COVENANT LOGISTICS GROUP INC

Previous wording

This report contains certain statements that may be considered forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and such statements are subject to the safe harbor created by those sections and the Private Securities Litigation Reform Act of 1995, as amended. All statements, other than statements of historical or current fact, are statements that could be deemed forward-looking statements, including without limitation: any projections of earnings, revenues, or other financial items; any statement of plans, strategies, and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; and any statements of belief and any statements of assumptions underlying any of the foregoing. In this Form 10-Q, statements relating to future impact of accounting standards, future third-party transportation provider expenses, future tax rates, expenses, and deductions, expected freight demand, capacity, and volumes and trucking industry conditions, potential results of a default and testing of our fixed charge covenant under the Credit Facility or other debt agreements, expected sources, as well as adequacy, of working capital and liquidity (including our mix of debt, finance leases, and operating leases as means of financing revenue equipment), future inflation, future stock repurchases and dividends, if any, expected capital expenditures, allocations, and requirements, future customer relationships, future interest expense, future driver market conditions, future use of independent contractors, expected cash flows, future investments in and growth of our reportable segments and services, future margins of our reportable segments, future rates and prices, future depreciation and amortization, future salaries, wages, and related expenses, including driver compensation, expected net fuel costs, strategies for managing fuel costs, the effectiveness and impact of, and cash flows relating to, our fuel surcharge programs, future fluctuations in operations and maintenance expenses, expected effects and mix of our solo and team operations, future fleet size, management, upgrades, and age, availability of tractors and trailers, the market value of used equipment, the anticipated impact of our investment in TEL, the future impact of our strategic plan and other strategic initiatives, anticipated levels of and fluctuations relating to insurance and claims expenses, including the erosion of available limits in our aggregate insurance policies, any future indemnification obligations related to the TFS Portfolio, the contingent consideration related to our**purchase of AAT, LTST and Sims, and the future impact of our acquisition of LTST and Sims, among others, are forward-looking statements. Forwar…

Excerpt shortened here; the source contains the full paragraph.

Current wording

This report contains certain statements that may be considered forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and such statements are subject to the safe harbor created by those sections and the Private Securities Litigation Reform Act of 1995, as amended. All statements, other than statements of historical or current fact, are statements that could be deemed forward-looking statements, including without limitation: any projections of earnings, revenues, or other financial items; any statement of plans, strategies, and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; and any statements of belief and any statements of assumptions underlying any of the foregoing. In this Form 10-Q, statements relating to future impact of accounting standards, future third-party transportation provider expenses, future tax rates, expenses, and deductions, expected freight demand, capacity, and volumes and trucking industry conditions, potential results of a default and testing of our fixed charge covenant under the Credit Facility or other debt agreements, expected sources, as well as adequacy, of working capital and liquidity (including our mix of debt, finance leases, and operating leases as means of financing revenue equipment), future inflation, future stock repurchases and dividends, if any, expected capital expenditures, allocations, and requirements, future customer relationships, future interest expense, future driver market conditions, including driver satisfaction, future use of independent contractors, expected cash flows, future investments in and growth of our reportable segments and services, future margins of our reportable segments, future rates and prices, future depreciation and amortization, future salaries, wages, and related expenses, including driver compensation, expected net fuel costs, strategies for managing fuel costs, the effectiveness and impact of, and cash flows relating to, our fuel surcharge programs, future fluctuations in operations and maintenance expenses, expected effects and mix of our solo and team operations, future fleet size, management, upgrades, and age, availability and usage of tractors and trailers, the market value of used equipment, the anticipated impact of our investment in TEL, the future impact of our business model, strategic plan and other strategic initiatives, changes to and deviations from our business model, strategic plan, and other strategic initiatives, anticipated levels of and fluctuations relating to insurance and claims expenses, including the erosion of available limits in our aggregate insurance policies, any future indemnification obligations related to the TFS Settlement,* contingent consideration rela…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

Our asset-based segments contributed approximately 68% of total revenue and 64% of total freight revenue in the quarter. Our Expedited segment grew revenue modestly, through modest growth in the average total tractor count and improved utilization, partially offset by lower rates. Our combined truckload operations experienced diminished year over year margins due to the acquisition related contingent consideration expense in the current quarter.

