Covenant Logistics Group, Inc 8-K/A, filed Jul 16, 2020

Covenant Logistics Group, Inc. (CVLG)

8-K/A 2020-07-16 For: 2020-07-08

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Added on April 04, 2026

About this 8-K/A

Covenant Logistics Group, Inc filed this 8-K/A on July 16, 2020, reporting on events of July 8, 2020.

Items reported

Item 9.01: Financial statements and exhibits

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Nevada	000-24960	88-0320154
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

400 Birmingham Hwy., Chattanooga, TN	37419
(Address of principal executive offices)	(Zip Code)

[ ]	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ]	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ]	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
$0.01 Par Value Class A common stock	CVLG	The NASDAQ Global Select Market

Item 9.01	Financial Statements and Exhibits.

	(b)	Pro Forma Financial Information.

	The unaudited pro forma consolidated financial statements of the Company giving effect to the Transaction are furnished as Exhibit 99.2 hereto and incorporated herein by reference. Such unaudited pro forma consolidated financial statements are not necessarily indicative of the operating results and financial position that actually would have been achieved if the Transaction had been in effect on the dates indicated or that may be achieved for future periods, and should be read in conjunction with the financial statements of the Company.

	(d)	Exhibits.

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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. [ ]

	EXHIBIT NUMBER	EXHIBIT DESCRIPTION

	99.2	Unaudited pro forma consolidated financial statements of Covenant Logistics Group, Inc.

	COVENANT LOGISTICS GROUP, INC.
	(Registrant)

Date: July 16, 2020	By:	/s/ M. Paul Bunn
		M. Paul Bunn
		Executive Vice President, Chief Financial Officer, and Secretary

COVENANT LOGISTICS GROUP, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET (In thousands, except share data)
	March 31, 2020
ASSETS	Covenant Logistics Group			Transaction Adjustments			Notes	Pro Forma
Current assets:
Cash and cash equivalents	$	39,655		$	5,089		(A)	$	44,744
Accounts receivable, net of allowance		192,628			(108,723	)	(B)		83,905
Drivers' advances and other receivables, net of allowance		9,799			-				9,799
Inventory and supplies		3,812			-				3,812
Prepaid expenses		7,948			-				7,948
Assets held for sale		22,691			-				22,691
Income taxes receivable		4,785			(4,623	)	(C)		162
Other short-term assets		1,226			-				1,226
Total current assets		282,544			(108,257	)			174,287

Property and equipment, net of accumulated depreciation		499,518			-				499,518
Goodwill		42,518			-				42,518
Other intangibles, net		28,884			-				28,884
Other assets, net		59,220			22,339		(A)		81,559
Total assets	$	912,684		$	(85,918	)		$	826,766

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Checks outstanding in excess of bank balances	$	481		$	-			$	481
Accounts payable		23,742			(5,437	)	(B)		18,305
Accrued expenses		34,180			900		(B)		35,080
Current maturities of long-term debt		61,403			-				61,403
Current portion of finance lease obligations		7,062			-				7,062
Current portion of operating lease obligations		18,452			-				18,452
Current portion of insurance and claims accrual		21,998			-				21,998
Other short-term liabilities		1,086			-				1,086
Total current liabilities		168,404			(4,537	)			163,867

Long-term debt		228,203			(103,286	)	(A)		124,917
Long-term portion of finance lease obligations		24,901			-				24,901
Long-term portion of operating lease obligations		36,357			-				36,357
Insurance and claims accrual		42,902			-				42,902
Deferred income taxes		78,670			2,141		(C)		80,811
Other long-term liabilities		4,754			-				4,754
Total liabilities		584,191			(105,682	)			478,509

Stockholders' equity:
Class A common stock		173			-				173
Class B common stock		24			-				24
Additional paid-in-capital		142,345			-				142,345
Treasury stock at cost		(17,515	)		-				(17,515	)
Accumulated other comprehensive loss		(3,364	)		-				(3,364	)
Retained earnings		206,830			19,764		(D)		226,594
Total stockholders' equity		328,493			19,764				348,257
Total liabilities and stockholders' equity	$	912,684		$	(85,918	)		$	826,766

