SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2001
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number 0-24960
Covenant Transport, Inc.
(Exact name of registrant as specified in its charter)
Nevada 88-0320154
(State or other jurisdiction of (I.R.S. employer identification number)
incorporation or organization)
400 Birmingham Hwy.
Chattanooga, TN 37419
(423) 821-1212
(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive office)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for at least the past 90 days.
YES X NO __
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date (July 31, 2001).
Class A Common Stock, $.01 par value: 11,660,753 shares
Class B Common Stock, $.01 par value: 2,350,000 shares
Exhibit Index is on Page 15
PART I
FINANCIAL INFORMATION
Page Number
Item 1. Financial statements
Condensed Consolidated Balance Sheets as of December 31, 2000
and June 30, 2001 (Unaudited) 3
Condensed Consolidated Statements of Income for the three and
six months ended June 30, 2000 and 2001 (Unaudited) 4
Condensed Consolidated Statements of Cash Flows for the six
months ended June 30, 2000 and 2001 (Unaudited) 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures about Market Risk 14
PART II
OTHER INFORMATION
Page Number
Item 1. Legal Proceedings 15
Items 2 and 3. Not applicable 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Not applicable 15
Item 6. Exhibits and reports on Form 8-K 15
2
COVENANT TRANSPORT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
December 31, 2000 June 30, 2001
(unaudited)
--------------------- ---------------------
ASSETS
Current assets:
Cash and cash equivalents $ 2,287 $ 589
Accounts receivable, net of allowance of $1,263 in 2000 and
$1,230 in 2001 72,482 69,325
Drivers' advances and other receivables 11,393 7,790
Tire and parts inventory 2,949 3,616
Prepaid expenses 13,914 11,492
Deferred income taxes 2,590 2,052
Income taxes receivable 3,651 1,662
----------------- -----------------
Total current assets 109,266 96,526
Property and equipment, at cost 356,630 374,715
Less accumulated depreciation and amortization 100,581 110,302
----------------- -----------------
Net property and equipment 256,049 264,413
Other 25,198 24,900
----------------- -----------------
Total assets $ 390,513 $ 385,839
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 6,505 $ 6,183
Securitization facility 62,000 55,130
Accounts payable 6,988 10,038
Accrued expenses 17,176 19,783
----------------- -----------------
Total current liabilities 92,669 91,134
Long-term debt, less current maturities 74,295 71,707
Deferred income taxes 55,727 53,584
----------------- -----------------
Total liabilities 222,691 216,425
Stockholders' equity:
Class A common stock, $.01 par value; 20,000,000 shares authorized;
12,566,850 and 12,632,253 shares issued and 11,595,350 and 11,660,753 126 126
shares outstanding as of 2000 and 2001, respectively
Class B common stock, $.01 par value; 5,000,000 shares authorized;
2,350,000 shares issued and outstanding as of 2000 and 2001 24 24
Additional paid-in-capital 78,343 79,152
Treasury stock, at cost; 971,500 shares as of 2000 and 2001 (7,935) (7,935)
Retained earnings 97,264 98,047
----------------- -----------------
Total stockholders' equity 167,822 169,414
----------------- -----------------
Total liabilities and stockholders' equity $ 390,513 $ 385,839
================= =================
The accompanying notes are an integral part of these consolidated financial statements.
3
COVENANT TRANSPORT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 2001
(In thousands except per share data)
Three months ended June 30, Six months ended June 30,
(unaudited) (unaudited)
---------------------------------- --------------------------------
2000 2001 2000 2001
---- ---- ---- ----
Revenue $ 139,398 $ 141,683 $ 265,879 $ 273,012
Operating expenses:
Salaries, wages, and related expenses 60,943 63,223 114,888 123,229
Fuel, oil, and road expenses 23,322 26,296 44,334 50,608
Revenue equipment rentals and
purchased transportation 19,360 17,323 38,079 34,238
Repairs 3,049 4,787 6,057 8,405
Operating taxes and licenses 3,513 3,632 6,798 7,023
Insurance and claims 3,645 4,892 7,021 8,957
Communications and utilities 1,788 1,881 3,541 3,650
General supplies and expenses 6,411 6,039 12,097 11,238
Depreciation and amortization,
including gain on disposal of equipment 10,102 10,543 20,112 19,945
--------------- -------------- -------------- -------------
Total operating expenses 132,133 138,616 252,927 267,293
--------------- -------------- -------------- -------------
Operating income 7,265 3,067 12,952 5,719
Interest expense 2,436 2,174 4,740 4,457
--------------- -------------- -------------- -------------
Income before income taxes 4,829 893 8,212 1,262
Income tax expense 1,929 339 3,280 479
--------------- -------------- ------------- -------------
Net income $ 2,900 $ 554 $ 4,932 $ 783
=============== ============== ============== =============
Basic earnings per share $ 0.20 $ 0.04 $ 0.33 $ 0.06
Diluted earnings per share $ 0.20 $ 0.04 $ 0.33 $ 0.06
Weighted average shares outstanding 14,785 13,967 14,851 13,957
Adjusted weighted average shares and assumed
conversions outstanding 14,790 14,257 14,869 14,230
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
COVENANT TRANSPORT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 2001
(In thousands)
Six months ended June 30,
(unaudited)
--------------------------------------------
2000 2001
---- ----
Cash flows from operating activities:
Net income $ 4,932 $ 783
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for losses on receivables 144 24
Depreciation and amortization 20,828 19,169
Deferred income tax expense 646 (1,604)
Equity in earnings of affiliate - 860
Gain on disposition of property and equipment (716) (101)
Changes in operating assets and liabilities:
Receivables and advances 837 6,611
Prepaid expenses (3,432) 2,422
Tire and parts inventory (143) (667)
Accounts payable and accrued expenses 2,176 7,645
------------------ -----------------
Net cash flows provided by operating activities 25,272 35,142
Cash flows from investing activities:
Acquisition of property and equipment (39,989) (44,059)
Proceeds from disposition of property and equipment 29,711 16,283
Acquisition of company stock (6,450) -
------------------ -----------------
Net cash flows used in investing activities (16,728) (27,776)
Cash flows from financing activities:
Changes in checks outstanding in excess of bank
balances (101) -
Deferred costs (111) (94)
Exercise of stock option 30 810
Proceeds from issuance of long-term debt 21,000 38,000
Repayments of long-term debt (29,347) (47,780)
------------------ -----------------
Net cash flows used in financing activities (8,529) (9,064)
------------------ -----------------
Net change in cash and cash equivalents 15 (1,698)
Cash and cash equivalents at beginning of period 1,046 2,287
------------------ -----------------
Cash and cash equivalents at end of period $ 1,061 $ 589
================== =================
The accompanying notes are an integral part of these consolidated financial statements.
