SEC Comment Letter for COVENANT LOGISTICS GROUP, INC. (CVLG) (CIK 0000928658) (CVLG) — Jul 6, 2005
COVENANT LOGISTICS GROUP, INC. (CVLG) (CIK 0000928658)
Date: July 6, 2005 · CIK: 0000928658 · Accession: 0000000000-05-034389
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 000-24960
Letter
July 6, 2005 Via US Mail and Facsimile Mr. Joey B. Hogan Chief Financial Officer Covenant Transport, Inc. 400 Birmingham Highway Chattanooga, TN 37419
Re: Covenant Transport, Inc. Form 10-K for the year ended December 31, 2004 Commission File Number: 000-24960
Dear Mr. Hogan:
We have reviewed the above referenced filing and have the following comments. We have limited our review to the financial statements and related disclosures included within these documents. Understand that the purpose of our review process is to assist you in your compliance with the applicable disclosure requirem ents and to enhance the overall disclosure in your filings.
Where expanded or revised disc losure is requested, you may co mply with these comments in future filings. If you disagree, we will consid er your explanation as to why our comments are inapplicable or a revision is unnecessary. In so me of our comments, we may ask you to provide us with supplemental information so we may better understand your disclosure. Please be as detailed as necessary in your explanation.
We look forward to working with you in these respects and welcome any questions you may have about any aspects of our review.
* * * * * * * * * * * * * * * * * * * * * * * Management’s Discussion and Analysis
Overview, page 14
Increase to Claims Reserves, page 15 1. We note that the $19.6 million adjustment made in the fourth qua rter of 2004, as described in this section and elsewhere in the filing, relates to the 2001-2003 fiscal years’ increases in primary retention amounts for and frequency of workers compensation and casualty claims.
Mr. Joey B. Hogan Covenant Transport, Inc. July 6, 2005 Page 2
Supplementally explain to us why you feel this is a change in estimate versus an error, and is properly recorded during 2004.
2. As a related matter, we note that you have discussed adjusted net income for the $18 million ($12.2 million net of tax) current year adjustment to claims reserves as well as net income in your overview of results, and that you have presented a non-GAAP meas ure reconciliation to net income for this presentation. Assuming that this charge represents a change in estimate, we would generally not consider it to constitute a “non-recurr ing” item for purposes of a non- GAAP presentation. Accordingly, we believe that this presentation should be eliminated from your future reports pursuan t to the guidance in Item 10 (e ) of Regulation S-K. Please revise or advise. In this rega rd, please note we do not object to the discussion of the effect of this charge on net income in the context of the discussion of net income as measured by GAAP. Such a discussion appears to be be neficial to a reader’s understanding of the financial statements and is therefore acceptable.
Table of Contractual Obligations, page 23 3. We note that you have included only principa l payments in your table of contractual obligations. We generally believe you should also include estimat ed interest payments in the table as these represent a c ontractual obliga tion. Your tabular disclosure should be accompanied by a footnote explanation of th e methodology used in the calculation. See Section IV.A of FR-72 for guidance and revise or advise.
Financial Statements
Note 1. Summary of Significant Accounting Policies
Nature of Business, page 44 4. We note from the discussion of your business on page 4 that you are organized into four major transportation services: Expedited Team Service, Dedicated Fleet Service, Temperature Controlled Servi ce, and Regional Truckload Serv ice. Supplementally explain to us how you have organized your business, how this organization relate s to the description on page 4, and why you feel these activities do not cons titute separately reportable operating segments. Refer to the guidance in paragraph 10 of SFAS 131.
Goodwill, page 44
5. You state that, under SFAS 142, you are require d to evaluate goodwill and other intangible assets with indefinite useful lives for impa irment on an annual basis, with any resulting impairment recorded as a cumulative effect of a change in accounting principle. While this would be true of an impairment loss recognized as a result of the transi tional impairment test, we would generally expect subsequent goodw ill impairment losses to be reported as a component of income from operations before in come tax as described in paragraph B183 of
Mr. Joey B. Hogan Covenant Transport, Inc. July 6, 2005 Page 3
SFAS 142. Please revise to clarify or suppl ementally explain why you believe the above referenced guidance is inappropriate.
* * * * * * * * * * * * * * * * * * * * * * *
We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filings reviewed by the staff to be certain that they have provided a ll information investors require. Since the company and its management are in possession of all facts relating to a company’s disclosure, they are responsible for th e accuracy and adequacy of the disclosures they have made.
In connection with responding to our comments, please provide, in writing, a statement from the company acknowledging that
the company is responsible for the adequacy and accuracy of the disclo sure in the filings; staff comments or changes to disclosure in response to staff comments in the filings reviewed by the staff do not foreclose th e Commission from taking any action with respect to the filing; and the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federa l securities laws of the United States.
In addition, please be advised that the Division of Enforcement ha s access to all information you provide to the staff of the Divi sion of Corporation Finance in our review of your filing or in response to our comments on your filing.
Please file your response to our comments via E DGAR within ten business days from the date of this letter. Please understand th at we may have additional comments after reviewing your response. You may contact Amy Geddes at 202-551-3304 or Margery Re ich at 202-551-2247 if you have questions or me at 202- 551-3211 with any concerns as I supervised the review of your filing.
