[X]
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the fiscal year ended December 31, 2006
OR
|
|
[
]
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the transition period from to
|
Nevada
|
88-0320154
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
Identification
No.)
|
|
400
Birmingham Hwy.
|
||
Chattanooga,
TN
|
37419
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant's
telephone number, including area code:
|
423-821-1212
|
Securities
registered pursuant to Section 12(b) of the Act:
|
$0.01
Par Value Class A Common Stock - The NASDAQ Stock Market
LLC
|
(Title
of class)
|
|
Securities
registered pursuant to Section 12(g) of the Act:
|
None
|
[
] Large Accelerated Filer
|
[X]
Accelerated Filer
|
[
] Non-Accelerated Filer
|
Part
I
|
|||
Item
1.
|
Business
|
||
Item
1A.
|
Risk
Factors
|
||
Item
1B.
|
Unresolved
Staff Comments
|
||
Item
2.
|
Properties
|
||
Item
3.
|
Legal
Proceedings
|
||
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
||
Part
II
|
|||
Item
5.
|
Market
for
Registrant's Common Equity
and
Related Stockholder Matters
|
||
Item
6.
|
Selected
Financial
Data
|
||
Item
7.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
||
Item
7A.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
||
Item
8.
|
Financial
Statements and Supplementary Data
|
||
Item
9.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
||
Item
9A.
|
Controls
and Procedures
|
||
Item
9B.
|
Other
Information
|
||
Part
III
|
|||
Item
10.
|
Directors,
Executive Officers,
and Corporate Governance
|
||
Item
11.
|
Executive
Compensation
|
||
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
||
Item
13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
||
Item
14.
|
Principal
Accountant
Fees and Services
|
||
Part
IV
|
|||
Item
15.
|
Exhibits
and Financial Statement Schedules
|
||
Signatures
|
||
Reports
of Independent Registered Public Accounting Firm
|
||
Financial
Data
|
||
Consolidated
Balance Sheets
|
||
Consolidated
Statements of Operations
|
||
Consolidated
Statements of Stockholders' Equity and Comprehensive Income
(Loss)
|
||
Consolidated
Statements of Cash Flows
|
||
Notes
to Consolidated Financial Statements
|
•
|
Establish
and manage toward strategic goals;
|
•
|
Seek
and provide the necessary human, capital, and other resources necessary
to
execute strategic goals;
|
•
|
Establish
and hold the service offering general managers accountable for achieving
their goals; and
|
•
|
Allocate
assets to successful service offerings and mitigate
risks.
|
•
|
Star
regional solo-driver service offering. Star
operates primarily in the southeastern United States, with shipments
concentrated from Texas across the Southeast to Virginia, and has
an
average length of haul of approximately 470 miles. We are operating
Star
as a separate subsidiary, continuing with substantially the same
personnel, customers, lanes, and terminal locations as it had prior
to our
acquisition. The acquisition included 614 tractors and 1,719 trailers.
|
•
|
Brokerage
freight service offering. At December 31, 2006, the brokerage freight
offering accounted for approximately 0.67% of our total loads. Since
our
tractors
are not utilized in this division, our methods of performance measurement
vary from the other service offerings. We expect the brokerage freight
offering to help us continue to serve customers when we lack capacity
in a
given area or the load does not meet our operating profile. We expect
this
service to be especially helpful as we continue to realign trucks
between
the other four service offerings and manage our freight mix toward
preferred lanes.
|
Average
Length of Haul. Our average length of haul has decreased over time
as we
have increased the use of solo-driver tractors and increased our
focus on
regional markets. Shorter lengths of haul frequently involve higher
rates
per mile from customers, fewer miles per truck, and a greater percentage
of non-revenue miles caused by re-positioning of equipment.
|
Average
Freight Revenue Per Total Mile. Our average freight revenue per mile
has
increased sharply. Average freight revenue per loaded mile has increased
approximately 21.6% since 2000, while non-revenue miles have also
increased. This led to a 17.4% increase in average freight revenue
per
total mile. All freight revenue per mile numbers exclude fuel surcharge
revenue.
|
Average
Miles Per Tractor. We are beginning to see our average miles per
tractor
increase due to our ability to move units between divisions to where
they
are better utilized.
|
Average
Freight Revenue per Tractor per Week. We use average freight revenue
per
tractor per week (which excludes fuel surcharges) as our main measure
of
asset productivity. This operating metric takes into account the
effects
of freight rates, non-revenue miles, and miles per tractor. In addition,
because we calculate average freight revenue per tractor using all
of our
trucks, it takes into account the percentage of our fleet that is
unproductive due to lack of drivers, repairs, and other
factors.
|
•
|
Developing
management depth to oversee the service offerings and also manage
regional
terminals within the service offerings;
|
•
|
Adapting
our personnel to new strategies, policies, and procedures, including
more
distributed decision making;
|
•
|
Maintaining
customer relationships and freight volumes while changing routes,
pricing,
and other aspects of our operations;
|
•
|
Maintaining
a sufficient number of qualified drivers while changing routes, policies,
procedures, and management structures;
|
•
|
Controlling
headcount and expenses generally during a transition that may entail
a
period of duplication of some functions; and
|
•
|
Improving
or eliminating processes, functions, services, or other items that
are
identified as substandard.
|
•
|
Our
vulnerability to adverse economic conditions and competitive pressures
is
heightened;
|
•
|
We
will continue to be required to dedicate a substantial portion of
our cash
flows from operations to operating lease payments and repayment of
debt,
limiting the availability of cash for other purposes;
|
•
|
Our
flexibility in planning for, or reacting to, changes in our business
and
industry will be limited;
|
•
|
Our
profitability is sensitive to fluctuations in interest rates because
some
of our debt obligations are subject to variable interest rates, and
future
borrowings and lease financing arrangements will be affected by any
such
fluctuations;
|
•
|
Our
ability to obtain additional financing in the future for working
capital,
capital expenditures, acquisitions, or other purposes may be limited;
and
|
•
|
We
may be required to issue additional equity securities to raise funds,
which would dilute the ownership position of our
stockholders.
|
•
|
We
compete with many other truckload carriers of varying sizes and,
to a
lesser extent, with less-than-truckload carriers, railroads, and
other
transportation companies, many of which have more equipment and greater
capital resources than we do.
|
•
|
Many
of our competitors periodically reduce their freight rates to gain
business, especially during times of reduced growth rates in the
economy,
which may limit our ability to maintain or increase freight rates
or
maintain significant growth in our business.
|
•
|
Many
of our customers are other transportation companies, and they may
decide
to transport their own freight.
|
•
|
Many
customers reduce the number of carriers they use by selecting "core
carriers" as approved service providers, and in some instances we
may not
be selected.
|
•
|
Many
customers periodically accept bids from multiple carriers for their
shipping needs, and this process may depress freight rates or result
in
the loss of some business to competitors.
|
•
|
The
trend toward consolidation in the trucking industry may create other
large
carriers with greater financial resources and other competitive advantages
relating to their size.
|
•
|
Advances
in technology require increased investments to remain competitive,
and our
customers may not be willing to accept higher freight rates to cover
the
cost of these investments.
|
•
|
Competition
from non-asset-based logistics and freight brokerage companies may
adversely affect our customer relationships and freight rates.
|
•
|
Economies
of scale that may be passed on to smaller carriers by procurement
aggregation providers may improve their ability to compete with us.
