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 UpdateMr. 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
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