false000092865800009286582020-09-232020-09-23

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________________________________

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):

___________________________________________________________________

COVENANT LOGISTICS GROUP, INC.

(Exact name of registrant as specified in its charter)

(State or other jurisdiction

400 Birmingham Hwy., Chattanooga, TN

(Address of principal executive offices)

(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:

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))

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange on which registered

$0.01 Par Value Class A common stock

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. [ ]

Entry into a Material Definitive Agreement.

On September 23, 2020, Covenant Transport Solutions, LLC (“CTS”), doing business as Transport Financial Services (“TFS”) and an indirect wholly owned subsidiary of Covenant Logistics Group, Inc., a Nevada corporation (the “Company” and collectively with CTS, “Covenant”), and the Company entered into an Account Management Agreement, Amendment to Purchase Agreement, and Mutual Release (the “Account Management Agreement”) with Advance Business Capital LLC (“ABC”), an indirect wholly owned subsidiary of Triumph Bancorp, Inc. (“TBI” and collectively with ABC, “Triumph”), and TBI. Pursuant to the Account Management Agreement, CTS and Triumph agreed to amend that certain Accounts Receivable Purchase Agreement (the “Purchase Agreement”), dated as of July 8, 2020, by and among CTS and Triumph as follows: (a) CTS shall sell the 630,268 shares of TBI common stock received pursuant to the Purchase Agreement and pay the cash proceeds thereof to Triumph, (b) the opportunity for CTS to earn net contingent cash consideration of up to approximately $9.9 million is eliminated, and (c) certain indemnification obligations of CTS are eliminated and replaced with Covenant’s obligation to indemnify ABC for losses incurred by ABC related to the $62,167,152 in over-formula advances made to specified clients identified in the Account Management Agreement (the “Over-Formula Advance Portfolio”) with Covenant responsible for and will indemnify ABC for 100% of the first $30 million of any losses incurred by ABC related to the Over-Formula Advance Portfolio, and for 50% of the next $30,000,000 of any losses incurred by ABC, for total indemnification by Covenant of $45 million (the “Amended Transaction”).

In connection with the Account Management Agreement, on September 23, 2020, TBK Bank, SSB, as lender and agent for Triumph (“TBK Bank”), provided Covenant with a $45 million line of credit (the “Draw Note”), the proceeds of which are to be used solely to satisfy Covenant’s indemnification obligations under the Account Management Agreement. Covenant may borrow pursuant to the Draw Note until September 23, 2025. Any amount outstanding under the Draw Note will accrue interest at a per annum rate equal to one and one-half (1.5) percentage points over LIBOR, provided, however, that LIBOR shall be deemed to be at least 0.25%. Accrued interest is due monthly and the outstanding principal balance is due on September 23, 2026. To secure Covenant’s obligations under the Account Management Agreement and the Draw Note, Covenant and certain other wholly owned subsidiaries pledged certain unencumbered revenue equipment with an estimated net orderly liquidation value of $60 million (the “Equipment Collateral”). The Draw Note includes usual and customary events of default for a facility of this nature and provides that, upon occurrence and continuation of an event of default, payment of all amounts payable under the Draw Note may be accelerated.

Pursuant to the Account Management Agreement, Covenant and Triumph have (x) agreed to certain terms related to the management of the Over-Formula Advance Portfolio, and the terms by which Covenant may provide assistance to maximize recovery on the Over-Formula Advance Portfolio and (y) provided mutual releases to each other related to any and all claims related to the transactions contemplated by the Purchase Agreement or the Over-Formula Advance Portfolio. Also in connection the Account Management Agreement, Covenant agreed to dismiss, with prejudice, the declaratory judgment action filed in the 95th Judicial District Court of Dallas County, Texas (removed to the United States District Court, Northern District of Texas), related to the Purchase Agreement and the transactions contemplated thereby.

