form10k.htm

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Covenant Transportation Group, Inc.:

We have audited the accompanying consolidated balance sheets of Covenant Transportation Group, Inc. and subsidiaries as of December 31, 2012 and 2011, and the related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2012. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Covenant Transportation Group, Inc. and subsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2012, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

Atlanta, Georgia

March 28, 2013

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COVENANT TRANSPORTATION GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2012 AND 2011 (In thousands, except share data)

	2012			2011
ASSETS
Current assets:
Cash and cash equivalents	$	6,846		$	3,895
Accounts receivable, net of allowance of $1,729 in 2012 and $1,711 in 2011		76,220			64,676
Drivers' advances and other receivables, net of allowance of $1,041 in 2012 and $730 in 2011		3,851			5,711
Inventory and supplies		4,550			4,611
Prepaid expenses		8,244			8,002
Assets held for sale		3,898			16,891
Deferred income taxes		4,642			4,383
Income taxes receivable		59			232
Total current assets		108,310			108,401

Property and equipment, at cost		419,947			440,051
Less: accumulated depreciation and amortization		(140,930	)		(117,748	)
Net property and equipment		279,017			322,303

Other assets, net		12,905			9,121

Total assets	$	400,232		$	439,825
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Checks outstanding in excess of bank balances	$	8,261		$	5,963
Accounts payable		10,035			8,752
Accrued expenses		27,884			23,272
Current maturities of long-term debt		63,636			96,258
Current portion of capital lease obligations		2,091			1,957
Current portion of insurance and claims accrual		16,383			14,303
Total current liabilities		128,290			150,505

Long-term debt		95,214			128,167
Long-term portion of capital lease obligations		14,003			16,129
Insurance and claims accrual		16,768			13,734
Deferred income taxes		49,837			42,670
Other long-term liabilities		1,447			1,565
Total liabilities		305,559			352,770
Commitments and contingent liabilities		-			-
Stockholders' equity:
Class A common stock, $.01 par value; 20,000,000 shares authorized; 13,469,090 shares issued; 12,409,447 and 12,371,552 outstanding as of December 31, 2012 and 2011, respectively		143			143
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		90,328			89,535
Treasury stock at cost; 1,059,643 and 1,097,538 shares as of December 31, 2012 and 2011, respectively		(13,955	)		(14,445	)
Accumulated other comprehensive income		320			50
Retained earnings		17,813			11,748
Total stockholders' equity		94,673			87,055
Total liabilities and stockholders' equity	$	400,232		$	439,825

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

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COVENANT TRANSPORTATION GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 2012, 2011, AND 2010 (In thousands, except per share data)

	2012			2011			2010
Revenues
Freight revenue	$	529,080		$	512,026		$	546,320
Fuel surcharge revenue		145,174			140,601			103,429
Total revenue	$	674,254		$	652,627		$	649,749

Operating expenses:
Salaries, wages, and related expenses		217,080			211,169			216,316
Fuel expense		194,841			208,693			177,239
Operations and maintenance		45,265			43,585			42,050
Revenue equipment rentals and purchased transportation		85,010			63,353			71,474
Operating taxes and licenses		11,043			12,148			11,090
Insurance and claims		33,707			36,163			32,648
Communications and utilities		4,809			5,137			4,974
General supplies and expenses		16,068			15,627			16,143
Depreciation and amortization, including gains and losses on disposition of equipment		43,222			46,274			51,807
Goodwill impairment		-			11,539			-
Total operating expenses		651,045			653,688			623,741
Operating income (loss)		23,209			(1,061	)		26,008
Other expenses (income):
Interest expense		12,697			16,208			16,566
Interest income		-			(32	)		(2	)
Other		(13	)		(123	)		(20	)
Other expenses, net		12,684			16,053			16,544
Equity in income of affiliate		1,875			675			-
Income (loss) before income taxes		12,400			(16,439	)		9,464
Income tax expense (benefit)		6,335			(2,172	)		6,175
Net income (loss)	$	6,065		$	(14,267	)	$	3,289

Income (loss) per share:
Basic income (loss) per share:	$	0.41	$	(0.97	)	$	0.23

Diluted income (loss) per share:	$	0.41	$	(0.97	)	$	0.23

Basic weighted average shares outstanding		14,742		14,689			14,374

Diluted weighted average shares outstanding		14,808		14,689			14,505

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

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COVENANT TRANSPORTATION GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE YEARS ENDED DECEMBER 31, 2012, 2011, AND 2010

(In thousands)

	2012			2011			2010

Net income (loss)	$	6,065		$	(14,267	)	$	3,289

Other comprehensive income (loss):
Unrealized gain on effective portion of fuel hedges, net of tax of $2,100, $935, and $1,208 in 2012, 2011 and 2010, respectively		3,369			1,500			1,938

Reclassification of fuel hedge gains into statement of operations, net of tax of $1,932, $1,200, and $1,101 in 2012, 2011, and 2010, respectively		(3,099	)		(1,926	)		(1,767	)
Total other comprehensive income (loss)		270			(426	)		171

Comprehensive income (loss)	$	6,335		$	(14,693	)	$	3,460

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

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COVENANT TRANSPORTATION GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2012, 2011, AND 2010

(In thousands)

	Common Stock
	Class A		Class B		Additional Paid-In Capital			Treasury Stock			Accumulated Other Comprehensive Income			Retained Earnings			Total Stockholders' Equity

Balances at December 31, 2009	$	136	$	24	$	90,679		$	(19,195	)	$	305		$	22,726		$	94,675
Net income		-		-		-			-			-			3,289			3,289
Other comprehensive income		-		-		-			-			171			-			171
Income tax benefit arising from exercise of stock options and restricted stock vesting		-		-		421			-			-			-			421
Stock-based employee compensation cost		-		-		1,018			-			-			-			1,018
Issuance of restricted stock, net		2		-		(2,582	)		2,396			-			-			(184	)
Exercise of stock options		2		-		1,306			-			-			-			1,308
Balances at December 31, 2010	$	140	$	24	$	90,842		$	(16,799	)	$	476		$	26,015		$	100,698
Net loss		-		-		-			-			-			(14,267	)		(14,267	)
Other comprehensive loss		-		-		-			-			(426	)		-			(426	)
Income tax benefit arising from restricted stock vesting		-		-		432			-			-			-			432
Stock-based employee compensation cost		-		-		1,026			-			-			-			1,026
Issuance of restricted stock, net		3		-		(2,765	)		2,354			-			-			(408	)
Balances at December 31, 2011	$	143	$	24	$	89,535		$	(14,445	)	$	50		$	11,748		$	87,055
Net income		-		-		-			-			-			6,065			6,065
Other comprehensive income		-		-		-			-			270			-			270
Stock-based employee compensation cost		-		-		1,184			-			-			-			1,184
Issuance of restricted stock, net		-		-		(391	)		490			-			-			99
Balances at December 31, 2012	$	143	$	24	$	90,328		$	(13,955	)	$	320		$	17,813		$	94,673

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

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COVENANT TRANSPORTATION GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2012, 2011, AND 2010

(In thousands)

	2012			2011			2010
Cash flows from operating activities:
Net income (loss)	$	6,065		$	(14,267	)	$	3,289
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Provision for losses on accounts receivable		904			713			422
Deferred gain on sales of equipment to affiliate		198			562			-
Depreciation and amortization		48,135			53,001			56,100
Goodwill impairment		-			11,539			-
Amortization of deferred financing fees		492			414			715
(Reversal into earnings) deferred gain on fuel hedge		-			(773	)		773
Casualty premium credit		(4,000	)		-			-
Equity in income of affiliate		(1,875	)		(675	)		-
Deferred income tax expense (benefit)		6,735			(2,158	)		17,422
(Gain) loss on disposition of property and equipment		(4,913	)		(6,727	)		(4,293	)
Income tax benefit arising from restricted share vesting and exercise of stock options		-			(432	)		(421	)
Stock-based compensation expense		1,284			1,226			1,118
Changes in operating assets and liabilities:
Receivables and advances		(10,415	)		(4,348	)		1,018
Prepaid expenses and other assets		4,630			1,513			(2,097	)
Inventory and supplies		61			(130	)		(477	)
Insurance and claims accrual		3,979			1,056			1,690
Accounts payable and accrued expenses		3,821			(8,453	)		(4,420	)
Net cash flows provided by operating activities		55,101			32,061			70,839

Cash flows from investing activities:
Acquisition of property and equipment		(41,787	)		(114,800	)		(137,347	)
Investment in affiliated company		(2,900	)		(1,500	)		-
Return of investment in affiliated company		316			241			-
Proceeds from disposition of property and equipment		57,525			65,318			55,075
Net cash flows provided by (used in) investing activities		13,154			(50,741	)		(82,272	)

Cash flows from financing activities:
Payment of minimum tax withholdings on stock compensation		(9	)		(561	)		(284	)
Proceeds from the exercise of stock options		-			-			1,308
(Repayments) proceeds from/of borrowings under revolving credit facility, net		(15,885	)		15,869			(12,665	)
Repayments of capital lease obligation		(1,992	)		(1,651	)		(1,158	)
Change in checks outstanding in excess of bank balances		2,298			1,168			(43	)
Proceeds from issuance of notes payable		26,395			85,152			97,766
Repayments of notes payable		(76,085	)		(86,938	)		(76,208	)
Debt refinancing costs		(26	)		(257	)		(564	)
Income tax benefit arising from restricted share vesting and exercise of stock options		-			432			421
Net cash flows (used in) provided by financing activities		(65,304	)		13,214			8,573

Net change in cash and cash equivalents		2,951			(5,466	)		(2,860	)

Cash and cash equivalents at beginning of year		3,895			9,361			12,221
Cash and cash equivalents at end of year	$	6,846		$	3,895		$	9,361

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Supplemental disclosure of cash flow information:
Cash paid (received) during the year for:
Interest, net of capitalized interest	$	12,967	$	16,236		$	16,710
Income taxes	$	342	$	(295	)	$	(7,928	)
Equipment purchased under capital leases	$	-	$	4,920		$	2,405
Accrued investment in TEL	$	500	$	1,000		$	-
Noncash change in insurance claims accruals recorded in excess of retention	$	1,236	$	-		$	-

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

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COVENANT TRANSPORTATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012, 2011 AND 2010

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business and Segments

Covenant Transportation Group, Inc., a Nevada holding company, together with its wholly-owned subsidiaries offers truckload transportation and brokerage services to customers throughout the continental United States.

We have two reportable segments: asset-based truckload services (“Truckload”) and non-asset based brokerage and ancillary services ("Solutions").

The Truckload segment consists of three asset-based operating fleets that are aggregated because they have similar economic characteristics and meet the aggregation criteria. The three operating fleets that comprise our Truckload segment are as follows: (i) Covenant Transport, Inc. ("Covenant Transport"), our historical flagship operation, which provides expedited long haul, dedicated, temperature control, and regional solo-driver service; (ii) Southern Refrigerated Transport, Inc. ("SRT"), which provides primarily long-haul and regional temperature-controlled service; and (iii) Star Transportation, Inc. ("Star"), which provides regional solo-driver and dedicated services, primarily in the southeastern United States.

