Company Quick10K Filing
Daseke
Price-0.00 EPS-5
Shares65 P/E0
MCap-0 P/FCF-0
Net Debt634 EBIT-371
TEV634 TEV/EBIT-2
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-07
10-K 2019-12-31 Filed 2020-03-10
10-Q 2019-09-30 Filed 2019-11-12
10-Q 2019-06-30 Filed 2019-08-05
10-Q 2019-03-31 Filed 2019-05-06
10-K 2018-12-31 Filed 2019-03-08
10-Q 2018-09-30 Filed 2018-11-06
10-Q 2018-06-30 Filed 2018-08-09
10-Q 2018-03-31 Filed 2018-05-10
10-K 2017-12-31 Filed 2018-03-16
10-Q 2017-09-30 Filed 2017-11-09
10-Q 2017-06-30 Filed 2017-08-09
10-Q 2017-03-31 Filed 2017-05-10
10-K 2016-12-31 Filed 2017-02-24
10-Q 2016-09-30 Filed 2016-11-01
10-Q 2016-06-30 Filed 2016-07-19
10-Q 2016-03-31 Filed 2016-05-13
10-K 2015-12-31 Filed 2016-02-19
10-Q 2015-09-30 Filed 2015-11-12
10-Q 2015-06-30 Filed 2015-09-03
8-K 2020-06-18
8-K 2020-05-21
8-K 2020-05-07
8-K 2020-05-07
8-K 2020-05-06
8-K 2020-04-20
8-K 2020-04-02
8-K 2020-04-01
8-K 2020-03-10
8-K 2020-02-11
8-K 2020-02-07
8-K 2020-01-30
8-K 2019-12-16
8-K 2019-11-12
8-K 2019-11-12
8-K 2019-09-19
8-K 2019-09-05
8-K 2019-09-03
8-K 2019-08-26
8-K 2019-08-14
8-K 2019-08-05
8-K 2019-08-05
8-K 2019-05-20
8-K 2019-05-06
8-K 2019-05-06
8-K 2019-03-08
8-K 2019-02-26
8-K 2019-02-12
8-K 2019-02-07
8-K 2019-01-16
8-K 2018-11-14
8-K 2018-11-06
8-K 2018-11-06
8-K 2018-08-30
8-K 2018-08-09
8-K 2018-08-09
8-K 2018-06-29
8-K 2018-06-25
8-K 2018-06-15
8-K 2018-06-06
8-K 2018-05-22
8-K 2018-05-08
8-K 2018-05-08
8-K 2018-05-08
8-K 2018-04-16
8-K 2018-04-13
8-K 2018-03-16
8-K 2018-02-14
8-K 2018-02-12
8-K 2018-01-10

DSKE 10Q Quarterly Report

Part I – Financial Information
Item 1. Financial Statements (Unaudited)
Note 1 – Nature of Operations and Summary of Significant Accounting Policies
Note 2 – Leases
Note 3 – Planned Divestiture of Aveda
Note 4 – Prepaid and Other Current Assets
Note 5 – Goodwill and Intangible Assets
Note 6 – Integration and Restructuring
Note 7 – Property and Equipment
Note 8 – Accrued Expenses and Other Liabilities
Note 9 – Long - Term Debt
Note 10 – Income Taxes
Note 11 – Stockholders’ Equity
Note 12 – Stock - Based Compensation
Note 13 – Defined Contribution Plan
Note 14 – Commitments and Contingencies
Note 15 – Reportable Segments
Note 16 –Loss per Share
Item 2. Management’S Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibits
EX-31.1 dske-20200331ex311bd39ca.htm
EX-31.2 dske-20200331ex31239fbf2.htm
EX-32.1 dske-20200331ex321524c4f.htm
EX-32.2 dske-20200331ex32213e454.htm

Daseke Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
1.61.31.00.60.30.02013201520172020
Assets, Equity
0.50.30.20.0-0.1-0.32013201520172020
Rev, G Profit, Net Income
0.30.20.10.0-0.1-0.22013201520172020
Ops, Inv, Fin

10-Q 1 dske-20200331x10q.htm 10-Q dske_Current_Folio_10Q

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

 

 

 

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

 

For the quarterly period ended March 31, 2020

 

OR

 

 

 

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

 

For the transition period from ________ to _________

 

Picture 4

DASEKE, INC.

