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What changed in COVENANT LOGISTICS GROUP, INC.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of COVENANT LOGISTICS GROUP, INC.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+361 added−334 removedSource: 10-K (2026-02-27) vs 10-K (2025-02-28)

Top changes in COVENANT LOGISTICS GROUP, INC.'s 2025 10-K

361 paragraphs added · 334 removed · 266 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

109 edited+29 added−30 removed126 unchanged
Biggest changeIf 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.
Biggest changeThe 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 2024. Under Phase 3, heavy duty vehicles are subject to periodic emissions testing and annual compliance fees, which, if applicable, could increase our operating costs and related expenses.
The petition was generally disfavored by transportation industry participants, citing, among other things, the petition’s failure to address privacy and data security risks. It remains to be seen what rules, if any, may stem from this notice. However, in February 2023, the FMCSA announced a new operational test for monitoring and enforcing driver and motor carrier safety compliance standards.
The petition was generally disfavored by transportation industry participants, citing, among other things, the petition’s failure to address privacy and data security risks. It remains to be seen what rules, if any, may stem from this notice. However, in 2023, the FMCSA announced a new operational test for monitoring and enforcing driver and motor carrier safety compliance standards.
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.
In 2020 CARB 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.
It is unclear if other jurisdictions will adopt this view, or if any legislation will result from this holding. If so, this could have a material adverse effect on our business, financial condition, and results of operations. In November 2023, a bill was introduced to Congress that would eliminate an exclusion of truck drivers from receiving overtime pay.
It is unclear if other jurisdictions will adopt this view, or if any legislation will result from this holding. If so, this could have a material adverse effect on our business, financial condition, and results of operations. In 2023, a bill was introduced to Congress that would eliminate an exclusion of truck drivers from receiving overtime pay.
In March 2024, the FMCSA began proof-of-concept testing to determine whether the technology required for electronic identification systems is sufficient and information and data being provided is secure, reliable, and useful for the FMCSA. In 2022 Senate lawmakers introduced legislation that would set aside grant funds over four years to expand truck parking across the United States.
In 2024, the FMCSA began proof-of-concept testing to determine whether the technology required for electronic identification systems is sufficient and information and data being provided is secure, reliable, and useful for the FMCSA. In 2022 Senate lawmakers introduced legislation that would set aside grant funds over four years to expand truck parking across the United States.
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.
In 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.
In periods of economic growth, however, the supply/demand environment may be favorable enough for us to offset expected compensation increases with better freight pricing. We use driver teams in a substantial portion of our tractors.
In periods of economic growth, however, the supply/demand environment may be favorable enough for us to offset expected compensation increases with better freight pricing. We use driver teams in a portion of our tractors.
The main factors that impact profitability in terms of expenses are the variable costs of outsourcing the transportation freight for our customers and managing fixed costs, including purchased transportation, salaries, facility warehousing costs, and selling, general, and administrative expenses.
The main factors that impact profitability in terms of expenses are the variable costs of outsourcing the transportation freight for our customers and managing fixed costs, including purchased transportation, salaries, facility warehousing costs, insurance, and selling, general, and administrative expenses.
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.
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 1,500 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.
In November 2024, a new rule referred to by the FMCSA as "Clearinghouse II," a program that relates to drivers with drug and alcohol violations took effect.
In 2024, a new rule referred to by the FMCSA as "Clearinghouse II," a program that relates to drivers with drug and alcohol violations took effect.
The California Air Resources Board ("CARB") also adopted emission control regulations that will be applicable to all heavy-duty tractors that pull 53-foot or longer box-type trailers within the state of California. The tractors and trailers subject to these CARB regulations must be either EPA SmartWay certified or equipped with low-rolling, resistance tires and retrofitted with SmartWay-approved aerodynamic technologies.
The California Air Resources Board ("CARB") also adopted emission control regulations that is applicable to all heavy-duty tractors that pull 53-foot or longer box-type trailers within the state of California. The tractors and trailers subject to these CARB regulations must be either EPA SmartWay certified or equipped with low-rolling, resistance tires and retrofitted with SmartWay-approved aerodynamic technologies.
We currently perform urine testing and will continue to monitor any developments in this area to ensure compliance. Finally, federal drug regulators have announced a proposal to add fentanyl to a drug testing panel that would detect the use of such drug among safety-sensitive federal employees, which would include truck drivers if adopted by the DOT.
We currently perform urine testing and will continue to monitor any developments in this area to ensure compliance. Finally, federal drug regulators have announced a proposal to add fentanyl and norfentanyl to a drug testing panel that would detect the use of such drugs among safety-sensitive federal employees, which would include truck drivers if adopted by the DOT.
Environmental Regulations We are subject to various environmental laws and regulations dealing with the hauling and handling of hazardous materials, fuel storage tanks, air emissions from our vehicles and facilities, engine idling, and discharge and retention of storm water. Our tractor terminals often are located in industrial areas where groundwater or other forms of environmental contamination could occur.
Environmental Regulations We are subject to various environmental laws and regulations including those dealing with the hauling and handling of hazardous materials, fuel storage tanks, air emissions from our vehicles and facilities, engine idling, and discharge and retention of storm water. Our tractor terminals often are located in industrial areas where groundwater or other forms of environmental contamination could occur.
We also may become subject to new or more restrictive regulations relating to fuel emissions, drivers' hours-of-service, ergonomics, or other matters affecting safety or operating methods. Other agencies, such as the Environmental Protection Agency ("EPA"), the Department of Homeland Security ("DHS"), and the U.S. Department of Defense also regulate our equipment, operations, drivers, and environment.
We also may become subject to new or more restrictive regulations relating to fuel emissions, drivers' hours-of-service, ergonomics, or other matters affecting safety or operating methods. Other agencies, such as the Environmental Protection Agency ("EPA"), the Department of Homeland Security ("DHS"), and the U.S. Department of War also regulate our equipment, operations, drivers, and environment.
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.
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 2026, we do not see anything in the first half of the year that would indicate a near-term recovery of the freight market.
We concentrate on service offerings where we believe our capacity in relation to sector size and our operating proficiency can make a meaningful difference to customers. The primary service offerings are further described below: ● Expedited: In our Expedited business, we operate approximately 900 tractors substantially all of which are driven by two-person driver teams.
We concentrate on service offerings where we believe our capacity in relation to sector size and our operating proficiency can make a meaningful difference to customers. The primary service offerings are further described below: ● Expedited: In our Expedited business, we operate approximately 800 tractors substantially all of which are driven by two-person driver teams.
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.
At December 31, 2025, 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.
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.
Even though the trailer provisions of the current 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 (the “2022 NOx Rule”).
We also provide shuttle and switching services related to shuttling containers and trailers in or around freight yards and to/from warehouses. 5 Table of Contents Additionally, we participate in the market for used equipment sales and leasing through our 49% ownership of Transport Enterprise Leasing, LLC (“TEL”).
We also provide shuttle and switching services related to shuttling containers and trailers in or around freight yards and to/from warehouses for Warehousing customers. 5 Table of Contents Additionally, we participate in the market for used equipment sales and leasing through our 49% ownership of Transport Enterprise Leasing, LLC (“TEL”).
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.
Our top ten customers accounted for approximately 44% and 45% of our total revenue in 2025 and 2024, 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.
The NHTSA and the EPA have fuel economy and greenhouse gas standards for medium-and heavy-duty vehicles, including the tractors we use.
The NHTSA and the EPA currently have fuel economy and greenhouse gas standards for medium-and heavy-duty vehicles, including the tractors we use.
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.
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, 2025 or December 31, 2024.
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.
The EPA had indicated that the 2022 NOx 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.
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.
There were no fuel hedging gains in 2025 or 2024. 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.
Additionally, increasing efforts to control emissions of greenhouse gases may have an adverse effect on us.
Additionally, efforts to control emissions of greenhouse gases may have an adverse effect on us.
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.
In 2018, the FMCSA granted a petition filed by the ATA and in doing so determined that federal law preempts 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 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.
In 2021, the Ninth Circuit Court of Appeals upheld the FMCSA's determination that federal law preempts 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.
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.
With Clearinghouse II now in effect, states are 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.
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.
We had one customer, serviced by our Expedited and Managed Freight reportable segments, that accounted for more than 10% of our consolidated revenue in 2025 and one customer, serviced by our Expedited, Managed Freight, and Warehousing reportable segments, that accounted for more than 10% of our consolidated revenue in 2024.
Complying with these environmental regulations and any future GHG regulations enacted by CARB, the EPA, the NHTSA and/or any other state or federal governing body has increased and will likely continue to increase the cost of our new tractors, may increase the cost of new trailers, may require us to retrofit certain of our trailers, may increase our maintenance costs, and could impair equipment productivity and increase our operating costs, particularly if such costs are not offset by potential fuel savings.
These effects, combined with the uncertainty of any future GHG regulations enacted by CARB, the EPA, the NHTSA and/or any other state or federal governing body has increased and will likely continue to increase the cost of our new tractors, may increase the cost of new trailers, may require us to retrofit certain of our trailers, may increase our maintenance costs, and could impair equipment productivity and increase our operating costs, particularly if such costs are not offset by potential fuel savings.
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 Company’s (or its subsidiaries', as applicable) new tractor purchases in 2025 complied with the emission and fuel consumption reductions required by the standards.
It remains unclear whether such acts will ultimately become law, however, and what changes they may undergo prior to finalization. 13 Table of Contents Fuel Availability and Cost The cost of fuel trended lower in 2024 as compared to 2023, as demonstrated by a decrease in the Department of Energy ("DOE") national average for diesel to approximately $3.76 per gallon for 2024, compared to $4.21 per gallon for 2023.
It remains unclear whether such acts will ultimately become law, however, and what changes they may undergo prior to finalization. 13 Table of Contents Fuel Availability and Cost The cost of fuel trended lower in 2025 as compared to 2024, as demonstrated by a decrease in the Department of Energy ("DOE") national average for diesel to approximately $3.65 per gallon for 2025, compared to $3.76 per gallon for 2024.
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 what changes, if any, will ultimately result from the proposed rulemaking. Federal courts have reached different decisions on the issue of whether preemption applies to broker liability.
In 2022, the United States Supreme Court (the “Supreme Court”) declined to review a Ninth Circuit Court of Appeals holding that broker liability is not preempted by federal regulation, which expose freight brokers to a patchwork of state regulations across the United States.
In 2022, the United States Supreme Court (the “Supreme Court”) declined to review a Ninth Circuit Court of Appeals holding that broker liability is not preempted by federal regulation in certain circumstances, which expose freight brokers to a patchwork of state laws across the United States.
