COVENANT TRANSPORT ANNOUNCES SECOND QUARTER FINANCIAL AND OPERATING RESULTS
CHATTANOOGA, TENNESSEE - July 20, 2004 - Covenant Transport, Inc.
(Nasdaq/NMS:CVTI) announced today financial and operating results for the
quarter and six month period ended June 30, 2004.
For the quarter, net income increased 39%, to $4.4 million from $3.2 million in
2003, and basic and diluted earnings per share increased by 36%, to $.30 from
$.22 in 2003. Total revenue increased 3%, to $149.8 million from $145.9 million
in 2003. Freight revenue, before fuel surcharges, remained essentially constant
at $140.0 million in the 2004 quarter and $139.5 million in the 2003 quarter.
The Company measures freight revenue, before fuel surcharges, because management
believes that fuel surcharges tend to be a volatile source of revenue and that
removal of such surcharges affords a more consistent basis for comparing results
of operations from period to period.
For the first six months, net income increased 28%, to $5.1 million, or $.34 per
diluted share, compared with $4.0 million, or $.27 per diluted share in 2003.
Total revenue increased 1%, to $287.5 million from $283.8 million during the
same period of 2003. Freight revenue, before fuel surcharges, remained
essentially constant at $270.6 million in the 2004 period and $269.8 million in
the 2003 period.
Chairman, President, and Chief Executive Officer David R. Parker stated, "We are
very excited about Covenant's overall progress during the quarter. Our earnings
per share increased 36% versus last year despite an additional $.07 per share of
diesel fuel expense, net of fuel surcharge revenue. We believe that the
combination of tight truck capacity and our dedication to restoring Covenant's
profitability back to the levels maintained by the Company in the late 90's will
continue to positively impact our earnings going forward.
As we have mentioned in the past, we believe that the key to substantially
improving our profitability is to improve our revenue per tractor per week,
primarily through increases in revenue per loaded mile. During the second
quarter, revenue per loaded mile increased 10%, or $.12 per mile, versus the
same quarter in 2003. Revenue per tractor per week increased almost 4%, to
$2,996 from $2,892 during the same quarter of 2003. The increase in revenue per
loaded
mile was partially offset by lower tractor utilization and a higher percentage
of non-revenue miles. Our average length of haul decreased by 11% to 941 from
1,055.
On the expense side, our after-tax costs increased about 8% or $.086 per mile.
The main factors were a $.03 per mile driver pay increase that commenced on
March 15, 2004, lower fuel economy of new tractor engines, diesel fuel prices
that averaged approximately $.28 per gallon more than the second quarter of
2003, and an approximately $.02 per mile increase in our cost of owning and
operating revenue equipment. Our ownership and operating costs include
ownership/lease costs and maintenance costs. Ownership/lease costs include both
leased and owned equipment and are reflected in the combined cost of revenue
equipment rentals, depreciation, and interest, and related to increased costs of
equipment, trade-in costs, and the addition of 1,812 trailers versus last year
to improve our customer service as a result of increased dedicated loads and
decreased lengths of haul. Compared to second quarter of last year, our
ownership/lease costs of revenue equipment increased approximately $.04 per
mile. These amounts were partially offset by savings in the areas of tractor and
trailer maintenance. Our newer fleet saved us $.018 per mile compared with the
same quarter last year, resulting in a net increase of approximately $.021 per
mile in costs relating to revenue equipment. By the end of 2004, we expect these
costs to drop by an additional $.01 per mile as a result of fewer trade-ins and
the related expenses.
Our balance sheet remains strong despite acquiring a substantial amount of
revenue equipment, which lowered the average age of our tractor and trailer
fleets to 1.5 years and 2.5 years, respectively, for the 2004 quarter compared
to 2.2 years and 4.8 years, respectively, for the 2003 quarter. At June 30,
2004, we had $195.5 million in stockholders' equity and $60.5 million in balance
sheet debt, for a debt-to-total capitalization ratio of 24%."
The Company will be hosting a conference call on Wednesday, July 21, 2004, at
10:00 a.m. EDT. The public will be able to listen and participate in the call
telephonically by dialing 800-603-1780 access code 8512599. 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.
The Company's Class A 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
of 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, ports, 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 June 30 Six Months Ended June 30
-------------------------------- ---------------------------------
($000s) 2004 2003 % Change 2004 2003 % Change
---- ---- -------- ---- ---- --------
Freight revenue $140,036 $139,480 0.4% $270,626 $269,833 0.3%
Fuel surcharge revenue 9,811 6,462 16,888 13,984
------------------------ -------------------------
Total revenue $149,847 $145,942 2.7% $287,514 $283,817 1.3%
Operating expenses
Salaries, wages and related expenses 56,378 55,662 108,336 109,472
Fuel expense 30,264 26,502 57,816 55,290
Operations and maintenance 7,482 10,290 15,193 20,284
Revenue equipment rentals and
purchased transportation 18,589 16,562 37,153 31,380
Operating taxes and licenses 3,674 3,745 7,153 7,176
Insurance and claims 8,999 9,558 17,264 17,597
Communications and utilities 1,535 1,731 3,316 3,439
General supplies and expenses 3,524 3,826 7,021 6,999
Depreciation and amortization 10,677 10,617 22,480 21,217
------------------------ -------------------------
Total operating expenses 141,122 138,493 275,732 272,854
------------------------ -------------------------
Operating income 8,725 7,449 17.1% 11,782 10,963 7.5%
Other (income) expenses:
Interest expense 655 596 1,263 1,247
Interest income (69) (25) (87) (63)
Other (510) 61 (482) 46
------------------------ -------------------------
Other (income) expenses, net 76 632 694 1,230
------------------------ -------------------------
Income before income taxes 8,649 6,817 26.9% 11,088 9,733 13.9%
Income tax expense 4,261 3,653 5,981 5,730
------------------------ -------------------------
Net income $4,388 $3,164 38.7% $5,107 $4,003 27.6%
======================== =========================
Basic earnings per share $0.30 $0.22 36.4% $0.35 $0.28 25.0%
Diluted earnings per share $0.30 $0.22 36.4% $0.34 $0.27 25.9%
Weighted avg. common shares outstanding 14,643 14,397 14,660 14,389
Weighted avg. common shares outstanding 14,787 14,664 14,823 14,637
adjusted for assumed conversions
Operating statistics excludes fuel surcharges.
Net margin as a percentage of freight revenue 3.13% 2.27% 1.89% 1.48%
Average revenue per loaded mile $1.375 $1.252 9.8% $1.347 $1.252 7.6%
Average revenue per total mile $1.248 $1.153 8.2% $1.225 $1.151 6.4%
Average revenue per tractor per week $2,996 $2,892 3.6% $2,871 $2,792 2.8%
Average miles per tractor per period 31,215 32,612 -4.3% 60,950 62,913 -3.1%
Weighted avg. tractors for period 3,578 3,699 -3.3% 3,612 3,706 -2.5%
Tractors at end of period 3,540 3,623 -2.3% 3,540 3,623 -2.3%
Trailers at end of period 8,945 7,133 25.4% 8,945 7,133 25.3%
June 2004 Dec 2003
--------- --------
Total assets $351,623 $354,281
Total equity 195,477 192,143
Total debt, including current maturities 60,480 61,653
Debt to Capitalization Ratio 23.6% 24.3%