|
Terminal
Locations
|
Maintenance
|
Recruiting/
Orientation
|
Sales
|
Ownership
|
Chattanooga,
Tennessee
|
x
|
x
|
x
|
Leased
|
Dalton,
Georgia
|
x
|
Owned
|
||
Charlotte,
North Carolina
|
Leased
|
|||
Dayton,
Ohio
|
Leased
|
|||
Indianapolis,
Indiana
|
Leased
|
|||
Texarkana,
Arkansas
|
x
|
x
|
x
|
Owned
|
Little
Rock, Arkansas
|
Owned
|
|||
Hutchins,
Texas
|
x
|
x
|
Owned
|
|
El
Paso, Texas
|
x
|
Leased
|
||
Columbus,
Ohio
|
Leased
|
|||
French
Camp, California
|
Leased
|
|||
Fontana,
California
|
x
|
Leased
|
||
Long
Beach, California
|
Owned
|
|||
Pomona,
California
|
x
|
Owned
|
||
Allentown,
Pennsylvania
|
Leased
|
|||
Nashville,
Tennessee
|
x
|
x
|
x
|
Owned
|
Desoto,
Mississippi
|
x
|
x
|
Owned
|
|
Knoxville,
Tennessee
|
x
|
Leased
|
||
Maryville,
Tennessee
|
Leased
|
|||
Jacksonville,
Florida
|
x
|
x
|
Leased
|
|
Orlando,
Florida
|
Leased
|
|||
Jackson,
Mississippi
|
x
|
Leased
|
||
Atlanta,
Georgia
|
x
|
Leased
|
Period
|
High
|
Low
|
|
Calendar
Year 2005:
|
|||
1st
Quarter
|
$21.65
|
$16.05
|
|
2nd
Quarter
|
$18.13
|
$10.75
|
|
3rd
Quarter
|
$14.95
|
$11.93
|
|
4th
Quarter
|
$14.40
|
$9.81
|
|
Calendar
Year 2006:
|
|||
1st
Quarter
|
$16.43
|
$12.98
|
|
2nd
Quarter
|
$15.64
|
$12.54
|
|
3rd
Quarter
|
$15.44
|
$11.31
|
|
4th
Quarter
|
$13.00
|
$10.88
|
(In
thousands, except per share and operating data
amounts)
|
||||||||||||||||
Years
Ended December 31,
|
||||||||||||||||
2006
|
2005
|
2004
|
2003
|
2002
|
||||||||||||
Statement
of Operations Data:
|
||||||||||||||||
Freight
revenue
|
$
|
572,239
|
$
|
555,428
|
$
|
558,453
|
$
|
555,678
|
$
|
550,603
|
||||||
Fuel
surcharges
|
111,589
|
87,626
|
45,169
|
26,779
|
13,815
|
|||||||||||
Total
revenue
|
$
|
683,828
|
$
|
643,054
|
$
|
603,622
|
$
|
582,457
|
$
|
564,418
|
||||||
Operating
expenses:
|
||||||||||||||||
Salaries,
wages, and related expenses (1)
|
262,303
|
242,157
|
225,778
|
220,665
|
227,332
|
|||||||||||
Fuel
expense
|
194,355
|
170,582
|
127,723
|
109,231
|
96,332
|
|||||||||||
Operations
and maintenance
|
36,112
|
33,625
|
30,555
|
39,822
|
39,625
|
|||||||||||
Revenue
equipment rentals and
purchased
transportation
|
63,532
|
61,701
|
69,928
|
69,997
|
59,265
|
|||||||||||
Operating
taxes and licenses
|
14,516
|
13,431
|
14,217
|
14,354
|
13,934
|
|||||||||||
Insurance
and claims expense (2)
|
34,104
|
41,034
|
54,847
|
35,454
|
31,761
|
|||||||||||
Communications
and utilities
|
6,727
|
6,579
|
6,517
|
7,177
|
7,021
|
|||||||||||
General
supplies and expenses
|
21,387
|
17,778
|
15,104
|
14,495
|
14,677
|
|||||||||||
Depreciation
and amortization, including
net
gains on disposition of equipment
and
impairment of assets (3)
|
41,163
|
39,101
|
45,001
|
43,041
|
49,497
|
|||||||||||
Total
operating expenses
|
674,199
|
625,988
|
589,670
|
554,236
|
539,444
|
|||||||||||
Operating
income
|
9,629
|
17,066
|
13,952
|
28,221
|
24,974
|
|||||||||||
Other
(income) expense:
|
||||||||||||||||
Interest
expense
|
7,153
|
4,203
|
3,098
|
2,332
|
3,542
|
|||||||||||
Interest
income
|
(568
|
)
|
(273
|
)
|
(48
|
)
|
(114
|
)
|
(63
|
)
|
||||||
Other
|
(157
|
)
|
(538
|
)
|
(926
|
)
|
(468
|
)
|
916
|
|||||||
Loss
on early extinguishment of debt
|
-
|
-
|
-
|
-
|
1,434
|
|||||||||||
Other
expenses, net
|
6,428
|
3,392
|
2,124
|
1,750
|
5,829
|
|||||||||||
Income
before income taxes and cumulative
effect
of change in accounting principle
|
3,201
|
13,674
|
11,828
|
26,471
|
19,145
|
|||||||||||
Income
tax expense
|
4,582
|
8,003
|
8,452
|
14,315
|
10,871
|
|||||||||||
Income
(loss) before cumulative effect of
change
in accounting principle
|
(1,381
|
)
|
5,671
|
3,376
|
12,156
|
8,274
|
||||||||||
Cumulative
effect of change in accounting
principle,
net of tax (4)
|
-
|
(485
|
)
|
-
|
-
|
-
|
||||||||||
Net
income (loss)
|
$
|
(1,381
|
)
|
$
|
5,186
|
$
|
3,376
|
$
|
12,156
|
$
|
8,274
|
(1)
|
Includes
a $1,500 pre-tax increase to workers' compensation claims reserve
in
2004.
|
(2)
|
Includes
an $18,000 pre-tax increase to casualty claims reserve in
2004.
|
(3)
|
Includes
a $3,300 pre-tax impairment charge related to tractors in
2002.
|
(4)
|
Represents
a
$485 adjustment, net of tax, related to the adoption of FIN 47,
Accounting
for Conditional Asset Retirement Obligations.
|
Basic
earnings (loss) per share before
cumulative
effect of change in accounting
principle:
|
$
|
(0.10
|
)
|
$
|
0.40
|
$
|
0.23
|
$
|
0.84
|
$
|
0.58
|
|||||
Cumulative
effect of change in accounting
principle
|
-
|
(0.03
|
)
|
-
|
-
|
-
|
||||||||||
Basic
earnings (loss) per share:
|
$
|
(0.10
|
)
|
$
|
0.37
|
$
|
0.23
|
$
|
0.84
|
$
|
0.58
|
|||||
Diluted
earnings (loss) per share before
cumulative
effect of change in
accounting
principle:
|
$
|
(0.10
|
)
|
$
|
0.40
|
$
|
0.23
|
$
|
0.83
|
$
|
0.57
|
|||||
Cumulative
effect of change in accounting
principle
|
-
|
(0.03
|
)
|
-
|
-
|
-
|
||||||||||
Diluted
earnings (loss) per share:
|
$
|
(0.10
|
)
|
$
|
0.37
|
$
|
0.23
|
$
|
0.83
|
$
|
0.57
|
|||||
Basic
weighted average common shares
outstanding
|
13,996
|
14,175
|
14,641
|
14,467
|
14,223
|
|||||||||||
Diluted
weighted average common shares
outstanding
|
13,996
|
14,270
|
14,833
|
14,709
|
14,519
|
Years
Ended December 31,
|
||||||||||||||||
2006
|
2005
|
2004
|
2003
|
2002
|
||||||||||||
Selected
Balance Sheet Data:
|
||||||||||||||||
Net
property and equipment
|
$
|
274,974
|
$
|
211,158
|
$
|
209,422
|
$
|
221,734
|
$
|
238,488
|
||||||
Total
assets
|
$
|
475,094
|
$
|
371,261
|
$
|
357,383
|
$
|
354,281
|
$
|
361,541
|
||||||
Long-term
debt, less current maturities
|
$
|
104,900
|
$
|
33,000
|
$
|
8,013
|
$
|
12,000
|
$
|
1,300
|
||||||
Total
stockholders' equity
|
$
|
188,844
|
$
|
189,724
|
$
|
195,699
|
$
|
192,142
|
$
|
175,588
|
||||||
Selected
Operating Data:
|
||||||||||||||||
Average
freight revenue per loaded mile (1)
|
$
|
1.51
|
$
|
1.51
|
$
|
1.40
|
$
|
1.27
|
$
|
1.24
|
||||||
Average
freight revenue per total mile (1)
|
$
|
1.36
|
$
|
1.36
|
$
|
1.27
|
$
|
1.17
|
$
|
1.15
|
||||||
Average
freight revenue per tractor per week
(1)
|
$
|
3,077
|
$
|
3,013
|
$
|
2,995
|
$
|
2,897
|
$
|
2,870
|
||||||
Average
miles per tractor per year
|
117,621
|
115,765
|
122,899
|
129,656
|
129,906
|
|||||||||||
Weighted
average tractors for year (2)
|
3,546
|
3,535
|
3,558
|
3,667
|
3,680
|
|||||||||||
Total
tractors at end of period (2)
|
3,719
|
3,471
|
3,476
|
3,752
|
3,738
|
|||||||||||
Total
trailers at end of period (3)
|
9,820
|
8,565
|
8,867
|
9,255
|
7,485
|
(1)
|
Excludes
fuel surcharge revenue.
|
(2)
|
Includes
monthly rental tractors and tractors provided by
owner-operators.
|
(3)
|
Excludes
monthly rental trailers.
|
•
|
Expedited
service. Increased the fleet by approximately 3%. The team operation
is
also the main training ground for new drivers, and improvements in
our
training have allowed us to lower turnover in a difficult driver
market.
Average freight revenue per total mile decreased 5%, while length
of haul
increased approximately 1%.
|
•
|
Refrigerated
service. Increased our combined Southern Refrigerated Transport
("SRT")
and Covenant refrigerated fleet by approximately 18%, while decreasing
the
length of haul by approximately 7% and the miles per truck by about
8%.
Average freight revenue per total mile declined by approximately
2%.