5
COVENANT TRANSPORT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The condensed consolidated financial statements include the accounts of
Covenant Transport, Inc., a Nevada holding company, and its wholly-owned
subsidiaries ("Covenant" or the "Company"). All significant intercompany
balances and transactions have been eliminated in consolidation.
The financial statements have been prepared, without audit, in accordance
with generally accepted accounting principles, pursuant to the rules and
regulations of the Securities and Exchange Commission. In the opinion of
management, the accompanying financial statements include all adjustments
which are necessary for a fair presentation of the results for the interim
periods presented, such adjustments being of a normal recurring nature.
Certain information and footnote disclosures have been condensed or omitted
pursuant to such rules and regulations. The December 31, 2000 Condensed
Consolidated Balance Sheet was derived from the audited balance sheet of
the Company for the year then ended. It is suggested that these condensed
consolidated financial statements and notes thereto be read in conjunction
with the consolidated financial statements and notes thereto included in
the Company's Form 10-K for the year ended December 31, 2000. Results of
operations in interim periods are not necessarily indicative of results to
be expected for a full year.
Note 2. Basic and Diluted Earnings Per Share
The following table sets forth for the periods indicated the
calculation of net earnings per share included in the Company's Condensed
Consolidated Statements of Income:
(in thousands except per share data) Three months ended Six months ended
June 30, June 30,
2000 2001 2000 2001
---- ---- ---- ----
Numerator:
Net Income $ 2,900 $ 554 $ 4,932 $ 783
Denominator:
Denominator for basic earnings
per share - weighted-average shares 14,785 13,967 14,851 13,957
Effect of dilutive securities:
Employee stock options 5 290 18 273
----------- ----------- ----------- -----------
Denominator for diluted earnings per share -
adjusted weighted-average shares and assumed 14,790 14,257 14,869 14,230
conversions
=========== ========== =========== ===========
Basic earnings per share $ .20 $ .04 $ .33 $ .06
=========== ========== =========== ===========
Diluted earnings per share $ .20 $ .04 $ .33 $ .06
=========== =========== =========== ===========
Note 3. Income Taxes
Income tax expense varies from the amount computed by applying the federal
corporate income tax rate of 35% to income before income taxes primarily due to
state income taxes, net of federal income tax effect, plus the effect of
nondeductible amortization of goodwill. The Company implemented certain tax
planning strategies during 2000. The effective income tax rate approximates 38%
in the six months ended June 30, 2001, and 40% in the six months ended June 30,
2000.
6
Note 4. Investment in Transplace.com
Effective July 1, 2000, the Company merged its logistics business with five
other transportation companies into a company called Transplace.com
("TPC"). TPC operates an Internet-based global transportation logistics
service and is developing programs for the cooperative purchasing of
products, supplies, and services. In the transaction, Covenant contributed
its logistics customer list, logistics business software and software
licenses, certain intellectual property, intangible assets totaling
approximately $5.1 million, and $5.0 million in cash for the initial
funding of the venture. In exchange, Covenant received 13% ownership in
TPC, which is being accounted for using the equity method of accounting.
Upon completion of the transaction, Covenant ceased operating its own
transportation logistics and brokerage business, which consisted primarily
of the Terminal Truck Broker, Inc. business acquired in November 1999. The
excess of the Company's share of TPC's net assets over its cost basis is
being amortized over twenty years using the straight-line method.
Note 5. Con-Way Truckload Services, Inc. acquisition
In August 2000, the Company purchased certain trucking assets of Con-Way
Truckload Services, Inc. ("CTS"), an $80 million annual revenue truckload
carrier headquartered in Fort Worth, Texas. The Company acquired CTS's
customer list and driver files as well as 90 tractors and 90 trailers. The
acquisition has been accounted for under the purchase method of accounting
with the excess of the purchase price over the estimated fair value of the
net assets acquired of approximately $2.6 million allocated to intangible
assets. CTS was owned by Con-Way Transportation Services of Ann Arbor,
Michigan, a subsidiary of CNF Inc., a $5.6 billion global supply chain
management services company.
Note 6. Recent Accounting Pronouncements
In 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 133 ("FAS 133"), Accounting for
Derivative Instruments and Hedging Activities, as amended by Statement of
Financial Accounting Standards No. 137, Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133, an amendment of FASB Statement No. 133, and Statement of
Financial Accounting Standards No. 138, Accounting for Certain Derivative
Instruments and Certain Hedging Activities, an amendment of FASB Statement
No. 133.
FAS 133 requires that all derivative instruments be recorded on the balance
sheet at their fair value. Changes in the fair value of derivatives are
recorded each period in current earnings or in other comprehensive income,
depending on whether a derivative is designated as part of a hedging
relationship and, if it is, depending on the type of hedging relationship.
The Company adopted FAS 133 effective January 1, 2001 but had no
instruments in place on that date. During the first quarter the Company
entered into derivatives to manage the risk of variability in cash flows
associated with floating- rate debt. These derivatives are not designated
as hedging instruments under FAS 133 and consequently are marked to fair
value through earnings, although the impact of the derivatives is not
material.
In July 2001 the Financial Accounting Standards Board (FASB) issued SFAS
No. 141 "Business Combinations" and SFAS No. 142 "Goodwill and Other
Intangible Assets." SFAS No. 141 requires business combinations initiated
after June 30, 2001 to be accounted for using the purchase method of
accounting, and broadens the criteria for recording intangible assets
separate from goodwill. Recorded goodwill and intangibles will be evaluated
against this new criteria and may result in certain intangibles being
subsumed into goodwill, or alternatively, amounts initially recorded as
goodwill may be separately identified and recognized apart from goodwill.