COVENANT LOGISTICS GROUP, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data)
	Three Months Ended March 31, 2020
	Covenant Logistics Group			Transaction Adjustments			Notes	Pro Forma Consolidated
Revenue:
Freight revenue	$	192,321		$	(2,739	)	(B)	$	189,582
Fuel surcharge revenue		21,232			-				21,232
Total revenue	$	213,553		$	(2,739	)		$	210,814

Operating expenses:
Salaries, wages, and related expenses		82,825			(360	)	(B)		82,465
Fuel expense		25,265			-				25,265
Operations and maintenance		12,825			-				12,825
Revenue equipment rentals and purchased transportation		46,062			-				46,062
Operating taxes and licenses		3,454			-				3,454
Insurance and claims		15,614			-				15,614
Communications and utilities		1,569			-				1,569
General supplies and expenses		8,568			(123	)	(B)		8,445
Depreciation and amortization, including gains and losses on disposition of property and equipment		16,663			-				16,663
Total operating expenses		212,845			(483	)			212,362
Operating income (loss)		708			(2,256	)			(1,548	)
Interest expense, net		2,892			(993	)	(B)		1,899
Loss on equity method investment		735			-				735
Loss before income taxes		(2,919	)		(1,263	)			(4,182	)
Income tax benefit		(706	)		(322	)	(E)		(1,028	)
Net loss	$	(2,213	)	$	(941	)		$	(3,154	)

Income per share:
Basic and diluted net loss per share	$	(0.12	)					$	(0.17	)
Basic and diluted weighted average shares outstanding		18,088							18,088

COVENANT LOGISTICS GROUP, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data)
	Year Ended December 31, 2019
	Covenant Logistics Group			Transaction Adjustments			Notes	Pro Forma
Revenue:
Freight revenue	$	800,401		$	(9,140	)	(B)	$	791,261
Fuel surcharge revenue		94,127			-				94,127
Total revenue	$	894,528		$	(9,140	)		$	885,388

Operating expenses:
Salaries, wages, and related expenses		321,997			(1,499	)	(B)		320,498
Fuel expense		115,307			-				115,307
Operations and maintenance		59,505			-				59,505
Revenue equipment rentals and purchased transportation		204,655			-				204,655
Operating taxes and licenses		13,024			-				13,024
Insurance and claims		47,724			-				47,724
Communications and utilities		6,969			-				6,969
General supplies and expenses		30,434			(114	)	(B)		30,320
Depreciation and amortization, including gains and losses on disposition of property and equipment		78,879			-				78,879
Total operating expenses		878,494			(1,613	)			876,881
Operating income		16,034			(7,527	)			8,507
Interest expense, net		11,110			(2,892	)	(F)		8,218
Income from equity method investment		(7,017	)		-				(7,017	)
Income before income taxes		11,941			(4,635	)			7,306
Income tax expense (benefit)		3,464			(1,182	)	(E)		2,282
Net income	$	8,477		$	(3,453	)		$	5,024

Income per share:
Basic net income per share	$	0.46						$	0.27
Diluted net income per share	$	0.45						$	0.27
Basic weighted average shares outstanding		18,435							18,435
Diluted weighted average shares outstanding		18,635							18,635

COVENANT LOGISTICS GROUP, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data)
	Year Ended December 31, 2018
	Covenant Logistics Group			Transaction Adjustments			Notes	Pro Forma
Revenue:
Freight revenue	$	779,729		$	(5,038	)	(B)	$	774,691
Fuel surcharge revenue		105,726			-				105,726
Total revenue	$	885,455		$	(5,038	)		$	880,417

Operating expenses:
Salaries, wages, and related expenses		304,447			(1,005	)	(B)		303,442
Fuel expense		121,264			-				121,264
Operations and maintenance		55,505			-				55,505
Revenue equipment rentals and purchased transportation		183,645			-				183,645
Operating taxes and licenses		11,831			-				11,831
Insurance and claims		43,333			-				43,333
Communications and utilities		7,061			-				7,061
General supplies and expenses		23,227			(325	)	(B)		22,902
Depreciation and amortization, including gains and losses on disposition of property and equipment		76,156			-				76,156
Total operating expenses		826,469			(1,330	)			825,139
Operating income		58,986			(3,708	)			55,278
Interest expense, net		8,708			(1,363	)	(F)		7,345
Income from equity method investment		(7,732	)		-				(7,732	)
Income before income taxes		58,010			(2,345	)			55,665
Income tax expense (benefit)		15,507			(598	)	(E)		14,909
Net income	$	42,503		$	(1,747	)		$	40,756

