Exhibit 99.3
COVENANT TRANSPORT UPDATES THIRD QUARTER EXPECTATIONS
CHATTANOOGA, TENNESSEE - October 6, 2004 - Covenant Transport, Inc.
(Nasdaq/NMS:CVTI) announced today updated earnings guidance for the third
quarter of 2004. The Company expects to release actual results for the quarter
and nine months ended September 30, 2004, after the close of the market on
October 18.
Chairman, President, and Chief Executive Officer David R. Parker stated, "Our
present estimate is that earnings per diluted share will be in a range of $.32
to $.36 for the quarter, excluding the effects of an interest accrual we expect
to make in connection with the reversal of a tax-planning strategy and the
results of an actuarial study presently being conducted on our claims accruals.
Our current estimate compares with $.28 per diluted share for the third quarter
last year and our guidance given in July that indicated an expected range of
$.36 to $.40 for the third quarter of this year.
The business environment is good. We experienced a soft spot in August that we
did not expect and disruption in freight patterns in the Southeast during August
and September due to the hurricanes that affected our equipment utilization, but
in general July and September were quite good and October has started out
strong. For the quarter, we expect revenue per total mile, excluding fuel
surcharge, to improve more than 10% compared with the same period last year. We
expect revenue per tractor per week, excluding fuel surcharge, to improve
approximately 2%, to approximately $3,025 for the quarter. Excluding the
possible effects of the actuarial study mentioned above, we are expecting an
operating ratio of approximately 92.7% for the quarter compared with 94.0% for
the same quarter last year.
In addition to the effects on utilization mentioned above, rapidly escalating
fuel costs were the other main factor that influenced the change in our
expectations. The national average diesel fuel price, as reported weekly by the
United States Department of Energy, increased approximately 30 cents per gallon
between July and September. Our fuel surcharge program historically has
recovered approximately 70% of the effect of increases in fuel prices over the
baseline prices in our contracts. As prices have risen, the effect of the
unrecovered portion has grown. Even with fuel surcharge revenue expected to
exceed $.10 per mile for the quarter, our net fuel cost, after collection of
fuel surcharges, is up 2.5 cents
per company mile versus the third quarter of last year. For the quarter, we
estimate that the impact of higher fuel prices, after collection of surcharges,
is approximately $.10 per diluted share compared with the third quarter last
year and approximately $.04 per diluted share greater than we expected based on
fuel prices when we issued our guidance in July.
The tax item relates to our reversal of a tax planning strategy that was
disallowed by the IRS. The strategy accelerated certain deductions. Accordingly,
when it was reversed, certain deductions were recognized later than originally
recorded, so we will incur interest, but not any penalties, on the reversal. We
expect the interest charge to be approximately $400,000 pre-tax, and are in the
process of finalizing that amount.
During the quarter we engaged an actuarial firm to analyze our claims accruals.
Our self insured retention amounts have increased significantly over the past
three years, and we believed it was appropriate to engage an outside actuarial
firm to review the reserves and methodologies that we employ each quarter in our
own analysis. While we believe our claims accrual methods have been prudent, the
outside firm's analysis is not yet complete, and we cannot predict whether their
analysis will indicate a need for changes in our accruals.
All-in-all, although we never like to lower guidance, we feel very good about
the progress we are making in our business and the current supply-demand
relationship in the freight market."
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 and changes in the resale value of our used 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; fluctuations in claims expenses that result
from high self-insured retention amounts and differences between estimates used
in establishing and adjusting claims reserves and actual results over time;
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