The Solutions segment provides: (i) freight brokerage service directly and through freight brokerage agents who are paid a commission for the freight they provide; (ii) less-than-truckload consolidation services; and (iii) accounts receivable factoring.

Principles of Consolidation

The consolidated financial statements include the accounts of Covenant Transportation Group, Inc., a holding company incorporated in the state of Nevada in 1994, and its wholly-owned subsidiaries: Covenant Transport, Inc., a Tennessee corporation; Southern Refrigerated Transport, Inc., an Arkansas corporation; Star Transportation, Inc., a Tennessee corporation; Covenant Transport Solutions, Inc., a Nevada corporation; Covenant Logistics, Inc., a Nevada corporation; Covenant Asset Management, Inc., a Nevada corporation; and CTG Leasing Company, a Nevada corporation.

References in this report to "it," "we," "us," "our," the "Company," and similar expressions refer to Covenant Transportation Group, Inc. and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Investment in Transport Enterprise Leasing, LLC.

Transport Enterprise Leasing, LLC ("TEL") is a tractor and trailer equipment leasing company and used equipment reseller. We evaluated our investment in TEL to determine whether it should be recorded on a consolidated basis. The percentage of ownership interest, an evaluation of control and whether a variable interest entity ("VIE") existed were all considered in our consolidation assessment. The analysis provided that we do not control TEL and that TEL is not deemed a VIE. We have accounted for our investment in TEL using the equity method of accounting given our 49% ownership interest and ability to exercise significant influence over operating and financial policies. Under the equity method, the cost of our investment is adjusted for our share of equity in the earnings of TEL and reduced by distributions received and our proportionate share of TEL’s net income is included in our earnings.

On a periodic basis, we assess whether there are any indicators that the fair value of our investment in TEL may be impaired. The investment is impaired only if the estimate of the fair value of the investment is less than the carrying value of the investment, and such decline in value is deemed to be other than temporary. To the extent impairment has occurred, the loss would be measured as the excess of the carrying amount of the investment over the fair value of the investment. As a result of TEL’s 2012 and 2011 earnings, no impairment indicators were noted that would provide for impairment of our investment.

Revenue Recognition

Revenue, drivers' wages, and other direct operating expenses generated by our Truckload reportable segment are recognized on the date shipments are delivered to the customer. Revenue includes transportation revenue, fuel surcharges, loading and unloading activities, equipment detention, and other accessorial services.

Revenue generated by our Solutions reportable segment is recognized upon completion of the services provided. Revenue is recorded on a gross basis, without deducting third party purchased transportation costs, as we act as a principal with substantial risks as primary obligor, except for transactions whereby equipment from our Truckload segment perform the related services, which we record on a net basis in accordance with the related authoritative guidance. Solutions revenue includes $0.8 million of revenue related to an accounts receivable factoring business started in 2012 to supplement several aspects of our non-asset operations. Revenue for this business is recognized on a net basis, given we are acting as an agent and are not the primary obligor in these transactions.

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Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make decisions based upon estimates, assumptions, and factors we consider as relevant to the circumstances. Such decisions include the selection of applicable accounting principles and the use of judgment in their application, the results of which impact reported amounts and disclosures. Changes in future economic conditions or other business circumstances may affect the outcomes of our estimates and assumptions. Accordingly, actual results could differ from those anticipated.

Cash and Cash Equivalents

We consider all highly liquid investments with a maturity of three months or less at acquisition to be cash equivalents. Additionally, we are also subject to concentrations of credit risk related to deposits in banks in excess of the Federal Deposit Insurance Corporation limits.

Accounts Receivable and Concentration of Credit Risk

We extend credit to our customers in the normal course of business. We perform ongoing credit evaluations and generally do not require collateral. Trade accounts receivable are recorded at their invoiced amounts, net of allowance for doubtful accounts. We evaluate the adequacy of our allowance for doubtful accounts quarterly. Accounts outstanding longer than contractual payment terms are considered past due and are reviewed individually for collectability. We maintain reserves for potential credit losses based upon its loss history and specific receivables aging analysis. Receivable balances are written off when collection is deemed unlikely.

Accounts receivable are comprised of a diversified customer base that results in a lack of concentration of credit risk. During 2012, 2011, and 2010, our top ten customers generated 32%, 39%, and 40% of total revenue, respectively. During each of the years in the three year period ended December 31, 2012, no single customer represented more than 10% of total revenue. The carrying amount reported in the consolidated balance sheet for accounts receivable approximates fair value based on the fact that the receivables collection averaged approximately 36 days in both 2012 and 2011.

Included in accounts receivable is $7.5 million of factoring receivables at December 31, 2012, net of a $0.1 million allowance for bad debts. We advance 80% to 90% of each receivable factored and retain the remainder as collateral for collection issues that might arise. The retained amounts are returned to the clients after the related receivable has been collected. At December 31, 2012, the retained amounts related to factored receivables totaled $0.3 million and were included in accounts payable in the consolidated balance sheet. Our clients are smaller trucking companies that factor their receivables to us for a fee to facilitate faster cash flow. We evaluate each client’s customer base and only factor specific receivables that meet predefined criteria.

The following table provides a summary of the activity in the allowance for doubtful accounts for 2012, 2011, and 2010:

Years ended December 31:	Beginning balance January 1,		Additional provisions to allowance		Write-offs and other deductions			Ending balance December 31,

2012	$	1,711	$	904	$	(886	)	$	1,729

2011	$	1,537	$	713	$	(539	)	$	1,711

2010	$	1,845	$	422	$	(730	)	$	1,537

Inventories and Supplies

Inventories and supplies consist of parts, tires, fuel, and supplies. Tires on new revenue equipment are capitalized as a component of the related equipment cost when the tractor or trailer is placed in service and recovered through depreciation over the life of the vehicle. Replacement tires and parts on hand at year end are recorded at the lower of cost or market with cost determined using the first-in, first-out (FIFO) method. Replacement tires are expensed when placed in service.

Assets Held for Sale

Assets held for sale include property and revenue equipment no longer utilized in continuing operations which are available and held for sale. Assets held for sale are no longer subject to depreciation, and are recorded at the lower of depreciated book value or fair market value less, selling costs. We periodically review the carrying value of these assets for possible impairment. We expect to sell the majority of these assets within twelve months.

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Property and Equipment

Property and equipment is stated at cost less accumulated depreciation. Depreciation for book purposes is determined using the straight-line method over the estimated useful lives of the assets, while depreciation for tax purposes is generally recorded using an accelerated method. Depreciation of revenue equipment is our largest item of depreciation. We generally depreciate new tractors (excluding day cabs) over five years to salvage values of approximately 23% of their cost and new trailers over seven years for refrigerated trailers and ten years for dry van trailers to salvage values of approximately 21% of their cost. We annually review the reasonableness of our estimates regarding useful lives and salvage values of our revenue equipment and other long-lived assets based upon, among other things, our experience with similar assets, conditions in the used revenue equipment market, and prevailing industry practice. Changes in the useful life or salvage value estimates, or fluctuations in market values that are not reflected in our estimates, could have a material effect on our results of operations. Gains and losses on the disposal of revenue equipment are included in depreciation expense in the consolidated statements of operations.

We lease certain revenue equipment under capital leases with terms of 60 months. Amortization of leased assets is included in depreciation and amortization expense.

Although a majority of our tractors are protected by non-binding indicative trade-in values or binding trade-back agreements with the manufacturers, substantially all of our owned trailers are subject to fluctuations in market prices for used revenue equipment. Moreover, our trade-back agreements are contingent upon reaching acceptable terms for the purchase of new equipment. Declines in the price of used revenue equipment or failure to reach agreement for the purchase of new tractors with the manufacturers issuing trade-back agreements could result in impairment of, or losses on the sale of, revenue equipment.

Impairment of Long-Lived Assets

Pursuant to applicable accounting standards, revenue equipment and other long-lived assets are tested for impairment whenever an event occurs that indicates an impairment may exist. Expected future cash flows are used to analyze whether an impairment has occurred. If the sum of expected undiscounted cash flows is less than the carrying value of the long-lived asset, then an impairment loss is recognized. We measure the impairment loss by comparing the fair value of the asset to its carrying value. Fair value is determined based on a discounted cash flow analysis or the appraised value of the assets, as appropriate.

Goodwill and Other Intangible Assets

We classify intangible assets into two categories: (i) intangible assets with definite lives subject to amortization and (ii) goodwill. We test intangible assets with definite lives for impairment if conditions exist that indicate the carrying value may not be recoverable. Such conditions may include an economic downturn in a geographic market or a change in the assessment of future operations. We record an impairment charge when the carrying value of the definite lived intangible asset is not recoverable by the cash flows generated from the use of the asset.

We test goodwill for impairment at least annually or more frequently if events or circumstances indicate that such intangible assets or goodwill might be impaired. We perform our impairment tests of goodwill at the reporting unit level. Our reporting units are defined as our subsidiaries because each is a legal entity that is managed separately. Such impairment tests for goodwill include comparing the fair value of the respective reporting unit with its carrying value, including goodwill. We use a variety of methodologies in conducting these impairment tests, including discounted cash flow analyses and market analyses. As of September 30, 2011, we have no goodwill on our consolidated balance sheet.

We determine the useful lives of our identifiable intangible assets after considering the specific facts and circumstances related to each intangible asset. Factors we consider when determining useful lives include the contractual term of any agreement, the history of the asset, our long-term strategy for the use of the asset, any laws or other local regulations which could impact the useful life of the asset, and other economic factors, including competition and specific market conditions. Intangible assets that are deemed to have definite lives are amortized, generally on a straight-line basis, over their useful lives, ranging from 4 to 20 years.

Insurance and Other Claims

The primary claims arising against us consist of cargo, liability, personal injury, property damage, workers' compensation, and employee medical expenses. Our insurance program involves self-insurance with high risk retention levels. Due to our significant self-insured retention amounts, we have exposure to fluctuations in the number and severity of claims and to variations between our estimated and actual ultimate payouts. We accrue the estimated cost of the uninsured portion of pending claims and an estimate for allocated loss adjustment expenses including legal and other direct costs associated with a claim. Estimates require judgments concerning the nature and severity of the claim, historical trends, advice from third-party administrators and insurers, the size of any potential damage award based on factors such as the specific facts of individual cases, the jurisdictions involved, the prospect of punitive damages, future medical costs, and inflation estimates of future claims development, and the legal and other costs to settle or defend the claims. We have significant exposure to fluctuations in the number and severity of claims. If there is an increase in the frequency and severity of claims, or we are required to accrue or pay additional amounts if the claims prove to be more severe than originally assessed, or any of the claims would exceed the limits of our insurance coverage, our profitability could be adversely affected.

