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, 1997
( ) 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 15, 1997):
Class A Common Stock, $.01 par value: 11,000,000 shares
Class B Common Stock, $.01 par value: 2,350,000 shares
Exhibit Index is on Page 13.
1
PART I
FINANCIAL INFORMATION
PAGE
NUMBER
Item 1. Financial statements
Condensed consolidated balance sheets as of
December 31, 1996 and June 30, 1997 (unaudited) 3
Condensed consolidated statements of operations for
the three and six months ended June 30, 1996 and
1997 (unaudited) 4
Condensed consolidated statements of cash flows for
the six months ended June 30, 1996 and 1997 (unaudited) 5
Notes to condensed consolidated financial statements
(unaudited) 6
Item 2. Management's discussion and analysis of financial
condition and results of operations 7
PART II
OTHER INFORMATION
PAGE
NUMBER
Item 1. Legal proceedings 13
Items 2.,
3., 4.,
and 5. Not applicable
Item 6. Exhibits and reports on Form 8-K 13
2
COVENANT TRANSPORT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, June 30,
ASSETS 1996 1997
------ --------------------------
(unaudited)
Current assets:
Cash and cash equivalents $ 3,491,543 $ 389,517
Accounts receivable, net of allowance of $500,000
in 1996 and $700,000 in 1997 29,955,577 35,231,845
Drivers advances and other receivables 3,230,857 1,798,066
Tire and parts inventory 880,086 991,201
Prepaid expenses 3,781,003 4,426,448
Deferred income taxes 248,000 259,000
--------------------------
Total current assets 41,587,066 43,096,077
Property and equipment, at cost 183,136,067 205,288,458
Less accumulated depreciation and amortization 38,752,116 47,170,287
--------------------------
Net property and equipment 144,383,951 158,118,171
Other 1,177,158 1,632,686
--------------------------
Total assets $187,148,175 $202,846,934
==========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 50,000 $ 50,000
Accounts payable 3,892,208 5,651,764
Accrued expenses 4,480,151 7,733,581
--------------------------
Total current liabilities 8,422,359 13,435,345
Long-term debt, less current maturities 83,110,000 85,110,000
Deferred income taxes 13,886,000 17,181,000
--------------------------
Total liabilities 105,418,359 115,726,345
Stockholders' equity:
Class A common stock, $.01 par value; 11,000,000
shares issued and outstanding 110,000 110,000
Class B common stock, $.01 par value; 2,350,000
shares issued and outstanding 23,500 23,500
Additional paid-in-capital 50,469,596 50,469,596
Retained earnings 31,126,720 36,517,493
--------------------------
Total stockholders' equity 81,729,816 87,120,589
==========================
Total liabilities and stockholders' equity $187,148,175 $202,846,934
==========================
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
COVENANT TRANSPORT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1996 and 1997
(unaudited)
Three months ended Six months ended
June 30, June 30,
1996 1997 1996 1997
------------------------------------------------------
Revenue $ 59,625,531 $ 70,059,872 $109,083,358 $132,647,730
Operating expenses:
Salaries, wages, and
related expenses 27,033,645 31,707,144 50,559,249 59,392,373
Fuel, oil, and road
expenses 13,917,483 14,912,295 25,385,520 30,471,920
Revenue equipment
rentals and purchased
transportation 90,159 1,105,296 321,179 1,532,684
Repairs 959,893 1,304,095 2,014,008 2,571,528
Operating taxes and
licenses 1,556,754 1,814,210 3,078,858 3,347,722
Insurance 1,511,214 1,904,821 2,866,276 3,690,729
General supplies and
expenses 3,053,421 3,861,624 6,093,233 7,552,614
Depreciation and
amortization,
including gain on
disposition of
equipment 5,410,893 6,332,759 10,550,486 12,688,787
------------------------------------------------------
Total operating
expenses 53,533,462 62,942,244 100,868,809 121,248,357
------------------------------------------------------
Operating income 6,092,069 7,117,628 8,214,549 11,399,373
Interest expense 1,491,991 1,477,113 2,860,151 2,844,600
------------------------------------------------------
Income before
income taxes 4,600,078 5,640,515 5,354,398 8,554,773
Income tax expense 1,676,000 2,088,000 1,948,000 3,164,000
------------------------------------------------------
Net income $ 2,924,078 $ 3,552,515 $ 3,406,398 $ 5,390,773
======================================================
Earnings per share
Net income $ 0.22 $ 0.27 $ 0.26 $ 0.40
======================================================
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, 1996 and 1997
(Unaudited)
1996 1997
--------------------------
Cash flows from operating activities:
Net income $ 3,406,398 $ 5,390,773
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for losses on receivables 176,461 193,195
Depreciation and amortization 10,693,238 12,809,956