Current wording

Our asset-based segments, consisting of Expedited and Dedicated, contributed approximately 70% of total revenue and 67% of total freight revenue in the quarter. Our combined truckload operations experienced improved year over year margins primarily related to operating 9.1% more average tractors combined with improved freight revenue per total mile, partially offset by a reduction in utilization and higher costs compared to the prior year quarter.

Previous wording

Our asset-light segments contributed approximately 32% of total revenue and 36% of total freight revenue in the quarter. Although year over year freight revenue growth was modest at 3.6%, operating income improved by approximately 217% due to the combination of improved cost efficiencies and rate increases in our Warehousing reportable segment and improved cargo related claims costs in our Managed Freight segment.

Current wording

Our asset-light segments, consisting of Managed Freight and Warehousing, contributed approximately 30% of total revenue and 33% of total freight revenue in the quarter. Although year over year freight revenue declined 3.1%, operating income improved by approximately 96.7% due to the combination of improved cost efficiencies and rate increases in our Warehousing reportable segment as well as improved purchased transportation costs, cargo related claims costs, and the year over year impact of the higher-margin Sims acquisition in our Managed Freight segment.

Previous wording

Additional items of note for the first quarter of 2024 include the following:

Current wording

Additional items of note for the second quarter of 2024 include the following:

Previous wording

At March 31, 2024, we operated 2,234 tractors and 5,997 trailers. Of such tractors, 2,070 were owned, 23 were financed under finance or operating leases, and 141 tractors were provided by independent contractors, who own and drive their own tractors. Of such trailers, 5,786 were owned and 211 were held under finance or operating leases. At March 31, 2024, our fleet had an average tractor age of 1.7 years and an average trailer age of 6.0 years.

Current wording

At June 30, 2024, we operated 2,314 tractors and 6,314 trailers. Of such tractors, 2,160 were owned, 22 were financed under finance or operating leases, and 132 tractors were provided by independent contractors, who own and drive their own tractors. Of such trailers, 5,833 were owned and 481 were held under finance or operating leases. At June 30, 2024, our fleet had an average tractor age of 1.7 years and an average trailer age of 5.7 years.

Previous wording

COMPARISON OF three months ended March 31, 2024** TO three months ended March 31, 2023**

Current wording

COMPARISON OF three and six months ended June 30, 2024** TO three and six months ended June 30, 2023**

Previous wording

Salaries, wages, and related expenses for the three months ended March 31, 2024, increased, on a dollars basis primarily as a result ofaveraging more drivers and tractors, resulting in higher driver salaries, wages, and benefits. As a percentage of total revenue and freight revenue, salaries, wages, and related expenses for the three months ended March 31, 2024, decreased primarily due to improved tractor utilization that more efficiently covered fixed compensation expense and lower overall driver cost based on the hiring and retention market.

Current wording

Salaries, wages, and related expenses for the three and six months ended June 30, 2024, increased on a dollars basis primarily as a result ofaveraging more drivers and tractors primarily due to growth in our Dedicated reportable segment, resulting in higher driver salaries, wages, and benefits. As a percentage of total revenue and freight revenue, salaries, wages, and related expenses for thethree and six months ended June 30, 2024, decreased slightly primarily due to improved tractor utilization that more efficiently covered fixed compensation expense and lower overall driver cost based on the hiring and retention market.

Previous wording

The decreases in total fuel expense are primarily related to lower fuel prices in 2024 partially offset by a 9.0% increase in total miles.

Current wording

The decreases in total fuel expense are primarily related to lower fuel prices in the 2024 periods partially offset by a 7.3% and 8.1% increase in total miles compared to the same 2023 periods, respectively.

Previous wording

The rate of fuel price changes also can have an impact on results. Most fuel surcharges are based on the average fuel price as published by the Department of Energy ("DOE") for the week prior to the shipment, meaning we typically bill customers in the current week based on the previous week's applicable index. Therefore, in times of increasing fuel prices, we do not recover as much as we are currently paying for fuel. In periods of declining prices, the opposite is true. Fuel prices as measured by the DOE were $0.41 per gallon, or 9.3%, lower for the quarter ended March 31, 2024 compared with the same quarter in 2023.

Current wording

The rate of fuel price changes also can have an impact on results. Most fuel surcharges are based on the average fuel price as published by the Department of Energy ("DOE") for the week prior to the shipment, meaning we typically bill customers in the current week based on the previous week's applicable index. Therefore, in times of increasing fuel prices, we do not recover as much as we are currently paying for fuel. In periods of declining prices, the opposite is true. Fuel prices as measured by the DOE were $0.07 per gallon, or 1.8%, lower for the quarter ended June 30, 2024 compared with the same quarter in 2023.