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In addition to estimates within our self-insured retention layers, we also must make judgments concerning claims where we have third party insurance and for claims outside our coverage limits. In addition, our current auto liability policy includes a policy release premium refund of up to $4.0 million per year, if certain losses are not met and we were to commute the policy for that policy year. We did not elect to commute the policy for the April 1, 2010 through March 31, 2011 policy year. However, in June 2012 we commuted the policy for the April 1, 2011 through March 31, 2012 policy year and as such are responsible for all claims that occurred during that policy year, excluding any claims between $10.0 million and $20.0 million, should such a claim develop. As a result of a few large accidents during the policy that runs from April 1, 2012 to March 31, 2013, management believes the possibility of commuting the current policy to be remote. Our critical estimates include evaluating the likely exposure in each policy year and deciding whether to release the policy. Upon settling claims and expenses associated with claims where we have third party coverage, we are generally required to initially fund payment to the claimant and seek reimbursement from the insurer. Receivables from insurers for claims and expenses we have paid on their behalf total $0.5 million and $2.0 million at December 31, 2012 and 2011, respectively, and are included in drivers’ advances and other receivables on the consolidated balance sheet. Additionally, we accrue claims above our self-insured retention and record a corresponding receivable for amounts we expect to collect from insurers upon settlement of such claims. We have $3.4 million and $2.2 million at December 31, 2012 and 2011, respectively, as a receivable in other assets and as a corresponding accrual in the long-term portion of insurance and claims accruals on the consolidated balance sheet for claims above our self-insured retention for which we believe it is reasonably assured that the insurers will provide their portion of such claims. We evaluate collectability of the receivables based on the credit worthiness and surplus of the insurers along with our prior experience and contractual terms with each. If any claim occurrence were to exceed our aggregate coverage limits, we would have to accrue for the excess amount. Our critical estimates include evaluating whether a claim may exceed such limits and, if so, by how much. If one or more claims were to exceed our then effective coverage limits, our financial condition and results of operations could be materially and adversely affected. Additionally, we accrue claims above our self-insured retention and record a corresponding receivable for amounts we expect to collect from insurers upon settlement of such claims. We evaluate collectability of the receivables based on the credit worthiness and surplus of the insurers along with our prior experience and contractual terms with each. If any claim occurrence were to exceed our aggregate coverage limits, we would have to accrue for the excess amount. Our critical estimates include evaluating whether a claim may exceed such limits and, if so, by how much. If one or more claims were to exceed our then effective coverage limits, our financial condition and results of operations could be materially and adversely affected.

Our casualty insurance self-insured retention limit for the primary excess layer of casualty is no more than $1.0 million. The policy includes a limit for a single loss of $9.0 million, an aggregate of $15.0 million for each policy year, and a $27.0 million aggregate for three years ended March 31, 2013. Our excess policies cover up to $30.0 million per claim, subject to certain aggregate limits. We are self-insured on an occurrence/per claim basis for workers' compensation up to the first $1.3 million. We purchase coverage on an occurrence per claim basis for any cargo losses in the $0.3 million to $2.0 million layer, with our contracts generally excluding the value of any cargo in excess of $2.0 million. We also maintain a self-insured group medical plan for our Covenant Transport, Solutions, and corporate employees with annual per individual claimant stop-loss deductible of $0.4 million with a maximum lifetime benefit of $1.0 million. Star offers a self-insured group medical plan with annual per individual claimant stop-loss deductible of $0.2 million with a maximum lifetime benefit of $1.0 million, while SRT offers a fully insured group health program to its employees. We are completely self-insured for physical damage to our own tractors and trailers.

Interest

We capitalize interest on major projects during construction. Interest is capitalized based on the average interest rate on related debt. Capitalized interest was less than $0.1 million in 2012, 2011, and 2010.

Fair Value of Financial Instruments

Our financial instruments consist primarily of cash and cash equivalents, accounts receivable, commodity contracts, accounts payable, and debt. The carrying amount of cash and cash equivalents, accounts receivable, accounts payable, and current debt approximates their fair value because of the short-term maturity of these instruments. The carrying value of the factored receivables approximates the fair value, as the receivables are generally repaid directly to us by the client’s customer within 30-40 days due to the combination of the short-term nature of the financing transaction and the underlying quality of the receivables. Interest rates that are currently available to us for issuance of long-term debt with similar terms and remaining maturities are used to estimate the fair value of our long-term debt, which primarily consists of revenue equipment installment notes. The fair value of our revenue equipment installment notes approximated the carrying value at December 31, 2012, as the weighted average interest rate on these notes approximates the market rate for similar debt. Borrowings under our revolving Credit Facility approximate fair value due to the variable interest rate on the facility. Additionally, commodity contracts, which are accounted for as hedge derivatives, as discussed in Note 13, are valued based on the forward rate of the specific indices upon which the contract is being settled and adjusted for counterparty credit risk using available market information and valuation methodologies.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We have reflected the necessary deferred tax assets and liabilities in the accompanying consolidated balance sheets. We believe the future tax deductions will be realized principally through future reversals of existing taxable temporary differences and future taxable income, except for when a valuation allowance has been provided as discussed in Note 9.

In the ordinary course of business there is inherent uncertainty in quantifying our income tax positions. We assess our income tax positions and record tax benefits for all years subject to examination based upon management's evaluation of the facts, circumstances, and information available at the reporting dates. For those tax positions where it is more-likely-than-not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more-likely-than-not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements. Potential accrued interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense.

Our policy is to recognize income tax benefit arising from the exercise of stock options and restricted share vesting based on the ordering provisions of the tax law as prescribed by the Internal Revenue Code, including indirect tax effects, if any.

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Lease Accounting and Off-Balance Sheet Transactions

We issue residual value guarantees in connection with the operating leases we enter into for certain of our revenue equipment. These leases provide that if we do not purchase the leased equipment from the lessor at the end of the lease term, then we are liable to the lessor for an amount equal to the shortage (if any) between the proceeds from the sale of the equipment and an agreed value. To the extent the expected value at the lease termination date is lower than the residual value guarantee; we would accrue for the difference over the remaining lease term. We believe that proceeds from the sale of equipment under operating leases would exceed the payment obligation on substantially all operating leases. The estimated values at lease termination involve management judgments. As leases are entered into, determination as to the classification as an operating or capital lease involves management judgments on residual values and useful lives.

Capital Structure

The shares of Class A and B common stock are substantially identical except that the Class B shares are entitled to two votes per share while beneficially owned by our Chief Executive Officer or certain members of his immediate family, and Class A shares are entitled to one vote per share. The terms of any future issuances of preferred shares will be set by our Board of Directors.

Comprehensive Income (Loss)

Comprehensive income (loss) generally includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. Comprehensive income for 2012 and 2010 were comprised of the net income plus the unrealized gain on the effective portion of diesel fuel hedges. Comprehensive loss for 2011 was comprised of the net loss and the unrealized gain on the effective portion of diesel fuel hedges.

Income (Loss) Per Share

Basic income (loss) per share excludes dilution and is computed by dividing earnings available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted income (loss) per share reflects the dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in our earnings. The calculation of diluted loss per share excludes all unexercised options and 48,247, 61,097, and 70,178 unvested shares since the effect of any assumed exercise of the related awards would be anti-dilutive for the years ended December 31, 2012, 2011, and 2010, respectively.

The following table sets forth the calculation of net income (loss) per share included in the consolidated statements of operations for each of the three years ended December 31:

(in thousands except per share data)
	2012		2011			2010
Numerator:

Net income (loss)	$	6,065	$	(14,267	)	$	3,289

Denominator:

Denominator for basic income (loss) per share – weighted-average shares		14,742		14,689			14,374
Effect of dilutive securities:
Equivalent shares issuable upon conversion of unvested restricted stock		66		-			128
Equivalent shares issuable upon conversion of unvested employee stock options		-		-			3
Denominator for diluted income (loss) per share adjusted weighted-average shares and assumed conversions		14,808		14,689			14,505

Net income (loss) per share:
Basic income (loss) per share	$	0.41	$	(0.97	)	$	0.23
Diluted income (loss) per share	$	0.41	$	(0.97	)	$	0.23

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Stock-Based Employee Compensation

We issue several types of stock-based compensation, including awards that vest based on service, market, and performance conditions or a combination of the conditions. Performance-based awards vest contingent upon meeting certain performance criteria established by the Compensation Committee. Market-based awards vest contingent upon meeting certain stock price targets selected by the Compensation Committee. All awards require future service and thus forfeitures are estimated based on historical forfeitures and the remaining term until the related award vests. Determining the appropriate amount to expense in each period is based on likelihood and timing of achieving the stated targets for performance and market based awards, respectively, and requires judgment, including forecasting future financial results and market performance. The estimates are revised periodically based on the probability and timing of achieving the required performance and adjustments are made as appropriate. Awards that are only subject to time vesting provisions are amortized using the straight-line method.

Derivative Instruments and Hedging Activities

We periodically utilize derivative instruments to manage exposure to changes in fuel prices. At inception of a derivative contract, we document relationships between derivative instruments and hedged items, as well as our risk-management objective and strategy for undertaking various derivative transactions, and assess hedge effectiveness. We record derivative financial instruments in the balance sheet as either an asset or liability at fair value. If it is determined that a derivative is not highly effective as a hedge, or if a derivative ceases to be a highly effective hedge, we discontinue hedge accounting prospectively. The effective portion of changes in the fair value of derivatives are recorded in other comprehensive income, and reclassified into earnings in the same period during which the hedged transaction affects earnings. The ineffective portion is recorded in other income or expense.

Recent Accounting Pronouncements

Presentation of Comprehensive Income (loss) - In June 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2011-05. Under ASU 2011-05, an entity has the option to present the total of comprehensive income (loss), the components of net income (loss), and the components of other comprehensive income (loss) either in a single continuous statement of comprehensive income (loss) or in two separate but consecutive statements. Under both options, an entity will be required to present each component of net income (loss) along with total net income (loss), each component of other comprehensive income (loss) along with a total for other comprehensive income (loss), and a total amount for comprehensive income (loss). In December 2011, the FASB issued ASU 2011-12, which deferred the requirement to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income (loss) to net income (loss) while the FASB further deliberates this aspect of the proposal. The amendments contained in ASU 2011-05 do not change the items that must be reported in other comprehensive income (loss) or when an item of other comprehensive income (loss) must be reclassified to net income. The amendments also do not affect how earnings per share is calculated or presented. We adopted this guidance in the first quarter of 2012 and have presented a separate statement of comprehensive income (loss), which contains net income (loss) and comprehensive income (loss). This accounting guidance only impacted presentation and did not have an impact on our consolidated balance sheets, results of operations, stockholders’ equity or cash flows.

