Citing economic challenges tied to the coronavirus pandemic, Southern Refrigerated Transport (SRT), a reefer subsidiary of the Covenant Transportation Group (NASDAQ: CVTI), will shut down its terminal and headquarters in Texarkana, Arkansas, according to an internal memo obtained by FreightWaves.
The move, to take place by May 1, 2020, is an operational consolidation and not a closure. SRT will relocate its fleet to Chattanooga, Tennessee, where Covenant is headquartered, and it will continue to operate under the SRT banner.
In the memo, SRT president and COO Joey Hogan said none of the company’s drivers will lose their jobs. SRT will lay off 150 “non-driving employees,” who will be offered severance and benefit opportunities, according to Hogan.
A full-truckload refrigerated carrier, SRT had 740 drivers and 840 power units, according to the Federal Motor Carrier Safety Administration’s SAFER database.
“During these unprecedented times, we have been working hard to strengthen the financial stability and future of the enterprise, while also meeting the challenge to be compassionate and fair to our team members,” Hogan wrote.
Over the past year, the SRT leadership and team in Texarkana has been “working tirelessly to improve our solo over-the-road operations,” he said.
“Unfortunately, the obviously unforeseen current COVID-induced economic situation has resulted in market circumstances like no other time in our history, requiring a stronger response and quicker shift in strategic direction.”
Founded in 1986, SRT, which had operated out of a 100,000-square-foot complex adjacent to Interstate 30 in Texarkana, sold to Covenant in 2007.
Even before the pandemic, Covenant was facing a difficult operating environment. In its fourth quarter earnings release, the company reported a 14% year-over-year decline in consolidated revenue to $233 million.
Refrigerated truckload has been a performance stand-out during the COVID shutdown, as shippers have paid a premium for cold-chain transportation services, but with the significant downturn in the broader freight industry related to economic contraction, companies are looking for areas of potential efficiencies in their operations. Consolidating the SRT fleet operations back to Chattanooga allows Covenant the opportunity to gain operational synergies and efficiencies.
Covenant will report earnings for the first quarter of 2020 on April 23.