SFAS No. 142 requires the use of a nonamortization approach to account for
purchased goodwill and certain intangibles. Under a nonamortization
approach, goodwill and certain intangibles will not be amortized into
results of operations, but instead would be reviewed for impairment and
written down and charged to results of operations only in the periods in
which the recorded value of goodwill and certain intangibles is more than
its fair value. The provisions of each statement which apply to goodwill
and intangible assets acquired prior to June 30, 2001 will be adopted by
the Company on January 1, 2002. The impact of the application of the
provisions of this statement on the Company's financial position or results
of operations upon adoption are not known at this time however the Company
anticipates the standard will result in reducing the amortization of
goodwill.
7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The condensed consolidated financial statements include the accounts of Covenant
Transport, Inc., a Nevada holding company, and its wholly-owned subsidiaries
("Covenant" or the "Company"). All significant intercompany balances and
transactions have been eliminated in consolidation.
Except for the historical information contained herein, the discussion in this
quarterly report contains forward-looking statements that involve risk,
assumptions, and uncertainties that are difficult to predict. Statements that
constitute forward-looking statements are usually identified by words such as
"anticipates," "believes," "estimates," "projects," "expects," or similar
expressions. These statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Such statements are based
upon the current beliefs and expectations of the Company's management and are
subject to significant risks and uncertainties. Actual results may differ from
those set forth in the forward-looking statements. The following factors, among
others, could cause actual results to differ materially from those in
forward-looking statements: excess capacity in the trucking industry; surplus
inventories; recessionary economic cycles and downturns in customers' business
cycles; increases or rapid fluctuations in fuel prices, interest rates, fuel
taxes, tolls, and license and registration fees; the resale value of the
Company's used equipment; increases in compensation for and difficulty in
attracting and retaining qualified drivers and owner-operators; increases in
insurance premiums and deductible amounts relating to accident, cargo, workers'
compensation, health, and other claims; seasonal factors such as harsh weather
conditions that increase operating costs; competition from trucking, rail, and
intermodal competitors; and the ability to identify acceptable acquisition
candidates, consummate acquisitions, and integrate acquired operations. Readers
should review and consider the various disclosures made by the Company in its
press releases, stockholder reports, and public filings, as well as the factors
explained in greater detail in the Company's annual report on Form 10-K.
The Company grew its revenue 2.7%, to $273.0 million in the six months ended
June 30, 2001, from $265.9 million during the same period of 2000. A slight
increase in fleet size and the acquisition of certain assets of Con-Way
Truckload Services, Inc. ("CTS") in late August 2000 contributed to revenue
growth over this period. Due to a weak freight environment, the Company has
elected to slow the growth of the Company fleet until freight demand increases.
The Company's pretax margin decreased to 0.5% of revenue from 3.1% of revenue,
and the Company's net income decreased approximately 84.1%, to $0.8 million for
the six months ended June 30, 2001, from $4.9 million during the same period of
2000. A soft freight environment that has impacted freight rates and equipment
utilization was the major factor contributing to the decrease. Other factors
included increased fuel costs and higher insurance, claims and repair costs as
compared with the previous year.
The Company continues to obtain revenue equipment through its owner-operator
fleet and finance equipment under operating leases. The Company's owner-operator
fleet decreased to an average of 385 in the six month period ended June 30, 2001
compared to 573 in the six month period ended June 30, 2000. Owner-operators
provide a tractor and a driver and bear all operating expenses in exchange for a
fixed payment per mile. The Company does not have the capital outlay of
purchasing the tractor. The Company's use of operating leases continued to grow.
As of June 30, 2001, the Company had financed approximately 1,084 tractors and
1,619 trailers under operating leases as compared to 771 tractors and 1,059
trailers under operating leases as of June 30, 2000. The payments to
owner-operators and the financing of equipment under operating leases are
recorded in revenue equipment rentals and purchased transportation. Expenses
associated with owned equipment, such as interest and depreciation, are not
incurred, and for owner-operator tractors, driver compensation, fuel, and other
expenses are not incurred. Because obtaining equipment from owner-operators and
under operating leases effectively shifts financing expenses from interest to
"above the line" operating expenses, the Company evaluates its efficiency using
pretax margin and net margin rather than operating ratio.
Effective July 1, 2000, the Company merged its logistics business with five
other transportation companies into Transplace.com, L.L.C. ("TPC").
Transplace.com operates an Internet-based global transportation logistics
service and is developing programs for the cooperative purchasing of products,
supplies, and services. In the transaction, Covenant contributed its logistics
customer list, logistics business software and software license, certain
intellectual property, and $5.0 million in cash for the initial funding of the
venture. In exchange, Covenant received 13% ownership in Transplace.com. Upon
completion of the transaction, Covenant ceased operating its own transportation
logistics and brokerage business, which consisted primarily of the Terminal
Truck Broker, Inc. business acquired in November 1999. The contributed operation
generated approximately $5.0 million in net brokerage revenue (gross revenue
less purchased transportation expense) received on an annualized basis.
8
The following table sets forth the percentage relationship of certain items to
revenue:
Three Months Ended Six Months Ended
June 30, June 30,
2000 2001 2000 2001
----------- ----------- ----------- -----------
Revenue 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Salaries, wages, and related expenses 43.7 44.6 43.2 45.1
Fuel, oil, and road expenses 16.7 18.6 16.7 18.5
Revenue equipment rentals and purchased
transportation 13.9 12.2 14.3 12.5
Repairs 2.2 3.4 2.3 3.1
Operating taxes and licenses 2.5 2.6 2.6 2.6
Insurance 2.6 3.5 2.6 3.3
Communications and utilities 1.3 1.3 1.3 1.3
General supplies and expenses 4.6 4.3 4.5 4.1
Depreciation and amortization 7.2 7.4 7.6 7.3
----------- ----------- ------------- -----------
Total operating expenses 94.8 97.8 95.1 97.9
----------- ----------- ------------ ------------
Operating income 5.2 2.2 4.9 2.1
Interest expense 1.7 1.5 1.8 1.6
----------- ----------- ------------ ------------
Income before income taxes 3.5 0.6 3.1 0.5
Income tax expense 1.4 0.2 1.2 0.2
----------- ----------- ------------ ------------
Net income 2.1% 0.4% 1.9% 0.3%
=========== =========== ============ ============
COMPARISON OF THREE MONTHS ENDED JUNE 30, 2001 TO THREE MONTHS ENDED JUNE 30,
2000
Revenue increased $2.3 million (1.6%), to $141.7 million in the 2001 period from
$139.4 million in the 2000 period. The revenue increase was primarily generated
by a 4.8% increase in weighted average tractors, to 3,947 during the 2001 period
from 3,766 during the 2000 period and from the asset acquisition of CTS. These
increases were offset by an approximately $1.7 million reclassification of
accessorial revenue. Due to a weak freight environment, the Company has elected
to manage the size of its tractor fleet until freight demand increases.
