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COVENANT LOGISTICS GROUP, INC.

COVENANT LOGISTICS GROUP, INC.CVLGEarnings & Financial Report

NYSE · transport

Covenant Logistics Group, Inc. is an American company focused on truckload shipping. The company is headquartered in Chattanooga, Tennessee, and is publicly traded on the New York Stock Exchange. The company provides temperature controlled trucking, regional delivery, and longhaul team driver delivery.

What changed in COVENANT LOGISTICS GROUP, INC.'s 10-K — 2023 vs 2024

Top changes in COVENANT LOGISTICS GROUP, INC.'s 2024 10-K

255 paragraphs added · 263 removed · 209 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

91 edited+20 added−37 removed154 unchanged
It is expected that the rule may further impair the availability of an already weak driver pool. In September 2020, the Department of Health and Human Services (“DHHS”) announced proposed mandatory guidelines to allow employers to drug test truck drivers and other federal workers for pre-employment and random testing using hair specimens.
It is expected that the rule may further impair the availability of an already weak driver pool. In 2020, the Department of Health and Human Services (“DHHS”) announced proposed mandatory guidelines to allow employers to drug test truck drivers and other federal workers for pre-employment and random testing using hair specimens.
In December 2018, the FMCSA granted a petition filed by the ATA and in doing so determined that federal law does preempt California’s wage and hour laws, and interstate truck drivers are not subject to such laws. The FMCSA’s decision has been appealed by labor groups and multiple lawsuits have been filed in federal courts seeking to overturn the decision.
In 2018, the FMCSA granted a petition filed by the ATA and in doing so determined that federal law does preempt California’s wage and hour laws, and interstate truck drivers are not subject to such laws. The FMCSA’s decision has been appealed by labor groups and multiple lawsuits have been filed in federal courts seeking to overturn the decision.
Our leverage ratio increased in 2023 as compared to the prior year, as we remain focused on investing capital when we can obtain acceptable returns while maintaining lower leverage than we have historically. During 2023 we completed our revenue equipment replacement plan to bring our trade cycle back to normalized levels.
Our leverage ratio increased in 2024 as compared to the prior year, as we remain focused on investing capital when we can obtain acceptable returns while maintaining lower leverage than we have historically. During 2023 we completed our revenue equipment replacement plan to bring our trade cycle back to normalized levels.
Additionally, in February 2022 the DOT issued a notice of proposed rulemaking that would include oral fluid testing as an alternative to urine testing for purposes of the DOT’s drug testing program, with a goal of improving the integrity and effectiveness of the drug testing program, along with potential cost savings to regulated parties.
Additionally, in 2022 the DOT issued a notice of proposed rulemaking that would include oral fluid testing as an alternative to urine testing for purposes of the DOT’s drug testing program, with a goal of improving the integrity and effectiveness of the drug testing program, along with potential cost savings to regulated parties.
In September 2022, the FMCSA issued an advance notice of proposed rulemaking that would require fleets and independent contractors to equip their trucks with unique electronic identification systems designed to streamline roadside inspections and provide transparency and accountability in day-to-day trucking operations.
In 2022, the FMCSA issued an advance notice of proposed rulemaking that would require fleets and independent contractors to equip their trucks with unique electronic identification systems designed to streamline roadside inspections and provide transparency and accountability in day-to-day trucking operations.
In September 2019, California enacted A.B. 5 (“AB5”), a new law that changed the landscape of the state’s treatment of employees and independent contractors. AB5 provides that the three-pronged “ABC Test” must be used to determine worker classification in wage-order claims.
In 2019, California enacted A.B. 5 (“AB5”), a new law that changed the landscape of the state’s treatment of employees and independent contractors. AB5 provides that the three-pronged “ABC Test” must be used to determine worker classification in wage-order claims.
("AAT"), and our 2023 acquisitions of Lew Thompson & Son Trucking, Inc., Lew Thompson & Son Leasing Inc., Lew Thompson & Son Dedicated Leasing, Inc., Josh Thompson Trucking, Inc. (collectively "LTST") and Sims Transport Services LLC ("Sims") are examples of that commitment. Landair is a leading dedicated truckload carrier and supplier of transportation management, warehousing, and logistics inventory management systems.
("AAT"), and our 2023 acquisitions of Lew Thompson & Son Trucking, LLC, Lew Thompson & Son Leasing LLC, Lew Thompson & Son Dedicated Leasing, LLC, Josh Thompson Trucking, LLC (collectively "LTST") and Sims Transport Services LLC ("Sims") are examples of that commitment. Landair is a leading dedicated truckload carrier and supplier of transportation management, warehousing, and logistics inventory management systems.
The Protecting the Rights to Organize ("PRO") Act was passed by the U.S. House of Representatives and received by the Senate in March 2021, which was further sent to the Senate's Committee on Health, Education, Labor, and Pensions. In 2023, a substantially similar bill was introduced to the U.S.
The Protecting the Rights to Organize ("PRO") Act was passed by the U.S. House of Representatives and received by the Senate in 2021, which was further sent to the Senate's Committee on Health, Education, Labor, and Pensions. In 2023, a substantially similar bill was introduced to the U.S.
We are strategically focused on continuing to integrate into the supply chain of our customers and reducing our seasonal and cyclical volatility. Our 2018 acquisition of Landair Holdings, Inc., Landair Transport, Inc., Landair Logistics, Inc., and Landair Leasing, Inc. (collectively, "Landair"), our 2022 acquisition of AAT Carriers, Inc.
We are strategically focused on continuing to integrate into the supply chain of our customers and reducing our seasonal and cyclical volatility. Our 2018 acquisition of Landair Holdings, Inc., Landair Transport, LLC, Landair Logistics, LLC, and Landair Leasing, Inc. (collectively, "Landair"), our 2022 acquisition of AAT Carriers, Inc.
The EPA has indicated that the December 2022 rule is the first part of a three-part plan focusing on greenhouse gas emissions, which is commonly referred to as the “Cleaner Trucks Initiative,” or the “Clean Trucks Plan.” In April 2023, the EPA released the second and third parts to the Clean Trucks Plan, including a proposed rule relating to GHG standards for heavy-duty vehicles known as “Phase 3” to the EPA’s GHG program.
The EPA has indicated that the 2022 rule is the first part of a three-part plan focusing on greenhouse gas emissions, which is commonly referred to as the “Cleaner Trucks Initiative,” or the “Clean Trucks Plan.” In 2023, the EPA released the second and third parts to the Clean Trucks Plan, including a proposed rule relating to GHG standards for heavy-duty vehicles known as “Phase 3” to the EPA’s GHG program.
Expedited services generally require two-person driver teams on equipment either owned or leased by the Company. ● Dedicated: In our Dedicated business, we operate approximately 1,200 tractors, substantially all of which are driven by a solo driver. The Dedicated reportable segment provides customers with committed truckload capacity over contracted periods with the goal of three to five years in length.
Expedited services generally require two-person driver teams on equipment either owned or leased by the Company. ● Dedicated: In our Dedicated business, we operate approximately 1,400 tractors, substantially all of which are driven by a solo driver. The Dedicated reportable segment provides customers with committed truckload capacity over contracted periods with the goal of three to five years in length.
ITEM 1. BUSINESS GENERAL Background and Strategy We were founded in 1986 as a provider of expedited freight transportation, primarily using two-person driver teams in transcontinental lanes. Since that time, we have grown from 25 tractors to approximately 2,100 tractors and expanded our services to include a wide array of transportation and logistics services for our customers.
ITEM 1. BUSINESS GENERAL Background and Strategy We were founded in 1986 as a provider of expedited freight transportation, primarily using two-person driver teams in transcontinental lanes. Since that time, we have grown from 25 tractors to approximately 2,300 tractors and expanded our services to include a wide array of transportation and logistics services for our customers.
Recently, our industry has experienced decreased freight demand, volatile fuel costs, tight new and used equipment market, scarcity of qualified truck drivers, and regulations that limit productivity. As we look toward 2024, we do not see anything in the first half of the year that would indicate a near-term recovery of the freight market.
Recently, our industry has experienced decreased freight demand, volatile fuel costs, tight new and used equipment market, scarcity of qualified truck drivers, and regulations that limit productivity. As we look toward 2025, we do not see anything in the first half of the year that would indicate a near-term recovery of the freight market.
At December 31, 2023, all of our tractors were equipped with ELDs, which electronically monitor tractor miles and facilitate enforcement of hours-of-service regulations. Over the past decade, the price of new tractors has risen dramatically and there has been significant volatility in the used equipment market. This has substantially increased our costs of operation.
At December 31, 2024, all of our tractors were equipped with ELDs, which electronically monitor tractor miles and facilitate enforcement of hours-of-service regulations. Over the past decade, the price of new tractors has risen dramatically and there has been significant volatility in the used equipment market. This has substantially increased our costs of operation.
Because the fixed price is determined based on market prices at the time we enter into the hedge, in times of increasing fuel prices the hedge contracts become more valuable, whereas in times of decreasing fuel prices the opposite is true. We had no fuel hedging contracts at December 31, 2023 or December 31, 2022.
Because the fixed price is determined based on market prices at the time we enter into the hedge, in times of increasing fuel prices the hedge contracts become more valuable, whereas in times of decreasing fuel prices the opposite is true. We had no fuel hedging contracts at December 31, 2024 or December 31, 2023.
The DOT accident rate per million miles, as defined by the Federal Motor Carrier Safety Administration ("FMCSA"), decreased 7% year over year and was the lowest in the Company’s history.
The DOT accident rate per million miles, as defined by the Federal Motor Carrier Safety Administration ("FMCSA"), decreased 1% year over year and was the lowest in the Company’s history.
In May 2023, a final rule was published amending DOT’s drug testing program to include oral fluid testing, and became effective June 2023; however, implementation cannot take effect until DHHS approves at least two laboratories to conduct oral fluid testing. Currently, DHHS has not approved any laboratories. Any final rule may reduce the number of available drivers.
In 2023, a final rule was published amending DOT’s drug testing program to include oral fluid testing became effective; however, implementation cannot take effect until DHHS approves at least two laboratories to conduct oral fluid testing. Currently, DHHS has not approved any laboratories. Any changes to drug testing programs may reduce the number of available drivers.
In February 2023, the FMCSA issued a supplemental notice of proposed rulemaking requesting additional information on automated driving systems (“ADS”) and seeking comment on regulatory approaches that would enable it to obtain relevant safety information and the current and anticipated size of the population of carriers operating ADS-equipped commercial motor vehicles.
In February 2023, the FMCSA issued a supplemental notice of proposed rulemaking requesting additional information on automated driving systems (“ADS”) and seeking comment on regulatory approaches that would enable it to obtain relevant safety information and the current and anticipated size of the population of carriers operating ADS-equipped CMVs.
Thus, even though the trailer provisions of the Phase 2 Standards were removed, we still must ensure the majority of our fleet is compliant with the California Phase 2 standards, which may adversely affect our operating results and profitability.
Thus, even though the trailer provisions of the federal were removed, we still must ensure the majority of our fleet is compliant with the California standards, which may adversely affect our operating results and profitability.
In June 2020 CARB also passed the Advanced Clean Trucks (“ACT”) regulation, which became effective in March 2021 and generally requires original equipment manufacturers to begin shifting towards greater production and sales of zero-emission heavy duty tractors starting in 2024. Under ACT, by 2045, every new tractor sold in California will need to be zero-emission.
In 2020 CARB also passed the Advanced Clean Trucks (“ACT”) regulation, which became effective in 2021 and generally requires original equipment manufacturers to begin shifting towards greater production and sales of zero-emission heavy duty tractors starting with model year 2024. Under ACT, by 2045, every new tractor sold in California will need to be zero-emission.
Our top ten customers accounted for approximately 44% and 43% of our total revenue in 2023 and 2022, respectively. Within our asset based transportation service offerings (Expedited and Dedicated), we operate tractors driven by a single driver and also tractors assigned to two-person driver teams.
Our top ten customers accounted for approximately 45% and 44% of our total revenue in 2024 and 2023, respectively. Within our asset based transportation service offerings (Expedited and Dedicated), we operate tractors driven by a single driver and also tractors assigned to two-person driver teams.
In January 2021, the Ninth Circuit Court of Appeals upheld the FMCSA's determination that federal law does preempt California's meal and rest break laws, as applied to drivers of property-carrying commercial motor vehicles. Other current and future state and local laws, including laws related to employee meal breaks and rest periods, may also vary significantly from federal law.
In 2021, the Ninth Circuit Court of Appeals upheld the FMCSA's determination that federal law does preempt California's meal and rest break laws, as applied to drivers of property-carrying CMVs. Other current and future state and local laws, including laws related to employee meal breaks and rest periods, may also vary significantly from federal law.
Among other things, the Infrastructure Investment and Jobs Act (“IIJA”), signed into law by President Biden in November 2021, created an apprenticeship program for drivers aged 18 to 20 years old to eventually qualify to drive commercial trucks in interstate commerce.
Among other things, the Infrastructure Investment and Jobs Act (“IIJA”), signed into law in 2021, created an apprenticeship program for drivers aged 18 to 20 years old to eventually qualify to drive commercial trucks in interstate commerce.
We also order most of our equipment with uniform specifications to reduce our parts inventory and facilitate maintenance. At December 31, 2023, our tractor fleet had an average age of approximately 1.6 years, and our trailer fleet had an average age of approximately 5.9 years.
We also order most of our equipment with uniform specifications to reduce our parts inventory and facilitate maintenance. At December 31, 2024, our tractor fleet had an average age of approximately 1.6 years, and our trailer fleet had an average age of approximately 5.7 years.
Currently, the Company is required to (i) report drug and alcohol violations to the clearinghouse; (ii) query the clearinghouse regarding drug and alcohol violations for current and prospective employees prior to permitting such employees to operate a commercial motor vehicle; and (iii) query the clearinghouse for each currently employed driver annually.
Currently, the Company is required to (i) report drug and alcohol violations to the clearinghouse; (ii) query the clearinghouse regarding drug and alcohol violations for current and prospective employees prior to permitting such employees to operate a CMV; and (iii) query the clearinghouse for each currently employed driver annually.
The Company We operate a relatively new tractor fleet and employ sophisticated tractor technology that enhances our operational efficiencies and our drivers' safety. Our company-owned tractor fleet has an average age of approximately 1.6 years, compared to an average U.S. Class 8 tractor age of approximately 6.4 years in 2023.
The Company We operate a relatively new tractor fleet and employ sophisticated tractor technology that enhances our operational efficiencies and our drivers' safety. Our company-owned tractor fleet has an average age of approximately 1.6 years, compared to an average U.S. Class 8 tractor age of approximately 5.7 years in 2024.
In January 2022, our Board of Directors (the "Board") approved a quarterly cash dividend program of $0.0625 per share, which was increased to $0.08 per share in August 2022 and $0.11 per share in February 2023. ● Risk Management—Assess and Mitigate. We evaluate risk areas with significant volatility, as well as the costs and benefits associated with mitigating the volatility.
In January 2022, our Board of Directors (the "Board") approved a quarterly cash dividend program of $0.03125 per share, which was increased to $0.04 per share in August 2022 and $0.055 per share in February 2023. ● Risk Management—Assess and Mitigate. We evaluate risk areas with significant volatility, as well as the costs and benefits associated with mitigating the volatility.
TEL is a tractor and trailer equipment leasing company and used equipment reseller. 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 since May 2011, or $21.4 million in 2023 and $25.2 million in 2022.
TEL is a tractor and trailer equipment leasing company and used equipment reseller. 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 since May 2011, or $14.7 million in 2024 and $21.4 million in 2023.
House of Representatives and referred to the House Committee on Education and Workforce. These bills propose to apply the "ABC Test" for classifying workers under Federal Fair Labor Standards Act claims. In January 2024, the Department of Labor published a final rule regarding independent contractor classification, which is set to take effect on March 11, 2024.