In connection with the Amended Transaction, on September 23, 2020, the Company and substantially all of its direct and indirect wholly owned subsidiaries entered into a Seventeenth Amendment to Third Amended and Restated Credit Agreement (the “Seventeenth Amendment”) with Bank of America, N.A., as agent (the “Agent”), and JP Morgan Chase Bank, N.A. (together with the Agent, the “Lenders”), which amended that certain Third Amended and Restated Credit Agreement, dated September 23, 2008, by and among the Company, substantially all of its direct and indirect subsidiaries, the Agent, and the Lenders, as amended from time to time (the “Credit Agreement”). The Seventeenth Amendment amended the Credit Agreement by, among other things, permitting the Amended Transaction, the Draw Note, and the pledge of the Equipment Collateral.

The foregoing descriptions of the Account Management Agreement, the Amended Transaction, the Draw Note and the Seventeenth Amendment do not purport to be complete and are qualified in their entirety by reference to the Account Management Agreement, the Draw Note, and the Seventeenth Amendment, copies of which will be filed with the Company’s Quarterly Report on Form 10-Q for the quarter ending September 30, 2020.

Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information set forth in Item 1.01 related to the Draw Note is incorporated into this Item 2.03 by reference.

Regulation FD Disclosure.

On September 23, 2020, the Company issued a press release announcing the Amended Transaction and an update to its third quarter 2020 financial guidance. The new financial guidance anticipates an adjusted operating ratio⁽¹⁾ in the low 90’s as compared to the Company’s previously disclosed expectations of an adjusted operating ratio⁽¹⁾ in the mid 90’s, third quarter freight revenue (which excludes fuel surcharge revenue) to be in the range between $190 million to $200 million, average tractor count to be approximately 2,525 and average freight revenue per tractor per week to be approximately $4,025, assuming no significant reversal in current market conditions.

The purchase accounting for the Amended Transaction has not yet been finalized. The previously disclosed $26.5 million estimated gain is expected to be reduced to a modest third quarter gain or loss reflecting the impact of the amended terms. These expectations exclude the impact of any future indemnification obligations as such amounts currently cannot be estimated. Future indemnification obligations will be recorded as expenses in the periods recognized, which could increase the volatility of our reported future financial results.

A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.

(1) In addition to operating ratio, we use adjusted operating ratio, a non-GAAP measure, as a key measures of profitability. Adjusted operating ratio means operating expenses, net of fuel surcharge revenue, excluding amortization of intangibles, and significant unusual items, divided by total revenue, less fuel surcharge revenue. Adjusted operating ratio is not a substitute for operating ratio measured in accordance with GAAP. There are limitations to using non-GAAP financial measures. We believe our presentation of adjusted operating ratio is useful because it provides investors and securities analysts with supplemental information that we use internally for purposes of assessing profitability. Further, our Board and management use adjusted operating ratio on a supplemental basis to remove items that may not be an indicator of performance from period-to-period. Although we believe that adjusted operating ratio improves comparability in analyzing our period-to-period performance, it could limit comparability to other companies in our industry, if those companies define such measures differently. Because of these limitations, adjusted operating ratio should not be considered a measure of income generated by our business or discretionary cash available to us to invest in the growth of our business. Management compensates for these limitations by primarily relying on GAAP results and using non-GAAP financial measures on a supplemental basis. The timing and amount of charges that we exclude from our calculation of adjusted operating ratio cannot be reliably predicted or estimated. Therefore, the Company believes a reconciliation of adjusted operating ratio to operating ratio for projected results is not meaningful or available without unreasonable effort.

The Company is amending and restating in its entirety the risk factor formerly entitled “We are involved in a dispute arising from our disposition of substantially all of the operations and assets of TFS, which could have a material adverse effect on our business, financial condition, and results of operation”, from its Form 10-Q for the quarter ended June 30, 2020, as set forth below. This risk factor supplements, and should be read in conjunction with, the other risk factors set forth under “Item 1A. Risk Factors” in the Company’s Form 10-K for the fiscal year ended December 31, 2019, Form 10-Q for the quarter ended March 31, 2020, as amended, and Form 10-Q for the quarter ended June 30, 2020.