Previous wording

The decreases in operations and maintenance for thethree months ended March 31, 2024 were primarily related to a decrease in the average age of our fleet and the improvement in both availability and cost of tires and maintenance related parts compared to the prior year period.

Current wording

The decreases in operations and maintenance for thethree and six months ended June 30, 2024 were primarily related to a decrease in the average age of our fleet and the improvement in both availability and cost of tires and maintenance related parts compared to the prior year period.

Previous wording

The changes in revenue equipment rentals and purchased transportation for thethree months ended March 31, 2024 were primarily the result of an increase in purchased transportation costs due to additional business in the Managed Freight reportable segment. Additionally, total miles run by independent contractors increased from 6.9% for the three months ended March 31, 2023 to 8.4% for the same 2024 period.

Current wording

The decreases in revenue equipment rentals and purchased transportation for thethree and six months ended June 30, 2024 were primarily the result of a decrease in purchased transportation costs due to the decline in the spot market primarily affecting the Managed Freight reportable segment. These decreases were partially offset as total miles run by independent contractors increased from 7.4% and 7.2% for the three and six months ended June 30, 2023, respectively, to 8.3% and 8.4% for the same 2024 periods.

Previous wording

Insurance and claims per mile cost increased to 22.8 cents per mile for the three months ended March 31, 2024 compared to 20.5 cents per mile for the same 2023 period. The increase for the three months ended March 31, 2024 is primarily the result of current period claims expense and the development of prior period claims, as well as increased insurance premiums compared to the same 2023 period.

Current wording

Insurance and claims per mile cost increased to 23.9 cents per mile and 23.4 cents per mile for the three and six months ended June 30, 2024, respectively, compared to 16.5 cents per mile and 18.4 cents per mile, respectively, for the same 2023 periods. The increases for the three and six months ended June 30, 2024 are primarily the result of current period claims expense and the development of prior period claims compared to the same 2023 period.

Previous wording

Our insurance program includes multi-year policies with specific insurance limits that may be 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, 2018 to 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 we continue to maintain. 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, 2018 and March 31, 2021, could result in additional expense accruals. We have maintained our retention and limits set in place during the prior renewal cycle. 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.

Current wording

Our insurance program includes multi-year policies with specific insurance limits that may be 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, 2018 to March 31, 2021, the aggregate limits available in the coverage layer $9.0 million in excess of $1.0 million were fully eroded. 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 we continue to maintain. 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, 2018 and March 31, 2021, could result in additional expense accruals. We have maintained our retention and limits set in place during the prior renewal cycle. 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.

Previous wording

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

Current wording

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

Previous wording

The increases in general supplies and expenses for thethree months ended March 31, 2024 were primarily the result of the increase in the contingent consideration liability since the 2023 period.

Current wording

The increase in general supplies and expenses for the three months ended June 30, 2024 was insignificant both as a percentage of total revenue and freight revenue. The increase in general supplies and expenses for thesix months ended June 30, 2024 was primarily the result of the increase in the contingent consideration liability since the 2023 period partially offset by acquisition costs recognized during the 2023 period with no similar costs during the same 2024 period.

Previous wording

Depreciation expense increased $5.3 million to $18.7 million for thethree months ended March 31, 2024 compared to $13.5 million in the same 2023 period as a result of increased costs on new equipment and an increase in our average total tractor count. Amortization of intangible assets was $2.4 million forthree months ended March 31, 2024, compared to $1.1 million for the same 2023 period. The increase for thethree months ended March 31, 2024 is due to the amortization of the intangible assets related to the LTST and Sims acquisitions.

Current wording

Depreciation expense increased $2.6 million and $7.9 million to $19.7 million and $38.5 million for thethree and six months ended June 30, 2024, respectively, compared to $17.1 million and $30.6 million in the same 2023 periods, as a result of increased costs on new equipment and an increase in our average total tractor count. Amortization of intangible assets was $2.4 million and $4.7 million forthree and six months ended June 30, 2024, respectively, compared to $1.8 million and $2.9 million for the same 2023 periods. The increase for thethree and six months ended June 30, 2024 is due to the amortization of the intangible assets related to the LTST and Sims acquisitions.