House of Representatives and referred to the House Committee on Education and Workforce. These bills propose to apply the "ABC Test" for classifying workers under Federal Fair Labor Standards Act claims. In January 2024, the Department of Labor published a final rule regarding independent contractor classification, which took effect in 2024.
The use of teams, however, increases the accumulation of miles on tractors and trailers, personnel costs as a percentage of revenue, and the number of drivers we must recruit. We are not a party to any collective bargaining agreement. At December 31, 2023, we employed approximately 2,900 drivers and approximately 1,700 non-driver personnel.
The use of teams, however, increases the accumulation of miles on tractors and trailers, personnel costs as a percentage of revenue, and the number of drivers we must recruit. We are not a party to any collective bargaining agreement. At December 31, 2024, we employed approximately 3,100 drivers and approximately 1,700 non-driver personnel.
Now that the rule is effective, training schools and other programs are required to implement the prescribed curriculum and register with the FMCSA's Training Provider Registry to certify that their program meets the classroom and driving standards.
Training schools and other programs are required to implement the prescribed curriculum and register with the FMCSA's Training Provider Registry to certify that their program meets the classroom and driving standards.
The CPDP will expand the types of eligible crashes, modify the SMS to exclude crashes with not preventable determinations from the prioritization algorithm and note the not preventable determinations in the Pre-Employment Screening Program.
The CPDP will expand the types of eligible crashes, modifies the SMS to exclude crashes with not preventable determinations from the prioritization algorithm and notes the not preventable determinations in the Pre-Employment Screening Program.
Furthermore, in April 2022, the FMCSA issued a notice of intent to propose a rule during 2023 that will require certain commercial vehicles to be equipped with speed limiters; however, no final rule was proposed. It is now expected that the DOT will issue a rule sometime in 2024.
The FMCSA issued a notice of intent to propose a rule during 2023 that will require certain commercial vehicles to be equipped with speed limiters; however, no final rule was proposed. It is now expected that the DOT will issue a rule sometime in May 2025.
Our average number of teams as a percentage of our seated fleet increased for 2023 as compared to 2022. Our average open tractors, including wrecked tractors, decreased to 4.8% for the year ended December 31, 2023, from approximately 6.7% for the year ended December 31, 2022.
Our average number of teams as a percentage of our seated fleet increased for 2024 as compared to 2023. Our average open tractors, including wrecked tractors, decreased to 3.3% for the year ended December 31, 2024, from approximately 4.8% for the year ended December 31, 2023.
Fourth, a confluence of regulatory constraints, safety and security demands, and scarcity of qualified driver applicants, negatively impacted our asset productivity and reinforced what a precious resource professional truck drivers are (and we believe increasingly will be) in our industry. 3 Table of Contents We are proud of the operational improvements we have made in recent years, especially in light of headwinds we faced around the COVID-19 pandemic, rising casualty insurance costs and the challenging supply shortage of professional drivers.
Fourth, a confluence of regulatory constraints, safety and security demands, and scarcity of qualified driver applicants, negatively impacted our asset productivity and reinforced what a precious resource professional truck drivers are (and we believe increasingly will be) in our industry. 3 Table of Contents We are proud of the operational improvements we have made in recent years, in spite of rising casualty insurance costs and the challenging supply shortage of professional drivers.
The Company’s (or its subsidiaries', as applicable) new tractor purchases in 2023 complied with the emission and fuel consumption reductions required by the Phase 2 Standards.
The Company’s (or its subsidiaries', as applicable) new tractor purchases in 2024 complied with the emission and fuel consumption reductions required by the standards.
The following table reflects the size of each of our reportable segments measured by 2023 total revenue, net of fuel surcharge revenue, which we refer to as "freight revenue": Distribution of Freight Revenue Among Service Offerings Expedited 35 % Dedicated 28 % Managed Freight 27 % Warehousing 10 % Total 100 % In our Expedited and Dedicated reportable segments, we generate revenue by transporting freight for our customers.
The following table reflects the size of each of our reportable segments measured by 2024 total revenue, net of fuel surcharge revenue, which we refer to as "freight revenue": Distribution of Freight Revenue Among Service Offerings Expedited 34 % Dedicated 31 % Managed Freight 25 % Warehousing 10 % Total 100 % In our Expedited and Dedicated reportable segments, we generate revenue by transporting freight for our customers.
Court of Appeals for the District of Columbia ruled in favor of the association challenging the standards and vacated all portions of the Phase 2 Standards that applied to trailers, and consequently, the Phase 2 Standards will only require reductions in emissions and fuel consumption for tractors.
Court of Appeals for the District of Columbia ruled in favor of an association challenging the standards and vacated all portions of the standards that applied to trailers. Consequently, the standards require 25 reductions in emissions and fuel consumption for tractors.
Beginning November 2024, states will be required to query the Clearinghouse when issuing, renewing, transferring, or upgrading a commercial driver's license and must revoke a driver's commercial driving privileges if such driver is prohibited from driving a motor vehicle for one or more drug or alcohol violations.
With Clearinghouse II now in effect, states will be required to query the Clearinghouse when issuing, renewing, transferring, or upgrading a commercial driver's license and must revoke a driver's commercial driving privileges if such driver is prohibited from driving a motor vehicle for one or more drug or alcohol violations.
The rule also stipulates that “available financial security” falls below $75,000 when there is a drawdown on the broker or freight forwarder’s surety bond or trust fund. Implementation and compliance with these changes may negatively impact our business by increasing our compliance obligations, operating costs, and related expenses.
The rule also stipulates that “available financial security” falls below $75,000 when there is a drawdown on the broker or freight forwarder’s surety bond or trust fund. Implementation and compliance with these changes may negatively impact our business by increasing our compliance obligations, operating costs, and related expenses. Compliance under this final rule has been pushed back until January 2026.
We will continue to promote improvement of these scores in all seven categories with ongoing reviews of all safety-related policies, programs, and procedures for their effectiveness. 10 Table of Contents In December 2016, the FMCSA issued a final rule establishing a national clearinghouse for drug and alcohol testing results and requiring motor carriers and medical review officers to provide records of violations by commercial drivers of FMCSA drug and alcohol testing requirements.
We will continue to promote improvement of these scores in all seven categories with ongoing reviews of all safety-related policies, programs, and procedures for their effectiveness. 10 Table of Contents There is a national clearinghouse for drug and alcohol testing results that requires motor carriers and medical review officers to provide records of violations by commercial drivers of FMCSA drug and alcohol testing requirements.
In 2022, an industry group known as the Trucking Alliance sought an exemption from the FMCSA that would allow positive hair specimen tests to be uploaded into the FMCSA Drug and Alcohol Clearinghouse. This request was denied by the FMCSA, however, noting they cannot act until the DHHS finalizes these guidelines.
In 2022, an industry group known as the Trucking Alliance sought an exemption from the FMCSA that would allow positive hair specimen tests to be uploaded to the Clearinghouse. This request was denied by the FMCSA, however, noting they cannot act until the DHHS finalizes these guidelines, which have been delayed by the DHHS until May 2025.
Additionally, in April 2023, NHTSA issued an advance notice of proposed rulemaking that would require side underride guards to be installed on all new heavy-duty trucks. It remains to be seen, what, if any, final rules will stem from such proposals.
Additionally, in April 2023, NHTSA issued an advance notice of proposed rulemaking that would require side underride guards to be installed on all new heavy-duty trucks. While a final rule with respect to automatic braking is expected to be issued in 2025, it remains to be seen, what, if any, final rules will stem from such proposals.
Other rules have been proposed or made final by the FMCSA, including a rule setting forth minimum driver training standards for new drivers applying for commercial driver’s licenses for the first time and to experienced drivers upgrading their licenses or seeking a hazardous materials endorsement, known as Entry-Level Driver Training regulations (the "ELDT Regulations"), which was made final in December 2016, with a compliance date in February 2020.
Other rules have been proposed or made final by the FMCSA, including a rule setting forth minimum driver training standards for new drivers applying for commercial driver’s licenses for the first time and to experienced drivers upgrading their licenses or seeking a hazardous materials endorsement, known as Entry-Level Driver Training regulations.
Therefore, it is unclear if, when and to what extent such changes to the CSA program will occur. In February 2023, the FMCSA published a notice of proposed changes to its Safety Measurement System (“SMS”) methodology, including the BASIC categories.
The adoption of such changes is contingent on the results of the new modeling theory and additional public feedback. Therefore, it is unclear if, when and to what extent such changes to the CSA program will occur. In February 2023, the FMCSA published a notice of proposed changes to its Safety Measurement System (“SMS”) methodology, including the BASIC categories.
These effects, combined with the uncertainty as to the operating results that will be produced by the newly designed diesel engines and the residual values of these vehicles, could increase our costs or otherwise adversely affect our business or operations.
Compliance with these regulations could increase the cost of new tractors and trailers, impair equipment productivity, and increase operating expenses. These effects, combined with the uncertainty as to the operating results that will be produced by the newly designed diesel engines and the residual values of these vehicles, could increase our costs or otherwise adversely affect our business or operations.
A summary of these metrics for our Expedited reportable segment for 2023 and 2022 is as follows: 2023 2022 Average freight revenue per total mile $ 2.13 $ 2.32 Average miles per tractor 183,717 170,925 Average freight revenue per tractor per week $ 7,501 $ 7,604 A summary of the key performance metrics for our Dedicated reportable segment for 2023 and 2022 is as follows: 2023 2022 Average freight revenue per total mile $ 2.67 $ 2.63 Average miles per tractor 81,387 78,728 Average freight revenue per tractor per week $ 4,162 $ 3,975 Within our Managed Freight reportable segment, we derive revenue from providing Brokerage and TMS services, particularly arranging transportation services for customers directly and through relationships with thousands of third-party carriers and integration with our Expedited reportable segment.
A summary of these metrics for our Expedited reportable segment for 2024 and 2023 is as follows: 2024 2023 Average freight revenue per total mile $ 2.09 $ 2.13 Average miles per tractor 185,340 183,717 Average freight revenue per tractor per week $ 7,416 $ 7,501 A summary of the key performance metrics for our Dedicated reportable segment for 2024 and 2023 is as follows: 2024 2023 Average freight revenue per total mile $ 2.88 $ 2.67 Average miles per tractor 80,556 81,387 Average freight revenue per tractor per week $ 4,436 $ 4,162 Within our Managed Freight reportable segment, we derive revenue from providing Brokerage and TMS services, particularly arranging transportation services for customers directly and through relationships with thousands of third-party carriers and integration with our Expedited reportable segment.
In August 2023, the FMCSA announced in an advanced notice of proposed rulemaking and request for comments that it was interested in developing a new methodology to determine whether a carrier is fit to operate commercial motor vehicles. Additionally, the U.S. Government Accountability Office made a suggestion in 2023 to the FMCSA to make complaint data public.
In August 2023, the FMCSA announced in an advanced notice of proposed rulemaking and request for comments that it was interested in developing a new methodology to determine whether a carrier is fit to operate commercial motor vehicles ("CMVs" or a "CMV"). Additionally, the U.S.
Of such trailers, 5,665 trailers were owned, 215 trailers were held under operating or finance leases. Furthermore, at December 31, 2023, approximately 86% of our trailers were dry vans, 11% of our trailers were refrigerated vans, and the remaining trailers were specialty trailers related to our poultry business.
Of such trailers, 5,804 trailers were owned, 641 trailers were held under operating or finance leases. Furthermore, at December 31, 2024, approximately 71% of our trailers were dry vans, 12% of our trailers were refrigerated vans, and the remaining trailers were specialty trailers related to our poultry business.
We actively manage our fuel costs by routing our drivers through fuel centers with which we have negotiated volume discounts and through jurisdictions with lower fuel taxes, where possible.
There were no fuel hedging gains in 2024 or 2023. We actively manage our fuel costs by routing our drivers through fuel centers with which we have negotiated volume discounts and through jurisdictions with lower fuel taxes, where possible.
At December 31, 2023, we engaged 130 independent contractor drivers. 8 Table of Contents Revenue Equipment At December 31, 2023, we operated 2,139 tractors and 5,880 trailers. Of such tractors, 1,961 tractors were owned, 48 tractors were financed under operating or finance leases, and 130 tractors were provided by independent contractors, who own and drive their own tractors.
At December 31, 2024, we engaged 109 independent contractor drivers. 8 Table of Contents Revenue Equipment At December 31, 2024, we operated 2,307 tractors and 6,445 trailers. Of such tractors, 2,196 tractors were owned, 2 tractors were financed under operating or finance leases, and 109 tractors were provided by independent contractors, who own and drive their own tractors.
As with ACT, adoption and implementation of ACF could materially and negatively impact our business by increasing our compliance obligations, operating costs, and related expenses. The periodic testing portion of California’s Clean Truck Check (as a part of CARB’s Clean Truck program), known as Phase 3 of the Clean Truck Check, is set to begin in July 2024.
If CARB seeks to adopt and implement the ACF in the future, it could materially and negatively impact our business by increasing our compliance obligations, operating costs, and related expenses. The periodic testing portion of California’s Clean Truck Check (as a part of CARB’s Clean Truck program), known as Phase 3 of the Clean Truck Check, began in July 2024.
In May 2023, the DRIVE Safe Integrity Act of 2023 was introduced, which supports participation in the SDAP and would permit 18- to 20-year-olds to operate across state lines if data from the SDAP does not indicate such drivers are less safe than current commercial motor vehicle drivers. Whether this legislation will ultimately become law is uncertain.
If not renewed, the SDAP is currently set to conclude in November 2025. In May 2023, the DRIVE Safe Integrity Act of 2023 was introduced, which supports participation in the SDAP and would permit 18- to 20-year-olds to operate across state lines if data from the SDAP does not indicate such drivers are less safe than current CMV drivers.
If signed into law, SB 253 would require CARB to adopt regulations before January 2025 requiring public and private companies that exceed $1 billion in annual revenue and that do business in California to begin publicly disclosing their GHG emissions, and SB 261 would require companies doing business in California and earning revenue exceeding $500 million to report on their climate-related financial risks and measures taken to mitigate such risks on or before January 2026.
SB 253 requires companies that exceed $1 billion in annual revenue and that do business in California to publicly disclose their GHG emissions, while SB 261 requires companies doing business in California and earning annual revenue exceeding $500 million to report on their climate-related financial risks and measures taken to mitigate such risks on or before January 2026.
Additionally, we implemented an enterprise safety tactical plan that will continue to drive sustainability across our enterprise. We believe the ongoing execution of our strategic plan has contributed to the substantial improvement in operating results and profitability we have generated over the past several years.
We believe the ongoing execution of our strategic plan has contributed to the substantial improvement in operating results and profitability we have generated over the past several years.
However, pursuant to the Fixing America's Surface Transportation Act (the "FAST Act"), which was signed into law in December 2015, the FMCSA was required to remove from public view the previously available CSA scores while it reviews the reliability of the scoring system.
Under the CSA, these scores were initially made available to the public in five of the seven categories. However, pursuant to the Fixing America's Surface Transportation Act (the "FAST Act"), the FMCSA was required to remove from public view the previously available CSA scores while it reviews the reliability of the scoring system.
Currently, it is uncertain what changes, if any, the FMCA will make to the CSA rating system or the SMS methodology; however, any change which would result in the Company or its subsidiaries receiving less favorable scores, or an increased visibility of less favorable scores or of complaints against the Company may have an adverse effect on our operations and financial position.
Whether this revised SMS methodology will take effect is uncertain; however, any change which results in the Company or its subsidiaries receiving less favorable scores, or an increased visibility of less favorable scores or of complaints against the Company may have an adverse effect on our operations and financial position.
The IIJA may result in increased compliance and implementation-related expenses, which could have a negative impact on our operations. In January 2023, the Safer Highways and Increased Performance for Interstate Trucking Act (the “SHIP IT Act”) was introduced into the U.S. House of Representatives.
However, adoption and implementation could negatively impact our business by increasing our compliance obligations and related expenses. In January 2023, the Safer Highways and Increased Performance for Interstate Trucking Act (the “SHIP IT Act”) was introduced into the U.S. House of Representatives.