We may incur additional charges in connection with the disposition of substantially all of the operations and assets of TFS, which could have a material adverse effect on our results of operations, cash flows, available liquidity, and total indebtedness.

During the third quarter of 2020, we sold substantially all of the operations and assets of TFS. In connection with the sale of TFS’ assets, we agreed to indemnify the purchaser of TFS’ assets for certain advances we made to specified clients prior to the sale. We are responsible for and will indemnify the purchaser for 100% of the first $30 million of any losses incurred by the purchaser related to these advances, and for 50% of the next $30 million of any losses incurred by the purchaser, for total indemnification by us of $45 million. Our indemnification obligations are secured by certain revenue equipment.

We have not accrued a liability for our indemnification obligations as of the date hereof. We will record liabilities, if any, when they become probable and capable of estimation in accordance with GAAP. The accrual of material liabilities and payment of amounts with respect to the indemnification obligations could create volatility in our reported future financial results and have an adverse effect on our results of operations, cash flows, available liquidity, and total indebtedness.

Due to the amended terms for the sale of TFS’ assets, the previously disclosed $26.5 million estimated gain is expected to be reduced to a modest third quarter 2020 gain or loss. The gain or loss ultimately recorded is subject to change based upon finalization of purchase accounting for the transaction.

Financial Statements and Exhibits.

Covenant Logistics Group, Inc. press release, dated September 23, 2020.

Inline XBRL for the cover page of this Current Report on Form 8-K.

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.

The information in Item 1.01, 2.03, 7.01, 8.01 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 italicized paragraph at the end of the attached press release and various disclosures by the Company in its press releases, stockholder reports, and filings with the Securities and Exchange Commission for information concerning risks, uncertainties, and other factors that may affect future results.

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.

COVENANT LOGISTICS GROUP, INC.

Date: September 23, 2020

Executive Vice President, Chief Financial Officer, and Secretary

Covenant Logistics Group Updates Third Quarter Earnings Expectations and

Resolves Dispute Regarding Sale of TFS Factoring Division

•	Third quarter adjusted operating and financial results expected to significantly exceed prior expectations

•	Dispute with TFS buyer resolved through purchase price adjustment and ongoing portfolio risk sharing

CHATTANOOGA, Tenn., Sept. 23, 2020 (GLOBE NEWSWIRE) -- Covenant Logistics Group, Inc. (NASDAQ/GS: CVLG) (“Covenant”) updated its expectations regarding third quarter financial results financial results and announced amendments to the terms of its July 8, 2020, sale of the assets of its TFS factoring division.

Third Quarter Earnings Expectations

Executive Vice President & Chief Financial Officer, Paul Bunn, commented: “The freight environment in the third quarter has been favorable across all of our service offerings, leading to operating results that are exceeding our prior expectations. After reviewing preliminary financial information through the end of August and operating trends through mid-September, we expect to report an adjusted operating ratio⁽¹⁾ in the low 90’s as compared to our previously disclosed expectations of an adjusted operating ratio⁽¹⁾ in the mid 90’s. We expect freight revenue (which excludes fuel surcharge revenue) to range between $190 million and $200 million, average tractor count to be approximately 2,525 and average freight revenue per tractor per week to be approximately $4,025, for the third quarter of 2020.

Our anticipated results reflect sequential and year-over-year improvements attributable primarily to a combination of (1) a significant improvement in freight fundamentals, including increased demand across markets and less industry-wide trucking capacity, (2) a partial recovery of the U.S. economy in the third quarter from the second quarter impact of Covid-19-related business shutdowns and reduction in personal and commercial economic activity, as well as inventory restocking, and (3) reduced overhead and fixed costs related to the ongoing execution of our strategic plan. We are excited about the progress to date and remain focused on continuing to refine the business model so that it is less-cyclical, more sustainable, and operating in higher margin sectors where we can add value to our customers and for our stakeholders.”