Salaries, wages, and related expenses increased $2.3 million (3.7%), to $63.2
million in the 2001 period from $60.9 million in the 2000 period. As a
percentage of revenue, salaries, wages, and related expenses increased to 44.6%
in the 2001 period from 43.7% in the 2000 period. Driver wages as a percentage
of revenue increased to 31.2% in the 2001 period from 30.8% in the 2000 period,
partially due to the Company utilizing fewer owner-operators during the first
quarter of 2001. The Company's non-driving employee payroll expense increased to
6.7% of revenue in the 2001 period from 5.9% of revenue in 2000 period due to
growth in headcount and salaried drivers in the dedicated fleet.
Fuel, oil, and road expenses increased $3.0 million (12.8%), to $26.3 million in
the 2001 period from $23.3 million in the 2000 period. As a percentage of
revenue, fuel, oil, and road expenses increased to 18.6% of revenue in the 2001
period from 16.7% in the 2000 period. This increase was due to lower quantities
of fuel being hedged using purchase commitments, slightly lower fuel economy,
and by the increased usage of company trucks (due to the decrease in the
Company's utilization of owner-operators, who pay for their own fuel purchases).
These increases were partially offset by fuel surcharges, which amounted to
$.049 per loaded mile or approximately $5.8 million during the 2001 period
compared to $.042 per loaded mile or approximately $4.7 million during the 2000
period.
Revenue equipment rentals and purchased transportation decreased $2.0 million
(10.5%), to $17.3 million in the 2001 period from $19.4 million in the 2000
period. As a percentage of revenue, revenue equipment rentals and purchased
transportation decreased to 12.2% in the 2001 period from 13.9% in the 2000
period. The decrease was due to the Company utilizing fewer owner-operators,
which was offset partially by the Company entering into additional operating
leases. The Company's owner-operator fleet decreased to an average of 384 in the
2001 period compared to 513 in the 2000 period. Owner-operators provide a
tractor and driver and cover all of their operating expenses in exchange for a
fixed payment per mile. Accordingly, expenses such as driver salaries, fuel,
repairs, depreciation, and interest normally associated with Company-owned
equipment are consolidated in revenue equipment rentals and purchased
transportation when owner-operators are utilized. The Company also entered into
additional operating leases. As of June 30, 2001, the Company had financed
approximately 1,084 tractors and 1,619 trailers under operating leases as
compared to 771 tractors and 1,059 trailers under operating leases as of June
30, 2000.
Repairs increased approximately $1.7 million (57.0%), to $4.8 million in the
2001 period from $3.0 million in the 2000 period. As a percentage of revenue,
repairs increased to 3.4% in the 2001 period from 2.2% in the 2000 period. The
increase was primarily the
9
result of the Company adopting an insurance program with significantly higher
physical damage deductible exposure. Repair expense will vary based on the
frequency and severity of physical damage claims. The Company accrues the
estimated cost of the uninsured portion of pending claims. These accruals are
based on management's evaluation of the nature and severity of the claim and
estimates of future claims development based on historical trends.
Operating taxes and licenses increased approximately $0.1 million (3.4%), to
$3.6 million in the 2001 period from $3.5 million in the 2000 period. As a
percent of revenue, operating taxes and licenses remained essentially constant
at 2.6% in 2001 as compared to 2.5% in the 2000.
Insurance and claims, consisting primarily of premiums and deductible amounts
for liability, physical damage, and cargo damage insurance and claims, increased
$1.2 million (34.2%), to $4.9 million in the 2001 period from $3.6 million in
the 2000 period. As a percentage of revenue, insurance increased to 3.5% in the
2001 period from 2.6% in the 2000 period because of an industry-wide increase in
insurance rates, which the Company addressed by adopting an insurance program
with significantly higher deductible exposure that is partially offset by lower
premium rates. The Company's insurance program for liability, physical damage,
and cargo damage involves self-insurance with varying risk retention levels.
Claims in excess of these risk retention levels are covered by insurance in
amounts which management considers adequate. The Company accrues the estimated
cost of the uninsured portion of pending claims. These accruals are based on
management's evaluation of the nature and severity of the claim and estimates of
future claims development based on historical trends. Insurance and claims
expense will vary based on the frequency and severity of claims.
Communications and utilities expense increased approximately $0.1 million
(5.2%), to $1.9 million in the 2001 period from $1.8 million in the 2000 period.
As a percentage of revenue, communications and utilities remained essentially
constant at 1.3% in the 2000 and 2001 periods.
General supplies and expenses, consisting primarily of driver recruiting
expenses and terminal lease expense, decreased $0.4 million (5.8%), to $6.0
million in the 2001 period from $6.4 million in the 2000 period. As a percentage
of revenue, general supplies and expenses decreased to 4.3% in the 2001 period
from 4.6% in the 2000 period. The 2001 decrease is primarily the result of the
capitalization of the Company's headquarters facility and a reclassification of
certain accessorial charges to shippers against the related expense. In March
2001, the Company's headquarters facility operating lease expired. The building
was refinanced through the Credit Agreement (as defined below), and the related
expenses are being reflected in the depreciation and amortization category as
well as interest expense. The Company implemented accessorial reclassification
in the third quarter of 2000.