It remains unclear whether any regulatory changes will stem from the apprenticeship program.
Whether this legislation will ultimately become law is uncertain. It remains unclear whether any regulatory changes will stem from the apprenticeship program.
The data is organized into seven categories (such categories know as the "BASICs"). Carriers are grouped by category with other carriers that have a similar number of safety events (e.g., crashes, inspections, or violations) and carriers are ranked and assigned a rating percentile to prioritize them for interventions if they are above a certain threshold.
Carriers are grouped by category with other carriers that have a similar number of safety events (e.g., crashes, inspections, or violations) and carriers are ranked and assigned a rating percentile to prioritize them for interventions if they are above a certain threshold. Generally, these scores do not have a direct impact on a carrier’s safety rating.
During this period of review by the FMCSA, we will continue to have access to our own scores and will still be subject to intervention by the FMCSA when such scores are above the intervention thresholds.
During this period of review by the FMCSA, we will continue to have access to our own scores and will still be subject to intervention by the FMCSA when such scores are above the intervention thresholds. A study was conducted and delivered to the FMCSA with several recommendations to make the CSA program more fair, accurate, and reliable.
We believe that the key to the improved safety results is a combination of training, consistent and proactive coaching, utilizing proven safety technologies, and consistent collaboration between all of our business units.
We believe that the key to the improved safety results remains a combination of training, consistent and proactive coaching, utilizing proven safety technologies, and consistent collaboration between all of our business units. The expansion of our safety training program has allowed us to further increase new driver training and sustain consistent messaging around the culture of safety.
Motor carriers are required to query the clearinghouse to ensure drivers and driver applicants do not have violations of federal drug and alcohol testing regulations that prohibit them from operating commercial motor vehicles. The final rule became effective in 2017, with an initial compliance date of January 2020 and certain compliance dates extended until January 2023.
Motor carriers are required to query the clearinghouse to ensure drivers and driver applicants do not have violations of federal drug and alcohol testing regulations that prohibit them from operating CMVs.
Recently, federal courts have reached different decisions on the issue of whether preemption applies to broker liability.
It is uncertain what changes, if any, will result from the notice of proposed rulemaking. Recently, federal courts have reached different decisions on the issue of whether preemption applies to broker liability.
It is uncertain how long the current circuit split will continue and whether the U.S. Supreme Court will decide to review similar cases in the future. If additional circuit courts, or the U.S. Supreme Court, adopt the Ninth Circuit view, freight brokers’ ability to rely on federal agency standards in selecting motor carriers would be called into question.
Supreme Court has declined to review the issue and it is uncertain how long the current circuit split will continue and whether the U.S. Supreme Court will decide to review similar cases in the future. If additional circuit courts, or the U.S.
In order to reduce exhaust emissions, lawmakers, including federal and some states and municipalities, have begun to restrict the locations and amount of time where diesel-powered tractors may idle.
These laws are currently facing litigation, which could result in delays or modifications to the laws. Implementation of these additional reporting requirements would result in increased compliance costs and resource utilization. In order to reduce exhaust emissions, lawmakers, including federal and some states and municipalities, have begun to restrict the locations and amount of time where diesel-powered tractors may idle.
It would also allow for truck parking expansion at commercial truck stops and travel plazas. Industry groups are generally in favor of the bill, as a lack of available parking has negatively impacted the industry as a whole, including the Company and its subsidiaries.
Industry groups are generally in favor of additional funding to improve parking infrastructure, as a lack of available parking has negatively impacted the industry as a whole, including the Company and its subsidiaries.
The provision drew certain mechanics from the bills introduced in Congress in 2019 related to lowering the age requirements for interstate commercial driving. The FMCSA announced the establishment of this apprenticeship program in January 2022 in an effort to begin to help the industry’s ongoing driver shortage.
The FMCSA announced the establishment of this apprenticeship program in January 2022 in an effort to begin to help the industry’s ongoing driver shortage.
Such changes include the testing and possible adoption of a revised risk modeling theory, potential collection and dissemination of additional carrier data and revised measures for intervention thresholds. The adoption of such changes is contingent on the results of the new modeling theory and additional public feedback.
The FMCSA provided a report to Congress outlining the changes it may make to the CSA program in response to the study. Such changes include the testing and possible adoption of a revised risk modeling theory, potential collection and dissemination of additional carrier data and revised measures for intervention thresholds.
In May 2020, the FMCSA announced that effective immediately it is making permanent a pilot program that will not count a crash in which a motor carrier was not at fault when calculating the carrier’s safety measurement profile, called the Crash Preventability Demonstration Program (“CPDP”).
In 2020, the FMCSA announced that it would permanently implement the Crash Preventability Demonstration Program ("CPDP"), which does not count crashes when motor carriers are not at fault while calculating a carrier’s safety measurement profile.
Executive and Legislative Climate In August 2022, the Inflation Reduction Act of 2022 was signed into law by President Biden. Amongst other considerations, the Inflation Reduction Act contains provisions relating to energy, climate change, and tax reform.
The Inflation Reduction Act of 2022 contains provisions relating to energy, climate change, and tax reform.
In August 2011, the NHTSA and the EPA adopted final rules that established the first-ever fuel economy and greenhouse gas standards for medium-and heavy-duty vehicles, including the tractors we employ (the "Phase 1 Standards").
The NHTSA and the EPA have fuel economy and greenhouse gas standards for medium-and heavy-duty vehicles, including the tractors we use.
If the FMCSA determines the crash was not preventable, it will be listed on the SMS but not included when calculating a carrier’s BASICs measure for the crash indicator category in SMS.
Under the program, may submit a Request for Data Review with the required police accident report and other supporting documents, photos or videos through the FMCSA’s DataQs website. If the FMCSA determines the crash was not preventable, it will be listed on the SMS but not included when calculating a carrier’s BASICs measure for the crash indicator category in SMS.
In December 2022, the EPA adopted a final rule that reflected a compromise of the options previously proposed, with new emissions standards of nitrogen oxides for heavy-duty motor vehicles beginning with model year 2027 being more than 80% stronger than current emission standards, with the intent to reduce heavy duty emissions by almost 50% from today's levels by 2045.
Even though the trailer provisions of the standards have been removed, we will still need to ensure the majority of our fleet is compliant with the California standards (described in further detail below). 12 Table of Contents In 2022, the EPA adopted a final rule regarding emissions standards of nitrogen oxides for heavy-duty motor vehicles beginning with model year 2027 being more than 80% stronger than current emission standards, with the intent to reduce heavy duty emissions by almost 50% from 2022 levels by 2045.
It could also lead to primary (as opposed to contingent) liability being imposed upon freight brokers, and increased insurance premiums for brokerage operations generally.
Supreme Court, adopt the Ninth Circuit view, that freight brokers liability is not preempted by federal regulation, it could lead to patchwork regulations across the United States and also result in primary (as opposed to contingent) liability being imposed upon freight brokers, and increased insurance premiums for brokerage operations generally.
Additionally, we provide poultry feed and live haul transportation, as well as highly regulated, time sensitive loads for the U.S. government. We had one customer, serviced by our Expedited and Managed Freight reportable segments, that accounted for more than 10% of our consolidated revenue in 2023 and none in 2022.
We had one customer, serviced by our Expedited, Managed Freight, and Warehousing reportable segments, that accounted for more than 10% of our consolidated revenue in 2024 and one customer, serviced by our Expedited and Managed Freight reportable segments, that accounted for more than 10% of our consolidated revenue in 2023.
In October 2016, the EPA and NHTSA published the final rule mandating that the Phase 2 Standards will apply to trailers beginning with model year 2018 and tractors beginning with model year 2021. The Phase 2 Standards require nine percent and 25 percent reductions in emissions and fuel consumption for trailers and tractors, respectively, by 2027.
In 2016, the NHTSA and EPA published the final rule mandating that fuel economy and greenhouse gas standards apply to trailers beginning with model year 2018 and tractors beginning with model year 2021; however, in 2021, a panel for the U.S.
In November 2022 Senate lawmakers introduced legislation that would set aside grant funds over four years to expand truck parking across the United States. Such legislation would allow for the creation of new parking areas, the expansion of existing facilities, and the approval of commercial parking at existing weigh stations, rest areas, and park-and-ride facilities.
Such legislation would allow for the creation of new parking areas, the expansion of existing facilities, and the approval of commercial parking at existing weigh stations, rest areas, and park-and-ride facilities. It would also allow for truck parking expansion at commercial truck stops and travel plazas.
Additionally, in October 2023, the California State Senate and State Assembly approved two bills, Senate Bill 253 (“SB 253”) and Senate Bill 261 (“SB 261”), that could require thousands of companies doing business in California to disclose greenhouse gas (“GHG”) emissions and climate-related financial risks, with reporting beginning in 2026.
Under Phase 3, heavy duty vehicles are subject to periodic emissions testing and annual compliance fees, increasing our operating costs and related expenses Additionally, in 2023, California enacted two bills into law, Senate Bill 253 (“SB 253”) and Senate Bill 261 (“SB 261”), which require certain companies doing business in California to disclose greenhouse gas (“GHG”) emissions and climate-related financial risks, with reporting beginning in 2026.
In its petition to the Supreme Court, the broker unsuccessfully argued that the Ninth Circuit’s decision improperly disallowed federal preemption and would expose freight brokers to a patchwork of state regulations across the United States. In April 2023, the Eleventh Circuit Court held that the Federal Aviation Administration Authorization Act (“FAAAA”) expressly preempted such personal liability claims against a broker.
In April 2023, the Eleventh Circuit Court held that the Federal Aviation Administration Authorization Act (“FAAAA”) expressly preempted such personal liability claims against a broker, and subsequently, in July 2023, the Seventh Circuit Court of Appeals provided a decision that also supported federal preemption. The U.S.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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As a result of our level of debt, finance leases, operating leases, and encumbered assets, we believe: ● our vulnerability to adverse economic and industry conditions and competitive pressures is heightened; ● we will continue to be required to dedicate a substantial portion of our cash flows from operations to lease payments and repayment of debt, limiting the availability of cash for our operations, capital expenditures, and future business opportunities; ● our flexibility in planning for, or reacting to, changes in our business and industry will be limited; ● our results of operations and cash flows are sensitive to fluctuations in interest rates because some of our debt obligations are subject to variable interest rates, and future borrowings and lease financing arrangements will be affected by any such fluctuations; ● our ability to obtain additional financing in the future for working capital, capital expenditures, debt service requirements, acquisitions, or other purposes may be limited; ● it may be difficult for us to comply with the multitude of financial covenants, borrowing conditions, or other obligations contained in our debt agreements, thereby increasing the risk that we trigger certain cross-default provisions; ● we may be required to issue additional equity securities to raise funds, which would dilute the ownership position of our stockholders; and ● we may be placed at a competitive disadvantage relative to some of our competitors that have less, or less restrictive, debt than us.
As a result of our level of debt, finance leases, operating leases, fluctuations in working capital requirements, and encumbered assets, we believe: ● our vulnerability to adverse economic and industry conditions and competitive pressures is heightened; ● we will continue to be required to dedicate a substantial portion of our cash flows from operations to lease payments and repayment of debt, limiting the availability of cash for our operations, capital expenditures, and future business opportunities; ● our flexibility in planning for, or reacting to, changes in our business and industry will be limited; ● our results of operations and cash flows are sensitive to fluctuations in interest rates because some of our debt obligations are subject to variable interest rates, and future borrowings and lease financing arrangements will be affected by any such fluctuations; ● our ability to obtain additional financing in the future for working capital, capital expenditures, debt service requirements, acquisitions, or other purposes may be limited; ● it may be difficult for us to comply with the multitude of financial covenants, borrowing conditions, or other obligations contained in our debt agreements, thereby increasing the risk that we trigger certain cross-default provisions; ● we may be required to issue additional equity securities (which would dilute the ownership position of our stockholders) or debt securities to raise funds; and ● we may be placed at a competitive disadvantage relative to some of our competitors that have less, or less restrictive, debt than us.
As a result, we expect to continue to pay increased prices for equipment and incur additional expenses and related financing costs for the foreseeable future. Furthermore, reduced equipment efficiency may result from new engines designed to reduce emissions, thereby increasing our operating expenses.
As a result, we expect to continue to pay steady to increased prices for equipment and incur additional expenses and related financing costs for the foreseeable future. Furthermore, reduced equipment efficiency may result from new engines designed to reduce emissions, thereby increasing our operating expenses.
These factors include the following: ● we compete with many other truckload carriers of varying sizes and, to a lesser extent, with (i) less-than-truckload carriers, (ii) railroads, intermodal companies, and (iii) other transportation and logistics companies, many of which have access to more equipment and greater capital resources than we do; ● many of our competitors periodically reduce their freight rates to gain business, especially during times of reduced growth in the economy, which may limit our ability to maintain or increase freight rates or to maintain or expand our business or may require us to reduce our freight rates in order to maintain business and keep our equipment productive; ● many of our customers, including several in our top ten, are other transportation companies or also operate their own private trucking fleets, and they may decide to transport more of their own freight; ● we may increase the size of our fleet during periods of high freight demand during which our competitors also increase their capacity, and we may experience losses in greater amounts than such competitors during subsequent cycles of softened freight demand if we are required to dispose of assets at a loss to match reduced customer demand; ● a significant portion of our business is in the retail industry, which continues to undergo a shift away from the traditional brick and mortar model towards e-commerce, and this shift could impact the manner in which our customers source or utilize our services; ● many customers reduce the number of carriers they use by selecting so-called "core carriers" as approved service providers or by engaging dedicated providers, and we may not be selected; ● the trend toward consolidation in the trucking industry may create large carriers with greater financial resources and other competitive advantages relating to their size, and we may have difficulty competing with these larger carriers; ● the market for qualified drivers is increasingly competitive, and our inability to attract and retain drivers could reduce our equipment utilization or cause us to increase compensation to our drivers and independent contractors we engage, both of which would adversely affect our profitability; ● competition from freight logistics and freight brokerage companies may adversely affect our customer relationships and freight rates; ● the Covenant brand name is a valuable asset that is subject to the risk of adverse publicity (whether or not justified), which could result in the loss of value attributable to our brand and reduced demand for our services; and ● advances in technology may require us to increase investments in order to remain competitive, and our customers may not be willing to accept higher freight rates to cover the cost of these investments.
These factors include the following: ● we compete with many other truckload carriers of varying sizes and, to a lesser extent, with (i) less-than-truckload carriers, (ii) railroads, intermodal companies, and (iii) other transportation and logistics companies, many of which have access to more equipment and greater capital resources than we do, preferential customer contracts, and other competitive advantages; ● many of our competitors periodically reduce their freight rates to gain business, especially during times of reduced growth in the economy, which may limit our ability to maintain or increase freight rates or to maintain or expand our business or may require us to reduce our freight rates in order to maintain business and keep our equipment productive; ● many of our customers, including several in our top ten, are other transportation companies or also operate their own private trucking fleets, and they may decide to transport more of their own freight; ● we may increase the size of our fleet during periods of high freight demand during which our competitors also increase their capacity, and we may experience losses in greater amounts than such competitors during subsequent cycles of softened freight demand if we are required to dispose of assets at a loss to match reduced customer demand; ● a significant portion of our business is in the retail industry, which continues to undergo a shift away from the traditional brick and mortar model towards e-commerce, and this shift could impact the manner in which our customers source or utilize our services; ● many customers reduce the number of carriers they use by selecting so-called "core carriers" as approved service providers or by engaging dedicated providers, and we may not be selected; ● the trend toward consolidation in the trucking industry may create large carriers with greater financial resources and other competitive advantages relating to their size, and we may have difficulty competing with these larger carriers; ● the market for qualified drivers is increasingly competitive, and our inability to attract and retain drivers could reduce our equipment utilization or cause us to increase compensation to our drivers and independent contractors we engage, both of which would adversely affect our profitability; ● competition from freight logistics and freight brokerage companies and the proliferation of new brokerage platforms and technologies may adversely affect our customer relationships and freight rates; ● the Covenant brand name is a valuable asset that is subject to the risk of adverse publicity (whether or not justified), which could result in the loss of value attributable to our brand and reduced demand for our services; and ● advances in technology may require us to increase investments in order to remain competitive, and our customers may not be willing to accept higher freight rates to cover the cost of these investments.
