Covenant Logistics Group, Inc 8-K, filed Apr 23, 2020
Covenant Logistics Group, Inc. (CVLG)
8-K
2020-04-23
For: 2020-04-17
View Original
Added on
April 04, 2026
About this 8-K
Covenant Logistics Group, Inc filed this 8-K on April 23, 2020, reporting on events of April 17, 2020.
Items reported
- Item 2.05: Exit or restructuring costs
- Item 4.01: Change of auditor
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________________________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
April 17, 2020
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COVENANT TRANSPORTATION GROUP, INC.
(Exact name of registrant as specified in its charter)
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Nevada
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000-24960
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88-0320154
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(State or other jurisdiction
of incorporation)
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(Commission
File Number)
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(IRS Employer
Identification No.)
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400 Birmingham Hwy., Chattanooga, TN
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37419
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(Address of principal executive offices)
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(Zip Code)
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(423) 821-1212
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s) | Name of each exchange on which registered |
| $0.01 Par Value Class A common stock | CVTI | The NASDAQ Global Select Market |
Indicate by check mark whether that 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).
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Emerging growth company [ ]
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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. [ ]
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Item 2.05
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Costs Associated with Exit or Disposal Activities
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On April 17, 2020, Covenant Transportation Group, Inc., a Nevada corporation and subsidiaries (the “Company”), communicated the closure of its Texarkana terminal to potentially affected employees. The Texarkana terminal houses the
operations of Southern Refrigerated Transport, Inc. and the closure involves the permanent workforce reduction of approximately 150 support staff teammates.
The Company expects the terminal closure to be substantially complete in the second quarter of 2020. The Company expects to incur an immaterial
amount of one-time employee benefit termination costs in connection with the terminal closure. The Company is currently unable in good faith to make a determination of an estimate of the amount or range of any other amounts expected to be
incurred in connection with these the terminal closure, both with respect to each major type of cost associated therewith and with respect to the total cost, or an estimate of the amount or range of amounts that will result in future cash
expenditures. The Company will file an amendment to this Current Report on Form 8-K after it determines such estimate or range of estimates, if such estimates are material.
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| Item 4.01 | Changes in Registrant’s Certifying Accountant |
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(a) Dismissal of Independent Registered Public Accounting Firm
On April 17, 2020, the Audit Committee of the Board of Directors (the “Audit Committee”) of the Company, made the decision to change the Company’s independent registered public accounting
firm and the Company dismissed KPMG LLP (“KPMG”) as its independent registered public accounting firm.
The audit reports of KPMG on the Company's consolidated financial statements as of and for the years ended December 31, 2019 and 2018 did not contain an adverse opinion or disclaimer of
opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles, except as follows:
• The audit report of KPMG on the consolidated financial statements of the Company as of and for the year ended December 31, 2019 contained a paragraph stating that “As
discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2019 due to the adoption of ASU 2016-02, Leases, and subsequently issued additional ASUs amending this
ASU (collectively ASC 842, Leases).”
The audit reports of KPMG on the effectiveness of internal control over financial reporting as of and for the years ended December 31, 2019 and 2018 did not contain an adverse opinion or
disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles, except that KPMG’s report indicates that the Company did not maintain effective internal control over financial reporting as
of December 31, 2018 because of the effect of a material weakness described in the following paragraph.
During the two fiscal years ended December 31, 2019 and 2018, and from January 1, 2020 through March 10, 2020, there were no “disagreements” (as defined in Item 304(a)(1)(iv) of Regulation
S-K and related instructions) with KPMG on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of KPMG, would have caused
KPMG to make reference in connection with their opinion to the subject matter of the disagreement. During the years ended December 31, 2019 and 2018, and from January 1, 2020 through April 17, 2020, there have been no “reportable events” (as
defined in Regulation S-K Item 304(a)(1)(v)); except for a material weakness in internal control over financial reporting identified during the audit for the year ended December 31, 2018 related to the design and maintenance of effective
program change management controls over certain information technology (“IT”) operating systems, databases and IT applications that support the Company’s financial reporting processes. This material weakness was disclosed in Item 9A of the
Company’s Annual Report on Form 10-K for the year ended December 31, 2018 and was disclosed by the Company as remediated in Item 9A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
The Company has requested that KPMG furnish a letter addressed to the Securities and Exchange Commission, pursuant to Item 304(a)(3) of Regulation S-K, stating whether or not KPMG agrees with
the statements related to them made by the Company in this report. A copy of KPMG’s letter, dated April 23, 2020, is attached as Exhibit 16 to this report.
(b) Newly Engaged Independent Registered Public Accounting Firm
On April 17, 2020, the Audit Committee made the decision to engage Grant Thornton LLP (“GT”) as the Company's independent registered public accounting firm, effective immediately, to perform
independent audit services for the fiscal year ending December 31, 2020. During the fiscal years ended December 31, 2019 or 2018, and from January 1, 2020 through April 17, 2020, neither the Company nor anyone on its behalf consulted GT
regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered with respect to the consolidated financial statements of the Company,
and no written report or oral advice was provided to the Company by GT that was an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issue; or (ii) any matter that was the
subject of a “disagreement” (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or a “reportable event” (as that term is defined in Item 304(a)(1)(v) of Regulation S-K).