Depreciation and amortization, consisting primarily of depreciation of revenue
equipment, increased $0.4 million (4.4%), to $10.5 million in the 2001 period
from $10.1 million in the 2000 period. As a percentage of revenue, depreciation
and amortization increased to 7.4% in the 2001 period from 7.2% in the 2000
period. The increase is primarily due to the capitalization of the Company's
headquarters facility which was previously financed through an operating lease
that expired in March 2001. The headquarters lease expense was previously
recorded in general supplies and expenses. Depreciation and amortization expense
is net of any gain or loss on the sale of tractors and trailers. The
predictability of any gain/(loss) on the sale of equipment is difficult due to
the variation in market value of used equipment from year to year. The
unpredictability of gains/(losses) could impact depreciation and amortization as
a percentage of revenue. The Company is reserving against tractor values, which
will affect this line item in future periods. Amortization expense primarily
relates to covenants not to compete and goodwill from acquisitions.
Interest expense decreased $0.3 million (10.8%), to $2.2 million in the 2001
period from $2.4 million in the 2000 period. As a percentage of revenue,
interest expense decreased to 1.5% in the 2001 period from 1.7% in the 2000
period. The decrease was the result of lower debt balances and interest rates.
As a result of the foregoing, the Company's pretax margin decreased to 0.6% in
the 2001 period from 3.5% in the 2000 period.
The Company's effective tax rate decreased to 38.0% in the 2001 period from
39.9% in the 2000 period due to the Company implementing certain tax planning
strategies during 2000.
Primarily as a result of the factors described above, net income decreased $2.3
million (80.9%), to $0.6 million in the 2001 period (0.4% of revenue) from $2.9
million in the 2000 period (2.1% of revenue).
COMPARISON OF SIX MONTHS ENDED JUNE 30, 2001 TO SIX MONTHS ENDED JUNE 30, 2000
Revenue increased $7.1 million (2.7%), to $273.0 million in the 2001 period from
$265.9 million in the 2000 period. The revenue increase was primarily generated
by a 5.1% increase in weighted average tractors, to 3,869 during the 2001 period
from 3,680 during the 2000 period and from the asset acquisition of CTS. These
increases were offset by an approximately $3.3 million reclassification of
accessorial revenue in the 2001 period. Due to a weak freight environment, the
Company has elected to manage the size of its tractor fleet until freight demand
increases.
10
Salaries, wages, and related expenses increased $8.3 million (7.3%), to $123.2
million in the 2001 period from $114.9 million in the 2000 period. As a
percentage of revenue, salaries, wages, and related expenses increased to 45.1%
in the 2001 period from 43.2% in the 2000 period. Driver wages as a percentage
of revenue increased to 31.4% in the 2001 period from 30.2% in the 2000 period.
The increase was partially due to the Company utilizing fewer owner-operators
during the first six months of 2001. The Company's non-driving employee payroll
expense increased to 6.7% of revenue in the 2001 period from 6.3% of revenue in
2000 period due to due to growth in headcount and salaried drivers in the
dedicated fleet.
Fuel, oil, and road expenses increased $6.3 million (14.2%), to $50.6 million in
the 2001 period from $44.3 million in the 2000 period. As a percentage of
revenue, fuel, oil, and road expenses increased to 18.5% of revenue in the 2001
period from 16.7% in the 2000 period. This increase was due to lower quantities
of fuel being hedged using price purchase commitments, slightly lower fuel
economy, and by the increased usage of company trucks (due to the decrease in
the Company's utilization of owner-operators, who pay for their own fuel
purchases). These increases were partially offset by fuel surcharges which
amounted to $.051 per loaded mile or approximately $11.5 million during the 2001
period compared to $.044 per loaded mile or approximately $9.6 million during
the 2000 period.
Revenue equipment rentals and purchased transportation decreased $3.8 million
(10.1%), to $34.2 million in the 2001 period from $38.1 million in the 2000
period. As a percentage of revenue, revenue equipment rentals and purchased
transportation decreased to 12.5% in the 2001 period from 14.3% in the 2000
period. The decrease was due to the Company utilizing fewer owner-operators,
which was offset partially by the Company entering into additional operating
leases. The Company's owner-operator fleet decreased to an average of 385 in the
2001 period compared to 573 in the 2000 period. Owner-operators provide a
tractor and driver and cover all of their operating expenses in exchange for a
fixed payment per mile. Accordingly, expenses such as driver salaries, fuel,
repairs, depreciation, and interest normally associated with Company-owned
equipment are consolidated in revenue equipment rentals and purchased
transportation when owner-operators are utilized. The Company also entered into
additional operating leases. As of June 30, 2001, the Company had financed
approximately 1,084 tractors and 1,619 trailers under operating leases as
compared to 771 tractors and 1,059 trailers under operating leases as of June
30, 2000.
Repairs increased approximately $2.3 million (38.8%), to $8.4 million in the
2001 period from $6.1 million in the 2000 period. As a percentage of revenue,
repairs increased to 3.1% in the 2001 period from 2.3% in the 2000 period. The
increase was primarily the result of the Company adopting an insurance program
with significantly higher physical damage deductible exposure. Repair expense
will vary based on the frequency and severity of physical damage claims. The
Company accrues the estimated cost of the uninsured portion of pending claims.
These accruals are based on management's evaluation of the nature and severity
of the claim and estimates of future claims development based on historical
trends.
Operating taxes and licenses increased approximately $0.2 million (3.3%), to
$7.0 million in the 2001 period from $6.8 million in the 2000 period. As a
percent of revenue, operating taxes and licenses remained essentially constant
at 2.6% in the 2000 and 2001 periods.
Insurance and claims, consisting primarily of premiums and deductible amounts
for liability, physical damage, and cargo damage insurance and claims, increased
$1.9 million (27.6%), to $9.0 million in the 2001 period from $7.0 million in
the 2000 period. As a percentage of revenue, insurance increased to 3.3% in the
2001 period from 2.6% in the 2000 period because of an industry-wide increase in
insurance rates, which the Company addressed by adopting an insurance program
with significantly higher deductible exposure that is partially offset by lower
premium rates. The Company's insurance program for liability, physical damage,
and cargo damage involves self-insurance with varying risk retention levels.
Claims in excess of these risk retention levels are covered by insurance in
amounts which management considers adequate. The Company accrues the estimated
cost of the uninsured portion of pending claims. These accruals are based on
management's evaluation of the nature and severity of the claim and estimates of
future claims development based on historical trends. Insurance and claims
expense will vary based on the frequency and severity of claims.
Communications and utilities expense increased approximately $0.1 million
(3.1%), to $3.7 million in the 2001 period from $3.5 million in the 2000 period.