Within this service offering, SRT continued to generate strong operating
profit performance and Covenant Refrigerated had been less proactive
than
desired because of taking on more trucks than its business plan called
for
to cover additional trucks coming out of the Covenant regional service
offering. On January 14, 2007, as a result of our continual review
of
underperforming assets and examining means to streamline and improve
efficiencies within the consolidated group, we consolidated the solo
operations of the Covenant refrigerated fleet into SRT and the team
operations of the Covenant refrigerated fleet into the Covenant expedited
service offering. Approximately 170 solo tractors were moved to SRT
and
115 team tractors were moved to the expedited service offering.
|
•
|
Dedicated
service. Increased the fleet by approximately 21% and expanded the
average
length of haul by 11%, while miles per truck decreased about 4%.
Average
freight revenue per truck per week increased 10%. While we believe
the
reallocation of trucks from the regional business to new dedicated
business was prudent, the margins on the new dedicated business have
not
reached our long-term targets due to the quick expansion of this
service
offering. However, we believe we have identified the customer contracts
that carry unfavorable terms and are in the process of renewing them
with
more favorable terms. Contracts covering 46% of the dedicated fleet
were
renewed during the fourth quarter of 2006, as evidenced by the improved
average freight revenue per truck per week of 16%. Contracts covering
approximately 37% of the dedicated fleet are subject to renewal by
June
30, 2007, with an additional 13% subject to renewal in the second
half of
2007. We have received generally positive responses concerning improved
renewal terms with most of our customers with the 2006 and 2007 contract
renewals. Based
on these responses, we expect profitability from our dedicated service
offering in 2007, with margins improving throughout the year. If
contract
renewals do not proceed on an acceptable basis, we would expect to
dispose
of the unprofitable equipment or shift it into a more profitable
service
offering.
|
•
|
Covenant
regional solo-driver service. Decreased the fleet by approximately
44%,
along with decreasing the average length of haul by about 19% and
increasing the average miles per truck by approximately 5%. Average
freight revenue per total mile declined by approximately 8%. The
freight
mix within our regional service offering changed substantially, as
we have
worked to reposition several hundred tractors around freight centers
and
driver domiciles. During the third and fourth quarters of 2006, we
allocated several trucks and trailers from this service offering
to our
more profitable service offerings, as well as reducing the service
offering's overall fleet size.
|
•
|
Star
regional solo-driver service. On September 14, 2006, we acquired
100% of
the outstanding stock of Star, a short-to-medium haul dry van regional
truckload carrier based in Nashville, Tennessee. The acquisition
included
614 tractors and 1,719 trailers. Star's operating results have
been accounted for in our results of operations since the acquisition
date. Star's average length of haul since the acquisition has been
462
miles. The major industries that Star serves include consumer products,
manufacturing, and automotive. In general, Star's operations are
characterized by good equipment utilization, low non-revenue miles,
and a
moderate rate structure. Star operates as a separate subsidiary and
a general integration with the Covenant regional service offering is
not expected. However, Star's management has been sharing best practices
in regional freight operations with the Covenant regional service
management team that may assist with improved profitability in the
Covenant regional service offering.
|
•
|
Brokerage
freight service. In the first quarter of 2006, we initiated our freight
brokerage operation and hired a Vice President and General Manager
of this
separate subsidiary operating as Covenant Transport Solutions, Inc.
The
brokerage operation has helped us continue to serve customers when
we
lacked capacity in a given area or when the load has not met the
operating
profile of one of our service offerings. This service has been useful
as
we continue to realign trucks between service offerings and subsidiaries
and in the management of our freight mix toward preferred lanes.
Since
inception, the loads and revenues provided by this operation have
steadily
grown each quarter.
|
2006
|
2005
|
2004
|
2006
|
2005
|
2004
|
|||||||||
Total
revenue
|
100.0%
|
100.0%
|
100.0%
|
Freight
revenue
(1)
|
100.0%
|
100.0%
|
100.0%
|
|||||||
Operating
expenses:
|
Operating
expenses:
|
|||||||||||||
Salaries,
wages, and related
expenses
|
38.4
|
37.7
|
37.4
|
Salaries,
wages, and related
expenses
|
45.8
|
43.6
|
40.4
|
|||||||
Fuel
expense
|
28.4
|
26.5
|
21.2
|
Fuel
expense (1)
|
14.5
|
14.9
|
14.8
|
|||||||
Operations
and maintenance
|
5.3
|
5.2
|
5.1
|
Operations
and maintenance
|
6.3
|
6.1
|
5.5
|
|||||||
Revenue
equipment rentals
and
purchased transportation
|
9.3
|
9.6
|
11.6
|
Revenue
equipment rentals
and
purchased transportation
|
11.1
|
11.1
|
12.5
|
|||||||
Operating
taxes and licenses
|
2.1
|
2.1
|
2.4
|
Operating
taxes and licenses
|
2.5
|
2.4
|
2.5
|
|||||||
Insurance
and claims
|
5.0
|
6.4
|
9.1
|
Insurance
and claims
|
6.0
|
7.4
|
9.8
|
|||||||
Communications
and utilities
|
1.0
|
1.0
|
1.1
|
Communications
and utilities
|
1.2
|
1.2
|
1.2
|
|||||||
General
supplies and expenses
|
3.1
|
2.8
|
2.5
|
General
supplies and expenses
|
3.7
|
3.2
|
2.7
|
|||||||
Depreciation
and amortization,
including
net gains on
disposition
of equipment
|
6.0
|
6.1
|
7.5
|
Depreciation
and amortization,
including
net gains on
disposition
of equipment
|
7.2
|
7.0
|
8.1
|
|||||||
Total
operating expenses
|
98.6
|
97.3
|
97.7
|
Total
operating expenses
|
98.3
|
96.9
|
97.5
|
|||||||
Operating
income
|
1.4
|
2.7
|
2.3
|
Operating
income
|
1.7
|
3.1
|
2.5
|
|||||||
Other
expense, net
|
0.9
|
0.5
|
0.4
|
Other
expense, net
|
1.1
|
0.6
|
0.4
|
|||||||
Income
before income taxes and
cumulative
effect of change
in
accounting principle
|
0.5
|
2.1
|
2.0
|
Income
before income taxes and
cumulative
effect of change
in
accounting principle
|
0.6
|
2.5
|
2.1
|
|||||||
Income
tax expense
|
0.7
|
1.2
|
1.4
|
Income
tax expense
|
0.8
|
1.4
|
1.5
|
|||||||
Cumulative
effect of change in
accounting
principle,
net
of tax
|
0.0
|
0.1
|
0.0
|
Cumulative
effect of change in
accounting
principle,
net
of tax
|
0.0
|
0.1
|
0.0
|
|||||||
Net
income (loss)
|
(0.2)%
|
0.9%
|
0.6%
|
Net
income (loss)
|
(0.2)%
|
1.0%
|
0.6%
|
(1)
|
Freight
revenue is total revenue less fuel surcharges. In this table, fuel
surcharges are eliminated from revenue and subtracted from fuel expense.
The amounts were $111.6 million, $87.6 million, and $45.2 million
in 2006,
2005, and 2004, respectively.
|
Payments
due by period:
(in
thousands)
|
Total
|
2007
|
2008
|
2009
|
2010
|
2011
|
Thereafter
|
|||||||||||||||
Long-term
debt, including current
maturities (1)
|
$
|
140,415
|
$ |
7,103
|
$
|
7,103
|
$
|
7,103
|
$
|
7,103
|
$
|
112,003
|
$
|
-
|
||||||||
Securitization
facility, including
interest (2)
|
57,725
|
57,725
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Operating
leases (3)
|
175,299
|
42,033
|
34,164
|
24,642
|
18,279
|
8,859
|
47,322
|
|||||||||||||||
Lease
residual value guarantees
|
45,302
|
14,714
|
14,067
|
1,440
|
7,906
|
7,175
|
-
|
|||||||||||||||
Purchase
obligations:
|
||||||||||||||||||||||
Diesel
fuel (4)
|
275,358
|
137,679
|
137,679
|
-
|
-
|
-
|
-
|
|||||||||||||||
Equipment
(5)
|
6,244
|
6,244
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Total
contractual cash obligations
|
$
|
700,343
|
$
|
265,498
|
$
|
193,013
|
$
|
33,185
|
$
|
33,288
|
$
|
128,037
|
$
|
47,322
|
(1)
|
Represents
principal and interest payments owed at December 31, 2006. The borrowings
consist of draws under a revolving line of credit, with fluctuating
borrowing amounts and variable interest rates. In determining future
contractual interest and principal obligations, for variable interest
rate
debt, the interest rate and principal amount in place at December
31, 2006
was utilized. The table assumes long-term debt is held to maturity.
