0000928658
COVENANT LOGISTICS GROUP, INC.
true
--12-31
FY
2020
2,992
1,440
764
692
-
-
0.01
0.01
40,000,000
16,183,139
14,784,214
40,000,000
16,165,145
16,165,145
1,398,925
0
548
437
377
189
5
408
10
10
10
1
1
1
5
7
10
1.0
195,000
200,000
70,000
0
0
0
0
0
1
0.4
0.4
0
0
0
0
0
9.8
3
10
5
10
0
15
7
40
2
10
15.0
2.0
3.7
1.9
3.3
0
1.8
2.9
2.3
3.4
21
21
0.9
0
0.2
4
362,988
00009286582020-01-012020-12-31
iso4217:USD
00009286582020-06-30
xbrli:shares
0000928658us-gaap:CommonClassAMember2021-03-02
0000928658us-gaap:CommonClassBMember2021-03-02
thunderdome:item
00009286582020-12-31
00009286582019-12-31
iso4217:USDxbrli:shares
0000928658us-gaap:CommonClassAMember2020-12-31
0000928658us-gaap:CommonClassAMember2019-12-31
0000928658us-gaap:CommonClassBMember2020-12-31
0000928658us-gaap:CommonClassBMember2019-12-31
0000928658us-gaap:CargoAndFreightMember2020-01-012020-12-31
0000928658us-gaap:CargoAndFreightMember2019-01-012019-12-31
0000928658us-gaap:CargoAndFreightMember2018-01-012018-12-31
0000928658cvlg:FuelSurchargeMember2020-01-012020-12-31
0000928658cvlg:FuelSurchargeMember2019-01-012019-12-31
0000928658cvlg:FuelSurchargeMember2018-01-012018-12-31
00009286582019-01-012019-12-31
00009286582018-01-012018-12-31
0000928658us-gaap:CommonClassAMemberus-gaap:CommonStockMember2017-12-31
0000928658us-gaap:CommonClassBMemberus-gaap:CommonStockMember2017-12-31
0000928658us-gaap:AdditionalPaidInCapitalMember2017-12-31
0000928658us-gaap:TreasuryStockMember2017-12-31
0000928658us-gaap:AccumulatedOtherComprehensiveIncomeMember2017-12-31
0000928658us-gaap:RetainedEarningsMember2017-12-31
00009286582017-12-31
0000928658us-gaap:CommonClassAMemberus-gaap:CommonStockMember2018-01-012018-12-31
0000928658us-gaap:CommonClassBMemberus-gaap:CommonStockMember2018-01-012018-12-31
0000928658us-gaap:AdditionalPaidInCapitalMember2018-01-012018-12-31
0000928658us-gaap:TreasuryStockMember2018-01-012018-12-31
0000928658us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-01-012018-12-31
0000928658us-gaap:RetainedEarningsMember2018-01-012018-12-31
0000928658srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:CommonClassAMemberus-gaap:CommonStockMember2017-12-31
0000928658srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:CommonClassBMemberus-gaap:CommonStockMember2017-12-31
0000928658srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AdditionalPaidInCapitalMember2017-12-31
0000928658srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:TreasuryStockMember2017-12-31
0000928658srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AccumulatedOtherComprehensiveIncomeMember2017-12-31
0000928658srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RetainedEarningsMember2017-12-31
0000928658srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2017-12-31
0000928658us-gaap:CommonClassAMemberus-gaap:CommonStockMember2018-12-31
0000928658us-gaap:CommonClassBMemberus-gaap:CommonStockMember2018-12-31
0000928658us-gaap:AdditionalPaidInCapitalMember2018-12-31
0000928658us-gaap:TreasuryStockMember2018-12-31
0000928658us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-31
0000928658us-gaap:RetainedEarningsMember2018-12-31
00009286582018-12-31
0000928658us-gaap:CommonClassAMemberus-gaap:CommonStockMember2019-01-012019-12-31
0000928658us-gaap:CommonClassBMemberus-gaap:CommonStockMember2019-01-012019-12-31
0000928658us-gaap:AdditionalPaidInCapitalMember2019-01-012019-12-31
0000928658us-gaap:TreasuryStockMember2019-01-012019-12-31
0000928658us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-012019-12-31
0000928658us-gaap:RetainedEarningsMember2019-01-012019-12-31
0000928658us-gaap:CommonClassAMemberus-gaap:CommonStockMember2019-12-31
0000928658us-gaap:CommonClassBMemberus-gaap:CommonStockMember2019-12-31
0000928658us-gaap:AdditionalPaidInCapitalMember2019-12-31
0000928658us-gaap:TreasuryStockMember2019-12-31
0000928658us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-31
0000928658us-gaap:RetainedEarningsMember2019-12-31
0000928658us-gaap:CommonClassAMemberus-gaap:CommonStockMember2020-01-012020-12-31
0000928658us-gaap:CommonClassBMemberus-gaap:CommonStockMember2020-01-012020-12-31
0000928658us-gaap:AdditionalPaidInCapitalMember2020-01-012020-12-31
0000928658us-gaap:TreasuryStockMember2020-01-012020-12-31
0000928658us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-12-31
0000928658us-gaap:RetainedEarningsMember2020-01-012020-12-31
0000928658us-gaap:CommonClassAMemberus-gaap:CommonStockMember2020-12-31
0000928658us-gaap:CommonClassBMemberus-gaap:CommonStockMember2020-12-31
0000928658us-gaap:AdditionalPaidInCapitalMember2020-12-31
0000928658us-gaap:TreasuryStockMember2020-12-31
0000928658us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-31
0000928658us-gaap:RetainedEarningsMember2020-12-31
xbrli:pure
0000928658cvlg:HighwayServicesMembercvlg:ExpeditedMember2020-01-012020-12-31
0000928658cvlg:HighwayServicesMembercvlg:ExpeditedMember2019-01-012019-12-31
0000928658cvlg:HighwayServicesMembercvlg:ExpeditedMember2018-01-012018-12-31
0000928658cvlg:DedicatedMember2020-01-012020-12-31
0000928658cvlg:DedicatedMember2019-01-012019-12-31
0000928658cvlg:DedicatedMember2018-01-012018-12-31
0000928658cvlg:ManagedFreightMember2020-01-012020-12-31
0000928658cvlg:ManagedFreightMember2019-01-012019-12-31
0000928658cvlg:ManagedFreightMember2018-01-012018-12-31
0000928658cvlg:ManagedFreightMembersrt:WarehouseMember2020-01-012020-12-31
0000928658cvlg:ManagedFreightMembersrt:WarehouseMember2019-01-012019-12-31
0000928658cvlg:ManagedFreightMembersrt:WarehouseMember2018-01-012018-12-31
0000928658cvlg:TransportEnterpriseLeasingLLCMember2020-12-31
0000928658srt:ScenarioForecastMember2021-03-21
0000928658srt:ScenarioForecastMember2024-04-01
00009286582020-04-01
0000928658us-gaap:DiscontinuedOperationsHeldforsaleMembercvlg:TransportFinancialServicesMember2020-07-08
0000928658us-gaap:DiscontinuedOperationsHeldforsaleMembercvlg:TransportFinancialServicesMember2020-07-082020-07-08
0000928658us-gaap:DiscontinuedOperationsHeldforsaleMembercvlg:TransportFinancialServicesMember2020-09-30
0000928658us-gaap:DiscontinuedOperationsHeldforsaleMembercvlg:TransportFinancialServicesMember2020-12-31
0000928658us-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember2020-01-012020-12-31
0000928658us-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember2019-01-012019-12-31
0000928658us-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember2018-01-012018-12-31
0000928658us-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMembercvlg:OneCustomerMember2020-01-012020-12-31
0000928658us-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMembercvlg:OneCustomerMember2019-01-012019-12-31
0000928658us-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMembercvlg:OneCustomerMember2018-01-012018-12-31
0000928658us-gaap:IntangibleAssetsAmortizationPeriodMember2020-01-012020-12-31
utr:Y
0000928658cvlg:TractorsMember2020-01-012020-12-31
0000928658cvlg:TractorsMembersrt:MinimumMember2020-12-31
0000928658cvlg:TractorsMembersrt:MaximumMember2020-12-31
0000928658cvlg:RefrigeratedTrailersMember2020-01-012020-12-31
0000928658cvlg:DryVanTrailersMember2020-01-012020-12-31
0000928658cvlg:DryVanTrailersMembersrt:MinimumMember2020-12-31
0000928658cvlg:DryVanTrailersMembersrt:MaximumMember2020-12-31
utr:M
0000928658cvlg:RevenueEquipmentMembersrt:MinimumMember2020-01-012020-12-31
0000928658cvlg:RevenueEquipmentMembersrt:MaximumMember2020-01-012020-12-31
0000928658srt:MinimumMember2020-01-012020-12-31
0000928658srt:MaximumMember2020-01-012020-12-31
0000928658cvlg:ReceivablesFromInsurersMember2020-12-31
0000928658cvlg:ReceivablesFromInsurersMember2019-12-31
00009286582018-04-30
00009286582018-04-012018-04-30
00009286582014-10-012018-03-31
0000928658us-gaap:EmployeeStockOptionMember2020-01-012020-12-31
0000928658us-gaap:EmployeeStockOptionMember2019-01-012019-12-31
0000928658us-gaap:EmployeeStockOptionMember2018-01-012018-12-31
0000928658cvlg:EmployeeStockOptionsMember2020-01-012020-12-31
0000928658us-gaap:RestrictedStockMember2020-01-012020-12-31
0000928658us-gaap:RestrictedStockMember2019-01-012019-12-31
0000928658us-gaap:RestrictedStockMember2018-01-012018-12-31
0000928658us-gaap:DiscontinuedOperationsHeldforsaleMembercvlg:TransportFinancialServicesMember2020-01-012020-12-31
0000928658us-gaap:DiscontinuedOperationsHeldforsaleMembercvlg:TransportFinancialServicesMember2019-01-012019-12-31
0000928658us-gaap:DiscontinuedOperationsHeldforsaleMembercvlg:TransportFinancialServicesMember2018-01-012018-12-31
0000928658us-gaap:DiscontinuedOperationsHeldforsaleMembercvlg:TransportFinancialServicesMembersrt:MinimumMember2020-12-31
0000928658us-gaap:DiscontinuedOperationsHeldforsaleMembercvlg:TransportFinancialServicesMembersrt:MaximumMember2020-12-31
0000928658us-gaap:DiscontinuedOperationsHeldforsaleMembercvlg:TransportFinancialServicesMember2019-12-31
0000928658us-gaap:DiscontinuedOperationsHeldforsaleMembercvlg:TransportFinancialServicesMember2018-12-31
0000928658us-gaap:DiscontinuedOperationsHeldforsaleMembercvlg:TransportFinancialServicesMembersrt:ProFormaMember2020-01-012020-12-31
0000928658us-gaap:DiscontinuedOperationsHeldforsaleMembercvlg:TransportFinancialServicesMembersrt:ProFormaMember2019-01-012019-12-31
0000928658us-gaap:DiscontinuedOperationsHeldforsaleMembercvlg:TransportFinancialServicesMembersrt:ProFormaMember2018-01-012018-12-31
0000928658cvlg:RevenueEquipmentMembercvlg:HighwayServicesAndDedicatedMember2020-01-012020-12-31
0000928658cvlg:TerminalPropertyMembercvlg:HighwayServicesAndDedicatedMember2020-01-012020-12-31
0000928658cvlg:LeasedOfficeFacilityMembercvlg:ManagedFreightMember2020-01-012020-12-31
0000928658cvlg:TrainingAndOrientationCenterMembercvlg:HighwayServicesMember2020-01-012020-12-31
0000928658cvlg:GainOnDispositionOfPropertyAndEquipmentNetMembercvlg:HighwayServicesAndDedicatedMember2020-01-012020-12-31
0000928658cvlg:SalariesWagesAndRelatedExpensesMembercvlg:HighwayServicesDedicatedAndManagedFreightMember2020-01-012020-12-31
0000928658cvlg:DepreciationAndAmortizationMembercvlg:DedicatedAndManagedFreightMember2020-01-012020-12-31
0000928658cvlg:RevenueEquipmentRentalsAndPurchasedTransportationMembercvlg:HighwayServicesAndDedicatedMember2020-01-012020-12-31
0000928658cvlg:GeneralSuppliesAndExpensesMembercvlg:HighwayServicesAndDedicatedMember2020-01-012020-12-31
00009286582020-07-012020-07-01
00009286582020-07-01
0000928658cvlg:SalariesWagesAndRelatedExpensesMember2020-01-012020-12-31
0000928658cvlg:SalariesWagesAndRelatedExpensesMember2019-01-012019-12-31
0000928658cvlg:SalariesWagesAndRelatedExpensesMember2018-01-012018-12-31
0000928658cvlg:GeneralSuppliesAndExpensesMember2020-01-012020-12-31
0000928658cvlg:GeneralSuppliesAndExpensesMember2018-01-012018-12-31
0000928658cvlg:GeneralSuppliesAndExpensesMember2019-01-012019-12-31
0000928658us-gaap:CommonClassAMember2020-01-012020-12-31
0000928658us-gaap:CommonClassAMember2019-01-012019-12-31
0000928658us-gaap:CommonClassAMember2018-01-012018-12-31
0000928658us-gaap:CommonClassAMember2018-12-31
0000928658cvlg:ServicesProvidedMember2020-12-31
0000928658us-gaap:PerformanceSharesMember2020-12-31
0000928658us-gaap:PerformanceSharesMemberus-gaap:ShareBasedCompensationAwardTrancheOneMember2020-12-31
0000928658cvlg:MarketBasedAwardsMember2020-12-31
0000928658us-gaap:PerformanceSharesMemberus-gaap:ShareBasedCompensationAwardTrancheTwoMember2020-12-31
