Covenant Logistics Group, Inc 10-Q for FY2026 Q3
Covenant Logistics Group, Inc. (CVLG)
About this 10-Q
Covenant Logistics Group, Inc filed this 10-Q on November 6, 2026, covering the quarter ended September 30, 2026 (FY2026 Q3).
Covenant Logistics Group reported third-quarter revenue of $353,894 thousand, up from $296,889 thousand, as operating income rose to $12,494 thousand and net income reached $10,704 thousand. AI summary
Headline figures
Quarter ended September 30, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $353.89M
- up 19.2% from $296.89M a year earlier
- Net income
- $10.7M
- up 17.7% from net income of $9.09M a year earlier
- Diluted EPS
- $0.40
- up 14.3% from $0.35 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
COVENANT LOGISTICS GROUP, INC.
(Exact name of registrant as specified in its charter)
| | |
| (State or other jurisdiction of incorporation | (I.R.S. Employer Identification No.) |
| or organization) | |
| | |
| | |
| (Address of principal executive offices) | (Zip Code) |
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
| | No ☐ |
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
| | No ☐ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ |
| |
| Non-accelerated filer ☐ | Smaller reporting company | |
| Emerging growth company | ||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| Yes | No ☒ |
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date (November 4, 2026).
Class A Common Stock, $.01 par value:
Class B Common Stock, $.01 par value:
| PART I FINANCIAL INFORMATION |
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| Page Number |
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| Item 1. |
Financial Statements |
|
| Condensed Consolidated Balance Sheets as of September 30, 2026 and December 31, 2025 (unaudited) |
3 | |
| Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2026 and 2025 (unaudited) |
4 | |
| Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2026 and 2025 (unaudited) |
5 | |
| Condensed Consolidated Statements of Stockholders' Equity for the three and nine months ended September 30, 2026 and 2025 (unaudited) |
6 | |
| Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2026 and 2025 (unaudited) |
7 | |
| Notes to Condensed Consolidated Financial Statements (unaudited) |
8 | |
| Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
22 |
| Item 3. |
Quantitative and Qualitative Disclosures about Market Risk |
36 |
| Item 4. |
Controls and Procedures |
37 |
| PART II OTHER INFORMATION |
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| Page Number |
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| Item 1. |
Legal Proceedings |
38 |
| Item 1A. |
Risk Factors |
39 |
| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
40 |
| Item 3. |
Defaults Upon Senior Securities |
40 |
| Item 4. |
Mine Safety Disclosures |
40 |
| Item 5. |
Other Information |
40 |
| Item 6. |
Exhibits |
41 |
| PART I |
FINANCIAL INFORMATION |
| FINANCIAL STATEMENTS |
| CONDENSED CONSOLIDATED BALANCE SHEETS |
| (In thousands, except share data) |
| September 30, 2026 | December 31, 2025 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable and contract assets, net of allowance of $ in 2026 and $ in 2025 | ||||||||
| Drivers' advances and other receivables, net of allowance of $ in 2026 and $ in 2025 | ||||||||
| Inventory and supplies | ||||||||
| Prepaid expenses | ||||||||
| Assets held for sale | ||||||||
| Income taxes receivable | ||||||||
| Other short-term assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, at cost | ||||||||
| Less: accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Net property and equipment | ||||||||
| Goodwill | ||||||||
| Other intangibles, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Other receivables | ||||||||
| Other assets, net | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Current maturities of long-term debt | ||||||||
| Current portion of finance lease obligations | ||||||||
| Current portion of operating lease obligations | ||||||||
| Current portion of insurance and claims accrual | ||||||||
| Total current liabilities | ||||||||
| Long-term debt, less current portion | ||||||||
| Long-term portion of finance lease obligations, less current portion | ||||||||
| Long-term portion of operating lease obligations, less current portion | ||||||||
| Insurance and claims accrual, less current portion | ||||||||
| Deferred income taxes, net | ||||||||
| Other long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Stockholders' equity: | ||||||||
| Class A common stock, $ par value; shares authorized; shares issued and outstanding as of September 30, 2026; and shares issued and outstanding as of December 31, 2025 | ||||||||
| Class B common stock, $ par value; shares authorized; shares issued and outstanding | ||||||||
| Additional paid-in-capital | ||||||||
| Treasury stock at cost; and shares as of September 30, 2026 and December 31, 2025, respectively | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Retained earnings | ||||||||
| Total stockholders' equity | ||||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
COVENANT LOGISTICS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE three and nine months ended September 30, 2026 and 2025
(In thousands, except per share data)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues | ||||||||||||||||
| Freight revenue | $ | $ | $ | $ | ||||||||||||
| Fuel surcharge revenue | ||||||||||||||||
| Total revenue | $ | $ | $ | $ | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Salaries, wages, and related expenses | $ | $ | $ | $ | ||||||||||||
| Fuel expense | ||||||||||||||||
| Operations and maintenance | ||||||||||||||||
| Revenue equipment rentals and purchased transportation | ||||||||||||||||
| Operating taxes and licenses | ||||||||||||||||
| Insurance and claims | ||||||||||||||||
| Communications and utilities | ||||||||||||||||
| General supplies and expenses | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| (Gain) loss on disposition of property and equipment, net | ( | ) | ( | ) | ( | ) | ||||||||||
| Total operating expenses | ||||||||||||||||
| Operating income | ||||||||||||||||
| Interest expense, net | ||||||||||||||||
| Income from equity method investment | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income before income taxes | ||||||||||||||||
| Income tax expense | ||||||||||||||||
| Income from continuing operations, net of tax | ||||||||||||||||
| Income from discontinued operations, net of tax | ||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Basic income per share: | ||||||||||||||||
| Income from continuing operations | $ | $ | $ | $ | ||||||||||||
| Income from discontinued operations | ||||||||||||||||
| Net income per share | $ | $ | $ | $ | ||||||||||||
| Diluted income per share: | ||||||||||||||||
| Income from continuing operations | $ | $ | $ | $ | ||||||||||||
| Income from discontinued operations | ||||||||||||||||
| Net income per share | $ | $ | $ | $ | ||||||||||||
| Basic weighted average shares outstanding | ||||||||||||||||
| Diluted weighted average shares outstanding | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
COVENANT LOGISTICS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE three and nine months ended September 30, 2026 and 2025
(Unaudited and in thousands)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Other comprehensive income: | ||||||||||||||||
| Unrealized gain (loss) on effective portion of cash flow hedges, net of tax of ($) and ($) in 2026 and ($) and $ in 2025, respectively | ( | ) | ||||||||||||||
| Reclassification of cash flow hedge gains into statement of operations, net of tax of $ and $ in 2026 and $ and $ in 2025, respectively | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other comprehensive gain (loss)⁽¹⁾ | ( | ) | ( | ) | ||||||||||||
| Comprehensive income | $ | $ | $ | $ | ||||||||||||
| (1) | It is the Company’s policy to release income tax effects from accumulated other comprehensive income at such time as the earnings or loss of the related activity are recognized in earnings. |
The accompanying notes are an integral part of these condensed consolidated financial statements.
COVENANT LOGISTICS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE three and nine months ended September 30, 2026 and 2025
(Unaudited and in thousands)
| For the Three Months Ended September 30, 2026 | ||||||||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||||||
| Common Stock | Paid-In | Treasury | Comprehensive | Retained | Stockholders' | |||||||||||||||||||||||
| Class A | Class B | Capital | Stock | Income | Earnings | Equity | ||||||||||||||||||||||
| Balances at December 31, 2025 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||
| Cash dividend ($ per common share) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Other comprehensive loss | ||||||||||||||||||||||||||||
| Stock-based employee compensation expense | - | |||||||||||||||||||||||||||
| Exercise of stock options | ( | ) | ||||||||||||||||||||||||||
| Issuance of restricted shares, net of shares withheld | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balances at March 31, 2026 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||
| Cash dividend ($ per common share) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Other comprehensive loss | ||||||||||||||||||||||||||||
| Stock-based employee compensation expense | - | |||||||||||||||||||||||||||
| Exercise of stock options | ( | ) | ( | ) | ||||||||||||||||||||||||
| Issuance of restricted shares, net of shares withheld | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balances at June 30, 2026 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||
| Cash dividend ($ per common share) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||||||||||
| Stock-based employee compensation expense | ||||||||||||||||||||||||||||
| Exercise of stock options | ( | ) | ||||||||||||||||||||||||||
| Issuance of restricted shares, net of shares withheld | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balances at September 30, 2026 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||
| For the Three Months Ended September 30, 2025 | ||||||||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||||||
| Common Stock | Paid-In | Treasury | Comprehensive | Retained | Stockholders' | |||||||||||||||||||||||
| Class A | Class B | Capital | Stock | Income | Earnings | Equity | ||||||||||||||||||||||
| Balances at December 31, 2024 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||
| Cash dividend ($ per common share) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Other comprehensive income | ( | ) | ( | ) | ||||||||||||||||||||||||
| Exercise of stock options | ||||||||||||||||||||||||||||
| Stock-based employee compensation expense | ||||||||||||||||||||||||||||
| Issuance of restricted shares, net of shares withheld | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balances at March 31, 2025 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||
| Cash dividend ($ per common share) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Share repurchase | ( | ) | ( | ) | ||||||||||||||||||||||||
| Other comprehensive income | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock-based employee compensation expense | ||||||||||||||||||||||||||||
| Issuance of restricted shares, net of shares withheld | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balances at June 30, 2025 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||
| Cash dividend ($ per common share) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Other comprehensive income | ( | ) | ( | ) | ||||||||||||||||||||||||
| Share repurchase | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock-based employee compensation expense | ||||||||||||||||||||||||||||
| Issuance of restricted shares, net of shares withheld | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balances at September 30, 2025 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
COVENANT LOGISTICS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE nine months ended September 30, 2026 and 2025
(Unaudited and in thousands)
| Nine Months Ended September 30, | ||||||||
| 2026 | 2025 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Provision for losses on accounts receivable | ( | ) | ||||||
| Reversal of gain on sales to equity method investee | ( | ) | ( | ) | ||||
| Depreciation and amortization | ||||||||
| Deferred income tax benefit | ||||||||
| Income tax expense arising from restricted share vesting and stock options exercised | ( | ) | ( | ) | ||||
| Stock-based compensation expense | ||||||||
| Income from equity method investment | ( | ) | ( | ) | ||||
| Return on investment from equity method investee | ||||||||
| Gain on disposition of property and equipment | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Receivables and advances | ( | ) | ( | ) | ||||
| Prepaid expenses and other assets | ( | ) | ( | ) | ||||
| Inventory and supplies | ( | ) | ( | ) | ||||
| Insurance and claims accrual | ( | ) | ||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Net cash flows provided by operating activities | ||||||||
| Cash flows from investing activities: | ||||||||
| Other investments | ( | ) | ( | ) | ||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Proceeds from disposition of property and equipment | ||||||||
| Net cash flows used by investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Cash dividend | ( | ) | ( | ) | ||||
| Proceeds from notes payable | ||||||||
| Repayments of notes payable | ( | ) | ( | ) | ||||
| Repayments of finance lease obligations | ( | ) | ( | ) | ||||
| Proceeds under revolving credit facility | ||||||||
| Repayments under revolving credit facility | ( | ) | ( | ) | ||||
| Payment of contingent consideration liability | ( | ) | ( | ) | ||||
| Proceeds from exercise of stock options | ||||||||
| Payment of minimum tax withholdings on stock compensation | ( | ) | ( | ) | ||||
| Common stock repurchased | ( | ) | ||||||
| Net cash flows used by financing activities | ( | ) | ( | ) | ||||
| Net change in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid (received) during the year for: | ||||||||
| Interest, net of capitalized interest | ||||||||
| Income taxes | ||||||||
| Non-cash transactions during the year for: | ||||||||
| Equipment acquired under operating leases | ||||||||
| Non-cash capital asset acquisitions | ||||||||
| Non-cash debt reduction | ( | ) | ( | ) | ||||
| Insurance and claims accruals | ( | ) | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
COVENANT LOGISTICS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| Note 1. | Significant Accounting Policies |
Basis of Presentation
The condensed consolidated financial statements include the accounts of Covenant Logistics Group, Inc., a Nevada holding company, and its wholly owned subsidiaries. References in this report to "we," "us," "our," the "Company," and similar expressions refer to Covenant Logistics Group, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X promulgated under the Securities Act of 1933. In preparing financial statements, it is necessary for management to make assumptions and estimates affecting the amounts reported in the condensed consolidated financial statements and related notes. These estimates and assumptions are developed based upon all information available. Actual results could differ from estimated amounts. In the opinion of management, the accompanying financial statements include all adjustments that are necessary for a fair presentation of the results for the interim periods presented, such adjustments being of a normal recurring nature.
Certain information and footnote disclosures have been condensed or omitted pursuant to such rules and regulations. The December 31, 2025, condensed consolidated balance sheet was derived from our audited balance sheet as of that date. Our operating results are subject to seasonal trends when measured on a quarterly basis; therefore, operating results for the nine months ended September 30, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026. These condensed consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in our Form 10-K for the year ended December 31, 2025.
Revenue Recognition
Revenue, drivers' wages, and other direct operating expenses generated by our Expedited and Dedicated reportable segments are recognized proportionally as the transportation service is performed based on the percentage of miles completed as of the period end. Revenue is recognized on a gross basis at amounts charged to our customers because we control and are primarily responsible for the fulfillment of the promised service. Revenue includes transportation revenue, fuel surcharges, loading and unloading activities, equipment detention, lease revenue and other accessorial services.
Revenue generated by our Managed Freight reportable segment is recognized proportionally as the services are provided based on the percentage of completion method using the estimated time elapsed as of the period end. Revenue is recorded on a gross basis, without deducting third-party purchased transportation costs, as we act as a principal with substantial risks as primary obligor. Revenue for the Warehousing reportable segment is generally recognized as the service is performed, based upon a weekly rate.
Contract assets for estimated revenue of in-process services were $
Accounts receivable, net were $
Property and Equipment
Property and equipment is stated at cost less accumulated depreciation. Depreciation for book purposes is determined using the straight-line method over the estimated useful lives of the assets. Depreciation of revenue equipment is our largest item of depreciation. We generally depreciate new tractors over years to salvage values ranging from approximately
Company-Owned Life Insurance
The Company maintains corporate-owned life insurance policies that are held in a rabbi trust to fund its nonqualified deferred compensation plan. The policies are carried at the amounts that could be realized under the insurance contracts as of the balance sheet date, which represent the cash surrender values provided by the insurance carriers. The carrying values of the policies were $
Recent Accounting Pronouncements
Accounting standards not yet adopted
In September 2025, the Financial Accounting Standards Board ("FASB") issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software: Targeted Improvements to the Accounting for Internal-Use Software, which clarifies and modernizes the accounting for costs related to internal-use software. The amendments in the standard remove all previous references to project stages and clarify the threshold entities apply to begin capitalizing costs. The standard becomes effective for us on January 1, 2028, for annual and interim periods and may be adopted on a prospective basis, a modified basis for in-process projects, or a retrospective basis. The Company is currently evaluating the effects adoption of this guidance will have on our consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses which was later clarified by ASU 2025-01. This guidance requires disclosure of disaggregated information about certain income statement expense line items in the notes to the financial statements. The guidance in this ASU is effective for all public entities for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The update may be applied either prospectively or retrospectively. Early adoption is permitted. The Company is currently evaluating the effects adoption of this guidance will have on our consolidated financial statements.
Accounting standards adopted
In July 2025, the FASB issued ASU 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets. In developing reasonable and supportable forecasts as part of estimating expected credit losses, all entities may elect a practical expedient that assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset. This guidance became effective for us for our annual reporting period beginning January 1, 2026, and related interim reporting periods. We made the election to adopt the practical expedient as of January 1, 2026. The adoption of this standard had an immaterial effect on our consolidated financial statements.
| Note 2. | Income Per Share |
Basic income per share excludes dilution and is computed by dividing earnings available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted income per share reflects the dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in our earnings. Income per share is the same for both Class A and Class B shares.
The following table sets forth, for the periods indicated, the calculation of net income per share included in the condensed consolidated statements of operations:
| (in thousands except per share data) | Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Numerator: | ||||||||||||||||
| Income from continuing operations | $ | $ | $ | $ | ||||||||||||
| Income from discontinued operations | ||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Denominator: | ||||||||||||||||
| Denominator for basic income per share – weighted-average shares | ||||||||||||||||
| Effect of dilutive securities: | ||||||||||||||||
| Equivalent shares issuable upon conversion of unvested restricted shares | ||||||||||||||||
| Equivalent shares issuable upon conversion of vested employee stock options | ||||||||||||||||
| Denominator for diluted income per share adjusted weighted-average shares and assumed conversions | ||||||||||||||||
| Net income per share: | ||||||||||||||||
| Income from continuing operations | $ | $ | $ | $ | ||||||||||||
| Income from discontinued operations | ||||||||||||||||
| Basic income per share | $ | $ | $ | $ | ||||||||||||
| Diluted income per share: (1) | ||||||||||||||||
| Income from continuing operations | $ | $ | $ | $ | ||||||||||||
| Income from discontinued operations | ||||||||||||||||
| Diluted income per share | $ | $ | $ | $ | ||||||||||||
There were
| Note 3. | Fair Value of Financial Instruments |
Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Accordingly, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability.
The fair value of our interest rate swap agreements is determined using the market-standard methodology of netting the discounted future fixed-cash payments and the discounted expected variable-cash receipts. The variable-cash receipts are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. These analyses reflect the contractual terms of the swap, including the period to maturity, and use observable market-based inputs, including interest rate curves and implied volatilities. The fair value calculation also includes an amount for risk of non-performance of our counterparties using "significant unobservable inputs" such as estimates of current credit spreads to evaluate the likelihood of default, which we have determined to be insignificant to the overall fair value of our interest rate swap agreements.
The fair value of the contingent consideration arrangement is based on inputs that are not observable in the market and is estimated using a probability-weighted method. The significant unobservable inputs used in the fair value of the contingent consideration liability include the financial projections over the earn-out period, the volatility of the underlying financial metrics, and estimated discount rates. Significant increases or decreases to any of these inputs could result in a significantly higher or lower liability. Ultimately, the liability will be equivalent to the amount settled, and the difference between the fair value estimate and amount settled will be recorded as a component of general supplies and expenses within the condensed consolidated statements of operations.