The expectations concerning adjusted operating ratio⁽¹⁾ described above exclude the impact of items that currently have not been quantified and could be material, including without limitation the following: the gain or loss associated with purchase accounting adjustments in relation to the amended sale terms of the TFS division’s factoring assets and any reserves for portfolio losses recorded in connection therewith, the impact of freight rates and equipment utilization over the remainder of the third quarter, the impact of any accidents or changes in claims reserves over the remainder of the third quarter, severance or other infrequent costs associated with implementing our strategic plan, and the potential write off of approximately $3 million in prepaid insurance assets related to exhausting the aggregate coverage limits (as previously announced) of the policy covering the $9 million excess of $1 million layer in the third quarter.

TFS Sale Dispute Resolved

Company Comments

Chairman and Chief Executive Officer, David R. Parker, commented: “We are pleased to reach an amicable resolution of our dispute with Triumph Bancorp and its affiliates concerning the sale of our TFS factoring division. The resolution will result in lower total value and more risk sharing for Covenant, while providing a clear path forward and a fair outcome. At the end of the day, we will have sold the most stable portion of the TFS portfolio for a premium to net asset value while sharing the risk on the balance of the portfolio with a leading provider of factoring and other financial services to the transportation industry. Working with Triumph, we feel well positioned to optimize the results for Covenant, Triumph, and the clients that helped grow the portfolio. Just as important, resolving the dispute allows our management team to remain intently focused on executing our strategic plan.”

Background and Resolution

On July 8, 2020, Covenant sold a portfolio of accounts receivable, contract rights, and associated assets consisting of approximately $103.3 million in net funds employed (the “Portfolio”) to a subsidiary of Triumph Bancorp for approximately $122.3 million plus an earn-out opportunity of up to $9.9 million. After the transaction closed, Covenant and Triumph had a dispute over the nature of approximately $66 million of the assets included in the Portfolio. The dispute has been resolved through entering into an amendment of the purchase agreement and related funding arrangements, with the primary terms including the following:

•

The purchase price was reduced to approximately $108.4 million, representing the cash amount received by Covenant at closing and a modest premium to the approximately $103.3 million in net funds employed in the Portfolio. Covenant will sell the Triumph stock it received at closing and deliver the net proceeds to Triumph. The earnout was terminated.

•

Approximately $62 million of specifically identified accounts within the Portfolio, which related to advances on services that had not yet been performed, were placed in a loss sharing pool to be repaid with proceeds other than those generated from ordinary working capital factoring. To the extent losses on covered accounts are incurred, Covenant will indemnify Triumph on a dollar for dollar basis for up to the first $30 million of losses, and on a 50% basis for up to the next $30 million of losses, for total indemnification exposure of up to $45 million.

•

Triumph provided Covenant with an up to $45 million line of credit, secured by previously unencumbered tractors and trailers, that may be drawn through September 2025 to fund Covenant’s portion of any loss sharing. This will allow Covenant to maintain its existing cash and line of credit for liquidity and general corporate purposes.

•

Covenant and Triumph will cooperate to manage the covered accounts, to assist the clients with operational improvements and paydown and collection efforts (to the extent desired by the clients), and to attempt to minimize losses on the covered accounts. Future additional collateral and proceeds received from clients with covered accounts (outside of ordinary collections) will reduce the size of the loss sharing pool.

•	The parties executed mutual releases.

Financial Impact

From a cash perspective, Covenant will retain the approximately $108.4 million of cash received at closing. However, indemnification obligations on the covered accounts could result in cash payments by Covenant in future periods. To the extent any such payments are required, Covenant expects to fund them with available cash or borrowing. Covenant currently has approximately $16.2 million in unrestricted cash, $58.3 million of available borrowing under its primary revolving credit facility, and $45 million of available borrowing under the new credit facility with Triumph.

