COVENANT TRANSPORT ANNOUNCES FOURTH QUARTER AND YEAR-END OPERATING RESULTS
CHATTANOOGA, TENNESSEE - January 27, 2004 - Covenant Transport, Inc.
(Nasdaq/NMS:CVTI) announced today financial and operating results for the fourth
quarter and year ended December 31, 2003.
For the quarter, total revenue increased 4%, to $152.2 million from $146.7
million in 2002. Total revenue included fuel surcharges and other accessorial
revenue of $9.1 million, compared with $8.0 million in 2002. Excluding fuel
surcharge and other accessorial revenue, freight revenue increased 3% to $143.1
million from $138.7 million in 2002. The Company measures revenue, before fuel
surcharge and other accessorial revenue, or "freight revenue," in addition to
total revenue, because management believes removing this sometimes volatile
source of revenue affords a more consistent basis for comparing results of
operations from period to period. Net income increased 23%, to $4.1 million from
$3.4 million in 2002. Net income per diluted share increased 22%, to $0.28 from
$0.23 in 2002.
For the year, total revenue increased 3%, to $582.5 million from $564.4 million
in 2002. Total revenue included fuel surcharges and other accessorial revenue of
$35.7 million, compared with $22.6 million in 2002. Excluding fuel surcharge and
other accessorial revenue, freight revenue increased 1% to $546.8 million from
$541.8 million in 2002. Net income increased 47%, to $12.2 million from $8.3
million in 2002. Net income per diluted share increased 48%, to $0.83 from $0.57
in 2002. During the first quarter of 2002, the Company recognized pre-tax
charges of $3.3 million to reflect an impairment in tractor values and $1.4
million to reflect the early extinguishment of debt.
Chairman, President, and Chief Executive Officer David R. Parker stated,
"Freight demand continued to be strong throughout the fourth quarter in all
areas of the country and across industry groups. This strength allowed us to
raise revenue per tractor per week by 3.8% compared with the same quarter of
2002. After several difficult years, being able to exceed $2,900 per truck per
week for two straight quarters is beginning to show progress towards our goal of
at least $3,000 per truck per week. Contributing factors were an increase in
average revenue per loaded mile of $.04 per mile and an increase in average
miles per tractor of 1%.
On the expense side, our after-tax cost per mile increased $.024 per mile. As
previously announced, the higher costs of new tractors and trailers which
resulted from updating our fleet, plus adding 1,770 trailers while not growing
our tractor fleet, increased our ownership/lease costs by $.037 per mile.
Savings in other areas partially offset this increase. Ownership/lease costs
include both leased and owned equipment and are reflected in the combined cost
of revenue equipment rentals, depreciation, and interest. Our results for the
quarter included an approximately $260,000 non-cash benefit from interest rate
changes under SFAS No. 133. Our pretax margin improved by approximately 75 basis
points versus the fourth quarter of 2002.
During 2003, one of our major goals was to reduce the average age of our
tractors and trailers in order to reduce our ongoing maintenance expense. We
also decided to increase the size of our trailer fleet and operate with a higher
trailer to tractor ratio, because of the reduction in our average length of haul
over the past few years. We took delivery of 1,447 tractors and 3,038 trailers
and disposed of 1,520 tractors and 2,407 trailers during the year. This lowered
the average age of our tractor fleet to 19.1 months from 26.3 months and our
trailer fleet to 33.8 months from 54.8 months, at December 31, 2003, and 2002
respectively. We are beginning to realize the maintenance savings and expect the
savings to increase in 2004. In addition, we believe the additional trailer
capacity will improve the efficiency of our operations, particularly in our
short to medium haul lanes.
We financed a significant portion of the tractors and trailers under operating
leases. Our increased usage of operating leases allowed us to use our cash flows
to reduce balance sheet debt. At December 31, 2003, our total balance sheet debt
was $61.7 million and our stockholders' equity was $192.1 million, for a total
debt-to-capitalization ratio of 24%. The reduction in debt of approximately $22
million during 2003 was more than offset by an increase in operating leases,
which we estimate to have increased by a present value of approximately $47
million. At December 31, 2003, we had $88 million of available borrowing
capacity on our line of credit.
The Company will be hosting a conference call on Wednesday, January 28, 2004, at
11:00 a.m. EST. The public will be able to listen and participate in the call
telephonically by dialing 800-603-1780 access code 4810372. For more information
on how to access the conference call and for statistical and financial
information regarding the Company that is expected to be discussed during the
conference call, please visit our website at www.covenanttransport.com
Covenant Transport, Inc. is a public truckload carrier that offers just-in-time
service and other premium transportation services for customers throughout the
United States. Covenant operates one of the ten largest fleets in North America
and is committed to growing revenue and earnings per share both internally and
through acquisitions. The Company's common stock is traded on the Nasdaq
National Market under symbol, "CVTI."