A three-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows:
| ● | Level 1. Observable inputs such as quoted prices in active markets; |
| ● | Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and |
| ● | Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
Financial Instruments Measured at Fair Value on a Recurring Basis
| (in thousands) | ||||||||||||
| September 30, 2026 | December 31, 2025 | Input Level | ||||||||||
| Interest rate swaps | 2 | |||||||||||
| Contingent consideration | ( | ) | ( | ) | 3 | |||||||
There were no transfers between Level 1, Level 2 and Level 3 during the nine months ended September 30, 2026 or for the year ended December 31, 2025.
The carrying amount of cash and cash equivalents, certificates of deposit, accounts receivable, accounts payable, and current debt approximates their fair value because of the short-term maturity of these instruments.
Interest rates that are currently available to us for issuance of long-term debt with similar terms and remaining maturities are used to estimate the fair value of our long-term debt, which primarily consists of equipment installment notes. The fair value of our equipment installment notes approximated the carrying value as of September 30, 2026, as the weighted average interest rate on these notes approximates the market rate for similar debt. Borrowings under our revolving Credit Facility (as defined herein) approximate fair value due to the variable interest rate on that facility.
The Company uses interest rate swap agreements to manage its exposure to fluctuations in interest rates on variable-rate debt. The interest rate swaps are designated as cash flow hedges and changes in the fair value of the swaps are recognized in accumulated other comprehensive income and reclassified into earnings as the hedged interest payments affect earnings. At September 30, 2026, the swaps had an aggregate notional amount of $
Contingent consideration arrangements require us to pay up to $
The fair value of the contingent consideration is adjusted at each reporting period based on changes to the expected cash flows and related assumptions.
The following table provides a summary (in thousands) of the contingent consideration payments made during the three and nine months ended September 30, 2026 and 2025:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| LTST | $ | $ | $ | $ | ||||||||||||
| Asset Acquisition | ||||||||||||||||
| Total contingent consideration payments | $ | $ | $ | $ | ||||||||||||
Of the $
The following table provides a summary (in thousands) of the changes in the fair value of the contingent consideration during the three and nine months ended September 30, 2026 and 2025:
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | September 30, | ||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||
| LTST | $ | $ | $ | $ | |||||||||||
| Sims | ( | ) | |||||||||||||
| Asset Acquisition | |||||||||||||||
| Net change in fair value of contingent consideration | $ | $ | $ | ( | ) | $ | |||||||||
The adjustment to the fair value of the contingent consideration liability was recorded as a component of general supplies and expenses within the condensed consolidated statements of operations. Of the $
The following table provides a summary (in thousands) of the activity for the contingent consideration liability for 2026:
| December 31, 2025 | Additions | Adjustments to fair market value | Payments | September 30, 2026 | ||||||||||||||||
| Contingent consideration | $ | ( | ) | $ | $ | $ | $ | ( | ) | |||||||||||
| Note 4. | Segment Information |
We have reportable segments:
| ● | Expedited: The Expedited reportable segment primarily provides truckload services to customers with high service freight and delivery standards, such as 1,000 miles in 22 hours, or 15-minute delivery windows. Expedited services generally require two-person driver teams on equipment either owned or leased by the Company. |
| ● | Dedicated: The Dedicated reportable segment provides customers with committed truckload capacity over contracted periods with the goal of three to five years in length. Equipment is either owned or leased by the Company. The Dedicated reportable segment also provides shuttle and switching services related to shuttling containers and trailers in or around freight yards and to/from warehouses for Dedicated customers. |
| ● | Managed Freight: The Managed Freight reportable segment includes our brokerage and transport management services (“TMS”). Brokerage services provide logistics capacity by outsourcing the carriage of customers’ freight to third parties. TMS provides comprehensive logistics services on a contractual basis to customers who prefer to outsource their logistics needs. |
| ● | Warehousing: The Warehousing reportable segment provides day-to-day warehouse management services to customers who have chosen to outsource this function. The Warehousing reportable segment also provides shuttle and switching services related to shuttling containers and trailers in or around freight yards and to/from warehouses for Warehousing customers. |
The Company's chief operating decision maker ("CODM"), the Chief Executive Officer, evaluates the operating results through reportable segment operating income, which includes certain corporate overhead allocations directly attributable to each of the segments. We do not report our intersegment revenues by segment to our CODM and do not believe they are a meaningful metric for evaluating the performance of our reportable segments.
Each segment uses certain shared infrastructure and each segment is presented with its direct costs and an allocation of certain shared overhead costs. Insurance and claims expense is charged to the segments based on their historic claims experience and an allocation of current insurance premiums.
The CODM uses operating income for each segment in the annual budget and strategic planning process. The CODM considers budget-to-actual variances on a quarterly basis as well as month-over-month variances when making decisions about the allocation of operating and capital resources to each segment. The CODM also uses segment operating income for evaluating pricing strategy, to assess the performance of each segment by comparing the results of each segment with one another, and in determining the compensation of certain employees.
The following table summarizes our total revenue by our four reportable segments, as used by our CODM in making decisions regarding allocation of resources etc., for the three and nine months ended September 30, 2026 and 2025:
| (in thousands) | ||||||||||||||||||||
| Three Months Ended September 30, 2026 | Expedited | Dedicated | Managed Freight | Warehousing | Total | |||||||||||||||
| Revenues | ||||||||||||||||||||
| Freight revenue | $ | $ | $ | $ | $ | |||||||||||||||
| Fuel surcharge revenue(1) | ||||||||||||||||||||
| Subtotal operating revenues | $ | $ | $ | $ | $ | |||||||||||||||
| Other revenues | ||||||||||||||||||||
| Total revenue | $ | |||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Salaries, wages, and related expenses | ||||||||||||||||||||
| Fuel expense(1) | ||||||||||||||||||||
| Operations and maintenance | ||||||||||||||||||||
| Revenue equipment rentals and purchased transportation | ||||||||||||||||||||
| Operating taxes and licenses | ||||||||||||||||||||
| Insurance and claims | ||||||||||||||||||||
| Communications and utilities | ||||||||||||||||||||
| General supplies and expenses | ||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Gain on disposition of property and equipment, net | ( | ) | ||||||||||||||||||
| Total allocated overhead | ||||||||||||||||||||
| Segment operating expenses | ||||||||||||||||||||
| Subtotal operating income | $ | $ | $ | $ | $ | |||||||||||||||
| Other (2) | ( | ) | ||||||||||||||||||
| Total consolidated operating income | ||||||||||||||||||||
| Interest expense, net | ( | ) | ||||||||||||||||||
| Income from equity method investment | ||||||||||||||||||||
| Income before income taxes | $ | |||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Three Months Ended September 30, 2025 | Expedited | Dedicated | Managed Freight | Warehousing | Total | |||||||||||||||
| Revenues | ||||||||||||||||||||
| Freight revenue | $ | $ | $ | $ | $ | |||||||||||||||
| Fuel surcharge revenue(1) | ||||||||||||||||||||
| Subtotal operating revenues | $ | $ | $ | $ | $ | |||||||||||||||
| Other revenues | ||||||||||||||||||||
| Total revenue | $ | |||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Salaries, wages, and related expenses | ||||||||||||||||||||
| Fuel expense(1) | ||||||||||||||||||||
| Operations and maintenance | ||||||||||||||||||||
| Revenue equipment rentals and purchased transportation | ||||||||||||||||||||
| Operating taxes and licenses | ||||||||||||||||||||
| Insurance and claims | ||||||||||||||||||||
| Communications and utilities | ||||||||||||||||||||
| General supplies and expenses | ||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Gain on disposition of property and equipment, net | - | ( | ) | |||||||||||||||||
| Total allocated overhead | ||||||||||||||||||||
| Segment operating expenses | ||||||||||||||||||||
| Segment operating income | $ | $ | $ | $ | $ | |||||||||||||||
| Other (2) | ( | ) | ||||||||||||||||||
| Total consolidated operating income | ||||||||||||||||||||
| Interest expense, net | ( | ) | ||||||||||||||||||
| Income from equity method investment | ||||||||||||||||||||
| Income before income taxes | $ | |||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Nine Months Ended September 30, 2026 | Expedited | Dedicated | Managed Freight | Warehousing | Total | |||||||||||||||
| Revenues | ||||||||||||||||||||
| Freight revenue | $ | $ | $ | $ | $ | |||||||||||||||
| Fuel surcharge revenue(1) | ||||||||||||||||||||
| Subtotal operating revenues | $ | $ | $ | $ | $ | |||||||||||||||
| Other revenues | ||||||||||||||||||||
| Total revenue | $ | |||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Salaries, wages, and related expenses | ||||||||||||||||||||
| Fuel expense(1) | ||||||||||||||||||||
| Operations and maintenance | ||||||||||||||||||||
| Revenue equipment rentals and purchased transportation | ||||||||||||||||||||
| Operating taxes and licenses | ||||||||||||||||||||
| Insurance and claims | ||||||||||||||||||||
| Communications and utilities | ||||||||||||||||||||
| General supplies and expenses | ||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Gain on disposition of property and equipment, net | ( | ) | ||||||||||||||||||
| Total allocated overhead | ||||||||||||||||||||
| Segment operating expenses | ||||||||||||||||||||
| Segment operating income | $ | $ | $ | $ | $ | |||||||||||||||
| Other (2) | ( | ) | ||||||||||||||||||
| Total consolidated operating income | ||||||||||||||||||||
| Interest expense, net | ( | ) | ||||||||||||||||||
| Income from equity method investment | ||||||||||||||||||||
| Income before income taxes | $ | |||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Nine Months Ended September 30, 2025 | Expedited | Dedicated | Managed Freight | Warehousing | Total | |||||||||||||||
| Revenues | ||||||||||||||||||||
| Freight revenue | $ | $ | $ | $ | $ | |||||||||||||||
| Fuel surcharge revenue(1) | ||||||||||||||||||||
| Subtotal operating revenues | $ | $ | $ | $ | $ | |||||||||||||||
| Other revenues | ||||||||||||||||||||
| Total revenue | $ | |||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Salaries, wages, and related expenses | ||||||||||||||||||||
| Fuel expense(1) | ||||||||||||||||||||
| Operations and maintenance | ||||||||||||||||||||
| Revenue equipment rentals and purchased transportation | ||||||||||||||||||||
| Operating taxes and licenses | ||||||||||||||||||||
| Insurance and claims | ||||||||||||||||||||
| Communications and utilities | ||||||||||||||||||||
| General supplies and expenses | ||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Loss on disposition of property and equipment, net | ||||||||||||||||||||
| Total allocated overhead | ||||||||||||||||||||
| Segment operating expenses | ||||||||||||||||||||
| Segment operating income | $ | $ | $ | $ | $ | |||||||||||||||
| Other (2) | ( | ) | ||||||||||||||||||
| Total consolidated operating income | ||||||||||||||||||||
| Interest expense, net | ( | ) | ||||||||||||||||||
| Income from equity method investment | ||||||||||||||||||||
| Income before income taxes | $ | |||||||||||||||||||
| (1) | The CODM does not receive fuel surcharge revenue and fuel expense individually, but is provided with fuel expense less fuel surcharge revenue (other than the fuel surcharge revenue we reimburse to independent contractors and other third parties which is included in purchased transportation), which we refer to as net fuel expense. The CODM uses net fuel expense to measure the effectiveness of our fuel surcharge program. |
| (2) | Other represents indirect costs not directly attributable to any one reportable segment, amortization of intangible assets, and contingent consideration liability adjustments to match the information our CODM uses to evaluate the operating results of our reportable segments. |
Balance sheet data by reportable segment is not maintained by the Company.
| Note 5. | Income Taxes |
Income tax expense in both 2026 and 2025 varies from the amount computed by applying the federal corporate income tax rates of
Our liability recorded for uncertain tax positions as of September 30, 2026 is unchanged since December 31, 2025.
The net deferred tax liability of $
| Note 6. | Debt |
Current and long-term debt and lease obligations consisted of the following as of September 30, 2026 and December 31, 2025:
| (in thousands) | September 30, 2026 | December 31, 2025 | ||||||||||||||
| Current | Long-Term | Current | Long-Term | |||||||||||||
| Borrowings under Credit Facility | $ | $ | $ | $ | ||||||||||||
| Equipment installment notes; weighted average interest rate of % at September 30, 2026, and % at December 31, 2025, due in monthly installments with final maturities at various dates ranging from February 2027 to September 2032, secured by related equipment (1) | ||||||||||||||||
| Real estate notes; interest rate of % at September 30, 2026 and % at December 31, 2025 due in monthly installments with a fixed maturity at August 2035, secured by related real estate | ||||||||||||||||
| Total debt | ||||||||||||||||
| Principal portion of finance lease obligations, secured by related revenue equipment | ||||||||||||||||
| Principal portion of operating lease obligations, secured by related real estate and revenue equipment | ||||||||||||||||
| Total debt and lease obligations | $ | $ | $ | $ | ||||||||||||
| (1) | Equipment installment notes consist primarily of financing arrangements for the Company's revenue equipment and also include an immaterial note payable related to the Company's fractional aircraft ownership interest. |
We and substantially all of our subsidiaries are parties to the Third Amended and Restated Credit Agreement (the "Credit Facility") with Bank of America, N.A., as agent (the "Agent") and JPMorgan Chase Bank, N.A. (together with the Agent, the "Lenders"). The Credit Facility is a $
Borrowings under the Credit Facility are classified as either "base rate loans" or "SOFR loans." Base rate loans accrue interest at a base rate equal to the greater of the Agent’s prime rate, the federal funds rate plus
Borrowings under the Credit Facility are subject to a borrowing base limited to the lesser of (A) $
We had $
The Credit Facility includes usual and customary events of default for a facility of this nature and provides that, upon the occurrence and continuation of an event of default, payment of all amounts payable under the Credit Facility may be accelerated, and the Lenders' commitments may be terminated. If an event of default occurs under the Credit Facility and the Lenders cause, or have the ability to cause, all of the outstanding debt obligations under the Credit Facility to become due and payable, this could result in a default under other debt instruments that contain acceleration or cross-default provisions. The Credit Facility contains certain restrictions and covenants relating to, among other things, debt, dividends, liens, acquisitions and dispositions outside of the ordinary course of business, and affiliate transactions. Failure to comply with the covenants and restrictions set forth in the Credit Facility could result in an event of default.
Pricing for the equipment installment notes is quoted by the respective financial affiliates of our primary revenue equipment suppliers and other lenders at the funding of each group of equipment acquired and include fixed annual rates for new equipment under retail installment contracts. The notes included in the funding are due in monthly installments with final maturities at various dates ranging from February 2027 to September 2032. The notes contain certain requirements regarding payment, insuring of collateral, and other matters, but do not have any financial or other material covenants or events of default. Additional borrowings from the financial affiliates of our primary revenue equipment suppliers and other lenders are expected to be available to fund new tractors expected to be delivered in 2026, while any other property and equipment purchases, including trailers, are expected to be funded with a combination of available cash, notes, operating leases, finance leases, and/or from the Credit Facility.
In August 2015, we financed a portion of the purchase of our corporate headquarters, a maintenance facility, and certain surrounding property in Chattanooga, Tennessee by entering into a $
| Note 7. | Leases |
Lessee Disclosures
The finance leases in effect at September 30, 2026 terminate from June 2028 through November 2033 and contain guarantees of the residual value of the related equipment by us.
A summary of our lease costs and other lease information at September 30, 2026 and 2025 is as follows:
| (dollars in thousands) | Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months Ended | ||||||||||||
| September 30, 2026 | September 30, 2025 | September 30, 2026 | September 30, 2025 | |||||||||||||
| Finance lease cost: | ||||||||||||||||
| Amortization of right-of-use assets | $ | $ | $ | $ | ||||||||||||
| Interest on lease liabilities | ||||||||||||||||
| Operating lease cost | ||||||||||||||||
| Variable lease cost | ( | ) | ( | ) | ||||||||||||
| Short-term lease cost | ||||||||||||||||
| Total lease cost | ||||||||||||||||
| Other information | ||||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||||
| Operating cash flows from finance leases | ||||||||||||||||
| Operating cash flows from operating leases | ||||||||||||||||
| Financing cash flows from finance leases | ||||||||||||||||
| Right-of-use assets obtained in exchange for new finance lease liabilities | ||||||||||||||||
| Right-of-use assets obtained in exchange for new operating lease liabilities | ||||||||||||||||
| Weighted-average remaining lease term—finance leases (in years) | ||||||||||||||||
| Weighted-average remaining lease term—operating leases (in years) | ||||||||||||||||
| Weighted-average discount rate—finance leases | % | % | ||||||||||||||
| Weighted-average discount rate—operating leases | % | % | ||||||||||||||
As of September 30, 2026 and December 31, 2025, we had right-of-use assets of $
Our future minimum lease payments as of September 30, 2026, are summarized as follows by lease category:
| (in thousands) | Operating | Finance | ||||||
| 2026 (1) | $ | |||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 | ||||||||
| Thereafter | ||||||||
| Total minimum lease payments | $ | $ | ||||||
| Less: amount representing interest | ( | ) | ( | ) | ||||
| Present value of minimum lease payments | $ | $ | ||||||
| Less: current portion | ( | ) | ( | ) | ||||
| Lease obligations, long-term | $ | $ | ||||||
(1) Excludes the nine months ended September 30, 2026.
Lessor Disclosures
We lease certain revenue equipment and real estate to third parties under operating and sales-type lease arrangements. Revenue equipment arrangements generally consist of trailers leased to customers under agreements with varying contractual terms. Our real estate arrangements primarily consist of office, parking, warehouse and other property leased or subleased to third parties. Operating lease income is recognized on a straight-line basis over the lease term in freight revenue and general supplies and expense.
