UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
___________________________________________________________________
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date
of
Report (Date of earliest event reported):
April
3,
2006
___________________________________________________________________
COVENANT
TRANSPORT, INC.
(Exact
name of registrant as specified in its charter)
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Nevada
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000-24960
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88-0320154
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(State
or other jurisdiction
of
incorporation)
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(Commission
File
Number)
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(IRS
Employer
Identification
No.)
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400
Birmingham Hwy., Chattanooga, TN
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37419
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(Address
of principal executive offices)
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(Zip
Code)
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(423)
821-1212
(Registrant's
telephone number, including area code)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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[
]
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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[
]
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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[
]
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
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[
]
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
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Item
1.01
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Entry
into a Material Definitive Agreement.
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On
April 3, 2006, Covenant Transport, Inc., a Tennessee corporation
and
wholly-owned operating subsidiary of the registrant ("Covenant-TN"),
entered into a purchase and sale agreement (the "Purchase and Sale
Agreement") with CT Chattanooga TN, LLC, a Delaware limited liability
company and subsidiary of SunTrust Equity Funding, LLC (the "Purchaser").
Pursuant to the terms of the Purchase and Sale Agreement, Covenant-TN
sold
certain property including its headquarters facility, a maintenance
facility, a body shop, and approximately forty-six (46) acres of
surrounding property in Chattanooga, Tennessee (the "Property") to
the
Purchaser for a purchase price of $30 million. Concurrent with the
sale of
the Property, Covenant-TN and the Purchaser entered into a twenty-year
lease agreement (the "Lease Agreement"), whereby Covenant-TN will
lease
back the Property at an annual rental rate of approximately $2.5
million,
subject to annual rent increases of 1.0%. Under the Lease Agreement,
Covenant-TN has eight (8) consecutive options to extend the term
of the
lease by five (5) years for each such option. If the Purchaser decides
to
sell or otherwise convey title to the Property during the term of
the
Lease Agreement, Covenant-TN shall have a right of first refusal
to
purchase the Property on the same terms offered to any third
party.
In
consideration of, and as an inducement to, the Purchaser's agreement
to
enter into the above described sale/lease back arrangement, the registrant
concurrently executed a lease guaranty, pursuant to which it guaranteed
the prompt payment when due of all rent payments to be made by Covenant-TN
under the Lease Agreement.
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Item
2.03
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Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance
Sheet Arrangement of a Registrant.
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See
the information set forth in Item 1.01 of this Current Report on
Form 8-K,
which is incorporated by reference herein.
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Item
7.01
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Regulation
FD Disclosure.
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See
the information set forth in Item 1.01 of this Current Report on
Form 8-K,
which is incorporated by reference herein.
As
a result of the sale/lease back arrangement, the registrant recognized
an
approximate $2.1 million gain, which will be amortized ratably
over the
life of the lease. The registrant realized net, after-tax proceeds
of
approximately $29.0 million from the sale of the Property. The
registrant
used the cash proceeds to pay down borrowing under its revolving
credit
facility and to purchase revenue equipment.
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lease will be accounted for as an operating lease. Accordingly,
the
approximately $27.7 million net book value allocated to the Property
will
no longer be recorded under property and equipment on the registrant's
balance sheet. The principal effects on the registrant's statement
of
operations will be to increase terminal lease expense, which is
recorded
under general supplies and expenses, and decrease depreciation
and
interest expenses. For the first full year, the registrant expects
an
increase in net lease expense of approximately $2.4 million. This
increase
in net lease expense will reflect an offset of approximately $105,000
relating to a portion of the approximate $2.1 million deferred
gain, which
is amortized over 20 years. The registrant expects a savings of
approximately $1.1 million in depreciation expense and $1.8 million
in interest expense in the first full year. The expected reduction
in
interest expense is based on interest applicable to the debt paid
down
with proceeds from the sale of the Property.
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Item
9.01
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Financial
Statements and Exhibits.
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(c)
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Exhibits.
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EXHIBIT
NUMBER
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EXHIBIT
DESCRIPTION
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Purchase
and Sale Agreement dated April 3, 2006, between Covenant Transport,
Inc.,
a Tennessee corporation, and CT Chattanooga TN, LLC, a Delaware limited
liability company
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Lease
Agreement dated April 3, 2006, between Covenant Transport, Inc.,
a
Tennessee corporation, and CT Chattanooga TN, LLC, a Delaware limited
liability company
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Lease
Guaranty dated April 3, 2006, by Covenant Transport, Inc., a Nevada
corporation, for the benefit of CT Chattanooga TN, LLC, a Delaware
limited
liability company and subsidiary of SunTrust Equity Funding, LLC
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The
information contained in this report and in Exhibits 10.18, 10.19, and 10.20
shall not be deemed "filed" for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or incorporated by
reference in any filing under the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act, except as shall be expressly set
forth
by specific reference in such a filing.
The
information in this report and the exhibits hereto may contain "forward-looking
statements" within the meaning of Section 27A of the Securities Act, and
Section
21E of the Exchange Act. Such statements are based upon the current beliefs
and
expectations of the registrant's management and are inherently subject to
risks
and uncertainties, some of which cannot be predicted or quantified, which
may
cause future events and actual results to differ materially from those set
forth
in, contemplated by, or underlying such statements. Accordingly, actual results
may differ from those set forth in the forward-looking statements. In this
Current Report on Form 8-K, statements relating to registrant's expectation
of
future expenses are forward-looking statements. Such statements are not capable
of being subjected to the review procedures associated with the release of
actual financial results and are premised on management's assumptions regarding,
among other things, registrant's future cost of borrowing. For risks and
uncertainties that could affect the registrant's actual results, readers
should
review and consider the risk factors contained in the registrant's filings
with
the Securities and Exchange Commission. The registrant disclaims any obligation
to update or revise any forward-looking statements to reflect actual results
or
changes in the factors affecting the forward-looking
information.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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COVENANT
TRANSPORT, INC.
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Date:
April 7,
2006
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By:
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/s/ Joey B. Hogan |
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Joey
B. Hogan
Executive
Vice President and Chief Financial
Officer
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EXHIBIT
NUMBER
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EXHIBIT
DESCRIPTION
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Purchase
and Sale Agreement dated April 3, 2006, between Covenant Transport,
Inc.,
a Tennessee corporation, and CT Chattanooga TN, LLC, a Delaware limited
liability company
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Lease
Agreement dated April 3, 2006, between Covenant Transport, Inc.,
a
Tennessee corporation, and CT Chattanooga TN, LLC, a Delaware limited
liability company
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Lease
Guaranty dated April 3, 2006, by Covenant Transport, Inc., a Nevada
corporation, for the benefit of CT Chattanooga TN, LLC, a Delaware
limited
liability company and subsidiary of SunTrust Equity Funding,
LLC
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