Previous wording

The loss on disposition of property and equipment, net for the three-months ended March 31, 2024, compared to a gain on disposition of property and equipment, net for the prior period, was primarily the result of the $7.6 million gain on sale of a Tennessee terminal in the first quarter of 2023, with no such sales in the same 2024 period, as well as reductions in the gain on disposition of equipment due to the soft used equipment market.

Current wording

The loss on disposition of property and equipment, net for the three and six months ended June 30, 2024, compared to a gain on disposition of property and equipment, net for the prior periods, was primarily the result of reductions in the gain on disposition of equipment due to the soft used equipment market. Additionally, the six months ended 2023 includes the $7.6 million gain on sale of a Tennessee terminal in the first quarter of 2023, with no such sales in the same 2024 period.

Previous wording

For the periods presented, the increases in interest expense were primarily the result of an increase in revenue equipment installment notes as a result of additional equipment added during 2023 as a result of our revenue equipment replacement plan, as well as increased interest rates since the 2023 period.

Current wording

For the periods presented, the increases in interest expense were primarily the result of an increase in revenue equipment installment notes as a result of additional equipment added during 2023 and 2024 as a result of our revenue equipment replacement plan, as well as increased interest rates since the 2023 periods.

Previous wording

We have accounted for our investment in TEL using the equity method of accounting and thus our financial results include our proportionate share of TEL's net income or loss. The decrease in TEL's contribution to our results for thethree months ended March 31, 2024 were primarily the result of a reduction on gain on sale of revenue equipment compared to the 2023 period. Due to TEL's business model, gains and losses on sale of equipment is a normal part of the business and can cause earnings to fluctuate from period to period and therefore our income from investment to similarly fluctuate. We expect TEL's net income for the full 2024 year to approximate that of 2023.

Current wording

We have accounted for our investment in TEL using the equity method of accounting and thus our financial results include our proportionate share of TEL's net income or loss. The decrease in TEL's contribution to our results for thethree and six months ended June 30, 2024 were primarily the result of a deterioration in the equipment market, suppressing gains on sale of used equipment, and increased interest expense associated with higher interest rates on equipment related debt compared to the 2023 periods. Due to TEL's business model, gains and losses on sale of equipment is a normal part of the business and can cause earnings to fluctuate from period to period and therefore our income from investment to similarly fluctuate. We expect TEL's net income for the full 2024 year to approximate that of 2023.

Previous wording

The decreases in income tax expense were primarily related to the $18.1 million decrease in pre-tax income in the three months ended March 31, 2024, compared to the same 2023 period resulting from the aforementioned decreases in operating income and earnings on investment in TEL.

Current wording

The increase in income tax expense for the three months ended June 30, 2024 was the result of the rate impact of executive compensation disallowance as well as a $0.8 million increase in pre-tax income compared to the same 2023 period. The decrease in income tax expense for the six months ended June 30, 2024, were primarily related to the $17.3 million decrease in pre-tax income in the six months ended June 30, 2024, compared to the same 2023 period. The decreases in pre-tax income resulted from the aforementioned changes in operating income and earnings on investment in TEL.

Previous wording

COMPARISON OF three months ended March 31, 2024** TO three months ended March 31, 2023**

Current wording

COMPARISON OF three and six months ended June 30, 2024** TO three and six months ended June 30, 2023**

Previous wording

The increase in Expedited revenue for the three months ended March 31, 2024 relates to a 44 (or 5.1%) average tractor increase, partially offset by a $0.4 million decrease in fuel surcharge revenue and a decrease in average freight revenue per tractor per week of 0.2%, compared to the 2023 quarter. The decrease in average freight revenue per tractor per week for the quarter ended March 31, 2024 is the result of a 12.0 cents per mile (or 5.4%) decrease in average rate per total mile partially offset by a 6.6% increase in average miles per unit compared to the 2023 quarter. Expedited team-driven tractors averaged 844 and 783 tractors in the first quarter of 2024 and 2023, respectively.

Current wording

The increase in Expedited revenue for the three months ended June 30, 2024 relates to an increase of 55 (or 6.4%) average tractors and a $1.0 million increase in fuel surcharge revenue partially offset by a decrease in average freight revenue per tractor per week of 2.8%, compared to the 2023 quarter. The decrease in average freight revenue per tractor per week for the quarter ended June 30, 2024 is the result of a 4.0 cents per mile (or 1.9%) decrease in average rate per total mile and a 0.9% decrease in average miles per unit compared to the 2023 quarter. Expedited team-driven tractors averaged 845 and 789 tractors in the second quarter of 2024 and 2023, respectively.