(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

Delaware
(State or other jurisdiction of incorporation or organization)

 

001-37509
(Commission
File Number)

 

47-3913221
(IRS Employer
Identification No.)

 

 

 

 

 

15455 Dallas Parkway, Suite 550
Addison, Texas

 

75001

(Address of Principal Executive Offices)

 

(Zip Code)

 

 

 

 

 

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

 

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☑     No  ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).Yes  ☑      No  ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

 

☐ Large accelerated filer

 

 

 

☑ Accelerated filer

☐ Non-accelerated filer

 

 

 

☑ Smaller reporting company

 

 

 

 

☐ Emerging growth company

 

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

 

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

 

 

 

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

DSKE

The NASDAQ Capital Market

 

Common shares of the registrant outstanding at May 1, 2020 were 64,615,857.

 

 

 

DASEKE, INC.

FORM 10-Q

For the Quarterly Period Ended March 31, 2020

INDEX

 

 

 

 

 

 

Cautionary Note Regarding Forward-Looking Statements

 

This Quarterly Report on Form 10-Q (this Report) of Daseke, Inc. (Daseke or the Company) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Except as otherwise indicated by the context, references in this Report to “we,” “us” and “our” are to the consolidated business of the Company. All statements in this Report, including those made by the management of the Company, other than statements of historical fact, are forward-looking statements. These forward-looking statements are based on management’s estimates, projections and assumptions as of the date hereof. Forward-looking statements may contain words such as “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “believe,” “plan,” “should,” “could,” “would,” “forecast,” “seek,” “target,” “predict,” and “potential,” the negative of these terms, or other comparable terminology. Forward-looking statements may include statements about the Company’s goals; the Company’s financial strategy, liquidity and capital required for its business strategy and plans; the Company’s competition and government regulations; general economic conditions; and the Company’s future operating results.

 

These forward-looking statements are based on information available as of the date of this Report (or, in the case of forward-looking statements incorporated herein by reference, as of the date of the applicable filed document), and current expectations, forecasts and assumptions. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that the Company anticipates. Accordingly, forward-looking statements should not be relied upon as representing the Company’s views as of any subsequent date, and the Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. Accordingly, readers are cautioned not to place undue reliance on the forward-looking statements.

 

Forward-looking statements are subject to risks and uncertainties (many of which are beyond the Company’s control) that could cause actual results to differ materially from the Company’s historical experience and our present expectations or projections. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, general economic and business risks, such as downturns in customers’ business cycles and disruptions in capital and credit markets; impact to the Company’s business and operations resulting from the COVID-19 pandemic; the Company’s ability to adequately address downward pricing and other competitive pressures; driver shortages and increases in driver compensation or owner-operator contracted rates; the Company’s ability to execute and realize all of the expected benefits of its integration, business improvement and comprehensive restructuring plans; loss of key personnel; the Company’s ability to realize all of the intended benefits from recent or future acquisitions; the Company’s ability to complete recent or future divestitures successfully; seasonality and the impact of weather and other catastrophic events; fluctuations in the price or availability of diesel fuel; increased prices for, or decreases in the availability of, new revenue equipment and decreases in the value of used revenue equipment; the Company’s ability to generate sufficient cash to service all of the Company’s indebtedness and the Company’s ability to finance its capital requirements; restrictions in its existing and future debt agreements; increases in interest rates; changes in existing laws or regulations, including environmental and worker health safety laws and regulations and those relating to tax rates or taxes in general; the impact of governmental regulations and other governmental actions related to the Company and its operations; insurance and claims expenses; and litigation and governmental proceedings. For additional information regarding known material factors that could cause the Company’s actual results to differ from its projected results, please see the Company’s filings with the Securities and Exchange Commission (the SEC), particularly the section titled “Part I. Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K, filed with the SEC on March 10, 2020, and “Part II. Item 1A. Risk Factors” in this Report.