The purchase accounting for the transaction has not yet been finalized. The previously disclosed $26.5 million estimated gain is expected to be reduced to a modest third quarter gain or loss reflecting the impact of the amended terms. These expectations exclude the impact of any future indemnification obligations as such amounts currently cannot be estimated. Future indemnification obligations will be recorded as expenses in the periods recognized, which could increase the volatility of our reported future financial results.

About Covenant Logistics

Covenant Logistics Group, Inc., through its subsidiaries, offers a portfolio of transportation and logistics services to customers throughout the United States. Primary services include asset-based expedited, dedicated, and irregular route truckload capacity, as well as asset-light warehousing, transportation management, and freight brokerage capability. In addition, Transport Enterprise Leasing is an affiliated company providing revenue equipment sales and leasing services to the trucking industry. Covenant's Class A common stock is traded on the NASDAQ Global Select market under the symbol, “CVLG.”

Forward Looking Statements

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," “could,” “would,” “may,” “will,” "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 adjusted operating ratio, the estimated range of freight revenue, average tractor count, average freight revenue per tractor, other expected financial and operating measures, the impact of freight rates and equipment utilization, the impact of any accidents or changes in claims reserves, implementation of our strategic plan and associated costs, and the potential write off of certain prepaid insurance assets are forward-looking statements. Such items have not been subject to all the review procedures associated with the release of actual financial results and are premised on certain assumptions. The following factors, among others could cause actual results to differ materially from those in the forward-looking statements: purchase price allocation, reserves for losses, the financial and operational performance of the clients that factored the covered accounts, Triumph’s credit decisions regarding the clients that factored the covered accounts, the amount (if any) of collateral provided in the future by the clients that factored the covered accounts to bolster the substantially under-secured nature of those accounts, the amount and timing of indemnification claims for which we may be obligated, 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 trade back 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; the impact of the recent coronavirus outbreak or other similar outbreaks; the material weakness in our internal control over financial reporting as of June 30, 2020; and erosion of available limits in our aggregate insurance policies. 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:

Paul Bunn, Executive Vice President & Chief Financial Officer

PBunn@covenanttransport.com

For copies of Company information contact:

Brooke McKenzie, Executive Administrative Assistant

BMcKenzie@covenanttransport.com

Back to Form 8-K

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

	COVENANT LOGISTICS GROUP, INC.
	(Registrant)

Date: September 23, 2020	By:	/s/ M. Paul Bunn
		M. Paul Bunn
		Executive Vice President, Chief Financial Officer, and Secretary

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

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 1.01	Entry into a Material Definitive Agreement.