Certain revenue equipment leases are classified as sales-type leases when the terms of the arrangement result in the transfer of control of the underlying equipment to the lessee. At lease commencement, we derecognize the underlying asset and recognize a net investment in the lease and any related selling profit or loss. The net investment in sales-type leases is presented in drivers' advances and other receivables, net and other assets, net in our condensed consolidated balance sheets. Interest income on our net investment in sales-type leases is recognized over the lease term in a manner that produces a constant periodic rate of return on the remaining net investment and is reported in interest expense, net in our condensed consolidated statement of operations.
A summary of our lease income for the three and nine months ended September 30, 2026 and 2025 is as follows:
| (in thousands) | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Operating lease income | $ | $ | $ | $ | ||||||||||||
| Sales-type lease selling profit | ||||||||||||||||
| Interest income on net investment in sales-type lease | ||||||||||||||||
| Total lease income | $ | $ | $ | $ | ||||||||||||
| Note 8. | Stock-Based Compensation |
Our Third Amended and Restated 2006 Omnibus Incentive Plan, as amended (the "Incentive Plan") governs the issuance of equity awards and other incentive compensation to management and members of the Board of Directors (the "Board"). The Incentive Plan includes (i) a fungible share reserve feature, under which shares subject to stock options and stock appreciation rights will be counted as share for every share granted and shares subject to all other awards will be counted as
The Incentive Plan permits annual awards of shares of our Class A common stock to executives, other key employees, consultants, non-employee directors, and eligible participants under various types of options, restricted stock, or other equity instruments. As of September 30, 2026, there were
Included in salaries, wages, and related expenses within the condensed consolidated statements of operations is stock-based compensation expense of $
During the nine months ended September 30, 2026, we issued
The Incentive Plan allows participants to pay the federal and state minimum statutory tax withholding requirements related to awards that vest or allows participants to deliver to us shares of Class A common stock having a fair market value equal to the minimum amount of such required withholding taxes. To satisfy withholding requirements for shares that vested through September 30, 2026, certain participants elected to forfeit receipt of an aggregate of
| Note 9. | Commitments and Contingencies |
Legal Proceedings
From time-to-time, we are a party to litigation arising in the ordinary course of business, most of which involves claims for personal injury, workers’ compensation, and/or property damage incurred in connection with the transportation of freight. 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.
There are inherent uncertainties in these legal matters, some of which are beyond management’s control, making the ultimate outcomes difficult to predict. Moreover, management's views and estimates related to these matters may change in the future, as new events and circumstances arise and the matters continue to develop. The Company’s business, results of operations, financial condition, or liquidity could be materially and adversely affected by the resolution of one or more of these contingencies.
In 2025, a third-party trucking company hauling a load brokered by Covenant Transport Solutions, LLC, and using a trailer owned by Landair Leasing, Inc. was involved in an accident in Texas that resulted in five fatalities and injuries to at least one other person. There are several possible defendants in the case, facts are still being developed, alleged damages have not been specified, and there are significant factual and legal issues to be resolved. In September 2026, the litigation was remanded from Federal court to Texas state court. The Company has filed a notice of appeal to this decision, and the state court process has been stayed pending the appeal. The Company has concluded that a loss related to this claim is probable, but given the preliminary nature of the proceedings, the Company cannot reasonably estimate a range of possible losses at this time in excess of the amount accrued for legal costs. As of September 30, 2026, the Company has recognized approximately $
Other Commitments and Contingencies
We had $
| Note 10. | Equity Method Investment |
We own a
As of September 30, 2026, we had a revenue equipment operating lease liability to TEL of $
We have evaluated our interest in TEL under the variable interest entity model including consideration of whether we have (i) the power to direct the activities of TEL that most significantly impact its economic performance and (ii) the obligation to absorb losses or the right to receive benefits that could potentially be significant to TEL. We have determined that we are not the primary beneficiary of TEL because we do not have the power to direct the activities that most significantly impact TEL’s economic performance, which are directed by the majority owners in accordance with TEL's operating agreement. While we hold a significant equity interest in TEL, we do not have unilateral or controlling decision-making authority over significant activities. Accordingly, we do not consolidate TEL and 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 2026 net income through September 30, 2026, or $
Our accounts receivable from TEL, accounts payable to TEL, and investment in TEL as of September 30, 2026 and December 31, 2025 are as follows (in thousands):
| Description: | Balance Sheet Line Item: | September 30, 2026 | December 31, 2025 | ||||||
| Accounts receivable from TEL | Driver advances and other receivables | $ | $ | ||||||
| Accounts payable to TEL | Accrued expenses | $ | $ | ||||||
| Investment in TEL | Other assets | $ | $ | ||||||
| Operating lease obligations | Current and long-term portion of operating lease obligations | $ | $ | ||||||
Our accounts receivable from TEL related to cash disbursements made pursuant to our performance of certain back-office and maintenance functions on TEL’s behalf and our accounts payable to TEL primarily related to leased revenue equipment payment accruals.
| Note 11. | Goodwill, Intangibles, and Other Assets |
The Landair Holdings, Inc. ("Landair") trade name has a residual value of $
Amortization expense of $
A summary of other intangible assets as of September 30, 2026 and December 31, 2025 is as follows:
| (in thousands) | September 30, 2026 | |||||||||||||||
| Gross intangible assets | Accumulated amortization | Net intangible assets | Remaining life (months) | |||||||||||||
| Trade name: | ||||||||||||||||
| Dedicated | $ | $ | ( | ) | $ | |||||||||||
| Managed Freight | ( | ) | ||||||||||||||
| Warehousing | ( | ) | ||||||||||||||
| Total trade name | ( | ) | ||||||||||||||
| Non-compete agreement: | ||||||||||||||||
| Dedicated | ( | ) | ||||||||||||||
| Managed Freight | ( | ) | ||||||||||||||
| Total non-compete agreement | ( | ) | ||||||||||||||
| Customer relationships: | ||||||||||||||||
| Dedicated | ( | ) | ||||||||||||||
| Managed Freight | ( | ) | ||||||||||||||
| Warehousing | ( | ) | ||||||||||||||
| Total customer relationships: | ( | ) | ||||||||||||||
| Credentialing: | ||||||||||||||||
| Expedited | ( | ) | ||||||||||||||
| Total credentialing | ( | ) | ||||||||||||||
| Total other intangible assets | $ | $ | ( | ) | $ | |||||||||||
| (in thousands) | December 31, 2025 | |||||||||||||||
| Gross intangible assets | Accumulated amortization | Net intangible assets | Remaining life (months) | |||||||||||||
| Trade name: | ||||||||||||||||
| Dedicated | $ | $ | ( | ) | $ | |||||||||||
| Managed Freight | ( | ) | ||||||||||||||
| Warehousing | ( | ) | ||||||||||||||
| Total trade name | ( | ) | ||||||||||||||
| Non-compete agreement: | ||||||||||||||||
| Dedicated | ( | ) | ||||||||||||||
| Managed Freight | ( | ) | ||||||||||||||
| Total non-compete agreement | ( | ) | ||||||||||||||
| Customer relationships: | ||||||||||||||||
| Dedicated | ( | ) | ||||||||||||||
| Managed Freight | ( | ) | ||||||||||||||
| Warehousing | ( | ) | ||||||||||||||
| Total customer relationships: | ( | ) | ||||||||||||||
| Credentialing: | ||||||||||||||||
| Expedited | ( | ) | ||||||||||||||
| Total credentialing | ( | ) | 133 | |||||||||||||
| Total other intangible assets | $ | $ | ( | ) | $ | |||||||||||
The expected amortization of these assets for the next five successive years is as follows:
| (in thousands) | ||||
| 2026⁽¹⁾ | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
(1) Excludes the nine months ended September 30, 2026.
The carrying amount of goodwill was $
| (in thousands) | ||||||||||||||||||||
| Expedited | Dedicated | Managed Freight | Warehousing | Total | ||||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | $ | $ | |||||||||||||||
| Post-acquisition goodwill adjustments | ||||||||||||||||||||
| Balance at September 30, 2026 | $ | $ | $ | $ | $ | |||||||||||||||
At September 30, 2026, our insurance program involves self-insurance to certain risk retention levels. We accrue claims above our self-insured retention and record a corresponding receivable for the amounts we expect to collect from insurers upon settlement of such claims. We have $
| Note 12. | Equity |
Other Equity
On April 23, 2025, our Board approved a stock repurchase authorization of up to $
Dividends
On February 5, 2026, our Board declared a cash dividend of $
On February 10, 2025, our Board declared a cash dividend of $
| Note 13. | Acquisition of Assets of Brokerage Business Operating as Star Logistics Solutions |
On October 10, 2025, we acquired the assets of a truckload brokerage business, which we are operating as Star. Star operates in the consumer retail and disaster relief sectors where we historically have lacked exposure. Additionally, the disaster recovery market is highly specialized and synergistic with our Expedited business and offers occasional, high volume and high margin opportunities. The acquisition date fair value of the consideration transferred was $
The acquisition date fair value of the consideration transferred consisted of the following:
| October 10, 2025 | ||||
| (in thousands) | ||||
| Cash paid pursuant to Asset Purchase Agreement | $ | |||
| Contingent consideration | ||||
| Net purchase price | $ | |||
We estimated the fair value of the contingent consideration using a probability-weighted model. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement. Refer to Note 3, "Fair Value of Financial Instruments" for information regarding changes in the contingent consideration arrangement.
All goodwill related to the acquisition is deductible for tax purposes, and there are no deferred income taxes arising from the acquisition.
The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date.
| October 10, 2025 | ||||
| Accounts receivable | $ | |||
| Driver advances and other receivables | ||||
| Inventory and supplies | ||||
| Prepaid expenses | ||||
| Other short-term assets | ||||
| Net property and equipment | ||||
| Other intangibles, net | ||||
| Total identifiable assets acquired | ||||
| Accounts payable | ( | ) | ||
| Accrued expenses | ( | ) | ||
| Current maturities of long-term debt | ( | ) | ||
| Current portion of operating lease obligations | ( | ) | ||
| Current portion of insurance and claims accrual | ( | ) | ||
| Long-term portion of operating lease obligations | ( | ) | ||
| Total liabilities assumed | ( | ) | ||
| Net identifiable assets acquired | ||||
| Goodwill | ||||
| Net assets acquired | $ | |||
Since acquisition we recognized measurement period adjustments which increased goodwill recognized for Star by $
Star’s results have been included in the consolidated financial statements since the date of acquisition and are reported within our Managed Freight reportable segment.
| (in thousands) | ||||||||||||||||
| Three months ended | Nine months ended | |||||||||||||||
| September 30, 2026 | September 30, 2025 | September 30, 2026 | September 30, 2025 | |||||||||||||
| Total revenue | $ | $ | $ | $ | ||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Basic net income per share | $ | $ | $ | $ | ||||||||||||
| Diluted net income per share | $ | $ | $ | $ | ||||||||||||
The pro forma financial information for all periods presented above has been calculated after adjusting the results of Star to reflect the business combination accounting effects resulting from this acquisition, including the amortization expense from acquired intangible assets as though the acquisition occurred as of the beginning of the Company’s fiscal year 2025. The Company's historical consolidated financial statements have been adjusted in the pro forma combined financial statements to give effect to pro forma events that are directly attributable to the business combination and factually supportable. The pro forma financial information is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of 2025.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The condensed consolidated financial statements include the accounts of Covenant Logistics Group, Inc., a Nevada holding company, and its wholly owned subsidiaries. References in this report to "we," "us," "our," the "Company," and similar expressions refer to Covenant Logistics Group, Inc. and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
This report contains certain statements that may be considered forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and such statements are subject to the safe harbor created by those sections and the Private Securities Litigation Reform Act of 1995, as amended. All statements, other than statements of historical or current fact, are statements that could be deemed forward-looking statements, including without limitation: any projections of earnings, revenues, or other financial items; any statement of plans, strategies, and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; and any statements of belief and any statements of assumptions underlying any of the foregoing. In this Form 10-Q, statements relating to future impact of accounting standards, future third-party transportation provider expenses, future tax rates, expenses, and deductions, expected freight demand, capacity, and volumes and trucking industry conditions, potential defaults and results of a default and testing of our fixed charge covenant under the Credit Facility or other debt agreements, expected sources, as well as adequacy, of working capital and liquidity (including our mix of debt, finance leases, and operating leases as means of financing revenue equipment), future inflation, future stock repurchases and dividends, if any, expected capital expenditures, allocations, and requirements, future customer relationships, future interest expense, future driver market conditions, including driver satisfaction, future use of independent contractors, expected cash flows, future investments in and growth of our reportable segments and services, future margins of our reportable segments, future rates and prices, future depreciation and amortization, future salaries, wages, and related expenses, including driver compensation, expected net fuel costs, strategies for managing fuel costs, the effectiveness and impact of, and cash flows relating to, our fuel surcharge programs, future fluctuations in operations and maintenance expenses, expected effects and mix of our solo and team operations, future fleet size, management, utilization, upgrades, and age, availability and usage of tractors and trailers, the market value of used equipment, the anticipated impact of our investment in TEL, the future impact of our business model, service standards, strategic plan and other strategic initiatives, changes to and deviations from our business model, strategic plan, and other strategic initiatives, claims and litigation, anticipated levels of and fluctuations relating to insurance and claims expenses, including the erosion of available limits in our aggregate insurance policies, insurance and claims accruals, and the impact of a recent Supreme Court decision regarding liability for freight brokers, contingent consideration related to our prior acquisitions, and the future impact of our prior acquisitions, among others, are forward-looking statements. Forward-looking statements may be identified by the use of terms or phrases such as "believe," "may," "could," "would," "will," "expects," "estimates," "projects," "appears," "mission," "anticipates," "plans," " outlook," "focus," "seek," "potential," "continue," "goal," "target," "objective," "optimistic," "intends," "improve," "remain," "strategy," derivations thereof, and similar terms and phrases. Such statements are based on currently available operating, financial, and competitive information. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, which could cause future events and actual results to differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the sections entitled "Item 1A. Risk Factors," set forth in our Form 10-Q for the quarter ended June 30, 2026 and our Form 10-K for the year ended December 31, 2025. Readers should review and consider the factors discussed in "Item 1A. Risk Factors," set forth in our Form 10-Q for the quarter ended June 30, 2026 and our Form 10-K for the year ended December 31, 2025, along with various disclosures in our press releases, stockholder reports, and other filings with the Securities and Exchange Commission.
All such forward-looking statements speak only as of the date of this Form 10-Q. You are cautioned not to place undue reliance on such forward-looking statements. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in the events, conditions, or circumstances on which any such statement is based.
Executive Overview
We were pleased with our third quarter earnings of $0.40 per diluted share. The third quarter reflected strong coordination between our Expedited, Dedicated, and Managed Freight segments as we continued to re-allocate assets to customers that are seeking long-term capacity for their needs and are willing to offer a reasonable return on our meaningful investments in professional drivers, new equipment, and advanced technology. Exiting the third quarter, approximately 80% of our fleet assets were under long-term contracts, and we continue to receive inbound demand from our customers on growing our committed capacity. Repositioning for new contracts created some disruption to utilization and added cost to the Expedited and Dedicated fleets. This was more than countered by higher revenue and operating income in Managed Freight, as our historical brokerage operations successfully sourced capacity for overflow Expedited freight, and the brokerage operations we acquired in the fourth quarter of 2025 had their best quarter as part of the Company. Margin improvement reflected customer rate increases implemented during the first half of the year and lower purchased transportation costs as spot rates eased during the quarter. These improvements followed three consecutive quarters of margin compression.
From a market perspective, freight demand is adequate in most sectors and strong in specific sectors that are aligned with U.S. economic growth. Driver capacity is tight, and the cost of recruiting, retaining, and compensating drivers is increasing significantly. Cost inflation is weighing on nearly every significant line item in our business, including wages and benefits, equipment ownership and maintenance, and technology. In this environment, rate increases have been largely offset by cost increases. However, we expect sequential improvement to continue in the fourth quarter as a higher percentage of our fleet operates under committed arrangements and we incur less repositioning cost.
Our goal is to place substantially all of our asset-based business under long-term dedicated or other committed contracts by the end of this freight market upcycle. Consistent with our strategy, which reduced volatility during the recent freight market downturn, we intend to remain disciplined and patient in pursuing customers and markets that support sustainable long-term value creation.
Additional items of note for the third quarter of 2026 include the following:
| ● |
Total revenue of $353.9 million, an increase of 19.2% compared with the third quarter of 2025, and freight revenue (which excludes revenue from fuel surcharges) of $315.1 million, an increase of 17.2% compared with the third quarter of 2025; |
|
| ● |
Operating income of $12.5 million, compared with $7.9 million in the third quarter of 2025; |
|
| ● |
Net income of $10.7 million, or $0.40 per diluted share, compared with $9.1 million, or $0.35 per diluted share, in the third quarter of 2025. Of the net income for the third quarter of 2025, $2.8 million, or $0.11 per share, was from discontinued operations; |
|
| ● |
Our equity investment in TEL provided $5.7 million of pre-tax earnings in the third quarter of 2026 compared to $3.6 million in the third quarter of 2025; |
|
| ● | We distributed a total of $1.8 million to stockholders through cash dividends; | |
| ● | Since December 31, 2025, total indebtedness, comprised of total debt and finance leases, net of cash, decreased by $12.4 million to $283.9 million, primarily due to fleet downsizing and selling excess equipment. With available borrowing capacity of $75.2 million under our Credit Facility at September 30, 2026 we do not expect to be required to test our fixed charge covenant in the foreseeable future; | |
| ● | Stockholders' equity at September 30, 2026, was $422.3 million; and | |
| ● |
Tangible book value at September 30, 2026, was $244.6 million. |
Outlook
Based on our growing customer pipeline, we expect Dedicated fleet growth, and a stable Expedited fleet with a higher proportion of capacity under dedicated or committed contracts. We are also focused on reducing overhead and other controllable costs as a percentage of revenue, which we expect will support gradual margin expansion. For the fourth quarter of 2026, we expect a modest sequential increase in earnings per share, with anticipated operating margin improvement from our asset-based operations partially offset by lower income from our equity method investment, TEL. Longer term, we believe our strategy can materially improve the combined operating margins of our Expedited and Dedicated reportable segments through continued world-class customer service and disciplined asset reallocation to operations offering higher margins and returns.