Previous wording

The increase in Dedicated revenue for the three months ended March 31, 2024 relates to a 28, or 2.3% average tractor increase as a result of the LTST acquisition including growth since acquisition and an increase in average freight revenue per tractor per week of 5.8% compared to the 2023 quarter partially offset by a $2.0 million decrease in fuel surcharge revenue. The increase in average freight revenue per tractor per week was the result of a 12.8 cents per mile (or 4.8%) increase in average rate per total mile and a 2.1% increase in average miles per unit compared to the 2023 quarter.

Current wording

The increase in Dedicated revenue for the three months ended June 30, 2024 relates to a 136, or 10.9% average tractor increase and an increase in average freight revenue per tractor per week of 6.6% compared to the 2023 quarter. The increase in average freight revenue per tractor per week was the result of a 19.0 cents per mile (or 7.1%) increase in average rate per total mile partially offset by a 0.5% decrease in average miles per unit compared to the 2023 quarter.

Previous wording

For the three months ended March 31, 2024, Warehousing total revenue increased as a result of period-over-period new customer business as well as customer rate increases that went into effect during the third quarter of 2023.

Current wording

For the three and six months ended June 30, 2024, Warehousing total revenue increased as a result of customer rate increases since the same 2023 periods.

Previous wording

The decrease in operating income for the three months ended March 31, 2024, was the result of a $16.1 million, $9.1 million, and $1.0 million increase in Dedicated, Expedited, and Managed Freight operating expenses partially offset by a $0.9 million decrease in Warehousing operating expenses, partially offset by the increase in total revenue described above.

Current wording

The increase in operating income for the three months ended June 30, 2024, was the result of the increase in total revenue described above and a $4.3 million and $1.1 million decrease in Managed Freight and Warehousing operating expenses, respectively, partially offset by a $10.1 million and $5.0 million increase in Dedicated and Expedited operating expenses, respectively. The decrease in operating income for thesix months ended June 30, 2024, was the result of a $26.2 million and $14.1 million increase in Dedicated and Expedited operating expenses, respectively, partially offset by a $3.3 million and $2.0 million decrease in Managed Freight and Warehousing operating expenses, respectively as well as the aforementioned changes in total revenue.

Previous wording

The decrease in Expedited operating income for thethree months ended March 31, 2024 was primarily the result of an increase in Expedited operating expenses partially offset by the aforementioned increase in revenue. The increase in Expedited operating expenses for thethree months ended March 31, 2024 was primarily the result of increases in depreciation expense as a result of our equipment trade cycle and increased equipment costs since the 2023 period partially offset by the prior period increase in the contingent consideration liability. The decrease in Dedicated operating income for thethree months ended March 31, 2024 was primarily the result of an increase in Dedicated operating expenses partially offset by the aforementioned increase in revenue. The increase in Dedicated operating expenses for thethree months ended March 31, 2024, was primarily the result of the increase in the contingent consideration liability, as well as increased depreciation expense as a result of our equipment trade cycle and increased equipment costs since the 2023 period.

Current wording

The decrease in Expedited operating income for thethree and six months ended June 30, 2024 was primarily the result of an increase in Expedited operating expenses partially offset by the aforementioned increase in revenue. The increase in Expedited operating expenses for thethree and six months ended June 30, 2024 was primarily the result of increases in insurance and claims expense, and depreciation expense as a result of increased equipment costs since the 2023 period partially offset by the prior period increases in the contingent consideration liability. The increase in Dedicated operating income for the three months ended June 30, 2024 was primarily the result of the aforementioned increase in revenue, partially offset by an increase in Dedicated operating expenses. The decrease in Dedicated operating income for thesix months ended June 30, 2024 was primarily the result of an increase in Dedicated operating expenses partially offset by the aforementioned increase in revenue. The increase in Dedicated operating expenses for thethree and six months ended June 30, 2024, was primarily the result of increased salaries, wages, and benefits for our professional drivers as the result of growth, increased depreciation expense as a result of increased equipment costs, and the increase in the contingent consideration liability since the 2023 period. Additionally, during the six months ended June 30, 2023*,* we sold a Tennessee terminal resulting in a $7.6 million gain which is included in gain on disposition of property and equipment, net in the condensed consolidated statements of operations with no similar gain in the same 2024 period.