 

All forward-looking statements, expressed or implied, attributed to the Company or persons acting on its behalf are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that the Company or persons acting on its behalf may issue.

 

 

 

 

Part I – FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

DASEKE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In millions, except share data)

 

 

 

 

 

 

 

 

 

    

March 31, 

    

December 31, 

 

 

2020

 

2019

ASSETS

 

 

 

 

 

 

Current assets:

 

 

  

 

 

  

Cash and cash equivalents

 

$

107.5

 

$

95.7

Accounts receivable, net of allowance of $4.3 at March 31, 2020 and $3.5 at December 31, 2019

 

 

166.6

 

 

197.8

Drivers’ advances and other receivables

 

 

6.9

 

 

8.2

Parts supplies

 

 

3.1

 

 

3.5

Assets held for sale

 

 

69.8

 

 

 —

Prepaid and other current assets

 

 

18.4

 

 

21.9

Total current assets

 

 

372.3

 

 

327.1

 

 

 

 

 

 

 

Property and equipment, net

 

 

387.9

 

 

439.0

Intangible assets, net

 

 

100.8

 

 

109.1

Goodwill

 

 

139.1

 

 

139.9

Right-of-use assets

 

 

108.5

 

 

95.9

Other long-term assets

 

 

29.5

 

 

29.6

Total assets

 

$

1,138.1

 

$

1,140.6

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

  

 

 

  

Accounts payable

 

$

17.4

 

$

20.5

Accrued expenses and other liabilities

 

 

46.9

 

 

44.2

Accrued payroll, benefits and related taxes

 

 

24.9

 

 

28.2

Accrued insurance and claims

 

 

19.3

 

 

18.7

Current portion of long-term debt

 

 

57.7

 

 

59.4

Liabilities held for sale

 

 

13.1

 

 

 —

Other current liabilities

 

 

49.3

 

 

48.8

Total current liabilities

 

 

228.6

 

 

219.8

 

 

 

 

 

 

 

Line of credit

 

 

 —

 

 

1.7

Long-term debt, net of current portion

 

 

625.6

 

 

631.6

Deferred tax liabilities

 

 

70.7

 

 

69.9

Other long-term liabilities

 

 

92.6

 

 

78.9

Total liabilities

 

 

1,017.5

 

 

1,001.9

 

 

 

 

 

 

 

Commitments and contingencies (Note 14)

 

 

  

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

  

 

 

  

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

 

 

65.0

 

 

65.0

Common stock, par value $0.0001 per share; 250,000,000 shares authorized, 64,598,025 and
64,589,075 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively

 

 

 —

 

 

 —

Additional paid-in-capital

 

 

438.4

 

 

437.5

Accumulated deficit

 

 

(381.9)

 

 

(363.4)

Accumulated other comprehensive loss

 

 

(0.9)

 

 

(0.4)

Total stockholders’ equity

 

 

120.6

 

 

138.7

Total liabilities and stockholders’ equity

 

$

1,138.1

 

$

1,140.6

 

 

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

 

1

DASEKE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In millions, except share and per share data)

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31, 

 

    

2020

    

2019

Revenues:

 

 

  

 

 

  

Company freight

 

$

180.9

 

$

206.2

Owner operator freight

 

 

107.8

 

 

111.0

Brokerage

 

 

61.7

 

 

71.4

Logistics

 

 

10.1

 

 

12.4

Fuel surcharge

 

 

30.5

 

 

32.0

Total revenue

 

 

391.0

 

 

433.0

 

 

 

 

 

 

 

Operating expenses:

 

 

  

 

 

  

Salaries, wages and employee benefits

 

 

110.4

 

 

119.1

Fuel

 

 

28.7

 

 

35.0

Operations and maintenance

 

 

45.6

 

 

54.8

Communications

 

 

1.0

 

 

1.0

Purchased freight

 

 

134.2

 

 

146.6

Administrative expenses

 

 

20.2

 

 

16.1

Sales and marketing

 

 

0.7

 

 

1.2

Taxes and licenses

 

 