In addition to operating ratio, we use "adjusted operating ratio" as a key measure of profitability. Adjusted operating ratio is not a substitute for operating ratio measured in accordance with GAAP. There are limitations to using non-GAAP financial measures. Adjusted operating ratio means operating expenses, net of fuel surcharge revenue, excluding amortization of intangibles, and significant unusual items, divided by total revenue, less fuel surcharge revenue. 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, amortization of intangibles, and significant unusual items. Our Board and management focus on our adjusted operating ratio as an indicator of our performance from period to period. We believe our presentation of adjusted operating ratio is useful because it provides investors and securities analysts the same information that we use internally to assess our core operating performance. Although we believe that adjusted operating ratio improves comparability in analyzing our period-to-period performance, it could limit comparability to other companies in our industry, if those companies define adjusted operating ratio differently. Because of these limitations, adjusted operating ratio should not be considered a measure of income generated by our business or discretionary cash available to us to invest in the growth of our business. Management compensates for these limitations by primarily relying on GAAP results and using non-GAAP financial measures on a supplemental basis.
Operating Ratio
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||||||||
| GAAP Operating Ratio: |
2026 |
OR % |
2025 |
OR % |
2026 |
OR % |
2025 |
OR % |
||||||||||||||||||||||||
| Total revenue |
$ | 353,894 | $ | 296,889 | $ | 993,928 | $ | 869,098 | ||||||||||||||||||||||||
| Total operating expenses |
341,400 | 96.5 | % | 288,963 | 97.3 | % | 966,311 | 97.2 | % | 841,982 | 96.9 | % | ||||||||||||||||||||
| Operating income |
$ | 12,494 | $ | 7,926 | $ | 27,617 | $ | 27,116 | ||||||||||||||||||||||||
| Adjusted Operating Ratio: |
2026 |
Adj. OR % |
2025 |
Adj. OR % |
2026 |
Adj. OR % |
2025 |
Adj. OR % |
||||||||||||||||||||||||
| Total revenue |
$ | 353,894 | $ | 296,889 | $ | 993,928 | $ | 869,098 | ||||||||||||||||||||||||
| Fuel surcharge revenue |
(38,844 | ) | (28,049 | ) | (102,260 | ) | (80,507 | ) | ||||||||||||||||||||||||
| Freight revenue (total revenue, excluding fuel surcharge) |
315,050 | 268,840 | 891,668 | 788,591 | ||||||||||||||||||||||||||||
| Total operating income |
12,494 | 7,926 | 27,617 | 27,116 | ||||||||||||||||||||||||||||
| Adjusted for: |
||||||||||||||||||||||||||||||||
| Amortization of intangibles |
3,001 | 2,653 | 9,001 | 7,770 | ||||||||||||||||||||||||||||
| Contingent consideration liability adjustment |
328 | 710 | 984 | 2,130 | ||||||||||||||||||||||||||||
| Transaction costs |
- | - | - | 149 | ||||||||||||||||||||||||||||
| Employee separation costs |
- | 1,375 | - | 1,375 | ||||||||||||||||||||||||||||
| Lease abandonment and customer exit costs |
- | 429 | - | 429 | ||||||||||||||||||||||||||||
| Abandonment of long-lived software |
- | 1,884 | - | 1,884 | ||||||||||||||||||||||||||||
| Adjusted operating income |
$ | 15,823 | 95.0 | % | $ | 14,977 | 94.4 | % | $ | 37,602 | 95.8 | % | $ | 40,853 | 94.8 | % | ||||||||||||||||
Revenue and Expenses
We focus on targeted markets throughout the United States where we believe our service standards can provide a competitive advantage. We are a major carrier for transportation companies such as parcel freight forwarders, less-than-truckload carriers, and third-party logistics providers that require a high level of service to support their businesses, as well as for traditional truckload customers such as manufacturers, retailers, and food and beverage shippers. Additionally, we provide poultry feed and live haul transportation, as well as highly regulated, time sensitive loads for the U.S. government.
We have four reportable segments, which include:
| ● |
Expedited: The Expedited reportable segment primarily provides truckload services to customers with high service freight and delivery standards, such as 1,000 miles in 22 hours, or 15-minute delivery windows. Expedited services generally require two-person driver teams on equipment either owned or leased by the Company. |
| ● |
Dedicated: The Dedicated reportable segment provides customers with committed truckload capacity over contracted periods with the goal of three to five years in length. Equipment is either owned or leased by the Company. The Dedicated reportable segment also provides shuttle and switching services related to shuttling containers and trailers in or around freight yards and to/from warehouses for Dedicated customers. |
| ● |
Managed Freight: The Managed Freight reportable segment includes our brokerage and transport management services (“TMS”). Brokerage services provide logistics capacity by outsourcing the carriage of customers’ freight to third parties. TMS provides comprehensive logistics services on a contractual basis to customers who prefer to outsource their logistics needs. |
| ● |
Warehousing: The Warehousing reportable segment provides day-to-day warehouse management services to customers who have chosen to outsource this function. The Warehousing reportable segment also provides shuttle and switching services related to shuttling containers and trailers in or around freight yards and to/from warehouses for Warehousing customers. |
In our Expedited and Dedicated reportable segments, we primarily generate revenue by transporting freight for our customers. Generally, we are paid a predetermined rate per mile for our truckload services. We enhance our truckload revenue by charging for tractor and trailer detention, loading and unloading activities, and other specialized services, as well as through the collection of fuel surcharges to mitigate the impact of increases in the cost of fuel. The main factors that could affect our Expedited and Dedicated revenue are the revenue per mile we receive from our customers, the percentage of miles for which we are compensated, and the number of shipments and miles we generate. These factors relate, among other things, to the general level of economic activity in the United States, inventory levels, specific customer demand, the level of capacity in the trucking industry, and driver availability.
The main expenses that impact the profitability of our Expedited and Dedicated reportable segments are the variable costs of transporting freight for our customers. These costs include fuel expenses, driver-related expenses, such as wages, benefits, training, and recruitment, and purchased transportation expenses, which primarily include compensating independent contractors. Expenses that have both fixed and variable components include maintenance and tire expense and our total cost of insurance and claims. These expenses generally vary with the miles we travel, but also have a controllable component based on safety, self-insured retention versus insurance premiums, fleet age, efficiency, and other factors. Historically, our main fixed costs include rentals and depreciation of long-term assets, such as revenue equipment and terminal facilities, and the compensation of non-driver personnel.
Within our Expedited and Dedicated reportable segments, we operate tractors driven by a single driver and also tractors assigned to two-person driver teams. Our single driver tractors generally operate in shorter lengths of haul, generate fewer miles per tractor, and experience more non-revenue miles, but the lower productive miles are expected to be offset by generally higher revenue per loaded mile and the reduced employee expense of compensating only one driver. In contrast, our two-person driver tractors generally operate in longer lengths of haul, generate greater miles per tractor, and experience fewer non-revenue miles, but we typically receive lower revenue per loaded mile and incur higher employee expenses of compensating both drivers. We expect operating statistics and expenses to shift with the mix of single and team operations.
Within our Managed Freight reportable segment, we derive revenue from Brokerage and TMS services, particularly, for arranging transportation services for customers, directly and through relationships with third-party providers and integration with our Expedited reportable segment. Additionally, utilizing technology and process management, we provide detailed visibility into a customer’s movement of freight – inbound and outbound – throughout the customer’s network and focused customer support through multiyear contracts. 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, facility warehousing costs, salaries, and selling, general, and administrative expenses.
In May 2011, we acquired a 49.0% interest in TEL. 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.
Our main measures of profitability are operating ratio and adjusted operating ratio. We define adjusted operating ratio as operating expenses, net of fuel surcharge revenue, excluding amortization of intangibles, and significant unusual items, divided by total revenue, less fuel surcharge revenue. See page 24 for the uses and limitations associated with adjusted operating ratio.
Revenue Equipment
At September 30, 2026, we operated 2,178 tractors and 7,011 trailers. Of such tractors, 2,107 were owned, 15 were financed under finance or operating leases, and 56 tractors were provided by independent contractors, who own and drive their own tractors. Of such trailers, 6,280 were owned and 731 were held under finance or operating leases. At September 30, 2026, our fleet had an average tractor age of 2.2 years and an average trailer age of 6.2 years.
Independent contractors provide a tractor and a driver and are responsible for all operating expenses in exchange for a fixed payment per mile, such that we do not have the capital outlay of purchasing or leasing the tractor. The payments to independent contractors and the financing of equipment under operating leases are recorded in revenue equipment rentals and purchased transportation. Expenses associated with company owned equipment, such as interest and depreciation, and expenses associated with employee drivers, including driver compensation, fuel, and other expenses, are not incurred with respect to independent contractors. Obtaining equipment from independent contractors and under operating leases effectively shifts financing expenses from interest to "above the line" operating expenses.
RESULTS OF CONSOLIDATED OPERATIONS
COMPARISON OF three and nine months ended September 30, 2026 TO three and nine months ended September 30, 2025
The following tables set forth the percentage relationship of certain items to total revenue and freight revenue (total revenue less fuel surcharge revenue) for the periods indicated, where applicable (dollars in thousands):
Revenue
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2026 |
2025 |
2026 |
2025 |
|||||||||||||
| Revenue: |
||||||||||||||||
| Freight revenue |
$ | 315,050 | $ | 268,840 | $ | 891,668 | $ | 788,591 | ||||||||
| Fuel surcharge revenue |
38,844 | 28,049 | 102,260 | 80,507 | ||||||||||||
| Total revenue |
$ | 353,894 | $ | 296,889 | $ | 993,928 | $ | 869,098 | ||||||||
The increase in total revenue for the three months ended September 30, 2026 compared to 2025 primarily resulted from a $49.4 million, $3.8 million, and $1.9 million increase in freight revenue for Managed Freight, Dedicated, and Warehousing, respectively, partially offset by a $9.6 million decrease in freight revenue for Expedited, as well as a $10.8 million increase in fuel surcharge revenue. The increase in total revenue for the nine months ended September 30, 2026 compared to 2025 primarily resulted from a $105.3 million, $16.7 million, and $6.6 million increase in freight revenue for Managed Freight, Dedicated, and Warehousing, respectively, partially offset by a $27.4 million decrease in freight revenue for Expedited, as well as an $21.8 million increase in fuel surcharge revenue.
See results of reportable segment operations section for discussion of fluctuations.
For comparison purposes in the discussion below, we use total revenue and freight revenue (total revenue less fuel surcharge revenue) when discussing changes as a percentage of revenue.
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.
Salaries, wages, and related expenses
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2026 |
2025 |
2026 |
2025 |
|||||||||||||
| Salaries, wages, and related expenses |
$ | 115,501 | $ | 109,745 | $ | 334,903 | $ | 323,845 | ||||||||
| % of total revenue |
32.6 | % | 37.0 | % | 33.7 | % | 37.3 | % | ||||||||
| % of freight revenue |
36.7 | % | 40.8 | % | 37.6 | % | 41.1 | % | ||||||||
Salaries, wages, and related expenses increased on a dollars basis for the three and nine months ended September 30, 2026 compared to the same 2025 periods primarily as a result of growth in our Dedicated and Warehousing reportable segments, pay increases since the prior period, and group health expenses, partially offset by a lower percentage of revenue from Expedited. As a percentage of freight revenue for the three and nine months ended September 30, 2026, salaries, wages, and related expenses decreased as the foregoing factors increasing these expenses were offset by a lower percentage of revenue from Expedited, where we incur driver pay for team-driven tractors, and a higher percentage of revenue from Managed Freight, where we don't incur driver pay.
We believe driver and non-driver, including shop technicians, pay and benefits will continue to increase as the result of wage inflation, higher healthcare costs, and, in certain periods, increased incentive compensation due to better performance. Driver pay may also fluctuate based on the number of miles driven. Driver capacity is tight, and the cost of recruiting, retaining, and compensating drivers is increasing significantly. We have historically put driver pay increases in place as necessary to address driver market pressure and will continue to do so as necessary. As the freight market rates increase, we would expect to, as we have historically, pass a portion of those rate increases on to our professional drivers. 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.
Fuel expense
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2026 |
2025 |
2026 |
2025 |
|||||||||||||
| Fuel expense |
$ | 38,259 | $ | 29,506 | $ | 104,406 | $ | 85,663 | ||||||||
| % of total revenue |
10.8 | % | 9.9 | % | 10.5 | % | 9.9 | % | ||||||||
| % of freight revenue |
12.1 | % | 11.0 | % | 11.7 | % | 10.9 | % | ||||||||
Total fuel expense for the three and nine months ended September 30, 2026 increased on a dollars basis primarily due to higher fuel prices partially offset by a 19.3% and 14.5% decrease in total miles, respectively, compared to the 2025 periods. As a percentage of freight revenue for the three and nine months ended September 30, 2026, total fuel expense increased as the foregoing factors partially offset a lower percentage of revenue from Expedited, where we incur fuel expense, and a higher percentage of revenue from Managed Freight, where we don't incur fuel expense.
We receive a fuel surcharge on our loaded miles from most shippers; however, this does not cover the entire cost of fuel for several reasons, including the following: surcharges cover only loaded miles we operate; surcharges do not cover miles driven out-of-route by our drivers; and surcharges typically do not cover refrigeration unit fuel usage or fuel burned by tractors while idling. Moreover, most of our business relating to shipments obtained from freight brokers does not carry a fuel surcharge. Finally, fuel surcharges vary in the percentage of reimbursement offered, and not all surcharges fully compensate for fuel price increases even on loaded miles.
The rate of fuel price changes also can have an impact on results. Most fuel surcharges are based on the average fuel price as published by the Department of Energy ("DOE") for the week prior to the shipment, meaning we typically bill customers in the current week based on the previous week's applicable index. Therefore, in times of increasing fuel prices, we do not recover as much as we are currently paying for fuel. In periods of declining prices, the opposite is true. Average fuel prices as measured by the DOE were $2.54 per gallon, or 67.8%, higher for the quarter ended September 30, 2026 compared with the same quarter in 2025.
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. The result is referred to as net fuel expense. Our net fuel expense as a percentage of freight revenue is affected by the cost of diesel fuel net of fuel surcharge revenue, the percentage of miles driven by company tractors, our fuel economy, and our percentage of deadhead miles, for which we do not receive material fuel surcharge revenues.
Net fuel expense is shown below:
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2026 |
2025 |
2026 |
2025 |
|||||||||||||
| Total fuel surcharge |
$ | 38,844 | $ | 28,049 | $ | 102,260 | $ | 80,507 | ||||||||
| Less: Fuel surcharge revenue reimbursed to independent contractors and other third parties |
2,005 | 1,877 | 5,638 | 5,261 | ||||||||||||
| Company fuel surcharge revenue |
$ | 36,839 | $ | 26,172 | $ | 96,622 | $ | 75,246 | ||||||||
| Total fuel expense |
$ | 38,259 | $ | 29,506 | $ | 104,406 | $ | 85,663 | ||||||||
| Less: Company fuel surcharge revenue |
36,839 | 26,172 | 96,622 | 75,246 | ||||||||||||
| Net fuel expense |
$ | 1,420 | $ | 3,334 | $ | 7,784 | $ | 10,417 | ||||||||
| % of freight revenue |
0.5 | % | 1.2 | % | 0.9 | % | 1.3 | % | ||||||||
For the periods presented, net fuel expense decreased, including as a percentage of freight revenue, primarily due to improved fuel surcharge recovery compared to the prior periods.
We expect to continue managing our idle time and tractor speeds, investing in more fuel-efficient tractors and auxiliary power units to improve our miles per gallon, partnering with customers to adjust fuel surcharge programs that are inadequate to recover a fair portion of fuel costs, and testing the latest technologies that reduce fuel consumption. Going forward, our net fuel expense is expected to fluctuate as a percentage of revenue based on factors such as diesel fuel prices, percentage recovered from fuel surcharge programs, percentage of uncompensated miles, percentage of revenue generated by team-driven tractors (which tend to generate higher miles and lower revenue per mile, thus proportionately more fuel cost as a percentage of revenue), percentage of revenue generated from independent contractors, and the success of fuel efficiency initiatives. These fluctuations could be greater given international conflicts impacting the price of fuel.
Operations and maintenance
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2026 |
2025 |
2026 |
2025 |
|||||||||||||
| Operations and maintenance |
$ | 20,235 | $ | 19,352 | $ | 56,915 | $ | 52,168 | ||||||||
| % of total revenue |
5.7 | % | 6.5 | % | 5.7 | % | 6.0 | % | ||||||||
| % of freight revenue |
6.4 | % | 7.2 | % | 6.4 | % | 6.6 | % | ||||||||
The increase in operations and maintenance for the three and nine months ended September 30, 2026 was primarily the result of the increased average age of tractors, high demands on equipment as we grow our fleet in niche service areas, and increased recruiting costs due to the tight driver market.
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, the average age of our tractor fleet, accident severity and frequency, weather, the reliability of new and untested revenue equipment models, our mix of specialty and commoditized freight, wage and parts inflation, and any disruption of the supply chain.
Revenue equipment rentals and purchased transportation
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2026 |
2025 |
2026 |
2025 |
|||||||||||||
| Revenue equipment rentals and purchased transportation |
$ | 113,412 | $ | 72,908 | $ | 301,354 | $ | 206,504 | ||||||||
| % of total revenue |
32.0 | % | 24.6 | % | 30.3 | % | 23.8 | % | ||||||||
| % of freight revenue |
36.0 | % | 27.1 | % | 33.8 | % | 26.2 | % | ||||||||
The increases in revenue equipment rentals and purchased transportation for the three and nine months ended September 30, 2026 were primarily the result of the 2025 Star Acquisition and heightened costs associated with securing capacity within the Managed Freight reportable segment, especially during the first half of 2026 until spot rates started to ease during the third quarter of 2026. Additionally, total miles run by independent contractors decreased from 7.7% and 7.2% for the three and nine months ended September 30, 2025, to 5.7% and 6.1% for the same 2026 periods, respectively.