This press release 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," "plans,"
"intends," 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 our
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 tractor or trailer capacity in
the trucking industry; decreased demand for our services or loss of one or more
or our major customers; surplus inventories; recessionary economic cycles and
downturns in customers' business cycles; strikes, work slow downs, or work
stoppages at the Company, customers, parts, or other shipping related
facilities; increases or rapid fluctuations in fuel prices as well as
fluctuations in hedging activities and surcharge collection, the volume and
terms of diesel purchase commitments, interest rates, fuel taxes, tolls, and
license and registration fees; increases in the prices paid for new revenue
equipment; the resale value of our used equipment and the price of new
equipment; increases in compensation for and difficulty in attracting and
retaining qualified drivers and independent contractors; elevated experience in
the frequency and severity of claims relating to accident, cargo, workers'
compensation, health, and other claims; high insurance premiums and deductible
amounts; seasonal factors such as harsh weather conditions that increase
operating costs; competition from trucking, rail, and intermodal competitors;
regulatory requirements that increase costs or decrease efficiency, including
revised hours-of-service requirements for drivers; the ability to successfully
execute the Company's initiative of improving the profitability of medium length
of haul movements; and the ability to identify acceptable acquisition
candidates, consummate acquisitions, and integrate acquired operations. 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 Exchange Commission.
For further information contact:
Joey B. Hogan, Executive VP and Chief Financial Officer (423) 825-3336
hogjoe@covenanttransport.com
For copies of Company information contact:
Kim Perry, Administrative Assistant (423) 825-3357
perkim@covenanttransport.com
Covenant Transport, Inc.
Key Financial and Operating Statistics
Three Months Ended Dec. 31 Twelve Months Ended Dec. 31
----------------------------------- --------------------------------------
($000s) 2003 2002 % Change 2003 2002 % Change
---- ---- --------- ---- ---- ---------
Freight revenue $143,058 $138,695 3.1% $546,766 $541,830 0.9%
Fuel surcharge and other accessorial revenue 9,099 7,969 35,691 22,588
---------------------- -------------------------
Total revenue $152,157 $146,664 3.7% $582,457 $564,418 3.2%
Operating expenses
Salaries, wages and related expenses 55,329 57,685 220,665 227,332
Fuel expense 27,571 26,110 109,231 96,332
Operations and maintenance 9,376 9,801 39,822 39,625
Revenue equipment rentals and
purchased transportation 19,983 14,897 69,997 59,265
Operating taxes and licenses 3,835 3,576 14,354 13,934
Insurance and claims 9,618 8,917 35,454 31,761
Communications and utilities 1,870 1,918 7,177 7,021
General supplies and expenses 3,969 3,950 14,495 14,677
Depreciation and amortization (1) 11,833 12,031 43,041 49,497
---------------------- -------------------------
Total operating expenses 143,384 138,885 554,236 539,444
---------------------- -------------------------
Operating income 8,773 7,779 12.8% 28,221 24,974 13.0%
Other (income) expenses:
Interest expense 546 740 2,332 3,542
Interest income (9) (26) (114) (63)
Other (261) (18) (468) 916
Early extinguishment of debt (2) - - - 1,434
---------------------- -------------------------
Other (income) expenses, net 276 696 1,750 5,829
---------------------- -------------------------
Income before income taxes 8,497 7,083 20.0% 26,471 19,145 38.3%
Income tax expense 4,393 3,733 14,315 10,871
---------------------- -------------------------
Net income $4,104 $3,350 22.5% $12,156 $8,274 46.9%
====================== =========================
(1) Includes a $3.3 million pre-tax impairment charge which incurred in the first quarter of 2002.
(2) Reflects the reclassification of early extinguishment of debt due to the adoption of SFAS 145.
Basic earnings per share $0.28 $0.23 21.7% $0.84 $0.58 44.8%
Diluted earnings per share $0.28 $0.23 21.7% $0.83 $0.57 45.6%
Weighted avg. common shares outstanding 14,626 14,375 14,467 14,223
Weighted avg. common shares outstanding 14,870 14,682 14,709 14,519
adjusted for assumed conversions
Operating statistics exclude fuel and accessorial surcharges.
Net margin as a percentage of freight revenue 2.87% 2.42% 2.2% 1.5%
Average revenue per loaded mile $1.272 $1.232 3.2% $1.245 $1.215 2.5%
Average revenue per total mile $1.174 $1.145 2.5% $1.147 $1.129 1.6%
Average revenue per tractor per week $2,967 $2,859 3.8% $2,852 $2,812 1.4%
Average miles per tractor per period 33,214 32,801 1.3% 129,656 129,906 -0.2%
Weighted avg. tractors for period 3,657 3,684 -0.7% 3,667 3,680 -0.4%
Tractors at end of period 3,752 3,738 0.4% 3,752 3,738 0.4%
Trailers at end of period 9,255 7,485 23.6% 9,255 7,485 23.6%
Dec 2003 Dec 2002
-------- --------
Total assets $354,281 $361,541
Total equity 192,143 175,588
Total debt, including current maturities 61,653 83,530
Debt to Capitalization Ratio 24.3% 32.2%