2. LIQUIDITY

Our business requires significant capital investments over the short-term and the long-term. Recently, we have financed our capital requirements with borrowings under our Third Amended and Restated Credit Facility ("Credit Facility"), cash flows from operations, long-term operating leases, capital leases, secured installment notes with finance companies, and proceeds from the sale of our used revenue equipment in 2012 and 2011. Our primary sources of liquidity at December 31, 2012, were funds provided by operations, proceeds from the sale of used revenue equipment, borrowings under our Credit Facility, borrowings from secured installment notes, capital leases, operating leases of revenue equipment, and cash and cash equivalents. We had a working capital (total current assets less total current liabilities) deficit of $20.0 million and $42.1 million at December 31, 2012 and 2011, respectively. Working capital deficits are common to many trucking companies that operate by financing revenue equipment purchases through borrowing or capitalized leases. When we finance revenue equipment through borrowing or capitalized leases, the principal amortization scheduled for the next year is categorized as a current liability, although the revenue equipment is classified as a long-term asset. Consequently, each purchase of revenue equipment financed with borrowing or capitalized leases decreases working capital. We believe our working capital deficit had little impact on our liquidity. Based on our expected financial condition, net capital expenditures, and results of operations and related net cash flows, we believe our working capital and sources of liquidity will be adequate to meet our current and projected needs for at least the next year.

We had a de minimus amount of borrowings outstanding under the Credit Facility as of December 31, 2012, undrawn letters of credit outstanding of approximately $39.6 million, and available borrowing capacity of $52.7 million. We do not expect to experience material liquidity constraints in the foreseeable future or on a long-term basis, based on our anticipated financial condition, results of operations, cash flows, continued availability of our Credit Facility, secured installment notes, and other sources of financing that we expect will be available to us.

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3. FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Accordingly, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. The fair value of the hedge derivative asset was determined based on quotes from the counterparty which were verified by comparing them to the exchange on which the related futures are traded, adjusted for counterparty credit risk. A three-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows:

•	Level 1. Observable inputs such as quoted prices in active markets;
•	Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
•	Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

(in thousands)	December 31,
Hedge derivative asset	2012	2011
Fair Value of Derivative	$524	$82
Quoted Prices in Active Markets (Level 1)	-	-
Significant Other Observable Inputs (Level 2)	$524	$82
Significant Unobservable Inputs (Level 3)	-	-

4. STOCK-BASED COMPENSATION

On March 31, 2011, the Compensation Committee of the Board of Directors of the Company approved a second amendment (the "Second Amendment") to the 2006 Omnibus Incentive Plan (the "Incentive Plan") to, among other things, (i) provide that the maximum aggregate number of shares of Class A common stock available for the grant of awards under the Incentive Plan from and after May 17, 2011, shall not exceed 800,000, (ii) limit the shares of Class A common stock that shall be available for issuance or reissuance under the Incentive Plan from and after May 17, 2011 to the additional 800,000 shares reserved, plus any expirations, forfeitures, cancellations, or certain other terminations of such shares, and (iii) re-set the term of the Incentive Plan to expire with respect to the ability to grant new awards on March 31, 2021. The Compensation Committee also re-approved, subject to stockholder re-approval, the material terms of the performance-based goals under the Incentive Plan so that certain incentive awards granted thereunder would continue to qualify as exempt "performance-based compensation" under Internal Revenue Code Section 162(m). The Second Amendment and the material terms of the performance-based goals under the Incentive Plan were forwarded for stockholder approval, and on May 17, 2011, at our 2011 Annual Meeting, our stockholders approved the adoption of the Second Amendment and re-approved the material terms of the performance-based goals under the Incentive Plan.

The Incentive Plan permits annual awards of shares of our Class A common stock to executives, other key employees, non-employee directors, and eligible participants under various types of options, restricted stock awards, or other equity instruments. At December 31, 2012, 224,731 of the aforementioned 800,000 shares were available for award under the amended Incentive Plan. No participant in the Incentive Plan may receive awards of any type of equity instruments in any calendar-year that relates to more than 200,000 shares of our Class A common stock. No awards may be made under the Incentive Plan after March 31, 2021. To the extent available, we have issued treasury stock to satisfy all share-based incentive plans.

Included in salaries, wages, and related expenses within the consolidated statements of operations is stock-based compensation expense of $1.2 million in 2012 and $1.0 million in 2011 and 2010. Included in general supplies and expenses within the consolidated statements of operations is stock-based compensation expenses for non-employee directors of $0.1 million in 2012, 2011, and 2010. All stock compensation expense recorded in 2012, 2011, and 2010 relates to restricted stock given no options were granted during these periods. Income tax benefits associated with stock compensation expense totaled $0.4 million in 2011 and 2010 related to the exercise of stock options and restricted share vesting, resulting in a related reduction in taxable income and an offsetting increase to additional paid in capital.

The Incentive Plan allows participants to pay the federal and state minimum statutory tax withholding requirements related to awards that vest or allows the participant to deliver to us shares of Class A common stock having a fair market value equal to the minimum amount of such required withholding taxes. To satisfy withholding requirements for shares that vested, certain participants elected to deliver to us 1,940 Class A common stock shares, which were withheld at a weighted average per share price of $4.60 based on the closing price of our Class A common stock on the dates the shares vested in 2012, in lieu of the federal and state minimum statutory tax withholding requirements. We remitted a de minimis amount to the proper taxing authorities in satisfaction of the employees' minimum statutory withholding requirements. To satisfy withholding requirements for shares that vested in 2011, certain participants elected to deliver to us approximately 61,752 Class A common stock shares, which were withheld at a weighted average per share price of $9.02 based on the closing price of our Class A common stock on the dates the shares vested, in lieu of the federal and state minimum statutory tax withholding requirements. We remitted approximately $0.6 million to the proper taxing authorities in satisfaction of the employees' minimum statutory withholding requirements. To satisfy withholding requirements for shares that vested in 2010, certain participants elected to deliver to us approximately 41,000 shares which were withheld at a per share price of $6.87, based on the closing price of our common stock on the date the shares vested, in lieu of the federal and state minimum statutory tax withholding requirements. We remitted approximately $0.3 million to the proper taxing authorities in satisfaction of the employees' minimum statutory withholding requirements. The payment of minimum tax withholdings on stock compensation are reflected within the issuances of restricted stock from treasury stock in the accompanying consolidated statement of stockholders' equity.

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The following table summarizes our restricted stock award activity for the fiscal years ended December 31, 2012, 2011, and 2010:

	Number of stock awards (in thousands)			Weighted average grant date fair value

Unvested at December 31, 2009		774		$	7.76

Granted		370		$	6.59
Vested		(228	)	$	3.07
Forfeited		(145	)	$	10.60
Unvested at December 31, 2010		771		$	8.05

Granted		224		$	9.33
Vested		(238	)	$	4.01
Forfeited		(289	)	$	12.04
Unvested at December 31, 2011		468		$	8.27

Granted		383		$	4.48
Vested		(40	)	$	4.19
Forfeited		(47	)	$	7.64
Unvested at December 31, 2012		764		$	6.62

The unvested shares at December 31, 2012 will vest based on when and if the related vesting criteria are met for each award. All awards require continued service to vest, noting that 288,031 of these awards vest solely based on continued service, which vest in varying increments between 2013 and 2015. Additionally, 30,999 awards vest if and to the extent that our Class A Stock trades above $11 for twenty consecutive trading days beginning January 1, 2013 through December 31, 2015. Performance based awards account for 445,265 of the unvested shares at December 31, 2012, including 111,957 shares that will vest based on our 2012 performance goals once such satisfaction of such performance goals has been certified by the compensation committee, 111,942 shares that will vest if our performance meets or exceeds a 1.0% improvement in the net income margin over 2010 results beginning January 1, 2013 through December 31, 2013, 113,366 shares that will vest if our performance meets or exceeds a 1.3% and 1.8% margin for the fiscal years 2013 and 2014, respectively, whereby if the 1.3% margin is not attained for fiscal year 2013, the full number of shares will vest if our performance meets or exceeds a 1.8% margin for the fiscal year 2014, and 108,000 awards that will vest if we meet or exceed $1.12 earnings per share for fiscal year 2014, 65.0% total net indebtedness, and 9.0% return on invested capital for fiscal year 2014.

The fair value of restricted stock awards that vested in 2012, 2011, and 2010 were approximately $0.1 million, $2.2 million, and $1.6 million, respectively. As of December 31, 2012, we had approximately $1.2 million of unrecognized compensation expense related to restricted stock awards, which is probable to be recognized over a weighted average period of approximately twenty-four months. All restricted shares awarded to executives and other key employees pursuant to the 2006 Plan have voting and other stockholder-type rights, but will not be issued until the relevant restrictions are satisfied.

On February 21, 2013, the Compensation Committee of our Board of Directors approved, subject to stockholder approval, a third amendment (the “Third Amendment”) to the Incentive Plan. The Third Amendment provides that (i) the maximum aggregate number of shares of Class A common stock available for grant of awards under the Incentive Plan from and after May 29, 2013, shall not exceed 750,000, plus any remaining available shares of the 800,000 shares approved under the Second Amendment, and any expirations, forfeitures, cancellations, or certain other terminations of shares approved for grant under the Third Amendment or the Second Amendment, and (ii) the term of the Incentive Plan will expire with respect to the ability to grant new awards on March 31, 2023. The Third Amendment is subject to stockholder approval at the Company’s May 29, 2013 annual meeting.

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The following table summarizes our stock option activity for the fiscal years ended December 31, 2012, 2011, and 2010:

	Number of options (in thousands)			Weighted average exercise price		Weighted average remaining contractual term	Aggregate intrinsic value (in thousands)

Outstanding at December 31, 2009		980		$	13.36	3.6 years	$	-

Options granted		-			-
Options exercised		(163	)	$	8.00
Options forfeited		(197	)	$	13.42
Outstanding at December 31, 2010		620		$	14.66	3.2 years	$	230

Options granted		-			-
Options exercised		-			-
Options forfeited		(183	)	$	12.27
Outstanding at December 31, 2011		437		$	15.67	2.1 years	$	-

Options granted		-			-
Options exercised		-			-
Options forfeited		(104	)	$	15.54
Outstanding at December 31, 2012		333		$	15.70	1.5 years	$	-

Exercisable at December 31, 2012		333		$	15.70	1.5 years	$	-

During the third quarter of 2010, certain members of management exercised 163,000 stock options, which provided for $1.3 million of proceeds.

5. PROPERTY AND EQUIPMENT

A summary of property and equipment, at cost, as of December 31, 2012 and 2011 is as follows:

(in thousands)	Estimated Useful Lives		2012		2011
Revenue equipment	3-10 years		$	331,761	$	351,433
Communications equipment	5-10 years			13,089		12,706
Land and improvements	0-10 years			16,658		18,910
Buildings and leasehold improvements	7-40 years			41,050		39,025
Construction in-progress		-		1,310		1,221
Other	2-7 years			16,079		16,756
			$	419,947	$	440,051

Depreciation expense was $47.8 million, $52.6 million, and $55.5 million in 2012, 2011, and 2010, respectively. The aforementioned depreciation expense excludes net gains on the sale of property and equipment totaling $4.9 million, $6.7 million and $4.3 million in 2012, 2011 and 2010, respectively, which are presented net in depreciation and amortization expense in the consolidated statements of operations.

