Board approved an amendment to the Company's stock repurchase program authorizing the purchase of up to an aggregate $55.0 million of our Class A common stock. The amendment added an incremental approximately $37.5 million to the approximately $17.5 million that was then-remaining under the program. Between May 2022and April 2023,we repurchased a total of 2.7 million shares of our Class A common stock. No additional shares have been repurchased since April 2023 (through February 26, 2024).*

On* January 26, 2022,our Board declared a cash dividend of $0.0625 per share, which was paid on March 25, 2022,to stockholders of record on March 4, 2022.On May 18, 2022,our Board declared a cash dividend of $0.0625 per share, which was paid on June 24, 2022,to stockholders of record on June 3, 2022.On August 17, 2022,our Board declared a cash dividend of $0.08 per share which was paid on September 30, 2022,to stockholders of record on September 2, 2022.On February 15, 2023,our Board declared a cash dividend of $0.11 per share, which was paid on March 31, 2023,to stockholders of record on March 3, 2023.On May 17, 2023,our Board declared a cash dividend of $0.11 per share which was paid on June 30, 2023,to stockholders of record on June 2, 2023.On August 16, 2023,our Board declared a cash dividend of $0.11 per share which was paid on September 29, 2023,to stockholders of record on September 1, 2023.On November 15, 2023,our Board declared a cash dividend of $0.11 per share which was paid on December 29, 2023,to stockholders of record on December 1, 2023.*

On* February 13, 2024,our Board approved a quarterly cash dividend program of $0.11 per share, subject to quarterly approval by our Board. Our Board has approved the dividend, which will be for stockholders of record as of March 1, 2024,and payable on March 29, 2024.*