0000928658us-gaap:RestrictedStockMember2020-12-31
0000928658us-gaap:EmployeeStockOptionMember2019-12-31
0000928658us-gaap:EmployeeStockOptionMember2020-12-31
0000928658cvlg:RevenueEquipmentMember2020-12-31
0000928658cvlg:RevenueEquipmentMember2019-12-31
0000928658us-gaap:OfficeEquipmentMembersrt:MinimumMember2020-01-012020-12-31
0000928658us-gaap:OfficeEquipmentMembersrt:MaximumMember2020-01-012020-12-31
0000928658us-gaap:OfficeEquipmentMember2020-12-31
0000928658us-gaap:OfficeEquipmentMember2019-12-31
0000928658us-gaap:LandAndLandImprovementsMembersrt:MinimumMember2020-01-012020-12-31
0000928658us-gaap:LandAndLandImprovementsMembersrt:MaximumMember2020-01-012020-12-31
0000928658us-gaap:LandAndLandImprovementsMember2020-12-31
0000928658us-gaap:LandAndLandImprovementsMember2019-12-31
0000928658us-gaap:BuildingAndBuildingImprovementsMembersrt:MinimumMember2020-01-012020-12-31
0000928658us-gaap:BuildingAndBuildingImprovementsMembersrt:MaximumMember2020-01-012020-12-31
0000928658us-gaap:BuildingAndBuildingImprovementsMember2020-12-31
0000928658us-gaap:BuildingAndBuildingImprovementsMember2019-12-31
0000928658us-gaap:ConstructionInProgressMember2020-12-31
0000928658us-gaap:ConstructionInProgressMember2019-12-31
0000928658us-gaap:PropertyPlantAndEquipmentOtherTypesMembersrt:MinimumMember2020-01-012020-12-31
0000928658us-gaap:PropertyPlantAndEquipmentOtherTypesMembersrt:MaximumMember2020-01-012020-12-31
0000928658us-gaap:PropertyPlantAndEquipmentOtherTypesMember2020-12-31
0000928658us-gaap:PropertyPlantAndEquipmentOtherTypesMember2019-12-31
0000928658cvlg:NetInDepreciationAndAmortizationExpenseMember2020-01-012020-12-31
0000928658cvlg:NetInDepreciationAndAmortizationExpenseMember2019-01-012019-12-31
0000928658cvlg:NetInDepreciationAndAmortizationExpenseMember2018-01-012018-12-31
0000928658cvlg:LandairHoldingsIncMember2018-07-03
0000928658cvlg:LandairHoldingsIncMemberus-gaap:TradeNamesMember2020-01-012020-06-30
0000928658cvlg:LandairHoldingsIncMemberus-gaap:TradeNamesMember2020-06-30
0000928658cvlg:DedicatedMember2020-12-31
0000928658cvlg:DedicatedMember2019-12-31
0000928658cvlg:ManagedFreightMember2020-12-31
0000928658cvlg:ManagedFreightMember2019-12-31
0000928658cvlg:WarehousingMember2020-12-31
0000928658cvlg:WarehousingMember2019-12-31
0000928658us-gaap:TradeNamesMembercvlg:DedicatedMember2020-12-31
0000928658us-gaap:TradeNamesMembercvlg:ManagedFreightMember2020-12-31
0000928658us-gaap:TradeNamesMembercvlg:WarehousingMember2020-12-31
0000928658us-gaap:TradeNamesMember2020-12-31
0000928658us-gaap:TradeNamesMember2020-01-012020-12-31
0000928658us-gaap:NoncompeteAgreementsMembercvlg:DedicatedMember2020-12-31
0000928658us-gaap:NoncompeteAgreementsMembercvlg:ManagedFreightMember2020-12-31
0000928658us-gaap:NoncompeteAgreementsMembercvlg:WarehousingMember2020-12-31
0000928658us-gaap:NoncompeteAgreementsMember2020-12-31
0000928658us-gaap:CustomerRelationshipsMembercvlg:DedicatedMember2020-12-31
0000928658us-gaap:CustomerRelationshipsMembercvlg:ManagedFreightMember2020-12-31
0000928658us-gaap:CustomerRelationshipsMembercvlg:WarehousingMember2020-12-31
0000928658us-gaap:CustomerRelationshipsMember2020-12-31
0000928658us-gaap:CustomerRelationshipsMember2020-01-012020-12-31
0000928658us-gaap:TradeNamesMembercvlg:DedicatedMember2019-12-31
0000928658us-gaap:TradeNamesMembercvlg:ManagedFreightMember2019-12-31
0000928658us-gaap:TradeNamesMembercvlg:WarehousingMember2019-12-31
0000928658us-gaap:TradeNamesMember2019-12-31
0000928658us-gaap:TradeNamesMember2019-01-012019-12-31
0000928658us-gaap:NoncompeteAgreementsMembercvlg:DedicatedMember2019-12-31
0000928658us-gaap:NoncompeteAgreementsMembercvlg:ManagedFreightMember2019-12-31
0000928658us-gaap:NoncompeteAgreementsMembercvlg:WarehousingMember2019-12-31
0000928658us-gaap:NoncompeteAgreementsMember2019-12-31
0000928658us-gaap:NoncompeteAgreementsMember2019-01-012019-12-31
0000928658us-gaap:CustomerRelationshipsMembercvlg:DedicatedMember2019-12-31
0000928658us-gaap:CustomerRelationshipsMembercvlg:ManagedFreightMember2019-12-31
0000928658us-gaap:CustomerRelationshipsMembercvlg:WarehousingMember2019-12-31
0000928658us-gaap:CustomerRelationshipsMember2019-12-31
0000928658us-gaap:CustomerRelationshipsMember2019-01-012019-12-31
0000928658cvlg:LendersMember2020-12-31
0000928658cvlg:TriumphBankMember2020-12-31
0000928658cvlg:LendersMember2020-01-012020-12-31
0000928658us-gaap:RevolvingCreditFacilityMember2020-12-31
0000928658us-gaap:RevolvingCreditFacilityMember2019-12-31
0000928658cvlg:DrawNoteMember2020-12-31
0000928658cvlg:DrawNoteMember2019-12-31
0000928658cvlg:RevenueEquipmentInstallmentNotesMember2020-12-31
0000928658cvlg:RevenueEquipmentInstallmentNotesMember2019-12-31
0000928658cvlg:RealEstateNoteMember2020-12-31
0000928658cvlg:RealEstateNoteMember2019-12-31
0000928658us-gaap:RevolvingCreditFacilityMembercvlg:LendersMember2020-10-23
0000928658us-gaap:RevolvingCreditFacilityMembercvlg:LendersMember2020-12-31
0000928658us-gaap:LetterOfCreditMembercvlg:LendersMember2020-10-23
0000928658us-gaap:LetterOfCreditMembercvlg:LendersMember2020-12-31
0000928658cvlg:SwingLineSubFacilityMembercvlg:LendersMember2020-12-31
0000928658cvlg:BaseRateLoansMembercvlg:LendersMembercvlg:FederalFundsRateMember2020-01-012020-12-31
0000928658cvlg:BaseRateLoansMembercvlg:LendersMemberus-gaap:LondonInterbankOfferedRateLIBORMember2020-01-012020-12-31
0000928658cvlg:BaseRateLoansMembercvlg:LendersMembersrt:MinimumMembercvlg:ApplicableMarginMember2020-10-232020-10-23
0000928658cvlg:BaseRateLoansMembercvlg:LendersMembersrt:MaximumMembercvlg:ApplicableMarginMember2020-10-232020-10-23
0000928658cvlg:BaseRateLoansMembercvlg:LendersMembersrt:MinimumMembercvlg:ApplicableMarginMember2020-01-012020-12-31
0000928658cvlg:BaseRateLoansMembercvlg:LendersMembersrt:MaximumMembercvlg:ApplicableMarginMember2020-01-012020-12-31
0000928658cvlg:LIBORLoansMembercvlg:LendersMembersrt:MinimumMembercvlg:ApplicableMarginMember2020-10-232020-10-23
0000928658cvlg:LIBORLoansMembercvlg:LendersMembersrt:MaximumMembercvlg:ApplicableMarginMember2020-10-232020-10-23
0000928658cvlg:LIBORLoansMembercvlg:LendersMembersrt:MinimumMembercvlg:ApplicableMarginMember2020-01-012020-12-31
0000928658cvlg:LIBORLoansMembercvlg:LendersMembersrt:MaximumMembercvlg:ApplicableMarginMember2020-01-012020-12-31
0000928658cvlg:LendersMember2020-10-232020-10-23
0000928658cvlg:LendersMember2020-10-23
0000928658cvlg:LendersMember2019-01-012020-12-31
0000928658cvlg:DrawNoteMembercvlg:TBKBankMember2020-09-23
0000928658cvlg:DrawNoteMembercvlg:TBKBankMemberus-gaap:LondonInterbankOfferedRateLIBORMember2020-09-232020-09-23
0000928658cvlg:DrawNoteMembercvlg:TBKBankMembersrt:MinimumMemberus-gaap:LondonInterbankOfferedRateLIBORMember2020-09-232020-09-23
0000928658cvlg:LendersMember2020-04-30
0000928658cvlg:LendersMember2020-05-012020-12-31
0000928658cvlg:VariableRateNoteMember2015-08-31
0000928658us-gaap:InterestRateSwapMember2015-08-31
0000928658cvlg:LeasedOfficeFacilityMember2020-01-012020-12-31
0000928658cvlg:RevenueEquipmentMember2020-01-012020-12-31
0000928658cvlg:RevenueEquipmentMember2019-01-012019-12-31
0000928658cvlg:RevenueEquipmentMember2018-01-012018-12-31
0000928658us-gaap:LandAndBuildingMember2020-01-012020-12-31
0000928658us-gaap:LandAndBuildingMember2019-01-012019-12-31
0000928658us-gaap:LandAndBuildingMember2018-01-012018-12-31
0000928658us-gaap:OtherMachineryAndEquipmentMember2020-01-012020-12-31
0000928658us-gaap:OtherMachineryAndEquipmentMember2019-01-012019-12-31
0000928658us-gaap:OtherMachineryAndEquipmentMember2018-01-012018-12-31
0000928658cvlg:TransportFinancialServicesMember2020-01-012020-12-31
0000928658cvlg:TransportFinancialServicesMember2019-01-012019-12-31
0000928658cvlg:TransportFinancialServicesMember2018-01-012018-12-31
0000928658us-gaap:StateAndLocalJurisdictionMembercvlg:DeferredTaxAssetsRelatedToStateNetOperatingLossCarryForwardsMember2020-12-31
0000928658us-gaap:DomesticCountryMember2020-01-012020-12-31
0000928658us-gaap:DomesticCountryMember2020-12-31
0000928658us-gaap:StateAndLocalJurisdictionMember2020-12-31
0000928658cvlg:TransportEnterpriseLeasingLLCMember2020-01-012020-12-31
0000928658cvlg:TransportEnterpriseLeasingLLCMember2019-01-012019-12-31
0000928658cvlg:TransportEnterpriseLeasingLLCMember2018-01-012018-12-31
0000928658cvlg:ReductionInTELInvestmentMembercvlg:TransportEnterpriseLeasingLLCMember2020-12-31
0000928658cvlg:ReductionInTELInvestmentMembercvlg:TransportEnterpriseLeasingLLCMember2019-12-31
0000928658cvlg:DriverAdvancesAndOtherReceivableMemberus-gaap:EquityMethodInvestmentNonconsolidatedInvesteeOrGroupOfInvesteesMembercvlg:TransportEnterpriseLeasingLLCMember2020-12-31
0000928658cvlg:DriverAdvancesAndOtherReceivableMemberus-gaap:EquityMethodInvestmentNonconsolidatedInvesteeOrGroupOfInvesteesMembercvlg:TransportEnterpriseLeasingLLCMember2019-12-31
0000928658us-gaap:OtherAssetsMember2020-12-31
0000928658us-gaap:OtherAssetsMember2019-12-31
0000928658us-gaap:EquityMethodInvestmentNonconsolidatedInvesteeOrGroupOfInvesteesMembercvlg:TransportEnterpriseLeasingLLCMember2020-12-31
0000928658us-gaap:EquityMethodInvestmentNonconsolidatedInvesteeOrGroupOfInvesteesMembercvlg:TransportEnterpriseLeasingLLCMember2019-12-31
0000928658us-gaap:EquityMethodInvestmentNonconsolidatedInvesteeOrGroupOfInvesteesMembercvlg:TransportEnterpriseLeasingLLCMember2020-01-012020-12-31
0000928658us-gaap:EquityMethodInvestmentNonconsolidatedInvesteeOrGroupOfInvesteesMembercvlg:TransportEnterpriseLeasingLLCMember2019-01-012019-12-31
0000928658us-gaap:EquityMethodInvestmentNonconsolidatedInvesteeOrGroupOfInvesteesMembercvlg:TransportEnterpriseLeasingLLCMember2018-01-012018-12-31
0000928658cvlg:TBKBankMembercvlg:DrawNoteMember2020-12-31
00009286582020-04-012020-06-30
0000928658us-gaap:OperatingSegmentsMembercvlg:HighwayServicesMember2020-01-012020-12-31
0000928658us-gaap:OperatingSegmentsMembercvlg:DedicatedMember2020-01-012020-12-31
0000928658us-gaap:OperatingSegmentsMembercvlg:ManagedFreightMember2020-01-012020-12-31
0000928658us-gaap:OperatingSegmentsMembercvlg:FactoringMember2020-01-012020-12-31
0000928658us-gaap:OperatingSegmentsMember2020-01-012020-12-31
0000928658us-gaap:IntersegmentEliminationMembercvlg:HighwayServicesMember2020-01-012020-12-31
0000928658us-gaap:IntersegmentEliminationMembercvlg:DedicatedMember2020-01-012020-12-31
0000928658us-gaap:IntersegmentEliminationMembercvlg:ManagedFreightMember2020-01-012020-12-31
0000928658us-gaap:IntersegmentEliminationMembercvlg:FactoringMember2020-01-012020-12-31
0000928658us-gaap:IntersegmentEliminationMember2020-01-012020-12-31
0000928658us-gaap:OperatingSegmentsMembercvlg:HighwayServicesMember2019-01-012019-12-31
0000928658us-gaap:OperatingSegmentsMembercvlg:DedicatedMember2019-01-012019-12-31
0000928658us-gaap:OperatingSegmentsMembercvlg:ManagedFreightMember2019-01-012019-12-31
0000928658us-gaap:OperatingSegmentsMembercvlg:FactoringMember2019-01-012019-12-31
0000928658us-gaap:OperatingSegmentsMember2019-01-012019-12-31
0000928658us-gaap:IntersegmentEliminationMembercvlg:HighwayServicesMember2019-01-012019-12-31
0000928658us-gaap:IntersegmentEliminationMembercvlg:DedicatedMember2019-01-012019-12-31
0000928658us-gaap:IntersegmentEliminationMembercvlg:ManagedFreightMember2019-01-012019-12-31
0000928658us-gaap:IntersegmentEliminationMembercvlg:FactoringMember2019-01-012019-12-31