4.5

 

 

4.9

Insurance and claims

 

 

15.0

 

 

12.5

Depreciation and amortization

 

 

26.3

 

 

41.5

Gain on disposition of property and equipment

 

 

(1.2)

 

 

(0.4)

Impairment

 

 

13.4

 

 

 —

Restructuring charges

 

 

0.5

 

 

 —

Total operating expenses

 

 

399.3

 

 

432.3

Income (loss) from operations

 

 

(8.3)

 

 

0.7

 

 

 

 

 

 

 

Other expense (income):

 

 

  

 

 

  

Interest income

 

 

(0.3)

 

 

(0.2)

Interest expense

 

 

12.0

 

 

12.7

Other

 

 

1.2

 

 

(0.6)

Total other expense

 

 

12.9

 

 

11.9

 

 

 

 

 

 

 

Loss before benefit for income taxes

 

 

(21.2)

 

 

(11.2)

Benefit for income taxes

 

 

(3.9)

 

 

(1.9)

Net loss

 

 

(17.3)

 

 

(9.3)

 

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

  

 

 

  

Foreign currency translation adjustments, net of tax of $(0.2) and $0.1, respectively

 

 

(0.5)

 

 

0.1

Comprehensive loss

 

 

(17.8)

 

 

(9.2)

 

 

 

 

 

 

 

Net loss

 

 

(17.3)

 

 

(9.3)

Less dividends to Series A convertible preferred stockholders

 

 

(1.2)

 

 

(1.2)

Net loss attributable to common stockholders

 

$

(18.5)

 

$

(10.5)

 

 

 

 

 

 

 

Net loss per common share:

 

 

  

 

 

  

Basic and Diluted

 

$

(0.29)

 

$

(0.16)

Weighted-average common shares outstanding:

 

 

  

 

 

  

Basic and Diluted

 

 

64,598,025

 

 

64,469,642

 

 

 

 

 

 

 

Dividends declared per Series A convertible preferred share

 

$

1.91

 

$

1.91

 

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

 

2

 

DASEKE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

Three Months Ended March 31, 2020

(Unaudited)

(In millions, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A Convertible

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

Preferred Stock

 

Common Stock

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

Par

 

Additional

 

Accumulated

 

Comprehensive

 

 

 

 

    

Shares

    

Amount

    

Shares

    

Value

    

Paid- In Capital

    

Deficit

    

Income (Loss)

    

Total

Balance at January 1, 2020

 

650,000

 

$

65.0

 

64,589,075

 

$

 —

 

$

437.5

 

$

(363.4)

 

$

(0.4)

 

$

138.7

Vesting of restricted stock units

 

 —

 

 

 —

 

8,950

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Series A convertible preferred stock dividend

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(1.2)

 

 

 —

 

 

(1.2)

Stock-based compensation expense

 

 —

 

 

 —

 

 —

 

 

 —

 

 

0.9

 

 

 —

 

 

 —

 

 

0.9

Foreign currency translation adjustments

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(0.5)

 

 

(0.5)

Net loss

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(17.3)

 

 

 —

 

 

(17.3)

Balance at March 31, 2020

 

650,000

 

$

65.0

 

64,598,025

 

$

 —

 

$

438.4

 

$

(381.9)

 

$

(0.9)

 

$

120.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

3

DASEKE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

Three Months Ended March 31, 2019

(Unaudited)

(In millions, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A Convertible

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

Preferred Stock

 

Common Stock

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

Par

 

Additional

 

Accumulated

 

Comprehensive

 

 

 

 

    

Shares

    

Amount

 

Shares

    

Value

    

Paid- In Capital

    

Deficit

    

Income (Loss)

    

Total

Balance at January 1, 2019

 

650,000

 

$

65.0

 

64,455,174

 

$

 —

 

$

433.9

 

$

(51.0)

 

$

(0.9)

 

$

447.0

Vesting of restricted stock units

 

 —

 

 

 —

 

14,498

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Series A convertible preferred stock dividend

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(1.2)

 

 

 —

 

 

(1.2)

Stock-based compensation expense

 

 —

 