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.
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 each of 2025 and 2024.
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.
The CPDP expands 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.
Among other changes, the rule allows brokers or freight forwarders to meet regulatory requirements to have “assets readily available” by maintaining trusts that meet certain criteria, including that they can be liquidated within seven calendar days of an event that triggers a payment from the trust.
Among other changes, the modified regulations allow brokers or freight forwarders to meet regulatory requirements to have “assets readily available” by maintaining trusts that meet certain criteria, including that they can be liquidated within seven calendar days of an event that triggers a payment from the trust.
Some of the significant successes resulting from our strategic planning efforts include the Landair Acquisition in 2018; consolidation of our back-office operations; enhancements to recruiting, retention, and business intelligence; upgraded information technology; focus on service and on time delivery; sale of TFS; the acquisition of AAT in 2022; and the acquisition of LTST and Sims in 2023.
Some of the significant successes resulting from our strategic planning efforts include the Landair Acquisition in 2018; consolidation of our back-office operations; enhancements to recruiting, retention, and business intelligence; upgraded information technology; focus on service and on time delivery; sale of Transport Financial Services; the acquisition of AAT in 2022; the acquisition of LTST and Sims in 2023 and the acquisition of Star in 2025.
Our baseline expectation for net capital equipment expenditures in 2025 is $70 million to $80 million and reflects our priorities of growing our dedicated footprint, maintaining the average age of our fleet in a manner that allows us to optimize operational uptime and related operating costs, and offering a fleet of equipment that our professional drivers are proud to operate.
Our baseline expectation for net capital equipment expenditures in 2026 is $40 million to $50 million and reflects our priorities of growing our dedicated footprint, maintaining the average age of our fleet in a manner that allows us to optimize operational uptime and related operating costs, and offering a fleet of equipment that our professional drivers are proud to operate.
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.
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 2024, a Department of Labor rule regarding independent contractor classification took effect. The 2024 rule rescinded the Independent Contractor Status Under the Fair Labor Standards Act.
The IIJA also required that the FMCSA clarify the differences between brokers, bona fide agents, and dispatch services, and to further specify its interpretation of the definitions of “broker” and “bona fide agents.” In June 2023, FMCSA issued final guidance on the definitions of "broker" and "bona fide agents," in which the distinction between the two largely hinges upon control and whether the person or company is engaged in the allocation of traffic between motor carriers.
The Infrastructure Investment and Jobs Act (“IIJA”) required that the FMCSA clarify the differences between brokers, bona fide agents, and dispatch services, and to further specify its interpretation of the definitions of “broker” and “bona fide agents.” In 2023, FMCSA issued final guidance on the definitions of "broker" and "bona fide agents," in which the distinction between the two largely hinges upon control and whether the person or company is engaged in the allocation of traffic between motor carriers.
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.
SB 253 requires companies that exceed $1 billion in annual revenue and that do business in California to publicly disclose their GHG emissions with initial reporting due on or before August 10, 2026, 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.
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.
Our average number of teams as a percentage of our seated fleet was consistent for 2025 as compared to 2024. Our average open tractors, including wrecked tractors, increased to 4.8% for the year ended December 31, 2025, from approximately 3.3% for the year ended December 31, 2024.
In November 2024, the FMCSA published a notice announcing a revised SMS methodology implementing certain changes proposed in the February 2023 notice, including, among other changes, (i) rebranding BASICs as "Compliance Categories" and revising certain categories, (ii) consolidating existing road violations into simplified and distinct violation groups and simplifying the scale used to measure the severity of violations, (iii) adjusting intervention thresholds, and (iv) revising the SMS methodology to focus more heavily on recent violations.
In 2024, the FMCSA published a notice announcing a revised Safety Measurement System (“SMS”) methodology, including, among other changes, (i) rebranding BASICs as "Compliance Categories" and revising certain categories, (ii) consolidating existing road violations into simplified and distinct violation groups and simplifying the scale used to measure the severity of violations, (iii) adjusting intervention thresholds, and (iv) revising the SMS methodology to focus more heavily on recent violations.
The final rule, which became effective in January 2024, modified regulations in five areas: (i) assets readily available, (ii) immediate suspension of broker/freight forwarder operating authority, (iii) surety or trust responsibilities, (iv) enforcement authority, and (v) entities eligible to serve as BMC-85 trustees.
In 2024, the FMCSA modified regulations in five areas: (i) assets readily available, (ii) immediate suspension of broker/freight forwarder operating authority, (iii) surety or trust responsibilities, (iv) enforcement authority, and (v) entities eligible to serve as BMC-85 trustees.
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.
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 suffered ongoing delays with the DHHS.
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.
We also order most of our equipment with uniform specifications to reduce our parts inventory and facilitate maintenance. At December 31, 2025, our tractor fleet had an average age of approximately 2.0 years, and our trailer fleet had an average age of approximately 5.7 years.
Under the ABC Test, a worker is presumed to be an employee, and the burden to demonstrate their independent contractor status is on the hiring company through satisfying all three of the following criteria: ● the worker is free from control and direction in the performance of services; and ● the worker is performing work outside the usual course of business of the hiring company; and ● the worker is customarily engaged in an independently established trade, occupation, or business.
Under the ABC Test, a worker is presumed to be an employee, and the burden to demonstrate their independent contractor status is on the hiring company through satisfying all three of the following criteria: ● the worker is free from control and direction in the performance of services, both under the contract for the performance of the work and in fact; and ● the worker is performing work outside the usual course of business of the hiring company; and ● the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
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.
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, 2025, we employed approximately 2,900 drivers and approximately 1,800 non-driver personnel.
A final rule with respect to these regulations was issued in March 2024 and establishes new GHG emission standards for heavy-duty motor vehicles which are phased-in starting with model year 2027 and increasing in stringency annually through model year 2032. .
A final rule with respect to these regulations was issued in 2024 and established new GHG emission standards for heavy-duty motor vehicles which are phased-in starting with model year 2027 and increasing in stringency annually through model year 2032 (the “Phase 3 Rule”).
Additionally, utilizing technology and process management to provide detailed visibility into a customer’s movement of freight – inbound and outbound – throughout the customer’s network providing focused customer support through multi-year contracts. We provide Brokerage services directly and through agents, who are paid a commission for the freight they provide.
Additionally, utilizing technology and process management to provide detailed visibility into a customer’s movement of freight – inbound and outbound – throughout the customer’s network providing focused customer support through multi-year contracts. We provide Brokerage services directly.
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.
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 2.0 years, compared to an average U.S. Class 8 tractor age of approximately 6.3 years in 2025.
The effects of these rules could result in a decrease in fleet production and driver availability, and/or an increase in recruitment and training costs, either of which could adversely affect our business, operations or profitability.
The effects of these rules could result in a decrease in driver availability, greater competition for drivers, and/or an increase in recruitment and training costs, either of which could adversely affect our business, operations or profitability.
A similar bill, the Truck Parking Safety Improvement Act, was introduced into the Senate in March 2023 and if enacted as proposed, would dedicate $755 million in funding over the next three years to expand access to truck parking and rest areas for commercial drivers.
A similar bill, the Truck Parking Safety Improvement Act, was introduced into the Senate in 2023 and reintroduced in February 2025. If enacted, the bill would dedicate $755 million in funding over the following three years to expand access to truck parking and rest areas for commercial drivers.
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.
In 2023, the Eleventh Circuit Court held that the Federal Aviation Administration Authorization Act (“FAAAA”) expressly preempted such personal liability claims against a broker. The Seventh Circuit Court of Appeals has since provided a decision that also supported federal preemption.
It is also possible AB5 will spur similar legislation in states other than California, which could adversely affect our results of operations and profitability. Further, class actions and other lawsuits have been filed against certain members of our industry seeking to reclassify independent contractors as employees for a variety of purposes, including workers' compensation and health care coverage.
AB5 has spurred the introduction of similar legislation in states other than California, which if enacted, could adversely affect our results of operations and profitability. Further, class actions and other lawsuits have been filed against certain members of our industry seeking to reclassify independent contractors as employees for a variety of purposes, including workers' compensation and health care coverage.
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 in recent years compared to historical results.
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.
If the Supreme Court adopts the Ninth Circuit view that freight broker liability is not preempted by federal regulation in certain circumstances, it could lead to exposure to a patchwork of state laws 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.
However, the proposal also requires a second sample using either urine or an oral fluid test if a hair test is positive, if a donor is unable to provide a sufficient amount of hair for faith-based or medical reasons, or due to an insufficient amount or length of hair.
However, the proposal also requires a second sample using either urine or an oral fluid test if a hair test is positive or if a donor is unable to provide a sufficient amount of hair.
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.
At December 31, 2025, we engaged 110 independent contractor drivers. 8 Table of Contents Revenue Equipment At December 31, 2025, we operated 2,315 tractors and 6,611 trailers. Of such tractors, 2,194 tractors were owned, 11 tractors were financed under operating or finance leases, and 110 tractors were provided by independent contractors, who own and drive their own tractors.
When independent contractor tractors are utilized, we avoid expenses generally associated with company-owned equipment, such as driver compensation, fuel, interest, and depreciation. Obtaining equipment from independent contractors and under operating leases effectively shifts financing expenses from interest to "above the line" operating expenses. We continue to educate our drivers and non-driver personnel regarding the FMCSA Compliance Safety Accountability program ("CSA").
When independent contractor tractors are utilized, we avoid expenses generally associated with company-owned equipment, such as driver compensation, fuel, interest, and depreciation. Obtaining equipment from independent contractors and under operating leases effectively shifts financing expenses from interest to "above the line" operating expenses. We believe the FMCSA Compliance Safety Accountability program ("CSA"), in conjunction with other U.S.
These adverse effects, combined with the uncertainty as to the reliability of the newly designed diesel engines and the residual values of our equipment, could materially increase our costs or otherwise adversely affect our business or operations. We cannot predict, however, the extent to which our operations and productivity will be impacted.
These adverse effects, combined with the uncertainty as to whether manufacturers will be required to re-design diesel engines or make other changes affecting the residual values of our equipment, could materially increase our costs or otherwise adversely affect our business or operations. We cannot predict, however, the extent to which our operations and productivity will be impacted.
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.
A summary of these metrics for our Expedited reportable segment for 2025 and 2024 is as follows: 2025 2024 Average freight revenue per total mile $ 2.10 $ 2.09 Average miles per tractor 177,114 185,340 Average freight revenue per tractor per week $ 7,143 $ 7,416 A summary of the key performance metrics for our Dedicated reportable segment for 2025 and 2024 is as follows: 2025 2024 Average freight revenue per total mile $ 3.13 $ 2.88 Average miles per tractor 74,076 80,556 Average freight revenue per tractor per week $ 4,453 $ 4,436 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 third-party providers and integration with our Expedited reportable segment.