0000928658us-gaap:IntersegmentEliminationMember2019-01-012019-12-31
0000928658us-gaap:OperatingSegmentsMembercvlg:HighwayServicesMember2018-01-012018-12-31
0000928658us-gaap:OperatingSegmentsMembercvlg:DedicatedMember2018-01-012018-12-31
0000928658us-gaap:OperatingSegmentsMembercvlg:ManagedFreightMember2018-01-012018-12-31
0000928658us-gaap:OperatingSegmentsMembercvlg:FactoringMember2018-01-012018-12-31
0000928658us-gaap:OperatingSegmentsMember2018-01-012018-12-31
0000928658us-gaap:IntersegmentEliminationMembercvlg:HighwayServicesMember2018-01-012018-12-31
0000928658us-gaap:IntersegmentEliminationMembercvlg:DedicatedMember2018-01-012018-12-31
0000928658us-gaap:IntersegmentEliminationMembercvlg:ManagedFreightMember2018-01-012018-12-31
0000928658us-gaap:IntersegmentEliminationMembercvlg:FactoringMember2018-01-012018-12-31
0000928658us-gaap:IntersegmentEliminationMember2018-01-012018-12-31
0000928658srt:ConsolidationEliminationsMember2020-01-012020-12-31
0000928658srt:ConsolidationEliminationsMember2019-01-012019-12-31
0000928658srt:ConsolidationEliminationsMember2018-01-012018-12-31
00009286582020-01-012020-03-31
00009286582020-07-012020-09-30
00009286582020-10-012020-12-31
00009286582019-01-012019-03-31
00009286582019-04-012019-06-30
00009286582019-07-012019-09-30
00009286582019-10-012019-12-31
0000928658us-gaap:SubsequentEventMember2021-01-062021-01-06
0000928658us-gaap:CommonClassAMemberus-gaap:SubsequentEventMember2021-01-25
0000928658us-gaap:CommonClassAMemberus-gaap:SubsequentEventMember2021-03-022021-03-02
0000928658us-gaap:SubsequentEventMember2021-01-28
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020, 2019, and 2018
1.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Nature of Business
On July 1, 2020, the stockholders of Covenant Transportation Group, Inc. approved the amendment to the organization’s Articles of Incorporation to change the Company’s name to Covenant Logistics Group, Inc. All references herein reflect the change of name to Covenant Logistics Group, Inc.
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 in 1994, 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; Landair Transport, Inc., a Tennessee corporation; Landair Logistics, Inc., a Tennessee corporation; Landair Leasing, Inc., a Tennessee corporation; 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.
Segment Realignment
In 2020, we made a number of changes to our organizational structure in an effort to streamline our business in a manner that we believe will allow us to significantly lower our fixed costs, pay down debt and produce consistent acceptable margins. These changes impacted the Company’s reportable operating segments but did not impact the Company’s Consolidated Financial Statements. We have recast prior year information to conform to the realignment. Under this revised reporting structure, we have four reportable operating segments, which include:
●
|
Non-dedicated truckload services ("Expedited"), which services customers with high service freight and delivery standards, such as 1,000 miles in 22 hours, or 15-minute delivery windows.
|
●
|
Dedicated contract truckload services (“Dedicated”), which consists of our truckload business that involves longer-term contracts that allocate a specified number of tractors and trailers to a specific customer, with fixed and variable compensation.
|
●
|
Managed Freight services, which consists of our brokerage and transportation management services ("TMS") and provides logistics capacity by outsourcing the carriage of customers' freight to third parties, as well as, comprehensive logistics services on a contractual basis to customers who prefer to outsource their logistics needs.
|
●
|
Warehousing services (“Warehousing”), provides day-to-day warehouse management services to customers who have chosen to outsource this function.
|
The following table summarizes our revenue by our four reportable operating segment, 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, 2020, 2019, and 2018:
|
|
Year ended December 31,
|
|
(in thousands)
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Expedited
|
|
$
|
320,202
|
|
|
$
|
356,521
|
|
|
$
|
469,308
|
|
Dedicated
|
|
|
288,652
|
|
|
|
342,473
|
|
|
|
257,739
|
|
Managed Freight
|
|
|
177,579
|
|
|
|
138,616
|
|
|
|
129,790
|
|
Warehousing
|
|
|
52,128
|
|
|
|
47,777
|
|
|
|
23,580
|
|
Total revenues
|
|
$
|
838,561
|
|
|
$
|
885,387
|
|
|
$
|
880,417
|
|
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 is not the primary beneficiary of TEL and TEL should not be consolidated. We have accounted for our investment in TEL using the equity method of accounting given our 49% 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.
On a periodic basis, we assess whether there are any indicators that the fair value of our investment in TEL may be 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, 2020 and 2019.
Risks and Uncertainties
We are continuing to monitor the progression of the COVID-19 pandemic, further government response, and development of treatments and vaccines and their potential effect on our short-term and long-term financial position, results of operations, cash flows and liquidity. These events could have an impact in future periods on certain estimates used in the preparation of our 2020 financial results, including, but not limited to impairment of goodwill, other intangible assets and other long-lived assets, income tax provision and recoverability of certain receivables. Local, state and national governments continue to emphasize the importance of transportation and have designated it as an essential service. The health and safety of our team members and the community is our first priority, as such, we've put certain measures into place, including remote work arrangements, enforced social distancing and increased sanitation protocols, among others. Should the pandemic continue for an extended period of time, the impact on our operations could have a material adverse effect on our financial condition, results of operations, cash flows and liquidity.
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 current policy period ( 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 estimated to be fully eroded based on claims expense accruals. We have 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, 2021 to 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, 2018 and March 31, 2021, could result in additional expense accruals. Effective April 1, 2020, consistent with an extremely difficult insurance market for the industry, our insurance renewal terms include a higher fixed premium expense of approximately $0.5 million per quarter, greater self-insured retention, and lower aggregate limits than prior coverage. 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.
On July 8, 2020, we sold a portfolio of accounts receivable, contract rights, and associated assets consisting of approximately $103.3 million in net funds employed (the “Portfolio”) previously held by Transport Financial Services ("TFS"), a division of Covenant Transport Solutions, LLC, an indirect wholly owned subsidiary of the Company, to a subsidiary of Triumph Bancorp, Inc. ("Triumph") for approximately $122.3 million, consisting of $108.4 million in cash and $13.9 million in Triumph stock, plus an earn-out opportunity of up to $9.9 million. After the transaction closed, the Company and Triumph became involved in a dispute over the nature of approximately $66.0 million of the assets included in the Portfolio. The dispute was resolved on September 23, 2020 with an amendment of the purchase agreement and related funding arrangements that reduced the purchase price of the Portfolio to approximately $108.4 million, representing the cash amount received by us at closing. Additionally, the earnout opportunity was terminated and we were required to sell, and subsequently sold, the Triumph stock we received at closing for $28.1 million and remitted the proceeds to Triumph upon settlement.
The amended purchase agreement specifically identified approximately $62.0 million of accounts within the Portfolio, which related to advances on services that had not yet been performed, that were placed in a loss sharing pool to be repaid with proceeds other than those generated from ordinary working capital factoring. To the extent losses on covered accounts are incurred, we will indemnify Triumph on a dollar for dollar basis for up to the first $30.0 million of losses, and on a 50% basis for up to the next $30.0 million of losses, for total indemnification exposure of up to $45.0 million. The amended purchase agreement resulted in a gain on the sale of the Portfolio of $3.7 million, net of related expenses. During the fourth quarter of 2020, the Company recorded $44.2 million of contingent liabilities, reflected as other long-term liabilities from discontinued operations in our consolidated balance sheet, because as of December 31, 2020 it was probable and estimable that such amount would be due to Triumph under the amended purchase agreement.
To date no indemnification obligations have been required to be funded and the Company and Triumph are cooperating to manage the covered accounts and assist the clients with, among other things, operational improvements in an attempt to minimize losses on the covered accounts.
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 upon completion of the services provided. Revenue is recorded on a gross basis, without deducting third 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 are no assets or liabilities recorded in conjunction with revenue recognized, other than accounts receivable and allowance for doubtful accounts. We recognized in-process revenue of $1.2 million, $0.8 million, and $1.3 million for the years ended December 31, 2020, 2019, and 2018, respectively. We had accounts receivable, net of allowance for doubtful accounts, of $91.3 million, $81.2 million, and $97.5 million at December 31, 2020, 2019, and 2018, 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.
Cash and Cash Equivalents
We consider all highly liquid investments with a maturity of three 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.
Accounts Receivable and Concentration of Credit Risk
We extend credit to our customers in the normal course of business, which are generally due within 30-45 days of the services performed. We perform ongoing credit evaluations and generally do not require collateral. Trade accounts receivable are recorded at their invoiced amounts, net of allowance for doubtful accounts. We evaluate the adequacy of our allowance for doubtful accounts 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 and specific receivables aging analysis. 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. During 2020, 2019, and 2018, our top ten customers generated 48%, 45%, and 49% of total revenue, respectively. In 2020, 2019, and 2018 one customer accounted for more than 10% of our consolidated revenue in each year. The carrying amount reported in the consolidated balance sheet for accounts receivable approximates fair value based on the fact that the receivables collection averaged approximately 38 days and 33 days in 2020 and 2019, respectively.