Although we do not have any direct operations in Russia, Belarus, Ukraine, or the Middle East, we may be affected by the broader consequences of the conflicts in Ukraine or the Middle East or expansion of such conflicts to other areas or countries or similar conflicts elsewhere, such as, increased inflation, supply chain issues, including access to parts for our revenue equipment, embargoes, geopolitical shift, access to diesel fuel, higher energy prices, potential retaliatory action by the Russian or other governments, including cyber-attacks, and the extent of the conflict’s effect on the global economy.
Although we do not have any direct operations in Russia, Belarus, Ukraine, the Middle East, China, or Taiwan, we may be affected by the broader consequences of the conflicts in Ukraine or the Middle East, or expansion of such conflicts to other areas or countries or similar conflicts elsewhere, such as, increased inflation, supply chain issues (including access to parts for our revenue equipment), embargoes, geopolitical shift, access to diesel fuel, higher energy prices, potential retaliatory action by the Russian or other governments, including cyber-attacks, and the extent of the conflict’s effect on the global economy.
We believe that some of the most significant of these factors include (i) recessionary economic cycles; (ii) changes in customers’ inventory levels and practices, including shrinking product/package sizes, and in the availability of funding for their working capital; (iii) changes in the way our customers choose to utilize our services; (iv) downturns in our customers’ business cycles, including declines in consumer spending, (v) excess trucking capacity in comparison with shipping demand, (vi) driver shortages and increases in driver’s compensation, (vii) industry compliance with ongoing regulatory requirements, (viii) the availability and price of new revenue equipment and/or declines in the resale value of used revenue equipment; (ix) the impact of public health crises, epidemics, pandemics or similar events, such as COVID-19; (x) compliance with ongoing regulatory requirements; (xi) strikes, work stoppages or work slowdowns at our facilities, or at customer, port, border crossing or other shipping-related facilities, including related reductions in demand; (xii) increases in interest rates, inflation, fuel taxes, insurance, tolls, and license and registration fees; and (xiii) rising costs of healthcare.
We believe that some of the most significant of these factors include (i) recessionary economic cycles; (ii) changes in customers’ inventory levels and practices, including shrinking product/package sizes, and in the availability of funding for their working capital; (iii) changes in the way our customers choose to utilize our services; (iv) downturns in our customers’ business cycles, including declines in consumer spending, (v) excess trucking capacity in comparison with shipping demand, (vi) driver shortages and increases in driver’s compensation, (vii) industry compliance with ongoing regulatory requirements, (viii) the availability and price of new revenue equipment and/or declines in the resale value of used revenue equipment; (ix) the impact of public health crises, epidemics, pandemics, or similar events, such as COVID-19; (x) compliance with ongoing regulatory requirements; (xi) strikes, work stoppages or work slowdowns at our facilities, or at customer, port, border crossing or other shipping-related facilities, including related reductions in demand; (xii) increases in interest rates, inflation, fuel taxes, insurance, tolls, and license and registration fees; (xiii) changes in trade policy and tariff rates; and (xiv) rising costs of healthcare.
Covenant Transport, Inc. has been approved to self-insure for auto liability by the FMCSA. We believe this status, along with the use of captive insurance companies, allows us to post substantially lower aggregate letters of credit and restricted cash than we would be required to post without this status or the use of captive insurance companies.
Covenant Transport, LLC has been approved to self-insure for auto liability by the FMCSA. We believe this status, along with the use of captive insurance companies, allows us to post substantially lower aggregate letters of credit and restricted cash than we would be required to post without this status or the use of captive insurance companies.
Regulatory requirements, including those related to safety ratings, ELDs, hours-of-service changes, government imposed measures related to future outbreaks of COVID-19 or other contagious diseases, and an improved economy could further reduce the number of eligible drivers or force us to increase driver compensation to attract and retain drivers.
Regulatory requirements, including those related to safety ratings, ELDs, hours-of-service changes, government-imposed measures related to future outbreaks of contagious diseases, like COVID-19, and an improved economy could further reduce the number of eligible drivers or force us to increase driver compensation to attract and retain drivers.
All outstanding shares of Class B common stock are owned by the Parkers and are convertible to Class A common stock on a share-for-share basis at the election of the Parkers or automatically upon transfer to someone outside of the Parker family. This voting structure gives the Parkers approximately 41% of the voting power of all of our outstanding stock.
All outstanding shares of Class B common stock are owned by the Parkers and are convertible to Class A common stock on a share-for-share basis at the election of the Parkers or automatically upon transfer to someone outside of the Parker family. This voting structure gives the Parkers approximately 39% of the voting power of all of our outstanding stock.
Any future acquisitions we may consummate involve numerous risks, any of which could have a materially adverse effect on our business, financial condition, and results of operations, including: ● some of the acquired businesses may not achieve anticipated revenue, earnings, or cash flows; ● we may assume liabilities that were not disclosed to us or otherwise exceed our estimates; ● we may be unable to integrate acquired businesses successfully, or at all, and realize anticipated economic, operational and other benefits in a timely manner, which could result in substantial costs and delays or other operational, technical, or financial problems; ● the acquired business may increase our customer concentration; ● transaction costs and acquisition-related integration costs could adversely affect our results of operations in the period in which such charges are recorded; ● we may incur future impairment charges, write-offs, write-downs, or restructuring charges that could adversely impact our results of operations; ● acquisitions could disrupt our ongoing business, distract our management, and divert our resources; ● we may experience difficulties operating in markets in which we have had no or only limited direct experience; ● we may rely on management of the acquired businesses, especially in markets in which we have no or only limited direct experience, and turnover of such management may affect our ability to manage the acquired businesses efficiently and effectively; ● we could lose customers, employees, and drivers of any acquired company; and ● we may incur additional indebtedness The conflicts in Ukraine and the Middle East, expansion of such conflicts to other areas or countries or similar conflicts could adversely impact our business and financial results.
Any future acquisitions we may consummate involve numerous risks, any of which could have a materially adverse effect on our business, financial condition, and results of operations, including: ● some of the acquired businesses may not achieve anticipated revenue, earnings, or cash flows; ● we may assume liabilities that were not disclosed to us or otherwise exceed our estimates; ● we may be unable to integrate acquired businesses successfully, or at all, and realize anticipated economic, operational and other benefits in a timely manner, which could result in substantial costs and delays or other operational, technical, or financial problems; ● the acquired business may increase our customer concentration; ● transaction costs and acquisition-related integration costs could adversely affect our results of operations in the period in which such charges are recorded; ● we may incur future impairment charges, write-offs, write-downs, or restructuring charges that could adversely impact our results of operations; ● acquisitions could disrupt our ongoing business, distract our management, and divert our resources; ● we may experience difficulties operating in markets in which we have had no or only limited direct experience; ● we may rely on management of the acquired businesses, especially in markets in which we have no or only limited direct experience, and turnover of such management may affect our ability to manage the acquired businesses efficiently and effectively; ● we could lose customers, employees, and drivers of any acquired company; and ● we may incur additional indebtedness The conflicts in Ukraine and the Middle East, expansion of such conflicts to other areas or countries or similar conflicts, as well as the rising tensions between China and Taiwan, could adversely impact our business and financial results.
Based on these unfavorable ratings, we may be prioritized for an intervention action or roadside inspection, either of which could adversely affect our results of operations. In addition, customers may be less likely to assign loads to us. For further discussion of the CSA program, please see "Regulation" under “Item 1. Business.”.
Based on these unfavorable ratings, we may be prioritized for an intervention action or roadside inspection, either of which could adversely affect our results of operations. In addition, customers may be less likely to assign loads to us. For further discussion of the CSA program, please see "Regulation" under “Item 1. Business”.
Our Chairman of the Board and Chief Executive Officer, David Parker, and his wife, Jacqueline Parker, beneficially own or have sole voting and dispositive power approximately 15% of our outstanding Class A common stock and 100% of our Class B common stock.
Our Chairman of the Board and Chief Executive Officer, David Parker, and his wife, Jacqueline Parker, beneficially own or have sole voting and dispositive power approximately 13% of our outstanding Class A common stock and 100% of our Class B common stock.
In addition, events outside our control, such as deterioration of U.S. transportation infrastructure and reduced investment in such infrastructure, public health crises, epidemics, pandemics, or similar event, such as COVID-19, strikes or other work stoppages at our facilities or at customer, port, border or other shipping locations, armed conflicts, including the conflicts in Ukraine and the Middle East, terrorist attacks, efforts to combat terrorism, military action against a foreign state or group located in a foreign state or heightened security requirements could lead to wear, tear and damage to our equipment, driver dissatisfaction, reduced economic demand and freight volumes, reduced availability of credit, increased prices for fuel, or temporary closing of the shipping locations or U.S. borders.
In addition, events outside our control, such as deterioration of U.S. transportation infrastructure and reduced investment in such infrastructure, public health crises, epidemics, pandemics, or similar event, such as COVID-19, strikes or other work stoppages at our facilities or at customer, port, border or other shipping locations, armed conflicts, including the conflicts in Ukraine and the Middle East or as a result of rising tensions between China and Taiwan, terrorist attacks, efforts to combat terrorism, military action against a foreign state or group located in a foreign state or heightened security requirements could lead to wear, tear and damage to our equipment, driver dissatisfaction, reduced economic demand and freight volumes, reduced availability of credit, increased prices for fuel, or temporary closing of the shipping locations or U.S. borders.
The timing and amount of future repurchases of our Class A common stock, including repurchases under our current stock repurchase program authorizing the purchase of up to $55 million of our Class A common stock, as well as the declaration of future dividends, is at the discretion of our Board and will depend on many factors such as our financial condition, earnings, cash flows, capital requirements, any future debt service obligations, covenants under our existing or future debt agreements, industry practice, legal requirements, regulatory constraints, and other factors our Board deems relevant.
The timing and amount of future repurchases of our Class A common stock, including repurchases under our current stock repurchase program authorizing the purchase of up to $55 million of our Class A common stock, as well as the declaration of future dividends, is at the discretion of our Board and will depend on many factors such as our financial condition, earnings, cash flows, capital requirements, any future debt service obligations, covenants under our existing or future debt agreements, industry practice, legal requirements, regulatory constraints, changes in federal and state tax laws, and other factors our Board deems relevant.
We are subject to risk with respect to higher prices for new tractors and trailers, including significant increase in recent quarters. We have at times experienced an increase in prices for new tractors and trailers and the resale values of the tractors and trailers have not always increased to the same extent.
We are subject to risk with respect to higher prices for new tractors and trailers. We have at times experienced an increase in prices for new tractors and trailers and the resale values of the tractors and trailers have not always increased to the same extent.
Our Chairman of the Board and Chief Executive Officer and his wife control a large portion of our stock and have substantial control over us, which could limit other stockholders' ability to influence the outcome of key transactions, including changes of control.
Our Chairman of the Board and Chief Executive Officer and his wife control a large portion of our stock and have substantial control over us, including as a result of our concentrated leadership structure, which could limit other stockholders' ability to influence the outcome of key transactions, including changes of control.
If there is a deterioration of resale prices, it could have a material adverse effect on our business, financial condition, and results of operations. During 2022 and 2023, we experienced a softened used equipment market.
If there is a deterioration of resale prices, it could have a material adverse effect on our business, financial condition, and results of operations. In 2022 through 2024, we experienced a softened used equipment market.
Furthermore, capacity at driving schools may be limited by future outbreaks of COVID-19 or other contagious diseases.
Furthermore, capacity at driving schools may be limited by future outbreaks of contagious diseases, like COVID-19.
If a new health epidemic or outbreak were to occur, we could experience broad and varied impacts similar to the impact of COVID-19, including adverse impacts to our workforce, our operations, and financial results, such as increased costs, tightening of credit markets, market volatility and a weakened freight environment.
If a new health epidemic or outbreak were to occur, we could experience broad and varied impacts similar to the impact of COVID-19, including adverse impacts to our workforce, our operations, equipment availability and financial results, such as increased costs, tightening of credit markets, greater risk for collection of amounts owed, market volatility and a weakened freight environment.
As of December 31, 2023, we had goodwill of $75.7 million and other intangible assets of $99.6 million. We evaluate our goodwill and other intangible assets for impairment. We could recognize impairments in the future, and we may never realize the full value of our intangible assets. If these events occur, our profitability and financial condition will suffer.
As of December 31, 2024, we had goodwill of $78.9 million and other intangible assets of $90.1 million. We evaluate our goodwill and other intangible assets for impairment. We could recognize impairments in the future, and we may never realize the full value of our intangible assets. If these events occur, our profitability and financial condition will suffer.
Our business is subject to the risk of litigation by employees, independent contractors, customers, vendors, government agencies, stockholders, and other parties through private actions, class actions, administrative proceedings, regulatory actions, and other processes.
COMPLIANCE RISKS Litigation may adversely affect our business, financial condition, and results of operations. Our business is subject to the risk of litigation by employees, independent contractors, customers, vendors, government agencies, stockholders, and other parties through private actions, class actions, administrative proceedings, regulatory actions, and other processes.
The imposition of additional tariffs or quotas or changes to certain trade agreements, including tariffs applied to goods traded between the United States and China, could, among other things, increase the costs of the materials used by our suppliers to produce new revenue equipment or increase the price of fuel.
The imposition of additional tariffs or quotas or changes to certain trade agreements, including tariffs applied to goods traded between the United States and China, and proposed changes to tariffs on various imports from other countries (such as Canada, Mexico, and the E.U.) could, among other things, increase the costs of the materials used by our suppliers to produce new revenue equipment or increase the price of fuel.
For further discussion of the labor and employment laws, please see "Regulation" under “Item 1. Business.” The CSA program adopted by the FMCSA could adversely affect our profitability and operations, our ability to maintain or grow our fleet, and our customer relationships. Under CSA, fleets are evaluated and ranked against their peers based on certain safety-related standards.
Business.” The CSA program adopted by the FMCSA could adversely affect our profitability and operations, our ability to maintain or grow our fleet, and our customer relationships. Under CSA, fleets are evaluated and ranked against their peers based on certain safety-related standards.
Compliance with such regulations has increased the cost of our new tractors, may increase the cost of new trailers, could impair equipment productivity, in some cases, result in lower fuel mileage, and increase our operating expenses.
In addition, we have equipped our tractors with safety, aerodynamic, and other options that increase the price of new equipment. Compliance with such regulations has increased the cost of our new tractors, may increase the cost of new trailers, could impair equipment productivity, in some cases, result in lower fuel mileage, and increase our operating expenses.
The interests of the Parkers may conflict with the interests of other holders of Class A common stock, and they may take actions affecting us with which other stockholders disagree. Provisions in our charter documents or Nevada law may inhibit a takeover, which could limit the price investors might be willing to pay for our Class A common stock.
Parker, the Parker Family, and the interests of our other stockholders. Provisions in our charter documents or Nevada law may inhibit a takeover, which could limit the price investors might be willing to pay for our Class A common stock.
Increasing attention on environmental, social and governance ( “ ESG ” ) matters may have a negative impact on our business, impose additional costs on us, and expose us to additional risks. Companies are facing increasing attention from stakeholders relating to ESG matters, including environmental stewardship, social responsibility, and diversity and inclusion.
Conflicting views on environmental, social and governance ( “ ESG ” ) matters may have a negative impact on our business, impose additional costs on us, and expose us to additional risks. Certain stakeholders have pressured companies on initiatives relating to ESG matters, including environmental stewardship, social responsibility, and corporate governance.
If we entered into a collective bargaining agreement with our domestic employees, the terms could materially adversely affect our costs, efficiency, and ability to generate acceptable returns on the affected operations. Failure to comply with existing or future labor and employment laws could have a materially adverse effect on our business and operating results.
If we entered into a collective bargaining agreement with our domestic employees, the terms could materially adversely affect our costs, efficiency, and ability to generate acceptable returns on the affected operations.