Deferred income taxes 798,000 3,284,000
Loss (gain) on disposition of property and
equipment (212,752) (121,169)
Changes in operating assets and liabilities:
Receivables and advances 2,913,929 (4,588,491)
Prepaid expenses (1,470,952) (645,445)
Tire and parts inventory 161,442 (111,115)
Accounts payable and accrued expenses 3,428,865 5,012,986
--------------------------
Net cash flows from operating activities 19,894,629 21,224,690
Cash flows from investing activities:
Acquisition of property and equipment (31,315,637) (32,130,066)
Proceeds from disposition of property and
equipment 2,548,681 5,803,350
--------------------------
Net cash flows from investing activities (28,766,956) (26,326,716)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 10,000,000 2,000,000
Deferred debt issuance cost (132,452) --
--------------------------
Net cash flows from financing activities 9,867,548 2,000,000
--------------------------
Net change in cash and cash equivalents 995,221 (3,102,026)
Cash and cash equivalents at beginning of period 461,288 3,491,543
==========================
Cash and cash equivalents at end of period $ 1,456,509 $ 389,517
==========================
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
COVENANT TRANSPORT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 (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,
1996 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, 1996. Results of
operations in interim periods are not necessarily indicative of
results to be expected for a full year.
- --------------------------
FORWARD LOOKING STATEMENTS
This document contains forward-looking statements in paragraphs
that are marked with an asterisk. Statements by the Company in
press releases, public filings, and stockholder reports, as well as
oral public statements by Company representatives, also may contain
certain forward looking information. Forward-looking information is
subject to certain risks and uncertainties that could cause actual
results to differ materially from those projected. Without
limitation, these risks and uncertainties include economic factors
such as recessions, downturns in customers' business cycles,
surplus inventories, inflation, fuel price increases, and higher
interest rates; the resale value of the Company's used revenue
equipment; the availability and compensation of qualified drivers;
and competition from trucking, rail, and intermodal competitors.
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.
6
COVENANT TRANSPORT, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of certain items to
revenue for the periods indicated:
Three months ended Six months ended
June 30, June 30,
1996 1997 1996 1997
--------------------------------------
Revenue 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Salaries, wages, and related expenses 45.3 45.2 46.3 44.8
Fuel, oil, and road expenses 23.4 21.3 23.3 23.0
Revenue equipment rentals and
purchased transportation 0.2 1.6 0.3 1.1
Repairs 1.6 1.9 1.9 1.9
Operating taxes and licenses 2.6 2.6 2.8 2.5
Insurance 2.5 2.7 2.6 2.8
General supplies and expenses 5.1 5.5 5.6 5.7
Depreciation and amortization 9.1 9.0 9.7 9.6
--------------------------------------
Total operating expenses 89.8 89.8 92.5 91.4
--------------------------------------
Operating income 10.2 10.2 7.5 8.6
Interest expense 2.5 2.1 2.6 2.1
--------------------------------------
Income before income taxes 7.7 8.1 4.9 6.5
Provision for income taxes 2.8 3.0 1.8 2.4
--------------------------------------
Net income 4.9% 5.1% 3.1% 4.1%
======================================
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1997 TO THREE MONTHS ENDED JUNE 30,
1996
Revenue increased $10.4 million (17.5%) to $70.1 million in the 1997 period from
$59.6 million in the 1996 period. The revenue increase was primarily generated
by a 17.8% increase in weighted average tractors, to 1,759 during the 1997
period from 1,493 during the 1996 period, as the Company expanded to meet demand
from new customers and higher volume from existing customers. The Company's
average revenue per loaded mile also increased to approximately $1.127 during
the 1997 period from $1.096 during the 1996 period. The increase was
attributable to per-mile rate increases negotiated by the Company. Included in
the revenue amounts were fuel surcharges totaling approximately $800,000 during
the 1997 period and $775,000 during the 1996 period. The Company's revenue per
loaded mile in the 1997 period net of the fuel surcharges was $1.114 in the 1997
period and $1.083 in the 1996 period. Average miles per tractor decreased to
37,325 in the 1997 period from 38,462 in the 1996 period. Deadhead improved to
5.3% of total miles in the 1997 period from 5.4% in the 1996 period.