Certain industry groups have challenged these hours-of-service rules in court, and while the FMCSA's final rule has been upheld, it remains unclear if industry or other groups will bring additional challenges against the FMCSA's final rule. Any future changes to hours-of-service rules could materially and adversely affect our operations and profitability.
Certain industry groups have challenged these hours-of-service rules in court, and while the FMCSA's final rule has been upheld, it remains unclear if industry or other groups will bring additional challenges against the FMCSA's final rule.
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.
Of such trailers, 5,728 trailers were owned, 883 trailers were held under operating or finance leases. Furthermore, at December 31, 2025, 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.
It is still unclear what impact of the Food Traceability Rule will have on the Company and others in the industry, but further regulation in this area could negatively affect our business by increasing our compliance obligations and related expenses going forward.
It is still unclear what impact of the Food Traceability Rule will have on the Company and others in the industry, but further regulation in this area could negatively affect our business by increasing our compliance obligations and related expenses going forward. Executive and Legislative Climate In July 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law.
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 is unclear what other legislative initiatives will be signed into law and what changes they may undergo. However, adoption and implementation could negatively impact our business by increasing our compliance obligations and related expenses. In 2023, the Safer Highways and Increased Performance for Interstate Trucking Act (the “SHIP IT Act”) was introduced into the U.S. House of Representatives.
TMS provides comprehensive logistics services on a contractual basis to customers who prefer to outsource their logistics needs. ● Warehousing: The Warehousing reportable segment provides day-to-day warehouse management services to customers who have chosen to outsource this function.
Brokerage services provide logistics capacity by outsourcing the carriage of customers' freight to third-parties. TMS provides comprehensive logistics services on a contractual basis to customers who prefer to outsource their logistics needs. ● Warehousing: The Warehousing reportable segment provides day-to-day warehouse management services to customers who have chosen to outsource this function.
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.
The modified regulations also stipulate 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. Compliance with these changes was required starting in January 2026 and may negatively impact our business by increasing our compliance obligations, operating costs, and related expenses.
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.
Implementation of SB 253 and SB 261 or 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, continue to restrict the locations and amount of time where diesel-powered tractors may idle.
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.
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, $0.055 per share in February 2023, and $0.07 per share in February 2025. ● Risk Management—Assess and Mitigate.
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 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.
Weather and other seasonal events could adversely affect our operating results. Additional Information Our headquarters is located at 400 Birmingham Highway, Chattanooga, Tennessee 37419, and our website address is www. covenantlogistics .com .
Additional Information Our headquarters is located at 400 Birmingham Highway, Chattanooga, Tennessee 37419, and our website address is www. covenantlogistics .com .
During 2024, we continued to expand implementation of several safety related technologies, including telematics, predictive analytics programs, enhancing usage of our dorm/training facility, and ongoing adoption of truck manufacturer preventative systems. Each of these areas focus on sustainable safety performance for the enterprise.
The expansion of our safety training program continues to sustain consistent messaging around the culture of safety. During 2025, we continued to expand implementation of several safety related technologies, including telematics, event recorders, enhancing usage of our dorm/training facility, and testing of truck manufacturer preventative systems. Each of these areas focus on sustainable safety performance for the enterprise.
More recently, the DOT has provided funding to increase parking in certain heavily congested areas of Nevada, Ohio, and Wisconsin, and Congressional leaders have included a provision in the House funding bill introduced in June 2024 to allocate $200 million for truck parking projects.
Further, the DOT has provided funding to increase parking in certain heavily congested areas of Nevada, Ohio, Wisconsin, and Florida, while certain Congressional leaders have introduced legislation to allocate an additional $200 million for truck parking projects.
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.
In 2023, the FMCSA announced 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").
We believe our disciplined investment review has contributed to our improved results by allocating capital to more profitable business units and downsizing other units into greater profitability.
During 2023 we completed our revenue equipment replacement plan to bring our trade cycle back to normalized levels. We believe our disciplined investment review has contributed to our improved results by allocating capital to more profitable business units and downsizing other units into greater profitability.
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.
The following table reflects our service offerings measured by 2025 total revenue, net of fuel surcharge revenue, which we refer to as "freight revenue": Distribution of Freight Revenue Among Service Offerings Expedited 29.95 % Dedicated 33.47 % Managed Freight 27.08 % Warehousing 9.44 % Other 0.06 % Total 100.00 % In our Expedited and Dedicated reportable segments, we generate revenue by transporting freight for our customers.
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.
The data is organized into seven categories (such categories known 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.
First, supply chain patterns became more fluid in response to dynamic changes in labor and transportation costs, ocean freight and rail-intermodal service standards, retail distribution center networks, governmental regulations, and other industry-wide factors.
As our fleet has grown over almost four decades and our service platform matured, several important trends dramatically affected the truckload industry and our business. First, supply chain patterns became more fluid in response to dynamic changes in labor and transportation costs, ocean freight and rail-intermodal service standards, retail distribution center networks, governmental regulations, and other industry-wide factors.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe may not grow substantially in the future and we may not be successful in improving our profitability. We may not be able improve profitability in the future. Improving profitability depends upon numerous factors, including our ability to effectively and successfully implement other strategic initiatives, increase our average revenue per tractor, improve driver retention, and control costs and inefficiencies.
Biggest changeImproving profitability depends upon numerous factors, including our ability to effectively and successfully implement other strategic initiatives, increase our average revenue per tractor, improve driver retention, implement technology, and control costs and inefficiencies. If we are unable to improve our profitability, then our liquidity, financial position, and results of operations may be adversely affected.
Our tractor terminals often are located in industrial areas where groundwater or other forms of environmental contamination may have occurred or could occur. Our operations involve the risks of fuel spillage or seepage, environmental damage, and hazardous waste disposal, among others. We also maintain above-ground bulk fuel storage tanks and fueling islands at several of our facilities.
Our tractor terminals are often located in industrial areas where groundwater or other forms of environmental contamination may have occurred or could occur. Our operations involve the risks of fuel spillage or seepage, environmental damage, and hazardous waste disposal, among others. We also maintain above-ground bulk fuel storage tanks and fueling islands at several of our facilities.
Such risks related to system failure, upgrade complication, security breach (including cyberattacks), or other system disruption may also impact our customers, vendors, third-party capacity providers, and other counterparties, which could result in declines and volatility in customer demand and unavailability of products and services from vendors and third-party capacity providers, any of which would have a material adverse effect on our business.
Such risks related to system failure, upgrade complication, security breach (including cyberattacks), or other system disruption may also impact our customers, vendors, third-party providers, and other counterparties, which could result in declines and volatility in customer demand and unavailability of products and services from vendors and third-party providers, any of which would have a material adverse effect on our business.
Our Managed Freight reportable segment is dependent upon the services of third-party capacity providers, including other truckload carriers. For this business, we do not own or control the transportation assets that deliver our customers' freight, and we do not employ the people directly involved in delivering the freight.
Our Managed Freight reportable segment is dependent upon the services of third-party providers, including other truckload carriers. For this business, we do not own or control the transportation assets that deliver our customers' freight, and we do not employ or control the people directly involved in delivering the freight.
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.
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, Landair, LTST, and AAT brand names are valuable assets that are 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.
Acquisitions have provided a substantial portion of our growth. We may not have the financial capacity or be successful in identifying, negotiating, or consummating any future acquisitions. If we fail to make any future acquisitions, our historical growth rate could be materially and adversely affected.
Acquisitions have provided a substantial portion of our growth. We may not have the financial capacity or be successful in identifying, negotiating, or consummating any future acquisitions. If we fail to make any future acquisitions, our growth rate could be materially and adversely affected.
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.
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; (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.
Concern over climate change, including the impact of global warming, has led to significant legislative and regulatory efforts to limit carbon and other greenhouse gas emissions.
Concern over climate change, including the impact of global warming, has previously led to significant legislative and regulatory efforts to limit carbon and other greenhouse gas emissions.
Generally, we do not have contractual relationships that guarantee any minimum volumes with our customers, and there can be no assurance that our customer relationships will continue as presently in effect. Our business with the Department of Defense is not subject to a contract, requires significant compliance work, and could be terminated at any time.
Generally, we do not have contractual relationships that guarantee any minimum volumes with our customers, and there can be no assurance that our customer relationships will continue as presently in effect. Our business with the Department of War is not subject to a contract, requires significant compliance work, and could be terminated at any time.
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.
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 $50.0 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.
For further discussion of the DOT safety rating, please see "Regulation" under “Item 1. Business.” Compliance with various environmental laws and regulations upon which our operations are subject may increase our costs of operations and non-compliance with such laws and regulations could result in substantial fines or penalties.
For further discussion of the DOT safety rating, please see "Regulation" under “Item 1. Business.” Compliance with and changes to various environmental laws and regulations upon which our operations are subject may increase our costs of operations and non-compliance with such laws and regulations could result in substantial fines or penalties.
Should these expenses increase, we become unable to find excess coverage in amounts we deem sufficient, we experience a claim in excess of our coverage limits, we experience a claim for which we do not have coverage, or we have to increase our reserves or collateral, there could be a materially adverse effect on our results of operations and financial condition.
Should these expenses increase, we become unable to find excess coverage in amounts we deem sufficient, we experience a claim in excess of our coverage limits, we experience a claim for which we do not have coverage, or we have to increase our accruals or collateral, there could be a materially adverse effect on our results of operations and financial condition.
We operate in a highly regulated industry, and changes in existing regulations or violations of existing or future regulations could have a materially adverse effect on our operations and profitability. We, our drivers, and our equipment are regulated by the DOT, the EPA, the DHS, the U.S. Department of Defense, and other agencies in states in which we operate.
We operate in a highly regulated industry, and changes in existing regulations or violations of existing or future regulations could have a materially adverse effect on our operations and profitability. We, our drivers, and our equipment are regulated by the DOT, the EPA, the DHS, the U.S. Department of War, and other agencies in states in which we operate.
In addition, the shrinking independent contractor market may decrease the number of drivers available to utilize such portion of TEL’s business and could decrease TEL’s revenues. Further, we believe the used equipment market will significantly impact TEL's results of operations and such market has been volatile in the past and declined recently.
In addition, the shrinking independent contractor market may decrease the number of drivers available to utilize such portion of TEL’s business and could decrease TEL’s revenues. Further, we believe the used equipment market will significantly impact TEL's results of operations and such market has been volatile in the past and has been soft recently.