The magnitude of these risks cannot be predicted, including the extent to which the conflict may heighten other risks disclosed herein. Ultimately, these or other factors could materially and adversely affect our results of operations. COMPLIANCE RISKS Litigation may adversely affect our business, financial condition, and results of operations.
The increased tensions between China and Taiwan, and any resulting hostilities, may have similar consequences. The magnitude of these risks cannot be predicted, including the extent to which the conflict may heighten other risks disclosed herein. Ultimately, these or other factors could materially and adversely affect our results of operations.
If any of these were to occur, our operations, financial condition, liquidity, results of operations, and cash flows could be adversely impacted. 21 Table of Contents FINANCIAL RISKS Our Third Amended and Restated Credit Agreement (our "Credit Facility") and other financing arrangements contain certain covenants, restrictions, and requirements, and we may be unable to comply with such covenants, restrictions, and requirements.
Any decrease in the revenue of LTST may negatively impact our income and results of operations. 21 Table of Contents FINANCIAL RISKS Our Third Amended and Restated Credit Agreement (our "Credit Facility") and other financing arrangements contain certain covenants, restrictions, and requirements, and we may be unable to comply with such covenants, restrictions, and requirements.
Prices have increased and may continue to increase, due, in part, to (i) government regulations applicable to newly manufactured tractors and diesel engines, (ii) higher commodity prices, and (iii) the pricing discretion of equipment manufacturers. In addition, we have equipped our tractors with safety, aerodynamic, and other options that increase the price of new equipment.
Prices have increased in the past and may continue to increase, due, in part, to (i) government regulations applicable to newly manufactured tractors and diesel engines, (ii) higher commodity prices, (iii) the pricing discretion of equipment manufacturers, and (iv) increased demand for equipment due to more favorable freight market.
In addition, the adoption of artificial intelligence (“AI”) and other emerging technologies may become significant to operating results in the future. While AI and other technologies may offer substantial benefits, they may also introduce additional risk. If we are unable to successfully implement and utilize such emerging technologies as effectively as competitors, our results of operation may be negatively affected.
For further discussion of our cybersecurity programs, please see "Item 1C. Cybersecurity." In addition, the adoption of artificial intelligence (“AI”) and other emerging technologies may become significant to operating results in the future. While AI and other technologies may offer substantial benefits, they may also introduce additional risk.
Some tractor and trailer manufacturers have recently experienced periodic shortages of certain component parts and supplies, including semi-conductor chips, forcing such manufacturers to curtail or suspend their production, which could lead to a lower supply of tractors and trailers, higher prices, and lengthened trade cycles, which could have a material adverse effect on our business, financial condition, and results of operations, particularly our maintenance expense and driver retention.
During the COVID-19 pandemic some tractor and trailer manufacturers experienced periodic shortages of certain component parts and supplies, including semi-conductor chips, forcing such manufacturers to curtail or suspend their production, which led to a lower supply of tractors and trailers and higher prices.
If we are unable to retain our key employees, our business, financial condition, and results of operations could be harmed. We are dependent upon the services of our executive management team and other key personnel.
We are dependent upon the services of our executive management team and other key personnel.
Unfavorable ESG ratings may lead to negative investor sentiment toward the Company, which could have a negative impact on our stock price. In 2022, we published our Corporate Social Responsibility Report. This report reflects some of our initiatives and is not a guarantee that we will be able to achieve them.
Unfavorable ESG ratings may lead to negative investor sentiment toward the Company, which could have a negative impact on our stock price.
Such events or enhanced security measures in connection with such events could impair our operating efficiency and productivity and result in higher operating costs. We may not be successful in achieving our strategic plan.
Such events or enhanced security measures in connection with such events could impair our operating efficiency and productivity and result in higher operating costs. The Trump administration has stated its intention to impose new or increased tariff rates on imported goods from a number of countries, including China, Canada, Mexico, and the E.U.
Removed
Our ability to successfully execute these initiatives and accurately report our progress presents numerous operational, financial, legal, reputational and other risks, many of which are outside our control, and all of which could have a material negative impact on our business. Additionally, the implementation of these initiatives imposes additional costs on us.
Added
Such trade policies and tariff implementations, and any related retaliatory trade policies and tariff implementations by foreign governments may result in decreased shipping volumes and have an adverse impact on our revenues and results of operations. We may not be successful in achieving our strategic plan.
Removed
If our ESG initiatives fail to satisfy our stakeholders, then our reputation, our ability to attract or retain employees, and our attractiveness as an investment and business partner could be negatively impacted.
Added
Moreover, our responses to any union organizing efforts could also expose us to legal risk or reputational harm and cause us to incur costs to defend legal and regulatory actions. Any labor disputes or work stoppages, whether or not our employees unionize, could disrupt our operations and reduce our revenues.
Removed
Similarly, our failure, or perceived failure, to pursue or fulfill our goals, targets and objectives or to satisfy various reporting standards within the timelines we announce, or at all, could also have similar negative impacts and expose us to government enforcement actions and private litigation.
Added
Failure to comply with existing or future labor and employment laws could have a materially adverse effect on our business and operating results. For further discussion of the labor and employment laws, please see "Regulation" under “Item 1.
Added
Additionally, given the Trump administration’s initiatives surrounding ESG and diversity, equity, and inclusion matters, which may conflict with stakeholder initiatives on such matters, we may experience conflicts between governmental regulations and stakeholder expectations which could impose additional costs on our business and negatively impact investor sentiment.
Added
If we are unable to successfully implement and utilize such emerging technologies as effectively as competitors, we may be at a competitive disadvantage to such competitors and our results of operation may be negatively affected. If we are unable to retain our key employees, our business, financial condition, and results of operations could be harmed.
Added
In addition, hiring, training, and successfully integrating replacement personnel, whether internal or external, could be time-consuming, may cause additional disruptions to our operations and may be unsuccessful, which could negatively impact our business, financial condition, and results of operations.
Added
If any of these were to occur, our operations, financial condition, liquidity, results of operations, and cash flows could be adversely impacted. A large-scale outbreak of avian flu or related illness among the nation ’ s poultry flock may adversely affect the revenues of LTST.
Added
Our subsidiary, LTST derives the majority of its revenue from the transportation of poultry and feed products related to poultry operations. While LTST does not transport eggs, a widespread outbreak of avian flu or related illness among our customers’ poultry flocks could reduce the volume of loads hauled for such customers.
Added
Additionally, public concern following a nation-wide or well-publicized outbreak of avian flu may cause fear about the consumption of chicken, turkey, eggs, and other products derived from poultry, which could cause customers to consume less poultry and related products, reducing the volume of poultry and related products produced and negatively affecting the revenues of LTST.
Added
If such shortages occur again, such shortages could have a material adverse effect on our business, financial condition, and results of operations, particularly our maintenance expense, driver retention, and the length of our trade cycle.
Added
The interests of the Parkers may conflict with the interests of other holders of Class A common stock, and they may take actions affecting us with which other stockholders disagree. Moreover, Mr. Parker serves as both our Chief Executive Officer and Chairman of our Board.
Added
Although the Board has determined that the combination of Chief Executive Officer and Chairman of the Board positions is the most appropriate and suitable structure for proper and efficient Board functioning and communication, Mr. Parker may have an outsized ability to influence the operations of the Company, which may result in conflicts with the interests of Mr.
Added
Changes in taxation could lead to an increase of our tax exposure and could affect the Company ’ s financial results. Our effective tax rate may be adversely impacted by, among other things, changes in the regulations relating to capital expenditure deductions, or changes in tax laws where we operate, including the uncertainty of future tax rates.
Added
President Trump has indicated a desire to amend the federal tax laws. Until any changes are passed into law we will not know if such changes, if any, will have a materially adverse effect on our financial results and financial position.
Added
Any changes to the federal tax laws are likely to have an immediate revaluation of our deferred tax assets and liabilities in the year of enactment.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Identifying and assessing cybersecurity risk is integrated into our overall risk management systems and processes. Cybersecurity risks related to our business, technical operations, privacy and compliance issues are identified and addressed through a multi-faceted approach including third-party assessments, internal information technology audit, information technology security, governance, and risk and compliance reviews.
Cybersecurity risks related to our business, technical operations, privacy and compliance issues are identified and addressed through a multi-faceted approach including third -party assessments, internal information technology audit, information technology security, governance, and risk and compliance reviews.
ITEM 1C. CYBERSECURITY Cybersecurity Risk Management and Strategy We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats, as such term is defined in Item 106(a) of Regulation S-K. These risks include, among other things: operational risks, intellectual property theft, fraud, extortion, harm to employees or customers and violation of data privacy or security laws.
ITEM 1C. CYBERSECURITY Cybersecurity Risk Management and Strategy We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats, as such term is defined in Item 106 (a) of Regulation S-K.
Added
These risks include, among other things: operational risks, intellectual property theft, fraud, extortion, harm to employees or customers and violation of data privacy or security laws. Identifying and assessing cybersecurity risk is integrated into our overall risk management systems and processes.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Price Range of Common Stock Our Class A common stock is traded on the NASDAQ Global Select Market, under the symbol "CVLG." As of February 26, 2024, we had approximately 60 stockholders of record of our Class A common stock; however, we estimate our actual number of stockholders is much higher because a substantial number of our shares are held of record by brokers or dealers for their customers in street names.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Price Range of Common Stock Our Class A common stock is traded on the New York Stock Exchange, under the symbol "CVLG." As of February 26, 2025, we had approximately 55 stockholders of record of our Class A common stock; however, we estimate our actual number of stockholders is much higher because a substantial number of our shares are held of record by brokers or dealers for their customers in street names.
As of February 26, 2024, Mr. Parker, together with certain of his family members, owned all of the outstanding Class B common stock. Dividend Policy In January 2022, our Board approved a quarterly cash dividend program of $0.0625 per share, which was increased to $0.08 per share in August 2022 and $0.11 per share in February 2023.
As of February 26, 2025, Mr. Parker, together with certain of his family members, owned all of the outstanding Class B common stock. Dividend Policy In January 2022, our Board approved a quarterly cash dividend program of $0.03125 per share, which was increased to $0.04 per share in August 2022 and $0.055 per share in February 2023.
Dividends under the quarterly cash dividend program are subject to quarterly approval by our Board. It is the current intention of our Board to continue to pay a quarterly dividend under the dividend program, however, there is no assurance that we will declare or pay any future dividends or as to the amount or timing of those dividends, if any.
It is the current intention of our Board to continue to pay a quarterly dividend under the dividend program, however, there is no assurance that we will declare or pay any future dividends or as to the amount or timing of those dividends, if any. The payment of cash dividends is currently limited by our financing arrangements.
The payment of cash dividends is currently limited by our financing arrangements. Future payments of cash dividends will depend upon our financial condition, earnings, cash flows, capital requirements, any future debt service obligations, covenants under our existing or future debt agreements, industry practice, legal requirements, regulatory constraints, and other factors our Board deems relevant.
Future payments of cash dividends will depend upon our financial condition, earnings, cash flows, capital requirements, any future debt service obligations, covenants under our existing or future debt agreements, industry practice, legal requirements, regulatory constraints, and other factors our Board deems relevant.
Added
Our most recent dividend was declared in February of 2025 for $0.07 per share of Class A and Class B common stock and is scheduled to be paid in March of 2025. Dividends under the quarterly cash dividend program are subject to quarterly approval by our Board.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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If that occurs, we will be operating with less liability coverage insurance at various levels of our insurance tower. For the policy period that ran from April 1, 2018 to March 31, 2021, the aggregate limits available in the coverage layer $9.0 million in excess of $1.0 million were fully eroded based on claims expense.
If that occurs, we will be operating with less liability insurance coverage at various levels of our insurance tower. For the policy period that ran from April 1, 2018 to March 31, 2021, the aggregate limits available in the coverage layer $9.0 million in excess of $1.0 million were fully eroded based on claims expense.
Net cash flows provided by operating activities and financing activities in the 2023 period also included payment of $0.8 million and $9.2 million, respectively, of contingent consideration liabilities related to the acquisition of AAT.
Net cash flows provided by operating activities and provided by financing activities in the 2023 period also included payment of $0.8 million and $9.2 million, respectively, of contingent consideration liabilities related to the acquisition of AAT.
On May 18, 2022, our Board approved a new stock repurchase authorization of up to $75.0 million of our Class A common stock, with any remaining amount available under prior authorizations being excluded and no longer available. Under such authorization, we repurchased 2.0 million shares of our Class A common stock for $54.7 million during 2022.
On May 18, 2022 our Board approved a stock repurchase authorization of up to $75.0 million of our Class A common stock, with any remaining amount available under prior authorizations being excluded and no longer available. Under such authorization, we repurchased 2.0 million shares of our Class A common stock for $54.7 million during 2022.
As a result of the most recent goodwill impairment analysis performed (October 1, 2023), no impairment was indicated. 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.
As a result of the most recent goodwill impairment analysis performed (October 1, 2024), no impairment was indicated. 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.
The primary assumptions used in these various models include earnings multiples of acquisitions in a comparable industry, future cash flow estimates of each of the reporting units, weighted average cost of capital, working capital and capital expenditure requirements. We completed our annual goodwill impairment test, using the qualitative test, as of October 1, 2023, for each of our reporting units.
The primary assumptions used in these various models include earnings multiples of acquisitions in a comparable industry, future cash flow estimates of each of the reporting units, weighted average cost of capital, working capital and capital expenditure requirements. We completed our annual goodwill impairment test, using the qualitative test, as of October 1, 2024, for each of our reporting units.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this document can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this document can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
The cost of fuel has been volatile over the last several years, with costs increasing in 2021 and 2022 but decreasing in 2023. Health care prices have increased faster than general inflation, primarily due to the rapid increase in prescription drug costs and more people on our health plan.
The cost of fuel has been volatile over the last several years, with costs increasing in 2022 but decreasing in 2023 and 2024. Health care prices have increased faster than general inflation, primarily due to the rapid increase in prescription drug costs and more people on our health plan.
Additionally, changes in the used tractor market could cause us to adjust residual values, increase depreciation, hold assets longer than planned, or experience increased losses on sale. Successfully executing our 2024 growth plan could also increase depreciation and amortization going forward.
Additionally, changes in the used tractor market could cause us to adjust residual values, increase depreciation, hold assets longer than planned, or experience increased losses on sale. Successfully executing our 2025 growth plan could also increase depreciation and amortization going forward.
We generally depreciate new tractors over five years to salvage values that range from 0% to 35% of cost, depending on the reportable segment profile of the equipment. 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 25% of their cost, respectively.
We generally depreciate new tractors over five years to salvage values that range from 0% to 35% of cost, depending on the reportable segment profile of the equipment. We generally depreciate new trailers over seven years for refrigerated trailers and ten years for dry van trailers to salvage values of approximately 20% and 25% of their cost, respectively.
Due to TEL's business model, gains and losses on sale of equipment is a normal part of the business and can cause earnings to fluctuate from period to period and therefore our income from investment to similarly fluctuate. We expect TEL's results for 2024 to remain similar to those of 2023.
Due to TEL's business model, gains and losses on sale of equipment is a normal part of the business and can cause earnings to fluctuate from period to period and therefore our income from investment to similarly fluctuate. We expect TEL's results for 2025 to remain similar to those of 2024.
In our asset-light reportable segments, we are prioritizing long-term growth, focusing on talent acquisition, and technology enhancements. 36 Table of Contents Liquidity and Capital Resources Our business requires significant capital investments over the short-term and the long-term.
In our asset-light reportable segments, we are prioritizing long-term growth, as well as focusing on talent acquisition and technology enhancements. 36 Table of Contents Liquidity and Capital Resources Our business requires significant capital investments over the short-term and the long-term.
All of our revenue generated was generated within the U.S. in 2022 and 2023. We do not separately track domestic and foreign revenue from customers, and providing such information would not be meaningful.
All of our revenue generated was generated within the U.S. in 2023 and 2024. We do not separately track domestic and foreign revenue from customers, and providing such information would not be meaningful.