 

 —

 

 —

 

 

 —

 

 

1.0

 

 

 —

 

 

 —

 

 

1.0

Foreign currency translation adjustments

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

0.1

 

 

0.1

Net loss

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(9.3)

 

 

 —

 

 

(9.3)

Balance at March 31, 2019

 

650,000

 

$

65.0

 

64,469,672

 

$

 —

 

$

434.9

 

$

(61.5)

 

$

(0.8)

 

$

437.6

 

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

 

 

 

4

DASEKE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in millions)

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31, 

 

    

2020

    

2019

Cash flows from operating activities

 

 

  

 

 

  

Net loss

 

$

(17.3)

 

$

(9.3)

Adjustments to reconcile net loss to net cash provided by operating activities

 

 

 

 

 

 

Depreciation

 

 

24.5

 

 

37.2

Amortization of intangible assets

 

 

1.8

 

 

4.3

Amortization of deferred financing fees

 

 

1.1

 

 

0.7

Non-cash operating lease expense

 

 

2.9

 

 

6.6

Stock-based compensation expense

 

 

0.9

 

 

1.0

Deferred taxes

 

 

(3.8)

 

 

(1.9)

Bad debt expense

 

 

0.9

 

 

0.1

Gain on disposition of property and equipment

 

 

(1.2)

 

 

(0.4)

Impairment

 

 

13.4

 

 

 —

Changes in operating assets and liabilities

 

 

 

 

 

 

Accounts receivable

 

 

1.3

 

 

(8.9)

Drivers’ advances and other receivables

 

 

(0.2)

 

 

(2.8)

Prepaid and other current assets

 

 

(4.0)

 

 

1.9

Accounts payable

 

 

2.2

 

 

7.5

Accrued expenses and other liabilities

 

 

7.2

 

 

0.4

Net cash provided by operating activities

 

 

29.7

 

 

36.4

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

  

 

 

  

Purchases of property and equipment

 

 

(4.5)

 

 

(3.9)

Proceeds from sale of property and equipment

 

 

5.8

 

 

4.6

Net cash provided by investing activities

 

 

1.3

 

 

0.7

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

  

 

 

  

Advances on line of credit

 

 

351.0

 

 

314.7

Repayments on line of credit

 

 

(352.7)

 

 

(314.7)

Principal payments on long-term debt

 

 

(17.1)

 

 

(19.3)

Series A convertible preferred stock dividends

 

 

(1.2)

 

 

(1.2)

Net cash used in financing activities

 

 

(20.0)

 

 

(20.5)

 

 

 

 

 

 

 

Effect of exchange rates on cash and cash equivalents

 

 

0.8

 

 

(0.2)

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

 

11.8

 

 

16.4

Cash and cash equivalents – beginning of period

 

 

95.7

 

 

46.0

Cash and cash equivalents – end of period

 

$

107.5

 

$

62.4

 

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

5

DASEKE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS – (Continued)

(Unaudited)

(in millions)

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31, 

 

    

2020

    

2019

Supplemental disclosure of cash flow information

 

 

 

 

 

 

Cash paid for interest

 

$

10.9

 

$

11.7

Cash paid for income taxes

 

$

0.2

 

$

 —

 

 

 

 

 

 

 

Noncash investing and financing activities

 

 

 

 

 

 

Property and equipment acquired with debt or finance lease obligations

 

$

9.8

 

$

25.1

Property and equipment sold for notes receivable

 

$

 —

 

$

0.4

Right-of-use assets acquired

 

$

19.1

 

$

8.1

 

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

 

 

6

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

 

Nature of Operations

 

Daseke, Inc.’s (the Company or Daseke) wholly-owned subsidiary Daseke Companies, Inc., was incorporated in December 2008 and began operations on January 1, 2009. Daseke is engaged in full service open-deck trucking that specializes primarily in flatbed truckload and heavy haul transportation of specialized items throughout the United States, Canada and Mexico. The Company also provides logistical planning and warehousing services to customers. The Company is subject to regulation by the Department of Transportation, the Department of Defense, the Department of Energy, and various state regulatory authorities in the United States. The Company is also subject to regulation by the Ministries of Transportation and Communications and various provincial regulatory authorities in Canada.

