Covenant Logistics Group (CVLG) risk factors, FY2025 10-K

STRATEGIC RISKS

1. 01Our business is subject to economic, credit, business, and regulatory factors affecting the truckload industry that are largely beyond our control, any of which could have a materially adverse effect on our operating results
2. 02We are also subject to potential increases in various costs and other events that are outside our control that could materially reduce our profitability if we are unable to increase our rates sufficiently. Further, we may not be able to appropriately adjust our costs and staffing levels to changing market demands48% rewritten
3. 03We may not be successful in achieving our strategic plan52% rewritten
4. 04We derive a significant portion of our revenues from our major customers, and the loss of, or a significant reduction of business with, one or more of which could have a materially adverse effect on our business
5. 05We operate in a highly competitive and fragmented industry, and numerous competitive factors could impair our ability to improve our profitability, limit growth opportunities, and could have a materially adverse effect on our results of operations
6. 06We may not grow substantially in the future and we may not be successful in improving our profitability
7. 07We may not make acquisitions in the future, or if we do, we may not be successful in our acquisition strategy
8. 08Global conflicts could adversely impact our business and financial resultsNew
9. 09Litigation may adversely affect our business, financial condition, and results of operations44% rewritten
10. 10We self-insure for a significant portion of our claims and have exposure outside of our insurance coverage, which could significantly increase the volatility of, and decrease the amount of, our earnings31% rewritten
11. 11Our self-insurance for auto liability claims and our use of a captive insurance company could adversely impact our operations27% rewritten
12. 12We have experienced, and may experience additional, erosion of available limits in our aggregate insurance policies. Furthermore, we may experience additional expense to reinstate insurance policies due to liability claims
13. 13We operate in a highly regulated industry, and changes in existing regulations or violations of existing or future regulations could have a materially adverse effect on our operations and profitability
14. 14If our independent contractor drivers are deemed by regulators or judicial process to be employees, our business, financial condition, and results of operations could be adversely affected
15. 15Developments in labor and employment law and any unionizing efforts by employees or employees of related businesses could have a materially adverse effect on our results of operations31% rewritten
16. 16The CSA program adopted by the FMCSA could adversely affect our profitability and operations, our ability to maintain or grow our fleet, and our customer relationships
17. 17Receipt of an unfavorable DOT safety rating could have a materially adverse effect on our operations and profitability
18. 18Compliance with and changes to various environmental laws and regulations upon which our operations are subject may increase our costs of operations and non-compliance with such laws and regulations could result in substantial fines or penalties47% rewritten
19. 19Changes to trade regulation, export controls, duties, or tariffs, caused by the changing U.S. and geopolitical environments or otherwise, may increase our costs and materially adversely affect our business60% rewritten
20. 20Regulatory changes related to climate change could increase our costs significantly
21. 21Conflicting views on environmental and societal matters may have a negative impact on our business, impose additional costs on us, and expose us to additional risks67% rewritten

OPERATIONAL RISKS

1. 22Increases in driver compensation or difficulties attracting and retaining qualified drivers could have a materially adverse effect on our profitability and the ability to maintain or grow our fleet36% rewritten
2. 23Our engagement of independent contractors to provide a portion of our capacity exposes us to different risks than we face with our tractors driven by company drivers
3. 24Fluctuations in the price or availability of fuel, the volume and terms of diesel fuel purchase commitments, surcharge collection, and hedging activities may increase our costs of operation, which could have a materially adverse effect on our profitability
4. 25If we are unable to retain our key employees, our business, financial condition, and results of operations could be harmed
5. 26Seasonality and the impact of weather and climate change and other catastrophic events affect our operations and profitability
6. 27A large-scale outbreak of avian flu or related illness among the nation’s poultry flock may adversely affect the revenues of LTST

FINANCIAL RISKS

1. 28Our Third Amended and Restated Credit Agreement (our "Credit Facility") and other financing arrangements contain certain covenants, restrictions, and requirements, and we may be unable to comply with such covenants, restrictions, and requirements
2. 29In the future, we may need to obtain additional financing that may not be available or, if it is available, may result in a reduction in the percentage ownership of our stockholders
3. 30Our indebtedness and finance and operating lease obligations could adversely affect our ability to respond to changes in our industry or business
4. 31Our profitability may be materially adversely impacted if our capital investments do not match customer demand or if there is a decline in the availability of funding sources for these investments
5. 32Our 49% owned subsidiary, TEL, faces certain additional risks particular to its operations, any one of which could adversely affect our operating results
6. 33TEL's majority owners are generally restricted from transferring their interests in TEL, other than to certain permitted transferees, without our consent. There is no assurance that we will be able to agree on any proposed sale or transfer of interests in TEL, whether by us or the other owners
7. 34We could determine that our goodwill and other intangible assets are impaired, thus recognizing a related loss98% rewritten
8. 35We could recognize further impairments in the future, and we may never realize the full value of our goodwill or intangible assets. If these event occur, our profitability and financial condition will sufferNew
9. 36Provisions in our charter documents or Nevada law may inhibit a takeover, which could limit the price investors might be willing to pay for our Class A common stock
10. 37The market price of our Class A common stock may be volatile
11. 38We cannot guarantee the timing or amount of repurchases of our Class A common stock, or the declaration of future dividends, if any
12. 39Changes in taxation could lead to an increase of our tax exposure and could affect the Company’s financial results59% rewritten
13. 40If we fail to maintain effective internal control over financial reporting in the future, there could be an elevated possibility of a material misstatement, and such a misstatement could cause investors to lose confidence in our financial statements, which could have a material adverse effect on our stock price