Salaries, wages, and related expenses increased $4.7 million (17.3%) to $31.7
million in the 1997 period from $27.0 million in the 1996 period. As a
percentage of revenue, salaries, wages, and related expenses decreased to 45.2%
of revenue in the 1997 period from 45.3% in the 1996 period. Driver wages as a
percentage of revenue increased to 33.3% in the 1997 period from 32.9% in the
1996 period as the 1997 period included a per mile pay increase to the drivers
that was effective on May 15, 1997. The per mile pay increase will be in effect
for the entire quarter in future quarters. Non-driving employee payroll expense
increased to 5.2% of revenue in the 1997 period from 5.1% in the 1996. Employee
benefits, consisting primarily of health insurance, workers' compensation costs,
and employer paid taxes, decreased to 6.7% of revenue in the 1997 period from
7.3% in the 1996 period as the Company did not contract with the leasing company
utilized during the 1996 period and obtained more favorable rates for health
insurance during the 1997 period. (*)
Fuel, oil, and road expenses increased $995,000 (7.2%) to $14.9 million in the
1997 period from $13.9 million in the 1996 period. As a percentage of revenue,
fuel, oil, and road expenses decreased to 21.3% of revenue in the 1997 period
from 23.3% in the 1996 period primarily as a result of lower per gallon fuel
costs during the 1997 period. Fuel surcharges totaled $800,000 during the 1997
period and $775,000 in the 1996 period and were in effect with a majority of the
Company's customers. Recent decreases in fuel prices have reduced the Company's
fuel expense and reduced the amount of fuel surcharges. (*)
Revenue equipment rentals and purchased transportation increased $1.0 million
(1,125.9%) to $1.1 million in the 1997 period from $90,000 in the 1996 period.
As a percentage of revenue, revenue equipment rentals and purchased
transportation increased to 1.6% in the 1997 period from 0.2% in the 1996 period
as operating leases for revenue equipment were added in 1997 and the Company
initiated the use of independent contractor owner-operators of tractors during
the 1997 period.
Repairs increased $344,000 (35.9%) to $1.3 million in the 1997 period from $1.0
million in the 1996 period. As a percentage of revenue, repairs increased to
1.9% in the 1997 period from 1.6% in the 1996 period as the 1996 period was
unusually low.
Operating taxes and licenses increased $257,000 (16.5%) to $1.8 million in the
1997 period from $1.6 million in the 1996 period. As a percent of revenue,
operating taxes and licenses remained unchanged at 2.6% in the 1997 and the 1996
period.
Insurance increased $394,000 (26.1%) to $1.9 million in the 1997 period from
$1.5 million in the 1996 period. As a percentage of revenue, insurance increased
to 2.7% in the 1997 period from 2.5% in the 1996 period as a larger number of
accidents resulted in additional deductibles being paid.
General supplies and expenses, consisting primarily of driver recruiting,
communications expenses, and facilities expenses, increased $808,000 (26.5%) to
$3.9 million in the 1997 period from $3.1 million in the 1996 period. As a
percentage of revenue, general supplies and expenses increased to 5.5% of
revenue in the 1997 period from 5.1% in the 1996 period. The 1997 increase is
primarily due to higher facilities expenses related to the Company's new
headquarters and terminal in Chattanooga, Tennessee and the continuing rent
payable on the former headquarters.
Depreciation and amortization, consisting primarily of depreciation of revenue
equipment, increased $922,000 (17.0%) to $6.3 million in the 1997 period from
$5.4 million in the 1996 period. As a percentage of revenue, depreciation and
amortization remained essentially constant at 9.0% in the 1997 period and 9.1%
in the 1996 period. The use of operating leases and independent contractors
during the 1997 period slightly more than offset higher utilization per tractor
during the 1996 period.
As a result of the foregoing, the Company's operating ratio was 89.8% in both
the 1997 and the 1996 periods.