As a percentage of revenue, communications and utilities remained essentially
constant at 1.3% in the 2000 and 2001 periods.
General supplies and expenses, consisting primarily of driver recruiting
expenses and terminal lease expense, decreased $0.9 million (7.1%), to $11.2
million in the 2001 period from $12.1 million in the 2000 period. As a
percentage of revenue, general supplies and expenses decreased to 4.1% in the
2001 period from 4.5% in the 2000 period. The 2001 decrease is primarily the
result of the capitalization of the Company's headquarters facility and a
reclassification of certain accessorial charges to shippers against the related
expense. In March 2001, the Company's headquarters facility operating lease
expired. The building was refinanced through the Credit Agreement (as defined
below), and the related expenses are being reflected in the depreciation and
amortization category as well as interest expense. The Company implemented
accessorial reclassification in the third quarter of 2000.
11
Depreciation and amortization, consisting primarily of depreciation of revenue
equipment, decreased $0.2 million (0.8%), to $19.9 million in the 2001 period
from $20.1 million in the 2000 period. As a percentage of revenue, depreciation
and amortization decreased to 7.3% in the 2001 period from 7.6% in the 2000
period. The decrease is primarily due to the Company leasing more revenue
equipment through operating leases and extending the depreciable life of the
Company's trailers from seven years to eight years to conform to the Company's
actual experience of equipment life, which the Company implemented in the second
quarter of 2000. The decrease was partially offset by the capitalization of the
Company's headquarters facility and lower gains on sale of equipment. The
headquarters lease expense was previously recorded in general supplies and
expenses. Depreciation and amortization expense is net of any gain or loss on
the sale of tractors and trailers. Gain on sale of tractors and trailers was
approximately $100,000 in 2001 and $715,000 in 2000. The predictability of any
gain/(loss) on the sale of equipment is difficult due to the variation in market
value of used equipment from year to year. The unpredictability of
gains/(losses) could impact depreciation and amortization as a percentage of
revenue. The Company is reserving against tractor values, which will affect this
line item in future periods. Amortization expense primarily relates to covenants
not to compete and goodwill from acquisitions.
Interest expense decreased $0.3 million (6.0%), to $4.5 million in the 2001
period from $4.7 million in the 2000 period. As a percentage of revenue,
interest expense decreased to 1.6% in the 2001 period from 1.8% in the 2000
period. The decrease was the result of lower debt balances and interest rates.
As a result of the foregoing, the Company's pretax margin decreased to 0.5% in
the 2001 period from 3.1% in the 2000 period.
The Company's effective tax rate decreased to 38.0% in the 2001 period from
39.9% in the 2000 period due to the Company implementing certain tax planning
strategies during 2000.
Primarily as a result of the factors described above, net income decreased $4.1
million (84.1%), to $0.8 million in the 2001 period (0.3% of revenue) from $4.9
million in the 2000 period (1.9% of revenue).
LIQUIDITY AND CAPITAL RESOURCES
The growth of the Company's business has required significant investments in new
revenue equipment. The Company has financed its revenue equipment requirements
with borrowings under a line of credit, cash flows from operations, long-term
operating leases, and borrowings under installment notes payable to commercial
lending institutions and equipment manufacturers. The Company's primary sources
of liquidity at June 30, 2001 were funds provided by operations, proceeds under
the Securitization Facility (as defined below), and borrowings under its primary
credit agreement, which had maximum available borrowing of $120.0 million at
June 30, 2001 (the "Credit Agreement"). The Company believes its sources of
liquidity are adequate to meet its current and projected needs.
Net cash provided by operating activities was $35.1 million in the 2001 period
and $25.3 million in the 2000 period. The 39.1% increase in operating cash flows
from the 2000 period to the 2001 period was primarily due to improved billing
and collection of accounts receivable, and increases in accounts payable,
accrued expenses and prepaid expenses.
Net cash used in investing activities was $27.8 million and $16.7 million in the
2001 and 2000 periods, respectively. Approximately $15 million of the increase
was related to the refinancing of the Company's headquarters facility, which was
previously financed through an operating lease that expired in March 2001. The
Company financed the facility using proceeds from the Credit Agreement. The
Company expects to spend no more than $7 million on net capital expenditures
during the remainder of 2001. Total projected net capital expenditures for 2001
are expected to be approximately $35 million (excluding operating leases of
equipment and the effect of any potential acquisitions).
Net cash used in financing activities was $9.1 million and $8.5 million in the
2001 and 2000 periods, respectively. At June 30, 2001, the Company had
outstanding debt of $133.0 million, primarily consisting of approximately $47.0
million drawn under the Company's Credit Agreement, $55.1 million in the
Securitization Facility, $25.0 million in 10-year senior notes, $3.0 million in
an interest bearing note to the former primary stockholder of Southern
Refrigerated Transportation, Inc. ("SRT") related to the acquisition of SRT in
October 1998, $2.6 million in term equipment financing, and $0.3 million in
notes related to non-compete agreements. Interest rates on this debt range from
3.7% to 9.0%.
In December 2000, the Company entered into the Credit Agreement with a group of
banks. The Credit Agreement allows maximum borrowings of $120 million and
matures December 2003. The Credit Agreement provides a revolving credit facility
with borrowings limited to the lesser of 90% of the net book value of eligible
revenue equipment or $120 million. Letters of credit are limited to an aggregate
commitment of $10 million. The Credit Agreement is collateralized by an
agreement, which includes pledged stock of the Company's subsidiaries,
inter-company notes, and licensing agreements. A commitment fee is charged on
the average daily unused portion of the facility and is adjusted quarterly
between 0.15% and 0.25% per annum based on the consolidated leverage ratio. At
June 30, 2001, the fee was 0.25% per annum. The Credit Agreement is guaranteed
by the Company and all of the Company's subsidiaries except CVTI Receivables
Corp. ("CRC").
12
Borrowings under the Credit Agreement are based on the banks' base rate or LIBOR
and accrue interest based on one, two, or three month LIBOR rates plus an
applicable margin that is adjusted quarterly between 0.75% and 1.25% based on a
ratio of total debt to trailing cash flow coverage. At June 30, 2001, the margin
was 1.25%.