Refer
to Note 6, "Long-term Debt."
|
(2)
|
In
2007, this amount represents proceeds drawn under our Securitization
Facility, and the interest rate in place at December 31, 2006 was
utilized. The net proceeds under the Securitization Facility are
required
to be shown as a current liability because the term, subject to annual
renewals, is 364 days. We expect the Securitization Facility to be
renewed
in December 2007. Refer to Note 7, "Accounts Receivable Securitization
and
Allowance for Doubtful Accounts."
|
(3)
|
Represents
future monthly rental payment obligations under operating leases
for
over-the-road tractors, day-cabs, trailers, office and terminal
properties, and computer and office equipment. Substantially all
lease
agreements for revenue equipment have fixed payment terms based on
the
passage of time. The tractor lease agreements generally stipulate
maximum
miles and provide for mileage penalties for excess miles. Lease terms
for
tractors and trailers range from 30 to 60 months and 60 to 84 months,
respectively. Refer to Item 7, Management's Discussion and Analysis
of
Financial Condition and Results of Operations - Off Balance Sheet
Arrangements and Note 8, "Leases," in the accompanying consolidated
financial statements for further information.
|
(4)
|
This
amount represents volume purchase commitments through our truck stop
network. We estimate that these amounts represent approximately 67%
of our
fuel needs for 2007.
|
(5)
|
Amount
reflects the total purchase price or lease commitment of tractors
and
trailers scheduled for delivery throughout 2007. Net of estimated
trade-in
values and other dispositions, the estimated amount due under these
commitments is approximately $3.6 million. These purchases are expected
to
be financed by debt, proceeds from sales of existing equipment, cash
flows
from operations, and operating leases. We have the option to cancel
commitments relating to tractor equipment with 60 days notice.
|
First
Quarter
|
Second
Quarter
|
Third
Quarter
|
Fourth
Quarter
|
||||||||||
2006
|
28,136
|
|
|
29,808
|
|
|
30,051
|
|
|
29,620
|
|
||
2005
|
|
|
27,245
|
|
|
28,589
|
|
|
29,592
|
|
|
30,376
|
|
2004
|
|
|
29,749
|
|
|
31,215
|
|
|
31,043
|
|
|
30,911
|
•
|
pertain
to the maintenance of records, that in reasonable detail, accurately
and
fairly reflect the transactions and dispositions of our
assets;
|
•
|
provide
reasonable assurance that transactions are recorded as necessary
to permit
preparation of financial statements in accordance with generally
accepted
accounting principles, and that our receipts and expenditures are
being
made only in accordance with authorizations of our management and
directors; and
|
•
|
provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could
have
a material effect on our financial
statements.
|
Plan
category
|
Number
of
securities
to
be
issued
upon
exercise
of
outstanding
options,
warrants
and
Rights
|
Weighted-
average
exercise
price
of
outstanding
options,
warrants
and
rights
|
Number
of securities
remaining
available for
future
issuance under
equity
compensation
plans
(excluding
securities
reflected in
column
(a))
|
(a)
|
(b)
|
(c)
|
|
Equity
compensation plans approved
by
security holders (1)
|
1,162,432
|
$13.99
|
440,466
|
Equity
compensation plans not
approved
by security holders (2)
|
125,000
|
$13.93
|
-
|
Total
|
1,287,432
|
$13.98
|
440,466
|
(1)
|
Includes
1994 Incentive Stock Plan, Outside Director Stock Option Plan, 2003
Incentive Stock Plan, and the 2006 Omnibus Incentive
Plan.
|
(2)
|
Includes
1998 Non-Officer Incentive Stock Plan, and shares issued pursuant
to
grants outside any plan.
|
(a)
|
1.
|
Financial
Statements.
|
|||
Our
audited consolidated financial statements are set forth at the following
pages of this report:
|
|||||
Reports
of Independent Registered Public Accounting Firm - KPMG
LLP
|
|||||
Consolidated
Balance Sheets
|
|||||
Consolidated
Statements of Operations
|
|||||
Consolidated
Statements of Stockholders' Equity and Comprehensive Income
(Loss)
|
|||||
Consolidated
Statements of Cash Flows
|
|||||
Notes
to Consolidated Financial Statements
|
|||||
2.
|
Financial
Statement Schedules.
|
||||
Financial
statement schedules are not required because all required information
is
included in the financial statements.
|
|||||
3.
|
Exhibits.
|
||||
The
exhibits required to be filed by Item 601 of Regulation S-K are listed
under paragraph (b) below and on the Exhibit Index appearing at the
end of
this report. Management contracts and compensatory plans or arrangements
are indicated by an asterisk.
|
|||||
(b)
|
Exhibits.
|
||||
The
following exhibits are filed with this Form10-K or incorporated by
reference to the document set forth next to the exhibit listed
below.
|
Exhibit
Number
|
Reference
|
Description
|
3.1
|
(1)
|
Restated
Articles of Incorporation
|
3.2
|
(1)
|
Amended
Bylaws dated September 27, 1994
|
4.1
|
(1)
|
Restated
Articles of Incorporation
|
4.2
|
(1)
|
Amended
Bylaws dated September 27, 1994
|
10.1
|
(1)
|
401(k)
Plan filed as Exhibit 10.10
|
10.2
|
(2)
|
Outside
Director Stock Option Plan, filed as Appendix A*
|
10.3
|
(3)
|
Amendment
No. 1 to the Outside Director Stock Option Plan, filed as Exhibit
10.11*
|
10.4
|
(4)
|
Loan
Agreement dated December 12, 2000, among CVTI Receivables Corp.,
Covenant
Transport, Inc., Three Pillars Funding Corporation, and SunTrust
Equitable
Securities Corporation, filed as Exhibit 10.10
|
10.5
|
(4)
|
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
|
10.6
|
(5)
|
Clarification
of Intent and Amendment No. 1 to Loan Agreement dated March 7,
2001, among
CVTI Receivables Corp., Covenant Transport, Inc., Three Pillars
Funding
Corporation, and SunTrust Equitable Securities Corporation, filed
as
Exhibit 10.12
|
10.7
|
(6)
|
Incentive
Stock Plan, Amended and Restated as of May 17, 2001, filed as
Appendix B*
|
10.8
|
(7)
|
Covenant
Transport, Inc. 2003 Incentive Stock Plan, filed as Appendix
B*
|
10.9
|
(8)
|
Consolidating
Amendment No. 1 to Loan Agreement effective May 2, 2003, among
CVTI
Receivables Corp., Covenant Transport, Inc., Three Pillars Funding
Corporation, and SunTrust Capital Markets, Inc. (formerly SunTrust
Equitable Securities Corporation), filed as Exhibit
10.3
|
10.10
|
(9)
|
Master
Lease Agreement dated April 15, 2003, between Transport International
Pool, Inc. and Covenant Transport, Inc., filed as Exhibit
10.4
|
10.11
|
(10)
|
Amendment
No. 5 to Loan Agreement dated December 9, 2003, among CVTI Receivables
Corp., Covenant Transport, Inc., Three Pillars Funding LLC (successor
to
Three Pillars Funding Corporation), and SunTrust Capital Markets,
Inc.
(formerly SunTrust Equitable Securities Corporation), filed as
Exhibit
10.16
|
10.12
|
(11)
|
Amendment
No. 6 to Loan Agreement dated July 8, 2004, among CVTI Receivables
Corp.,
Covenant Transport, Inc., Three Pillars Funding LLC (f/k/a Three
Pillars
Funding Corporation), and SunTrust Capital Markets, Inc. (formerly
SunTrust Equitable Securities Corporation) effective July 1, 2004,
filed
as Exhibit 10.1
|
10.13
|
(11)
|
Form
of Indemnification Agreement between Covenant Transport, Inc. and
each
officer and director, effective May 1, 2004, filed as Exhibit
10.2*
|
10.14
|
(12)
|
Amendment
No. 7 to Loan Agreement dated November 17, 2004, among CVTI Receivables
Corp., Covenant Transport, Inc., Three Pillars Funding LLC (f/k/a
Three
Pillars Funding Corporation), and SunTrust Capital Markets, Inc.