We maintain insurance for most risks above the amounts for which we self-insure with licensed insurance carriers. If any claim were to exceed our coverage, or fall outside the aggregate coverage limit, we would bear the excess or uncovered amount, in addition to our other self-insured amounts.
We maintain insurance for most risks above the amounts for which we self-insure with licensed insurance carriers. If any claim were to exceed our coverage, or fall outside the scope or coverage limit, we would bear the excess or uncovered amount, in addition to our other self-insured amounts.
We operate a business that hauls arms, ammunitions, and explosives that could increase our exposure if there were an accident involving this freight. 16 Table of Contents The outcome of litigation, particularly class action lawsuits and regulatory actions, is difficult to assess or quantify, and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time.
We operate a business that hauls arms, ammunitions, explosives, and other hazardous materials that could increase our exposure if there were an accident involving this freight. 16 Table of Contents The outcome of litigation, particularly class action lawsuits and regulatory actions, is difficult to assess or quantify, and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time.
Our Third Amended and Restated Articles of Incorporation (“Articles of Incorporation”), our Sixth Amended and Restated Bylaws ("Bylaws"), and Nevada corporate law contain provisions that could delay, discourage or prevent a change of control or changes in our Board or management that a stockholder might consider favorable.
Our Fourth Amended and Restated Articles of Incorporation (“Articles of Incorporation”), our Sixth Amended and Restated Bylaws ("Bylaws"), and Nevada corporate law contain provisions that could delay, discourage or prevent a change of control or changes in our Board or management that a stockholder might consider favorable.
Historically, we have had to significantly adjust our reserves on several occasions, and future significant adjustments may occur. Further, our self-insured retention levels could change and result in more volatility than in recent years.
Historically, we have had to significantly adjust our accruals on several occasions, and future significant adjustments may occur. Further, our self-insured retention levels could change and result in more volatility than in recent years.
For further discussion of the laws impacting the classification of independent contractors, please see "Regulation" under "Item 1, Business." Developments in labor and employment law and any unionizing efforts by employees could have a materially adverse effect on our results of operations.
For further discussion of the laws impacting the classification of independent contractors, please see "Regulation" under "Item 1, Business." Developments in labor and employment law and any unionizing efforts by employees or employees of related businesses could have a materially adverse effect on our results of operations.
Due to our significant self-insured amounts, we have significant exposure to fluctuations in the number and severity of claims and the risk of being required to accrue or pay additional amounts if our estimates are revised or the claims ultimately prove to be more severe than originally assessed.
Due to our significant self-insured amounts and exposure outside of insurance coverage, we have significant exposure to fluctuations in the number and severity of claims and the risk of being required to accrue or pay additional amounts if our estimates are revised or the claims ultimately prove to be more severe than originally assessed.
Additionally, with respect to our insurance carriers, the industry is experiencing a decline in the number of carriers and underwriters that offer certain insurance policies or that are willing to provide insurance for trucking companies, and the necessity to go off-shore for insurance needs has increased.
Additionally, the industry is experiencing a decline in the number of carriers and underwriters that offer certain insurance policies or that are willing to provide insurance for trucking companies, and the necessity to go off-shore for insurance needs has increased.
Organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to ESG matters. Such ratings are used by some investors to inform their investment and voting decisions.
Organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to environmental and societal matters. Such ratings are used by some investors to inform their investment and voting decisions.
Economic conditions that decrease shipping demand or increase the supply of available tractors and trailers can exert downward pressure on rates and equipment utilization, thereby decreasing asset productivity. The risks associated with these factors are heightened when the United States economy is weakened.
Economic conditions that decrease shipping demand or increase the supply of available tractors and trailers can exert downward pressure on rates and equipment utilization, thereby decreasing asset productivity. The risks associated with these factors are heightened when the U.S. economy is weakened.
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.
If a new health epidemic or outbreak were to occur, we could experience broad and varied impacts, 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.
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.
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 Global conflicts could adversely impact our business and financial results.
If we are unable to secure the services of these third-parties or if we become subject to increases in the prices we must pay to secure such services, our business, financial condition, and results of operations may be materially adversely affected, and we may be unable to serve our customers on competitive terms.
If we are unable to secure the services of these third parties, if we become subject to increases in the prices we must pay to secure such services, or if we become responsible for accidents involving these providers, our business, financial condition, and results of operations may be materially adversely affected, and we may be unable to serve our customers on competitive terms.
To the extent regulatory changes continue related to climate change, we could incur significant costs to our operation, mainly centered around our revenue producing equipment and our warehousing operations. We are not able to accurately predict the materiality of any potential losses or costs.
To the extent regulatory changes are aimed at curbing climate change, we could incur significant costs to our operation, mainly centered around our revenue producing equipment and our warehousing operations. We are not able to accurately predict the materiality of any potential losses or costs.
If more stringent federal leasing regulations are adopted, independent contractors could be deterred from becoming independent contractor drivers, which could materially adversely affect our goal of growing our current fleet levels of independent contractors. 19 Table of Contents Fluctuations in the price or availability of fuel, the volume and terms of diesel fuel purchase commitments, surcharge collection, and hedging activities may increase our costs of operation, which could have a materially adverse effect on our profitability.
If more stringent federal leasing regulations are adopted, independent contractors could be deterred from becoming independent contractor drivers, which could materially adversely affect our ability to engage independent contractors. 19 Table of Contents Fluctuations in the price or availability of fuel, the volume and terms of diesel fuel purchase commitments, surcharge collection, and hedging activities may increase our costs of operation, which could have a materially adverse effect on our profitability.
If we are required to accrue or pay additional amounts because our estimates are revised or the claims ultimately prove to be more severe than originally assessed or if our self-insured retention levels change, our financial condition and results of operations may be materially adversely affected.
If we are required to accrue or pay additional amounts because our estimates are revised or the claims ultimately prove to be more severe than originally assessed, if our self-insured retention levels or overall coverage change, or we experience claims not covered by our insurance, our financial condition and results of operations may be materially adversely affected.
There is no assurance that we will be successful in achieving our strategic plan and initiatives. Even if we are successful in achieving our strategic plan and initiatives, we still may not achieve our goals. If we are unsuccessful in implementing our strategic plan and initiatives, our financial condition, results of operations, and cash flows could be adversely affected.
Even if we are successful in achieving our strategic plan and initiatives, we still may not achieve our goals. If we are unsuccessful in implementing our strategic plan and initiatives, our financial condition, results of operations, and cash flows could be adversely affected.
To the extent we experience claims that are uninsured, exceed our coverage limits, involve significant aggregate use of our self-insured retention amounts, or cause increases in future premiums, the resulting expenses could have a materially adverse effect on our business, results of operations, financial condition, or cash flows.
To the extent we experience claims that are uninsured, exceed our coverage limits, involve significant aggregate use of our self-insured retention amounts, or cause increases in our insurance premiums, it could lead to increased volatility in our insurance and claims expense and any resulting increases in such expenses could have a materially adverse effect on our business, results of operations, financial condition, or cash flows.
We face a wide variety of risks related to public health crises, epidemics, pandemics, or similar events, such as COVID-19.
We face a wide variety of risks related to public health crises, epidemics, pandemics, or similar events.
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.
In recent years, 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.
Such cost increases for our revenue equipment suppliers would likely be passed on to us, and to the extent fuel prices increase, we may not be able to fully recover such increases through rate increases or our fuel surcharge program, either of which could have a material adverse effect on our business. 18 Table of Contents Regulatory changes related to climate change could increase our costs significantly.
Such cost increases for our revenue equipment suppliers would likely be passed on to us, and to the extent fuel prices increase, we may not be able to fully recover such increases through rate increases or our fuel surcharge program, either of which could have a material adverse effect on our business.
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.
Conflicting views on environmental and societal 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 environmental and societal matters, including matters related to corporate governance.
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.
The imposition of new or increased tariffs and other trade restrictions, 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.
A depressed market for used equipment could require us to trade our revenue equipment at depressed values or to record losses on disposal or impairments of the carrying values of our revenue equipment that is not protected by residual value arrangements.
During a depressed market for used equipment we may be required to trade our revenue equipment at depressed values or to record losses on disposal or impairments of the carrying values of our revenue equipment that is not protected by residual value arrangements.
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.
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 events, strikes or other work stoppages at our facilities or at customer, port, border or other shipping locations, global conflicts, terrorist attacks, efforts to combat terrorism, military action, 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.
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.
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.
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.
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 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.
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. In 2022 through 2025, we experienced a softened used equipment market.
State regulations generally provide protection to policy holders, rather than stockholders. Such regulations may increase our costs, limit our ability to change premiums, restrict our ability to access cash held by these subsidiaries, and otherwise impede our ability to take actions we deem advisable.
Such regulations may increase our costs, limit our ability to change premiums, restrict our ability to access cash held by these subsidiaries, and otherwise impede our ability to take actions we deem advisable.
Our ability to secure sufficient equipment or other transportation services may be affected by many risks beyond our control, including equipment shortages increased equipment prices, interruptions in service due to labor disputes, driver shortages, changes in regulations impacting transportation, and changes in transportation rates.
Our ability to secure sufficient equipment or other transportation services may be affected by many risks beyond our control, including equipment shortages increased equipment prices, interruptions in service due to labor disputes, driver shortages, changes in regulations impacting transportation, and changes in transportation rates. For additional clarification, see Note 16, "Commitments and Contingencies" of our consolidated financial statements.
The cost to defend litigation may also be significant. Not all claims are covered by our insurance, and there can be no assurance that our coverage limits will be adequate to cover all amounts in dispute.
The cost to defend litigation may also be significant. Not all claims are covered by our insurance, and there can be no assurance that our coverage limits will be adequate to cover all amounts in dispute. Additionally, our premiums for certain insurance layers are subject to upward adjustments based on claims experience.
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.
Parker may have an outsized ability to influence the operations of the Company, which may result in conflicts with the interests of the Parkers 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.
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.
Although we do not have any direct operations outside of the U.S., we may be affected by the broader consequences of the global conflicts, 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, retaliatory actions by other governments, including cyber-attacks, and the extent of the conflict’s effect on the global economy.
Such initiatives will require time, management and financial resources, changes in our operations and sales functions, and monitoring and implementation of technology. We may be unable to effectively and successfully implement, or achieve sustainable improvement from, our strategic plan and initiatives or achieve these objectives.
Such initiatives will require time, management and financial resources, and changes in our operations and sales functions. We may be unable to effectively and successfully implement, or achieve sustainable improvement from, our strategic plan and initiatives or achieve these objectives. In addition, our operating margins could be adversely affected by future changes in our business.