During October 1995, the Company placed $25 million in senior notes due October
2005 with an insurance company. The term agreement requires payments for
interest semi-annually in arrears with principal payments due in five equal
annual installments beginning October 1, 2001. Interest accrues at 7.39% per
annum. This agreement was amended and restated in December 2000.
The Credit Agreement and senior note agreement subject the Company to certain
restrictions and covenants related to, among others, dividends, tangible net
worth, cash flow, acquisitions, dispositions, and total indebtedness.
In December 2000, the Company entered into a $62 million revolving accounts
receivable securitization facility (the "Securitization Facility"). On a
revolving basis, the Company sells its interests in its accounts receivable to
CRC, a wholly owned bankruptcy-remote special purpose subsidiary. The
Securitization Facility is collateralized by the receivables of CRC. The
transaction does not meet the criteria for sale treatment under Financial
Accounting Standard No. 125 and is reflected as a secured borrowing in the
financial statements.
The Company can receive up to $62 million of proceeds, subject to eligible
receivables and will pay a service fee recorded as interest expense, based on
commercial paper interest rates plus an applicable margin of 0.41% per annum and
a commitment fee of 0.10% per annum on the daily unused portion of the facility.
The Securitization Facility is subject to annual renewal. The Securitization
Facility includes certain significant events that could cause amounts to be
immediately due and payable in the event of certain ratios. The proceeds
received are reflected as a current liability on the consolidated financial
statements because the committed term, subject to annual renewals, is 364 days.
As of June 30, 2001, there were $55.1 million in proceeds received, with a
weighted average interest rate of 3.8%.
The Company's headquarters facility was completed in December 31, 1996. The cost
of the approximately 75 acres and construction of the headquarters and shop
buildings was approximately $15 million. The Company financed the land and
improvements under a "build to suit" operating lease. This operating lease
expired March 2001, and the Company has purchased the facility using proceeds
from the Credit Agreement. In December 2000, the Company completed the
construction of an approximately 100,000 square foot addition to the office
building and has completed improvements on an additional 58 acres of land. The
cost of these additional activities was approximately $15 million, which was
also financed under the Credit Agreement.
The Credit Agreement, Securitization Facility, and senior notes contain certain
restrictions and covenants relating to, among other things, dividends, tangible
net worth, cash flow, acquisitions, dispositions, and total indebtedness. All of
these instruments are cross-defaulted. The Company was in compliance with the
agreements at June 30, 2001.
INFLATION AND FUEL COSTS
Most of the Company's operating expenses are inflation-sensitive, with inflation
generally producing increased costs of operations. During the past three years,
the most significant effects of inflation have been on revenue equipment prices
and the compensation paid to the drivers. Innovations in equipment technology
and comfort have resulted in higher tractor prices, and there has been an
industry-wide increase in wages paid to attract and retain qualified drivers.
The Company historically has limited the effects of inflation through increases
in freight rates and certain cost control efforts.
In addition to inflation, fluctuations in fuel prices can affect profitability.
Fuel expense comprises a larger percentage of revenue for Covenant than many
other carriers because of Covenant's long average length of haul. Most of the
Company's contracts with customers contain fuel surcharge provisions. Although
the Company historically has been able to pass through most long-term increases
in fuel prices and taxes to customers in the form of surcharges and higher
rates, increases in fuel expense usually are not fully recovered. In the fourth
quarter of 1999, fuel prices escalated rapidly and have remained high throughout
2000 and into 2001. This has increased the Company's cost of operating.
SEASONALITY
In the trucking industry, revenue generally decreases as customers reduce
shipments during the winter holiday season and as inclement weather impedes
operations. At the same time, operating expenses generally increase, with fuel
efficiency declining because of engine idling and weather creating more
equipment repairs. For the reasons stated, first quarter net income historically
has been lower than net income in each of the other three quarters of the year.
The Company's equipment utilization typically improves substantially between May
and October of each year because of the trucking industry's seasonal shortage of
equipment on traffic originating in California and the Company's ability to
satisfy some of that requirement. The seasonal shortage typically occurs between
May and August because
13
California produce carriers' equipment is fully utilized for produce during
those months and does not compete for shipments hauled by the Company's dry van
operation. During September and October, business increases as a result of
increased retail merchandise shipped in anticipation of the holidays.
RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001 the Financial Accounting Standards Board (FASB) issued SFAS No. 141
"Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets."
SFAS No. 141 requires business combinations initiated after June 30, 2001 to be
accounted for using the purchase method of accounting, and broadens the criteria
for recording intangible assets separate from goodwill. Recorded goodwill and
intangibles will be evaluated against this new criteria and may result in
certain intangibles being subsumed into goodwill, or alternatively, amounts
initially recorded as goodwill may be separately identified and recognized apart
from goodwill. SFAS No. 142 requires the use of a nonamortization approach to
account for purchased goodwill and certain intangibles. Under a nonamortization
approach, goodwill and certain intangibles will not be amortized into results of
operations, but instead would be reviewed for impairment and written down and
charged to results of operations only in the periods in which the recorded value
of goodwill and certain intangibles is more than its fair value. The provisions
of each statement which apply to goodwill and intangible assets acquired prior
to June 30, 2001 will be adopted by the Company on January 1, 2002. The impact
of the application of the provisions of this statement on the Company's
financial position or results of operations upon adoption are not known at this
time however the Company anticipates the standard will result in reducing the
amortization of goodwill.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company is exposed to market risks from changes in (i) certain commodity
prices and (ii) certain interest rates on its debt.
COMMODITY PRICE RISK
Prices and availability of all petroleum products are subject to political,
economic, and market factors that are generally outside the Company's control.
Because the Company's operations are dependent upon diesel fuel, significant
increases in diesel fuel costs could materially and adversely affect the
Company's results of operations and financial condition. Historically, the
Company has been able to recover a portion of short-term fuel price increases
from customers in the form of fuel surcharges. The price and availability of
diesel fuel can be unpredictable as well as the extent to which fuel surcharges
could be collected to offset such increases. For the second quarter of 2001,
diesel fuel expenses represented 15.8% of the Company's total operating expenses
and 15.4% of total revenue. The Company uses purchase commitments through
suppliers to reduce a portion of its exposure to fuel price fluctuations. At
June 30, 2001, the national average price of diesel fuel as provided by the U.S.