(formerly
SunTrust Equitable Securities Corporation), filed as Exhibit
10.14
|
10.15
|
(13)
|
Amendment
No. 8 to Loan Agreement dated March 29, 2005, among Three Pillars
Funding
LLC (f/k/a Three Pillars Funding Corporation), SunTrust Capital
Markets,
Inc. (f/k/a SunTrust Equitable Securities Corporation), CVTI Receivables
Corp., and Covenant Transport, Inc., filed as Exhibit
10.16
|
#
|
Amendment
No. 9 to Loan Agreement dated December 6, 2005, among Three Pillars
Funding LLC (f/k/a Three Pillars Funding Corporation), SunTrust
Capital
Markets, Inc. (f/k/a SunTrust Equitable Securities Corporation),
CVTI
Receivables Corp., and Covenant Transport, Inc.
|
|
10.17
|
(14)
|
Purchase
and Sale Agreement dated April 3, 2006, between Covenant Transport,
Inc.,
a Tennessee corporation, and CT Chattanooga TN, LLC, filed as Exhibit
10.18
|
10.18
|
(14)
|
Lease
Agreement dated April 3, 2006, between Covenant Transport, Inc.,
a
Tennessee corporation, and CT Chattanooga TN, LLC, filed as Exhibit
10.19
|
10.19
|
(14)
|
Lease
Guaranty dated April 3, 2006, by Covenant Transport, Inc., a Nevada
corporation, for the benefit of CT Chattanooga TN, LLC, filed as
Exhibit
10.20
|
10.20
|
(15)
|
Covenant
Transport, Inc. 2006 Omnibus Incentive Plan*
|
10.21
|
(16)
|
Form
of Restricted Stock Award Notice under the Covenant Transport,
Inc. 2006
Omnibus Incentive Plan, filed as Exhibit 10.22*
|
10.22
|
(16)
|
Form
of Restricted Stock Special Award Notice under the Covenant Transport,
Inc. 2006 Omnibus Incentive Plan, filed as Exhibit
10.23*
|
10.23
|
(16)
|
Form
of Incentive Stock Option Award Notice under the Covenant Transport,
Inc.
2006 Omnibus Incentive Plan, filed as Exhibit 10.24*
|
10.24
|
(17)
|
Stock
Purchase Agreement dated September 14, 2006, among Covenant Transport,
Inc., Star Transportation, Inc., Beth D. Franklin, David D. Dortch,
Rose
D. Shipp, David W. Dortch, and James F. Brower, Jr., filed as Exhibit
10.26
|
10.25
|
(17)
|
Amendment
No. 10 to Loan Agreement dated July 2006 among Three Pillars Funding
LLC
(f/k/a Three Pillars Funding Corporation), SunTrust Capital Markets,
Inc.
(f/k/a SunTrust Equitable Securities Corporation), CVTI Receivables
Corp.,
and Covenant Transport, Inc., filed as Exhibit 10.28
|
#
|
Amendment
No. 11 to Loan Agreement dated October 20, 2006, among Three Pillars
Funding LLC (f/k/a Three Pillars Funding Corporation), SunTrust Capital
Markets Inc. (f/k/a SunTrust Equitable Securities Corporation), CVTI
Receivables Corp., and Covenant Transport, Inc.
|
|
#
|
Amendment
and Joinder Agreement to Receivables Purchase Agreement dated October
20,
2006, among Covenant Transport, Inc., Southern Refrigerated Transport,
Inc., CVTI Receivables Corp., Covenant Transport Solutions, Inc.,
and Star
Transportation, Inc.
|
|
#
|
Second
Amended and Restated Credit Agreement dated December 21, 2006, among
Covenant Asset Management, Inc., Covenant Transport, Inc., Bank of
America, N. A., and each other financial institution which is a party
to
the Credit Agreement
|
|
#
|
Amendment
No. 12 to Loan Agreement dated December 5, 2006, among Three Pillars
Funding LLC (f/k/a Three Pillars Funding Corporation), SunTrust Capital
Markets, Inc. (f/k/a SunTrust Equitable Securities Corporation),
CVTI
Receivables Corp., and Covenant Transport, Inc.
|
|
#
|
List
of Subsidiaries
|
|
#
|
Consent
of Independent Registered Public Accounting Firm - KPMG
LLP
|
|
#
|
Certification
pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant
to
Section 302 of the Sarbanes-Oxley Act of 2002, by David R. Parker,
the
Company's Chief Executive Officer
|
|
#
|
Certification
pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant
to
Section 302 of the Sarbanes-Oxley Act of 2002, by Joey B. Hogan,
the
Company's Chief Financial Officer
|
|
#
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002, by David R. Parker, the Company's
Chief
Executive Officer
|
|
#
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002, by Joey B. Hogan, the Company's Chief
Financial Officer
|
#
|
Filed
herewith
|
*
|
Management
contract or compensatory plan or
arrangement.
|
(1)
|
Form
S-1, Registration No. 33-82978, effective October 28,
1994
|
(2)
|
Schedule
14A, filed April 13, 2000 (SEC Commission File No.
0-24960)
|
(3)
|
Form
10-Q, filed November 13, 2000 (SEC Commission File No.
0-24960)
|
(4)
|
Form
10-K, filed March 29, 2001 (SEC Commission File No.
0-24960)
|
(5)
|
Form
10-Q, filed May 14, 2001 (SEC Commission File No.
0-24960)
|
(6)
|
Schedule
14A, filed April 5, 2001 (SEC Commission File No.
0-24960)
|
(7)
|
Schedule
14A, filed April 16, 2003 (SEC Commission File No.
0-24960)
|
(8)
|
Form
10-Q, filed August 11, 2003 (SEC Commission File No.
0-24960)
|
(9)
|
Form
10-Q/A for the quarter ended June 30, 2003, filed October 31, 2003
(SEC
Commission File No. 0-24960)
|
(10)
|
Form
10-K, filed March 15, 2004 (SEC Commission File No.
0-24960)
|
(11)
|
Form
10-Q, filed August 5, 2004 (SEC Commission File No.
0-24960)
|
(12)
|
Form
10-K, filed March 16, 2005 (SEC Commission File No.
0-24960)
|
(13)
|
Form
10-Q, filed May 9, 2005 (SEC Commission File No.
0-24960)
|
(14)
|
Current
Report on Form 8-K, filed April 7, 2006 (SEC Commission File No.
0-24960)
|
(15)
|
Schedule
14A, filed April 17, 2006 (SEC Commission File No.
0-24960)
|
(16)
|
Form
10-Q, filed August 9, 2006 (SEC Commission File No.
0-24960)
|
(17)
|
Form
10-Q, filed November 9, 2006 (SEC Commission File No.
0-24960)
|
COVENANT
TRANSPORT, INC.
|
||
Date:
March 15, 2007
|
By:
|
/s/
Joey B. Hogan
|
Joey
B. Hogan
|
||
Executive
Vice President and Chief
Financial
Officer
|
Signature
and Title
|
Date
|
|
/s/
David R. Parker
|
March
15, 2007
|
|
David
R. Parker
|
||
Chairman
of the Board, President, and Chief Executive Officer (principal executive
officer)
|
||
/s/
Joey B. Hogan
|
March
15, 2007
|
|
Joey
B. Hogan
|
||
Executive
Vice President and Chief Financial Officer
(principal
financial and accounting officer)
|
||
/s/
Bradley A. Moline
|
March
15, 2007
|
|
Bradley
A. Moline
|
||
Director
|
||
/s/
William T. Alt
|
March
15, 2007
|
|
William
T. Alt
|
||
Director
|
||
/s/
Robert E. Bosworth
|
March
15, 2007
|
|
Robert
E. Bosworth
|
||
Director
|
||
/s/
Hugh O. Maclellan, Jr.