As a percentage of freight revenue, net fuel expense increased 0.3% for the year ended December 31, 2023, compared to 2022, primarily due to decreased fuel surcharge recovery partially offset by lower fuel prices. There were no diesel fuel hedge gains or loss for the years ended December 31, 2023 or 2022.
As a percentage of freight revenue, net fuel expense decreased 0.3% for the year ended December 31, 2024, compared to 2023, primarily due to decreased fuel surcharge recovery partially offset by lower fuel prices. There were no diesel fuel hedge gains or loss for the years ended December 31, 2024 or 2023.
We had commitments outstanding at December 31, 2023, to acquire revenue equipment totaling approximately $156.6 million in 2023 versus commitments at December 31, 2023 of approximately $156.6 million. These commitments are cancelable, subject to certain adjustments in the underlying obligations and benefits.
We had commitments outstanding at December 31, 2024, to acquire revenue equipment totaling approximately $114.0 million in 2024 versus commitments at December 31, 2023 of approximately $156.6 million. These commitments are cancelable, subject to certain adjustments in the underlying obligations and benefits.
Outlook The Company’s consistently good performance in a weak freight market is evidence that our strategic plan is working. Over the past two years, we reallocated a significant amount of fixed assets away from underperforming and highly cyclical legacy operations toward acquiring three high-performing, more steady businesses.
Outlook The Company’s consistently good performance in a weak freight market is evidence that our strategic plan continues to work. Over the past three years, we reallocated a significant amount of fixed assets away from underperforming and highly cyclical legacy operations toward acquiring three high-performing, more steady businesses.
Further, we expect to increase our capital allocation toward our Dedicated, Managed Freight, and Warehousing reportable segments to become the go-to partner for our customers’ most critical transportation and logistics needs. We had working capital (total current assets less total current liabilities) of $15.7 million and $66.5 million at December 31, 2023 and 2022, respectively.
Further, we expect to increase our capital allocation toward our Dedicated, Managed Freight, and Warehousing reportable segments to become the go-to partner for our customers’ most critical transportation and logistics needs. We had working capital (total current assets less total current liabilities) of $32.6 million and $15.7 million at December 31, 2024 and 2023, respectively.
Operating taxes and licenses Year ended December 31, (dollars in thousands) 2023 2022 Operating taxes and licenses $ 13,409 $ 11,931 % of total revenue 1.2 % 1.0 % % of freight revenue 1.4 % 1.1 % For the period presented, the change in operating taxes and licenses is insignificant both as a percentage of total revenue and freight revenue.
Operating taxes and licenses Year ended December 31, (dollars in thousands) 2024 2023 Operating taxes and licenses $ 11,954 $ 13,409 % of total revenue 1.1 % 1.2 % % of freight revenue 1.2 % 1.4 % For the period presented, the change in operating taxes and licenses is insignificant both as a percentage of total revenue and freight revenue.
Refer to Note 10, “Debt” of the accompanying consolidated financial statements for further information about material debt agreements. Our net capital expenditures for the year ended December 31, 2023 totaled $125.8 million of expenditures as compared to $47.5 million of expenditures for the prior year.
Refer to Note 10, “Debt” of the accompanying consolidated financial statements for further information about material debt agreements. Our net capital expenditures for the year ended December 31, 2024 totaled $80.8 million of expenditures as compared to $125.8 million of expenditures for the prior year.
These decreases were partially offset by an increase in the percentage of the total miles run by independent contractors from 6.6% for 2022 to 7.5% for 2023. 32 Table of Contents We expect purchased transportation to fluctuate as volumes in our Managed Freight reportable segment may be volatile.
These decreases were partially offset by a slight increase in the percentage of the total miles run by independent contractors from 7.5% for 2023 to 7.8% for 2024. 32 Table of Contents We expect purchased transportation to fluctuate as volumes in our Managed Freight reportable segment may be volatile.
Fuel prices as measured by the DOE averaged approximately $0.78 per gallon, or 15.6%, lower in 2023 than 2022. 31 Table of Contents To measure the effectiveness of our fuel surcharge program, we subtract fuel surcharge revenue (other than the fuel surcharge revenue we reimburse to independent contractors and other third-parties, which is included in purchased transportation) from our fuel expense.
Fuel prices as measured by the DOE averaged approximately $0.45 per gallon, or 10.7%, lower in 2024 than 2023. 31 Table of Contents To measure the effectiveness of our fuel surcharge program, we subtract fuel surcharge revenue (other than the fuel surcharge revenue we reimburse to independent contractors and other third-parties, which is included in purchased transportation) from our fuel expense.
As of December 31, 2023, we had no remaining fuel hedge contracts.
As of December 31, 2024, we had no remaining fuel hedge contracts.
Income from equity method investment Year ended December 31, (in thousands) 2023 2022 Income from equity method investment $ 21,384 $ 25,193 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.
Income from equity method investment Year ended December 31, (in thousands) 2024 2023 Income from equity method investment $ 14,713 $ 21,384 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.
For the year ended December 31, 2023, our earnings resulting from our investment in TEL decreased to $21.4 million. The decrease in 2023 as compared to 2022 is the result of a reduction of gain on sale of revenue equipment.
For the year ended December 31, 2024, our earnings resulting from our investment in TEL decreased to $14.7 million. The decrease in 2024 as compared to 2023 is the result of a reduction of gain on sale of revenue equipment.
For example, global supply chain disruptions similar to 2021 and 2022 could impact the availability of tractors and trailers and lead to increased pricing on new and used equipment.
These assumptions are subject to risk. For example, global supply chain disruptions similar to 2021 and 2022 could impact the availability of tractors and trailers and lead to increased pricing on new and used equipment.
Depreciation and amortization Year ended December 31, (dollars in thousands) 2023 2022 Depreciation and amortization $ 69,943 $ 57,512 % of total revenue 6.3 % 4.7 % % of freight revenue 7.2 % 5.5 % Depreciation and amortization consists primarily of depreciation of tractors, trailers and other capital assets (including those under finance leases), as well as amortization of intangible assets.
Depreciation and amortization Year ended December 31, (dollars in thousands) 2024 2023 Depreciation and amortization $ 86,529 $ 69,943 % of total revenue 7.6 % 6.3 % % of freight revenue 8.5 % 7.2 % Depreciation and amortization consists primarily of depreciation of tractors, trailers and other capital assets (including those under finance leases), as well as amortization of intangible assets.
Net income from discontinued operations of $0.6 million, or $0.04 per diluted share, for 2023, compared to $0.8 million, or $0.05 per diluted share in 2022; ● With available borrowing capacity of $76.6 million under our Credit Facility as of December 31, 2023, we do not expect to be required to test our fixed charge covenant in the foreseeable future; 28 Table of Contents ● Our equity investment in TEL provided $21.4 million of pre-tax earnings in 2023, compared to $25.2 million for 2022; ● Since December 31, 2022, total indebtedness, comprised of total debt and finance leases, net of cash, increased by $202.0 million to $248.3 million; ● Leverage ratio (average total indebtedness, net of cash, divided by the sum of operating income (loss, depreciation and amortization, gain on disposition of property and equipment, net, and impairment of long lived property and equipment) was 2.14 at December 31, 2023, compared to 0.34 at December 31, 2022; ● Stockholders' equity at December 31, 2023 was $403.4 million, compared to $377.1 million at December 31, 2022; and ● Tangible book value per end-of-quarter basic share at December 31, 2023 was $17.45, compared to $19.97 at December 31, 2022.
Net income from discontinued operations of $0.6 million, or $0.02 per diluted share, for 2024, compared to $0.6 million, or $0.02 per diluted share in 2023; ● With available borrowing capacity of $90.2 million under our Credit Facility as of December 31, 2024, we do not expect to be required to test our fixed charge covenant in the foreseeable future; 28 Table of Contents ● Our equity investment in TEL provided $14.7 million of pre-tax earnings in 2024, compared to $21.4 million for 2023; ● Since December 31, 2023, total indebtedness, comprised of total debt and finance leases, net of cash, decreased by $28.7 million to $219.6 million; ● Leverage ratio (average total indebtedness, net of cash, divided by the sum of operating income (loss, depreciation and amortization, gain on disposition of property and equipment, net, and impairment of long lived property and equipment) was 1.65 at December 31, 2024, compared to 2.14 at December 31, 2023; ● Stockholders' equity at December 31, 2024 was $438.3 million, compared to $403.4 million at December 31, 2023; and ● Tangible book value per end-of-quarter basic share at December 31, 2024 was $10.17, compared to $8.72 at December 31, 2023.
Amortization of intangible assets increased $3.2 million in 2023 to $7.5 million compared to 2022, primarily due to the amortization of the intangible assets related to the LTST and Sims acquisitions. We expect depreciation and amortization to increase going forward as the cost of new equipment increases and we see the full year effect of our 2023 equipment replacement plan.
Amortization of intangible assets increased $2.0 million in 2024 to $9.5 million compared to 2023, primarily due to the amortization of the intangible assets related to the LTST and Sims acquisitions. We expect depreciation and amortization to increase going forward as the cost of new equipment increases and we see the effect of our equipment investment and replacement plan.
Income tax expense Year ended December 31, (dollars in thousands) 2023 2022 Income tax expense $ 17,611 $ 34,860 % of total revenue 1.6 % 2.9 % % of freight revenue 1.8 % 3.3 % The decrease in tax expense primarily relates to the decrease in operating income and earnings on investment in TEL as described above.
Income tax expense Year ended December 31, (dollars in thousands) 2024 2023 Income tax expense $ 10,576 $ 17,611 % of total revenue 0.9 % 1.6 % % of freight revenue 1.0 % 1.8 % The decrease in tax expense primarily relates to the decrease in operating income and earnings on investment in TEL as described above.
The increase in average freight revenue per tractor per week is the result of a 1.3%, or 3.4 cents per mile, increase in average rate per total mile, as well as 3.4% more miles per tractor.
The increase in average freight revenue per tractor per week is the result of a 8.0%, or 21.3 cents per mile, increase in average rate per total mile, as well as 1.0% fewer miles per tractor.
As of December 31, 2023 and December 31, 2022 we had $293.5 million and $179.6 million in debt and lease obligations, respectively, consisting of the following: ● $11.6 million and no outstanding borrowings under the Credit Facility, respectively; ● No outstanding borrowings under the Draw Note; ● $213.9 million and $88.9 million in revenue equipment installment notes, respectively; ● $19.1 million and $20.3 million in real estate notes, respectively; ● $6.1 million and $5.8 million of the principal portion of financing lease obligations, respectively, and; ● $42.8 million and $64.6 million of the operating lease obligations, respectively.
As of December 31, 2024 and December 31, 2023 we had $296.9 million and $293.5 million in debt and lease obligations, respectively, consisting of the following: ● No outstanding borrowings under the Credit Facility; ● No outstanding borrowings under the Draw Note; ● $233.5 million and $213.9 million in revenue equipment installment notes, respectively; ● $17.8 million and $19.1 million in real estate notes, respectively; ● $3.9 million and $6.1 million of the principal portion of financing lease obligations, respectively, and; ● $41.7 million and $42.8 million of the operating lease obligations, respectively.
The decrease is primarily the result of a reduction in outside claims partially offset by an increase in insurance premiums compared to 2022. Our insurance program includes multi-year policies with specific insurance limits that may be eroded over the course of the policy term.
The increase is primarily the result of an increase in current period claims expense including a large current year claim incurred partially offset by a decrease in insurance premiums compared to 2023. Our insurance program includes multi-year policies with specific insurance limits that may be eroded over the course of the policy term.
The decrease in average freight revenue per tractor per week is the result of an 8.2%, or 19.1 cents per mile, decrease in average rate per total mile partially offset by an approximately 7.5% increase in average miles per tractor when compared to 2022.
The decrease in average freight revenue per tractor per week is the result of a 1.7%, or 3.7 cents per mile, decrease in average rate per total mile partially offset by an approximately 0.9% increase in average miles per tractor when compared to 2023.
Our cash flows may fluctuate depending on capital expenditures, future stock repurchases, dividends, strategic investments or divestitures, any indemnification calls related to the TFS settlement, and the extent of future income tax obligations and refunds. 38 Table of Contents Non-GAAP Financial Measures Operating Ratio Operating Ratio (“OR”) For 2023 and 2022: (dollars in thousands) For the twelve months ended December 31, 2023 GAAP Operating Ratio: Combined Expedited Dedicated Managed Freight Warehousing Total revenue $ 1,103,573 $ 423,820 $ 320,287 $ 258,903 $ 100,563 Total operating expenses 1,044,750 394,959 302,575 249,515 97,701 Operating income (loss) $ 58,823 $ 28,861 $ 17,712 $ 9,388 $ 2,862 Operating ratio 94.7 % 93.2 % 94.5 % 96.4 % 97.2 % (dollars in thousands) For the twelve months ended December 31, 2023 Adjusted Operating Ratio: Combined Expedited Dedicated Managed Freight Warehousing Total revenue $ 1,103,573 $ 423,820 $ 320,287 $ 258,903 $ 100,563 Fuel surcharge revenue (133,064 ) (80,041 ) (51,822 ) - (1,201 ) Freight revenue (total revenue, excluding fuel surcharge) 970,509 343,779 268,465 258,903 99,362 Total operating expenses 1,044,750 394,959 302,575 249,515 97,701 Adjusted for: Fuel surcharge revenue (133,064 ) (80,041 ) (51,822 ) - (1,201 ) Amortization of intangibles (1) (7,515 ) (2,133 ) (3,900 ) (446 ) (1,036 ) Gain on sale of terminals, net 7,627 3,928 3,699 - - Contingent consideration liability adjustment (2,977 ) (2,977 ) - - - Transaction and executive retirement (2,158 ) (1,113 ) (876 ) (90 ) (79 ) Adjusted operating expenses 906,663 312,623 249,676 248,979 95,385 Adjusted operating income $ 63,846 $ 31,156 $ 18,789 $ 9,924 $ 3,977 Adjusted operating ratio 93.4 % 90.9 % 93.0 % 96.2 % 96.0 % (1) "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets.
(dollars in thousands) For the twelve months ended December 31, 2023 GAAP Operating Ratio: Combined Expedited Dedicated Managed Freight Warehousing Total revenue $ 1,103,573 $ 423,820 $ 320,287 $ 258,903 $ 100,563 Total operating expenses 1,044,750 394,959 302,575 249,515 97,701 Operating income $ 58,823 $ 28,861 $ 17,712 $ 9,388 $ 2,862 Operating ratio 94.7 % 93.2 % 94.5 % 96.4 % 97.2 % 39 Table of Contents (dollars in thousands) For the twelve months ended December 31, 2023 Adjusted Operating Ratio: Combined Expedited Dedicated Managed Freight Warehousing Total revenue $ 1,103,573 $ 423,820 $ 320,287 $ 258,903 $ 100,563 Fuel surcharge revenue (133,064 ) (80,041 ) (51,822 ) - (1,201 ) Freight revenue (total revenue, excluding fuel surcharge) 970,509 343,779 268,465 258,903 99,362 Total operating expenses 1,044,750 394,959 302,575 249,515 97,701 Adjusted for: Fuel surcharge revenue (133,064 ) (80,041 ) (51,822 ) - (1,201 ) Amortization of intangibles (1) (7,515 ) (2,133 ) (3,900 ) (446 ) (1,036 ) Bad debt expense associated with customer bankruptcy and high credit risk customers - - - - - Strategic restructuring adjusting items: - - - - - Insurance policy erosion - - - - - Gain on disposal of terminals, net 7,627 3,928 3,699 - - Contingent consideration liability adjustment (2,977 ) (2,977 ) - - - Transaction and executive retirement (2,158 ) (1,113 ) (876 ) (90 ) (79 ) Adjusted operating expenses 906,663 312,623 249,676 248,979 95,385 Adjusted operating income $ 63,846 $ 31,156 $ 18,789 $ 9,924 $ 3,977 Adjusted operating ratio 93.4 % 90.9 % 93.0 % 96.2 % 96.0 % (1) "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets.