The following table provides a summary (in thousands) of the activity in the allowance for doubtful accounts for 2020, 2019, and 2018:
Years ended December 31:
|
|
Beginning balance January 1,
|
|
|
Additional provisions to allowance
|
|
|
Write-offs and other adjustments
|
|
|
Ending balance December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
$
|
1,440
|
|
|
$
|
3,011
|
|
|
$
|
(1,459
|
)
|
|
$
|
2,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
$
|
1,577
|
|
|
$
|
141
|
|
|
$
|
(278
|
)
|
|
$
|
1,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
$
|
1,258
|
|
|
$
|
182
|
|
|
$
|
137
|
|
|
$
|
1,577
|
|
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 recovered 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 the first-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 equipment no longer utilized in continuing operations which are available and held for sale. Assets held for sale are no 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 within twelve months.
Change in Estimates
The Company reviews the estimated useful lives and salvage values of its assets on an ongoing basis, based upon, among other things, our experience with similar assets, conditions in the used revenue equipment market, and prevailing industry practice. During the second quarter of 2020, the Company adjusted the useful lives of certain intangible finite-lived assets, including the Landair trade name and non-compete agreement, and certain revenue equipment held under operating leases as the result of management changes, a change in the branding of the organization, and the forward looking use of these assets. These changes are being treated as a change in accounting estimate, which during the twelve months ended December 31, 2020, resulted in an increase in depreciation and amortization expense of approximately $3.2 million, or a $2.5 million, or $0.14, per diluted share decrease to net income.
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 10% to 35% of their cost. We generally depreciate new trailers over seven years for refrigerated trailers and ten years for dry van trailers to salvage values of approximately 28% and 21% 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 are not 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.
Pursuant to applicable accounting standards, revenue equipment and other long-lived assets are tested for impairment whenever an event occurs that indicates 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 to its carrying value. Fair value is determined based on a discounted cash flow analysis or the appraised value of the assets, as appropriate. We recognized an impairment of $26.6 million during the twelve months ended December 31, 2020. See Note 3, "Cost Savings and Restructuring" for additional discussion around the impairment.
A portion of our tractors are protected by non-binding indicative trade-in values or 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 into two 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 may have occurred. We test intangible assets with finite lives for impairment if conditions exist that indicate the carrying value may not be recoverable. Such conditions may include 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 is not 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 15 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.
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, 2020, our insurance program involves self-insurance with the following risk retention levels (before giving effect to any commutation of an auto liability policy):
|
●
|
auto liability - the aggregate limits available in the coverage layer $9.0 million in excess of $1.0 million were estimated to be fully eroded based on claims expense accruals at December 31, 2020 and we replaced such layer with a new $7.0 million in excess of $3.0 million policy that runs from January 28, 2021 to April 1, 2024
|
|
●
|
workers' compensation - $1.3 million
|
|
●
|
employee medical - $0.4 million
|
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 from third-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 and 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 have third party insurance and for claims outside our coverage limits. Upon settling claims and expenses associated with claims where we have third party coverage, we are generally required to initially fund payment to the claimant and seek reimbursement from the insurer. Receivables from insurers for claims and expenses we have paid on behalf of insurers were $0.0 and $0.3 million at December 31, 2020 and 2019, respectively, and 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 $7.4 million and $0.0 million as other short-term assets and a corresponding accrual in the short-term portion of insurance and claims accruals and $24.4 million and $2.1 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, 2020 and 2019, 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.
Effective April 2018, we entered into new auto liability policies with a three-year term. The policy includes a limit for a single loss of $9.0 million, an aggregate of $18.0 million for each policy year, and a $30.0 million aggregate for the 36 month term ended March 31, 2021. The policy included a policy release premium refund or commutation option of up to $14.0 million, less any future amounts paid on claims by the insurer. A decision with respect to commutation of the policy could be made before April 1, 2021. Additionally, our prior auto liability policy that ran from October 1, 2014 through March 31, 2018, was commuted, resulting in a premium release of $7.3 million. Management cannot predict whether or not future claims or the development of existing claims will justify a commutation of either policy period, and accordingly, no related amounts were recorded at December 31, 2020. We carry excess policy layers above the primary auto liability policy described above.
Interest
We capitalize interest on major projects during construction. Interest is capitalized based on the average interest rate on related debt. Capitalized interest was less than $0.1 million in 2020 and 2018 and approximately $0.1 million in 2019, 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. The carrying value of the factored receivables approximates the fair value, as the receivables are generally repaid directly to us by the client's customer within 30–40 days due to the combination of the short-term nature of the financing transaction and the underlying quality of the receivables. 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, 2020, 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. Additionally, certain investments intended to serve the purposes of capital preservation and to fund insurance losses are designated as available-for-sale and are valued based on quoted prices in active markets. 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.
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 Note 10.
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 than not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit with a greater than 50% 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 is not more likely than not 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 than twelve 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 are not parties to our Credit Facility and may 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 do not typically include residual value guarantees or material restrictive covenants.
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 payments not 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 to two 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 to one vote per share. The terms of any future issuances of preferred shares will be set by our Board of Directors.
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 195,000; 200,000; and 129,000 shares issuable upon conversion of unvested restricted shares for the years ended December 31, 2020, 2019, and 2018, respectively. Of such shares, 195,000 unvested shares have been 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 year ended December 31, 2020. There were approximately 70,000; 0; and 0 shares issuable upon conversion of unvested employee stock options for the years ended December 31, 2020, 2019, and 2018, respectively. Of such options, 70,000 unvested options have been excluded from the calculation of diluted earnings per share since the effect of any assumed exercise of the related options would be anti-dilutive for the year ended December 31, 2020. Income per share is the same for both Class A and Class B shares.
The following table sets forth the calculation of net income per share included in the consolidated statements of operations for each of the three years ended December 31:
(in thousands except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Numerators:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations
|
|
$
|
(14,120
|
)
|
|
$
|
5,219
|
|
|
$
|
40,860
|
|
(Loss) income from discontinued operations
|
|
|
(28,598
|
)
|
|
|
3,258
|
|
|
|
1,643
|
|
Net (loss) income
|
|
$
|
(42,718
|
)
|
|
$
|
8,477
|
|
|
$
|
42,503
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic income per share – weighted-average shares
|
|
|
17,358
|
|
|
|
18,435
|
|
|
|
18,340
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Equivalent shares issuable upon conversion of unvested restricted shares
|
|
|
-
|
|
|
|
200
|
|
|
|
129
|
|
Equivalent shares issuable upon conversion of unvested employee stock options
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Denominator for diluted income per share adjusted weighted-average shares and assumed conversions
|
|
|
17,358
|
|
|
|
18,635
|
|
|
|
18,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
(0.81
|
)
|
|
$
|
0.28
|
|
|
$
|
2.23
|
|
(Loss) income from discontinued operations
|
|
$
|
(1.65
|
)
|
|
$
|
0.18
|
|
|
$
|
0.09
|
|
Net (loss) income per basic share
|
|
$
|
(2.46
|
)
|
|
$
|
0.46
|
|
|
$
|
2.32
|
|
Diluted (loss) income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
(0.81
|
)
|
|
$
|
0.28
|
|
|
$
|
2.21
|
|
(Loss) income from discontinued operations
|
|
$
|
(1.65
|
)
|
|
$
|
0.17
|
|
|
$
|
0.09
|
|
Diluted income per share
|
|
$
|
(2.46
|
)
|
|
$
|
0.45
|
|
|
$
|
2.30
|
|
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 of Directors. 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.
Recent Accounting Pronouncements
Accounting Standards not yet adopted
In June 2016, FASB issued ASU 2016-13, 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 will be effective for us for our annual reporting period beginning January 1, 2023, including interim periods within that reporting period. Early adoption is permitted. We are currently evaluating the impacts the adoption of this standard will have on the consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing the exceptions to the incremental approach for intra-period tax allocation in certain situations, the requirement to recognize a deferred tax liability for a change in the status of a foreign investment, and the general methodology for computing income taxes in an interim period when year-to date loss exceeds the anticipated loss for the year. The amendments also simplify the accounting for income taxes with regard to franchise tax, the evaluation of step up in the tax basis goodwill in certain business combinations, allocating current and deferred tax expense to legal entities that are not subject to tax and enacted change in tax laws or rates. The Company adopted these provisions in the first quarter of 2021 and the adoption did not have a material impact on its consolidated financial statements.
There are no other new accounting pronouncements that are expected to have a significant impact on our consolidated financial statements.
2.
|
DISCONTINUED OPERATIONS
|
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 the twelve months ended December 31, 2020, 2019, and 2018:
(in thousands)
|
|
Twelve months ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Total revenue
|
|
$
|
5,397
|
|
|
$
|
9,140
|
|
|
$
|
5,038
|
|
Operating expenses
|
|
|
1,149
|
|
|
|
1,876
|
|
|
|
1,467
|
|
Gain on disposal
|
|
|
(3,720
|
)
|
|
|
-
|
|
|
|
-
|
|
Loss contingency
|
|
|
44,151
|
|
|
|
-
|
|
|
|
-
|
|
Operating (loss) income
|
|
|
(36,183
|
)
|
|
|
7,264
|
|
|
|
3,571
|
|
Interest expense
|
|
|
1,950
|
|
|
|
2,892
|
|
|
|
1,363
|
|
(Loss) income before income taxes
|
|
|
(38,133
|
)
|
|
|
4,372
|
|
|
|
2,208
|
|
Income tax (benefit) expense
|
|
|
(9,535
|
)
|
|
|
1,114
|
|
|
|
565
|
|
Net (loss) income from discontinued operations, net of tax
|
|
$
|
(28,598
|
)
|
|
$
|
3,258
|
|
|
$
|
1,643
|
|
As of December 31, 2020, we had a contingent liability due to Triumph recorded in other long-term liabilities from discontinued operations on our consolidated balance sheet of $44.2 million. Based on the terms of the amended purchase agreement, as described in Note 1, we estimate our possible indemnification exposure to be from $44.2 million to $45.0 million.
Interest expense not directly attributable to or related to other operations has been allocated to discontinued operations in a manner consistent with debt needed to finance the net average funds employed by the Factoring reportable segment, multiplied by the company's weighted average interest rate.
The following table summarizes the major classes of assets and liabilities included as discontinued operations as of December 31, 2020 and 2019:
(in thousands)
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Accounts receivable, net of allowance of $0 in 2020 and $408 in 2019
|
|
$
|
-
|
|
|
$
|
86,620
|
|
Current assets of discontinued operations
|
|
|
-
|
|
|
|
86,620
|
|
Noncurrent deferred tax asset
|
|
|
9,535
|
|
|
|
-
|
|
Noncurrent assets from discontinued operations
|
|
|
9,535
|
|
|
|
-
|
|
Total assets from discontinued operations
|
|
$
|
9,535
|
|
|
$
|
86,620
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
816
|
|
|
$
|
6,245
|
|
Current liabilities of discontinued operations
|
|
|
816
|
|
|
|
6,245
|
|
Contingent liabilities
|
|
|
44,151
|
|
|
|
-
|
|
Total liabilities
|
|
$
|
44,967
|
|
|
$
|
6,245
|
|
The net cash flows for operating activities related to discontinued operations provided $11.7 million and used $28.1 million and $17.3 million for the years ended December 31, 2020, 2019, and 2018, respectively. There were $108.4 million investing and no financing cash flows related to discontinued operations for the year ended December 31, 2020 and no investing or financing cash flows related to discontinued operations for the same 2019 and 2018 periods.
The following unaudited summary information is presented on a consolidated pro forma basis as if the Factoring assets were sold as of January 1, 2018:
(in thousands)
|
|
Twelve months ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Total revenue
|
|
$
|
838,561
|
|
|
$
|
885,387
|
|
|
$
|
880,417
|
|
(Loss) income from continuing operations
|
|
|
(14,120
|
)
|
|
|
5,219
|
|
|
|
40,860
|
|
(Loss) income per basic share from continuing operations
|
|
$
|
(0.81
|
)
|
|
$
|
0.28
|
|
|
$
|
2.23
|
|
(Loss) income per diluted share from continuing operations
|
|
$
|
(0.81
|
)
|
|
$
|
0.28
|
|
|
$
|
2.21
|
|
Refer to Note 1, "Significant Accounting Policies" of the accompanying consolidated financial statements for further information about the amended TFS purchase agreement.
