Chattanooga-based Covenant closing Texarkana terminal, shifting operations to three Tennessee sites

Staff photo by C.B. Schmelter / Truckers are seen at Covenant Transport on Tuesday, Oct. 9, 2018, in Chattanooga.
Staff photo by C.B. Schmelter / Truckers are seen at Covenant Transport on Tuesday, Oct. 9, 2018, in Chattanooga.

Chattanooga-based Covenant Transport Group will close down its Southern Refrigerated Transport terminal in Texarkana, Arkansas, on May 1, and shift operations to three sites in Tennessee.

About 150 jobs at the Texarkana site will be permanently eliminated, while hundreds of professional truck-driving and non-driving jobs will relocate to Covenant sites in either Chattanooga, Nashville, or Greenville, Tennessee.

"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," wrote Chairman and Chief Executive Officer David R. Parker in a statement.

Covenant will continue to provide solo-driven refrigerated transport from the three Tennessee locations, Parker wrote in the statement.

"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."

Southern Refrigerated Transport was the fifth-largest employer in Texarkana in 2019, with 1,115 employees, according to the website for the Texarkana Chamber of Commerce. The 150 employees whose roles will be eliminated will be provided severance and health insurance support, according to the statement from Parker.

Doug Smith, senior director of talent development for Covenant, said it's important to note that the 'solo-driven' element of their refrigerated trucking business will continue. Solo-driven trucks are operated by a single driver, while team-driven trucks have two drivers who share the work and increase productivity.

"The inclusion of 'solo-driven' is important to us because we also perform team refrigerated services out of a different location/subsidiary and we don't want any customers to see this and think we will be downsizing or reducing any capital towards their team refrigerated business," Smith wrote in an email about the changes.

Covenant hasn't yet made a decision about whether to keep the Southern Refrigerated Transport brand, Smith said. The company was founded in 1986, and sold to Covenant in 1998.

"Consolidating the solo-driven refrigerated fleet operations across the three other locations allows Covenant the opportunity to gain operational synergies and efficiencies," Smith wrote.

Market challenges related to the pandemic were at play in the decision, Smith added.

In the release announcing the closure of the Texarkana site, Parker also offered information on the financial flexibility of Covenant. The company had about $75.3 million in cash and cash equivalents, plus available borrowing under its revolving line of credit as of March 31, 2020, Parker wrote.

Six weeks after announcing a $20 million stock repurchase plan, Covenant Transportation Group Inc. announced in late March it has temporarily suspended the program "for added flexibility in response to the uncertain impact" from the COVID-19 pandemic.

The Chattanooga-based trucking company said it would retain the ability to reinstate the stock repurchase program "as circumstances warrant." But Covenant, like many businesses facing uncertain future demand as the economy slows due to business shutdowns, is trying to preserve its resources.

Covenant announced its stock repurchase program on Feb. 10 to buy back the company's Class A common stock "from time-to-time based upon market conditions."

Staff Writer Dave Flessner contributed to this report.

Contact Mary Fortune at mfortune@timesfreepress.com or 423-757-6653. Follow her on Twitter @maryfortune.

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