Previous wording

The increase in operating income for Managed Freight for thethree months ended March 31, 2024 was primarily the result of the aforementioned increase in revenue partially offset by an increase in Managed Freight operating expenses. The increase in Managed Freight operating expenses was primarily the result of the changes in revenue driving changes in variable expenses, primarily purchased transportation. This increase was partially offset by a decrease in claims.

Current wording

The increase in operating income for Managed Freight for thethree and six months ended June 30, 2024 was primarily the result of a decrease in Managed Freight operating expenses partially offset by the aforementioned decreases in revenue. The decrease in Managed Freight operating expenses for the three months ended June 30, 2024 was primarily the result of the changes in revenue driving changes in variable expenses, primarily purchased transportation, while the decrease in operating expenses for the six months ended June 30, 2024 was primarily due to a small number of prior period claims recognized in the same 2023 period with no similar 2024 activity. Additionally, operating income improved for both periods as a result of the impact of the higher-margin Sims acquisition since the same 2023 periods.

Previous wording

The increase in operating income for Warehousing for the three months ended March 31, 2024 was primarily the result of the aforementioned increase in revenue and a decrease in Warehousing operating expenses. The decrease in Warehousing operating expenses for thethree months ended March 31, 2024, was a result of a reduction in outsourced labor since the 2023 period. In our asset-light reportable segments, we are prioritizing long-term growth, focusing on talent acquisition, and technology enhancements.

Current wording

The increase in operating income for Warehousing for thethree and six months ended June 30, 2024 was primarily the result of the aforementioned increase in revenue and a decrease in Warehousing operating expenses. The decrease in Warehousing operating expenses for thethree and six months ended June 30, 2024, was a result of a reduction in outsourced labor since the 2023 periods. In our asset-light reportable segments, we are prioritizing long-term growth, focusing on talent acquisition, and technology enhancements.

Previous wording

Our business requires significant capital investments over the short-term and the long-term. Historically, we have financed our capital requirements with borrowings under our Credit Facility, cash flows from operations, long-term operating leases, finance leases, secured installment notes with finance companies, and proceeds from the sale of our used revenue equipment. Going forward, we expect revenue equipment acquisitions to primarily be through purchases and finance leases. Further, we expect to increase our capital allocation toward our Dedicated, Managed Freight, and Warehousing reportable segments to become the go-to partner for our customers’ most critical transportation and logistics needs. We had working capital (total current assets less total current liabilities) of $7.0 million and $15.7 million at March 31, 2024 and December 31, 2023, respectively. Our working capital on any particular day can vary significantly due to the timing of collections and cash disbursements. Based on our expected financial condition, net capital expenditures, results of operations, related net cash flows, installment notes, and other sources of financing, we believe our working capital and sources of liquidity will be adequate to meet our current and projected needs, and we do not expect to experience material liquidity constraints in the foreseeable future.

Current wording

Our business requires significant capital investments over the short-term and the long-term. Historically, we have financed our capital requirements with borrowings under our Credit Facility, cash flows from operations, long-term operating leases, finance leases, secured installment notes with finance companies, and proceeds from the sale of our used revenue equipment. Going forward, we expect revenue equipment acquisitions to primarily be through purchases and finance leases. Further, we expect to increase our capital allocation toward our Dedicated, Managed Freight, and Warehousing reportable segments to become the go-to partner for our customers’ most critical transportation and logistics needs. We had working capital (total current assets less total current liabilities) of $14.1 million and $15.7 million at June 30, 2024 and December 31, 2023, respectively. Our working capital on any particular day can vary significantly due to the timing of collections and cash disbursements. Based on our expected financial condition, net capital expenditures, results of operations, related net cash flows, installment notes, and other sources of financing, we believe our working capital and sources of liquidity will be adequate to meet our current and projected needs, and we do not expect to experience material liquidity constraints in the foreseeable future.

Previous wording

As of March 31, 2024 and December 31, 2023 we had $291.4 million and $293.5 million in debt and lease obligations, respectively, consisting of the following:

Current wording

As of June 30, 2024 and December 31, 2023 we had $317.3 million and $293.5 million in debt and lease obligations, respectively, consisting of the following:

Previous wording

The increase in revenue equipment installment notes is primarily due to replacing our older equipment with new equipment. The decrease in the operating lease obligations was primarily due to replacing revenue equipment held under operating leases with owned equipment, as well as the amortization of the lease liability.