As such, the Parkers are able to substantially influence decisions requiring stockholder approval, including the election of our entire Board, the adoption or extension of anti-takeover provisions, mergers, and other business combinations.
Parker, the Parkers may be deemed to control stock possessing approximately 41% of the voting power of all of our outstanding stock. As such, the Parkers are able to substantially influence decisions requiring stockholder approval, including the election of our entire Board, the adoption or extension of anti-takeover provisions, mergers, and other business combinations.
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.
There can be no guarantee that work stoppages or further disruptions at ports will not occur. 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.
To the extent we do so, and one or more claims result in large payouts, we will not have insurance, and our financial condition, results of operation, and liquidity could be materially and adversely affected. Our self-insurance for auto liability claims and our use of captive insurance companies could adversely impact our operations.
To the extent we do so, and one or more claims result in large payouts, we will not have insurance, and our financial condition, results of operation, and liquidity could be materially and adversely affected. For additional clarification, see Note 16, "Commitments and Contingencies" of our consolidated financial statements.
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.
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.
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.
We believe this status, along with the use of a captive insurance company, 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 a captive insurance company.
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.
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. 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.
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.
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.
Governmental agencies continue to enact more stringent laws and regulations to reduce engine emissions. These laws and regulations are applicable to engines used in our revenue equipment. We have incurred and continue to incur costs related to the implementation of these more rigorous laws and regulations.
Governmental agencies continue to revise laws and regulations regarding greenhouse gases and emissions. These laws and regulations are applicable to engines used in our revenue equipment. When these laws and regulations have become more stringent, we have incurred, and continue to incur, increased compliance costs.
An increase in the number or severity of auto liability claims for which we self-insure through the captive insurance companies or pressure in the insurance and reinsurance markets could adversely impact our earnings and results of operations. Further, both arrangements increase the possibility that our expenses will be volatile. Our captive insurance companies are regulated by state authorities.
Our captive insurance subsidiary is a regulated insurance company through which we insure a portion of our auto liability claims in certain states. An increase in the number or severity of auto liability claims for which we self-insure through our captive insurance company or pressure in the insurance and reinsurance markets could adversely impact our earnings and results of operations.
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.
We could recognize further impairments in the future, and we may never realize the full value of our goodwill or intangible assets. If these event occur, our profitability and financial condition will suffer.
In addition, our operating margins could be adversely affected by future changes in and expansion of our business. Further, our operating results may be negatively affected by a failure to further penetrate our existing customer base, cross-sell our services, pursue new customer opportunities, or manage the operations and expenses.
Further, our operating results may be negatively affected by a failure to further penetrate our existing customer base, cross-sell our services, pursue new customer opportunities, or manage the operations and expenses. There is no assurance that we will be successful in achieving our strategic plan and initiatives.
Certain of our revenue equipment financing arrangements have balloon payments at the end of the finance terms equal to the values we expect to be able to obtain in the used 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. Certain of our revenue equipment financing arrangements have balloon payments at the end of the finance terms equal to the values we expect to be able to obtain in the used market.
Unfavorable ESG ratings may lead to negative investor sentiment toward the Company, which could have a negative impact on our stock price.
Unfavorable ratings may lead to negative investor sentiment toward the Company, which could have a negative impact on our stock price. Further, standards for tracking and reporting environmental and societal matters continue to evolve, and our reporting may not match stakeholder expectations.
Our business results in a substantial number of claims and litigation related to personal injuries, property damage, workers’ compensation, employment issues, health care, and other issues. We self-insure a significant portion of our claims exposure, which could increase the volatility of, and decrease the amount of, our earnings, and could have a materially adverse effect on our results of operations.
We self-insure a significant portion of our claims and have exposure outside of our insurance coverage, which could increase the volatility of, and decrease the amount of, our earnings, and could have a materially adverse effect on our results of operations.
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.
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, including in areas such as brokerage, dispatch, routing, pickup, and delivery appointments, and other areas where automation is possible.
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.
Shares of Class B common stock 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 Parkers' immediate family. As a result of the two-class structure, and including 800,000 unexercised options to purchase Class A common stock that are held by Mr.
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.
The imposition of additional tariffs or export controls, changes to certain trade agreements, or retaliatory trade policies 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.
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.
All outstanding shares of Class B common stock are owned by our Chairman of the Board and Chief Executive Officer, David Parker, and his wife Jacqueline (together, the "Parkers").
Additionally, in certain locations governments have banned or may in the future ban internal combustion engines for some types of vehicles. To the extent these bans affect our revenue equipment, we may be forced to incur substantial expense to retrofit existing engines or make capital expenditures to update our fleet.
To the extent these bans affect our revenue equipment, we may be forced to incur substantial expense to retrofit existing engines or make capital expenditures to update our fleet. As a result, our business, results of operations, and financial condition could be negatively affected.
These lawsuits have resulted, and may result in the future, in the payment of substantial settlements or damages and increases of our insurance costs. We self-insure for a significant portion of our claims exposure, which could significantly increase the volatility of, and decrease the amount of, our earnings.
For additional clarification, see Note 16, "Commitments and Contingencies" of our consolidated financial statements. We self-insure for a significant portion of our claims and have exposure outside of our insurance coverage, which could significantly increase the volatility of, and decrease the amount of, our earnings.
A small percentage of our freight consists of low-grade hazardous substances, which subjects us to a wide array of regulations.
A small percentage of our freight consists of low-grade hazardous substances, which subjects us to a wide array of regulations, and another portion consists of high security cargo such as arms, ammunitions, and explosives, which subjects us to a myriad of regulatory requirements concerning the storage, handling and transportation of hazardous materials, chemicals, and explosives.
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.
Regulatory requirements could further reduce the number of eligible drivers or force us to increase driver compensation to attract and retain drivers. Such regulatory requirements include those related to safety ratings, ELDs, and hours-of-service, as well as the DOT guidelines issued in 2025 strengthening enforcement of the FMCSA’s longstanding English proficiency requirements for commercial drivers.
As a result, our business, results of operations, and financial condition could be negatively affected. For further discussion of environmental laws and regulations, please see "Regulation" under “Item 1. Business.” Changes to trade regulation, quotas, duties, or tariffs, caused by the changing U.S. and geopolitical environments or otherwise, may increase our costs and materially adversely affect our business.
Business.” Changes to trade regulation, export controls, duties, or tariffs, caused by the changing U.S. and geopolitical environments or otherwise, may increase our costs and materially adversely affect our business. Since April 2025, new substantial tariffs have been imposed on imports to the U.S.
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.
Such events or enhanced security measures in connection with such events could impair our operating efficiency and productivity and result in higher operating costs.
Removed
Our initiatives include continuing to improve the durability of contracts in our Expedited and Dedicated reportable segments, growing our Dedicated reportable segment, with new poultry related business, delivering more consistent returns for our stockholders, increasing operating income and margins in each of our segments, improving profitability, and reducing costs and inefficiencies.
Added
Our initiatives include exiting unprofitable business relationships, moderately reducing our total truckload fleet (while growing the most profitable components), improving free cash flow, deleveraging our balance sheet, and opportunistically investing in areas that differentiate us from other carriers, such as high value and high service requirement freight.
Removed
If we are unable to improve our profitability, then our liquidity, financial position, and results of operations may be adversely affected.
Added
We may not grow substantially in the future and we may not be successful in improving our profitability. We may not be able to improve profitability in the future.
Removed
We currently accrue amounts for liabilities based on our assessment of claims that arise and our insurance coverage for the periods in which the claims arise, and we evaluate and revise these accruals from time to time based on additional information.
Added
These lawsuits have resulted, and may result in the future, in the payment of substantial settlements or damages and increases of our insurance costs. Recent federal court decisions have also created uncertainty regarding the extent to which the FAAAA preempts certain state law claims against motor carriers and freight brokers.
Removed
We have two wholly owned captive insurance subsidiaries which are regulated insurance companies through which we insure a portion of our auto liability claims in certain states.
Added
Courts have reached different conclusions on whether such claims are preempted, resulting in a patchwork of exposure across jurisdictions. While some courts have held that the FAAAA preempts these claims, others have allowed them to proceed, and the Supreme Court has agreed to review the issue.
Removed
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.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur team of cybersecurity professionals then collaborate with technical and business stakeholders across our business units to further analyze the risk to the company, and form detection, mitigation, and remediation strategies. As part of the above processes, we regularly engage external auditors and consultants to assess our internal cybersecurity programs and compliance with applicable practices and standards.
Biggest changeAs part of the above processes, we regularly engage external auditors and consultants to assess our internal cybersecurity programs and compliance with applicable practices and standards.
Members of the Audit Committee receive updates on a quarterly basis from senior management, including leaders from our Information Technology, Compliance, and Legal teams regarding matters of cybersecurity. This includes existing and new cybersecurity risks, status on how management is addressing and/or mitigating those risks, cybersecurity and data privacy incidents (if any), and status on key information security initiatives.
Members of the Audit Committee receive updates on a periodic basis from senior management, including leaders from our Information Technology, Compliance, and Legal teams regarding matters of cybersecurity. This includes existing and new cybersecurity risks, status on how management is addressing and/or mitigating those risks, cybersecurity and data privacy incidents (if any), and status on key information security initiatives.
We have implemented incident response and breach management processes which have four overarching and interconnected stages: 1) preparation for a cybersecurity incident, 2) detection and analysis of a security incident, 3) containment, eradication and recovery, and 4) post-incident analysis. Such incident responses are overseen by leaders from our Information Technology, Compliance, and Legal teams regarding matters of cybersecurity.
We have implemented incident response and breach management processes which have four overarching and interconnected stages: 1 ) preparation for a cybersecurity incident, 2 ) detection and analysis of a security incident, 3 ) containment, eradication and recovery, and 4 ) post-incident analysis.
Security events and data incidents are evaluated, ranked by severity and prioritized for response and remediation. Incidents are evaluated to determine materiality as well as operational and business impact, and reviewed for privacy impact. We also conduct tabletop exercises to simulate responses to cybersecurity incidents.
Such incident responses are overseen by leaders from our Information Technology, Compliance, and Legal teams regarding matters of cybersecurity. Security events and data incidents are evaluated, ranked by severity and prioritized for response and remediation. Incidents are evaluated to determine materiality as well as operational and business impact, and reviewed for privacy impact.
