Daseke(US:DSKE)2022-02-23 13:06Operations and Fleet - The Company operates a fleet of over 4,500 tractors and 11,000 flatbed and specialized trailers, providing services across the United States, Canada, and Mexico[14]. - The Company drove 405.5 million miles in 2021, with approximately 44% of revenue derived from company-owned equipment and 56% from asset-light services[16]. - The Company operated 2,623 company-owned tractors and 11,266 trailers as of December 31, 2021, with 2,074 tractors contracted from independent operators[25]. - Approximately 44% of the Company's freight revenue was carried by independent contractor owner-operators in 2021[88]. - The Company employed 4,006 individuals, including 2,454 company drivers, as of December 31, 2021[27]. Revenue and Customer Base - In 2021, the Flatbed Solutions segment generated approximately 44% of total segment revenue, while the Specialized Solutions segment accounted for about 56%[15]. - As of December 31, 2021, the Company had approximately 5,300 customers, with the top ten customers accounting for about 27% of total revenue in 2021[24]. - The Company's top ten customers accounted for approximately 27% of its revenue in 2021, down from 31% in 2020[83]. - No single customer represented 10% or more of the Company's revenue in 2021, while one customer accounted for approximately 10% in 2020[83]. Regulatory Compliance and Safety - The Company is subject to various federal, state, and local regulations, including safety and fitness regulations imposed by the DOT and FMCSA, which could impact operations and compliance costs[40]. - The FMCSA's CSA program evaluates and ranks fleets and drivers based on safety-related standards, affecting driver recruitment and retention, and potentially leading to increased operational costs[43]. - The Company currently holds a "satisfactory" FMCSA safety rating for 100% of its fleet, but changes in safety rating methodologies could adversely affect its operations and customer contracts[46]. - The Company has a safety program that includes mandatory drug testing and the use of critical-event recorders in tractors to enhance driver training and safety[33]. - The implementation of Electronic Logging Devices (ELDs) is mandatory for the Company and all carriers by December 16, 2019, impacting compliance with hours-of-service requirements[48]. Financial Performance and Risks - The Company is exposed to significant economic risks, including downturns in customer business cycles and recessionary economic cycles, which may lead to low overall freight levels[61]. - Cost increases outside of the Company's control, such as fuel prices and driver wages, could materially reduce profitability if rates cannot be increased sufficiently[62]. - The Company has incurred $18.2 million in costs related to organizational improvement plans initiated in the second half of 2019[106]. - The Company has not used derivatives to hedge against higher fuel costs, which may lead to significant adverse effects on profitability[77]. - As of December 31, 2021, the Company had $594.5 million of outstanding indebtedness, which may affect its ability to generate sufficient cash to service all of its debt obligations[111]. Environmental Compliance - Environmental compliance costs have historically not materially affected the Company's operations, but future compliance could lead to significant liabilities and operational impacts[49]. - The Company is involved in the EPA's SmartWay Transport Partnership, promoting energy efficiency, but may face increased costs due to new fuel efficiency and emissions standards[52]. - The Company must comply with various state-specific emission control regulations, which could increase equipment costs and operational expenses[53]. - The Company is subject to Phase 2 standards for fuel efficiency and greenhouse gas emissions, which could increase costs for acquiring new tractors and retrofitting existing ones[52]. - The Company has implemented programs to monitor and address environmental risks, but future compliance may lead to material adverse effects on its business[49]. Operational Challenges - The Company’s operations are subject to seasonal patterns, with productivity decreasing during winter due to inclement weather and increased operating expenses[39]. - The COVID-19 pandemic has negatively impacted the Company's operations and financial performance, leading to reduced revenue and potential liquidity challenges[69]. - The Company may experience disruptions in operations due to health epidemics, strikes, or other external events, which could impair efficiency and productivity[63]. - Driver shortages in the industry could lead to increased costs for the Company to attract and retain drivers[95]. - The Company faces competitive pressures, including competitors reducing freight rates to gain business, which may limit the ability to maintain or increase rates[67]. Management and Governance - The Company has experienced significant changes in its management team, including a new CEO in 2021, which may affect its ability to retain key personnel[97]. - As of December 31, 2021, Mr. Daseke and his affiliates owned approximately 29% of the Company's common stock, allowing them to significantly influence corporate decisions[142]. - The Company previously identified a material weakness in its internal control over financial reporting, which may lead to future misstatements of financial statements[139]. - The Company has identified material weaknesses in internal controls over financial reporting in the past, which have been remediated but may recur in the future[141]. Capital Expenditures and Investments - The Company has significant ongoing capital expenditure requirements, and failure to obtain necessary capital could adversely affect its business and growth initiatives[119]. - The Company may be forced to reduce or delay investments and capital expenditures if cash flows and capital resources are insufficient to fund debt service obligations[112]. - The Company has incurred costs related to potential acquisitions and investments, which may not yield the expected benefits[107]. - The Company may face challenges in successfully completing divestitures, which could disrupt its business and financial results[109]. Cybersecurity and Operational Risks - Cybersecurity threats pose a risk to the Company's operations, with past incidents highlighting vulnerabilities in its systems[102]. - The Company relies on third-party capacity providers for its brokerage business, which exposes it to risks such as equipment shortages and service interruptions[93]. - The Company may face significant border delays if it loses its C-TPAT status, impacting operational efficiency in Canada[87].