Current wording

The increase in revenue equipment installment notes is primarily due to replacing our older equipment with new equipment.

Previous wording

As of March 31, 2024, we had no borrowings outstanding, undrawn letters of credit outstanding of approximately $21.0 million, and available borrowing capacity of $89.0 million under the Credit Facility. Additionally, we had $45.0 million of remaining availability of a $45.0 million Draw Note from Triumph which is available solely to fund any indemnification owed to Triumph in relation to the TFS Settlement. Fluctuations in the outstanding balance and related availability under our Credit Facility are driven primarily by cash flows from operations and the timing and nature of property and equipment additions that are not funded through notes payable, as well as the nature and timing of collection of accounts receivable, payments of accrued expenses, and receipt of proceeds from disposals of property and equipment.

Current wording

As of June 30, 2024, we had no borrowings outstanding, undrawn letters of credit outstanding of approximately $20.8 million, and available borrowing capacity of $88.8 million under the Credit Facility. Additionally, we had $45.0 million of remaining availability of a $45.0 million Draw Note from Triumph which is available solely to fund any indemnification owed to Triumph in relation to the TFS Settlement. Fluctuations in the outstanding balance and related availability under our Credit Facility are driven primarily by cash flows from operations and the timing and nature of property and equipment additions that are not funded through notes payable, as well as the nature and timing of collection of accounts receivable, payments of accrued expenses, and receipt of proceeds from disposals of property and equipment.

Previous wording

Our net capital expenditures for the three months ended March 31, 2024 totaled $12.0 million of expenditures, as compared to $8.2 million of proceeds for the prior year period. During the three months ended March 31, 2024, we took delivery of approximately 244 new tractors and 189 new trailers, while disposing of approximately 167 used tractors and 44 used trailers. Our current fleet plan for the remainder of 2024 includes the delivery of an additional 558 new company replacement tractors and 357 additional new trailer deliveries. Net gains on disposal of equipment and real estate in the three months ended March 31, 2024 were $12.4 million compared to $39.3 million in the same prior year period primarily due to the $7.6 million gain on a Tennessee terminal during the 2023 period and the aforementioned disposal of revenue equipment as part of our trade cycle. For the balance of 2024, our baseline expectation for net capital expenditures is $60.0 million to $70.0 million. Our capital investment plan reflects our priorities growing Dedicated with new poultry related business, maintaining the average of our equipment to optimize operational uptime and related operating costs, and offering a fleet of equipment that our professional drivers are proud to operate.

Current wording

Our net capital expenditures for the six months ended June 30, 2024 totaled $54.8 million of expenditures, as compared to $111.9 million of expenditures for the prior year period. During the six months ended June 30, 2024, we took delivery of approximately 220 new tractors and 345 new trailers, while disposing of approximately 211 used tractors and 160 used trailers. Our current fleet plan for the remainder of 2024 includes the delivery of an additional 332 new company replacement tractors and 312 additional new trailer deliveries. Net losses on disposal of equipment and real estate in the six months ended June 30, 2024 were $1.5 million compared to $11.8 million net gains in the same prior year period primarily due to the $7.6 million gain on a Tennessee terminal during the 2023 period and the aforementioned disposal of revenue equipment as part of our trade cycle. For the balance of 2024, our baseline expectation for net capital expenditures is $30.0 million to $40.0 million. Our capital investment plan reflects our priorities growing Dedicated with new poultry related business, maintaining the average of our equipment to optimize operational uptime and related operating costs, and offering a fleet of equipment that our professional drivers are proud to operate.

Previous wording

We distributed a total of $1.4 million to stockholders in the first three months of 2024 through dividends.

Current wording

We distributed a total of $2.9 million to stockholders in the first six months of 2024 through dividends.

Previous wording

Despite a year over year reduction in net income of $12.7 million, net cash flows provided by operating activities increased to $21.7 million for the three months ended March 31, 2024, compared to $7.2 million for the same 2023 period, primarily due to increases in non-cash expenses such as depreciation and amortization and reductions to non-cash gains on sale of property, plant, and equipment in the current period. Changes in operating assets and liabilities such as receivables and driver advances, accounts payable and accrued expenses, and insurance and claims accruals provided improved cash flow for the three months ended March 31, 2024, compared to the 2023 period.