- -----------------------
(*) May contain forward-looking statements.
8
Interest expense remained virtually unchanged for the 1997 period as compared to
the 1996 period. Interest expense decreased to 2.1% of revenue in the 1997
period from 2.5% in the 1996 period, as higher average debt balances ($89.2
million in the 1997 period compared with $84.7 million in the 1996 period) were
offset by 1ower average interest rates (6.6% in the 1997 period compared with
7.0% in the 1996 period) and higher revenue in 1997.
The Company's effective tax rate was 37.0% in the 1997 period compared with
36.4% in the 1996 period reflecting increased state income taxes in the 1997
period. The effective tax rate is expected to average approximately 37.0% for
the remainder of 1997. (*)
Primarily as a result of the factors described above, net income increased to
$3.6 million in the 1997 period (5.1% of revenue) from $2.9 million in the 1996
period (4.9% of revenue).
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1997 TO SIX MONTHS ENDED JUNE 30, 1996
Revenue increased $23.6 million (21.6%) to $132.6 million in the 1997 period
from $109.1 million in the 1996 period. The revenue increase was primarily
generated by a 21.0% increase in weighted average tractors, to 1,812 during the
1997 period from 1,696 during the 1996 period, as the Company expanded to meet
demand from new customers and higher volume from existing customers. The
Company's average revenue per loaded mile also increased to approximately $1.118
during the 1997 period from $1.087 during the 1996 period. The increase was
attributable to per-mile rate increases negotiated by the Company and
approximately $1.5 million in fuel surcharge revenue during the 1997 period as
compared to $775,000 during the 1996 period. The Company's revenue per loaded
mile net of the fuel surcharges was $1.106 in the 1997 period and $1.079 in the
1996 period. Average miles per tractor decreased to 71,734 in the 1997 period
from 73,650 in the 1996 period. Deadhead improved to 5.3% of total miles in the
1997 period from 5.5% in the 1996 period.
Salaries, wages, and related expenses increased $8.8 million (17.5%) to $59.4
million in the 1997 period from $50.6 million in the 1996 period. As a
percentage of revenue, salaries, wages, and related expenses decreased to 44.8%
of revenue in the 1997 period from 46.4% in the 1996 period. Driver wages as a
percentage of revenue decreased to 32.9% in the 1997 period from 33.4% in the
1996 period as the first quarter of 1996 had an unusually high expense for
layover and other non-productive wages due to severe storms. The 1997 savings in
non-productive wages was not fully offset by the per mile pay increase to the
drivers that was effective on May 15, 1997. In future periods the per mile
increase in driver wages will be in effect for the entire period. Non-driving
employee payroll expense decreased to 5.2% in the 1997 period from 5.3% in the
1996. Employee benefits, consisting primarily of health insurance, workers'
compensation costs, and employer paid taxes, decreased to 6.6% of revenue in the
1997 period from 7.7% in the 1996 period as the Company did not contract with
the leasing company utilized during the 1996 period and obtained more favorable
rates for health insurance during the 1997 period. (*)
- ------------------------
(*) May contain forward-looking statements.
9
Fuel, oil, and road expenses increased $5.1 million (20.0%) to $30.5 million in
the 1997 period from $25.4 million in the 1996 period. As a percentage of
revenue, fuel, oil, and road expenses decreased to 23.0% of revenue in the 1997
period from 23.3% in the 1996 period. Fuel surcharges totaled $1.5 million
during the 1997 period and $775,000 in the 1996 period and were in effect with a
majority of the Company's customers . Recent decreases in fuel prices have
reduced the Company's fuel expense and reduced the amount of fuel surcharges.
Revenue equipment rentals and purchased transportation increased $1.2 million
(377.2%) to $1.1 million in the 1997 period from $321,000 in the 1996 period. As
a percentage of revenue, revenue equipment rentals and purchased transportation
increased to 1.1% in the 1997 period from 0.3% in the 1996 period as operating
leases for revenue equipment were added in 1997 and the Company initiated the
use of independent contractor owner-operators of tractors during the 1997
period.
Repairs increased $558,000 (27.7%) to $2.6 million in the 1997 period from $2.0
million in the 1996 period. As a percentage of revenue, repairs remained
constant at 1.9% of revenue in each period.