We expect purchased transportation to fluctuate as volumes in our Managed Freight reportable segment may be volatile. 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. 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. As industry-wide trucking capacity tightens in relation to freight demand, we have needed to increase the amounts we pay to third-party transportation providers and independent contractors, which increased this expense category on an absolute basis and as a percentage of freight revenue due to heightened costs outpacing our ability to capture contractual rate increases with certain of our customers. This trend is expected to continue as capacity tightens further. If we were to recruit more independent contractors, we would expect this line item to increase as a percentage of revenue.
Operating taxes and licenses
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2026 |
2025 |
2026 |
2025 |
|||||||||||||
| Operating taxes and licenses |
$ | 3,089 | $ | 3,304 | $ | 9,104 | $ | 10,326 | ||||||||
| % of total revenue |
0.9 | % | 1.1 | % | 0.9 | % | 1.2 | % | ||||||||
| % of freight revenue |
1.0 | % | 1.2 | % | 1.0 | % | 1.3 | % | ||||||||
For the periods presented, the change in operating taxes and licenses was insignificant both as a percentage of total revenue and freight revenue.
Insurance and claims
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2026 |
2025 |
2026 |
2025 |
|||||||||||||
| Insurance and claims |
$ | 9,791 | $ | 14,179 | $ | 40,575 | $ | 46,769 | ||||||||
| % of total revenue |
2.8 | % | 4.8 | % | 4.1 | % | 5.4 | % | ||||||||
| % of freight revenue |
3.1 | % | 5.3 | % | 4.6 | % | 5.9 | % | ||||||||
On a cents per mile basis, insurance and claims decreased to 17.9 cents per mile and increased to 23.6 cents per mile for the three and nine months ended September 30, 2026, respectively, compared to 20.9 cents per mile and 23.3 for the 2025 periods, respectively. For the three month period, the decrease on a cents per mile basis was primarily due to decreased insurance and claims expense, partially offset by decreased miles. For the nine month period, the increase on a cents per mile basis was primarily due to decreased miles, partially offset by reduced insurance and claims expense. Miles decreased primarily due to reducing our Expedited fleet as well as weather in 2026.
Our insurance program includes multi-year policies with specific insurance limits that may be eroded over the course of the policy term. If that occurs, we will be operating with less liability 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. 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. 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 September 30, 2026, there were no outstanding claims in this layer. 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 materially adverse effect on our business, results of operations, financial condition, or liquidity.
We expect insurance and claims expense to continue to be volatile over the long-term. The May 2026 United States Supreme Court decision that the Federal Aviation Administration Authorization Act does not preempt state law liability claims against freight brokers could lead to additional volatility in our insurance and claims expense, as discussed in Item 1A of Part II in our Form 10-Q for the quarter ended June 30, 2026. To the extent damages awarded against us for any claims exceed our coverage limits, involve significant aggregate use of our self-insured retention amounts, are uninsured, or cause increases in our insurance premiums, our insurance and claims expense would be volatile and increase. Any resulting increases in such expenses could have a materially adverse effect on our business, results of operations, financial condition, or liquidity. For additional details regarding our claims accruals, see Note 9, "Commitments and Contingencies" of the accompanying condensed consolidated financial statements.
Communications and utilities
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2026 |
2025 |
2026 |
2025 |
|||||||||||||
| Communications and utilities |
$ | 2,152 | $ | 1,631 | $ | 6,063 | $ | 4,580 | ||||||||
| % of total revenue |
0.6 | % | 0.5 | % | 0.6 | % | 0.5 | % | ||||||||
| % of freight revenue |
0.7 | % | 0.6 | % | 0.7 | % | 0.6 | % | ||||||||
For the periods presented, the change in communications and utilities was insignificant both as a percentage of total revenue and freight revenue.
General supplies and expenses
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2026 |
2025 |
2026 |
2025 |
|||||||||||||
| General supplies and expenses |
$ | 16,448 | $ | 15,872 | $ | 43,046 | $ | 44,124 | ||||||||
| % of total revenue |
4.6 | % | 5.3 | % | 4.3 | % | 5.1 | % | ||||||||
| % of freight revenue |
5.2 | % | 5.9 | % | 4.8 | % | 5.6 | % | ||||||||
For the three months ended September 30, 2026, general supplies and expenses increased as a result of a $1.2 million increase in legal and other professional service costs compared to the prior 2025 period. This increase was partially offset by the $0.3 million increase in the fair value of the contingent consideration recognized during the 2026 period, compared to the increase of $0.7 million during the same 2025 period. For the nine months ended September 30, 2026, general supplies and expenses decreased as a result of the less than $0.1 million decrease in the fair value of the contingent consideration recognized during the 2026 period, compared to an increase of $2.1 million recognized during the same 2025 period, partially offset by increased technology costs during the 2026 period.
Depreciation and amortization
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2026 |
2025 |
2026 |
2025 |
|||||||||||||
| Depreciation and amortization |
$ | 23,458 | $ | 22,953 | $ | 70,253 | $ | 67,869 | ||||||||
| % of total revenue |
6.6 | % | 7.7 | % | 7.1 | % | 7.8 | % | ||||||||
| % of freight revenue |
7.4 | % | 8.5 | % | 7.9 | % | 8.6 | % | ||||||||
Depreciation and amortization consists primarily of depreciation of tractors, trailers, and other capital assets, as well as amortization of intangible assets.
Depreciation expense increased $0.2 million to $20.5 million for the three months ended September 30, 2026 and increased $1.2 million to $61.3 million for the nine months ended September 30, 2026, compared to $20.3 million and $60.1 million in the same 2025 periods. Amortization of intangible assets was $3.0 million and $9.0 million for the three and nine months ended September 30, 2026 compared to $2.7 million and $7.8 million for the same 2025 periods. The increase for the three and nine months ended September 30, 2026 is due to the amortization of the intangible asset related to the Star Acquisition.
We expect depreciation and amortization to increase on a per unit basis going forward as the cost of new equipment increases. Additionally, changes in the used tractor market have caused us to adjust residual values and increase depreciation, and further adjustments may be necessary in the future. 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.
(Gain) loss on disposition of property and equipment, net
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2026 |
2025 |
2026 |
2025 |
|||||||||||||
| (Gain) loss on disposition of property and equipment, net |
$ | (945 | ) | $ | (487 | ) | $ | (308 | ) | $ | 134 | |||||
| % of total revenue |
(0.3 | %) | (0.2 | %) | 0.0 | % | 0.0 | % | ||||||||
| % of freight revenue |
(0.3 | %) | (0.2 | %) | 0.0 | % | 0.0 | % | ||||||||
For the periods presented, the change in (gain) loss on disposition of property and equipment, net was insignificant both as a percentage of total revenue and freight revenue.
Interest expense, net
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2026 |
2025 |
2026 |
2025 |
|||||||||||||
| Interest expense, net |
$ | 3,854 | $ | 3,468 | $ | 10,721 | $ | 8,795 | ||||||||
| % of total revenue |
1.1 | % | 1.2 | % | 1.1 | % | 1.0 | % | ||||||||
| % of freight revenue |
1.2 | % | 1.3 | % | 1.2 | % | 1.1 | % | ||||||||
For the periods presented, the change in interest expense, net was insignificant both as a percentage of total revenue and freight revenue.
This line item will fluctuate based on our decision with respect to purchasing revenue equipment with balance sheet debt versus operating leases, our revenue equipment replacement plan, and changing interest rates.
Income from equity method investment
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2026 |
2025 |
2026 |
2025 |
|||||||||||||
| Income from equity method investment |
$ | 5,650 | $ | 3,578 | $ | 14,602 | $ | 11,622 | ||||||||
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 or loss. The change in TEL's contribution to our results for the three and nine months ended September 30, 2026 was primarily due to equipment leasing growth with better lease rates and improvement in gain on sale of equipment as a result of improvements in the used equipment market. For the remainder of 2026, we expect TEL's earnings to remain relatively similar to those of the current period. However, 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.
Income tax expense
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2026 |
2025 |
2026 |
2025 |
|||||||||||||
| Income tax expense |
$ | 3,586 | $ | 1,772 | $ | 7,839 | $ | 7,276 | ||||||||
| % of total revenue |
1.0 | % | 0.6 | % | 0.8 | % | 0.8 | % | ||||||||
| % of freight revenue |
1.1 | % | 0.7 | % | 0.9 | % | 0.9 | % | ||||||||
The increases in income tax expense for the three and nine months ended September 30, 2026 were the result of a $6.3 million and $1.6 million increase in pre-tax income, respectively, compared to the same 2025 periods. The changes in pre-tax income resulted from the aforementioned changes in operating income, interest expense, net, and income from equity method investment.
The effective tax rate is different from the expected combined tax rate due primarily to state tax expense and permanent differences. The rate impact of items such as executive compensation disallowance and the deductibility of per diem payments will fluctuate in future periods as income fluctuates.
RESULTS OF SEGMENT OPERATIONS
We have four reportable segments, Expedited, Dedicated, Managed Freight, and Warehousing, each as described above.
COMPARISON OF three and nine months ended September 30, 2026 TO three and nine months ended September 30, 2025
The following table summarizes revenue and segment operating income data by reportable segment:
| (in thousands) |
Three Months Ended |
Nine Months Ended |
||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2026 |
2025 |
2026 |
2025 |
|||||||||||||
| Revenues: |
||||||||||||||||
| Expedited |
$ | 89,473 | $ | 94,632 | $ | 267,564 | $ | 286,625 | ||||||||
| Dedicated |
115,124 | 105,020 | 330,913 | 300,906 | ||||||||||||
| Managed Freight |
121,635 | 72,220 | 311,908 | 206,620 | ||||||||||||
| Warehousing |
26,945 | 24,964 | 81,530 | 74,894 | ||||||||||||
| Other |
717 | 53 | 2,013 | 53 | ||||||||||||
| Total revenues |
$ | 353,894 | $ | 296,889 | $ | 993,928 | $ | 869,098 | ||||||||
| Segment Operating Income(1): |
||||||||||||||||
| Expedited |
$ | 7,846 | $ | 5,079 | $ | 19,053 | $ | 18,135 | ||||||||
| Dedicated |
6,416 | 4,099 | 19,781 | 12,272 | ||||||||||||
| Managed Freight |
7,367 | 2,960 | 12,809 | 10,962 | ||||||||||||
| Warehousing |
1,697 | 2,498 | 5,049 | 6,258 | ||||||||||||
| (1) | Segment operating income excludes indirect costs not directly attributable to any one reportable segment, amortization of intangible assets, and contingent consideration liability adjustments to match the information our CODM uses to evaluate the operating results of our reportable segments. |
The decrease in Expedited revenue for the three months ended September 30, 2026 relates to a decrease of 21.5% in average total tractors compared to the 2025 quarter partially offset by a $4.5 million increase in fuel surcharge revenue. Average freight revenue per tractor per week increased 12.0% a result of a 42.0 cents per mile (or 20.0%) increase in average rate per total mile partially offset by a 6.5% decrease in average miles per unit compared to the 2025 quarter. Expedited team-driven tractors averaged 613 and 781 tractors in the third quarter of 2026 and 2025, respectively. During the quarter, our Expedited fleet continued to transition to multi-year committed capacity agreements.
For the nine months ended September 30, 2026 the decrease in Expedited revenue relates to a decrease of 16.4% in average total tractors compared to the 2025 period partially offset by a $8.4 million increase in fuel surcharge revenue. Average freight revenue per tractor per week increased 6.1% compared to the 2025 period as a result of a 24.0 cents per mile (or 11.4%) increase in average rate per total mile partially offset by a 4.5% decrease in average miles per unit as compared to the 2025 period. Expedited team-driven tractors averaged 660 and 794 tractors in the nine months ended September 30, 2026 and 2025, respectively.
The increase in Dedicated revenue for the three months ended September 30, 2026 relates to an increase in average freight revenue per tractor per week of 6.2% partially offset by a 30, or 1.9%, average tractor decrease compared to the 2025 quarter. The increase in average freight revenue per tractor per week was the result of a 49.0 cents per mile (or 16.0%) increase in average rate per total mile partially offset by a 8.3% decrease in average miles per unit compared to the 2025 quarter, as a result of the expansion of our agricultural protein-related business and exiting non-specialized dedicated business that has struggled to meet profitability thresholds.
For the nine months ended September 30, 2026 the increase in Dedicated revenue relates to an increase in average freight revenue per tractor per week of 7.8%, partially offset by a 31, or 1.3%, average tractor decrease compared to the 2025 period. The increase in average freight revenue per tractor per week was the result of a 45.0 cents per mile (or 14.3%) increase in average rate per total mile partially offset by a 5.7% decrease in average miles per unit compared to the 2025 period.
For the three and nine months ended September 30, 2026, Managed Freight total revenue increased compared to the 2025 periods primarily as a result of the fourth quarter 2025 Star Acquisition and customer rate increases obtained during the first half of the year.
For the three and nine months ended September 30, 2026, Warehousing total revenue increased $1.9 million and $6.6 million compared to the 2025 periods primarily due to onboarding a significant customer in the fourth quarter of 2025.
The increase in Expedited segment operating income for the three months ended September 30, 2026 was primarily the result of a decrease in Expedited segment operating expenses partially offset by the aforementioned decrease in revenue. For the nine months ended September 30, 2026 the increase in Expedited segment operating income was primarily the result of a decrease in Expedited segment operating expenses, partially offset by the aforementioned decrease in revenue. The decrease in Expedited segment operating expenses for the three and nine months ended September 30, 2026 was primarily the result of decreases in salaries, wages, and benefits for our professional drivers, operations and maintenance, and purchased transportation as compared to the same 2025 periods as a result of fewer average miles per unit and a decrease in the average number of Expedited team-driven tractors. As we progress throughout this cycle, our focus for our Expedited fleet is to serve customers who truly need our teams and are willing to agree to multi-year agreements as a sign of their commitment.
The increase in Dedicated segment operating income for the three and nine months ended September 30, 2026 was primarily the result of aforementioned increase in revenue, partially offset by an increase in Dedicated segment operating expenses. The increase in Dedicated segment operating expenses for the three and nine months ended September 30, 2026, was primarily the result of increased salaries, wages, and benefits for our professional drivers, fuel expenses, and operations and maintenance costs since the 2025 periods as a result of productivity from our agricultural protein related fleet which was negatively impacted by avian influenza during the prior year periods as well as exiting non-specialized dedicated business that was below our preferred profitability thresholds. Going forward, we remain focused on our strategy of growing our dedicated fleet, specifically in areas that provide value-added services for customers. We believe that if we are successful in providing best in class service and controlling our costs, growth and improved profitability will result.
The increase in segment operating income for Managed Freight for the three and nine months ended September 30, 2026 was primarily the result of the aforementioned increase in Managed Freight revenue partially offset by an increase in Managed Freight segment operating expenses. The increase in Managed Freight segment operating expenses for the three and nine months ended September 30, 2026 was primarily the result of the increases in revenue driving increases in variable expenses, primarily purchased transportation as well as heightened costs associated with securing capacity. The segment operating income improved compared to the periods last year due to the combination of customer rate increases obtained during the first half of the year and sequentially easing capacity costs experienced during the quarter. As supply continues to exit the freight market, our ability to source quality carrier capacity below contractual freight pricing can be challenging at times, leading to periods of margin compression. Additionally, higher insurance and claims expense has become a greater risk in Managed Freight.
The decrease in segment operating income for Warehousing for the three and nine months ended September 30, 2026 is primarily due to startup-related costs and inefficiencies for a significant customer onboarded during the fourth quarter of 2025 that more than offset the aforementioned increase in revenue as well as general labor inflation. Going forward, as activities within this startup normalize, our goal is to have operating income margins in the high-single digit range through a combination of rate increases and cost reductions.
LIQUIDITY AND CAPITAL RESOURCES
Our business requires significant capital investments over the short-term and the long-term. Historically, we have financed our capital requirements with borrowings under our Credit Facility, cash flows from operations, long-term operating leases, finance leases, secured installment notes with finance companies, and proceeds from the sale of our used revenue equipment. Going forward, we expect revenue equipment acquisitions to primarily be through purchases and finance leases. 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 $31.7 million and $22.8 million at September 30, 2026 and December 31, 2025, respectively. Our working capital on any particular day can vary significantly due to the timing of collections and cash disbursements. Based on our expected financial condition, net capital expenditures, results of operations, related net cash flows, installment notes, and other sources of financing, we believe our working capital and sources of liquidity will be adequate to meet our current and projected needs, and we do not expect to experience material liquidity constraints in the foreseeable future.
With an average tractor fleet age of 2.2 years at September 30, 2026, 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.
As of September 30, 2026 and December 31, 2025 we had $316.7 million and $338.7 million in debt and lease obligations, respectively, consisting of the following:
| ● |
$35.1 million and $30.0 million outstanding borrowings under the Credit Facility; | |
| ● | $234.2 million and $251.7 million in equipment installment notes, respectively; | |
| ● | $15.3 million and $16.3 million in real estate notes, respectively; | |
| ● | $3.1 million and $3.2 million of the principal portion of financing lease obligations, respectively; and | |
| ● | $29.1 million and $37.5 million of the operating lease obligations, respectively. |
The decrease in equipment installment notes is primarily due to fleet downsizing and selling excess equipment. The decrease in operating lease obligations is primarily the result of scheduled amortization.
As of September 30, 2026, we had $35.1 million borrowings outstanding, undrawn letters of credit outstanding of approximately $19.8 million, and available borrowing capacity of $75.2 million under the Credit Facility. Fluctuations in the outstanding balance and related availability under our Credit Facility are driven primarily by cash flows from operations and the nature and timing of property and equipment additions that are not funded through notes payable, 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.