We replaced our $9.0 million in excess of $1.0 million layer with a new $7.0 million in excess of $3.0 million policy that runs from January 28, 2021 to April 1, 2024.
We replaced our $9.0 million in excess of $1.0 million layer with a new $7.0 million in excess of $3.0 million policy effective starting January 28, 2021 that we continue to maintain.
Net gains on disposal of equipment and real estate for December 31, 2023 were $12.6 million compared to $40.3 million in 2022 primarily due to the $38.5 million gain on a California terminal during 2022 and a $7.6 million gain on the sale of a Tennessee terminal during 2023.
Net losses on disposal of equipment and real estate for December 31, 2024 were $1.6 million compared to a net gain of $12.6 million in 2023, which was primarily due to a $7.6 million gain on the sale of a Tennessee terminal during 2023.
The change in net cash flows from financing activities was primarily the result of net proceeds relating to notes payable and our Credit Facility of $129.7 million in 2023, compared to net proceeds of $77.7 million in 2022, the repurchase of $25.4 million of shares of our Class A common stock during 2023 compared to $84.7 million during 2022, as well as the payment of approximately $5.8 million in dividends during 2023 compared to $4.3 million during 2022.
The change in net cash flows from financing activities was primarily the result of net proceeds relating to notes payable and our Credit Facility of $30.0 million compared to net proceeds of $129.7 million in 2023 and the repurchase of $25.4 million of shares of our Class A common stock during 2023 compared to none during 2024.
Communications and utilities Year ended December 31, (dollars in thousands) 2023 2022 Communications and utilities $ 5,012 $ 5,385 % of total revenue 0.5 % 0.4 % % of freight revenue 0.5 % 0.5 % For the period presented, the change in communications and utilities are insignificant both as a percentage of total revenue and freight revenue. 33 Table of Contents General supplies and expenses Year ended December 31, (dollars in thousands) 2023 2022 General supplies and expenses $ 49,444 $ 37,762 % of total revenue 4.5 % 3.1 % % of freight revenue 5.1 % 3.6 % The increase in general supplies and expenses was primarily the result of an increase of $4.6 million for new leased spaces for our Warehousing reportable segment from 2022 to 2023 and the $3.0 million increase in the contingent consideration liability since the 2022 period related to the acquisition of AAT.
Communications and utilities Year ended December 31, (dollars in thousands) 2024 2023 Communications and utilities $ 5,407 $ 5,012 % of total revenue 0.5 % 0.5 % % of freight revenue 0.5 % 0.5 % For the period presented, the change in communications and utilities are insignificant both as a percentage of total revenue and freight revenue. 33 Table of Contents General supplies and expenses Year ended December 31, (dollars in thousands) 2024 2023 General supplies and expenses $ 66,053 $ 49,444 % of total revenue 5.8 % 4.5 % % of freight revenue 6.5 % 5.1 % The increase in general supplies and expenses was primarily the result of a $15.8 million increase in the contingent consideration liability since the 2023 period related to the acquisition of LTST.
Insurance and claims Year ended December 31, (dollars in thousands) 2023 2022 Insurance and claims $ 50,099 $ 50,547 % of total revenue 4.5 % 4.2 % % of freight revenue 5.2 % 4.8 % Insurance and claims per mile cost decreased slightly to 19.1 cents per mile for 2023 from 19.2 cents per mile in 2022.
Insurance and claims Year ended December 31, (dollars in thousands) 2024 2023 Insurance and claims $ 59,845 $ 50,099 % of total revenue 5.3 % 4.5 % % of freight revenue 5.9 % 5.2 % Insurance and claims per mile cost increased to 21.7 cents per mile for 2024 from 19.1 cents per mile in 2023.
The table below reflects the total revenue trends in each of these reportable segments: Year ended December 31, (in thousands) 2023 2022 Revenues: Expedited $ 423,820 $ 452,713 Dedicated 320,287 362,997 Managed Freight 258,903 320,985 Warehousing 100,563 80,163 Total revenues $ 1,103,573 $ 1,216,858 Our consolidated financial results are summarized as follows: ● Total revenue was $1,103.6 million, compared with $1,216.9 million for 2022, and freight revenue (which excludes revenue from fuel surcharges) was $970.5 million, compared with $1,046.4 million for 2022; ● Operating income from continuing operations was $58.8 million, compared with operating income from continuing operations of $120.7 million for 2022; ● Net income was $55.2 million, or $3.99 per diluted share, compared with net income of $108.7 million, or $7.00 per diluted share, for 2022; Net income from continuing operations was $54.6 million, or $3.95 per diluted share, for 2023, compared to $107.9 million or $6.95 per diluted share in 2022.
The table below reflects the total revenue trends in each of these reportable segments: Year ended December 31, (in thousands) 2024 2023 Revenues: Expedited $ 416,461 $ 423,820 Dedicated 364,414 320,287 Managed Freight 248,939 258,903 Warehousing 101,662 100,563 Total revenues $ 1,131,476 $ 1,103,573 Our consolidated financial results are summarized as follows: ● Total revenue was $1,131.5 million, compared with $1,103.6 million for 2023, and freight revenue (which excludes revenue from fuel surcharges) was $1,013.9 million, compared with $970.5 million for 2023; ● Operating income from continuing operations was $44.8 million, compared with operating income from continuing operations of $58.8 million for 2023; ● Net income was $35.9 million, or $1.30 per diluted share, compared with net income of $55.2 million, or $2.00 per diluted share, for 2023; Net income from continuing operations was $35.3 million, or $1.27 per diluted share, for 2024, compared to $54.6 million or $1.97 per diluted share in 2023.
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.
We record an impairment charge when the cost exceeds the fair value of the finite lived intangible asset. We determine the useful lives of our identifiable intangible assets after considering the specific facts and circumstances related to each intangible asset.
As of December 31, 2023, we had $11.6 million of borrowings outstanding, undrawn letters of credit outstanding of approximately $21.8 million, and available borrowing capacity of $76.6 million under the Credit Facility.
As of December 31, 2024, we had no borrowings outstanding, undrawn letters of credit outstanding of approximately $19.8 million, and available borrowing capacity of $90.2 million under the Credit Facility.
Net fuel expense is shown below: Year ended December 31, (dollars in thousands) 2023 2022 Total fuel surcharge $ 133,064 $ 170,462 Less: Fuel surcharge revenue reimbursed to independent contractors and other third-parties 9,752 11,156 Company fuel surcharge revenue $ 123,312 $ 159,306 Total fuel expense $ 133,291 $ 166,410 Less: Company fuel surcharge revenue 123,312 159,306 Net fuel expense $ 9,979 $ 7,104 % of freight revenue 1.0 % 0.7 % Net fuel expense increased $2.9 million, or 40.5%, for the year ended December 31, 2023, compared to 2022.
Net fuel expense is shown below: Year ended December 31, (dollars in thousands) 2024 2023 Total fuel surcharge $ 117,535 $ 133,064 Less: Fuel surcharge revenue reimbursed to independent contractors and other third-parties 9,032 9,752 Company fuel surcharge revenue $ 108,503 $ 123,312 Total fuel expense $ 115,981 $ 133,291 Less: Company fuel surcharge revenue 108,503 123,312 Net fuel expense $ 7,478 $ 9,979 % of freight revenue 0.7 % 1.0 % Net fuel expense decreased $2.5 million, or 25.1%, for the year ended December 31, 2024, compared to 2023.
Revenue equipment rentals and purchased transportation Year ended December 31, (dollars in thousands) 2023 2022 Revenue equipment rentals and purchased transportation $ 271,893 $ 325,624 % of total revenue 24.6 % 26.8 % % of freight revenue 28.0 % 31.1 % The decrease in revenue equipment rentals and purchased transportation was primarily the result of a reduction in purchased transportation costs in our Managed Freight reportable segment as a result of the softening freight market, the reduction in leased revenue equipment as the result of largely transitioning from tractors held under operating leases to owned tractors in 2022, and the recognition of $7.5 million of expense related to the early lease abandonment and disposal charges for tractors pulled from operations during the fourth quarter of 2022.
Revenue equipment rentals and purchased transportation Year ended December 31, (dollars in thousands) 2024 2023 Revenue equipment rentals and purchased transportation $ 254,302 $ 271,893 % of total revenue 22.5 % 24.6 % % of freight revenue 25.1 % 28.0 % The decrease in revenue equipment rentals and purchased transportation was primarily the result of a reduction in purchased transportation costs in our Managed Freight reportable segment as a result of the softening freight market, the reduction in leased revenue equipment as the result of largely transitioning from tractors held under operating leases to owned tractors in 2023.
Within our Dedicated reportable segment, we have worked hard over the last three years to improve the profitability within this segment by exiting unprofitable business and adding profitable business and we are pleased with the improvement to adjusted operating income compared to 2022.
Within our Dedicated reportable segment, we have worked hard over the last three years to improve the profitability within this segment by exiting unprofitable business and adding profitable business and while we are pleased with the improvement to adjusted operating income compared to 2023, we believe that if we are successful in providing best in class service and controlling costs, growth and improved profitability will result.
Our four reportable segments are Expedited, Dedicated, Managed Freight, and Warehousing, each as described under “Reportable Segments and Service Offerings” in Part I, Item 1 of this Annual Report on Form 10-K.
Our four reportable segments are Expedited, Dedicated, Managed Freight, and Warehousing, each as described under “Reportable Segments and Service Offerings” in Part I, Item 1 of this Annual Report on Form 10-K. For 2024, despite a challenging general freight environment, we achieved our third highest adjusted annual earnings per diluted share in our history.
The decrease in Dedicated freight revenue relates to a 168 (or 12.0%) average tractor decrease partially offset by an increase in average freight revenue per tractor per week of 4.7%, compared to 2022.
The increase in Expedited freight revenue relates to a 15 (or 1.7%) average tractor increase compared to 2023, partially offset by a decrease in average freight revenue per tractor per week of 1.1%.
Seated team driven tractors increased approximately 5.0% to an average of 815 teams in 2023 from 776 teams in 2022. Our Dedicated total revenue decreased $42.7 million, as freight revenue decreased $22.7 million and fuel surcharge revenue decreased $20.0 million.
Seated team driven tractors increased approximately 1.8% to an average of 829 teams in 2024 from 815 teams in 2023. Our Dedicated total revenue increased $44.1 million, as freight revenue increased $49.3 million and fuel surcharge revenue decreased $5.2 million.
For 2024 we expect gains on disposition of property and equipment to be less than those of 2023 as a result of having no large real estate property sales planned and having executed our 2023 equipment replacement plan which has helped return us to a more normalized equipment replacement cycle. 34 Table of Contents Interest expense, net Year ended December 31, (dollars in thousands) 2023 2022 Interest expense, net $ 7,967 $ 3,083 % of total revenue 0.7 % 0.3 % % of freight revenue 0.8 % 0.3 % For the period presented, the increase in interest expense, net is primarily the result of an increase in revenue equipment installment notes as we implemented our 2023 revenue equipment replacement plan.
For 2025 we expect gains on disposition of property and equipment to be more than those of 2024 as a result of a freight market that we expect to incrementally improve due to excess capacity that has exited the business. 34 Table of Contents Interest expense, net Year ended December 31, (dollars in thousands) 2024 2023 Interest expense, net $ 13,576 $ 7,967 % of total revenue 1.2 % 0.7 % % of freight revenue 1.3 % 0.8 % For the period presented, the increase in interest expense, net is primarily the result of an increase in revenue equipment installment notes as we implemented our 2024 revenue equipment replacement plan.
For each expense item discussed below, we have provided a table setting forth the relevant expense first as a percentage of total revenue, and then as a percentage of freight revenue. 30 Table of Contents Salaries, wages, and related expenses Year ended December 31, (dollars in thousands) 2023 2022 Salaries, wages, and related expenses $ 400,491 $ 402,276 % of total revenue 36.3 % 33.1 % % of freight revenue 41.3 % 38.4 % The decrease in salaries, wages, and related expenses on a dollars basis is primarily the result of averaging fewer drivers and tractors resulting in lower driver salaries, wages, and benefits, partially offset by driver and non-driver, including shop technicians, pay and benefits increases, as well as increased group health costs and executive retirement costs since 2022.
For each expense item discussed below, we have provided a table setting forth the relevant expense first as a percentage of total revenue, and then as a percentage of freight revenue. 30 Table of Contents Salaries, wages, and related expenses Year ended December 31, (dollars in thousands) 2024 2023 Salaries, wages, and related expenses $ 423,319 $ 400,491 % of total revenue 37.4 % 36.3 % % of freight revenue 41.7 % 41.3 % The increase in salaries, wages, and related expenses on a dollars basis is primarily the result of averaging more drivers and tractors resulting in higher driver salaries, wages, and benefits as a result of growth in Dedicated, along with increased shop technician salaries and benefits, workers compensation and group health costs, partially offset by contract labor reductions.
The following table sets forth total revenue and freight revenue (total revenue less fuel surcharge revenue) for the periods indicated: Revenue Year ended December 31, (in thousands) 2023 2022 Revenue: Freight revenue $ 970,509 $ 1,046,396 Fuel surcharge revenue 133,064 170,462 Total revenue $ 1,103,573 $ 1,216,858 The decrease in total revenue resulted from a $62.1 million, $22.7 million, and $11.6 million decrease in Managed Freight, Dedicated, and Expedited freight revenue, respectively, partially offset by a $20.5 million increase in freight revenue from our Warehousing reportable segment.
The following table sets forth total revenue and freight revenue (total revenue less fuel surcharge revenue) for the periods indicated: Revenue Year ended December 31, (in thousands) 2024 2023 Revenue: Freight revenue $ 1,013,941 $ 970,509 Fuel surcharge revenue 117,535 133,064 Total revenue $ 1,131,476 $ 1,103,573 The increase in total revenue resulted from a $44.1 million and $1.0 million increase in Dedicated and Warehouse freight revenue, respectively, partially offset by a $10.0 million and $7.4 million decrease in freight revenue from our Managed Freight and Expedited reportable segments, respectively.
We distributed a total of $5.8 million to stockholders during December 31, 2023 through dividends compared to $4.3 million during 2022.
We distributed a total of $5.8 million to stockholders through dividends during the years ended December 31, 2024 and 2023, respectively.
Fuel expense Year ended December 31, (dollars in thousands) 2023 2022 Fuel expense $ 133,291 $ 166,410 % of total revenue 12.1 % 13.7 % % of freight revenue 13.7 % 15.9 % The decreases in total fuel expense are primarily related to lower fuel prices in 2023 and the poor fuel economy of leased tractors abandoned during 2022, as well as a 0.6% decrease in total miles.
Fuel expense Year ended December 31, (dollars in thousands) 2024 2023 Fuel expense $ 115,981 $ 133,291 % of total revenue 10.3 % 12.1 % % of freight revenue 11.4 % 13.7 % The decreases in total fuel expense are primarily related to lower fuel prices in 2024, as well as a 5.3% decrease in total miles.
Between May 2022 and April 2023, we repurchased a total of 2.7 million shares of our Class A common stock. No additional shares have been repurchased since April 2023 (through February 26, 2024).
Between May 2022 and April 2023, we repurchased a total of 2.7 million shares of our Class A common stock. The program expired on January 31, 2024.
The 2022 period includes the February 2022 acquisition of AAT as well as the sale of a California terminal. Net cash flows provided by financing activities were approximately $84.7 million in 2023, compared to $12.8 million used in 2022.
Additionally, the 2023 period provided $12.5 million of proceeds related to the sale of a Tennessee terminal. Net cash flows provided by financing activities were approximately $18.1 million in 2024, compared to $84.7 million used in 2023.