Added
We also conduct tabletop exercises to simulate responses to cybersecurity incidents. Our team of cybersecurity professionals then collaborate with technical and business stakeholders across our business units to further analyze the risk to the company, and form detection, mitigation, and remediation strategies.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAlso, we own or lease administrative offices and truck terminals (which provide a transfer location for trailer relays on transcontinental routes, parking space for equipment dispatch, facilities for recruiting and orientation, sales offices, and warehouses) throughout the continental United States, none of which are individually material.
Biggest changeAlso, we own or lease administrative offices, warehouses, and truck terminals (which provide a transfer location for trailer relays on transcontinental routes, parking space for equipment dispatch, facilities for recruiting and orientation, and sales offices) throughout the continental United States, none of which are individually material.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs 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.
Biggest changeDividend 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, $0.055 per share in February 2023, and $0.07 per share in February 2025.
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.
Our most recent dividend was declared in February of 2026 for $0.07 per share of Class A and Class B common stock and is scheduled to be paid in March of 2026. Dividends under the quarterly cash dividend program are subject to quarterly approval by our Board.
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.
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 25, 2026, 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.
Added
As of February 25, 2026, Mr. Parker, together with certain of his family members, owned all of the outstanding Class B common stock.

Item 7. Management's Discussion & Analysis

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

71 edited+36 added−29 removed62 unchanged
Biggest changeOur 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 2024 and 2023: (dollars in thousands) For the twelve months ended December 31, 2024 GAAP Operating Ratio: Combined Expedited Dedicated Managed Freight Warehousing Total revenue $ 1,131,476 $ 416,461 $ 364,414 $ 248,939 $ 101,662 Total operating expenses 1,086,716 394,299 361,996 236,657 93,764 Operating income $ 44,760 $ 22,162 $ 2,418 $ 12,282 $ 7,898 Operating ratio 96.0 % 94.7 % 99.3 % 95.1 % 92.2 % (dollars in thousands) For the twelve months ended December 31, 2024 Adjusted Operating Ratio: Combined Expedited Dedicated Managed Freight Warehousing Total revenue $ 1,131,476 $ 416,461 $ 364,414 $ 248,939 $ 101,662 Fuel surcharge revenue (117,535 ) (69,764 ) (46,627 ) - (1,144 ) Freight revenue (total revenue, excluding fuel surcharge) 1,013,941 346,697 317,787 248,939 100,518 Total operating expenses 1,086,716 394,299 361,996 236,657 93,764 Adjusted for: Fuel surcharge revenue (117,535 ) (69,764 ) (46,627 ) - (1,144 ) Amortization of intangibles (1) (9,488 ) (2,133 ) (5,262 ) (1,057 ) (1,036 ) Contingent consideration liability adjustment (16,492 ) - (15,836 ) (656 ) - Adjusted operating expenses 943,201 322,402 294,271 234,944 91,584 Adjusted operating income $ 70,740 $ 24,295 $ 23,516 $ 13,995 $ 8,934 Adjusted operating ratio 93.0 % 93.0 % 92.6 % 94.4 % 91.1 % (1) "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets.
Biggest changeOur cash flows may fluctuate depending on capital expenditures, future stock repurchases, dividends, strategic investments or divestitures, and the extent of future income tax obligations and refunds. 38 Table of Contents Non-GAAP Financial Measures Operating Ratio Operating Ratio (“OR”) For 2025 and 2024: (Dollars in thousands) Year Ended December 31, GAAP Presentation 2025 2024 Total revenue $ 1,164,472 $ 1,131,476 Total operating expenses 1,161,535 1,086,716 Operating income $ 2,937 $ 44,760 Operating ratio 99.7 % 96.0 % Non-GAAP Presentation 2025 2024 Total revenue $ 1,164,472 $ 1,131,476 Fuel surcharge revenue (105,237 ) (117,535 ) Freight revenue (total revenue, excluding fuel surcharge) $ 1,059,235 $ 1,013,941 Total operating income 2,937 44,760 Amortization of intangibles (1) 10,770 9,488 Contingent consideration liability adjustment 2,838 16,492 Transaction costs 567 - Employee separation costs 1,375 - Lease abandonment and customer exit costs 429 - Abandonment of long-lived software 1,884 - Impairment of goodwill 10,698 - One-time insurance expenses 11,585 - Impairment of revenue equipment and related charges 8,652 - Adjustments to operating income $ 48,798 $ 25,980 Adjusted operating income $ 51,735 $ 70,740 Adjusted operating ratio 95.1 % 93.0 % (1) "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets. 39 Table of Contents (dollars in thousands) Year Ended December 31, GAAP Presentation 2025 2024 Expedited Dedicated Managed Freight Warehousing Expedited Dedicated Managed Freight Warehousing Total revenue $ 373,294 $ 403,180 $ 286,806 $ 100,555 $ 416,461 $ 364,414 $ 248,939 $ 101,662 Total segment operating expenses (1) 352,168 383,194 274,640 92,856 368,521 325,834 234,034 90,259 Segment operating income (1) $ 21,126 $ 19,986 $ 12,166 $ 7,699 $ 47,940 $ 38,580 $ 14,905 $ 11,403 Segment operating ratio (1) 94.3 % 95.0 % 95.8 % 92.3 % 88.5 % 89.4 % 94.0 % 88.8 % Non-GAAP Presentation Total revenue $ 373,294 $ 403,180 $ 286,806 $ 100,555 $ 416,461 $ 364,414 $ 248,939 $ 101,662 Fuel surcharge revenue (56,076 ) (48,554 ) - (607 ) (69,764 ) (46,627 ) - (1,144 ) Freight revenue (total revenue, excluding fuel surcharge) 317,218 354,626 286,806 99,948 346,697 317,787 248,939 100,518 Total segment operating income (1) $ 21,126 $ 19,986 $ 12,166 $ 7,699 $ 47,940 $ 38,580 $ 14,905 $ 11,403 Other (2) (5,801 ) (3,918 ) (890 ) (2,470 ) (23,645 ) (15,061 ) (909 ) (2,469 ) Transaction costs - 149 - - - - - - Employee separation costs 680 622 73 - - - - - Lease abandonment and customer exit costs 49 166 214 - - - - - Abandonment of long-lived software 880 1,004 - - - - - - Adjusted segment operating income $ 16,934 $ 18,009 $ 11,563 $ 5,229 $ 24,295 $ 23,519 $ 13,996 $ 8,934 Adjusted segment operating ratio 94.7 % 94.9 % 96.0 % 94.8 % 93.0 % 92.6 % 94.4 % 91.1 % (1) Segment operating expenses, segment operating income, and segment operating ratio exclude indirect costs not directly attributable to any one reportable segment, amortization of intangible assets, impairment of goodwill, and contingent consideration liability adjustments to match the information our Chief Operating Decision Maker uses to evaluate the operating results of our reportable segments.
If industry-wide trucking capacity tightens in relation to freight demand, we may need to increase the amounts we pay to third-party transportation providers and independent contractors, which could increase this expense category on an absolute basis and as a percentage of freight revenue absent an offsetting increase in revenue.
If industry-wide trucking capacity tightens in relation to freight demand, we may need to increase the amounts we pay to third-party providers and independent contractors, which could increase this expense category on an absolute basis and as a percentage of freight revenue absent an offsetting increase in revenue.
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.
Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 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, 2024.
In addition, if fuel prices increase, it would result in a further increase in what we pay third-party carriers and independent contractors. However, this expense category will fluctuate with the number and percentage of loads hauled by independent contractors, loads handled by Managed Freight, and tractors, trailers, and other assets financed with operating leases.
In addition, if fuel prices increase, it would result in a further increase in what we pay third-party providers and independent contractors. However, this expense category will fluctuate with the number and percentage of loads hauled by independent contractors, loads handled by Managed Freight, and tractors, trailers, and other assets financed with operating leases.
Fluctuations in the outstanding balance and related availability under our Credit Facility are driven primarily by cash flows from operations and the timing and nature of property and equipment additions that are not funded through notes payable and leases, as well as the nature and timing of collection of accounts receivable, payments of accrued expenses, and receipt of proceeds from disposals of property and equipment.
Fluctuations in the outstanding balance and related availability under our Credit Facility were driven primarily by the Star Acquisition, cash flows from operations and the timing and nature of property and equipment additions that are not funded through notes payable and leases, as well as the nature and timing of collection of accounts receivable, payments of accrued expenses, and receipt of proceeds from disposals of property and equipment.
In addition, factors such as the cost to obtain third-party transportation services and the amount of fuel surcharge revenue passed through to the third-party carriers and independent contractors will affect this expense category.
In addition, factors such as the cost to obtain third-party transportation services and the amount of fuel surcharge revenue passed through to the third-party providers and independent contractors will affect this expense category.
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.
All of our revenue generated was generated within the U.S. in 2024 and 2025. We do not separately track domestic and foreign revenue from customers, and providing such information would not be meaningful.
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.
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 quantitative test, as of October 1, 2025, for each of our reporting units.
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.
If that occurs, we will be operating with less liability insurance coverage at various levels of our insurance tower and may incur additional premiums. 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.
With an average tractor fleet age of 1.6 years, we believe we have flexibility to manage our fleet, and we plan to regularly evaluate our tractor replacement cycle, new tractor purchase requirements, and purchase options. If we were to grow our independent contractor fleet, our capital requirements would be reduced.
With an average tractor fleet age of 2.0 years, we believe we have flexibility to manage our fleet, and we plan to regularly evaluate our tractor replacement cycle, new tractor purchase requirements, and purchase options. If we were to grow our independent contractor fleet, our capital requirements would be reduced.
Going forward, we believe this category will fluctuate based on several factors, including the condition of the driver market and our ability to hire and retain drivers, our continued ability to maintain a relatively young fleet, accident severity and frequency, weather, the reliability of new and untested revenue equipment models, and the global disruption of the supply chain.
Going forward, we believe this category will fluctuate based on several factors, including the condition of the driver market and our ability to hire and retain drivers, our continued ability to maintain a relatively young fleet, accident severity and frequency, weather, the reliability of new and untested revenue equipment models, our mix of specialty and commoditized freight, and any disruption of the supply chain.
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.
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 $22.8 million and $32.6 million at December 31, 2025 and 2024, respectively.
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.
Income from equity method investment Year ended December 31, (in thousands) 2025 2024 Income from equity method investment $ 14,709 $ 14,713 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.
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.
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, 2025 totaled $112.1 million of expenditures as compared to $80.8 million of expenditures for the prior year.
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.
Fuel prices as measured by the DOE averaged approximately $0.11 per gallon, or 3.0%, lower in 2025 than 2024. 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.
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.
