COVENANT TRANSPORT INC - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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 September 30, 2004

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

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 incorporation		(I.R.S. Employer Identification No.)
or organization)

400 Birmingham Hwy.
Chattanooga, TN		37419
(Address of principal executive offices)		(Zip Code)

423-821-1212

(Registrant's telephone number, including area code)

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 such filing requirements for the past 90 days.

YES [ X ] NO [ ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

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 (November 2, 2004).

Class A Common Stock, $.01 par value: 12,312,595 shares

Class B Common Stock, $.01 par value: 2,350,000 shares


		Page 1

PART I FINANCIAL INFORMATION
		Page Number
Item 1.	Financial Statements
	Consolidated Balance Sheets as of September 30, 2004 (Unaudited) and December 31, 2003	3
	Consolidated Statements of Operations for the three and nine months ended September 30, 2004 and 2003 (Unaudited)	4
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2004 and 2003 (Unaudited)	5
	Notes to Consolidated Financial Statements (Unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	25
Item 4.	Controls and Procedures	26
PART II OTHER INFORMATION
		Page Number
Item 1.	Legal Proceedings	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 6.	Exhibits	29


		Page 2

ITEM 1. FINANCIAL STATEMENTS

COVENANT TRANSPORT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS *(In thousands, except share data)*
	September 30, 2004			December 31, 2003
ASSETS	(unaudited)
Current assets:
Cash and cash equivalents	$	943		$	3,306
Accounts receivable, net of allowance of $1,350 in 2004 and 2003		73,293			62,998
Drivers advances and other receivables		5,149			9,622
Inventory and supplies		3,566			3,581
Prepaid expenses		11,956			16,185
Deferred income taxes		13,041			13,462
Income taxes receivable		5,317			278
Total current assets		113,265			109,432

Property and equipment, at cost		306,598			320,909
Less accumulated depreciation and amortization		(90,797	)		(99,175	)
Net property and equipment		215,801			221,734

Other assets		22,910			23,115

Total assets	$	351,976		$	354,281

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt		9			1,300
Securitization facility		44,148			48,353
Accounts payable		6,130			8,822
Accrued expenses		16,716			14,420
Insurance and claims accrual		27,118			27,420
Total current liabilities		94,121			100,315

Long-term debt, less current maturities		16,015			12,000
Deferred income taxes		39,904			49,824
Total liabilities		150,040			162,139

Commitments and contingent liabilities

Stockholders' equity:
Class A common stock, $.01 par value; 20,000,000 shares authorized; 13,407,862 and 13,295,026 shares issued; 12,310,262 and 12,323,526 outstanding as of September 30, 2004 and December 31, 2003, respectively		133			133
Class B common stock, $.01 par value; 5,000,000 shares authorized; 2,350,000 shares issued and outstanding as of September 30, 2004 and December 31, 2003		24			24
Additional paid-in-capital		90,819			88,888
Treasury Stock at cost; 1,097,600 and 971,500 shares as of September 30, 2004 and December 31, 2003, respectively		(9,925	)		(7,935	)
Retained earnings		120,886			111,032
Total stockholders' equity		201,937			192,142
Total liabilities and stockholders' equity	$	351,976		$	354,281

The accompanying notes are an integral part of these consolidated financial statements.


		Page 3

COVENANT TRANSPORT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

(In thousands except per share data)

	Three months ended September 30, (unaudited)				Nine months ended September 30, (unaudited)

	2004		2003		2004		2003

Freight revenue	$	140,631	$	140,313	$	411,257	$	410,145
Fuel surcharges		11,304		6,170		28,192		20,155
Total revenue	$	151,935	$	146,483	$	439,449	$	430,300

Operating expenses:
Salaries, wages, and related expenses		55,563		55,863		163,899		165,335
Fuel expense		32,893		26,370		90,708		81,660
Operations and maintenance		7,657		10,161		22,851		30,446
Revenue equipment rentals and purchased transportation		16,593		18,634		53,745		50,014
Operating taxes and licenses		3,478		3,343		10,631		10,519
Insurance and claims		9,809		8,240		27,073		25,836
Communications and utilities		1,550		1,868		4,866		5,307
General supplies and expenses		3,422		3,527		10,443		10,526
Depreciation and amortization, including gains (losses) on disposition of equipment		10,728		9,991		33,209		31,208
Total operating expenses		141,693		137,997		417,425		410,851
Operating income		10,242		8,486		22,024		19,449
Other (income) expenses:
Interest expense		1,116		538