|
March
13, 2007
|
|
Hugh
O. Maclellan, Jr.
|
||
Director
|
||
/s/
Mark A. Scudder
|
March
15, 2007
|
|
Mark
A. Scudder
|
||
Director
|
||
/s/
Niel B. Nielson
|
March
13, 2007
|
|
Niel
B. Nielson
|
||
Director
|
CONSOLIDATED
BALANCE SHEETS
DECEMBER
31, 2006 AND 2005
(In
thousands, except share data)
|
|||||||
2006
|
2005
|
||||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
5,407
|
$
|
3,618
|
|||
Accounts
receivable, net of allowance of $1,491 in 2006
and
$2,200 in
2005
|
72,581
|
77,969
|
|||||
Drivers
advances and other receivables,
net of allowance
of
$2,598 in 2006 and
$2,464 in 2005
|
4,259
|
3,932
|
|||||
Inventory
and supplies
|
4,985
|
4,661
|
|||||
Prepaid
expenses
|
11,162
|
16,199
|
|||||
Assets
held for sale
|
22,581
|
3,204
|
|||||
Deferred
income taxes
|
16,021
|
16,158
|
|||||
Income
taxes receivable
|
6,371
|
7,559
|
|||||
Total
current assets
|
143,367
|
133,300
|
|||||
Property
and equipment, at cost
|
349,663
|
295,433
|
|||||
Less
accumulated depreciation and amortization
|
(74,689
|
)
|
(84,275
|
)
|
|||
Net
property and equipment
|
274,974
|
211,158
|
|||||
Goodwill
|
36,210
|
11,539
|
|||||
Other
assets, net
|
20,543
|
15,264
|
|||||
Total
assets
|
$
|
475,094
|
$
|
371,261
|
|||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Securitization
facility
|
$
|
54,981
|
$
|
47,281
|
|||
Checks
outstanding in excess of bank balances
|
4,280
|
-
|
|||||
Current
maturities of acquisition obligation
|
333
|
-
|
|||||
Accounts
payable and accrued expenses
|
30,521
|
25,545
|
|||||
Current
portion of insurance and claims accrual
|
20,097
|
18,529
|
|||||
Total
current liabilities
|
110,212
|
91,355
|
|||||
Long-term
debt
|
104,900
|
33,000
|
|||||
Insurance
and claims accrual, net of current portion
|
18,002
|
23,272
|
|||||
Deferred
income taxes
|
50,685
|
33,910
|
|||||
Other
long-term liabilities
|
2,451
|
-
|
|||||
Total
liabilities
|
286,250
|
181,537
|
|||||
Commitments
and contingent liabilities
|
-
|
-
|
|||||
Stockholders'
equity:
|
|||||||
Class
A common stock, $.01 par value; 20,000,000 shares authorized;
13,469,090
and 13,447,608
shares issued; 11,650,690 and 11,629,208
outstanding
as of
December 31, 2006 and 2005, respectively
|
135
|
134
|
|||||
Class
B common stock, $.01 par value; 5,000,000 shares authorized;
2,350,000
shares issued
and outstanding
|
24
|
24
|
|||||
Additional
paid-in-capital
|
92,053
|
91,553
|
|||||
Treasury
stock at cost; 1,818,400 shares
|
(21,582
|
)
|
(21,582
|
)
|
|||
Retained
earnings
|
118,214
|
119,595
|
|||||
Total
stockholders' equity
|
188,844
|
189,724
|
|||||
Total
liabilities and stockholders' equity
|
$
|
475,094
|
$
|
371,261
|
|||
CONSOLIDATED
STATEMENTS OF OPERATIONS
YEARS
ENDED DECEMBER 31, 2006, 2005, AND 2004
(In
thousands, except per share data)
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Revenues
|
||||||||||
Freight
revenue
|
$
|
572,239
|
$
|
555,428
|
$
|
558,453
|
||||
Fuel
surcharges
|
111,589
|
87,626
|
45,169
|
|||||||
Total
revenue
|
$
|
683,828
|
$
|
643,054
|
$
|
603,622
|
||||
Operating
expenses:
|
||||||||||
Salaries,
wages, and related expenses
|
262,303
|
242,157
|
225,778
|
|||||||
Fuel
expense
|
194,355
|
170,582
|
127,723
|
|||||||
Operations
and maintenance
|
36,112
|
33,625
|
30,555
|
|||||||
Revenue
equipment rentals and purchased transportation
|
63,532
|
61,701
|
69,928
|
|||||||
Operating
taxes and licenses
|
14,516
|
13,431
|
14,217
|
|||||||
Insurance
and claims
|
34,104
|
41,034
|
54,847
|
|||||||
Communications
and utilities
|
6,727
|
6,579
|
6,517
|
|||||||
General
supplies and expenses
|
21,387
|
17,778
|
15,104
|
|||||||
Depreciation
and amortization, including net gains on
disposition
of
equipment
|
41,163
|
39,101
|
45,001
|
|||||||
Total
operating expenses
|
674,199
|
625,988
|
589,670
|
|||||||
Operating
income
|
9,629
|
17,066
|
13,952
|
|||||||
Other
(income) expenses:
|
||||||||||
Interest
expense
|
7,153
|
4,203
|
3,098
|
|||||||
Interest
income
|
(568
|
)
|
(273
|
)
|
(48
|
)
|
||||
Other
|
(157
|
)
|
(538
|
)
|
(926
|
)
|
||||
Other
expenses, net
|
6,428
|
3,392
|
2,124
|
|||||||
Income
before income taxes and cumulative effect of change
in
accounting principle
|
3,201
|
13,674
|
11,828
|
|||||||
Income
tax expense
|
4,582
|
8,003
|
8,452
|
|||||||
Income
(loss) before cumulative effect of change in accounting
principle
|
(1,381
|
)
|
5,671
|
3,376
|
||||||
Cumulative
effect of change in accounting principle, net of tax
(Note
1)
|
-
|
(485
|
)
|
-
|
||||||
Net
income (loss)
|
$
|
(1,381
|
)
|
$
|
5,186
|
$
|
3,376
|
Net
income (loss) per share:
|
||||||||||
Basic
earnings (loss) per share before cumulative effect of change
in
accounting principle:
|
$
|
(0.10
|
)
|
$
|
0.40
|
$
|
0.23
|
|||
Cumulative
effect of change in accounting principle
|
-
|
(0.03
|
)
|
-
|
||||||
Basic
earnings (loss) per share:
|
$
|
(0.10
|
)
|
$
|
0.37
|
$
|
0.23
|
|||
Diluted
earnings (loss) per share before cumulative effect of change
in
accounting principle:
|
$
|
(0.10
|
)
|
$
|
0.40
|
$
|
0.23
|
|||
Cumulative
effect of change in accounting principle
|
-
|
(0.03
|
)
|
-
|
||||||
Diluted
earnings (loss) per share:
|
$
|
(0.10
|
)
|
$
|
0.37
|
$
|
0.23
|
|||
Basic
weighted average shares outstanding
|
13,996
|
14,175
|
14,641
|
|||||||
Diluted
weighted average shares outstanding
|
13,996
|
14,270
|
14,833
|
Common
Stock
|
Additional
Paid-In
Capital
|
Treasury
Stock
|
Retained
Earnings
|
Total
Stockholders'
Equity
|
Comprehensive
Income
(Loss)
|
|||||||||||||||||
Class
A
|
Class
B
|
|||||||||||||||||||||
Balances
at December 31, 2003
|
$
|
133
|
$
|
24
|
$
|
88,888
|
$
|
(7,935
|
)
|
$
|
111,032
|
$
|
192,142
|
|||||||||
Exercise
of employee stock options
|
1
|
-
|
1,960
|
-
|
-
|
1,961
|
||||||||||||||||
Income
tax benefit arising from the
exercise
of stock options
|
-
|
-
|
210
|
-
|
-
|
210
|
||||||||||||||||
Stock
repurchase
|
-
|
-
|
-
|
(1,990
|
)
|
-
|
(1,990
|
)
|
||||||||||||||
Net
income
|
-
|
-
|
-
|
-
|
3,376
|
3,376
|
3,376
|
|||||||||||||||
Comprehensive
income for 2004
|
$
|
3,376
|
||||||||||||||||||||
Balances
at December 31, 2004
|
$
|
134
|
$
|
24
|
$
|
91,058
|
$
|
(9,925
|
)
|
$
|
114,408
|
$
|
195,699
|
|||||||||
Exercise
of employee stock options
|
-
|
-
|
445
|
-
|
-
|
445
|
||||||||||||||||
Income
tax benefit arising from the
exercise
of stock options
|
-
|
-
|
50
|
-
|
-
|
50
|
||||||||||||||||
Stock
repurchase
|
-
|
-
|
-
|
(11,657
|
)
|
-
|
(11,657
|
)
|
||||||||||||||
Net
income
|
-
|
-
|
-
|
-
|
5,186
|
5,186
|
5,186
|
|||||||||||||||
Comprehensive
income for 2005
|
$
|
5,186
|
||||||||||||||||||||
Balances
at December 31, 2005
|
$
|
134
|
$
|
24
|
$
|
91,553
|
$
|
(21,582
|
)
|
$
|
119,595
|
$
|
189,724
|
|||||||||
Exercise
of employee stock options
|
1
|
-
|
245
|
-
|
-
|
246
|
||||||||||||||||
Income
tax benefit arising from the
exercise
of stock options
|
-
|
-
|
17
|
-
|
-
|
17
|