Department of Energy was $1.447 per gallon. At June 30, 2001, the notional
amount for purchase commitments during the remainder of 2001 was 1.5 million
gallons. At June 30, 2001, the price of the notional 1.5 million gallons would
have produced approximately $60,000 of income to offset increased fuel prices if
the price of fuel remained the same as of June 30, 2001. At June 30, 2001, a ten
percent change in the price of fuel would increase or decrease the gain on fuel
purchase commitments by approximately $200,000. The Company does not enter into
contracts with the objective of earning financial gains on price fluctuations,
nor does it trade in these instruments when there are no underlying related
exposures.
INTEREST RATE RISK
The Credit Agreement, provided there has been no default, carries a maximum
variable interest rate of LIBOR for the corresponding period plus 1.25%. At June
30, 2001, the Company had drawn $47 million under the Credit Agreement.
Approximately $27 million was subject to variable rates and the remaining $20
million was subject to interest rate swaps that fixed the interest rates at
5.16% and 4.75% plus the applicable margin per annum. The swaps expire January
2006 and March 2006. Assuming the June 30, 2001 variable rate borrowings, each
one-percentage point increase or decrease in LIBOR would affect the Company's
pretax interest expense by $270,000 on an annualized basis.
The Company does not trade in derivatives with the objective of earning
financial gains on price fluctuations, nor does it trade in these instruments
when there are no underlying related exposures.
14
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
None
Items 2 and 3 Not applicable
Item 4 Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of Covenant Transport, Inc. was held on
May 17, 2001, for the purpose of (a) electing seven directors for one-year
terms, (b) ratification of the selection of PricewaterhouseCoopers LLP as
independent certified public accounts for the Company, and (c) approving the
reservation of an additional 1,003,034 shares of the Company's Class A common
stock for issuance under the Company's Incentive Stock Plan. Proxies for the
meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act
of 1934, and there was no solicitation in opposition to management's nominees.
Each of management's nominees for director as listed in the Proxy Statement was
elected.
The voting tabulation on the election of directors was as follows:
Shares Voted Shares Voted Shares Voted
"FOR" "AGAINST" "ABSTAIN"
David R. Parker 12,156,884 - 1,776,595
Michael W. Miller 12,156,982 - 1,776,497
R. H. Lovin, Jr. 12,156,984 - 1,776,495
Mark A. Scudder 12,763,594 - 1,169,885
William T. Alt 12,764,367 - 1,169,112
Hugh O. Maclellan, Jr. 11,696,225 - 2,237,254
Robert E. Bosworth 12,763,169 - 1,170,310
The voting tabulation on the selection of accountants was "FOR" 13,840,189; "AGAINST" 81,100; and "ABSTAIN" 12,190.
The voting tabulation on approving the reservation of an additional 1,003,034 shares of the Company's Class A common
stock for issuance under the Company's Incentive Stock Plan was "FOR" 9,073,091; "AGAINST" 4,012,539; and "ABSTAIN"
14,673.
Item 5 Not applicable
Item 6. Exhibits and reports on Form 8-K.
(a) Exhibits
Exhibit
Number Reference Description
3.1 (1) Restated Articles of Incorporation.
3.2 (1) Amended By-Laws dated September 27, 1994.
4.1 (1) Restated Articles of Incorporation.
4.2 (1) Amended By-Laws dated September 27, 1994.
10.1 (1) Incentive Stock Plan filed as Exhibit 10.9.
10.2 (1) 401(k) Plan filed as Exhibit 10.10.
10.3 (2) Amendment No. 2 to the Incentive Stock Plan, filed as
Exhibit 10.10.
10.4 (3) Stock Purchase Agreement made and entered into as of
November 15, 1999, by and among Covenant Transport, Inc.,
a Tennessee corporation; Harold Ives; Marilu Ives, Tommy
Ives, Garry Ives, Larry Ives, Sharon Ann Dickson, and the
Tommy Denver Ives Irrevocable Trust; Harold Ives Trucking
Co.; and Terminal Truck Broker, Inc.
10.5 (4) Outside Director Stock Option Plan, filed as Exhibit A.
10.6 (5) Amendment No. 3 to the Incentive Stock Plan, filed as
Exhibit 10.10.
10.7 (5) Amendment No. 1 to the Outside Director Stock Option Plan,
filed as Exhibit 10.11.
10.8 (6) Amended and Restated Note Purchase Agreement dated
December 13, 2000, among Covenant Asset Management, Inc.,
Covenant Transport, Inc., and CIG & Co., filed as Exhibit
10.8.
10.9 (6) Credit Agreement by and among Covenant Asset Management,
Inc., Covenant
15
Transport, Inc., Bank of America, N.A., and Lenders,
dated December 13, 2000, filed as Exhibit 10.9.
10.10 (6) Loan Agreement dated December 12, 2000, among CVTI
Receivables Corp., and Covenant Transport, Inc., Three
Pillars Funding Corporation, and Suntrust Equitable
Securities Corporation, filed as Exhibit 10.10.
10.11 (6) Receivables Purchase Agreement dated as of December 12,
2000, among CVTI Receivables Corp., Covenant Transport,
Inc., and Southern Refrigerated Transport, Inc., filed as
Exhibit 10.11.
10.12 (7) Clarification of Intent and Amendment No. 1 to Loan
Agreement dated March 7, 2001, filed as Exhibit 10.12
- --------------------------------------------------------------------------------
References:
Previously filed as an exhibit to and incorporated by reference from:
(1) Form S-1, Registration No. 33-82978, effective October 28, 1994.
(2) Form 10-Q for the quarter ended June 30, 1999.
(3) Form 8-K for the event dated November 16, 1999.
(4) Schedule 14A, filed April 13, 2000.
(5) Form 10-Q for the quarter ended September 30, 2000.
(6) Form 10-K for the year ended December 31, 2000.
(7) Form 10-Q for the quarter ended March 31, 2001.
(b) There were no reports on Form 8-K filed during the second quarter
ended June 30, 2001.
16
SIGNATURE
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 thereunto duly authorized.
COVENANT TRANSPORT, INC.
Date: August 9, 2001 /s/ Joey B. Hogan
-----------------
Joey B. Hogan
Treasurer and Chief Financial Officer
17