3.
|
RESTRUCTURING AND COST SAVINGS INITIATIVES
|
Since the first quarter of 2020, we made significant changes to our operational business units, overhead structure and branding strategy in an effort to streamline our business in a manner that we believe will allow us to significantly lower our fixed costs, pay down debt and produce consistent acceptable margins. These changes include (i) a reduction in our fleet of tractors and refrigerated trailers, which have historically produced unacceptable or unprofitable operating income, (ii) reallocation of our operating fleet toward our more profitable expedited, dedicated and irregular route operations, (iii) the sale of our Hutchins, Texas terminal and discontinued use of our Texarkana, Arkansas terminal, (iv) changes to key management and reductions to headcount, (v) the closure and early termination of our leased office space in Chattanooga, Tennessee that our brokerage group occupied, (vi) the installation of new operational processes allowing us to abandon or discontinue the use of a number of peripheral information technology infrastructure and applications and (vii) a change in our branding strategy to focus on one company name, phasing out the use of the Landair trade name.
Although the significant majority of restructuring and cost savings initiatives were completed in the second quarter of 2020, we incurred additional costs in the third and fourth quarters of 2020 as we continued to optimize our fleet profile and management team.
In the second quarter of 2020 we discontinued the use of a significant amount of property and equipment, including assets owned and held under operating leases. We adjusted the carrying value of the owned property and equipment down to fair market value less estimated costs of disposal and classified them as available held for sale as of June 30, 2020. We expect to sell all the assets within the next twelve months. We terminated the lease agreement on a leased office facility in Chattanooga, TN during the second quarter of 2020 and recognized the related loss on the termination of the right of use asset and the abandonment of leasehold improvements within the impairment of property and equipment line item of the consolidated statements of operations. The following table provides a summary of the asset groups impaired, amount of the impairment and a description of the valuation technique used to determine fair value. We believe that these impairment activities are substantially complete. Accordingly, we incurred no additional charges during the third and fourth quarters of 2020 and do not expect to incur additional charges in connection with this activity. There were no such charges in 2019 or 2018.
(in thousands)
|
|
Twelve months ended December 31,
|
|
|
|
Description
|
|
2020
|
|
Segment(s) Impacted
|
Value Determination
|
Revenue equipment
|
|
$
|
16,779
|
|
Expedited and Dedicated
|
Third Party Market Appraisal
|
Terminal facility, leasehold improvements, and equipment, Texarkana, AR
|
|
|
7,319
|
|
Expedited and Dedicated
|
Third Party Market Appraisal
|
Leased office facility, Chattanooga, TN
|
|
|
2,236
|
|
Managed Freight
|
Loss on ROU Asset and Leasehold Improvements
|
Training and orientation center, Chattanooga, TN
|
|
|
235
|
|
Expedited and Dedicated
|
Quoted Market Price
|
Impairment of right-of use asset, long lived properties, and equipment
|
|
$
|
26,569
|
|
|
|
Other restructuring related gains and charges incurred during the twelve months ended December 31, 2020 are summarized in the table below. Unless noted below, we believe that these other restructuring related gains and charges are substantially complete. Accordingly, we do not expect to incur additional charges in connection with this activity. There were no such activities in 2019 or 2018.
(in thousands)
|
|
Twelve months ended December 31,
|
|
|
Description
|
|
2020
|
|
Segment(s) Impacted
|
Gain on disposal of terminals, net
|
|
$
|
(4,740
|
)
|
Expedited and Dedicated
|
Restructuring related separation and other
|
|
|
4,334
|
|
Expedited, Dedicated, and Managed Freight
|
Abandonment of information technology infrastructure
|
|
|
1,048
|
|
Expedited and Dedicated
|
Change in useful life/abandonment of intangible assets
|
|
|
1,331
|
|
Dedicated, Managed Freight, and Warehousing
|
Abandonment of revenue equipment held under operating leases
|
|
|
825
|
|
Expedited and Dedicated
|
Contract exit costs and restructuring related costs and professional fees
|
|
|
695
|
|
Expedited and Dedicated
|
Total restructuring
|
|
$
|
3,493
|
|
|
4.
|
STOCK-BASED COMPENSATION
|
Our Third Amended and Restated 2006 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. On July 1, 2020, the stockholders, upon recommendation of the board of directors, approved the Second Amendment (the “Second Amendment”) to our Third Amended and Restated 2006 Omnibus Incentive Plan (the "Incentive Plan"). The Second Amendment (i) increased the number of shares of Class A common stock available for issuance under the Incentive Plan by an additional 1,900,000 shares, (ii) added a fungible share reserve feature, under which shares subject to stock options and stock appreciation rights will be counted as one share for every share granted and shares subject to all other awards will be counted as 1.80 shares for every share granted, (iii) added a double-trigger vesting requirement upon a change in control, (iv) eliminated the Compensation Committee’s discretion to accelerate vesting, except in cases involving death or disability, (v) increased the maximum award granted or payable to any one participant under the Incentive Plan for a calendar year from 200,000 shares of Class A common stock or $2,000,000, in the event the award is paid in cash, to 500,000 shares of Class A common stock or $4,000,000, in the event the award is paid cash, (vi) re-set the date through which awards may be made under the Incentive Plan to June 1, 2030, and (vii) made other miscellaneous, administrative and conforming changes.
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, 2020, 1,785,014 of the 4,200,000 shares noted above were available for award under the amended Incentive Plan. No participant in the Incentive Plan may receive awards of any type of equity instruments in any calendar-year that relates to more than 500,000 shares of our Class A common stock or $4,000,000. No awards may be made under the Incentive Plan after March 31, 2023. 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 $1.8 million, $0.4 million, and $4.8 million in 2020, 2019, and 2018, respectively. Included in general supplies and expenses within the consolidated statements of operations is stock-based compensation expenses for non-employee directors of $0.4 million in 2020, 2019, and 2018, respectively. All the stock compensation expense recorded in 2020, 2019, and 2018 relates to restricted shares granted, other than less than $0.1 million in 2020, as no options were granted during 2019 or 2018. Associated with stock compensation expense was $0.2 million, $0.1 million, and $0.3 million of income tax expense in 2020, 2019, and 2018, respectively, related to the exercise of restricted share vesting as no stock options were eligible to vest during those years.
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 20,570, 62,255, and 11,052 Class A common stock shares, which were withheld at weighted average per share prices of $14.65, $17.75, and $21.89, respectively, based on the closing prices of our Class A common stock on the dates the shares vested in 2020, 2019, and 2018, respectively, in lieu of the federal and state minimum statutory tax withholding requirements. We remitted $0.3 million, $1.1 million, and $0.8 million in 2020, 2019, and 2018, 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, 2020, 2019, and 2018:
|
|
Number of stock awards (in thousands)
|
|
|
Weighted average grant date fair value
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2017
|
|
|
587
|
|
|
$
|
18.14
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
153
|
|
|
$
|
30.32
|
|
Vested
|
|
|
(35
|
)
|
|
$
|
25.97
|
|
Forfeited
|
|
|
(30
|
)
|
|
$
|
27.58
|
|
Unvested at December 31, 2018
|
|
|
675
|
|
|
$
|
20.08
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
351
|
|
|
$
|
15.42
|
|
Vested
|
|
|
(191
|
)
|
|
$
|
19.22
|
|
Forfeited
|
|
|
(48
|
)
|
|
$
|
19.33
|
|
Unvested at December 31, 2019
|
|
|
787
|
|
|
$
|
18.25
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
119
|
|
|
$
|
13.43
|
|
Vested
|
|
|
(65
|
)
|
|
$
|
23.82
|
|
Forfeited
|
|
|
(196
|
)
|
|
$
|
20.05
|
|
Unvested at December 31, 2020
|
|
|
645
|
|
|
$
|
16.25
|
|
The unvested shares at December 31, 2020 will vest based on when and if the related vesting criteria are met for each award. All awards require continued service to vest, and 192,472 of these awards vest solely based on continued service, in varying increments between 2021 and 2026. Performance based awards account for 397,499 of the unvested shares at December 31, 2020, for which we have not recognized any compensation cost as vesting is not probable. Market based awards account for 55,000 of the unvested shares at December 31, 2020 and have no unrecognized compensation cost as the cost has been fully recognized based on the market targets having been achieved for the year ended December 31, 2020.
The fair value of restricted share awards that vested in 2020, 2019, and 2018 was approximately $0.9 million, $3.4 million, and $0.7 million, respectively. As of December 31, 2020, we had approximately $1.9 million of unrecognized compensation expense related to 192,472 service-based shares, which is probable to be recognized over a weighted average period of approximately 30 months. All restricted shares awarded to executives and other key employees pursuant to the Incentive Plan provide the holder with voting and other stockholder-type rights, but will not be issued until the relevant restrictions are satisfied. Forfeitures are recognized as they're incurred.
There were no outstanding options at December 31, 2019 or 2018. The following table summarizes our stock option activity for the fiscal year ended December 31, 2020:
|
|
Number of options (in thousands)
|
|
|
Weighted average exercise price
|
|
|
Weighted average remaining contractual term
|
|
|
Aggregate intrinsic value (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
721
|
|
|
$
|
15.77
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Options forfeited
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2020
|
|
|
721
|
|
|
$
|
15.77
|
|
|
9.8 years
|
|
|
$
|
(692
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2020
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
5.
|
PROPERTY AND EQUIPMENT
|
A summary of property and equipment, at cost, as of December 31, 2020 and 2019 is as follows:
(in thousands)
|
|
Estimated Useful Lives (Years)
|
|
|
2020
|
|
|
2019
|
|
Revenue equipment
|
|
|
3 - 10
|
|
|
$
|
435,865
|
|
|
$
|
588,828
|
|
Communications equipment
|
|
|
5 - 10
|
|
|
|
5,492
|
|
|
|
6,189
|
|
Land and improvements
|
|
|
0 - 15
|
|
|
|
16,602
|
|
|
|
23,398
|
|
Buildings and leasehold improvements
|
|
|
7 - 40
|
|
|
|
57,308
|
|
|
|
75,471
|
|
Construction in-progress
|
|
|
-
|
|
|
|
695
|
|
|
|
400
|
|
Other
|
|
|
2 - 10
|
|
|
|
25,314
|
|
|
|
31,097
|
|
|
|
|
|
|
|
$
|
541,276
|
|
|
$
|
725,383
|
|
Depreciation expense was $60.4 million, $77.6 million, and $74.4 million, in 2020, 2019, and 2018, respectively. This depreciation expense excludes net gains on the sale of property and equipment totaling $7.7 million and $1.7 million in 2020 and 2019, respectively, and net losses of $0.3 million in 2018.
We lease certain revenue equipment under finance and operating leases with terms of approximately 48 to 84 months. At December 31, 2020 and 2019, property and equipment included finance and operating leases. Our finance leases had capitalized costs of $50.2 million and $55.0 million and accumulated amortization of $20.8 million and $21.0 million at December 31, 2020 and 2019, respectively. Amortization of these leased assets is included in depreciation and amortization expense in the consolidated statement of operations and totaled $4.1 million, $5.5 million, and $5.4 million during 2020, 2019, and 2018, respectively. See Note 9. Leases for additional information about our finance and operating leases.
6.
|
GOODWILL, OTHER INTANGIBLES, AND OTHER ASSETS
|
On July 3, 2018, we acquired 100% of the outstanding stock of Landair Holdings, Inc., a Tennessee corporation ("Landair"). Landair is a dedicated and for-hire truckload carrier, as well as a supplier of transportation management, warehousing, and inventory management services. Landair's results have been included in the consolidated financial statements since the date of acquisition. The Company's only goodwill and other intangible assets are a result of the Landair acquisition. Landair's trucking operations' results are reported within our Dedicated reportable segment, while Landair's logistics operations' results are reported within our Managed Freight and Warehousing reportable segments.
As a result of management compensation structure changes and a change in the branding strategy of the organization, the Company revised the estimated remaining useful life of the Landair trade name to 15 months as of June 30, 2020. At the end of its useful life, the Landair trade name will have a residual value of $0.5 million. The non-compete agreement with a former Landair executive was terminated during the second quarter of 2020. These changes resulted in additional amortization of $1.3 million during the year ended December 31, 2020, or a $1.0 million, or $0.06 per diluted share, decrease in net income. The remaining useful lives as adjusted are included in the summary of other intangible assets below.
