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
|
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. [ ]
|
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.
|
EXHIBIT
NUMBER
|
EXHIBIT DESCRIPTION
|
|
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
|
EXHIBIT
NUMBER
|
EXHIBIT DESCRIPTION
|
Unaudited pro forma consolidated financial statements of Covenant Logistics Group, Inc.
|
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.
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(A)
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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.
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(B)
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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.
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(C)
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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.
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(D)
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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.
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(E)
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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.
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(F)
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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.
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