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Item 7.01
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Regulation FD Disclosure.
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On April 20, 2020, the Company issued a press release announcing the closure of its Texarkana terminal and providing a liquidity update.
A copy of the press release is attached to this report as Exhibit 99.
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Item 9.01
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Financial Statements and Exhibits.
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(d)
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Exhibits.
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EXHIBIT
NUMBER
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EXHIBIT DESCRIPTION
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| 16 | Letter dated April 23, 2020 to the Securities and Exchange Commission from KPMG LLP. | |
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Covenant Transportation Group, Inc. press release announcing the closure of its Texarkana terminal and providing a liquidity update.
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The information contained in Items 7.01 and 9.01 of this report and the exhibit hereto shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
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The information in Item 2.05, 7.01, and 9.01 of this report may contain "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange 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. Such statements are made based on the current beliefs and expectations
of the Company's management and are subject to significant risks and uncertainties. Actual results or events may differ from those anticipated by forward-looking statements. Please refer to the stockholder reports and filings with the
Securities and Exchange Commission for information concerning risks, uncertainties, and other factors that may affect future results.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly
authorized.
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COVENANT TRANSPORTATION GROUP, INC.
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(Registrant)
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Date: April 23, 2020
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By:
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/s/ Richard B. Cribbs
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Richard B. Cribbs
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Executive Vice President and Chief Financial Officer
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Exhibit 16
April 23, 2020
Securities and Exchange Commission
Washington, D.C. 20549
Ladies and Gentlemen:
We were previously principal accountants for Covenant Transportation Group, Inc. (the “Company”) and, under the date of March 9, 2020,
we reported on the consolidated financial statements of the Company as of and for the years ended December 31, 2019 and 2018 and the effectiveness of internal control over financial reporting as of December 31, 2019. On April 17, 2020, we were
dismissed. We have read the Company’s statements included under Item 4.01 of its Form 8-K dated April 23, 2020, and we agree with such statements, except that we are not in a position to agree or disagree with the Company’s statement that the change
was approved by the Audit Committee of the Board of Directors and we are not in a position to agree or disagree with the Company’s statements in Item 4.01(b).
Very truly yours,
/s/ KPMG LLP
Exhibit 99
COVENANT TRANSPORTATION GROUP ANNOUNCES TEXARKANA TERMINAL CLOSURE AND PROVIDES LIQUIDITY UPDATE
CHATTANOOGA, TENNESSEE – April 20, 2020 - Covenant Transportation Group, Inc. (NASDAQ/GS: CVTI) (“CTG”) today announced its plans for closing
its Texarkana, Arkansas terminal and an update on liquidity as of March 31, 2020.
Texarkana Facility
Chairman and Chief Executive Officer, David R. Parker, commented: “Beginning May 1, 2020, CTG plans to wind down operations at the Texarkana, Arkansas terminal, which had primarily
served as the operating center for solo-driven refrigerated service. CTG is continuing to provide its high-quality solo-driven refrigerated service. The terminal closure is expected to result in a permanent workforce reduction of approximately 150
support staff teammates, who will be provided severance and healthcare insurance support. This action, while regrettable and extremely painful to many in our enterprise and especially to those directly impacted, is necessary to focus our staffing and
capital towards our targeted business units and to lower overhead costs. We plan to transfer all professional truck drivers and non-driving functions to our Chattanooga, Nashville, or Greeneville, Tennessee, locations. The enterprise has detailed
plans in place with the objective of continuing to deliver outstanding service for our customers and support our professional driving force from these locations.”
Liquidity Update
Mr. Parker continued: “We have a strong balance sheet and ample liquidity. At March 31, 2020, CTG had approximately $75.3 million in liquidity (cash and cash equivalents plus
available borrowings under its revolving line of credit). Other potential flexible sources of liquidity include over $30 million in net book value of unencumbered owned revenue equipment and over $105 million in net book value of accounts receivable
attributable to our factoring business that are not currently included in the borrowing base of our revolving credit facility. Our revolving credit facility contains a fixed charge coverage ratio covenant
that will only apply in the event that available borrowing capacity is below a certain threshold. Based on availability as of March 31, 2020, there was no fixed charge coverage requirement and we do not expect to be required to test our fixed
charge covenant in the foreseeable future.”
Covenant Transportation Group, Inc. is the holding company for several transportation providers that offer premium transportation services for customers throughout the United States.
The consolidated group includes operations from Covenant Transport and Covenant Transport Solutions of Chattanooga, Tennessee; Southern Refrigerated Transport of Texarkana, Arkansas; Landair Transport and Landair Logistics of Greeneville, Tennessee;
and Star Transportation of Nashville, Tennessee. In addition, Transport Enterprise Leasing, of Chattanooga, Tennessee is an integral affiliated company providing revenue equipment sales and leasing services to the trucking industry. The Company's
Class A common stock is traded on the NASDAQ Global Select market under the symbol, “CVTI”.