Operating taxes and licenses increased $269,000 (8.7%) to $3.3 million in the
1997 period from $3.1 million in the 1996 period. As a percent of revenue,
operating taxes and licenses decreased to 2.5% in the 1997 period from 2.8% in
the 1996 period.
Insurance increased $824,000 (28.8%) to $3.7 million in the 1997 period from
$2.9 million in the 1996 period. As a percentage of revenue, insurance increased
to 2.8% of revenue in the 1997 period from 2.6% in the 1996 period as a larger
number of accidents resulted in additional deductibles being paid.
General supplies and expenses, consisting primarily of driver recruiting,
communications expenses, and facilities expenses, increased $1.5 million (24.0%)
to $7.6 million in the 1997 period from $6.1 million in the 1996 period. As a
percentage of revenue, general supplies and expenses increased to 5.7% of
revenue in the 1997 period from 5.6% in the 1996 period. The 1997 increase is
primarily due to higher facilities expenses related to the Company's new
headquarters and terminal in Chattanooga, Tennessee and the continuing rent
payable on the former headquarters.
Depreciation and amortization, consisting primarily of depreciation of revenue
equipment, increased $2.1 million (20.3%) to $12.7 million in the 1997 period
from $10.6 million in the 1996 period. As a percentage of revenue, depreciation
and amortization remained essentially constant at 9.6% in the 1997 period and
9.7% in the 1996 period. The use of operating leases and independent contractors
during the 1997 period slightly more than offrset higher utilization per tractor
during the 1996 period.
As a result of the foregoing, the Company's operating ratio was 91.4% in the
1997 and 92.5% in the 1996 period.
Interest expense remained virtually unchanged for the 1997 period as compared to
the 1996 period. Interest expense decreased to 2.1% of revenue in the 1997
period from 2.6% in the 1996 period, as higher average debt balances ($86.3
million in the 1997 period compared with $82.3 million in the 1996 period) were
offset by 1ower average interest rates (6.6% in the 1997 period compared with
6.9% in the 1996 period) and higher revenue in 1997.
10
The Company's effective tax rate was 37.0% in the 1997 period compared with
36.0% in the 1996 period reflecting increased state income taxes in the 1997
period. The effective tax rate is expected to average approximately 37.0% for
the remainder of 1997. (*)
Primarily as a result of the factors described above, net income increased to
$5.4 million in the 1997 period (4.1% of revenue) from $3.4 million in the 1996
period (3.1% of revenue).
LIQUIDITY AND CAPITAL RESOURCES
The growth of the Company's business has required significant investments in new
revenue equipment. The Company historically has financed its revenue equipment
requirements with borrowings under a line of credit, senior notes, cash flows
from operations, and operating leases. The Company's primary sources of
liquidity at June 30, 1997, were funds provided by operations, borrowings under
its credit agreement, funds provided from its $25 million in senior notes, and
an operating lease covering its new headquarters and terminal facility.
The Company's primary source of cash flow from operations is net income
increased by depreciation and deferred income taxes. Historically, financing
increases in receivables and advances associated with the Company's revenue
growth has been a significant use of cash provided by operations. In the 1996
period, however, receivables and advances decreased due to collection of an
"other receivable" and rectifying an accounts receivable imbalance that had
occurred at the end of 1995 resulting in $2.9 million in operating cash flows.
Management believes that cash flows in the 1997 period are more representative
of a normalized period. Net cash provided by operating activities was $21.2
million in the 1997 period and $19.9 million in the 1996 period. (*)
Net cash used in investing activities was $26.3 million in the 1997 period and
$28.8 million in the 1996 period. These investments were primarily to acquire
additional revenue equipment as the Company expanded its operations. The Company
expects capital expenditures (primarily for revenue equipment), net of
trade-ins, to be approximately $45.0 million in 1997. (*)
Net cash provided by financing activities of $2.0 million in the 1997 period and
$10.0 million in the 1996 period. The cash provided was related to borrowings
under a credit agreement in each period.
At June 30, 1997, the Company had outstanding debt of $85.2 million,
substantially all of which related to draws under its credit agreement and $25
million in senior notes. Interest rates on this debt ranged from 6.1% to 7.4% at
June 30, 1997. Effective March 31, 1997, the Company renewed its credit
agreement for a term of five years and increased its limit to $85 million in
order to provide for future needs.