The following table summarizes revenue and operating income data by reportable segment and service offering: Year ended December 31, (in thousands) 2023 2022 Revenues: Expedited $ 423,820 $ 452,713 Dedicated 320,287 362,997 Managed Freight 258,903 320,985 Warehousing 100,563 80,163 Total revenues $ 1,103,573 $ 1,216,858 Operating Income: Expedited $ 28,861 $ 60,552 Dedicated 17,712 21,087 Managed Freight 9,388 36,858 Warehousing 2,862 2,185 Total operating income $ 58,823 $ 120,682 Comparison of Year Ended December 31, 2023 to Year Ended December 31, 2022 Our Expedited total revenue decreased $28.9 million, as freight revenue decreased $11.6 million and fuel surcharge revenue decreased $17.3 million.
The following table summarizes revenue and operating income data by reportable segment and service offering: Year ended December 31, (in thousands) 2024 2023 Revenues: Expedited $ 416,461 $ 423,820 Dedicated 364,414 320,287 Managed Freight 248,939 258,903 Warehousing 101,662 100,563 Total revenues $ 1,131,476 $ 1,103,573 Operating Income: Expedited $ 22,162 $ 28,861 Dedicated 2,418 17,712 Managed Freight 12,282 9,388 Warehousing 7,898 2,862 Total operating income $ 44,760 $ 58,823 Comparison of Year Ended December 31, 2024 to Year Ended December 31, 2023 Our Expedited total revenue decreased $7.4 million, as fuel surcharge revenue decreased $10.3 million and freight revenue increased $2.9 million.
The decrease in Managed Freight operating expenses is the result of the changes in revenue driving changes in variable expenses, primarily purchased transportation. The increase in Warehousing operating expenses is a result of additional leased space and equipment for new business and pay increases, partially offset by a reduction in outsourced labor since 2022.
These increases were partially offset by decreased fuel expense as a result of declining fuel prices. The decrease in Managed Freight operating expenses is the result of the changes in revenue driving changes in variable expenses, primarily purchased transportation. The decrease in Warehousing operating expenses is primarily the result of a reduction in outsourced labor since 2023.
In addition to the changes in revenue described above, the change was impacted by a $39.3 million and $34.6 million decrease in Dedicated and Managed Freight operating expenses, respectively, partially offset by a $19.7 million and $2.8 million increase in Warehousing and Expedited operating expenses, respectively.
Total operating income was $44.8 million in 2024, compared to operating income of $58.8 million in 2023. In addition to the changes in revenue described above, the change was impacted by a $59.4 million increase in Dedicated operating expenses, partially offset by a $12.9 million, $4.0 million, and $0.7 million decrease in Managed Freight, Warehouse and Expedited operating expenses, respectively.
Within our Expedited reportable segment, both total revenue and margins declined year over year primarily as a result of rate pressure, however, these headwinds were partially offset by an almost 8% improvement in utilization year-over-year.
Within our Expedited reportable segment, both total revenue and margins declined year over year primarily as a result of an approximately 4% reduction in average total tractors, partially offset by an approximately 2% increase in both freight revenue per total mile and utilization year-over-year.
Managed Freight total revenue decreased $62.1 million in 2023, compared to 2022 as a result of reduced volumes of high-margin overflow freight from both Expedited and Dedicated truckload operations. Revenue in this reportable segment is expected to fluctuate with changes in the freight market and our percentage of contracted versus non-contracted freight.
Managed Freight total revenue decreased $10.0 million in 2024, compared to 2023 as a result of reduced volumes of high-margin overflow freight from both Expedited and Dedicated truckload operations and excess capacity in the marketplace impacting freight rates and volumes.
Operations and maintenance Year ended December 31, (dollars in thousands) 2023 2022 Operations and maintenance $ 63,753 $ 79,051 % of total revenue 5.8 % 6.5 % % of freight revenue 6.6 % 7.6 % The decrease in operations and maintenance expense was primarily related to the reduced maintenance costs as a result of a decrease in the average age of equipment through the replacement of older tractors that experienced higher operating costs as well as having fewer new drivers and a smaller average fleet as compared to 2022.
Operations and maintenance Year ended December 31, (dollars in thousands) 2024 2023 Operations and maintenance $ 61,696 $ 63,753 % of total revenue 5.5 % 5.8 % % of freight revenue 6.1 % 6.6 % The decrease in operations and maintenance expense was primarily related to the reduced maintenance costs as a result of the Company's strategic efforts to purchase newer equipment and replace older equipment that was more costly to maintain.
We are continuing to work to increase the operating income and related margins in each of these segments by executing on our pipeline of new business, focused cost savings initiatives and additional proposed customer rate increases with existing customers within our Warehousing reportable segment.
Warehousing was able to grow revenue and operating income through improvements to direct labor costs and improved margins with contractual pricing increases put into place during the year. We are continuing to work towards increasing the operating income and related margins in each of these segments by executing on both our pipeline of new business and focused cost savings initiatives.
We believe we have sufficient liquidity to satisfy our cash needs, and will continue to evaluate the nature and extent of the potential short-term and long-term impacts to our business. 37 Table of Contents Cash Flows Net cash flows provided by operating activities decreased to $84.8 million in 2023, compared with $159.2 million in 2022, primarily due to an increase in receivables and driver advances as a result of an increase in our average receivable days outstanding and a $53.5 million decrease of net income, which is partially the result of the $38.5 million gain on sale of a California terminal during 2022, and a $1.7 million indemnification payment during 2023.
We believe we have sufficient liquidity to satisfy our cash needs and will continue to evaluate the nature and extent of the potential short-term and long-term impacts to our business. 37 Table of Contents Cash Flows Net cash flows provided by operating activities increased to $122.9 million in 2024, compared with $84.8 million in 2023, primarily due to increases in non-cash expenses such as depreciation and amortization and reductions to non-cash gains on sale of property and equipment compared to 2023.
The increase in net cash flows used by investing activities was primarily the result of timing of our trade cycle whereby we took delivery of approximately 1,242 new company tractors and disposed of approximately 1,235 used tractors in 2023, compared to delivery of 458 new company tractors and disposal of 223 used company tractors in 2022, the April 2023 acquisition of LTST, and the August 2023 acquisition of Sims.
The decrease in net cash flows used by investing activities was primarily due to the April 2023 and the August 2023 acquisitions of LTST and Sims, respectively, for $107.9 million, net of cash acquired, partially offset by the $4.6 million payment related to the acquisition of LTST and our Section 338(h)(10) election during the 2024 period, and the timing of our trade cycle whereby we took delivery of approximately 747 new tractors and 791 new trailers, while disposing of approximately 1,051 used tractors and 444 used trailers during 2024 compared to delivery of 1,242 new tractors and 1,111 new trailers, while disposing of approximately 1,235 used tractors and 634 used trailers in 2023.
The decrease in Expedited freight revenue relates to a decrease in average freight revenue per tractor per week of 1.4% compared to 2022 as well as a 17 (or 1.9%) average tractor decrease.
The increase in Dedicated freight revenue relates to a 133 (or 10.8%) average tractor increase and an increase in average freight revenue per tractor per week of 6.6%, compared to 2023.
The $20.4 million increase in Warehousing total revenue is a result of period-over-period new customer business as well as rate increases with existing customers since the third quarter of 2023. Total operating income was $58.8 million in 2023, compared to operating income of $120.7 million in 2022.
Revenue in this reportable segment is expected to fluctuate with changes in the freight market and our percentage of contracted versus non-contracted freight. The $1.1 million increase in Warehousing total revenue is a result of period-over-period new customer business as well as rate increases with existing customers in 2024.
The decrease in Dedicated operating expenses was primarily the result of averaging fewer drivers and tractors, resulting in lower driver salaries, wages, and benefits, reduced use of third-party purchased transportation, decreased fuel costs, and decreased maintenance and parts costs. Additionally, Expedited and Dedicated operating expenses were reduced as a result of the sale of a Tennessee terminal during 2023.
The decrease in Expedited operating expenses was primarily due to decreases in driver and non-driver pay, resulting from averaging fewer drivers and tractors compared to 2023, and lower fuel, maintenance, and parts costs. These decreases were partially offset by increased depreciation expense as a result of our equipment trade cycle.
The increase in our revenue equipment installment notes was primarily due to replacing our older revenue equipment with new equipment. The decrease in operating lease obligations was primarily due to largely having transitioned from tractors held under operating leases to owned tractors in 2022 as well as amortization of the operating lease liability.
The increase in our revenue equipment installment notes was primarily due to equipment acquisition to support growth in our Dedicated reportable segment. The decrease in operating and finance lease obligations was primarily due to amortization of the respective lease liability.
Gain on disposition of property and equipment, net Year ended December 31, (dollars in thousands) 2023 2022 Gain on disposition of property and equipment, net $ (12,585 ) $ (40,322 ) % of total revenue (1.1 %) (3.3 %) % of freight revenue (1.3 %) (3.9 %) The decrease in gain on disposition of property and equipment, net is primarily the result of the $38.5 million gain on sale of a California terminal in the third quarter of 2022 partially offset by an increase in the sale of used equipment compared to 2022 and the $7.6 million gain on sale of a Tennessee terminal in the first quarter of 2023.
Loss (gain) on disposition of property and equipment, net Year ended December 31, (dollars in thousands) 2024 2023 Loss (gain) on disposition of property and equipment, net $ 1,630 $ (12,585 ) % of total revenue 0.1 % (1.1 %) % of freight revenue 0.2 % (1.3 %) The decrease in gain on disposition of property and equipment, net is primarily the result of the declining equipment values as a result of economic headwinds in the freight market and excess capacity challenges that continued in 2024.
The increase in Expedited operating expenses was primarily due to the Expedited portion of the gain sale of a California terminal during the third quarter of 2022 (which resulted in lower operating expenses during 2022), increases in depreciation expense as a result of our equipment trade cycle, driver and non-driver pay increases, and increases in the contingent consideration liability related to AAT since 2022.
The increase in Dedicated operating expenses was primarily the result of averaging more drivers and tractors as a result of growth within LTST, resulting in higher driver and non-driver salaries, wages, and benefits, depreciation expense from equipment purchases to support the growth, and increases in the contingent consideration liability related to LTST since 2023.
Despite these short-term headwinds, we believe our more resilient operating model, together with the steps we have taken to reduce costs and inefficiencies, have positioned us well for another successful year. 29 Table of Contents RESULTS OF CONSOLIDATED OPERATIONS Our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this document generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
Our goal remains to grow profitably and generate meaningful returns for our stockholders while providing world-class career opportunities for our team members. 29 Table of Contents RESULTS OF CONSOLIDATED OPERATIONS Our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this document generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.
The effective tax rate is different from the expected combined tax rate due primarily to state tax expense and permanent differences, such as executive compensation disallowance in 2022. The nondeductible effect of the per diem payments was temporarily suspended for 2022 in accordance with IRS guidance issued during the quarter ended December 31, 2021.
The effective tax rate is different from the expected combined tax rate due primarily to state tax expense and permanent differences.
Managed Freight experienced significant reductions in both revenue and operating income with reduced volumes of high-margin overflow freight from both Expedited and Dedicated truckload operations and little to no project related freight during the year given changes in the freight market. The brokerage environment remains highly competitive with numerous brokers aggressively competing for volumes at the expense of margin.
Managed Freight experienced reduced revenue but improved operating income with increased volumes of high-margin overflow freight from both Expedited and Dedicated truckload operations and focusing on cost control.
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For 2023, despite the challenges that came with a soft freight market, we achieved our second highest adjusted annual earnings per diluted share in our history while improving the durability and diversification of our business through the acquisitions of LTST and Sims.
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Going forward, we seek to grow Managed Freight with profitable revenue from new customers, work closely with our asset-based segment to capitalize on overflow opportunities when available, and optimize costs to yield longer term margin goals in the mid-single digits, which will generate an acceptable return on capital given the asset light nature of the business.
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We also increased our quarterly dividend and repurchased approximately 5% of the shares of our outstanding Class A common stock at a weighted average share price of approximately $34 per share.
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For the first quarter of 2025, the general freight market appears to be incrementally improving as capacity and demand are better balanced than they have been for approximately two years, and customers are acknowledging this during rate and volume allocation discussions. However, in our dedicated markets, customers continue to experience greater than expected temporary customer shutdowns and volume pressure.
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We anticipate continued margin pressure in this environment. Warehousing was able to grow revenue through new customer startups and improve margins with contractual pricing increases put into place during the year.
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Additionally, bad weather has hampered operations and increased our costs limiting any benefit of general market uplift. Beyond the first quarter, we are focusing on positioning the Company to execute quickly and gain operating leverage as conditions improve, continuing to capture new dedicated contracts to expand the fleet organically, and evaluating multiple acquisition and investment opportunities.
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As we look to 2024, we do not see anything in the first half of the year that would indicate a near-term recovery of the freight market. We anticipate a continuation of difficult conditions where capacity continues to exit the market at a rate that yields steady but modest improvement.
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Depreciation increased $14.6 million in 2024 to $77.0 million compared to 2023, primarily as a result of the increased cost of new equipment purchased as part of our strategic initiative to support growth in our Dedicated segment and replace older equipment.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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At our December 31, 2023 level of borrowing on our non-hedged variable rate debt, a 1% increase in our applicable rate would have an immaterial impact to our consolidated results of operations. Our remaining debt is fixed rate debt, and therefore changes in market interest rates do not directly impact our interest expense.
At our December 31, 2024 level of borrowing on our non-hedged variable rate debt, a 1% increase in our applicable rate would have an immaterial impact to our consolidated results of operations. Our remaining debt is fixed rate debt, and therefore changes in market interest rates do not directly impact our interest expense.
For the years ended December 31, 2023 and 2022, the fair value of the swap agreements, amounts reclassified from accumulated other comprehensive loss into our results of operations, and amounts expected to be reclassified from accumulated other comprehensive income into our results of operations during the next twelve months due to interest rate changes, are approximately $0.4 million.
For the years ended December 31, 2024 and 2023, the fair value of the swap agreements, amounts reclassified from accumulated other comprehensive income into our results of operations, and amounts expected to be reclassified from accumulated other comprehensive income into our results of operations during the next twelve months due to interest rate changes, are approximately $0.3 million.
This sensitivity analysis considers that we expect to purchase approximately 12.6 million gallons of diesel annually, with an assumed fuel surcharge recovery rate of 99.8% of the cost (which was our fuel surcharge recovery rate during the year ended December 31, 2023).
This sensitivity analysis considers that we expect to purchase approximately 40.6 million gallons of diesel annually, with an assumed fuel surcharge recovery rate of 101.3% of the cost (which was our fuel surcharge recovery rate during the year ended December 31, 2024).
Of our total $293.5 million of debt including operating and finance leases, we had $30.7 million of variable rate debt outstanding at December 31, 2023, of which $19.1 million related to a real-estate note which is hedged with the interest rate swap agreement noted above at 4.2%.
Of our total $296.9 million of debt including operating and finance leases, we had $17.8 million of variable rate debt outstanding at December 31, 2024, which related to a real-estate note which is hedged with the interest rate swap agreement noted above at 4.2%.
In an effort to seek to reduce the variability of the ultimate cash flows associated with fluctuations in diesel fuel prices, we have periodically entered into various derivative instruments, including forward futures swap contracts. We have historically entered into hedging contracts with respect to ULSD.
In an effort to seek to reduce the variability of the ultimate cash flows associated with fluctuations in diesel fuel prices, we have periodically entered into various derivative instruments, including forward futures swap contracts. As of December 31, 2024, we have no remaining fuel hedge contracts in our consolidated balance sheet.
As of December 31, 2023, we have no remaining fuel hedge contracts in our consolidated balance sheet. We do not engage in speculative transactions, nor do we hold or issue financial instruments for trading purposes. A one dollar increase in the price of diesel per gallon would decrease our net income by less than $0.1 million.
We do not engage in speculative transactions, nor do we hold or issue financial instruments for trading purposes. A one dollar increase in the price of diesel per gallon would decrease our net income by approximately $0.4 million.
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Under these contracts, we paid a fixed rate per gallon of ULSD and received the monthly average price of Gulf Coast ULSD. The retrospective and prospective regression analyses provided that changes in the prices of diesel fuel and ULSD were deemed to be highly effective based on the relevant authoritative guidance.

Other CVLG 10-K year-over-year comparisons