||||||||||||||||
SFAS
No. 123R stock-based employee
compensation cost
|
-
|
-
|
238
|
-
|
-
|
238
|
||||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
(1,381
|
)
|
(1,381
|
)
|
(1,381
|
)
|
||||||||||||
Comprehensive
loss
for 2006
|
$
|
(1,381
|
)
|
|||||||||||||||||||
Balances
at December 31, 2006
|
$
|
135
|
$
|
24
|
$
|
92,053
|
$
|
(21,582
|
)
|
$
|
118,214
|
$
|
188,844
|
2006
|
2005
|
2004
|
||||||||
Cash
flows from operating activities:
|
||||||||||
Net
income (loss)
|
$
|
(1,381
|
)
|
$
|
5,186
|
$
|
3,376
|
|||
Adjustments
to reconcile net income (loss) to net cash
provided
by operating activities:
|
||||||||||
Net
provision for losses on accounts receivable
|
590
|
1,598
|
547
|
|||||||
Depreciation
and amortization
|
43,234
|
39,769
|
41,456
|
|||||||
Income
tax benefit from exercise of stock options
|
-
|
50
|
210
|
|||||||
Deferred
income taxes (benefit)
|
3,660
|
(6,249
|
)
|
(12,063
|
)
|
|||||
Loss
(gain) on disposition of property and equipment
|
(2,071
|
)
|
(668
|
)
|
3,545
|
|||||
Non-cash
stock compensation
|
239
|
-
|
-
|
|||||||
Cumulative
effect of change in accounting principle,
net
of tax
|
-
|
485
|
-
|
|||||||
Changes
in operating assets and liabilities, net of effects
from
purchase of Star Transportation, Inc.:
|
||||||||||
Receivables
and advances
|
14,449
|
(4,841
|
)
|
(9,454
|
)
|
|||||
Prepaid
expenses and other assets
|
6,295
|
(4,555
|
)
|
4,542
|
||||||
Inventory
and supplies
|
(283
|
)
|
(1,081
|
)
|
-
|
|||||
Insurance
and claims accrual
|
(6,255
|
)
|
(4,399
|
)
|
18,779
|
|||||
Accounts
payable and accrued expenses
|
2,187
|
278
|
(6,825
|
)
|
||||||
Net
cash flows provided by operating activities
|
60,664
|
25,573
|
44,113
|
|||||||
Cash
flows from investing activities:
|
||||||||||
Acquisition of property and equipment
|
(162,750
|
)
|
(109,918
|
)
|
(81,615
|
)
|
||||
Proceeds from disposition of property and equipment
|
71,652
|
65,992
|
49,179
|
|||||||
Proceeds from building sale leaseback
|
29,630
|
-
|
-
|
|||||||
Payment of acquisition obligation
|
(83
|
)
|
-
|
-
|
||||||
Purchase of Star Transportation, Inc., net of cash
acquired
|
(39,061
|
)
|
-
|
-
|
||||||
Net
cash flows used in investing activities
|
(100,612
|
)
|
(43,926
|
)
|
(32,436
|
)
|
||||
Cash
flows from financing activities:
|
||||||||||
Exercise
of stock options
|
246
|
445
|
1,961
|
|||||||
Income
tax benefit from exercise of stock options
|
17
|
-
|
-
|
|||||||
Repurchase
of company stock
|
-
|
(11,657
|
)
|
(1,990
|
)
|
|||||
Proceeds
from disposition of interest rate hedge
|
175
|
-
|
-
|
|||||||
Change
in checks outstanding in excess of bank balances
|
4,280
|
-
|
-
|
|||||||
Proceeds
from issuance of debt
|
167,188
|
122,000
|
57,026
|
|||||||
Repayments
of debt
|
(129,768
|
)
|
(93,889
|
)
|
(66,510
|
)
|
||||
Deferred
costs
|
(401
|
)
|
6
|
(404
|
)
|
|||||
Net
cash flows provided by (used in) financing activities
|
41,737
|
16,905
|
(9,917
|
)
|
||||||
Net
change in cash and cash equivalents
|
1,789
|
(1,448
|
)
|
1,760
|
||||||
Cash
and cash equivalents at beginning of year
|
3,618
|
5,066
|
3,306
|
|||||||
Cash
and cash equivalents at end of year
|
$
|
5,407
|
$
|
3,618
|
$
|
5,066
|
||||
Supplemental
disclosure of cash flow information:
|
||||||||||
Cash
paid during the year for:
|
||||||||||
Interest,
net of capitalized interest
|
$
|
7,486
|
$
|
4,255
|
$
|
3,031
|
||||
Income
taxes
|
$
|
1,485
|
$
|
16,261
|
$
|
20,867
|
(in
thousands except per share data)
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Numerator:
|
||||||||||
Net
earnings (loss)
|
$
|
(1,381
|
)
|
$
|
5,186
|
$
|
3,376
|
|||
Denominator:
|
||||||||||
Denominator
for basic earnings per share
- weighted-average shares
|
13,996
|
14,175
|
14,641
|
|||||||
Effect
of dilutive securities:
|
||||||||||
Employee stock options
|
0
|
95
|
192
|
|||||||
Denominator
for diluted earnings per share
- adjusted weighted-average shares and assumed
conversions
|
13,996
|
14,270
|
14,833
|
|||||||
Net
income (loss) per share:
|
||||||||||
Basic
earnings (loss) per share:
|
$
|
(0.10
|
)
|
$
|
0.37
|
$
|
0.23
|
|||
Diluted
earnings (loss) per share:
|
$
|
(0.10
|
)
|
$
|
0.37
|
$
|
0.23
|
(in
thousands except per share data)
|
2005
|
2004
|
|||||
Income
before cumulative effect of change in accounting principle, as
reported:
|
$
|
5,671
|
$
|
3,376
|
|||
Deduct:
Accretion of conditional asset retirement liability and
amortization
of related asset, net of related tax effects
|
(251
|
)
|
(130
|
)
|
|||
Pro
forma net income
|
$
|
5,420
|
$
|
3,246
|
|||
Basic
earnings per share:
|
|||||||
As
reported, before cumulative effect of change in accounting principle
|
$
|
0.40
|
$
|
0.23
|
|||
Pro
forma earnings per share:
|
$
|
0.38
|
$
|
0.22
|
|||
Diluted
earnings per share:
|
|||||||
As
reported, before cumulative effect of change in accounting principle
|
$
|
0.40
|
$
|
0.23
|
|||
Pro
forma diluted earnings per share:
|
$
|
0.38
|
$
|
0.22
|
December
31, 2005
|
December
31, 2004
|
$1.6
million
|
$1.3
million
|
(in
thousands, except per share data)
|
2005
|
2004
|
|||||
Net
income, as reported:
|
$
|
5,186
|
$
|
3,376
|
|||
Deduct:
Total stock-based employee compensation
expense
determined under fair value based method for
all
awards, net of related tax effects
|
(2,235
|
)
|
(1,185
|
)
|
|||
Pro
forma net income
|
$
|
2,951
|
$
|
2,190
|
|||
Basic
earnings per share:
|
|||||||
As
reported
|
$
|
0.37
|
$
|
0.23
|
|||
Pro
forma
|
$
|
0.21
|
$
|
0.15
|
|||
Diluted
earnings per share:
|
|||||||
As
reported
|
$
|
0.37
|
$
|
0.23
|
|||
Pro
forma
|
$
|
0.21
|
$
|
0.15
|
Number
of
options
|
Weighted
average
exercise
price
|
Weighted
average
remaining
contractual
term
|
Aggregate
intrinsic value
(in
thousands)
|
||||||||||
Under
option at December 31, 2003
|
1,229,390
|
$
|
14.37
|
75
months
|
$
|
5,704
|
|||||||
Options
granted in 2004
|
196,300
|
$
|
15.81
|
||||||||||
Options
exercised in 2004
|
(126,501
|
)
|
$
|
15.50
|
|||||||||
Options
canceled in 2004
|
(38,097
|
)
|
$
|
16.45
|
|||||||||
Under
option at December 31, 2004
|
1,261,092
|
$
|
14.42
|
71
months
|
$
|
8,072
|
|||||||
Options
granted in 2005
|
237,085
|
$
|
14.11
|
||||||||||
Options
exercised in 2005
|
(28,081
|
)
|
$
|
15.86
|
|||||||||
Options
canceled in 2005
|
(16,583
|
)
|
$
|
14.99
|
|||||||||
Under
option at December 31, 2005
|
1,453,513
|
$
|
14.33
|
68
months
|
$
|
1,608
|
|||||||
Options
granted in 2006
|
106,300
|
$
|
13.15
|
||||||||||
Options
exercised in 2006
|
(19,482
|
)
|
$
|
12.64
|
|||||||||
Options
canceled in 2006
|
(252,899
|
)
|
$
|
15.74
|
|||||||||
Under
option at December 31, 2006
|
1,287,432
|
$
|
13.98
|
68
months
|
$
|
685
|
|||||||
Exercisable
at December 31, 2006
|
1,179,616
|
$
|
14.07
|
64
months
|
$
|
683
|
Options
Outstanding
|
Options
Exercisable
|
||||
Range
of Exercise
Prices
|
Number
Outstanding
at
12/31/06
|
Weighted-
Average
Remaining