Going forward, we seek to grow Managed Freight with profitable revenue from new customers from organic initiatives and the Star Acquisition, work closely with our asset-based segments to capitalize on overflow opportunities when available, and optimize costs to yield longer-term margin goals in the mid-single digits, which would generate an acceptable return on capital given the asset light nature of the business.
During 2023 we engaged valuation specialists to assist us in determining the fair value of intangible assets and revenue equipment acquired through our acquisitions of LTST and Sims. Goodwill is not amortized, but is subject to impairment testing on at least an annual basis and its valuation is directly impacted by the valuation estimates of the other acquired long-lived assets.
During 2025 we engaged valuation specialists to assist us in determining the fair value of intangible assets and revenue equipment acquired through the Star Acquisition. Goodwill is not amortized, but is subject to impairment testing on at least an annual basis and its valuation is directly impacted by the valuation estimates of the other acquired long-lived assets.
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.
Operating taxes and licenses Year ended December 31, (dollars in thousands) 2025 2024 Operating taxes and licenses $ 13,776 $ 11,954 % of total revenue 1.2 % 1.1 % % of freight revenue 1.3 % 1.2 % For the period presented, the change in operating taxes and licenses is insignificant both as a percentage of total revenue and freight revenue.
We distributed a total of $5.8 million to stockholders through dividends during the years ended December 31, 2024 and 2023, respectively.
We distributed a total of $7.2 million and $5.8 million to stockholders through dividends during the years ended December 31, 2025 and 2024, respectively.
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.
We had commitments outstanding at December 31, 2025, to acquire revenue equipment totaling approximately $100.8 million in 2025 versus commitments at December 31, 2024 of approximately $114.0 million. These commitments are cancelable, subject to certain adjustments in the underlying obligations and benefits.
There are limitations to using non-GAAP financial measures. We believe the use of adjusted operating ratio allows us to more effectively compare periods, while excluding the potentially volatile effect of changes in fuel prices. Our Board and management focus on our adjusted operating ratio as an indicator of our performance from period to period.
We believe the use of adjusted operating ratio allows us to more effectively compare periods, while excluding the potentially volatile effect of changes in fuel prices. Our Board and management focus on our adjusted operating ratio as an indicator of our performance from period to period.
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.
The decrease in average freight revenue per tractor per week is the result of an approximately 4.4% decrease in average miles per tractor partially offset by a 0.5%, or 1.1 cents per mile, increase in average rate per total mile when compared to 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.
We replaced our $9.0 million in excess of $1.0 million layer with a new $7.0 million in excess of $3.0 million policy that we continue to maintain.
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.
Depreciation and amortization Year ended December 31, (dollars in thousands) 2025 2024 Depreciation and amortization $ 92,726 $ 86,529 % of total revenue 8.0 % 7.6 % % of freight revenue 8.8 % 8.5 % 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.
Salaries, wages, and related expenses will fluctuate to some extent based on the percentage of revenue generated by independent contractors and our Managed Freight reportable segment, for which payments are reflected in the purchased transportation line item.
Salaries, wages, and related expenses will fluctuate to some extent based on the percentage of revenue generated by independent contractors and our Managed Freight reportable segment, for which payments are reflected in the purchased transportation line item, as well as the mix of specialized freight (which requires higher driver pay) and commoditized freight.
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.
Net income from discontinued operations of $2.8 million, or $0.11 per diluted share, for 2025, compared to $0.6 million, or $0.02 per diluted share in 2024; ● With available borrowing capacity of $53.3 million under our Credit Facility as of December 31, 2025, 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 each 2025 and 2024; ● Since December 31, 2024, total indebtedness, comprised of total debt and finance leases, net of cash, increased by $76.7 million to $296.3 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 2.89 at December 31, 2025, compared to 1.65 at December 31, 2024; ● Stockholders' equity at December 31, 2025 was $404.0 million, compared to $438.3 million at December 31, 2024; and ● Tangible book value at December 31, 2025 was $217.9 million, compared to $269.3 million at December 31, 2024.
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.
Within our Expedited reportable segment, both total revenue and margins declined year over year primarily as a result of an approximately 4.7% reduction in average total tractors and a 3.7% increase in utilization year over year.
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.
Net cash flows provided by operating activities and used by financing activities in the 2025 period also included payment of $8.0 million and $5.3 million, respectively, of contingent consideration liabilities related to the acquisition of LTST.
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.
The cost of fuel has historically been volatile. 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.
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.
Fuel expense Year ended December 31, (dollars in thousands) 2025 2024 Fuel expense $ 112,292 $ 115,981 % of total revenue 9.6 % 10.3 % % of freight revenue 10.6 % 11.4 % The decreases in total fuel expense are primarily related to lower fuel prices in 2025, as well as a 4.4% decrease in total miles.
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.
As of December 31, 2025 and December 31, 2024 we had $338.7 million and $296.9 million in debt and lease obligations, respectively, consisting of the following: ● $30.0 million and no outstanding borrowings under the Credit Facility; ● $251.7 million and $233.5 million in revenue equipment installment notes, respectively; ● $16.3 million and $17.8 million in real estate notes, respectively; ● $3.2 million and $3.9 million of the principal portion of financing lease obligations, respectively; and ● $37.5 million and $41.7 million of the operating lease obligations, respectively.
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.
The change in net cash flows from financing activities was primarily the result of the repurchase of $36.6 million of shares of our Class A common stock during 2025 compared to none during 2024, partially offset by net proceeds relating to notes payable and our Credit Facility of $45.8 million during 2025, compared to net proceeds of $30 million in 2024.
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.
Income tax expense Year ended December 31, (dollars in thousands) 2025 2024 Income tax expense $ 1,181 $ 10,576 % of total revenue 0.1 % 0.9 % % of freight revenue 0.1 % 1.0 % The decrease in tax expense primarily relates to the decrease in operating income as described above.
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.
Insurance and claims Year ended December 31, (dollars in thousands) 2025 2024 Insurance and claims $ 70,125 $ 59,845 % of total revenue 6.0 % 5.3 % % of freight revenue 6.6 % 5.9 % Insurance and claims per mile cost increased to 26.6 cents per mile for 2025 from 21.7 cents per mile in 2024.
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.
Our earnings resulting from our investment in TEL were $14.7 million for both 2025 and 2024. 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.
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.
The table below reflects the total revenue trends in each of these reportable segments: Year ended December 31, (in thousands) 2025 2024 Revenues: Expedited $ 373,294 $ 416,461 Dedicated 403,180 364,414 Managed Freight 286,806 248,939 Warehousing 100,555 101,662 Other 637 - Total revenues $ 1,164,472 $ 1,131,476 Our consolidated financial results are summarized as follows: ● Total revenue was $1,164.5 million, compared with $1,131.5 million for 2024, and freight revenue (which excludes revenue from fuel surcharges) was $1,059.2 million, compared with $1,013.9 million for 2024; ● Operating income from continuing operations was $2.9 million, compared with operating income from continuing operations of $44.8 million for 2024; ● Net income was $7.2 million, or $0.27 per diluted share, compared with net income of $35.9 million, or $1.30 per diluted share, for 2024; Net income from continuing operations was $4.4 million, or $0.16 per diluted share, for 2025, compared to $35.3 million or $1.28 per diluted share in 2024.
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.
Seated team driven tractors decreased approximately 4.9% to an average of 788 teams in 2025 from 829 teams in 2024. Our Dedicated total revenue increased $38.8 million, as freight revenue increased $36.8 million and fuel surcharge revenue increased $1.9 million.
Due to these developments, we may experience additional expense accruals, increased insurance and claims expenses, and greater volatility in our insurance and claims expenses, which could have a material adverse effect on our business, financial condition, and results of operations. We expect insurance and claims expense to continue to be volatile over the long-term.
We have maintained our retention and limits set in place during the prior renewal cycle. Due to these developments, we may experience additional expense accruals, increased insurance and claims expenses, and greater volatility in our insurance and claims expenses, which could have a material adverse effect on our business, financial condition, and results of operations.
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.
As a percentage of freight revenue, net fuel expense increased 0.6% for the year ended December 31, 2025, compared to 2024, primarily due to decreased fuel surcharge recovery partially offset by lower fuel prices.
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.
Such conditions may include an economic downturn in a geographic market or a change in the assessment of future operations. We record an impairment charge when the 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.
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 increase in net cash flows used by investing activities was primarily due to the October 2025 Star Acquisition for $27.1 million, compared to 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 511 new tractors and 1012 new trailers, while disposing of approximately 465 used tractors and 310 used trailers during 2025 compared to delivery of 747 new tractors and 791 new trailers, while disposing of approximately 1,051 used tractors and 444 used trailers in 2024.
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.
The increase in average freight revenue per tractor per week is the result of a 8.9%, or 25.5 cents per mile, increase in average rate per total mile, partially offset by 8.0% fewer miles per tractor.
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.
The increase in our revenue equipment installment notes was primarily due to additional borrowings related to our trade cycle. The decrease in operating and finance lease obligations was primarily due to amortization of the respective lease liability.
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.
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 $113.7 million in 2025, compared with $122.9 million in 2024, primarily due a $28.7 million decrease in net income partially offset by increases in non-cash expenses such as the impairment of goodwill, write-down of held-for-sale assets, and depreciation and amortization compared to 2024.
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.
As of December 31, 2025, we had $30.0 million borrowings outstanding, undrawn letters of credit outstanding of approximately $19.9 million, and available borrowing capacity of $53.3 million under the Credit Facility.
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.
Net fuel expense is shown below: Year ended December 31, (dollars in thousands) 2025 2024 Total fuel surcharge $ 105,237 $ 117,535 Less: Fuel surcharge revenue reimbursed to independent contractors and other third-parties 6,950 9,032 Company fuel surcharge revenue $ 98,287 $ 108,503 Total fuel expense $ 112,292 $ 115,981 Less: Company fuel surcharge revenue 98,287 108,503 Net fuel expense $ 14,005 $ 7,478 % of freight revenue 1.3 % 0.7 % Net fuel expense increased $6.5 million, or 87.3%, for the year ended December 31, 2025, compared to 2024.
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.
Communications and utilities Year ended December 31, (dollars in thousands) 2025 2024 Communications and utilities $ 6,379 $ 5,407 % of total revenue 0.5 % 0.5 % % of freight revenue 0.6 % 0.5 % For the period presented, the change in communications and utilities is 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) 2025 2024 General supplies and expenses $ 59,185 $ 66,053 % of total revenue 5.1 % 5.8 % % of freight revenue 5.6 % 6.5 % The decrease in general supplies and expenses was primarily the result of a $2.8 million increase in the contingent consideration liability recognized in 2025 compared to a $16.0 million increase recognized in 2024, partially offset by additional costs related to investments in technology and the Star Acquisition.