 

Basis of Presentation

 

These interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ended December 31, 2020.

 

The consolidated balance sheet as of December 31, 2019 has been derived from the audited consolidated financial statements at that date. For additional information, including the Company’s significant accounting policies, refer to the consolidated financial statements and related footnotes for the year ended December 31, 2019 as set forth in the Company’s Annual Report on Form 10-K, filed with the SEC on March 10, 2020.

 

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

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of Daseke, Inc. and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

 

Use of Estimates

 

The preparation of the consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Deferred Financing Fees

 

In conjunction with obtaining long-term debt, the Company incurred financing costs which are being amortized using the straight-line method, which approximates the effective interest rate method, over the terms of the obligations. As of March 31, 2020 and December 31, 2019, the balance of deferred finance charges was $10.3 million and $11.4 million, respectively, which is included as a reduction of long-term debt, net of current portion in the consolidated balance sheets. Amortization expense was $1.1 million and $0.7 million the three months ended March 31, 2020 and 2019, respectively. Amortization expense is included in interest expense in the consolidated statements of operations and comprehensive loss.

 

Impairment of Long-Lived Assets 

 

Long-lived assets are reviewed for impairment at the asset group level whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If the sum of the expected future undiscounted cash flow is less than the carrying amount of the asset, an impairment is indicated. A loss is then recognized for the difference, if any, between the fair value of the asset (as estimated by management using its best judgment) and the carrying value of the asset. If actual market value is less favorable than that estimated by management, additional write-downs may be required. In the three months ended March 31, 2020, the Company recognized asset impairments, which are more fully described in Note 3.

 

7

Fair Value Measurements

 

The Company follows the accounting guidance for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements on a recurring basis. Fair value guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It also establishes a framework for measuring fair value and expands disclosures about fair value measurements. The three levels of the fair value framework are as follows:

 

Level 1 - Quoted market prices in active markets for identical assets or liabilities.

Level 2 - Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3 - Unobservable inputs reflecting the reporting entity’s own assumptions or external inputs from inactive markets.

 

A financial asset or liability’s classification within the framework is determined based on the lowest level of input that is significant to the fair value measurement.

 

Contingent Consideration

 

The contingent consideration liabilities, included in other current liabilities on the consolidated balance sheet, represent future payment obligations for certain EBITDA thresholds related to the Company’s acquisitions over a defined period of time. The fair value of the Company’s contingent consideration liabilities are determined using estimates based on discount rates that reflect the risk involved and the projected EBITDA of the acquired businesses, therefore the liabilities are classified within Level 3 of the fair value framework. The balance of contingent consideration as of March 31, 2020 and December 31, 2019 was $21.5 million and $21.5 million, respectively.

 

Stock-Based Compensation

 

Awards of equity instruments issued to employees and directors are accounted for under the fair value method of accounting and recognized in the consolidated statements of operations and comprehensive loss. Compensation cost is measured for all stock-based awards at fair value on the date of grant and recognized using the straight-line method over the service period over which the awards are expected to vest.

 

Fair value of all time-vested options as of the date of grant is estimated using the Black-Scholes option valuation model, which was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Since the Company does not have a sufficient history of exercise behavior, expected term is calculated using the assumption that the options will be exercised ratably from the date of vesting to the end of the contractual term for each vesting tranche of awards. The risk-free interest rate is based on the U.S. Treasury yield curve for the period of the expected term of the stock option. Expected volatility is calculated using an index of publicly traded peer companies.

 

Fair values of non-vested stock awards (restricted stock units) are equal to the market value of the common stock on the date of the award with compensation costs amortized over the vesting period of the award.

 

Segment Reporting

 

The Company determines its operating segments based on the information utilized by the chief operating decision maker to allocate resources and assess performance. Based on this information, the Company has determined it had 13 operating segments as of March 31, 2020 and 16 operating segments as of March 31, 2019 that are aggregated into two reportable segments: Flatbed Solutions, which delivers its services using primarily flatbed transportation equipment to meet the needs of high-volume, time-sensitive shippers, and Specialized Solutions, which delivers transportation and logistics solutions for super heavy haul, high-value customized and over-dimensional loads, many of which require engineering and customized equipment.