A summary of indefinite-lived goodwill, by reportable operating segment as of December 31, 2020 and 2019 is as follows:
(in thousands)
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
|
Gross/net goodwill
|
|
|
Gross/net goodwill
|
|
Dedicated
|
|
$
|
15,320
|
|
|
$
|
15,320
|
|
Managed Freight
|
|
|
5,448
|
|
|
|
5,448
|
|
Warehousing
|
|
|
21,750
|
|
|
|
21,750
|
|
Total goodwill
|
|
$
|
42,518
|
|
|
$
|
42,518
|
|
A summary of other intangible assets, by reportable operating segment as of December 31, 2020 and 2019 is as follows:
(in thousands)
|
|
December 31, 2020
|
|
|
|
|
|
|
|
Gross intangible assets
|
|
|
Accumulated amortization
|
|
|
Net intangible assets
|
|
|
Remaining Life (months)
|
|
Trade name:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dedicated
|
|
$
|
2,402
|
|
|
$
|
(1,204
|
)
|
|
$
|
1,198
|
|
|
|
|
|
Managed Freight
|
|
|
999
|
|
|
|
(501
|
)
|
|
|
498
|
|
|
|
|
|
Warehousing
|
|
|
999
|
|
|
|
(501
|
)
|
|
|
498
|
|
|
|
|
|
Total trade name
|
|
|
4,400
|
|
|
|
(2,206
|
)
|
|
|
2,194
|
|
|
|
9
|
|
Non-Compete agreement:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dedicated
|
|
|
914
|
|
|
|
(914
|
)
|
|
|
-
|
|
|
|
|
|
Managed Freight
|
|
|
130
|
|
|
|
(130
|
)
|
|
|
-
|
|
|
|
|
|
Warehousing
|
|
|
356
|
|
|
|
(356
|
)
|
|
|
-
|
|
|
|
|
|
Total non-compete agreement
|
|
|
1,400
|
|
|
|
(1,400
|
)
|
|
|
-
|
|
|
|
-
|
|
Customer relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dedicated
|
|
|
14,072
|
|
|
|
(2,931
|
)
|
|
|
11,141
|
|
|
|
|
|
Managed Freight
|
|
|
1,692
|
|
|
|
(354
|
)
|
|
|
1,338
|
|
|
|
|
|
Warehousing
|
|
|
12,436
|
|
|
|
(2,591
|
)
|
|
|
9,845
|
|
|
|
|
|
Total customer relationships:
|
|
|
28,200
|
|
|
|
(5,876
|
)
|
|
|
22,324
|
|
|
|
114
|
|
Total other intangible assets
|
|
$
|
34,000
|
|
|
$
|
(9,482
|
)
|
|
$
|
24,518
|
|
|
|
|
|
(in thousands)
|
|
December 31, 2019
|
|
|
|
|
|
|
|
Gross intangible assets
|
|
|
Accumulated amortization
|
|
|
Net intangible assets
|
|
|
Remaining Life (months)
|
|
Trade name:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dedicated
|
|
$
|
2,402
|
|
|
$
|
(240
|
)
|
|
$
|
2,162
|
|
|
|
|
|
Managed Freight
|
|
|
999
|
|
|
|
(100
|
)
|
|
|
899
|
|
|
|
|
|
Warehousing
|
|
|
999
|
|
|
|
(100
|
)
|
|
|
899
|
|
|
|
|
|
Total trade name
|
|
|
4,400
|
|
|
|
(440
|
)
|
|
|
3,960
|
|
|
|
162
|
|
Non-Compete agreement:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dedicated
|
|
|
914
|
|
|
|
(274
|
)
|
|
|
640
|
|
|
|
|
|
Managed Freight
|
|
|
130
|
|
|
|
(39
|
)
|
|
|
91
|
|
|
|
|
|
Warehousing
|
|
|
356
|
|
|
|
(107
|
)
|
|
|
249
|
|
|
|
|
|
Total non-compete agreement
|
|
|
1,400
|
|
|
|
(420
|
)
|
|
|
980
|
|
|
|
42
|
|
Customer relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dedicated
|
|
|
14,072
|
|
|
|
(1,759
|
)
|
|
|
12,313
|
|
|
|
|
|
Managed Freight
|
|
|
1,692
|
|
|
|
(213
|
)
|
|
|
1,479
|
|
|
|
|
|
Warehousing
|
|
|
12,436
|
|
|
|
(1,554
|
)
|
|
|
10,883
|
|
|
|
|
|
Total customer relationships
|
|
|
28,200
|
|
|
|
(3,525
|
)
|
|
|
24,675
|
|
|
|
126
|
|
Total other intangible assets
|
|
$
|
34,000
|
|
|
$
|
(4,385
|
)
|
|
$
|
29,615
|
|
|
|
|
|
The above finite-lived intangible assets have a weighted average remaining life of 105 months and 128 months as of December 31, 2020 and 2019, respectively as a result of the change in estimated useful life as discussed above. Amortization expense was $5.1 million, $2.9 million, and $1.5 million for the years ended December 31, 2020, 2019, and 2018, respectively. The expected amortization expense of these assets for the next five years is as follows:
|
|
(In thousands)
|
|
2021
|
|
$
|
4,044
|
|
2022
|
|
|
2,350
|
|
2023
|
|
|
2,350
|
|
2024
|
|
|
2,350
|
|
2025
|
|
|
2,350
|
|
Thereafter
|
|
|
10,574
|
|
A summary of other assets as of December 31, 2020 and 2019 is as follows:
(in thousands)
|
|
2020
|
|
|
2019
|
|
Investment in TEL
|
|
$
|
34,365
|
|
|
$
|
31,906
|
|
Other long-term receivables
|
|
|
24,378
|
|
|
|
2,140
|
|
Other assets, net
|
|
|
2,154
|
|
|
|
3,873
|
|
Total other assets, net
|
|
$
|
60,897
|
|
|
$
|
37,919
|
|
Other long-term receivables represents 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 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, 2020. The first step of the goodwill impairment test is the Company's assessment of qualitative factors to determine whether it is more likely than not 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, but not 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 than not 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.
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.
Our business requires significant capital investments over the short-term and the long-term. We generally finance 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. We had working capital (total current assets less total current liabilities) of $14.4 million and $93.1 million at December 31, 2020 and 2019, respectively. Based on our expected financial condition, net capital expenditures, and results of operations and related net cash flows, we believe our working capital and sources of liquidity will be adequate to meet our current and projected needs for at least the next year.
As of December 31, 2020, we had $15.0 million of borrowings outstanding, undrawn letters of credit outstanding of approximately $29.7 million, and available borrowing capacity of $65.3 million under the Credit Facility. Additionally, we had availability of a $45.0 million line of credit from Triumph Bank which is available solely to fund any indemnification owed to Triumph in relation to the sale of TFS. 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 and leases, 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.
During the first half of 2020, in response to the uncertainty of the upcoming economic environment as a result of COVID-19 and as part of our strategic focus to reduce overhead costs, we took measures to preserve our liquidity, including capital reductions, financing, cost reduction, and working capital actions. During 2020 we have paid down more than $200.0 million of debt and lease obligations. If needed, we have other potential flexible sources of liquidity that we can leverage such as unencumbered owned revenue equipment.
Current and long-term debt consisted of the following at December 31, 2020 and 2019:
(in thousands)
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
|
Current
|
|
|
Long-Term
|
|
|
Current
|
|
|
Long-Term
|
|
Borrowings under Credit Facility
|
|
$
|
-
|
|
|
$
|
15,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Borrowings under the Draw Note
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Revenue equipment installment notes; weighted average interest rate of 2.0% at December 31, 2020, and 3.7% December 31, 2019, due in monthly installments with final maturities at various dates ranging from January 2021 to January 2024, secured by related revenue equipment
|
|
|
6,437
|
|
|
|
11,358
|
|
|
|
53,431
|
|
|
|
177,514
|
|
Real estate notes; interest rate of 1.9% at December 31, 2020 and 3.3% at December 31, 2019 due in monthly installments with a fixed maturity at August 2035, secured by related real estate
|
|
|
1,140
|
|
|
|
21,530
|
|
|
|
1,093
|
|
|
|
22,670
|
|
Deferred loan costs
|
|
|
-
|
|
|
|
-
|
|
|
|
(147
|
)
|
|
|
(7
|
)
|
Total debt
|
|
|
7,577
|
|
|
|
47,888
|
|
|
|
54,377
|
|
|
|
200,177
|
|
Principal portion of finance lease obligations, secured by related revenue equipment
|
|
|
5,687
|
|
|
|
10,756
|
|
|
|
7,258
|
|
|
|
26,010
|
|
Principal portion of operating lease obligations, secured by related equipment
|
|
|
16,989
|
|
|
|
21,474
|
|
|
|
19,460
|
|
|
|
40,882
|
|
Total debt and finance lease obligations
|
|
$
|
30,253
|
|
|
$
|
80,118
|
|
|
$
|
81,095
|
|
|
$
|
267,069
|
|
We and substantially all of our subsidiaries are parties to 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"). On October 23, 2020, we amended and extended the Credit Facility (the “Eighteenth Amendment”). The Credit Facility is a $110.0 million revolving credit facility (increased from $95.0 million by the Eighteenth Amendment), with an uncommitted accordion feature that, so long as no event of default exists, allows us to request an increase in the revolving credit facility of up to $50.0 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 (increased from $95.0 million by the Eighteenth Amendment) 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 October 2025 (extended from September 2021 by the Eighteenth Amendment).
Borrowings under the Credit Facility are classified as either "base rate loans" or "LIBOR 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 LIBOR plus 1.0%, plus an applicable margin ranging from 0.25% to 0.75% (decreased from a range of 0.5% to 1.0% by the Eighteenth Amendment); while LIBOR loans accrue interest at LIBOR, plus an applicable margin ranging from 1.25% to 1.75% (decreased from a range of 1.5% to 2.0% by the Eighteenth Amendment). 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 or revenue equipment pledged under other financing agreements, including revenue equipment installment notes and finance leases.
Borrowings under the Credit Facility are subject to a borrowing base limited to the lesser of (A) $110.0 million (increased from $95.0 million by the Eighteenth Amendment), minus the sum of the stated amount of all outstanding letters of credit; or (B) the sum of (i) 87.5% (increased from 85% by the Eighteenth Amendment) of eligible accounts receivable, plus (ii) the least of (a) 85% of the appraised net orderly liquidation value of eligible revenue equipment, (b) 100% (increased from 95% by the Eighteenth Amendment) of the net book value of eligible revenue equipment, (c) 40.9% (increased from 35% by the Eighteenth Amendment) of the Lenders' aggregate revolving commitments under the Credit Facility, or (d) following the Eighteenth Amendment, $45.0 million, plus (iii) the lesser of (a) $10.4 million (as of the date of the Eighteenth Amendment) or (b) 80% (increased from 75% by the Eighteenth Amendment) of the appraised fair market value of eligible real estate, as reduced by a periodic amortization amount. We had $15.0 million borrowings outstanding under the Credit Facility as of December 31, 2020, undrawn letters of credit outstanding of approximately $29.7 million, and available borrowing capacity of $65.3 million. Based on availability as of December 31, 2020 and 2019, there was no 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 may be 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.
In connection with the TFS Settlement, on September 23, 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 may borrow pursuant to the Draw Note until September 23, 2025. Any amount outstanding under the Draw Note will accrue interest at a per annum rate equal to one and one-half (1.5) percentage points over LIBOR, provided, however, that LIBOR shall be deemed to be at least 0.25%. Accrued interest is due monthly and the outstanding principal balance is due on September 23, 2026. To secure our obligations under the TFS Settlement and the Draw Note, we pledged certain unencumbered revenue equipment with an estimated net orderly liquidation value of $60 million. The Draw Note includes usual and customary events of default for a facility of this nature and provides that, upon occurrence and continuation of an event of default, payment of all amounts payable under the Draw Note may be accelerated.
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 January 2021 to January 2024. The notes contain certain requirements regarding payment, insuring of collateral, and other matters, but do not have any financial or other material covenants or events of default except certain notes totaling $14.7 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 in 2021, 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 April 2020, in an effort to improve our liquidity during the COVID-19 pandemic, we executed a modification to certain of our revenue equipment installment notes, exercising an option to make interest only payments for a period of 90 days, extending the due date of $177.3 million of debt by three months. Subsequently, we paid down more than $200.0 million of debt and lease obligations, including the debt we had extended the due date on.
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 a third 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. For the second quarter ended June 30, 2020, we obtained a waiver from the third-party lender for a financial covenant that we did not comply with. Absent the waiver we would have been in default under our covenants. During the third quarter ended September 30, 2020, there was an amendment to the calculation of the covenant and we were in compliance with the calculation as stated in the amendment. We expect to be in compliance with our debt covenants for the next 12 months.