Our net capital expenditures for the nine months ended September 30, 2026 totaled $18.6 million of expenditures, as compared to $88.4 million of expenditures for the nine months ended September 30, 2025. During the nine months ended September 30, 2026, we took delivery of approximately 362 new tractors and 154 new trailers, while disposing of approximately 799 used tractors and 253 used trailers. Net gains on disposal of equipment were $0.3 million for the nine months ended September 30, 2026 compared to a net loss of $0.1 million for the nine months ended September 30, 2025. Our current fleet plan for the balance of 2026 ranges from $35.0 million to $40.0 million, which is a significant reduction compared to 2025. Our expected capital expenditures are subject to change based on growth opportunities in our Dedicated fleet and the potential impacts of tariffs during the year. Our equipment plan reflects our priorities of maintaining the average age of our fleet in a manner that allows us to optimize operational uptime and related operating costs and offer a fleet of equipment that our professional drivers are proud to operate. We expect the benefits of improved utilization, fuel economy and maintenance costs to produce acceptable returns despite increased prices of new equipment and potentially lower values of used equipment. Given the mix change between our high mileage Expedited fleet and lower mileage Dedicated fleets, going forward, we anticipate the average age of our equipment to range from 25 to 28 months.
We distributed a total of $5.3 million to stockholders in the first nine months of 2026 through dividends.
We believe we have sufficient liquidity to satisfy our cash needs, and we will continue to evaluate the nature and extent of potential short-term and long-term impacts to our business.
Cash Flows
Net cash flows provided by operating activities decreased to $44.9 million for the nine months ended September 30, 2026, compared to $88.1 million for the same 2025 period. Changes in operating assets and liabilities used $43.6 million and $3.7 million during the nine months ended September 30, 2026 and 2025, respectively, largely due to an increase in the cash used for receivables and advances driven by an increase in our days sales outstanding of 51 days compared to 48 days in the 2025 period. Additionally net income decreased to $23.7 million for the nine months ended September 30, 2026, compared to $25.5 million for the same 2025 period. These increases in cash used during the 2026 period were partially offset by higher non-cash adjustments, including deferred income tax benefit and depreciation and amortization.
Net cash flows used by investing activities were $19.1 million for the nine months ended September 30, 2026, compared to $89.2 million used in the same 2025 period. The decrease in net cash flows used by investing activities was primarily due to disposing of a large amount of unproductive used revenue equipment and buying very little new equipment, whereby we took delivery of approximately 362 new tractors and 154 new trailers, while disposing of approximately 799 used tractors and 253 used trailers during the 2026 period compared to delivery of 438 new tractors and 440 new trailers, while disposing of approximately 615 used tractors and 271 used trailers in the same 2025 period.
Net cash flows used by financing activities were $27.0 million for the nine months ended September 30, 2026, compared to $31.9 million used in the same 2025 period. The decrease in net cash used by financing activities was primarily attributable to the absence of common stock repurchases during the 2026 period compared to $36.6 million of net common stock repurchases (inclusive of excise tax) in the 2025 period. This decrease in net cash usage was partially offset by net repayments relating to our notes payable and our Credit Facility of $13.5 million in the 2026 period compared to net borrowings of $16.3 million in the 2025 period.
Net cash flows provided by operating activities included contingent consideration payments related to the LTST acquisition of $8.3 million and $8.0 million during the 2026 and 2025 periods, respectively. Net cash flows used by financing activities included contingent consideration payments of $4.2 million related to the LTST acquisition and $1.0 million related to the Asset Acquisition during 2026, compared to contingent consideration payments of $4.5 million related to the LTST acquisition during 2025.
On April 23, 2025, the Board approved a stock repurchase program authorizing the purchase of up to $50 million of the Company's Class A common stock from time-to-time based upon market conditions and other factors. The stock may be repurchased on the open market, in privately negotiated transactions, or other legally permissible means, including pursuant to Rule 10b5-1 trading plans. The Company did not place a limit on the duration of the repurchase program. The stock repurchase program does not obligate the Company to repurchase any specific number of shares, and the Company may suspend or terminate the program at any time without prior notice. There were no shares repurchased during nine months ended September 30, 2026 and approximately 1.6 million shares of our class A common stock for $36.2 million (excluding excise tax) repurchased during the nine months ended September 30, 2025 and the year ended December 31 2025.
Our 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.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires us to make decisions based upon estimates, assumptions, and factors we consider as relevant to the circumstances. Such decisions include the selection of applicable accounting principles and the use of judgment in their application, the results of which impact reported amounts and disclosures. Changes in future economic conditions or other business circumstances may affect the outcomes of our estimates and assumptions. Accordingly, actual results could differ from those anticipated. There have been no material changes to our most critical accounting policies and estimates during the three and nine months ended September 30, 2026, compared to those disclosed in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in our Form 10-K for the year ended December 31, 2025.
| QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Our market risks have not changed materially from the market risks reported in our Form 10-K for the year ended December 31, 2025.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures to ensure that material information relating to us, including our consolidated subsidiaries, is made known to the officers who certify our financial reports and to other members of senior management and the Board.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operations of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2026.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Accordingly, even effective internal control over financial reporting can only provide reasonable assurance of achieving its control objectives.
We have confidence in our internal controls and procedures. Nevertheless, our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure procedures and controls or our internal controls will prevent all errors or intentional fraud. An internal control system, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of such internal controls are met. Further, the design of an internal control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. As a result of the inherent limitations in all internal control systems, no evaluation of controls can provide absolute assurance that all our control issues and instances of fraud, if any, have been detected.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) that occurred during the three months ended September 30, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
| PART II |
OTHER INFORMATION |
| LEGAL PROCEEDINGS |
Information about our legal proceedings is included in Note 9, "Commitments and Contingencies" of the accompanying condensed consolidated financial statements and is incorporated by reference herein.
| RISK FACTORS |
While we attempt to identify, manage, and mitigate risks and uncertainties associated with our business, some level of risk and uncertainty will always be present. Our Form 10-Q for the quarter ended June 30, 2026 and Form 10-K for the year ended December 31, 2025, in the sections entitled "Item 1A. Risk Factors," describe some of the risks and uncertainties associated with our business. These risks and uncertainties have the potential to materially affect our business, financial condition, results of operations, cash flows, projected results, and future prospects.
| UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
During the quarter ended September 30, 2026, we did not engage in unregistered sales of securities or any other transactions required to be reported under this Item 2 of Part II on Form 10-Q.
The payment of cash dividends is currently limited by our financing arrangements, including certain covenants under our Credit Facility. We distributed a total of $5.3 million to stockholders in the first nine months of 2026 through dividends.
| DEFAULTS UPON SENIOR SECURITIES |
Not applicable.
| MINE SAFETY DISCLOSURES |
Not applicable.
| INFORMATION |
On , , our , a Rule 10b5-1 trading plan, that is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act, pursuant to which up to
On , , our , a Rule 10b5-1 trading plan, that is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act, pursuant to which up to
On , , a of the Company, a Rule 10b5-1 trading plan, that is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act, pursuant to which up to
| Exhibit Number |
Reference |
Description |
| (1) |
Fourth Amended and Restated Articles of Incorporation |
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| (2) |
Sixth Amended and Restated Bylaws |
|
| (1) |
Fourth Amended and Restated Articles of Incorporation |
|
| (2) |
Sixth Amended and Restated Bylaws |
|
| 10.1 | #* | Form of Executive Severance Agreement (2026) |
| # |
Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by David R. Parker, the Company's Principal Executive Officer |
|
| # |
Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by James S. Grant, the Company's Principal Financial Officer |
|
| ## |
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by David R. Parker, the Company's Chief Executive Officer |
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| ## |
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by James S. Grant, the Company's Principal Financial Officer |
|
| 101.INS |
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |
| 101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
|
| 101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
| 101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
| 101.LAB |
Inline XBRL Taxonomy Extension Labels Linkbase Document |
|
| 101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL Document and included in Exhibit 101) | |
| References: |
||
| (1) | Incorporated by reference to Exhibit 3.1 to the Company's Form 10-Q (File No. 001-42192), filed August 7, 2025. | |
| (2) |
Incorporated by reference to Exhibit 3.2 to the Company's Report on Form 8-K (File No. 000-24960), filed August 9, 2021. | |
| # |
Filed herewith. |
|
| ## |
Furnished herewith. |
|
| * | Management contract or compensatory plan or arrangement. | |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| COVENANT LOGISTICS GROUP, INC. |
||
| Date: November 6, 2026 |
By: |
/s/ James S. Grant |
| James S. Grant |
||
| Chief Financial Officer in his capacity as such and as a duly authorized officer on behalf of the issuer |
||
Exhibit 10.1
EXECUTIVE SEVERANCE AGREEMENT
THIS EXECUTIVE SEVERANCE AGREEMENT (“Agreement”) is made and entered into by and between Transport Management Services, LLC (“Company”) and __________ (“Executive”). Once signed by both parties, this Agreement will be deemed effective as of __________ (“Effective Date”). Capitalized terms used herein but undefined shall have the meaning set forth in Exhibit A to this Agreement.
1. Employment. Executive is currently employed by the Company. Executive has previously entered into that certain Confidentiality, Non-Disclosure and Restrictive Covenants Agreement (the “NDA”) with the Company (or an affiliate). In the event of a conflict between the terms set forth herein and those set forth in Executive’s NDA, the terms set forth herein shall control.
2. Term. This Agreement shall commence on the Effective Date and end on the date that Executive’s employment is terminated. Executive shall be an at-will employee whose employment may be terminated by either Executive or the Company at any time, for any reason, with or without Cause, subject to the terms of this Agreement.
3. Compensation. As compensation for Executive’s services, the Company shall pay to Executive a base annualized salary (“Annual Base Salary”), which salary shall be paid in conformity with the Company’s pay practices generally applicable to Company executives. Executive shall be entitled to participate in all employee benefit plans and programs to the same extent generally available to similarly situated Company executives in accordance with the terms of those plans and programs. Executive acknowledges that, as of the Effective Date, Company’s parent company is Covenant Logistics Group, Inc. (“Parent”). Executive further agrees that Executive’s employment can be transferred within the Company Group by Parent without effecting the rights and obligations set forth in this Agreement, provided a Change in Control is not effected in connection with such transfer.
4. Termination.
4.1 Termination Procedures.
(a) During the term of this Agreement, any purported termination of the Executive’s employment (other than by reason of death) shall be communicated by a Notice of Termination from one party hereto to the other party hereto in accordance with this Section 4.1(a). For purposes of this Agreement, a “Notice of Termination” shall mean, (i) in the case of a termination of the Executive’s employment by the Company without Cause, a written notice of termination, (ii) in the case of a termination of the Executive’s employment by the Company for Cause, a written notice of termination, which will indicate the conduct set forth in the definition of Cause set forth herein that the Executive was found to have violated, (iii) in the case of a termination of the Executive’s employment by the Company due to Executive’s Disability, a written notice of termination, and (iv) in the case of the Executive terminating his or her employment with the Company, a written notice of termination; provided, that a Notice of Termination by the Executive in the case of a Constructive Termination shall specify in reasonable detail the event or circumstance constituting the Constructive Termination under the definition of Constructive Termination set forth herein, and such notice of Constructive Termination must be provided by the Executive to the Company within ninety (90) days of the initial existence of the condition giving rise to the Constructive Termination. Notwithstanding anything to the contrary contained herein, if the Executive engages in conduct that the Company or Parent reasonably believes to be imminently harmful to the Company, Parent, or any subsidiary or affiliate of the Company or Parent (collectively, the “Company Group”), the Company may terminate the Executive’s employment by giving the Executive a verbal Notice of Termination, which may be effective immediately, and which shall be effective for purposes of this Agreement.
(b) “Date of Termination” with respect to any purported termination of the Executive’s employment during the term of this Agreement shall mean:
(i) if Executive’s employment is terminated by the Company for Disability, the date specified in the Notice of Termination (provided that the Executive shall not have returned to the full-time performance of the Executive’s duties before the date set forth in the Notice of Termination);
(ii) if Executive’s employment is terminated because of Executive’s death, immediately upon the death of Executive;
(iii) if Executive's employment is terminated by the Company for any reason other than Executive’s death or Disability, the date specified in the Notice of Termination; and
(iv) in the case of termination by the Executive (including a Constructive Termination), thirty (30) days after the date such Notice of Termination is given; provided, in the case of a Constructive Termination, the Notice of Termination contemplated by Paragraph (a) of this Section 4.1 shall be deemed cancelled, void and of no further force and effect, and no payment obligation of the Company shall arise therefrom, if the Company rescinds or otherwise eliminates or reverses the action or event that would otherwise constitute grounds for Constructive Termination, and so notifies the Executive in writing within thirty (30) days of its receipt of the notice of Constructive Termination; provided, further, in the case a Voluntary Separation with Notice, the Date of Termination shall be on the eighteen (18) month anniversary of the date of such Notice of Termination or such later date specified in such Notice of Termination.
For purposes of this Agreement, the term “Disability” means a medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six (6) months, where such impairment causes the Executive to be unable to perform the duties of his or her position of employment or any substantially similar position of employment.
4.2 Payments Upon Termination.
(a) If, during the term of this Agreement, Executive’s employment is terminated for any reason, Executive shall receive the following (“Standard Pay”): (i) the portion of Executive’s then current Annual Base Salary accrued through Executive’s date of termination (pro-rated if applicable); (ii) without duplication, any vested bonus payments or equity awards to which Executive is entitled as of the date of termination Executive’s employment, in accordance with the terms of the documents granting such bonuses or equity awards, as applicable; and (iii) any payments for reimbursement of expenses, which are due, accrued or payable as of the date of Executive’s termination in accordance with the Company’s expense reimbursement policy.
(b) If Executive’s employment is terminated by the Company without Cause, at any time other than between execution of a definitive agreement in contemplation of a Change in Control and continuing through twenty-four (24) months following a Change in Control, and other than as a result of Executive’s death or Disability, then the Company shall pay to Executive, in addition to the Standard Pay, the following payments (the “Continuation Severance Payments”), subject to Section 5 below: (i) Executive’s then-current Annual Base Salary for a __________ period, in the form of salary continuation payments, plus (ii) without duplication of any element of the Standard Pay, any annual short-term management incentive cash bonus payment that Parent’s compensation committee determined was attained under the terms of such cash bonus plan (and would have been paid to Executive for the year in which Executive’s employment is terminated) except (A) such cash bonus payment, if any, shall be prorated through Executive’s date of separation, and (B) any performance criteria applicable to such cash bonus will be deemed to have been achieved at the “target” level set forth in such cash bonus plan (regardless of the level actually attained), all of which shall be payable periodically in accordance with the Company’s normal payroll procedures, practices and policies. Additionally, the Company will pay the premiums for coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) for Executive and Executive’s eligible dependents, if any, at the rates and eligibility then in effect, subject to any subsequent changes in rates that are generally applicable to the Company’s active employees (the “COBRA Coverage”), until the earliest of (A) a period of __________ from the date of Executive’s termination of employment, (B) the date upon which Executive (and Executive’s eligible dependents, as applicable) becomes covered under similar plans, or (C) the date upon which Executive ceases to be eligible for coverage under COBRA. Executive’s receipt of COBRA Coverage is subject to Executive electing COBRA continuation coverage within the time period prescribed pursuant to COBRA for Executive and Executive’s eligible dependents, if any.
(c) If either (i) a Constructive Termination of Executive occurs while Executive remains employed by the Company or its successor, or (ii) if Executive’s employment is terminated by the Company without Cause, in each case, between execution of a definitive agreement in contemplation of a Change in Control and continuing through twenty-four (24) months following a Change in Control, then the Company shall pay to Executive, in addition to the Standard Pay, the following amounts (the “CIC Severance Payments”), subject to Section 5 below: a lump sum amount equal to: (i) __________ times the sum of Executive’s Annual Base Salary, plus (ii) without duplication of any element of the Standard Pay, any annual short-term management incentive cash bonus payment that Executive would have been eligible for in the year in which Executive’s employment is terminated (regardless of whether or not the criteria for such cash bonus payment was actually met), provided that any performance criteria applicable to such cash bonus will be deemed to have been achieved at the “target” level (regardless of the level actually attained or whether or not any level was actually attained). Additionally, the Company will pay for Executive’s COBRA Coverage until the earliest of (A) a period of __________ from the date of Executive’s termination of employment, (B) the date upon which Executive (and Executive’s eligible dependents, as applicable) becomes covered under similar plans, or (C) the date upon which Executive ceases to be eligible for coverage under COBRA. Executive’s receipt of COBRA Coverage is subject to Executive electing COBRA continuation coverage within the time period prescribed pursuant to COBRA for Executive and Executive’s eligible dependents, if any.
(d) If Executive’s employment is terminated by Executive in a Voluntary Separation with Notice, then the Company shall pay to Executive, in addition to the Standard Pay and subject to Section 5 below, Executive’s then-current Annual Base Salary for a period of __________from the date of Executive’s termination of employment, in the form of salary continuation payments (the “Voluntary Separation Severance Payments”) (the Continuation Severance Payments, the CIC Severance Payments, and the Voluntary Separation Severance Payments, each individually a “Severance Payment” and collectively, the “Severance Payments”). Additionally, the Company will pay for Executive’s COBRA Coverage until the earliest of (A) a period of __________ from the date of Executive’s termination of employment, (B) the date upon which Executive (and Executive’s eligible dependents, as applicable) becomes covered under similar plans, or (C) the date upon which Executive ceases to be eligible for coverage under COBRA. Executive’s receipt of COBRA Coverage is subject to Executive electing COBRA continuation coverage within the time period prescribed pursuant to COBRA for Executive and Executive’s eligible dependents, if any.
(e) For the avoidance of doubt, and notwithstanding anything contained herein to the contrary:
(i) if, during the Voluntary Separation Notice Period, Executive experiences a termination described in the first sentence of Section 4.2(b), then Executive will receive the Continuation Severance Payments under Section 4.2(b);
(ii) if, during the Voluntary Separation Notice Period, Executive experiences a termination described in the first sentence of Section 4.2(c), then Executive will receive the CIC Severance Payments under Section 4.2(c);
(iii) if Executive commences receipt of the Continuation Severance Payments (or any portion thereof) under Section 4.2(b), then Executive shall not receive any CIC Severance Payments (or any portion thereof) under Section 4.2(c) or any Voluntary Separation Severance Payments (or any portion thereof) under Section 4.2(d);
(iv) if Executive commences receipt of the CIC Severance Payments (or any portion thereof) under Section 4.2(c), then Executive shall not receive any Continuation Severance Payments (or any portion thereof) under Section 4.2(b) or any Voluntary Separation Severance Payments (or any portion thereof) under Section 4.2(d);
(v) if Executive commences receipt of the Voluntary Separation Severance Payments (or any portion thereof) under Section 4.2(d), then Executive shall not receive any CIC Severance Payments (or any portion thereof) under Section 4.2(c) or any Continuation Severance Payments (or any portion thereof) under Section 4.2(b); and
(vi) a termination of Executive’s employment due to Executive’s death or Disability shall not be deemed a termination of Executive without Cause, and in such event Executive will only be entitled to receive the Standard Pay.