This press release contains certain statements that may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are subject to the safe harbor created by those sections and the Private Securities Litigation Reform Act of 1995, as amended. Such statements may be identified by
their use of terms or phrases such as "expects," "estimates," "projects," "believes," "anticipates," "plans," "intends," “outlook,” “focus,” “seek,” “potential,” “continue,” “goal,” “target,” “objective,” derivations thereof, and similar terms and
phrases. Forward-looking statements are based upon the current beliefs and expectations of our management and 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. In this press release, the statements relating to expectations for the Texarkana closure and
related impact, plans, and objectives, as well as our expectations for testing our fixed charge covenant are forward-looking statements. The following factors, among others could cause actual results to differ materially from those in the
forward-looking statements: elevated experience in the frequency and severity of claims relating to accident, cargo, workers' compensation, health, and other claims, increased insurance premiums, higher self-insured retentions, reduced insurance
coverage, fluctuations in claims expenses that result from our self-insured retention amounts, including in our excess layers and in respect of claims for which we commute policy coverage, and the requirement that we pay additional premiums if there
are claims in certain of those layers, differences between estimates used in establishing and adjusting claims reserves and actual results over time, adverse changes in claims experience and loss development factors, or additional changes in
management's estimates of liability based upon such experience and development factors that cause our expectations of insurance and claims expense to be inaccurate or otherwise impacts our results; government regulations imposed on our captive
insurance companies; changes in the market condition for used revenue equipment and real estate that impact our capital expenditures and our ability to dispose of revenue equipment and real estate on the schedule and for the prices we expect;
increases in the prices paid for new revenue equipment that impact our capital expenditures and our results generally; changes in management’s estimates of the need for new tractors and trailers; the effect of any reduction in tractor purchases on
the number of tractors that will be accepted by manufacturers under tradeback arrangements; our inability to generate sufficient cash from operations and obtain financing on favorable terms to meet our significant ongoing capital requirements; our
ability to respond to changes in our industry or business in light of our substantial indebtedness and lease obligations; our ability to sustain or increase profitability in the future; the risks related to our Factoring segment; our ability to
maintain compliance with the provisions of our credit agreements, particularly financial covenants in our revolving credit facility; excess tractor or trailer capacity in the trucking industry; decreased demand for our services or loss of one or
more of our major customers; our ability to renew dedicated service offering contracts on the terms and schedule we expect; surplus inventories, recessionary economic cycles, and downturns in customers' business cycles; strikes, work slowdowns, or
work stoppages at the Company, customers, ports, or other shipping related facilities; increases or rapid fluctuations in fuel prices, as well as fluctuations in hedging activities and surcharge collection, including, but not limited to, changes in
customer fuel surcharge policies and increases in fuel surcharge bases by customers; the volume and terms of diesel purchase commitments and hedging contracts; interest rates, fuel taxes, tolls, and license and registration fees; increases in
compensation for and difficulty in attracting and retaining qualified drivers and independent contractors; our ability to retain our key employees; the risks associated with engaging independent contractors to provide a portion of our capacity;
seasonal factors such as harsh weather conditions that increase operating costs; competition from trucking, rail, and intermodal competitors; our dependence on third-party providers, particularly in our Managed Freight segment; regulatory
requirements that increase costs, decrease efficiency, or impact the availability or effective driving time of our drivers and other drivers in the industry, including the terms and exemptions from hours-of-service and electronic log requirements for
drivers and the Federal Motor Carrier Safety Administration’s Compliance, Safety, Accountability program applicable to driver standards and the methodology for determining a carrier’s Department of Transportation safety rating; the proper functioning
and availability of our management information and communication systems and other information technology assets; volatility of our stock price; our ability to maintain effective internal controls without material weaknesses; impairment of goodwill
and other intangible assets; future outcomes of litigation; uncertainties in the interpretation of the 2017 Tax Cuts and Jobs Act and other tax laws; the ability to reduce, or control increases in, operating costs; changes in the Company’s business
strategy that require the acquisition of new businesses, the disposition of businesses, and the ability to identify acceptable acquisition candidates and appropriate assets or businesses to be disposed, consummate acquisitions and dispositions, and
integrate acquired operations; our ability to achieve our strategic plan; fluctuations in the results of Transport Enterprise Leasing, which are included as equity in income (loss) of affiliate in our financial statements; our Chairman of the Board
and Chief Executive Officer and his wife control a large portion of our stock and have substantial control over us, which could limit other stockholders' ability to influence the outcome of key transactions, including changes of control; changes in
methods of determining LIBOR or replacement of LIBOR; future share repurchases, if any; and the impact of the recent coronavirus outbreak or other similar outbreaks. Readers should review and consider these factors along with the various disclosures
by the Company in its press releases, stockholder reports, and filings with the Securities and Exchange Commission. We disclaim any obligation to update or revise any forward-looking statements to reflect actual results or changes in the factors
affecting the forward-looking information.
For further information contact:
Richard B. Cribbs, Executive Vice President and Chief Financial Officer
RCribbs@covenanttransport.com