We lease certain revenue equipment under capital leases with terms of 60 months. At December 31, 2012 and 2011, property and equipment included capitalized leases, which had capitalized costs of $21.3 million and accumulated amortization of $5.5 million and $3.4 million, respectively. Amortization of these leased assets is included in depreciation and amortization expense in the consolidated statement of operations and totaled $2.1 million, $1.8 million, and $1.4 million during 2012, 2011, and 2010, respectively.

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6. GOODWILL AND OTHER ASSETS

Based upon a combination of factors that occurred in the third quarter of 2011, including a significant decline in our market capitalization below our book value, a reduction in year-over-year earnings as a result of deterioration in the macro-economic environment and the market segments in which we operate, reductions in current and forecasted earnings estimates, and the need to amend our Credit Facility to remain in compliance with our financial covenants, we deemed that there had been multiple triggering events that would require an update to the Company’s annual goodwill impairment analysis as of September 30, 2011. This updated analysis provided that the carrying value of both reporting units exceeded their fair values. As a result of the second step of the goodwill impairment analysis, which involves calculating the implied fair value of each reporting unit's goodwill by allocating the fair value of all of its assets and liabilities other than goodwill (including both recognized and unrecognized intangible assets), and comparing the residual amount to the carrying value of goodwill, we determined that the carrying value of both reporting units exceeded the fair value. The non-cash goodwill impairment charge amounted to $11.5 million ($9.4 million, net of a $2.1 million income tax benefit) to write off the remaining goodwill associated with several acquisitions that were made prior to 2001. Following this impairment charge, as of September 30, 2011, no goodwill remained on our balance sheet.

A summary of other assets as of December 31, 2012 and 2011 is as follows:

(in thousands)	2012			2011
Covenants not to compete	$	1,192		$	1,192
Customer relationships		3,490			3,490
Less: accumulated amortization of intangibles		(4,129	)		(3,811	)
Net intangible assets		553			871
Investment in TEL		6,133			2,372
Other long-term receivables		3,389			2,154
Deposits		947			1,824
Deferred loan costs, net		819			1,285
Other, net		1,064			615
	$	12,905		$	9,121

Amortization expenses of intangible assets were $0.3 million, $0.4 million, and $0.6 million for 2012, 2011, and 2010, respectively. Approximate intangible amortization expense for the next five years is as follows:

	(In thousands)
2013	$	227
2014		91
2015		66
2016		48
2017		35
Thereafter	$	86

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7. DEBT

Current and long-term debt consisted of the following at December 31, 2012 and 2011:

(in thousands)	December 31, 2012				December 31, 2011
	Current		Long-Term		Current		Long-Term
Borrowings under Credit Facility	$	-	$	5	$	15,890	$	-
Revenue equipment installment notes; weighted average interest rate of 5.2% at December 31, 2012, and 5.7% December 31, 2011, due in monthly installments with final maturities at various dates ranging from January 2013 to January 2018, secured by related revenue equipment		61,200		94,920		80,003		125,666
Real estate note; interest rate of 2.7% and 2.8% at December 31, 2012 and 2011, respectively, due in monthly installments with fixed maturity at October 2013, secured by related real-estate		2,328		-		365		2,258
Other note payable, interest rate of 3.0% at December 31, 2012 and 2011, with fixed maturity at November 2016		108		289		-		243
Total debt		63,636		95,214		96,258		128,167
Principal portion of capital lease obligations, secured by related revenue equipment		2,091		14,003		1,957		16,129

Total debt and capital lease obligations	$	65,727	$	109,217	$	98,215	$	144,296

In September 2008, we and substantially all of our subsidiaries (collectively, the "Borrowers") entered into a Third Amended and Restated Credit Facility (the "Credit Facility") with Bank of America, N.A., as agent (the "Agent") and JPMorgan Chase Bank, N.A. ("JPM," and together with the Agent, the "Lenders").

The Credit Facility was originally structured as an $85.0 million revolving credit facility, with an accordion feature that, so long as no event of default exists, allows us to request an increase in the revolving credit facility of up to $50.0 million. The Credit Facility included, within our $85.0 million revolving credit facility, a letter of credit sub facility in an aggregate amount of $85.0 million and a swing line sub facility in an aggregate amount equal to the greater of $10.0 million or 10% of the Lenders' aggregate commitments under the Credit Facility from time-to-time.

On January 29, 2013, we entered into an eighth amendment, which was effective December 31, 2012, to the Credit Facility which, among other things, (i) increased the revolver commitment to $95.0 million, (ii) extended the maturity date from September 2014 to September 2017, (iii) eliminated the availability block of $15.0 million, (iv) improved pricing for revolving borrowings by amending the applicable margin as set forth below (beginning January 1, 2013), (v) improved the unused line fee pricing to 0.375% per annum when availability is less than $50.0 million and 0.5% per annum when availability is at or over such amount (beginning January 1, 2013), (vi) provided that the fixed charge coverage ratio covenant will be tested only during periods that commence when availability is less than or equal to the greater of 12.5% of the revolver commitment or $11.9 million, (vii) eliminated the consolidated leverage ratio covenant, (viii) reduced the level of availability below which cash dominion applies to the greater of 15% of the revolver commitment or $14.3 million (previously this level was $75.0 million), (ix) added deemed amortization of real estate and eligible revenue equipment included in the borrowing base to the calculation of fixed charge coverage ratio, (x) amended certain types of permitted debt to afford additional flexibility, and (xi) allowed for stock repurchases in an aggregate amount not exceeding $5.0 million and the purchase of up to the remaining 51% equity interest in Transport Enterprise Leasing, provided that certain conditions are met.

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In exchange for these amendments, the Borrowers agreed to pay fees of $0.3 million. Based on availability as of December 31, 2012, there was no fixed charge coverage requirement. Following the effectiveness of the eighth amendment, the applicable margin was changed as follows:

New Pricing

Level	Average Pricing Availability	Base Rate Loans	LIBOR Loans	L/C Fee
I	> $75,000,000	.50%	1.50%	1.50%
II	≤ $75,000,000 but > $50,000,000	.75%	1.75%	1.75%
III	≤ $50,000,000 but > $25,000,000	1.00%	2.00%	2.00%
IV	≤ $25,000,000	1.25%	2.25%	2.25%

Prior Pricing

Level	Average Excess Availability	Base Rate Loans	LIBOR Loans
I	>$70,000,000	1.25%	2.25%
II	≤$70,000,000 but >$35,000,000	1.50%	2.50%
III	≤$35,000,000 but >$20,000,000	1.75%	2.75%
IV	≤$20,000,000 but <$10,000,000	2.00%	3.00%
V	≤$10,000,000	2.25%	3.25%

Borrowings under the Credit Facility are classified as either "base rate loans" or "LIBOR loans." Base rate loans accrue interest at a base rate equal to the greater of the Agent's prime rate, the federal funds rate plus 0.5%, or LIBOR plus 1.0%, plus an applicable margin; while LIBOR loans accrue interest at LIBOR, plus an applicable margin. The applicable rates are adjusted quarterly based on average pricing availability. The unused line fee is also adjusted quarterly based on the average daily amount by which the Lenders' aggregate revolving commitments under the Credit Facility exceed the outstanding principal amount of revolver loans and the aggregate undrawn amount of all outstanding letters of credit issued under the Credit Facility. The obligations under the Credit Facility are guaranteed by us and secured by a pledge of substantially all of our assets, with the notable exclusion of any real estate or revenue equipment pledged under other financing agreements, including revenue equipment installment notes and capital leases.

Borrowings under the Credit Facility are subject to a borrowing base limited to the lesser of (A) $95.0 million, minus the sum of the stated amount of all outstanding letters of credit; or (B) the sum of (i) 85% of eligible accounts receivable, plus (ii) the lesser of (a) 85% of the appraised net orderly liquidation value of eligible revenue equipment, (b) 95% of the net book value of eligible revenue equipment, or (c) 35% of the Lenders' aggregate revolving commitments under the Credit Facility, plus (iii) the lesser of (a) $25.0 million or (b) 65% of the appraised fair market value of eligible real estate. We had a de minimis amount of borrowings outstanding under the Credit Facility as of December 31, 2012, undrawn letters of credit outstanding of approximately $39.6 million, and available borrowing capacity of $52.7 million. The interest rate on outstanding borrowings as of December 31, 2012 was 5.0% and all loans were base rate loans.

The Credit Facility includes usual and customary events of default for a facility of this nature and provides that, upon the occurrence and continuation of an event of default, payment of all amounts payable under the Credit Facility may be accelerated, and the Lenders' commitments may be terminated. If an event of default occurs under the Credit Facility and the Lenders cause all of the outstanding debt obligations under the Credit Facility to become due and payable, this could result in a default under other debt instruments that contain acceleration or cross-default provisions. The Credit Facility contains certain restrictions and covenants relating to, among other things, debt, dividends, liens, acquisitions and dispositions outside of the ordinary course of business, and affiliate transactions.

Capital lease obligations are utilized to finance a portion of our revenue equipment and are entered into with certain finance companies who are not parties to our Credit Facility. The leases in effect at December 31, 2012 terminate in September 2014 through September 2016 and contain guarantees of the residual value of the related equipment by us. As such, the residual guarantees are included in the related debt balance as a balloon payment at the end of the related term as well as included in the future minimum capital lease payments. These lease agreements require us to pay personal property taxes, maintenance, and operating expenses.

Pricing for the revenue equipment installment notes are quoted by the respective financial affiliates of our primary revenue equipment suppliers and other lenders at the funding of each group of equipment acquired and include fixed annual rates for new equipment under retail installment contracts. The notes included in the funding are due in monthly installments with final maturities at various dates ranging from January 2013 to January 2018. The notes contain certain requirements regarding payment, insuring of collateral, and other matters, but do not have any financial or other material covenants or events of default except certain notes totaling $126.5 million are cross-defaulted with the Credit Facility. Additional borrowings from the financial affiliates of our primary revenue equipment suppliers and other lenders are available to fund most new tractors expected to be delivered in 2013, while any other property and equipment purchases, including trailers, will be funded with a combination of notes, operating leases, capital leases, and/or from the Credit Facility.

As of December 31, 2012, the scheduled principal payments of debt, excluding capital leases for which future payments are discussed in Note 8 are as follows:

	(in thousands)
2013	$	63,636
2014	$	25,520
2015	$	33,132
2016	$	27,657
2017	$	6,793
Thereafter	$	2,112

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8. LEASES

We have operating lease commitments for office and terminal properties, revenue equipment, and computer and office equipment and capital lease commitments for revenue equipment, exclusive of owner/operator rentals and month-to-month equipment rentals, summarized for the following fiscal years (in thousands):

	Operating		Capital
2013	$	24,334	$	3,059
2014	$	21,152	$	8,751
2015	$	19,204	$	3,362
2016	$	14,464	$	2,886
2017	$	6,683	$	-
Thereafter	$	26,252	$	-

A portion of our operating leases of tractors and trailers contain residual value guarantees under which we guarantee a certain minimum cash value payment to the leasing company at the expiration of the lease. We estimate that the residual guarantees are approximately $9.2 million and $3.9 million at December 31, 2012 and 2011, respectively. The residual guarantees at December 31, 2012 expire between 2016 and 2019. We expect our residual guarantees to approximate the market value at the end of the lease term. Additionally, certain leases contain cross-default provisions with other financing agreements and additional charges if the unit's mileage exceeds certain thresholds defined in the lease agreement.