(f) The Company intends that all payments and benefits provided under this Agreement or otherwise are exempt from, or comply with, the requirements of Section 409A of the Internal Revenue Code of 1986 (the “Code”) and any guidance promulgated under Section 409A of the Code (collectively, “Section 409A”) so that none of the payments or benefits will be subject to the additional tax imposed under Section 409A, and any ambiguities in this Agreement will be interpreted in accordance with this intent. No payment or benefits to be paid to Executive (including settlement of Company equity awards that constitute deferred compensation under Section 409A), if any, under this Agreement or otherwise, when considered together with any other severance payments or separation benefits that are considered deferred compensation under Section 409A (together, the “Deferred Payments”) will be paid or otherwise provided until Executive has a “separation from service” within the meaning of Section 409A. If, at the time of Executive’s termination of employment, Executive is a “specified employee” within the meaning of Section 409A, then the payment of the Deferred Payments will be delayed to the extent necessary to avoid the imposition of the additional tax imposed under Section 409A, which generally means that Executive will receive payment on the first payroll date that occurs on or after the date that is 6 months and 1 day following Executive’s termination of employment. The Company reserves the right to amend this Agreement as it considers necessary or advisable, in its sole discretion and without the consent of Executive or any other individual, to comply with any provision required to avoid the imposition of the additional tax imposed under Section 409A or to otherwise avoid income recognition under Section 409A prior to the actual payment of any benefits or imposition of any additional tax. Each payment, installment, and benefit payable under this Agreement is intended to constitute a separate payment for purposes of U.S. Treasury Regulation Section 1.409A-2(b)(2). In no event will the Company or any member of the Company Group reimburse, indemnify, or hold harmless Executive for any taxes, penalties and interest that may be imposed, or other costs that may be incurred, as a result of Section 409A.
5. Severance Payment Conditions. As a condition to the receipt of any and all Severance Payments or any other payment benefits described in this Agreement, in addition to any other conditions set forth herein, Executive shall:
(a) execute and comply with the terms of a general release of all claims (the “General Release”) against the Company Group and their affiliates and representatives, in the form attached hereto as Exhibit B, as updated by the Company for any change in laws. The General Release must be signed, and the period provided therein for revocation must have expired, not later than sixty days from the Date of Termination. Notwithstanding anything to the contrary contained herein, no Severance Payments or other benefits or payments required under this Agreement shall be paid until the General Release is signed and the revocation period has expired, and any amounts that would otherwise have been paid prior to such date shall be paid, without interest, within a reasonable time after such date; provided, however that in the event that a Date of Termination occurs at a time during the calendar year when it would be possible for the General Release to become effective in the calendar year following the calendar year in which the Date of Termination occurs, then such amounts shall be paid, without interest, on the first payroll date that is at least sixty (60) days following the Date of Termination or such later date as provided in Section 4(f); and
(b) fully perform and comply with all of Executive’s obligations hereunder, including, without limitation, Executive’s obligations under Section 6. In the event Executive breaches any of Executive’s obligations hereunder (including, without limitation, Executive’s obligations under Section 6), then, in addition to any other remedies to which the Company Group may be entitled as a result of such breach, the Company Group shall be immediately and automatically released from any obligation to make any further Severance Payments and, upon notice from the Company, Executive shall be required to immediately reimburse the Company Group for any and all Severance Payments made to Executive by the Company.
6. Restrictive Covenants. Executive acknowledges and agrees that during the course of Executive’s employment with the Company Group, Executive has had access to confidential information which, if disclosed, would assist in competition against the Company Group and that Executive has generated goodwill for the Company Group during the course of Executive’s employment. Therefore, Executive hereby acknowledges and agrees that the following restrictive covenants (i) are necessary to protect the goodwill, confidential information, and other legitimate interests of the Company Group (including, without limitation, the preservation of trade secrets, valuable confidential and professional information, and substantial relationships with prospective and existing customers and suppliers), (ii) are reasonable and necessary to induce the Company to enter into this Agreement, and (iii) are of a scope (including, without limitation, the time period and geographic area) that is reasonably tailored, and not broader than necessary, to protect the legitimate business interests of the Company Group, and do not prevent or preclude Executive from earning a suitable livelihood. Executive hereby agrees to abide by the following restrictive covenants:
(a) Non-Competition. During the period of Executive’s employment with any member of the Company Group and for __________ after such employment is terminated, Executive will not, and will not permit any other Person controlling, controlled by or under common control, directly or indirectly, with Executive to, directly or indirectly, without the prior written consent of the Company, which may be withheld in the Company’s sole and absolute discretion, directly or indirectly engage or invest in, own, manage, operate, finance, control or participate in the ownership, management, operation, financing or control of, be employed by, serve as an agent, officer, director or consultant to, be associated with or in any manner connected with, lend his, her, or its name or any similar name to, lend his, her or its credit or render services or advice to, any Competitive Business anywhere throughout the 48 contiguous United States, provided, however, that nothing herein will be deemed to prevent Executive from acquiring through market purchases and owning, solely as an investment, less than one percent (1%) in the aggregate of the equity securities of any entity that derives more than fifty percent (50%) of its gross revenues from the conduct of any Competitive Business, whose shares are registered under Section 12(b) or Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are listed or admitted for trading on any United States national securities exchange or are quoted on any system of automated dissemination of quotations of securities prices in common use, so long as Executive is not directly or indirectly a member of any “control group” (within the meaning of the rules and regulations of the Securities and Exchange Commission) of any such issuer; and provided further, however, that nothing herein will be deemed to prevent Executive from acquiring through market purchases and owning, solely as an investment, any shares, units or other interest in a mutual fund, exchange-traded fund, unit investment trust, or similar investment vehicle whose holdings include investments in any Competitive Business or any entity involved in a Competitive Business.
(b) Non-Solicitation. During the period of Executive’s employment with any member of the Company Group and for __________ after such employment is terminated, Executive will not, and will not permit any other Person controlling, controlled by or under common control, directly or indirectly, with Executive to, directly or indirectly, without the prior written consent of the Company, which may be withheld in the Company’s sole and absolute discretion:
(i) whether on Executive’s own behalf or on behalf of another Person, provide or solicit to provide any Competitive Services to any Person that: (x) was at any time in the twelve (12) months prior to the Date of Termination a customer, shipper, carrier or other client of any member of the Company Group; or (y) to Executive’s knowledge, was at any time in the twelve (12) months prior to the provision or solicitation to provide any Competitive Services, a customer, shipper, carrier or other client of any member of the Company Group;
(ii) whether on Executive’s own behalf or on behalf of another Person, solicit to employ or engage or employ or otherwise engage as an employee, independent contractor, agent or otherwise, any Person who: (x) was at any time in the twelve (12) months prior to the Date of Termination an employee, independent contractor, or agent of, or was otherwise engaged with, any member of the Company Group; or (y) to Executive’s knowledge, was at any time in the twelve (12) months prior to the solicitation, employment, or engagement of such Person, an employee, independent contractor, or agent of, or was otherwise engaged with, any member of the Company Group, provided that (A) general advertising (including general internet advertising) not targeted at a particular employee or consultant or independent contractor (or group thereof) shall not be deemed a breach hereof, nor shall hiring or retaining any Person who responds to such a general advertisement not targeted at a particular employee or consultant or independent contractor (or group thereof), and (B) nothing in this Agreement shall prohibit Executive or any other Person from engaging any professional services firm or other third party advisor that provides consulting services to multiple clients; or
(iii) at any time interfere with any member of the Company Group’s relationship with any Person that: (x) was at any time in the twelve (12) months prior to the Date of Termination an employee, contractor, supplier, agent, customer, shipper, carrier or other client of any member of the Company Group; or (y) to Executive’s knowledge, was at any time in the twelve (12) months prior to the interference an employee, contractor, supplier, agent, customer, shipper, carrier or other client of any member of the Company Group; including, without limitation, soliciting, encouraging, advising or influencing such Person(s) to discontinue or reduce the extent of such relationship.
(c) Non-Disclosure. Until the Date of Termination and at all times after the Date of Termination (continuing indefinitely), Executive will not, directly or indirectly, without the prior written consent of the Company, which may be withheld in the Company’s sole and absolute discretion:
(i) divulge, communicate, use to the detriment of any member of the Company Group, or for the benefit of any other Person(s), or misuse in any way, any confidential information, documents, materials or trade secrets pertaining to any member of the Company Group, except as required or compelled by law; or
(ii) divulge, communicate, use to the detriment of any member of the Company Group, or for the benefit of any other Person(s), or misuse in any way, any information, documentation, files, or other materials (written or verbal) arising out of or related to any Company Group employee, contractor, customer, shipper, vendor or supplier, except as required or compelled by law, regardless of whether such information, documents or materials are treated as confidential by any member of the Company Group.
(d) Mutual Non-Disparagement. Executive agrees not to do or say anything which would portray any member of the Company Group or any of their respective stockholders, directors, officers, employees, agents, products or services in a negative light or poor manner in the judgment of a reasonable third party, except as may be required in legal or statutory proceedings. Likewise, Company agrees that neither it nor its directors and officers will do or say anything which would portray Executive in a negative light or poor manner in the judgment of a reasonable third party, except as may be required in legal or statutory proceedings. This provision shall survive until, and become null and void on, the date that is five (5) years after the Date of Termination, except as to any matters that occurred prior to the Date of Termination, which shall be subject to the protection of this provision indefinitely.
(e) Future Eligibility. In further consideration of this Agreement, Executive agrees that Executive will not hereafter be reemployed by the Company or any other member of the Company Group, will not hereafter apply for or otherwise seek employment with the Company or any other member of the Company Group, and that Executive specifically waives any right to reinstatement or reemployment in the future.
(f) Reformation; Severability; Injunctive Relief. Executive expressly acknowledges and agrees that the restrictions contained herein are reasonable and no greater than necessary to protect the legitimate interests of the Company Group. However, if any covenant set forth in this Agreement (including, without limitation, this Section 6) is determined by any court to be unenforceable by reason of its extending for too great a period of time or over too great a geographic area, or by reason of its being too extensive in any other respect, such covenant shall be reformed and interpreted to extend only for the longest period of time and over the greatest geographic area, and to otherwise have the broadest application as shall be enforceable. The invalidity or unenforceability of any particular provision (or part thereof) of this Agreement (including, without limitation, this Section 6) shall not affect the other provisions hereof (or parts thereof), which shall continue in full force and effect. Without limiting the foregoing, the covenants contained herein shall be construed as separate covenants, covering their respective subject matters, with respect to each of the separate cities, counties and states, and each political subdivision thereof, within the 48 contiguous United States. Executive further acknowledges that any violation of this Agreement (including, without limitation, this Section 6) will result in irreparable injury to the Company Group, the exact amount of which will be difficult to ascertain, and that the remedies at law for any such violation would not be reasonable or adequate compensation to Company Group for such a violation. Accordingly, Executive agrees that if Executive violates the provisions of this Agreement (including, without limitation, this Section 6), any member of the Company Group, in addition to all other remedies which may be available to it at law or in equity, shall be entitled to specific performance and injunctive relief, without posting bond or other security, and without the necessity of proving actual damages. Such relief will not be exclusive, but will be in addition to all other relief available to Company Group, at law and equity.
7. Equity Awards. This Agreement does not incorporate, supersede, or in any way affect Parent’s 2006 Omnibus Incentive Plan, as amended from time to time, or awards thereunder, all of which are governed by separate documents prior to the date hereof.
8. Company Policies. Executive acknowledges and agrees that certain incentive compensation the Executive may have earned under Company incentive plans, whether received prior to the Date of Termination or payable after the Date of Termination, is subject to the terms of the Company’s Clawback policy, as amended from time to time, and may be subject to recoupment by the Company under certain circumstances, including in the case of an accounting restatement. During Executive’s employment with any member of the Company Group (including, without limitation, during the Voluntary Separation Notice Period), Executive acknowledges and agrees that (i) Executive will faithfully devote best efforts and Executive’s entire working time, during usual business hours, to advance the interests of the Company Group and (ii) Executive will not be employed by or provide services to any other Person without the written consent of a member of the Company Group.
9. Limitation on Payments.
(a) Reduction of Severance Payments. If any payment or benefit that Executive would receive from the Company or any member of the Company Group or any other party whether in connection with the provisions in this Agreement or otherwise (the “Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Payment will be equal to the Best Results Amount. The “Best Results Amount” will be either (x) the full amount of the Payment or (y) a lesser amount that would result in no portion of the Payment being subject to the Excise Tax, whichever of those amounts, taking into account the applicable federal, state and local employment taxes, income taxes and the Excise Tax, results in the Executive’s receipt, on an after-tax basis, of the greater amount. If a reduction in payments or benefits constituting parachute payments is necessary so that the Payment equals the Best Results Amount, reduction will occur in the following order: (A) reduction of cash payments in reverse chronological order (that is, the cash payment owed on the latest date following the occurrence of the event triggering the excise tax will be the first cash payment to be reduced); (B) cancellation of equity awards that were granted “contingent on a change in ownership or control” within the meaning of Section 280G of the Code in the reverse order of date of grant of the awards (that is, the most recently granted equity awards will be cancelled first); (C) reduction of the accelerated vesting of equity awards in the reverse order of date of grant of the awards (that is, the vesting of the most recently granted equity awards will be cancelled first); and (D) reduction of employee benefits in reverse chronological order (that is, the benefit owed on the latest date following the occurrence of the event triggering the excise tax will be the first benefit to be reduced). In no event will Executive have any discretion with respect to the ordering of Payment reductions. Executive will be solely responsible for the payment of all personal tax liability that is incurred as a result of the payments and benefits received under this Agreement, and Executive will not be reimbursed, indemnified, or held harmless by the Company or any member of the Company Group for any of those payments of personal tax liability.
(b) Determination of Excise Tax Liability. Unless the Company and Executive otherwise agree in writing, all determinations required under this Section 9 shall be made by the Company or its advisors in good faith and in accordance with applicable law and such determinations shall be conclusive and binding on Executive for all purposes. For purposes of making the calculations required by this Section 9, the Company may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. Executive will furnish to the Company such information and documents as the Company reasonably may request in order to make determinations under this Section 9.
10. Other Provisions. Except as otherwise set forth or permitted herein, no provisions of this Agreement may be modified, waived, or discharged except by a written document signed by Executive and a duly authorized Company officer. The terms and provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, representatives, heirs and estates, as applicable. This Agreement shall not be assignable by Executive without the prior written consent of the Company. This Agreement shall be governed by the laws of the State of Tennessee. Any litigation or other dispute resolution proceeding may only be brought within Tennessee, and all parties to this Agreement irrevocably consent to the exclusive jurisdiction and venue in Hamilton County. It is the desire and intent of the parties that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any provision of this Agreement is determined to be partially or wholly invalid, illegal or unenforceable in any jurisdiction, then such provision shall, as to such jurisdiction, be modified or restricted to the extent necessary to make such provision valid, binding and enforceable, or if such provision cannot be so modified or restricted, then such provision shall, as to such jurisdiction, be deemed to be excised from this Agreement; provided, however, that the legality, binding effect and enforceability of the remaining provisions of this Agreement, to the extent the economic benefits conferred upon the parties by virtue of this Agreement remain substantially unimpaired, shall not be affected or impaired in any manner, and any such invalidity, illegality or unenforceability with respect to such provision in such jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute the same instrument. Except for Executive’s NDA, all oral or written agreements or representations, express or implied, with respect to the subject matter of this Agreement are set forth herein. The parties expressly intend for the NDA to otherwise remain in full force and effect. Except as expressly provided herein, this Agreement supersedes all previous agreements, promises, representations, understandings and negotiations between the parties, whether written or oral, with respect to the subject matter hereof. This Agreement shall not be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between Executive and the Company, Executive shall not have any right to be retained in the employ of the Company. Notwithstanding the immediately preceding sentence or any other provision of this Agreement, any purported termination of Executive’s employment that is not effected in accordance with a Notice of Termination satisfying Section 4.1 shall not be effective for purposes of this Agreement. In the event a Severance Payment is triggered pursuant to the provisions of Section 4.2, the provisions of Section 4.2 are intended to be and are exclusive and in lieu of any other rights or remedies to which Executive may otherwise be entitled (including any contrary provisions in any written or oral employment agreement or arrangement Executive may have with any member of the Company Group), whether at law, tort or contract, in equity, or under this Agreement. Subject to Section 9, payments provided for hereunder will be subject to required withholding of federal, state and local income, excise, and employment-related taxes, without any gross-ups or similar payments made to Executive.
11. Communications with Government Agencies. Notwithstanding anything contained herein or in the NDA to the contrary, nothing set forth herein or in the NDA shall limit Executive’s ability to communicate with the Securities and Exchange Commission or any other federal, state or local governmental agency or commission (collectively, “Government Agencies”) or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company, or limit Executive’s right to receive an award for information provided to any Government Agencies.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties have executed and delivered, or have caused to be executed and delivered by their duly authorized representatives, this Executive Severance Agreement as of the Effective Date.