As of December 31, 2020, the scheduled principal payments of debt, excluding finance leases for which future payments are discussed in Note 9 are as follows:
|
|
(in thousands)
|
|
2021
|
|
$
|
7,577
|
|
2022
|
|
|
8,085
|
|
2023
|
|
|
5,703
|
|
2024
|
|
|
1,294
|
|
2025
|
|
|
16,350
|
|
Thereafter
|
|
|
16,456
|
|
Finance lease obligations are utilized to finance a portion of our revenue equipment and are entered into with certain finance companies who are not parties to our Credit Facility. The leases in effect at December 31, 2020 terminate in January 2021 through November 2024 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 do not typically include residual value guarantees or material restrictive covenants.
A summary of our lease obligations for the twelve months ended December 31, 2020 and 2019 are as follows:
(dollars in thousands)
|
|
Twelve Months Ended
|
|
|
Twelve Months Ended
|
|
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
Finance lease cost:
|
|
|
|
|
|
|
|
|
Amortization of right-of-use assets
|
|
$
|
4,080
|
|
|
$
|
5,469
|
|
Interest on lease liabilities
|
|
|
1,003
|
|
|
|
1,107
|
|
Operating lease cost
|
|
|
21,212
|
|
|
|
24,393
|
|
Variable lease cost
|
|
|
414
|
|
|
|
326
|
|
|
|
|
|
|
|
|
|
|
Total lease cost
|
|
$
|
26,709
|
|
|
$
|
31,295
|
|
|
|
|
|
|
|
|
|
|
Other information
|
|
|
|
|
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
|
|
|
Operating cash flows from finance leases
|
|
$
|
1,003
|
|
|
$
|
7,226
|
|
Operating cash flows from operating leases
|
|
$
|
24,325
|
|
|
$
|
24,393
|
|
Financing cash flows from finance leases
|
|
$
|
20,083
|
|
|
$
|
1,107
|
|
Right-of-use assets obtained in exchange for new finance lease liabilities
|
|
$
|
3,229
|
|
|
$
|
-
|
|
Right-of-use assets obtained in exchange for new operating lease liabilities
|
|
$
|
1,730
|
|
|
$
|
37,080
|
|
Weighted-average remaining lease term—finance leases
|
|
1.8 years
|
|
|
2.9 years
|
|
Weighted-average remaining lease term—operating leases
|
|
2.3 years
|
|
|
3.4 years
|
|
Weighted-average discount rate—finance leases
|
|
|
2.3
|
%
|
|
|
3.0
|
%
|
Weighted-average discount rate—operating leases
|
|
|
5.3
|
%
|
|
|
5.2
|
%
|
During the year ended December 31, 2020, we recognized $2.2 million of impairment expense related to a leased office facility in Chattanooga, TN held under an operating lease and approximately $0.8 million of additional revenue equipment and purchased transportation expense related to the abandonment of revenue equipment held under an operating lease. At December 31, 2020 and 2019, right-of-use assets of $37.4 million and $58.8 million for operating leases, respectively, and $29.4 million and $35.6 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, 2020, summarized as follows by lease category:
(in thousands)
|
|
Operating
|
|
|
Finance
|
|
2021
|
|
$
|
18,543
|
|
|
$
|
6,324
|
|
2022
|
|
|
15,523
|
|
|
|
6,884
|
|
2023
|
|
|
6,762
|
|
|
|
3,616
|
|
2024
|
|
|
28
|
|
|
|
-
|
|
2025
|
|
|
9
|
|
|
|
-
|
|
Thereafter
|
|
|
-
|
|
|
|
-
|
|
Total minimum lease payments
|
|
$
|
40,865
|
|
|
$
|
16,824
|
|
Less: amount representing interest
|
|
|
2,402
|
|
|
|
(381
|
)
|
Present value of minimum lease payments
|
|
|
38,463
|
|
|
|
16,443
|
|
Less: current portion
|
|
|
(16,989
|
)
|
|
|
(5,687
|
)
|
Lease obligations, long-term
|
|
$
|
21,474
|
|
|
$
|
10,756
|
|
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 the three years ended December 31:
(in thousands)
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Revenue equipment rentals
|
|
$
|
22,505
|
|
|
$
|
20,989
|
|
|
$
|
14,682
|
|
Building and lot rentals
|
|
|
2,982
|
|
|
|
2,898
|
|
|
|
1339
|
|
Other equipment rentals
|
|
|
478
|
|
|
|
506
|
|
|
|
881
|
|
Total rental expense
|
|
$
|
25,965
|
|
|
$
|
24,393
|
|
|
$
|
16,902
|
|
Income tax (benefit) expense for the years ended December 31, 2020, 2019, and 2018 is comprised of:
(in thousands)
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Federal, current
|
|
$
|
63
|
|
|
$
|
(2,040
|
)
|
|
$
|
(437
|
)
|
Federal, deferred
|
|
|
(2,391
|
)
|
|
|
3,976
|
|
|
|
14,117
|
|
State, current
|
|
|
2,349
|
|
|
|
828
|
|
|
|
1,284
|
|
State, deferred
|
|
|
(2,825
|
)
|
|
|
(415
|
)
|
|
|
(20
|
)
|
Income tax (benefit) expense
|
|
$
|
(2,804
|
)
|
|
$
|
2,349
|
|
|
$
|
14,944
|
|
Income tax (benefit) expense for the years ended December 31, 2020, 2019, and 2018 is summarized below:
(in thousands)
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Computed "expected" income tax expense
|
|
$
|
(3,554
|
)
|
|
$
|
1,642
|
|
|
$
|
11,745
|
|
State income taxes, net of federal income tax effect
|
|
|
(227
|
)
|
|
|
(600
|
)
|
|
|
2,484
|
|
831(b) election
|
|
|
(123
|
)
|
|
|
(393
|
)
|
|
|
(200
|
)
|
Per diem allowances
|
|
|
1,028
|
|
|
|
1,450
|
|
|
|
1,446
|
|
Tax contingency accruals
|
|
|
65
|
|
|
|
601
|
|
|
|
(57
|
)
|
Valuation allowance, net
|
|
|
(139
|
)
|
|
|
321
|
|
|
|
0
|
|
Tax credits
|
|
|
(403
|
)
|
|
|
(377
|
)
|
|
|
(968
|
)
|
Excess tax benefits on share-based compensation
|
|
|
129
|
|
|
|
105
|
|
|
|
50
|
|
Change in prior year estimates
|
|
|
288
|
|
|
|
(420
|
)
|
|
|
0
|
|
Other, net
|
|
|
132
|
|
|
|
20
|
|
|
|
444
|
|
Income tax (benefit) expense
|
|
$
|
(2,804
|
)
|
|
$
|
2,349
|
|
|
$
|
14,944
|
|
The amount of income tax (benefit) expense allocated to discontinued operations for TFS is $9.5 million, $1.1 million, and $0.6 million for the years ended December 31, 2020, 2019, and 2018, respectively.
Income tax expense varies from the amount computed by applying the applicable federal corporate income tax rate of 21% for 2020, 2019, and 2018, 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 is the effect of the per diem pay structure for drivers. 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 employee 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 our 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, 2020 and 2019 are as follows:
(in thousands)
|
|
2020
|
|
|
2019
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Insurance and claims
|
|
$
|
10,970
|
|
|
$
|
10,269
|
|
Net operating loss carryovers
|
|
|
7,759
|
|
|
|
25,849
|
|
Tax credits
|
|
|
11,395
|
|
|
|
10,942
|
|
Leased liability
|
|
|
9,969
|
|
|
|
15,668
|
|
Finance lease obligation
|
|
|
3,848
|
|
|
|
8,483
|
|
State bonus
|
|
|
4,860
|
|
|
|
6,576
|
|
Other
|
|
|
4,917
|
|
|
|
2,160
|
|
Valuation allowance
|
|
|
(242
|
)
|
|
|
(385
|
)
|
Total deferred tax assets
|
|
|
53,476
|
|
|
|
79,562
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
(78,682
|
)
|
|
|
(97,066
|
)
|
Investment in partnership
|
|
|
(31,585
|
)
|
|
|
(36,669
|
)
|
ROU Asset- leases
|
|
|
(9,697
|
)
|
|
|
(15,280
|
)
|
Other
|
|
|
(4,353
|
)
|
|
|
(7,462
|
)
|
Sec. 481(a) - finance leases
|
|
|
(588
|
)
|
|
|
(449
|
)
|
Prepaid expenses
|
|
|
(3,124
|
)
|
|
|
(2,966
|
)
|
Total deferred tax liabilities
|
|
|
(128,029
|
)
|
|
|
(159,892
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax liability
|
|
$
|
(74,553
|
)
|
|
$
|
(80,330
|
)
|
The net deferred tax liability of $65.0 million primarily relates to differences in cumulative book versus tax depreciation of property and equipment, partially off-set by tax credit carryovers and insurance claims that have been reserved but not 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 may be 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. Based on forecasted taxable income resulting from the reversal of deferred tax liabilities, primarily generated by accelerated depreciation for tax purposes in prior periods, and tax planning strategies available to us, a valuation allowance has been established at December 31, 2020 of approximately $0.3 million related to certain state net operating loss carry forwards. 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, 2020, we had a $1.0 million liability recorded for unrecognized tax benefits, which includes interest and penalties of $0.1 million. We recognize interest and penalties accrued related to unrecognized tax benefits in tax expense. As of December 31, 2019, we had a $0.9 million liability recorded for unrecognized tax benefits, which included interest and penalties of $0.1 million. Interest and penalties recognized for uncertain tax positions provided for no expense in 2020, a $0.8 million benefit in 2019, and a $0.1 million expense in 2018.
The following tables summarize the annual activity related to our gross unrecognized tax benefits (in thousands) for the years ended December 31, 2020, 2019, and 2018:
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Balance as of January 1,
|
|
$
|
823
|
|
|
$
|
1,796
|
|
|
$
|
1,924
|
|
Increases related to prior year tax positions
|
|
|
-
|
|
|
|
2,969
|
|
|
|
4
|
|
Decreases related to prior year positions
|
|
|
-
|
|
|
|
-
|
|
|
|
(9
|
)
|
Increases related to current year tax positions
|
|
|
98
|
|
|
|
287
|
|
|
|
-
|
|
Decreases related to settlements with taxing authorities
|
|
|
-
|
|
|
|
(4,200
|
)
|
|
|
-
|
|
Decreases related to lapsing of statute of limitations
|
|
|
(34
|
)
|
|
|
(29
|
)
|
|
|
(123
|
)
|
Balance as of December 31,
|
|
$
|
887
|
|
|
$
|
823
|
|
|
$
|
1,796
|
|
If recognized, approximately $0.9 million of unrecognized tax benefits would impact our effective tax rate as of both December 31, 2020 and 2019. 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.
Our 2015 through 2019 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. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, we believe that our reserves reflect the more likely than not outcome of known tax contingencies. We adjust these reserves, as well as the related interest, in light of changing facts and circumstances. Settlement of any particular issue would usually require the use of cash. Favorable resolution would be recognized as a reduction to our annual tax rate in the year of resolution. We do not expect any significant increases or decreases for uncertain income tax positions during the next year.
Our federal net operating loss ("NOL") of $101.9 million is expected to be substantially consumed in the current year. The remaining $3.9 million will carryforward indefinitely. Our $3.1 million of charitable contributions are all expected to be converted to NOL carryover in the current year, thereby extending their benefit indefinitely and increasing the indefinite NOL carryforward to $7.0 million. In addition to our federal net operating losses and charitable contributions, we also have $10.9 million of federal tax credits available to offset future federal taxable income which will begin to expire in 2030.
Our state net operating loss carryforwards and state tax credits of $92.2 million and $0.5 million, respectively expire beginning in 2022 and 2028 based on jurisdiction.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was signed into law. The CARES Act, among other things, includes provisions for refundable payroll tax credits, deferral for employer-side social-security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property. The Company considered the impacts of the legislation in the 2020 financial statements, noting that some items are continuing to be assessed through preparation of the 2020 income tax returns.