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.
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.
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.
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) 2025 2024 Revenue: Freight revenue $ 1,059,235 $ 1,013,941 Fuel surcharge revenue 105,237 117,535 Total revenue $ 1,164,472 $ 1,131,476 The increase in total revenue resulted from a $37.9 million and $36.8 million increase in Managed Freight and Dedicated freight revenue, respectively, partially offset by a $29.5 million and $0.5 million decrease in freight revenue from our Expedited and Warehousing reportable segments, respectively.
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 increase in Dedicated freight revenue relates to a 157 (or 11.5%) average tractor increase and an increase in average freight revenue per tractor per week of 0.4%, compared to 2024.
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 increase is primarily the result of an increase in claims and premium expense, including the settlement of a large auto liability claim during 2025, being spread over decreased miles compared to the prior year. Our insurance program includes multi-year policies with specific insurance limits that may be eroded over the course of the policy term.
Due to the erosion of the $9.0 million in excess of $1.0 million layer, any adverse developments in claims filed between April 1, 2018 and March 31, 2021, could result in additional expense accruals. We have maintained our retention and limits set in place during the prior renewal cycle.
Due to the erosion of the $9.0 million in excess of $1.0 million layer, any adverse developments in claims filed between April 1, 2018 and March 31, 2021, could result in additional expense accruals. As of December 31, 2025, there were no outstanding claims in this layer.
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%.
The decrease in Expedited freight revenue relates to a 42 (or 4.7%) average tractor decrease compared to 2024, and a decrease in average freight revenue per tractor per week of 3.7%.
In addition to operating ratio, we use "adjusted operating ratio" as a key measure of profitability. Adjusted operating ratio means operating expenses, net of fuel surcharge revenue and intangibles amortization, expressed as a percentage of revenue, excluding fuel surcharge revenue. Adjusted operating ratio is not a substitute for operating ratio measured in accordance with GAAP.
Adjusted operating ratio means operating expenses, net of fuel surcharge revenue, intangibles amortization, and certain other costs and expenses specified in the tables above, expressed as a percentage of revenue, excluding fuel surcharge revenue. Adjusted operating ratio is not a substitute for operating ratio measured in accordance with GAAP. There are limitations to using non-GAAP financial measures.
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.
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) 2025 2024 Salaries, wages, and related expenses $ 433,238 $ 423,319 % of total revenue 37.2 % 37.4 % % of freight revenue 40.9 % 41.7 % The increase in salaries, wages, and related expenses on a dollars basis is primarily the result of pay increases due to the expanded scale of our Dedicated agriculture supply chain operations and the strategic reduction in commoditized freight across the Expedited and Dedicated fleets since the prior period, as well as averaging more drivers and tractors resulting in higher driver salaries, wages, and benefits as a result of growth in Dedicated.
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.
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. Net losses on disposal of equipment and real estate in 2025 were $0.3 million compared to $1.6 million in 2024.
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.
Net cash flows used by financing activities were approximately $4.3 million in 2025, compared to $18.1 million provided by financing activities in 2024.
Intangible assets that are deemed to have finite lives are amortized, generally on a straight-line basis, over their useful lives, ranging from 3 to 17 years. Self-Insurance Accruals We record a liability for the estimated cost of the uninsured portion of pending claims and the estimated allocated loss adjustment expenses including legal and other direct costs associated with a claim.
Self-Insurance Accruals We record a liability for the estimated cost of the uninsured portion of pending claims and the estimated allocated loss adjustment expenses, including legal and other direct costs associated with a claim, when we believe that it is probable that a loss has been incurred and the amount can be reasonably estimated.
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.
Revenue equipment rentals and purchased transportation Year ended December 31, (dollars in thousands) 2025 2024 Revenue equipment rentals and purchased transportation $ 286,711 $ 254,302 % of total revenue 24.6 % 22.5 % % of freight revenue 27.1 % 25.1 % The increase in revenue equipment rentals and purchased transportation was primarily the result of an increase in purchased transportation costs related to new business awarded to the Managed Freight reportable segment during the year, partially offset by a slight decrease in the percentage of the total miles run by independent contractors from 7.8% for 2024 to 7.3% for 2025 and a first quarter $7.6 million decrease in purchased transportation costs due to the decline in the spot market that primarily affected the Managed Freight reportable segment. 32 Table of Contents We expect purchased transportation to fluctuate as volumes in our Managed Freight reportable segment may be volatile.
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.
We believe 2026 is all about execution, and we are hard at work to get that done. 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 2025 and 2024 items and year-to-year comparisons between 2025 and 2024.
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.
As a result of these factors, we performed an interim quantitative goodwill impairment test which resulted in a partial impairment of goodwill of $10.7 million within the Dedicated reportable segment for the legacy Dedicated reporting unit. We test intangible assets with finite lives for impairment if conditions exist that indicate the carrying value may not be recoverable.
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.
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 Warehousing total revenue remained relatively even compared to 2024. Other includes support services provided to our customers and third party carriers primarily including equipment maintenance and equipment leasing.
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.
The decrease in Managed Freight operating income is the result of an increase in Managed Freight operating expenses, partially offset by an increase in total revenue. The increase in Managed Freight operating expenses is the result of the increase in revenue driving increases in variable expenses, primarily heightened purchased transportation, particularly during the fourth quarter peak season.
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.
The increase in Dedicated operating expenses was primarily the result of increased salaries, wages, and benefits for our professional drivers, operations and maintenance costs, purchase transportation, insurance costs, and depreciation expense as a result of growth and increased equipment costs, since 2024.
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.
Operations and maintenance Year ended December 31, (dollars in thousands) 2025 2024 Operations and maintenance $ 69,573 $ 61,696 % of total revenue 6.0 % 5.5 % % of freight revenue 6.6 % 6.1 % The increase in operations and maintenance expense was primarily the result of high demands on equipment as we grow our fleet into specialty freight areas, as well as more equipment damage than was experienced in the prior year.
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.
These changes may also cause us to hold assets longer than planned, or experience increased losses on sale. If we were to grow our Expedited or Dedicated reportable segments we may face additional increases in depreciation and amortization.
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 decrease in Expedited operating expenses was primarily due to decreases in salaries, wages, and benefits for our professional drivers and fuel expense as compared to 2024 as a result of fewer average miles per unit and a decrease in the average number of Expedited team-driven tractors.
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.
Interest expense, net Year ended December 31, (dollars in thousands) 2025 2024 Interest expense, net $ 12,055 $ 13,576 % of total revenue 1.0 % 1.2 % % of freight revenue 1.1 % 1.3 % For the period presented, the change in interest expense, net is insignificant both as a percentage of total revenue and freight revenue.
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.
Going forward, we intend to improve upon the margin within this segment through a combination of rate increases and cost reductions. 36 Table of Contents Liquidity and Capital Resources Our business requires significant capital investments over the short-term and the long-term.
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.
Depreciation increased $4.9 million in 2025 to $81.9 million compared to 2024, primarily as a result of the increased cost of new equipment and an additional $2.2 million of depreciation expense as a result of an increased rate of depreciation during the quarter ended December 31, 2025.
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.
Loss on disposition of property and equipment, net Year ended December 31, (dollars in thousands) 2025 2024 Loss on disposition of property and equipment, net $ 337 $ 1,630 % of total revenue 0.0 % 0.1 % % of freight revenue 0.0 % 0.2 % For the period presented, the change in disposition of property and equipment, net is insignificant both as a percentage of total revenue and freight revenue. 34 Table of Contents Impairment of goodwill Year ended December 31, (dollars in thousands) 2025 2024 Impairment of goodwill $ 10,698 $ - % of total revenue 0.9 % 0.0 % % of freight revenue 1.0 % 0.0 % Impairment of goodwill represents the goodwill impairment recognized on the Dedicated reportable segment during 2025, primarily related to a reduction of projected future cash flows within our legacy dedicated reporting unit.
Removed
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.
Added
During 2025, the Company operated in a challenging freight and logistics environment characterized by prolonged industry overcapacity, muted demand, episodic weather-related disruptions, and elevated cost pressures, including elevated insurance expense, impairment of goodwill, and additional equipment related expenses.
Removed
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.
Added
Within our Dedicated reportable segment, total revenue increased while margins declined year over year primarily as a result of an approximately 11.5% increase in average total tractors along with a 8.0% decrease in utilization year over year.
Removed
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.
Added
Managed Freight experienced increased revenue with the fourth quarter integration of assets acquired that are now operating as Star (the "Star Acquisition") helping to offset the July 2025 loss of a key customer, but heightened costs associated with securing capacity during peak season compressed margins.
Removed
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.
Added
Warehousing operating income declined compared to 2024 primarily as the result of onboarding a significant new customer during the fourth quarter of 2025 resulting in associated startup expenses and operational inefficiencies that more than offset the incremental revenue.
Removed
The result has been better margins, more stable earnings, and improved returns on capital compared with our legacy operations during previous downturns.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+0 added−1 removed8 unchanged
Biggest changeAt 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.
Biggest changeAt our December 31, 2025 level of borrowing on our non-hedged variable rate debt, a 1% increase in our applicable rate would increase our interest expense by approximately $0.5 million. Our remaining debt is fixed rate debt, and therefore changes in market interest rates do not directly impact our interest expense.
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.
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, 2025, we have no remaining fuel hedge contracts in our consolidated balance sheet.
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.
For the years ended December 31, 2025 and 2024, 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.
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.
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 $1.8 million.
Our earnings would be affected by changes in these short-term interest rates, if we were to borrow under our Credit Facility or otherwise incur variable-rate obligations. Risk can be quantified by measuring the financial impact of a near-term adverse increase in short-term interest rates.
Our earnings would be affected by changes in these short-term interest rates if we were to incur additional variable-rate obligations. Risk can be quantified by measuring the financial impact of a near-term adverse increase in short-term interest rates.
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).
This sensitivity analysis considers that we expect to purchase approximately 37.5 million gallons of diesel annually, with an assumed fuel surcharge recovery rate of 93.7% of the cost (which was our fuel surcharge recovery rate during the year ended December 31, 2025).
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%.
Of our total $338.7 million of debt including operating and finance leases, we had $46.3 million of variable rate debt outstanding at December 31, 2025, which related to our Credit Facility and a real-estate note which is hedged with the interest rate swap agreement noted above at 4.2%.
Removed
In 2016, we also entered into several interest rate swaps all of which fully matured during 2022, which were designated to hedge against the variability in future interest rate payments due on rent associated with the purchase of certain trailers.

Other CVLG 10-K year-over-year comparisons