EXECUTIVE:
______________________________________
__________, individually
TRANSPORT MANAGEMENT SERVICES, LLC
By: ______________________________________
Name:
Title:
EXHIBIT A - DEFINED TERMS
“Cause” for termination by the Company of Executive's employment shall mean (i) failure by Executive to perform the essential functions of Executive’s position with the Company, other than any failure resulting from Executive's incapacity due to physical or mental Disability, it being understood that a reasonable, good faith attempt to perform but failure to do so will not be deemed a failure to perform essential functions; (ii) failure to comply with any lawful directive by the Board of Directors of the Company or the Parent (the “Board”), it being understood that a reasonable, good faith attempt to comply with such directive but failure to do so will not be deemed a failure to comply for purposes of this definition of “Cause”; (iii) a material violation by Executive of the corporate governance guidelines, code of ethics, insider trading policy, governance policy, or other policy of the Company or Parent; (iv) a breach of any fiduciary duty to any member of the Company Group; (v) misconduct in the course and scope of employment by Executive that is injurious to any member of the Company Group from a monetary or reputational standpoint in any material respect; (vi) any attempt to willfully obtain any personal profit from any transaction which is adverse to the interests of any member of the Company Group or in which any member of the Company Group has an interest or any act of fraud or embezzlement against any member of the Company Group or any of their respective customers or suppliers; (vii) a breach by Executive of any of the covenants contained in Section 6 of this Agreement in any material respect; (viii) the repeated use of alcohol or abuse of prescription drugs by Executive that interferes with Executive's duties, the use of illegal drugs by Executive, or a violation by Executive of the drug and/or alcohol policies of the Company or Parent; (ix) violation of any applicable law, rule or regulation, including without limitation the Sarbanes-Oxley Act of 2002 or other federal or state securities law, rule, or regulation, in each case, that is injurious to any member of the Company Group from a monetary or reputational standpoint in any material respect; or (x) the conviction or plea of guilty or nolo contendere to a felony or a misdemeanor involving moral turpitude. With respect to subsections (i), (ii) and (iii) above, Executive shall be notified in writing (which includes, without limitation, e-mail) of any alleged failure, breach or violation, such notice shall specify in reasonable detail the facts and circumstances claimed to constitute Cause under subsections (i), (ii) or (iii) as applicable and, if such failure, breach, or violation is capable of being remedied or cured, the Executive shall be given at least fifteen (15) calendar days to remedy or cure any failure, breach or violation. For purposes of this definition following a Change in Control, the Board’s determination of “Cause” must be made in good faith and will be binding on Executive.
"Change in Control" means a change in control of the Parent of a nature that would be required to be reported in response to Item 5.01 of a Current Report on Form 8-K, pursuant to Section 13 or 15(d) of the Exchange Act; provided that, without limitation, a Change in Control shall be deemed to have occurred at such time as any of the following occurs after the Effective Date:
(i) Any "person" within the meaning of Section 3(a)(9) of the Exchange Act, and as modified and used in Section 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) of the Exchange Act (but excluding the Parent, any employee benefit plan sponsored or maintained by the Parent (including any trustee of such plan (acting as trustee) or other fiduciary holding securities under an employee benefit plan of the Company), and any underwriter temporarily holding securities pursuant to an offering of such securities) (“Exchange Act Person”), other than a Permitted Holder becomes the "beneficial owner," as defined in Rule 13d-3 under the Exchange Act, directly or indirectly, of fifty percent (50%) or more of the combined voting power of the outstanding securities of the Parent ordinarily having the right to vote in the election of directors; provided, however, that the following will not constitute a Change in Control: any acquisition by any corporation if, immediately following such acquisition, more than seventy-five percent (75%) of the outstanding securities of the acquiring corporation (or the parent thereof) ordinarily having the right to vote in the election of directors is beneficially owned by all or substantially all of those persons who, immediately prior to such acquisition, were the beneficial owners of the outstanding securities of the Parent ordinarily having the right to vote in the election of directors;
(ii) Individuals who constitute the Board of Directors of the Parent on the Effective Date (the "Incumbent Board") have ceased for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the Effective Date, whose election or nomination for election by the Parent's stockholders was approved by a vote of at least three-fourths (3/4) of the directors comprising the Incumbent Board, either by a specific vote or by approval of the proxy statement of the Parent in which such person is named as a nominee for director without objection to such nomination (other than an election or nomination of an individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of an Exchange Act Person other than the Board of Directors of the Parent, including, without limitation, in connection with a "tender offer," as such term is used in Section 14(d) of the Exchange Act), shall be, for purposes of the Agreement, considered as though such person were a member of the Incumbent Board;
(iii) Upon the consummation by the Parent of a reorganization, merger, or consolidation, other than one with respect to which all or substantially all of those persons who were the beneficial owners, immediately prior to such reorganization, merger, or consolidation, of outstanding securities of the Parent ordinarily having the right to vote in the election of directors own, immediately after such transaction, more than seventy-five percent (75%) of the outstanding securities of the resulting corporation ordinarily having the right to vote in the election of directors;
(iv) Upon the approval by the Parent’s stockholders of a complete liquidation and dissolution of the Parent or the sale or other disposition of all or substantially all of the assets of the Parent other than to a subsidiary of the Parent or to an entity controlled by a Permitted Holder; or
(v) Upon the consummation of a transaction subject to Rule 13e-3 of the Exchange Act in which the Permitted Holders identified in romanette (iii) of the definition of Permitted Holder hereunder are the beneficial owners of more than fifty percent (50%) of the outstanding securities of the resulting corporation ordinarily having the right to vote in the election of directors.
“Competitive Business” means any business conducted by any member of the Company Group as of the date of Executive’s termination (including any business where strategic plans were in place as of the date of Executive’s termination for any member of the Company Group to engage in such business).
“Competitive Services” means those services provided in the furtherance of a Competitive Business.
“Constructive Termination” means the occurrence of any of the following, without Executive’s express written consent, at any time during the period between execution of a definitive agreement in contemplation of a Change in Control and continuing until twenty-four (24) months following a Change in Control (the “Change in Control Period”):
(i) material diminution in the overall scope of Executive’s duties, authorities and/or responsibilities from those held by Executive immediately prior to the Change in Control Period, it being understood that the fact that the Company is a subsidiary of a different public company or becomes a private company, and any diminution of duties in respect of no longer having public company related duties will not be considered a diminution;
(ii) written requirement for geographic relocation of the Executive’s assigned principal business location to a location greater than fifty (50) miles from the place of the Executive’s principal business location immediately prior to the Change in Control Period; or
(iii) written notice of diminution by ten percent (10%) or more of Executive’s annual base salary or target bonus in effect immediately prior to the Change in Control Period.
"Permitted Holder" means: (i) the Parent or a subsidiary of the Parent, (ii) any employee benefit plan sponsored by the Parent or a subsidiary of the Parent, or (iii) David or Jacqueline Parker or their siblings, children, or grandchildren ("Family Members") or a trust, corporation, partnership, limited partnership, limited liability company, or other such entity, so long as at least eighty percent (80%) of the beneficial interests of the entity are held by Mr. or Mrs. Parker and/or one or more Family Members, where such person(s) or entity acquired their Parent stock from Mr. or Mrs. Parker.
“Person” means any individual, person, business, enterprise or legal entity.
“Voluntary Separation Notice Period” means the period between the date of a Notice of Termination associated with a Voluntary Separation with Notice and the eighteen (18) month anniversary of the date of such Notice of Termination or such later date specified in such Notice of Termination.
“Voluntary Separation with Notice” means voluntarily terminating employment with or service to any member of the Company Group with at least eighteen (18) months' prior written notice to the Company that Executive is considering retirement or voluntary separation from such member of the Company Group; provided, however, that if Executive is terminated with Cause after Executive provides the required notice but before Executive’s employment terminates in connection with Executive’s Voluntary Separation with Notice, Executive shall be deemed to not have had a Voluntary Separation with Notice.
EXHIBIT B – GENERAL RELEASE
In exchange for the payments and benefits described in the agreement to which this release is attached (the “Agreement”), Executive, on his or her own behalf and on behalf of his or her heirs, executors, administrators, assigns and successors, does hereby covenant not to sue and acknowledges full and complete satisfaction of and hereby releases, absolves and discharges the Company, Parent, each affiliate or subsidiary of the Company or the Parent, and its and their successors and assigns, parents, subsidiaries and affiliates, past and present, as well as their trustees, directors, officers, agents, attorneys, insurers, stockholders and employees, past and present, and each of them (hereinafter collectively referred to as “Releasees”), with respect to and from any and all claims, demands, liens, agreements, contracts, covenants, actions, suits, causes of action, obligations, debts, wages, vacation pay, expenses, attorneys’ fees, damages, judgments, orders and liabilities of whatever kind or nature in law, equity or otherwise, whether now known or unknown, suspected or unsuspected, and whether or not concealed or hidden, which Executive now owns or holds or has at any time heretofore owned or held as against said Releasees, or any of them, arising out of or in any way connected with his or her employment or other relationships with the Company, Parent, or its or their affiliates, or his or her separation from any such employment or other relationships (collectively, “Released Claims”), including specifically, but without limiting the generality of the foregoing, any claim under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Age Discrimination in Employment Act of 1967, as amended by the Older Worker’s Benefit Protection Act (“ADEA”), the federal Family and Medical Leave Act, the Fair Labor Standards Act, the Equal Pay Act, the Employee Retirement Income Security Act of 1974, the Worker Adjustment and Retraining Notification Act, or any other employment related federal, state or local law, regulation or ordinance; provided, however, that the foregoing release will not include or affect (and only the following are expressly excluded from any Released Claims): (i) Executive’s rights under the Agreement; (ii) Executive’s rights to file claims for workers’ compensation or unemployment insurance benefits, (iii) Executive’s regular and usual salary accrued prior to the Date of Termination, COBRA continuation coverage and life insurance conversion rights, if any, (iv) Executive’s rights to provide information, assist or participate in any investigation, proceedings, or litigation concerning any administrative claim with any government agency under any applicable law that protects such rights, or to file such a claim, or (v) Executive’s rights under any written contracts between the Executive or his or her affiliated entities and any member of the Company Group. This General Release does not (i) limit Executive's ability to file a charge or complaint with the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration, the Securities and Exchange Commission or any other federal, state or local governmental agency or commission (“Government Agencies”), (ii) limit Executive’s ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company, or (iii) limit Executive’s right to receive an award for information provided to any Government Agencies.
Executive acknowledges that the non-disparagement and confidentiality provisions contained in the Agreement infringe on Executive’s rights described in this release, and Executive agrees that he or she is aware of and has consented to such infringement. Furthermore, notwithstanding the foregoing release, Executive will continue to be entitled to all of his or her respective statutory and other rights to indemnification, including, without limitation, indemnification pursuant to the Company’s organizational documents, indemnification agreements, insurance policies or under applicable law to the same extent Executive would have had the right to be indemnified absent this release.
As an inducement for the Company to enter into the Agreement, Executive hereby represents, warrants and covenants as follows:
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a. |
Executive has carefully read and fully understands all of the provisions of this Agreement; |
(b) Executive is, by and through this Agreement, releasing each member of the Company Group and each such member’s officers, agents, directors, supervisors, employees, representatives, successors and assigns and all persons acting by, through, under, or in concert with any of them from any and all claims Executive may have against any member of the Company Group or such individuals, including those under the Age Discrimination in Employment Act of 1967 (29 U.S.C. §621, et seq.), except as otherwise explicitly specified herein;
(c) Executive knowingly and voluntarily agrees to all of the terms set forth in this Agreement;
(d) Executive knowingly and voluntarily intends to be legally bound by the terms set forth in this Agreement;
(e) Executive agrees not to disclose the terms or existence of this Agreement to anyone except Executive’s attorneys, financial and other professional advisors, the IRS or other taxing authorities, or Executive’s immediate family (spouse, children, siblings, parents) who need to know the terms or existence of this Agreement and who are bound by obligations of restricted use and non-disclosure (collectively; “Representatives”), or, in the written opinion of Executive’s attorney(s), as required by applicable law or regulation. To the extent Executive discloses the terms of this Agreement to any permitted Representative, Executive agrees to advise them that they must not disclose the terms of this Agreement. Executive agrees to be responsible for any breach of this Agreement by his Representatives and agrees to take any and all action necessary to enforce compliance with the terms of this Agreement by his Representatives.
(f) Within seven (7) days following execution of this Agreement or on the actual Date of Termination, whichever occurs last, Executive shall return to the Company all items of Company Group property which the Executive may still have in Executive’s possession, custody or control, including without any limitation whatsoever: all identification cards, credit cards, customer and vendor files or any other Company Group files, records, materials or information produced by, for or relating to the Company Group, its business, Executive’s job duties or functions, or any customer or vendor; all keys (in any form) to any Company Group office building, employee office, filing cabinet, desk or other key; all cell phones, pagers or other electronic devices or items of tangible personal property; all computer software; the Microsoft Surface laptop or other computer issued to Executive by any member of the Company Group, together with any and all passwords and/or passcodes to any of the items described above.
(g) Further, Executive represents and warrants to the Company Group as follows: (1) the financial information of any member of the Company Group that Executive is responsible for (if any) does not contain any untrue statement of a fact or omit a statement of fact making the information misleading; (2) no events have occurred since the end of the most recent reporting period and up through the date of this Agreement that would require adjustment to the financial information of any member for the Company Group that Executive is responsible for (if any); (3) during Executive’s employment by any member of the Company Group, the Parent’s Ethics Hotline was made available to Executive and to Executive’s department, and during such time, Executive did not have any complaints or concerns (nor were any brought directly to Executive’s attention) regarding ethics or policy violations, or of fraud or the suspicion of fraud, involving management that have not been properly reported to a member of the Company Group; and (4) if an event of fraud or a suspicion of fraud, whether or not material, that involved management or other employees of any member of the Company Group occurred during Executive’s employment within five (5) years prior to the Date of Termination, Executive has disclosed said event or suspicion to the Internal Audit Department of Parent or otherwise properly reported the matter in writing to a member of the Company Group unless said event or suspicion was known by Executive to have been previously disclosed to the Internal Audit Department of Parent or otherwise properly reported in writing to a member of the Company Group by another Person.
(h) Executive agrees that he or she will reasonably cooperate with any member of the Company Group and their counsel in any legal action or other claim against any member of the Company Group and any legal action or other claim made by any member of the Company Group about which he or she may have particular knowledge or in which he or she may be a witness. Such cooperation includes meeting with representatives and counsel of any member of the Company Group to disclose facts; preparing with counsel of any member of the Company Group for depositions, trials, hearings or other proceedings; attending depositions, trials, hearings or other proceedings to provide truthful testimony; and providing other assistance to any member of the Company Group and their counsel in any legal action or claim as may, in the sole judgment of counsel of any member of the Company Group, be necessary. The Company agrees to reimburse Executive for reasonable out-of-pocket expenses incurred in the course of complying with this Section (h), and after the Company’s obligation to pay Separation Pay, if any, and Additional Separation Pay has expired, if Executive is requested and/or required to devote more than 10 hours in a given month in the course of complying with this Section (h), the Company agrees to compensate Executive for reasonable out-of-pocket expenses incurred and for time devoted in excess of 10 hours per month at a reasonable hourly rate to be agreed upon by the parties.
Executive acknowledges that he or she is waiving and releasing any rights he or she may have under the ADEA and that this waiver and release is knowing and voluntary. Executive and the Company agree that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the Effective Date (as hereinafter defined) of the Agreement. Executive acknowledges that the consideration given for the Agreement is in addition to anything of value to which he was already entitled. Executive further acknowledges that he or she has been advised by this writing that:
(a) He or she should consult with an attorney prior to executing the Agreement;
(b) He or she has at least twenty-one (21) days within which to consider the Agreement;
(c) He or she has seven (7) days following his or her execution of the Agreement to revoke the Agreement;
(d) This Agreement will not be effective until the eighth day after Executive executes and does not revoke the Agreement (the “Effective Date”); and
(e) Nothing in the Agreement prevents or precludes Executive from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs from doing so, unless specifically authorized by federal law. Any revocation must be in writing and hand delivered to the Company by close of business on or before the seventh day from the date that Executive signs the Agreement. In the event that Executive exercises his or her right of revocation, neither Executive nor any member of the Company, Parent, or its or their affiliates will have any further rights or obligations under the Agreement.
It is the desire and intent of the parties that the provisions of this release be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any provision of this release is determined to be partially or wholly invalid, illegal or unenforceable in any jurisdiction, then such provision shall, as to such jurisdiction, be modified or restricted to the extent necessary to make such provision valid, binding and enforceable, or if such provision cannot be so modified or restricted, then such provision shall, as to such jurisdiction, be deemed to be excised from this release; provided, however, that the legality, binding effect and enforceability of the remaining provisions of this release, to the extent the benefits conferred upon the parties by virtue of this release remain substantially unimpaired, shall not be affected or impaired in any manner, and any such invalidity, illegality or unenforceability with respect to such provision in such jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
Executive represents and warrants that he or she has no present knowledge of any injury, illness or disease to him or her that is or might be compensable as a workers’ compensation claim or similar claim for workplace injuries, illnesses or diseases.
Terms used herein and not otherwise defined will have the meanings set forth in the Agreement to which this Release was attached.
Intending to be legally bound, I have signed this General Release as of the date written below.
Signature: _____________________________________________
Date Signed: ___________________________________________
Exhibit 31.1
I, David R. Parker, certify that:
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1. |
I have reviewed this quarterly report on Form 10-Q of Covenant Logistics Group, Inc.; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Date: November 6, 2026 |
/s/ David R. Parker |
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David R. Parker |
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Principal Executive Officer |
Exhibit 31.2
I, James S. Grant, certify that:
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1. |
I have reviewed this quarterly report on Form 10-Q of Covenant Logistics Group, Inc.; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Date: November 6, 2026 |
/s/ James S. Grant |
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James S. Grant Principal Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Covenant Logistics Group, Inc. (the "Company") on Form 10-Q for the period ended September 30, 2026, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, David R. Parker, Chief Executive Officer of the Company, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify, that to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: November 6, 2026 |
/s/ David R. Parker |
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David R. Parker |
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Chief Executive Officer |
A signed original of this written statement required by Section 906 has been provided to Covenant Logistics Group, Inc. and will be retained by Covenant Logistics Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Covenant Logistics Group, Inc. (the "Company") on Form 10-Q for the period ended September 30, 2026, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, James S. Grant, Chief Financial Officer and Principal Financial Officer of the Company, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify, that to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: November 6, 2026 |
/s/ James S. Grant |
| James S. Grant | |
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Chief Financial Officer |
A signed original of this written statement required by Section 906 has been provided to Covenant Logistics Group, Inc. and will be retained by Covenant Logistics Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.