	On September 23, 2020, Covenant Transport Solutions, LLC (“CTS”), doing business as Transport Financial Services (“TFS”) and an indirect wholly owned subsidiary of Covenant Logistics Group, Inc., a Nevada corporation (the “Company” and collectively with CTS, “Covenant”), and the Company entered into an Account Management Agreement, Amendment to Purchase Agreement, and Mutual Release (the “Account Management Agreement”) with Advance Business Capital LLC (“ABC”), an indirect wholly owned subsidiary of Triumph Bancorp, Inc. (“TBI” and collectively with ABC, “Triumph”), and TBI. Pursuant to the Account Management Agreement, CTS and Triumph agreed to amend that certain Accounts Receivable Purchase Agreement (the “Purchase Agreement”), dated as of July 8, 2020, by and among CTS and Triumph as follows: (a) CTS shall sell the 630,268 shares of TBI common stock received pursuant to the Purchase Agreement and pay the cash proceeds thereof to Triumph, (b) the opportunity for CTS to earn net contingent cash consideration of up to approximately $9.9 million is eliminated, and (c) certain indemnification obligations of CTS are eliminated and replaced with Covenant’s obligation to indemnify ABC for losses incurred by ABC related to the $62,167,152 in over-formula advances made to specified clients identified in the Account Management Agreement (the “Over-Formula Advance Portfolio”) with Covenant responsible for and will indemnify ABC for 100% of the first $30 million of any losses incurred by ABC related to the Over-Formula Advance Portfolio, and for 50% of the next $30,000,000 of any losses incurred by ABC, for total indemnification by Covenant of $45 million (the “Amended Transaction”). In connection with the Account Management Agreement, on September 23, 2020, TBK Bank, SSB, as lender and agent for Triumph (“TBK Bank”), provided Covenant with a $45 million line of credit (the “Draw Note”), the proceeds of which are to be used solely to satisfy Covenant’s indemnification obligations under the Account Management Agreement. Covenant may borrow pursuant to the Draw Note until September 23, 2025. Any amount outstanding under the Draw Note will accrue interest at a per annum rate equal to one and one-half (1.5) percentage points over LIBOR, provided, however, that LIBOR shall be deemed to be at least 0.25%. Accrued interest is due monthly and the outstanding principal balance is due on September 23, 2026. To secure Covenant’s obligations under the Account Management Agreement and the Draw Note, Covenant and certain other wholly owned subsidiaries pledged certain unencumbered revenue equipment with an estimated net orderly liquidation value of $60 million (the “Equipment Collateral”). The Draw Note includes usual and customary events of default for a facility of this nature and provides that, upon occurrence and continuation of an event of default, payment of all amounts payable under the Draw Note may be accelerated. Pursuant to the Account Management Agreement, Covenant and Triumph have (x) agreed to certain terms related to the management of the Over-Formula Advance Portfolio, and the terms by which Covenant may provide assistance to maximize recovery on the Over-Formula Advance Portfolio and (y) provided mutual releases to each other related to any and all claims related to the transactions contemplated by the Purchase Agreement or the Over-Formula Advance Portfolio. Also in connection the Account Management Agreement, Covenant agreed to dismiss, with prejudice, the declaratory judgment action filed in the 95th Judicial District Court of Dallas County, Texas (removed to the United States District Court, Northern District of Texas), related to the Purchase Agreement and the transactions contemplated thereby. In connection with the Amended Transaction, on September 23, 2020, the Company and substantially all of its direct and indirect wholly owned subsidiaries entered into a Seventeenth Amendment to Third Amended and Restated Credit Agreement (the “Seventeenth Amendment”) with Bank of America, N.A., as agent (the “Agent”), and JP Morgan Chase Bank, N.A. (together with the Agent, the “Lenders”), which amended that certain Third Amended and Restated Credit Agreement, dated September 23, 2008, by and among the Company, substantially all of its direct and indirect subsidiaries, the Agent, and the Lenders, as amended from time to time (the “Credit Agreement”). The Seventeenth Amendment amended the Credit Agreement by, among other things, permitting the Amended Transaction, the Draw Note, and the pledge of the Equipment Collateral. The foregoing descriptions of the Account Management Agreement, the Amended Transaction, the Draw Note and the Seventeenth Amendment do not purport to be complete and are qualified in their entirety by reference to the Account Management Agreement, the Draw Note, and the Seventeenth Amendment, copies of which will be filed with the Company’s Quarterly Report on Form 10-Q for the quarter ending September 30, 2020.

Item 2.03	Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

	The information set forth in Item 1.01 related to the Draw Note is incorporated into this Item 2.03 by reference.

Item 7.01	Regulation FD Disclosure.