Rental expense is summarized as follows for each of the three years ended December 31:

(in thousands)	2012	2011	2010
Revenue equipment rentals	$19,746	$15,364	$17,346
Building and lot rentals	3,714	3,266	3,586
Other equipment rentals	679	812	1,063
	$24,139	$19,442	$21,995

On October 28, 2010, we executed a Letter Agreement ("Letter Agreement") with Transport International Pool, Inc. ("TIP"). The Letter Agreement modifies the Master Lease Agreement dated April 15, 2003, between TIP and us, pursuant to which we have entered into (among others) equipment lease schedules covering 2,446 trailers (the "Designated Schedules") which expired between November 2010 and May 2011. In addition, contemporaneously with the execution of the Letter Agreement, we returned 543 trailers in accordance with the terms of the Master Lease Agreement in order to better match our trailer fleet with our current number of tractors. Pursuant to the terms of the Letter Agreement, upon the scheduled expiration of each of the Designated Schedules, we will lease from TIP the trailers that are subject to such Designated Schedule on the terms and conditions set forth in the Letter Agreement and a new lease schedule attached to and made a part of the Letter Agreement. Under the terms of the Letter Agreement, the trailers subject to the agreement will be required to be returned or purchased at the rate of approximately 100 trailers per month beginning February 2012. In 2012, we began turning in the trailers that were covered by the Designated Schedules and replaced a portion of the trailers with new ones, such that our total trailer count is approximately 450 less at December 31, 2012 than December 31, 2011. We will continue turning in trailers in 2013 and 2014 pursuant to the Letter Agreement; however, these units will generally be replaced on a one-for-one basis with new trailers.

In April 2006, we entered into a sale leaseback transaction involving our corporate headquarters, a maintenance facility, a body shop, and approximately forty-six acres of surrounding property in Chattanooga, Tennessee. In the transaction, we entered into a twenty-year lease agreement, whereby we will lease back the property at an annual rental rate of approximately $2.5 million subject to annual rent increases of 1.0%, resulting in annual straight-line rental expense of approximately $2.7 million, which comprises a significant portion of building rentals above. The transaction resulted in a gain of approximately $2.1 million, which is being amortized ratably over the life of the lease, noting the $1.4 million deferred gain is included in other long-term liabilities in the consolidated balance sheet.

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9. INCOME TAXES

Income tax expense (benefit) for the years ended December 31, 2012, 2011, and 2010 is comprised of:

(in thousands)	2012			2011			2010
Federal, current	$	(707	)	$	(198	)	$	(11,377	)
Federal, deferred		6,897			(1,688	)		16,739
State, current		307			184			130
State, deferred		(162	)		(470	)		683
	$	6,335		$	(2,172	)	$	6,175

Income tax expense varies from the amount computed by applying the federal corporate income tax rate of 35% to income before income taxes for the years ended December 31, 2012, 2011, and 2010 as follows:

(in thousands)	2012			2011			2010
Computed "expected" income tax expense	$	4,340		$	(5,754	)	$	3,312
State income taxes, net of federal income tax effect		409			(559	)		322
Per diem allowances		2,550			3,015			3,350
Tax contingency accruals		(444	)		(70	)		145
Nondeductible foreign operating income		-			-			(133	)
Nondeductible goodwill impairment		-			2,275			-
Valuation allowance (release), net		(251	)		(708	)		(638	)
Disallowed interest release		-			-			(48	)
Tax credits		(407	)		(61	)		(182	)
Other, net		138			(310	)		47
Actual income tax expense	$	6,335		$	(2,172	)	$	6,175

Income tax expense varies from the amount computed by applying the federal corporate income tax rate of 35% to income (loss) before income taxes primarily due to state income taxes, net of federal income tax effect, adjusted for permanent differences, the most significant of which is the effect of the per diem pay structure for drivers. Drivers who meet the requirements to receive per diem receive non-taxable per diem pay in lieu of a portion of their taxable wages. This per diem program increases our drivers' net pay per mile, after taxes, while decreasing gross pay, before taxes. As a result, salaries, wages, and employee benefits are slightly lower and our effective income tax rate is higher than the statutory rate. Generally, as pre-tax income increases, the impact of the driver per diem program on our effective tax rate decreases, because aggregate per diem pay becomes smaller in relation to pre-tax income, while in periods where earnings are at or near breakeven the impact of the per diem program on our effective tax rate is significant. Due to the partially nondeductible effect of per diem pay, our tax rate will fluctuate in future periods based on fluctuations in earnings. Our effective tax rate is also significantly impacted in the 2011 period by the $11.5 million goodwill impairment recorded in the third quarter of 2011, of which $2.1 million of the goodwill impairment was tax deductible and the remaining $9.4 million was nondeductible.

The temporary differences and the approximate tax effects that give rise to our net deferred tax liability at December 31, 2012 and 2011 are as follows:

(in thousands)	2012			2011
Deferred tax assets:
Allowance for doubtful accounts	$	662		$	657
Insurance and claims		11,950			10,766
Net operating loss carryovers		16,978			31,031
Capital loss carryover related to Transplace		-			251
Other		5,607			6,085
Valuation allowance		(299	)		(550	)
Total deferred tax assets		34,898			48,240

Deferred tax liabilities:
Property and equipment		(76,748	)		(83,651	)
Other		(291	)		(34	)
Prepaid expenses		(3,054	)		(2,842	)
Total net deferred tax liabilities		(80,093	)		(86,527	)

Net deferred tax liability	$	(45,195	)	$	(38,287	)

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Deferred taxes are classified in the accompanying consolidated balance sheet based on the nature of the related asset or liability as current or long-term, such that current deferred tax assets and liabilities provide a net asset of $4.6 million, while long-term deferred tax assets and liabilities provide a net liability of $49.8 million. The net deferred tax liability of $45.2 million primarily relates to differences in cumulative book versus tax depreciation of property and equipment, partially off-set by net operating loss carryovers and insurance claims that have been reserved but not paid. The carrying value of our deferred tax assets assumes that we will be able to generate, based on certain estimates and assumptions, sufficient future taxable income in certain tax jurisdictions to utilize these deferred tax benefits. If these estimates and related assumptions change in the future, we may be required to establish a valuation allowance against the carrying value of the deferred tax assets, which would result in additional income tax expense. On a periodic basis, we assess the need for adjustment of the valuation allowance. Based on forecasted taxable income resulting from the reversal of deferred tax liabilities, primarily generated by accelerated depreciation for tax purposes in prior periods, and tax planning strategies available to us, no valuation allowance has been established at December 31, 2012 or 2011, except for $0.3 million and $0.6 million, respectively, related to certain state net operating loss and capital loss carry-forwards. If these estimates and related assumptions change in the future, we may be required to modify our valuation allowance against the carrying value of the deferred tax assets.

The activity in the valuation allowance on deferred tax assets (in thousands) is as follows:

Years ended December 31:	Beginning balance January 1,		Additional provisions to allowance		Write-offs and other deductions			Ending balance December 31,
2012	$	550	$	-	$	(251	)	$	299

2011	$	1,258	$	32	$	(740	)	$	550

As of December 31, 2012, we had a $2.6 million liability recorded for unrecognized tax benefits, which includes interest and penalties of $1.0 million. We recognize interest and penalties accrued related to unrecognized tax benefits in tax expense. As of December 31, 2011, we had a $3.3 million liability recorded for unrecognized tax benefits, which included interest and penalties of $1.3 million. Interest and penalties recognized for uncertain tax positions provided for a $0.3 million benefit in 2012, compared to $0.1 million and $0.2 million of expense in 2011 and 2010, respectively.

The following tables summarize the annual activity related to our gross unrecognized tax benefits (in thousands) for the years ended December 31, 2012, 2011, and 2010:

	2012			2011			2010
Balance as of January 1,	$	1,979		$	2,133		$	2,137
Increases related to prior year tax positions		-			3			75
Decreases related to prior year positions		-			-			(30	)
Increases related to current year tax positions		2			58			110
Decreases related to settlements with taxing authorities		-			-			-
Decreases related to lapsing of statute of limitations		(418	)		(215	)		(159	)
Balance as of December 31,	$	1,563		$	1,979		$	2,133

If recognized, $1.7 million and $2.0 million of unrecognized tax benefits would impact our effective tax rate as of December 31, 2012 and 2011 respectively. Any prospective adjustments to our reserves for income taxes will be recorded as an increase or decrease to our provision for income taxes and would impact our effective tax rate.

Our 2009 through 2012 tax years remain subject to examination by the IRS for U.S. federal tax purposes, our major taxing jurisdiction. In the normal course of business, we are also subject to audits by state and local tax authorities. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, we believe that our reserves reflect the more likely than not outcome of known tax contingencies. We adjust these reserves, as well as the related interest, in light of changing facts and circumstances. Settlement of any particular issue would usually require the use of cash. Favorable resolution would be recognized as a reduction to our annual tax rate in the year of resolution. We do not expect any significant increases or decreases for uncertain income tax positions during the next year.

Our federal net operating loss carryforwards are available to offset future federal taxable income, if any, through 2030, while our state net operating loss carryforwards and state tax credits expire over various periods between 2013 and 2030 based on jurisdiction.

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10. EQUITY METHOD INVESTMENT

On May 31, 2011, we acquired a 49.0% interest in Transport Enterprise Leasing, LLC for $1.5 million in cash. Additionally, TEL’s majority owners were eligible to receive an earn-out of up to $4.5 million for TEL’s results through December 31, 2012, of which $1.0 million was earned based on TEL’s 2011 results and $2.4 million was earned based on TEL’s 2012 results. At December 31, 2012 and 2011, $0.5 million and $1.0 million, respectively, were included in accrued expenses in the consolidated balance sheet related to amounts earned but not paid as of the respective balance sheet dates. The earn-out payments increased our investment balance and there are no additional earn-outs pursuant for future results.

TEL is a tractor and trailer equipment leasing company and used equipment reseller. We have not guaranteed any of TEL’s debt and have no obligation to provide funding, services or assets. Under the agreement, we have an option to acquire 100% of TEL between January 1, 2013 and May 31, 2016, by purchasing the majority owners’ interest based on a multiple of TEL’s average earnings before interest and taxes, adjusted for certain items including cash and debt balances as of the acquisition date. Subsequent to May 31, 2016, TEL’s majority owners’ have the option to acquire our interest based on the same terms detailed above. For the years ended, December 31, 2012 and 2011, we sold tractors and trailers to TEL for $8.6 million $5.4 million, respectively, and received $2.1 million and $0.5 million, respectively, for providing various maintenance services, certain back-office functions and for miscellaneous equipment. We deferred gains totaling $0.2 million and $0.6 million for the years ending December 31, 2012 and 2011, representing 49% of the gains on units sold to TEL less any gains previously deferred and recognized when the equipment was sold to a third party. Deferred gains totaling $0.8 and $0.6 million at December 31, 2012 and December 31, 2011, respectively, are being carried as a reduction in our investment in TEL. We had a receivable from TEL for 2012 and 2011 of $0.8 million and $0.6 million, respectively, related to cash disbursements made pursuant to our performance of certain back-office and maintenance functions on their behalf.