Contractual
Life
|
Weighted-
Average
Exercise
Price
|
Number
Exercisable
at
12/31/06
|
Weighted-
Average
Exercise
Price
|
$
8.00 to $13.00
|
385,939
|
39
months
|
$10.08
|
375,523
|
$10.04
|
$13.01
to $16.50
|
562,806
|
91
months
|
$14.48
|
465,406
|
$14.75
|
$16.51
to $21.50
|
338,687
|
65
months
|
$17.61
|
338,687
|
$17.61
|
1,287,432
|
1,179,616
|
2006
|
2005
|
2004
|
||||
Expected
volatility
|
37.4%
|
42.2%
|
50.7%
|
|||
Risk-free
interest rate
|
4.6%
- 5.0%
|
2.3%
- 4.3%
|
2.3%
- 4.3%
|
|||
Expected
lives (in years)
|
5.0
|
5.0
|
5.0
|
Number
of stock awards
|
Weighted
average grant date fair value
|
||||||
Unvested
at January 1, 2006
|
-
|
$
|
-
|
||||
Granted
|
484,984
|
$
|
12.65
|
||||
Vested
|
-
|
-
|
|||||
Forfeited
|
(28,000
|
)
|
-
|
||||
Unvested
at December 31,
2006
|
456,984
|
$
|
12.65
|
(in
thousands)
|
Estimated
Useful
Lives
|
2006
|
2005
|
|||||||
Revenue
equipment
|
3-8
years
|
$
|
264,063
|
$
|
196,331
|
|||||
Communications
equipment
|
5
years
|
17,565
|
16,422
|
|||||||
Land
and improvements
|
10-24
years
|
17,483
|
15,216
|
|||||||
Buildings
and leasehold improvements
|
10-40
years
|
31,069
|
46,503
|
|||||||
Construction
in-progress
|
3,333
|
6,432
|
||||||||
Other
|
1-5
years
|
16,150
|
14,529
|
|||||||
$
|
349,663
|
$
|
295,433
|
(in
thousands)
|
2006
|
2005
|
|||||
Covenants
not to compete
|
$
|
2,690
|
$
|
1,690
|
|||
Trade
name
|
1,250
|
330
|
|||||
Customer
relationships
|
3,490
|
-
|
|||||
Less:
accumulated amortization of intangibles
|
(2,167
|
)
|
(1,689
|
)
|
|||
Net
intangible
assets
|
5,263
|
331
|
|||||
Investment
in
Transplace
|
10,666
|
10,666
|
|||||
Note
receivable
from Transplace
|
2,642
|
2,869
|
|||||
Other,
net
|
1,972
|
1,398
|
|||||
$
|
20,543
|
$
|
15,264
|
(in
thousands)
|
2006
|
2005
|
|||||
Borrowings
under the Credit Facility
|
$
|
104,900
|
$
|
33,000
|
Years
ended December 31:
|
Beginning
balance
January
1,
|
Additional
provisions
to
allowance
|
Write-offs
and
other
deductions
|
Ending
balance
December
31,
|
||||
2006
|
$2,200
|
$590
|
$1,299
|
$1,491
|
||||
2005
|
$1,700
|
$1,598
|
$1,098
|
$2,200
|
||||
2004
|
$1,350
|
$547
|
$197
|
$1,700
|
||||
2007
|
$
|
42,033
|
||
2008
|
34,164
|
|||
2009
|
24,642
|
|||
2010
|
18,279
|
|||
2011
|
8,859
|
|||
Thereafter
|
47,322
|
(in
thousands)
|
2006
|
2005
|
2004
|
|||||||
Revenue
equipment rentals
|
$
|
42,129
|
$
|
41,379
|
$
|
36,625
|
||||
Building
and lot rentals
|
3,508
|
1,252
|
1,236
|
|||||||
Other
equipment rentals
|
3,311
|
3,060
|
3,158
|
|||||||
$
|
48,948
|
$
|
45,691
|
$
|
41,019
|
(in
thousands)
|
2006
|
2005
|
2004
|
|||||||
Federal,
current
|
$
|
784
|
$
|
13,344
|
$
|
17,796
|
||||
Federal,
deferred
|
3,415
|
(6,056
|
)
|
(10,930
|
)
|
|||||
State,
current
|
138
|
1,205
|
2,720
|
|||||||
State,
deferred
|
245
|
(490
|
)
|
(1,134
|
)
|
|||||
$
|
4,582
|
$
|
8,003
|
$
|
8,452
|
(in
thousands)
|
2006
|
2005
|
2004
|
|||||||
Computed
"expected" income tax expense
|
$
|
1,120
|
$
|
4,786
|
$
|
4,140
|
||||
State
income taxes, net of federal income tax effect
|
96
|
465
|
1,031
|
|||||||
Per
diem allowances
|
2,233
|
2,591
|
2,760
|
|||||||
Tax
contingency accruals
|
470
|
542
|
445
|
|||||||
Nondeductible
foreign operating loss
|
294
|
-
|
-
|
|||||||
Other,
net
|
369
|
(381
|
)
|
76
|
||||||
Actual
income tax expense
|
$
|
4,582
|
$
|
8,003
|
$
|
8,452
|
(in
thousands)
|
2006
|
2005
|
|||||
Net
deferred tax assets:
|
|||||||
Allowance
for doubtful accounts
|
$
|
345
|
$
|
475
|
|||
Insurance
and claims
|
13,237
|
15,493
|
|||||
Net
operating loss carryovers
|
3,375
|
179
|
|||||
Investments
|
161
|
161
|
|||||
Other,
net
|
866
|
11
|
|||||
Total
net deferred tax assets
|
17,984
|
16,319
|
|||||
Net
deferred tax liabilities:
|
|||||||
Property
and equipment
|
50,352
|
33,305
|
|||||
Intangible
and other assets
|
2,183
|
766
|
|||||
Other,
net
|
113
|
-
|
|||||
Total
net deferred tax liabilities
|
52,648
|
34,071
|
|||||
Net
deferred tax liability
|
$
|
(34,664
|
)
|
$
|
(17,752
|
)
|
|
(in
thousands)
|
2006
|
2005
|
|||||
Net
liability for derivatives at January 1
|
$
|
(13
|
)
|
$
|
(439
|
)
|
|
Gain
in value of derivative instruments that do not qualify as hedging
instruments
|
13
|
426
|
|||||
Net
liability for derivatives at December 31
|
$
|
-
|
$
|
(13
|
)
|
(In thousands) | ||||
Current
assets
|
$
|
10,970
|
||
Property
and equipment
|
62,339
|
|||
Deferred
tax assets
|
275
|
|||
Other
assets -
Interest rate swap (See Note 13)
|
252
|
|||
Identifiable
intangible assets:
|
||||
Tradename
(4-year estimated useful life)
|
920
|
|||
Noncompetition
agreement (7-year useful life)
|
1,000
|
|||
Customer
relationships
(20-year estimated useful life)
|
3,490
|
|||
Goodwill
|
24,655
|
|||
Total
assets
|
$
|
103,901
|
||
Current
liabilities
|
$
|
13,181
|
||
Long-term
debt, net of current maturities
|
36,298
|
|||
Deferred
tax liabilities
|
14,361
|
|||
Total
liabilities
|
$
|
63,840
|
||
Total
purchase price
|
$
|
40,061
|
(in
thousands, except per share data)
|
Year
ended December 31, 2006
|
|||
Pro
forma revenues
|
$
|
744,813
|
||
Pro
forma net income
|
$
|
389
|
||
Pro
forma basic and diluted earnings per share
|
$
|
0.03
|
(In
thousands except per share amounts)
|
|||||||||||||
Quarters
ended
|
March
31, 2006
|
June
30, 2006
|
Sept.
30, 2006
|
Dec.
31, 2006
|
|||||||||
Freight
revenue
|
$
|
129,434
|
$
|
139,334
|
$
|
144,148
|
$
|
159,313
|
|||||
Operating
income
|
350
|
2,953
|
3,520
|
2,806
|
|||||||||
Net
income (loss)
|
(884
|
)
|
(398
|
)
|
795
|
(894
|
)
|
||||||
Basic
earnings (loss) per share
|
(0.06
|
)
|
(0.03
|
)
|
0.06
|
(0.06
|
)
|
||||||
Diluted
earnings (loss) per share
|
(0.06
|
)
|
(0.03
|
)
|
0.06
|
(0.06
|
)
|
||||||
Quarters
ended
|
March
31, 2005
|
June
30, 2005
|
Sept.
30, 2005
|
Dec.
31, 2005 (1)
|
|||||||||
Freight
revenue
|
$
|
123,570
|
$
|
138,736
|
$
|
144,681
|
$
|
148,442
|
|||||
Operating
income
|
276
|
3,042
|
3,850
|
9,898
|
|||||||||
Net
income (loss) before cumulative
effect
of change in accounting
principle
|
(649
|
)
|
652
|
1,217
|
4,451
|
||||||||
Cumulative
effect of change in
accounting
principle
|
-
|
-
|
-
|
(485
|
)
|
||||||||
Net
income (loss)
|
(649
|
)
|
652
|
1,217
|
3,966
|
||||||||
Basic
earnings (loss) per share
before
cumulative effect of
change
in accounting principle
|
(0.04
|
)
|
0.05
|
0.09
|
0.31
|
||||||||
Cumulative
effect of change in
accounting
principle
|
-
|
-
|
-
|
(0.03
|
)
|
||||||||
Basic
earnings (loss) per share
|
(0.04
|
)
|
0.05
|
0.09
|
0.28
|
||||||||
Diluted
earnings (loss) per share
before
cumulative effect of
change
in accounting principle
|
(0.04
|
)
|
0.05
|
0.09
|
0.31
|
||||||||
Cumulative
effect of change in
accounting
principle
|
-
|
-
|
-
|
(0.03
|
)
|
||||||||
Diluted
earnings (loss) per share
|
(0.04
|
)
|
0.05
|
0.09
|
0.28
|
(1)
|
Includes
a $485 net of tax adjustment for the cumulative effect of a change
in
accounting principle.
|