Current wording

Despite a year over year reduction in net income of $12.8 million, net cash flows provided by operating activities increased to $44.1 million for the six months ended June 30, 2024, compared to $12.3 million for the same 2023 period, primarily due to increases in non-cash expenses such as depreciation and amortization and reductions to non-cash gains on sale of property and equipment in the current period. Changes in operating assets and liabilities such as receivables and driver advances, accounts payable and accrued expenses, and insurance and claims accruals provided improved cash flow for the six months ended June 30, 2024, compared to the 2023 period.

Previous wording

Net cash flows used by investing activities were $43.5 million for the three months ended March 31, 2024, compared to $7.1 million provided in the same 2023 period. The change in net cash flows used by investing activities was primarily due to the timing of our trade cycle whereby we took delivery of approximately 244 new tractors and 189 new trailers, while disposing of approximately 167 used tractors and 44 used trailers during the 2024 period compared to delivery of 150 new tractors and 64 new trailers, while disposing of approximately 162 used tractors and 123 used trailers in the same 2023 period. Net cash flows used by investing activities also included a $4.6 million payment related to the acquisition of LTST and our Section 338(h)10 election. Additionally, the 2023 period provided $12.5 million of proceeds related to the sale of a Tennessee terminal.

Current wording

Net cash flows used by investing activities were $86.5 million for the six months ended June 30, 2024, compared to $113.3 million used in the same 2023 period. The decrease in net cash flows used by investing activities was primarily due to the April 2023 acquisition of LTST for $99.9 million, net of cash acquired, partially offset by the $4.6 million payment related to the acquisition of LTST and our Section 338(h)(10) election during the 2024 period, and the timing of our trade cycle whereby we took delivery of approximately 220 new tractors and 345 new trailers, while disposing of approximately 211 used tractors and 160 used trailers during the 2024 period compared to delivery of 234 new tractors and 262 new trailers, while disposing of approximately 321 used tractors and 175 used trailers in the same 2023 period. Additionally, the 2023 period provided $12.5 million of proceeds related to the sale of a Tennessee terminal.

Previous wording

Net cash flows provided by financing activities were approximately $22.4 million for the three months ended March 31, 2024, compared to $28.4 million used in the same 2023 period. The change in net cash flows provided by financing activities was primarily a function of net proceeds relating to notes payable of $30.1 million in the 2024 period compared to net proceeds of $7.9 million in the 2023 period and the repurchase of $0.0 million of shares of our Class A common stock during the 2024 period compared to $20.8 million during the same 2023 period.

Current wording

Net cash flows provided by financing activities were approximately $41.4 million for the six months ended June 30, 2024, compared to $40.1 million provided in the same 2023 period. The increase in net cash flows provided by financing activities was primarily a function of no repurchases of shares of our Class A common stock during the 2024 period compared to $25.4 million during the same 2023 period, partially offset by net borrowings of notes payable and our Credit Facility of $49.4 million in the 2024 period compared to $76.9 million in the 2023 period.

Previous wording

On May 18, 2022 our Board approved a stock repurchase authorization of up to $75.0 million of our Class A common stock, with any remaining amount available under prior authorizations being excluded and no longer available. Under such authorization, we repurchased 2.0 million shares of our Class A common stock for $54.7 million during 2022. 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 2022 and April 2023, we repurchased a total of 2.7 million shares of our Class A common stock. The program expired January 31, 2024.

Current wording

On May 18, 2022 our Board approved a stock repurchase authorization of up to $75.0 million of our Class A common stock, with any remaining amount available under prior authorizations being excluded and no longer available. Under such authorization, we repurchased 2.0 million shares of our Class A common stock for $54.7 million during 2022. 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 2022 and April 2023, we repurchased a total of 2.7 million shares of our Class A common stock. The program expired on January 31, 2024.

Previous wording

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. 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. There have been no material changes to our most critical accounting policies and estimates during the three months ended March 31, 2024, compared to those disclosed in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in our Form 10-K for the year ended December 31, 2023.

Current wording

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. 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. There have been no material changes to our most critical accounting policies and estimates during the three and six months ended June 30, 2024, compared to those disclosed in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in our Form 10-K for the year ended December 31, 2023.