We have accounted for our investment in TEL using the equity method of accounting and thus our financial results include our proportionate share of TEL’s net income since May 31, 2011, or $1.9 million in 2012 and $0.7 million in 2011. We received an equity distribution from TEL for $0.3 million in 2012 and $0.2 million in 2011, which was distributed to each member based on its respective ownership percentage in order to satisfy estimated tax payments resulting from TEL’s earnings. The distribution is the result of TEL being a limited liability company and thus its earnings pass through to the members and are taxed for federal and certain state income on their respective tax returns. Our investment in TEL, totaling $6.1 million and $2.4 million at December 31, 2012 and 2011, respectively, is included in other assets in the accompanying consolidated balance sheet.

See TEL’s summarized financial information subsequent to our investment below.

(in thousands)	As of and for the twelve months ended December 31, 2012		As of and for the seven months ended December 31, 2011
Current Assets	$	6,898	$	3,805
Non-current Assets		21,150		11,255
Current Liabilities		9,988		5,136
Non-current Liabilities		13,670		8,739
Total Equity		4,390		1,185

Revenue	$	53,459	$	31,070
Operating Expenses		48,382		29,426
Operating Income		5,077		1,644
Net Income	$	3,850	$	1,331

11. DEFERRED PROFIT SHARING EMPLOYEE BENEFIT PLAN

We have a deferred profit sharing and savings plan under which all of our employees with at least six months of service are eligible to participate. Employees may contribute a percentage of their annual compensation up to the maximum amount allowed by the Internal Revenue Code. We may make discretionary contributions as determined by a committee of its Board of Directors. We made no contributions in 2012, 2011, and 2010 to the profit sharing and savings plan. The Board approved the suspension of employee matching "discretionary" contributions to be made beginning early in 2009 for an indefinite time period.

12. RELATED PARTY TRANSACTIONS

See Note 10 for discussions of the related party transactions associated with TEL.

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13. DERIVATIVE INSTRUMENTS

We engage in activities that expose us to market risks, including the effects of changes in fuel prices. Financial exposures are evaluated as an integral part of our risk management program, which seeks, from time-to-time, to reduce the potentially adverse effects that the volatility of fuel markets may have on operating results. In an effort to seek to reduce the variability of the ultimate cash flows associated with fluctuations in diesel fuel prices, we periodically enter into various derivative instruments, including forward futures swap contracts. As diesel fuel is not a traded commodity on the futures market, heating oil is used as a substitute for diesel fuel as prices for both generally move in similar directions. Under these contracts, we pay a fixed rate per gallon of heating oil and receive the monthly average price of New York heating oil per the "NYMEX" (New York Mercantile Exchange). The retrospective and prospective regression analyses provided that changes in the prices of diesel fuel and heating oil were deemed to be highly effective based on the relevant authoritative guidance. We do not engage in speculative transactions, nor do we hold or issue financial instruments for trading purposes.

We recognize all derivative instruments at fair value on our consolidated balance sheets. Our derivative instruments are designated as cash flow hedges, thus the effective portion of the gain or loss on the derivatives is reported as a component of accumulated other comprehensive income and will be reclassified into earnings in the same period during which the hedged transaction affects earnings. The effective portion of the derivative represents the change in fair value of the hedge that offsets the change in fair value of the hedged item. To the extent the change in the fair value of the hedge does not perfectly offset the change in the fair value of the hedged item, the ineffective portion of the hedge is immediately recognized in other income on our consolidated statements of operations. Ineffectiveness is calculated using the cumulative dollar offset method as an estimate of the difference in the expected cash flows of the heating oil futures contracts compared to the changes in the all-in cash outflows required for the diesel fuel purchases.

At December 31, 2012, we had forward futures swap contracts on approximately 12.1 million gallons of diesel to be purchased in 2013 or approximately 20% of our projected annual 2013 fuel requirements and 4.0 million gallons to be purchased in 2014 or approximately 6% of our projected annual 2014 fuel requirements.

The fair value of the contracts that were in effect at December 31, 2012 and 2011, which had a fair value of approximately $0.5 million and $0.1 million, respectively, and are included in other assets in the consolidated balance sheet, are included in accumulated other comprehensive income, net of tax. Additionally, $3.1 million, $1.9 million, and $1.8 million were reclassified from accumulated other comprehensive income (loss) to our results from operations for the years ended December 31, 2012, 2011, and 2010, respectively, related to gains on contracts that expired or were sold and for which we completed the forecasted transaction by purchasing the hedged diesel fuel.

Based on the amounts in accumulated other comprehensive income as of December 31, 2012 and the expected timing of the purchases of the diesel hedged, we expect to reclassify approximately $0.3 million on derivative instruments from accumulated other comprehensive income into our results from operations during the next year due to the actual diesel fuel purchases. The amounts actually realized will be dependent on the fair values as of the date of settlement.

We perform both a prospective and retrospective assessment of the effectiveness of our hedge contracts at inception and quarterly, including assessing the possibility of counterparty default. If we determine that a derivative is no longer expected to be highly effective, we discontinue hedge accounting prospectively and recognize subsequent changes in the fair value of the hedge in earnings. As a result of our effectiveness assessment at inception, quarterly, and at December 31, 2012 and 2011, we believe our hedge contracts have been and will continue to be highly effective in offsetting changes in cash flows attributable to the hedged risk.

Outstanding financial derivative instruments expose us to credit loss in the event of nonperformance by the counterparties to the agreements. We do not expect any of the counterparties to fail to meet their obligations. Our credit exposure related to these financial instruments is represented by the fair value of contracts reported as assets. To manage credit risk, we review each counterparty's audited financial statements and credit ratings and obtain references.

14. COMMITMENTS AND CONTINGENT LIABILITIES

From time-to-time, we are a party to ordinary, routine litigation arising in the ordinary course of business, most of which involves claims for personal injury and property damage incurred in connection with the transportation of freight. We maintain insurance to cover liabilities arising from the transportation of freight for amounts in excess of certain self-insured retentions. In management's opinion, our potential exposure under pending legal proceedings is adequately provided for in the accompanying consolidated financial statements.

We had $39.6 million and $38.9 million of outstanding and undrawn letters of credit as of December 31, 2012 and 2011, respectively. The letters of credit are maintained primarily to support our insurance programs.

We had commitments outstanding at December 31, 2012, to acquire revenue equipment totaling approximately $74.3 million in 2013 versus commitments at December 31, 2011, of approximately $55.0 million. These commitments are cancelable, subject to certain adjustments in the underlying obligations and benefits. These purchase commitments are expected to be financed by operating leases, capital leases, long-term debt, proceeds from sales of existing equipment, and/or cash flows from operations. Additionally, 2013 purchase obligations include $0.5 million of earn-out payments related to our investment in TEL to be paid in 2013 related to 2012 performance. We also had commitments outstanding at December 31, 2012, to acquire computer software totaling $0.4 million in 2013.

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15. SEGMENT INFORMATION

As previously discussed, we have two reportable segments: Truckload and Solutions.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Substantially all intersegment sales prices are market based. We evaluate performance based on operating income of the respective business units.

"Unallocated Corporate Overhead" includes expenses that are incidental to our activities and are not specifically allocated to one of the segments.

Year Ended December 31, 2012	Truckload			Solutions			Unallocated Corporate Overhead			Consolidated
Revenue	$	647,986		$	33,250		$	-		$	681,236
Intersegment revenue		-			(6,982	)		-			(6,982	)
Operating income (loss)		34,185			(741	)		(10,235	)		23,209
Depreciation and amortization		42,015			26			1,181			43,222
Total assets		363,223			11,963			25,046			400,232
Capital expenditures (proceeds), net		(14,093	)		-			939			(13,154	)

Year Ended December 31, 2011
Revenue	$	625,252		$	33,526		$	-		$	658,778
Intersegment revenue		-			(6,151	)		-			(6,151	)
Operating income (loss) (1)		10,438			1,687			(13,186	)		(1,061	)
Depreciation and amortization		44,825			24			1,425			46,274
Total assets		405,699			6,138			27,988			439,825
Capital expenditures, net		49,210			-			1,531			50,741

Year Ended December 31, 2010
Revenue	$	610,291		$	46,053		$	-		$	656,344
Intersegment revenue		-			(6,595	)		-			(6,595	)
Operating income (loss)		35,390			1,462			(10,844	)		26,008
Depreciation and amortization		50,821			23			963			51,807
Goodwill at carrying value		11,539			-			-			11,539
Total assets		391,510			6,983			42,686			441,179
Capital expenditures, net		81,316			2			954			82,272

(1)	Truckload segment includes $11.5 million goodwill impairment discussed in Note 6.

16. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

	(in thousands except per share amounts)
Quarters ended	Mar. 31, 2012 (2)			June 30, 2012		Sep. 30, 2012		Dec. 31, 2012

Total revenue	$	157,031		$	171,301	$	168,427	$	177,495
Operating income (1)		2,357			11,059		4,645		5,149
Net income (loss) (1)		(640	)		4,251		1,002		1,452
Basic and diluted income (loss) per share		(0.04	)		0.29		0.07		0.10

	(in thousands except per share amounts)

Quarters ended	Mar. 31, 2011			June 30, 2011		Sep. 30, 2011 (3)			Dec. 31, 2011

Total revenue	$	156,391		$	172,865	$	161,418		$	161,953
Operating income		301			7,234		(9,754	)		1,159
Net (loss) income		(2,464	)		1,655		(11,213	)		(2,245	)
Basic and diluted (loss) income per share (1)		(0.17	)		0.11		(0.76	)		(0.15	)

(1)	Quarter totals do not aggregate to annual results due to rounding.
(2)	Includes $2.4 million gain on the sale of a terminal property.
(3)	Includes $11.5 million goodwill impairment discussed in Note 6.

