COVENANT LOGISTICS GROUP, INC. Leases Disclosure
| 11. | LEASES |
Finance lease obligations are utilized to finance a portion of our revenue equipment and are entered into with certain finance companies who are not parties to our Credit Facility. The leases in effect at December 31, 2025 terminate in June 2028 through November 2033 and contain guarantees of the residual value of the related equipment by us. As such, the residual guarantees are included in the related debt balance as a balloon payment at the end of the related term as well as included in the future minimum finance lease payments. These lease agreements require us to pay personal property taxes, maintenance, and operating expenses. Our operating lease obligations do not typically include residual value guarantees or material restrictive covenants.
A summary of our lease obligations for the twelve months ended December 31, 2025, 2024, and 2023 are as follows:
| (dollars in thousands) | Twelve Months Ended | Twelve Months Ended | Twelve Months Ended | |||||||||
| December 31, 2025 | December 31, 2024 | December 31, 2023 | ||||||||||
| Finance lease cost: | ||||||||||||
| Amortization of right-of-use assets | $ | 872 | $ | 491 | $ | 689 | ||||||
| Interest on lease liabilities | 470 | 818 | 510 | |||||||||
| Operating lease cost | 14,849 | 14,350 | 18,296 | |||||||||
| Short-term lease cost | 6,846 | 4,117 | 7,514 | |||||||||
| Variable lease cost | (48 | ) | 266 | 1,024 | ||||||||
| Total lease cost | $ | 22,989 | $ | 20,042 | $ | 28,033 | ||||||
| Other information | ||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||
| Operating cash flows from finance leases | $ | 470 | $ | 818 | $ | 510 | ||||||
| Operating cash flows from operating leases | $ | 11,541 | $ | 11,222 | $ | 13,965 | ||||||
| Financing cash flows from finance leases | $ | 750 | $ | 2,949 | $ | 5,619 | ||||||
| Right-of-use assets obtained in exchange for new finance lease liabilities | $ | - | $ | 815 | $ | 5,938 | ||||||
| Right-of-use assets obtained in exchange for new operating lease liabilities | $ | 7,324 | $ | 13,753 | $ | 3,992 | ||||||
| Weighted-average remaining lease term—finance leases |
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| Weighted-average remaining lease term—operating leases |
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| Weighted-average discount rate—finance leases | 12.4 | % | 12.7 | % | 13.2 | % | ||||||
| Weighted-average discount rate—operating leases | 8.6 | % | 8.7 | % | 10.1 | % | ||||||
At December 31, 2025 and 2024, right-of-use assets of $35.5 million and $40.0 million for operating leases, respectively, and $2.8 million and $4.6 million for finance leases, are included in net property and equipment in our consolidated balance sheets. Operating lease right-of-use asset amortization is included in revenue equipment rentals and purchased transportation, communication and utilities, and general supplies and expenses, depending on the underlying asset, in the consolidated statement of operations. Amortization of finance leased assets is included in depreciation and amortization expense in the consolidated statement of operations.
Our future minimum lease payments as of December 31, 2025, summarized as follows by lease category:
| (in thousands) | Operating | Finance | ||||||
| 2026 | $ | 14,572 | $ | 1,212 | ||||
| 2027 | 12,917 | 1,212 | ||||||
| 2028 | 6,747 | 930 | ||||||
| 2029 | 3,915 | 340 | ||||||
| 2030 | 2,602 | 214 | ||||||
| Thereafter | 2,101 | 317 | ||||||
| Total minimum lease payments | $ | 42,854 | $ | 4,225 | ||||
| Less: amount representing interest | (5,400 | ) | (1,032 | ) | ||||
| Present value of minimum lease payments | $ | 37,454 | $ | 3,193 | ||||
| Less: current portion | (12,182 | ) | (840 | ) | ||||
| Lease obligations, long-term | $ | 25,272 | $ | 2,353 | ||||
Certain leases contain cross-default provisions with other financing agreements and additional charges if the unit's mileage exceeds certain thresholds defined in the lease agreement.
Rental expense is summarized as follows for each of the three years ended December 31:
| (in thousands) | 2025 | 2024 | 2023 | |||||||||
| Revenue equipment rentals | $ | 8,154 | $ | 5,390 | $ | 12,735 | ||||||
| Building and lot rentals | 12,890 | 12,816 | 13,721 | |||||||||
| Other equipment rentals | 603 | 527 | 378 | |||||||||
| Total rental expense | $ | 21,647 | $ | 18,733 | $ | 26,834 | ||||||
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Mar 5, 2021 | |
| 2019 | Mar 9, 2020 | |
| 2018 | Mar 13, 2019 | |
| 2017 | Feb 28, 2018 | |
| 2016 | Mar 14, 2017 | |
| 2015 | Feb 29, 2016 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.