Income per share:
Basic net income per share	$	2.32						$	2.22
Diluted net income per share	$	2.30						$	2.21
Basic weighted average shares outstanding		18,340							18,340
Diluted weighted average shares outstanding		18,469							18,469

COVENANT LOGISTICS GROUP, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data)
	Year Ended December 31, 2017
	Covenant Logistics Group			Transaction Adjustments			Notes	Pro Forma
Revenue:
Freight revenue	$	626,809		$	(3,128	)	(B)	$	623,681
Fuel surcharge revenue		78,198			-				78,198
Total revenue	$	705,007		$	(3,128	)		$	701,879

Operating expenses:
Salaries, wages, and related expenses		241,784			(706	)	(B)		241,078
Fuel expense		103,139			-				103,139
Operations and maintenance		48,774			-				48,774
Revenue equipment rentals and purchased transportation		141,954			-				141,954
Operating taxes and licenses		9,878			-				9,878
Insurance and claims		33,155			-				33,155
Communications and utilities		6,938			-				6,938
General supplies and expenses		14,783			(52	)	(B)		14,731
Depreciation and amortization, including gains and losses on disposition of property and equipment		76,447			-				76,447
Total operating expenses		676,852			(758	)			676,094
Operating income		28,155			(2,370	)			25,785
Interest expense, net		8,258			(880	)	(F)		7,378
Income from equity method investment		(3,400	)		-				(3,400	)
Income before income taxes		23,297			(1,490	)			21,807
Income tax benefit		(32,142	)		(577	)	(E)		(32,719	)
Net income	$	55,439		$	(913	)		$	54,526

Income per share:
Basic net income per share	$	3.03						$	2.98
Diluted net income per share	$	3.02						$	2.97
Basic weighted average shares outstanding		18,279							18,279
Diluted weighted average shares outstanding		18,372							18,372

	(in thousands)
Estimate of Consideration Received:
Cash received	$	108,375
Earnout, net ⁽¹⁾		8,397
Stock Interest as of the Transaction Date		13,942
Total consideration	$	130,714

Net Assets Disposed:
Factoring receivables sold	$	108,723
Less: Advance and rebate liabilities assumed by purchaser		(5,437	)
Net assets disposed	$	103,286

Estimated Pre-Tax Gain on Sale ⁽²⁾	$	26,528


(1)		The maximum earnout available under the Purchase Agreement is $9,879. Management believes that an estimate of 85% (after 10% distribution to former TFS management) of the maximum represents the most likely outcome and accordingly has included this as consideration

(2)		Represents the difference between estimated consideration received and net assets disposed, less estimated transaction costs of approximately $0.9 million.

(A)		Represents consideration received. The consideration includes the cash distribution of $108.4 million, stock valued at $13.9 million as of the transaction date, and estimated earn-out of $8.4 million. Of the cash received, $103.3 million will be used to pay down debt as a result of financing receivables.

(B)		The adjustment transactions on the condensed consolidated statements of operations represent direct revenues and expenses attributable to TFS. The adjustment transactions on the condensed balance sheet represents the removal of assets and liabilities attributable to the Transaction.

(C)		Represents the estimated deferred tax impact of the Transaction. The Company used the blended statutory income tax rate in effect for the period presented. The blended statutory income tax rate is subject to change.

(D)		Represents the impact to the Company’s retained earnings from the pro forma adjustments specified in (A), (B), and (C) above, resulting in the tax effected gain from the Transaction. As the gain is directly attributable to the disposition and is not expected to have a continuing impact on the Company’s operations, it is only reflected in retained earnings on the unaudited pro forma condensed consolidated balance sheet.

(E)		To reflect the income tax effect of each of the Transaction adjustments at an effective tax rate of 25.5% for the periods ended 2020, 2019, and 2018 and 38.7% for 2017, the Company’s blended statutory income tax rate in effect for the periods presented. The blended statutory income tax rate is subject to change.

(F)		To reflect reduced interest expense on long term debt incurred as a result of financing TFS receivables. A weighted average interest rate of 4% is used to finance the average net receivables for each period presented on the unaudited statement of consolidated operations.