 

Loss Per Share

 

Basic loss per common share is calculated by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share reflect the potential dilution of earnings per share that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the Company’s loss.

 

For the three months ended March 31, 2020 and 2019, shares of the Company’s 7.625% Series A Convertible Cumulative Preferred Stock (Series A Preferred Stock) and outstanding stock options were not included in the computation of diluted loss per share as their effects were anti-dilutive. Additionally, for the three months ended March 31, 2020 and 2019, there was no dilutive effect from the Merger Agreement earn-out provision found in the Agreement and Plan of Merger, dated December 22, 2016, in which a wholly-owned subsidiary of Hennessy

8

Capital Acquisition Corp. II (Hennessy) merged with and into Daseke, with Daseke surviving as a direct wholly-owned subsidiary of Hennessy, (the Merger Agreement) or the outstanding warrants to purchase shares of the Company’s common stock (the common stock purchase warrants). See Note 16 for the effects of non-vested restricted stock units on basic and diluted earnings per share under the two-class method.

 

Common Stock Purchase Warrants

 

The Company accounts for the issuance of common stock purchase warrants in connection with equity offerings in accordance with the provisions of the Accounting Standards Codification (ASC) 815, Derivatives and Hedging (Topic 815). The Company classifies as equity any contract that (i) requires physical settlement or net-share settlement or (ii) gives the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contract that (i) requires net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside the control of the Company) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). See Note 11 for additional details on the common stock purchase warrants.

 

The Company assessed the classification of its common stock purchase warrants and determined that such instruments meet the criteria for equity classification at the time of issuance.

 

Foreign Currency Gains and Losses

 

The functional currency for all operations except Canada is the U.S. dollar. The local currency is the functional currency for the Company’s operations in Canada. For these operations, assets and liabilities are translated at the rates of exchange on the consolidated balance sheet date, while income and expense items are translated at average rates of exchange during the period. The resulting gains or losses arising from the translation of accounts from the functional currency into U.S. dollars are included as a separate component of stockholders’ equity in accumulated other comprehensive income until a partial or complete liquidation of the Company’s net investment in the foreign operation.

 

From time to time, the Company’s foreign operations may enter into transactions that are denominated in a currency other than their functional currency. These transactions are initially recorded in the functional currency of the operating company based on the applicable exchange rate in effect on the date of the transaction. Monthly, these transactions are remeasured to an equivalent amount of the functional currency based on the applicable exchange rate in effect on the remeasurement date. Any adjustment required to remeasure a transaction to the equivalent amount of functional currency is recorded in the consolidated statements of operations and comprehensive loss of the foreign operating company as a component of foreign exchange gain or loss.

 

Revenue and Expense Recognition

 

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

 

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

 

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

 

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

 

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

 

9

Freight Revenue

 

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

 

Brokerage Revenue

 

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

 

Logistics Revenue

 

Logistics revenue is generated from a range of services, including value-added warehousing, loading and unloading, vehicle maintenance and repair, preparation and packaging, fuel management, and other fleet management solutions. The Company recognizes logistics revenue as services are completed.

 

Fuel Surcharge

 

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

 

The Company has designated the following preference and practical expedients:

 

·

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

 

·

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

 

·

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

 

Lease Accounting

 

Lessee

 

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

 

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

 

The Company determines whether an arrangement is classified as a lease at inception. The right-of-use assets and lease liabilities relating to operating leases are included in right-of-use assets, other current liabilities, and other long-term liabilities on the Company's consolidated balance sheets. The right-of-use assets and lease liabilities relating to finance leases are included in other long-term assets, current portion

10

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

 

Lessor

 

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

 

The Company recorded depreciation expense of $4.1 million and $4.9 million on its assets leased under operating leases for the three months ended March 31, 2020 and 2019, respectively. Lease income from lease payments related to the Company's operating leases for the three months ended March 31, 2020 and 2019, was $6.2 million and $5.4 million, respectively.