11.
|
EQUITY METHOD INVESTMENT
|
We own a 49.0% interest in TEL, a tractor and trailer equipment leasing company and used equipment reseller. There is no loss limitation on our 49.0% interest in TEL. We have not guaranteed any of TEL's debt and have no obligation to provide funding, services, or assets. In May 2016, the operating agreement with TEL was amended to, among other things, remove the previously agreed to fixed date purchase options. Our option to acquire up to the remaining 51% of TEL would have expired May 31, 2016, and TEL’s majority owners would have received the option to purchase our ownership in TEL. There are no 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 are no third party liquidity arrangements, guarantees, and/or other commitments that may affect the fair value or risk of our interest in TEL. For the years ended December 31, 2020, 2019, and 2018 we sold tractors and trailers to TEL for $2.1 million, none, and less than $0.1 million, respectively, and received $6.6 million, $9.4 million, and $8.2 million, respectively, for providing various maintenance services, certain back-office functions, and for miscellaneous equipment. Equipment purchased from TEL totaled $0.0 million, $10.5 million, and $1.8 million in 2020, 2019, and 2018, respectively. Additionally, we paid $0.6 million, $0.6 million, and $0.9 million to TEL for leases of revenue equipment in 2020, 2019, and 2018, respectively. We recorded net deferred gains of less than $0.1 million for the year ended December 31, 2020 and reversed previously deferred gains of less than $0.1 million for the same year ended and 2019, 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 a third party. Deferred gains totaling $0.2 million at December 31, 2020 and 2019, 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 $3.9 million in 2020, $7.0 million in 2019, and $7.7 million in 2018. We received an equity distribution from TEL for $1.5 million, $1.3 million, and $2.0 million in 2020, 2019 and 2018, which was distributed to each member based on its respective ownership percentage.
Our accounts receivable from TEL and investment in TEL as of December 31, 2020 and 2019, are as follows:
|
|
|
2020
|
|
|
2019
|
|
Description:
|
Balance Sheet Line Item:
|
|
|
|
|
|
|
|
|
Accounts receivable from TEL
|
Driver advances and other receivables
|
|
$
|
661
|
|
|
|
1,251
|
|
Investment in TEL
|
Other assets
|
|
$
|
34,365
|
|
|
$
|
31,906
|
|
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 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 and the abovementioned deferred gains on sales of equipment to TEL.
See TEL's summarized financial information below.
(in thousands)
|
|
As of the years ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Current Assets
|
|
$
|
27,167
|
|
|
$
|
28,577
|
|
Non-current Assets
|
|
|
283,913
|
|
|
|
346,014
|
|
Current Liabilities
|
|
|
66,495
|
|
|
|
85,751
|
|
Non-current Liabilities
|
|
|
183,393
|
|
|
|
232,992
|
|
Total Equity
|
|
$
|
61,192
|
|
|
$
|
55,848
|
|
(in thousands)
|
|
As of the years ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Revenue
|
|
$
|
95,016
|
|
|
$
|
110,298
|
|
|
$
|
108,801
|
|
Cost of Sales
|
|
|
11,617
|
|
|
|
20,404
|
|
|
|
37,307
|
|
Operating Expenses
|
|
|
64,581
|
|
|
|
65,058
|
|
|
|
47,281
|
|
Operating Income
|
|
|
18,818
|
|
|
|
24,836
|
|
|
|
24,213
|
|
Net Income
|
|
$
|
8,344
|
|
|
$
|
13,403
|
|
|
$
|
16,496
|
|
12.
|
DEFERRED PROFIT SHARING EMPLOYEE BENEFIT PLAN
|
We have a deferred profit sharing and savings plan under which all of our employees with at least six months of service are eligible to participate. Employees may contribute a percentage of their annual compensation up to the maximum amount allowed by the Internal Revenue Code. We may make discretionary contributions as determined by a committee of our Board of Directors. We made contributions of $0.7 million in 2020, $1.9 million in 2019, and $1.7 million in 2018 to the profit sharing and savings plan. The discretionary employer contributions were temporarily suspended during the first half of 2020 in light of the uncertain impact of COVID-19 on the Company's operations.
13.
|
RELATED PARTY TRANSACTIONS
|
During the fourth quarter of 2020, we purchased a shop facility in Greeneville, TN, from WLC Properties which is owned, in part, by our Co-President and Chief Operating Officer. Other than the Greeneville, TN shop purchase and the transactions associated with TEL, there are no other material related party transactions. See Note 11 for discussions of the related party transactions associated with TEL.
14.
|
COMMITMENTS AND CONTINGENT LIABILITIES
|
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.
Our subsidiary Covenant Transport, Inc. (“Covenant Transport”) is a defendant in a lawsuit filed on November 9, 2018, in the Superior Court of Los Angeles County, California. The lawsuit was filed on behalf of Richard Tabizon (a California resident and former driver) who is seeking to have the lawsuit certified as a class action. The complaint asserts that the time period covered by the lawsuit is from October 31, 2014 to the present and alleges claims for failure to properly pay drivers for rest breaks, failure to provide accurate itemized wage statements and/or reimbursement of business related expenses, unlawful deduction of wages, failure to pay proper minimum wage and overtime wages, failure to provide all wages due at termination, and other related wage and hour claims under the California Labor Code. Since the original filing date, the case has been removed from the Los Angeles Superior Court to the U.S. District Court in the Central District of California and subsequently the case was transferred to the U.S. District Court in the Eastern District of Tennessee where the case is now pending. Covenant Transport intends to vigorously defend itself in this matter. We do not currently have enough information to make a reasonable estimate as to the likelihood, or amount of a loss, or a range of reasonably possible losses as a result of this claim, as such there have been no related accruals recorded as of December 31, 2020.
On February, 28 2019, Covenant Transport was named in a separate (but related) lawsuit filed in the Superior Court of Los Angeles County, California requesting civil penalties under the California Private Attorneys’ General Act for the same underlying wage and hour claims at issue in the putative class action case noted above. On August 1, 2019, the Los Angeles Superior Court entered an order staying the action pending completion of the earlier-filed action that is pending in the United States District Court for the Eastern District of Tennessee. Covenant Transport intends to vigorously defend itself in this matter. We do not currently have enough information to make a reasonable estimate as to the likelihood, or amount of a loss, or a range of reasonably possible losses as a result of this claim, as such there have been no related accruals recorded as of December 31, 2020.
On August 2, 2018, Curtis Markson, et al. (collectively, “Markson”), filed a putative class action case in United States District Court, Central District of California generically claiming that five (5) specified trucking companies (including our subsidiary Southern Refrigerated Transport, Inc.) entered into a "no poaching conspiracy" in which they agreed not to solicit or hire employees in California who were "under contract" with a fellow defendant. The allegations center around new drivers in California who received their commercial driver's license through driving schools associated with, or paid for by, one of the named defendants, in exchange for agreeing to drive for that defendant carrier for a specified amount of time (typically 8-10 months). Over the ensuing 18 – 24 months, the Plaintiffs added more trucking companies as co-defendants in the lawsuit, including our subsidiary, Covenant Transport, Inc., on April 23, 2020. The lawsuit claims that the named co-defendants sent letters to one another, providing notice of "under contract" status, if these new California drivers were hired by another defendant carrier prior to the driver completing their contractual obligations. Plaintiffs contend that these notifications evidence a collusive agreement by the named defendants to restrain competition among trucking companies in California and suppress wages. Southern Refrigerated Transport, Inc. and Covenant Transport, Inc. are vigorously defending themselves against these claims. We do not currently have enough information to make a reasonable estimate as to the likelihood, or amount of a loss, or a range of reasonably possible losses as a result of this claim, as such there have been no related accruals recorded as of December 31, 2020.
We maintain insurance to cover liabilities arising from the transportation of freight for amounts in excess of certain self-insured retentions. In management's opinion, our potential exposure under pending legal proceedings is adequately provided for in the accompanying consolidated financial statements. Refer to Note 1, "Significant Accounting Policies" of the accompanying consolidated financial statements for information about our insurance program.
Based on our present knowledge of the facts and, in certain cases, advice of outside counsel, management believes the resolution of open claims and pending litigation, discussed above, taking into account existing reserves, is not likely to have a materially adverse effect on our condensed consolidated financial statement.
We had $29.7 million and $35.2 million of outstanding and undrawn letters of credit as of December 31, 2020 and 2019, 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.
We had commitments outstanding at December 31, 2020, to acquire revenue equipment totaling approximately $34.8 million in 2021 versus commitments at December 31, 2019 of approximately $68.4 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.
Until the second quarter of 2020, we had four reportable segments, Highway Services, Dedicated, Managed Freight, and Factoring. As discussed in Note 2, our Factoring reportable segment was classified as discontinued operations as of June 30, 2020. As of September 30, 2020, the segment formerly known as Highway Services is now reflected as Expedited, given the change in business mix surrounding the exit of the majority of the solo-refrigerated business in the second quarter of 2020. In addition, given management changes and growth, we have reported Warehousing as a separate reportable segment from Managed Freight. We believe the updated reportable segments reflect our service offerings, strategic directions, and how management, including our chief operating decision maker, monitors our performance.
Our four reportable segments are:
●
|
Expedited: The Expedited reportable operating segment primarily provides truckload services to customers with high service freight and delivery standards, such as 1,000 miles in 22 hours, or 15-minute delivery windows. Expedited services generally require two-person driver teams on equipment either owned or leased by the Company.
|
●
|
Dedicated: The Dedicated segment provides customers with committed truckload capacity over contracted periods with the goal of three to five years in length. Equipment is either owned or leased by the Company. Many of our Dedicated contract customers are automotive companies or shippers of produce, where the nature of the product we ship requires high service standards.
|
●
|
Managed Freight: The Managed Freight segment includes our brokerage and transport management services ("TMS"). Brokerage services provide logistics capacity by outsourcing the carriage of customers' freight to third parties. TMS provides comprehensive logistics services on a contractual basis to customers who prefer to outsource their logistics needs.
|
●
|
Warehousing: The Warehousing segment provides day-to-day warehouse management services to customers who have chosen to outsource this function.
|
These changes impacted the Company’s reportable segments but did not impact the Company’s Consolidated Financial Statements. The accounting policies of the 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.
The following table summarizes our segment information for 2020, 2019, and 2018:
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
|
Expedited
|
|
|
Dedicated
|
|
|
Managed Freight
|
|
|
Warehousing
|
|
|
Consolidated
|
|
Total revenue from external customers
|
|
$
|
320,202
|
|
|
$
|
288,652
|
|
|
$
|
177,579
|
|
|
$
|
52,128
|
|
|
$
|
838,561
|
|
Intersegment revenue
|
|
|
11,630
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,630
|
|
Operating (loss) income
|
|
|
(7,038
|
)
|
|
|
(15,534
|
)
|
|
|
4,482
|
|
|
|
4,063
|
|
|
|
(14,027
|
)
|
Depreciation and amortization
|
|
|
31,969
|
|
|
|
29,610
|
|
|
|
829
|
|
|
|
3,064
|
|
|
|
65,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2019
|
|
Expedited
|
|
|
Dedicated
|
|
|
Managed Freight
|
|
|
Warehousing
|
|
|
Consolidated
|
|
Total revenue from external customers
|
|
$
|
356,521
|
|
|
$
|
342,473
|
|
|
$
|
138,616
|
|
|
$
|
47,777
|
|
|
$
|
885,387
|
|
Intersegment revenue
|
|
|
10,302
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,302
|
|
Operating income
|
|
|
(1,260
|
)
|
|
|
1,188
|
|
|
|
3,323
|
|
|
|
5,518
|
|
|
|
8,769
|
|
Depreciation and amortization
|
|
|
39,371
|
|
|
|
38,716
|
|
|
|
418
|
|
|
|
1,997
|
|
|
|
80,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2018
|
|
Expedited
|
|
|
Dedicated
|
|
|
Managed Freight
|
|
|
Warehousing
|
|
|
Consolidated
|
|
Total revenue from external customers
|
|
$
|
469,308
|
|
|
$
|
257,739
|
|
|
$
|
129,790
|
|
|
$
|
23,580
|
|
|
$
|
880,417
|
|
Intersegment revenue
|
|
|
7,298
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,298
|
|
Operating income
|
|
|
32,693
|
|
|
|
12,699
|
|
|
|
7,150
|
|
|
|
2,874
|
|
|
|
55,416
|
|
Depreciation and amortization
|
|
|
44,564
|
|
|
|
30,604
|
|
|
|
286
|
|
|
|
389
|
|
|
|
75,843
|
|
(in thousands)
|
|
For the years ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Total external revenues for reportable segments
|
|
$
|
838,561
|
|
|
$
|
885,387
|
|
|
$
|
880,417
|
|
Intersegment revenues for reportable segments
|
|
|
11,630
|
|
|
|
10,302
|
|
|
|
7,298
|
|
Elimination of intersegment revenues
|
|
|
(11,630
|
)
|
|
|
(10,302
|
)
|
|
|
(7,298
|
)
|
Total consolidated revenues
|
|
$
|
838,561
|
|
|
$
|
885,387
|
|
|
$
|
880,417
|
|
Balance sheet data by reportable segment is not maintained by the Company.