S i n c e r e l y ,
David R. Humphrey B r a n c h C h i e f
Show Raw Text
July 6, 2005
Via US Mail and Facsimile
Mr. Joey B. Hogan
Chief Financial Officer
Covenant Transport, Inc.
400 Birmingham Highway
Chattanooga, TN 37419
Re: Covenant Transport, Inc.
Form 10-K for the year ended December 31, 2004
Commission File Number: 000-24960
Dear Mr. Hogan:
We have reviewed the above referenced filing and have the following comments. We have
limited our review to the financial statements and related disclosures included within these
documents. Understand that the purpose of our review process is to assist you in your
compliance with the applicable disclosure requirem ents and to enhance the overall disclosure in
your filings.
Where expanded or revised disc losure is requested, you may co mply with these comments in
future filings. If you disagree, we will consid er your explanation as to why our comments are
inapplicable or a revision is unnecessary. In so me of our comments, we may ask you to provide
us with supplemental information so we may better understand your disclosure. Please be as
detailed as necessary in your explanation.
We look forward to working with you in these respects and welcome any questions you may
have about any aspects of our review.
* * * * * * * * * * * * * * * * * * * * * * *
Management’s Discussion and Analysis
Overview, page 14
Increase to Claims Reserves, page 15
1. We note that the $19.6 million adjustment made in the fourth qua rter of 2004, as described in
this section and elsewhere in the filing, relates to the 2001-2003 fiscal years’ increases in
primary retention amounts for and frequency of workers compensation and casualty claims.
Mr. Joey B. Hogan
Covenant Transport, Inc.
July 6, 2005
Page 2
Supplementally explain to us why you feel this is a change in estimate versus an error, and is
properly recorded during 2004.
2. As a related matter, we note that you have discussed adjusted net income for the $18 million
($12.2 million net of tax) current year adjustment to claims reserves as well as net income in
your overview of results, and that you have presented a non-GAAP meas ure reconciliation to
net income for this presentation. Assuming that this charge represents a change in estimate, we would generally not consider it to constitute a “non-recurr ing” item for purposes of a non-
GAAP presentation. Accordingly, we believe that this presentation should be eliminated
from your future reports pursuan t to the guidance in Item 10 (e ) of Regulation S-K. Please
revise or advise. In this rega rd, please note we do not object to the discussion of the effect of
this charge on net income in the context of the discussion of net income as measured by
GAAP. Such a discussion appears to be be neficial to a reader’s understanding of the
financial statements and is therefore acceptable.
Table of Contractual Obligations, page 23
3. We note that you have included only principa l payments in your table of contractual
obligations. We generally believe you should also include estimat ed interest payments in the
table as these represent a c ontractual obliga tion. Your tabular disclosure should be
accompanied by a footnote explanation of th e methodology used in the calculation. See
Section IV.A of FR-72 for guidance and revise or advise.
Financial Statements
Note 1. Summary of Significant Accounting Policies
Nature of Business, page 44
4. We note from the discussion of your business on page 4 that you are organized into four
major transportation services: Expedited Team Service, Dedicated Fleet Service, Temperature Controlled Servi ce, and Regional Truckload Serv ice. Supplementally explain
to us how you have organized your business, how this organization relate s to the description
on page 4, and why you feel these activities do not cons titute separately reportable operating
segments. Refer to the guidance in paragraph 10 of SFAS 131.
Goodwill, page 44
5. You state that, under SFAS 142, you are require d to evaluate goodwill and other intangible
assets with indefinite useful lives for impa irment on an annual basis, with any resulting
impairment recorded as a cumulative effect of a change in accounting principle. While this
would be true of an impairment loss recognized as a result of the transi tional impairment test,
we would generally expect subsequent goodw ill impairment losses to be reported as a
component of income from operations before in come tax as described in paragraph B183 of
Mr. Joey B. Hogan
Covenant Transport, Inc.
July 6, 2005
Page 3
SFAS 142. Please revise to clarify or suppl ementally explain why you believe the above
referenced guidance is inappropriate.
* * * * * * * * * * * * * * * * * * * * * * *
We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the
filings reviewed by the staff to be certain that they have provided a ll information investors
require. Since the company and its management are in possession of all facts relating to a
company’s disclosure, they are responsible for th e accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please provide, in writing, a statement from the
company acknowledging that
the company is responsible for the adequacy and accuracy of the disclo sure in the filings;
staff comments or changes to disclosure in response to staff comments in the filings
reviewed by the staff do not foreclose th e Commission from taking any action with
respect to the filing; and
the company may not assert staff comments as a defense in any proceeding initiated by
the Commission or any person under the federa l securities laws of the United States.
In addition, please be advised that the Division of Enforcement ha s access to all information you
provide to the staff of the Divi sion of Corporation Finance in our review of your filing or in
response to our comments on your filing.
Please file your response to our comments via E DGAR within ten business days from the date of
this letter. Please understand th at we may have additional comments after reviewing your
response. You may contact Amy Geddes at 202-551-3304 or Margery Re ich at 202-551-2247 if
you have questions or me at 202- 551-3211 with any concerns as I supervised the review of your
filing.
S i n c e r e l y ,
David R. Humphrey
B r a n c h C h i e f