 

The Company has designated the following preferences and practical expedients:

 

·

Adopt the land easement practical expedient;

 

·

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

 

·

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

 

·

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

 

New Accounting Pronouncements

 

In March 2020, the FASB issued ASU 2020-04 –  Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company is currently evaluating its contracts and the optional expedients provided by the new standard.

 

In December 2019, the FASB issued ASU No. 2019-12 – Income Taxes (Topic 740). Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in the accounting standards. The amendments in ASU 2019-12 eliminate certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also clarifies and simplifies other aspects of the accounting for income taxes. The amendments in ASU 2019-12 will become effective for the Company on January 1, 2022. Early adoption is permitted, including adoption in any interim period. The Company is currently evaluating the impact of adopting this guidance.

 

In June 2016, the FASB issued ASU No. 2016-13 Accounting for Credit Losses (Topic 326). ASU 2016-13 requires the use of an “expected loss” model on certain types of financial instruments. The ASU sets forth a “current expected credit loss” (CECL) model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets, including trade receivables. The new standard will become effective for the Company beginning with the first quarter 2023 and is not expected to have a material impact on the Company’s consolidated financial statements.

 

11

NOTE 2 – LEASES

 

Lessee

 

The following table reflects the Company’s components of lease expenses for the three months ended March 31, 2020 and 2019 (in millions):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

 

Classification

    

2020

 

2019

Operating lease cost

 

 

 

 

 

 

 

 

Revenue equipment

 

Operations and maintenance

 

$

6.4

 

$

5.8

Real estate

 

Administrative expense

 

 

3.8

 

 

4.2

Total operating lease cost

 

 

 

$

10.2

 

$

10.0

 

 

 

 

 

 

 

 

 

Finance lease cost

 

 

 

 

 

 

 

 

Amortization of right-of-use assets

 

Depreciation and amortization

 

$

1.5

 

$

1.3

Interest on lease liabilities

 

Interest expense

 

 

0.3

 

 

0.2

Total finance lease cost

 

 

 

$

1.8

 

$

1.5

 

 

 

 

 

 

 

 

 

Total lease cost(a)

 

 

 

$

12.0

 

$

11.5

(a)

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

 

The Company follows ASC 360, “Impairment or Disposal of Long-Lived Assets” guidance to determine whether right-of-use assets relating to operating and finance leases are impaired. The Company recorded impairment charges of $3.2 million to right-of-use assets relating to operating leases for the three months ended March 31, 2020 in connection with the planned divestiture of Aveda Transportation and Energy Services Inc. (Aveda). See Note 3 for details. There was no impairment charge to right-of-use assets relating to operating leases for the three months ended March 31, 2019.

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

 

Classification

    

2020

    

2019

Assets

 

 

 

 

 

 

 

 

Capitalized operating lease right-of-use assets

 

Right-of-use assets

 

$

108.5

 

$

95.9

Finance lease right-of-use assets

 

Other long-term assets

 

 

25.3

 

 

25.3

Total lease assets

 

 

 

$

133.8

 

$

121.2

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Capitalized operating lease liabilities:

 

 

 

 

 

 

 

 

Current

 

Other current liabilities

 

$

27.8

 

$

27.3

Non-current

 

Other long-term liabilities

 

 

91.0

 

 

77.8

    Total capitalized operating lease liabilities

 

 

 

$

118.8

 

 

105.1

 

 

 

 

 

 

 

 

 

Finance lease liabilities:

 

 

 

 

 

 

 

 

Current

 

Current portion of long-term debt

 

$

6.3

 

 

6.2

Non-current

 

Long-term debt, net of current portion

 

 

19.7

 

 

19.3

    Total finance lease liabilities

 

 

 

$

26.0

 

 

25.5

 

 

 

 

 

 

 

 

 

Total lease liabilities

 

 

 

$

144.8

 

$

130.6

 

12

The following table is a summary of supplemental cash flows related to leases for the three months ended March 31, 2020 and 2019 (in millions):