	On September 23, 2020, the Company issued a press release announcing the Amended Transaction and an update to its third quarter 2020 financial guidance. The new financial guidance anticipates an adjusted operating ratio⁽¹⁾ in the low 90’s as compared to the Company’s previously disclosed expectations of an adjusted operating ratio⁽¹⁾ in the mid 90’s, third quarter freight revenue (which excludes fuel surcharge revenue) to be in the range between $190 million to $200 million, average tractor count to be approximately 2,525 and average freight revenue per tractor per week to be approximately $4,025, assuming no significant reversal in current market conditions. The purchase accounting for the Amended Transaction has not yet been finalized. The previously disclosed $26.5 million estimated gain is expected to be reduced to a modest third quarter gain or loss reflecting the impact of the amended terms. These expectations exclude the impact of any future indemnification obligations as such amounts currently cannot be estimated. Future indemnification obligations will be recorded as expenses in the periods recognized, which could increase the volatility of our reported future financial results. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference. (1) In addition to operating ratio, we use adjusted operating ratio, a non-GAAP measure, as a key measures of profitability. Adjusted operating ratio means operating expenses, net of fuel surcharge revenue, excluding amortization of intangibles, and significant unusual items, divided by total revenue, less fuel surcharge revenue. Adjusted operating ratio is not a substitute for operating ratio measured in accordance with GAAP. There are limitations to using non-GAAP financial measures. We believe our presentation of adjusted operating ratio is useful because it provides investors and securities analysts with supplemental information that we use internally for purposes of assessing profitability. Further, our Board and management use adjusted operating ratio on a supplemental basis to remove items that may not be an indicator of performance from period-to-period. Although we believe that adjusted operating ratio improves comparability in analyzing our period-to-period performance, it could limit comparability to other companies in our industry, if those companies define such measures differently. Because of these limitations, adjusted operating ratio should not be considered a measure of income generated by our business or discretionary cash available to us to invest in the growth of our business. Management compensates for these limitations by primarily relying on GAAP results and using non-GAAP financial measures on a supplemental basis. The timing and amount of charges that we exclude from our calculation of adjusted operating ratio cannot be reliably predicted or estimated. Therefore, the Company believes a reconciliation of adjusted operating ratio to operating ratio for projected results is not meaningful or available without unreasonable effort.

Item 8.01	Other Events.

	The Company is amending and restating in its entirety the risk factor formerly entitled “We are involved in a dispute arising from our disposition of substantially all of the operations and assets of TFS, which could have a material adverse effect on our business, financial condition, and results of operation”, from its Form 10-Q for the quarter ended June 30, 2020, as set forth below. This risk factor supplements, and should be read in conjunction with, the other risk factors set forth under “Item 1A. Risk Factors” in the Company’s Form 10-K for the fiscal year ended December 31, 2019, Form 10-Q for the quarter ended March 31, 2020, as amended, and Form 10-Q for the quarter ended June 30, 2020. We may incur additional charges in connection with the disposition of substantially all of the operations and assets of TFS, which could have a material adverse effect on our results of operations, cash flows, available liquidity, and total indebtedness. During the third quarter of 2020, we sold substantially all of the operations and assets of TFS. In connection with the sale of TFS’ assets, we agreed to indemnify the purchaser of TFS’ assets for certain advances we made to specified clients prior to the sale. We are responsible for and will indemnify the purchaser for 100% of the first $30 million of any losses incurred by the purchaser related to these advances, and for 50% of the next $30 million of any losses incurred by the purchaser, for total indemnification by us of $45 million. Our indemnification obligations are secured by certain revenue equipment. We have not accrued a liability for our indemnification obligations as of the date hereof. We will record liabilities, if any, when they become probable and capable of estimation in accordance with GAAP. The accrual of material liabilities and payment of amounts with respect to the indemnification obligations could create volatility in our reported future financial results and have an adverse effect on our results of operations, cash flows, available liquidity, and total indebtedness. Due to the amended terms for the sale of TFS’ assets, the previously disclosed $26.5 million estimated gain is expected to be reduced to a modest third quarter 2020 gain or loss. The gain or loss ultimately recorded is subject to change based upon finalization of purchase accounting for the transaction.

	EXHIBIT NUMBER	EXHIBIT DESCRIPTION

	99.1	Covenant Logistics Group, Inc. press release, dated September 23, 2020.
	104	Inline XBRL for the cover page of this Current Report on Form 8-K.