At June 30, 1997, $60 million was drawn under the Company's credit agreement.
The credit agreement is with a syndicate of banks and provides for outstanding
borrowings to bear interest at the London Interbank Offered Rate (LIBOR) plus an
applicable margin between 0.375% and
11
1.0%. For the quarter ended June 30, 1997, the applicable margin was 0.625%.
During February 1997, the Company entered into an interest rate swap agreement
that fixed interest rates for two years on $25 million of the borrowings under
the credit agreement at 5.9% plus the applicable margin. All remaining
borrowings under the credit agreement are at one, two, or three month LIBOR plus
the applicable margin.
The Company also has outstanding $25 million in senior notes due October 2005
that were placed with an insurance company. The notes bear interest at 7.39%,
payable semi-annually. Principal payments are due in equal annual installments
beginning in October 2001.
In December 1996, the Company took possession of its new headquarters and
terminal facility. The facility was constructed under a "build-to-suit"
operating lease and is expected to increase the Company's annual facilities
costs by approximately $750,000.(*)
The credit agreement, senior notes, and headquarters and terminal lease
agreement contain certain restrictions and covenants relating to, among other
things, dividends, tangible net worth, cash flow, acquisitions and dispositions,
and total indebtedness. All of these agreements are cross-defaulted. The Company
was in compliance with the agreements at June 30, 1997.
- --------------------
(*) May contain forward-looking statements.
12
COVENANT TRANSPORT, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
Item 1. Legal Proceedings
No reportable events or material changes occurred during the
quarter for which this report is filed.
Items 2, 3,
4 and 5. Not applicable
Item 6. Exhibits and reports on Form 8-K.
(a) Exhibits
Exhibit
Number Description
10.3** Credit Agreement dated January 17, 1995, among Covenant Transport,
Inc., a Tennessee corporation, ABN-AMRO Bank N.V., as agent, and
certain other banks.
10.4* Lease dated January 1, 1990, between David R. and Jacqueline F.
Parker and Covenant Transport, Inc, a Tennessee corporation, with
respect to the Chattanooga, Tennessee headquarters.
10.5* Lease dated June 1, 1994, between David R. and Jacqueline F. Parker
and Covenant Transport, Inc, a Tennessee corporation, with respect
to the terminal facility in Greer, South Carolina.
10.8* Incentive Stock Plan.
10.9* 401(k) Plan.
10.12*** Note Purchase Agreement dated October 15, 1995, among Covenant
Transport, Inc, a Tennessee corporation and CIG & Co.
10.13*** First Amendment to Credit Agreement and Waiver dated October 15,
1995.
10.14**** Participation Agreement dated March 29, 1996, among Covenant
Transport, Inc, a Tennessee corporation, Lease Plan USA, Inc., and
ABN-AMRO Bank, N.V., Atlanta Agency.
10.15**** Second Amendment to Credit Agreement and Waiver dated April 12,
1996.
10.16**** First Amendment to Note Purchase Agreement and Waiver dated April
1, 1996.
10.17***** Third Amendment to Credit Agreement and Waiver dated March 31,
1997.
10.18***** Waiver to Note Purchase Agreement dated March 31, 1997.
11 + Statement re: Computation for Per Share Earnings.
27 + Financial data schedule.
- ---------------------------
+ Filed herewith.
* Filed as an exhibit to the registrant's Registration Statement on
Form S-1, Registration No. 33-82978, effective October 28, 1994,
and incorporated herein by reference.
** Filed as an exhibit to the registrant's Form 10-Q for the quarter
ended March 31, 1995, and incorporated herein by reference.
*** Filed as an exhibit to the registrant's Form 10-K for the year
ended December 31, 1995, and incorporated herein by reference.
**** Filed as an exhibit to the registrant's Form 10-Q for the quarter
ended March 31, 1996, and incorporated herein by reference.
***** Filed as an exhibit to the registrant's Form 10-Q for the quarter
ended March 31, 1997, and incorporated herein by reference.
(b) No reports on Form 8-K have been filed during the quarter for
which this report is filed.
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SIGNATURE
Pursuant to the requirements of the Securities and 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: July 25, 1997 /s/ David R. Parker
------------- --------------------------
David R. Parker
Chairman, President, and
Chief Executive Officer
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