[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2012 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 / other jurisdiction of incorporation or organization)		(I.R.S. Employer 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 Global Select Market
	(Title of class)

Securities registered pursuant to Section 12(g) of the Act:	None

Large accelerated filer	[ ]	Accelerated filer	[ ]
Non-accelerated filer	[ ] (Do not check if a smaller reporting company)	Smaller reporting company	[X]

Part I
	Item 1.	Business	3
	Item 1A.	Risk Factors	11
	Item 1B.	Unresolved Staff Comments	16
	Item 2.	Properties	16
	Item 3.	Legal Proceedings	16
	Item 4.	Mine Safety Disclosures	16

Part II
	Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	17
	Item 6.	Selected Financial Data	19
	Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
	Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	35
	Item 8.	Financial Statements and Supplementary Data	36
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	36
	Item 9A.	Controls and Procedures	36
	Item 9B.	Other Information	37

Part III
	Item 10.	Directors, Executive Officers, and Corporate Governance	38
	Item 11.	Executive Compensation	38
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	38
	Item 13.	Certain Relationships and Related Transactions, and Director Independence	38
	Item 14.	Principal Accounting Fees and Services	38

Part IV
	Item 15.	Exhibits and Financial Statement Schedules	39

Signatures		42

Report of Independent Registered Public Accounting Firm		43

Financial Data
	Consolidated Balance Sheets	44
	Consolidated Statements of Operations	45
	Consolidated Statements of Comprehensive Income (Loss)	46
	Consolidated Statements of Stockholders' Equity	47
	Consolidated Statements of Cash Flows	48
	Notes to Consolidated Financial Statements	50

•	Expanding our refrigerated, non-asset based brokerage and ancillary services, and specialized team operation, while reducing capital allocated to certain other operations;
•	Increasing the use of owner-operators, particularly in our team operations, to more flexibly match equipment positioning to changes in freight patterns and economic demand, as well as reduce the capital allocated to this very mileage-intensive business;
•	Improving our debt-to-capitalization ratio through capital decisions and other means;
•	Implementing a more comprehensive sales and marketing approach that emphasizes to customers the enterprise-wide breadth of services we offer and encourages all sales associates to market all of our services; and
•	Designing our business to optimize the career opportunity for our drivers.

•	Grow freight revenue meaningfully without increasing our fleet of owned trucks;
•	Improve operating ratio to the low to mid 90s;
•	Generate a return on invested capital approaching double digits; and
•	Reduce total leverage by a meaningful amount.

Distribution of Revenue Among Subsidiaries
Covenant Transport	56%
SRT	30%
Star	9%
Solutions	5%

Average Freight Revenue Per Total Mile (excludes fuel surcharge revenue)	2008	2009	2010	2011	2012
	$1.36	$1.27	$1.31	$1.38	$1.47

Average Miles Per Tractor	2008	2009	2010	2011	2012
Average Miles Per Tractor	118,992	119,836	125,178	115,775	118,103

Average Freight Revenue Per Tractor Per Week (excludes fuel surcharge revenue)	2008	2009	2010	2011	2012
	$3,105	$2,920	$3,137	$3,069	$3,322

•	We may experience a reduction in overall freight levels, which may impair our asset utilization;
•	Certain of our customers may face credit issues and could experience cash flow problems that may lead to payment delays, increased credit risk, bankruptcies, and other financial hardships that could result in even lower freight demand and may require us to increase our allowance for doubtful accounts;
•	Freight patterns may change as supply chains are redesigned, resulting in an imbalance between our capacity and our customers' freight demand;
•	Customers may bid out freight or select competitors that offer lower rates from among existing choices in an attempt to lower their costs, and we might be forced to lower our rates or lose freight; and
•	We may be forced to accept more freight from freight brokers, where freight rates are typically lower, or may be forced to incur more non-revenue miles to obtain loads.

•	We compete with many other truckload carriers of varying sizes and, to a lesser extent, with less-than-truckload carriers, railroads, intermodal companies, 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, including four of our top ten, 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; and
•	Competition from non-asset-based logistics and freight brokerage companies may adversely affect our customer relationships and freight rates.

•	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 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.

Terminal Locations	Maintenance	Recruiting/ Orientation	Sales	Ownership
Chattanooga, Tennessee	x	x	x	Leased
Indianapolis, Indiana				Leased
Texarkana, Arkansas	x	x	x	Owned
Hutchins, Texas	x	x		Owned
Pomona, California		x		Owned
Allentown, Pennsylvania				Owned
Nashville, Tennessee	x	x	x	Owned
Olive Branch, Mississippi	x			Owned
Orlando, Florida				Owned

Period	High	Low

Calendar Year 2011:

1st Quarter	$10.00	$8.00
2nd Quarter	$9.86	$7.22
3rd Quarter	$7.83	$3.60
4th Quarter	$3.69	$2.35

Calendar Year 2012:

1st Quarter	$3.70	$2.84
2nd Quarter	$3.90	$2.92
3rd Quarter	$6.00	$3.50
4th Quarter	$5.88	$4.25

Period	(a) Total Number of Shares Purchased (1)		(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number of Class A Shares that May Yet Be Purchased Under the Publicly Announced Plans or Programs
October 1-31, 2012		-		-		-		-
November 1-30, 2012		-		-		-		-
December 1-31, 2012		529	$	5.10		-		-
Total		529	$	5.10		-		-

(In thousands, except per share and operating data amounts)
	Years Ended December 31,
	2012			2011			2010			2009			2008
Statement of Operations Data:
Freight revenue	$	529,080		$	512,026		$	546,320		$	520,495		$	615,810
Fuel surcharge revenue		145,174			140,601			103,429			68,192			158,104
Total revenue	$	674,254		$	652,627		$	649,749		$	588,687		$	773,914

Operating expenses:
Salaries, wages, and related expenses		217,080			211,169			216,316			220,213			268,742
Fuel expense		194,841			208,693			177,239			143,835			260,704
Operations and maintenance		45,265			43,585			42,050			40,833			48,837
Revenue equipment rentals and purchased transportation		85,010			63,353			71,474			76,484			90,974
Operating taxes and licenses		11,043			12,148			11,090			12,113			13,078
Insurance and claims		33,707			36,163			32,648			26,531			31,200
Communications and utilities		4,809			5,137			4,974			5,740			6,702
General supplies and expenses		16,068			15,627			16,143			19,538			21,450
Depreciation and amortization, including gains and losses on disposition of equipment and impairment of assets (1)		43,222			46,274			51,807			48,122			63,235
Goodwill impairment charge (2)		-			11,539			-			-			24,671
Total operating expenses		651,045			653,688			623,741			593,409			829,593
Operating income (loss)		23,209			(1,061	)		26,008			(4,722	)		(55,679	)
Other expense (income):
Interest expense		12,697			16,208			16,566			14,184			10,373
Interest income		-			(32	)		(2	)		(144	)		(435	)
Loss on sale of Transplace investment and note receivable (3)		-			-			-			11,485			-
Loss on early extinguishment of debt		-			-			-			-			726
Other		(13	)		(123	)		(20	)		(199	)		(160	)
Other expenses, net		12,684			16,053			16,544			25,326			10,504
Equity in income of affiliate		1,875			675			-			-			-
Income (loss) before income taxes		12,400			(16,439	)		9,464			(30,048	)		(66,183	)
Income tax expense (benefit)		6,335			(2,172	)		6,175			(5,018	)		(12,792	)
Net income (loss)	$	6,065		$	(14,267	)	$	3,289		$	(25,030	)	$	(53,391	)

(1)	Includes a $15,791 pre-tax impairment charge related to revenue equipment in 2008.
(2)	Represents non-cash impairment charges to write off the goodwill in our truckload segment.
(3)	Represents a non-cash loss on sale of investment in Transplace, Inc. ("Transplace") and a related receivable.

(1)	Excludes fuel surcharge revenue.
(2)	Includes monthly rental tractors and tractors provided by independent contractors.
(3)	Excludes monthly rental trailers.

•	Operating income was $23.2 million, compared with an operating loss of $1.1 million for 2011. Operating income in 2012 included a $2.4 million gain on disposition of real estate, a $4.0 million benefit from commutation of an insurance policy, and a $3.1 million gain on fuel hedging. Operating loss in 2011 included an $11.5 million charge for goodwill impairment and a $1.9 million gain on fuel hedging;
•	Net income was $6.1 million, or $0.41 per basic and diluted share, compared with net loss of $14.3 million, or ($0.97) per basic and diluted share, for 2011. Net loss for 2011 included pre-tax non-cash goodwill impairment charges of $11.5 million, or ($0.64) per share;
•	Since December 31, 2011, aggregate lease-adjusted indebtedness (which includes the present value of off-balance sheet lease obligations), net of cash, decreased by approximately $54.5 million to $242.4 million;
•	Stockholders' equity at December 31, 2012, was $94.7 million and our tangible book value was $94.1 million, or $6.38 per basic share; and
•	Our equity investment in TEL provided $1.9 million of pre-tax earnings in 2012 compared to $0.7 million for the seven months ended December 31, 2011.

(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 $145.2 million, $140.6 million, and $103.4 million in 2012, 2011, and 2010, respectively.
(2)	Includes a gain on the sale of property and equipment totaling $4.9 million, $6.7 million, and $4.3 million in 2012, 2011, and 2010, respectively.
(3)	Represents an $11.5 million non-cash impairment charge to write off the remaining goodwill in our truckload segment associated with several acquisitions that we made prior to 2001.

	Year ended December 31,
(in thousands)	2012			2011			2010
Revenues:
Truckload	$	647,986		$	625,252		$	610,291
Solutions		26,268			27,375			39,458
Total	$	674,254		$	652,627		$	649,749
Operating Income (loss):
Truckload	$	34,185		$	10,438		$	35,390
Solutions		(741	)		1,687			1,462
Unallocated Corporate Overhead		(10,235	)		(13,186	)		(10,844	)
Total	$	23,209		$	(1,061	)	$	26,008

Level	Average Excess Availability	Base Rate Loans	LIBOR Loans
I	>$70,000,000	1.25%	2.25%
II	≤$70,000,000 but >$35,000,000	1.50%	2.50%
III	≤$35,000,000 but >$20,000,000	1.75%	2.75%
IV	≤$20,000,000 but <$10,000,000	2.00%	3.00%
V	≤$10,000,000	2.25%	3.25%

Payments due by period: (in thousands)	Total		2013		2014		2015		2016		2017		Thereafter
Credit Facility, including interest (2)	$	5	$	-	$	-	$	-	$	-	$	5	$	-
Revenue equipment and property installment notes, including interest (3)	$	172,805	$	70,140	$	29,541	$	35,493	$	28,486	$	7,033	$	2,112
Operating leases (4)	$	112,089	$	24,334	$	21,152	$	19,204	$	14,464	$	6,683	$	26,252
Capital leases (5)	$	18,058	$	3,059	$	8,751	$	3,362	$	2,886	$	-	$	-
Lease residual value guarantees	$	9,221	$	-	$	-	$	-	$	5,711	$	1,212	$	2,298
Purchase obligations (6)	$	75,231	$	75,231	$	-	$	-	$	-	$	-	$	-
Total contractual cash obligations	$	387,409	$	172,764	$	59,444	$	58,059	$	51,547	$	14,933	$	30,662

(1)	Excludes any amounts accrued for unrecognized tax benefits as we are unable to reasonably predict the ultimate amount or timing of settlement of such unrecognized tax benefits.
(2)	Represents principal and interest payments owed at December 31, 2012. The borrowings consist of draws under our Credit Facility, 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, 2012, was utilized. The table assumes long-term debt is held to maturity. Refer to Note 7, "Debt" of the accompanying consolidated financial statements for further information.
(3)	Represents principal and interest payments owed at December 31, 2012. The borrowings consist of installment notes with finance companies, with fixed borrowing amounts and fixed interest rates, except for a variable rate real estate note, for which the interest rate and principal amount in place at December 31, 2012, was utilized. The table assumes these installment notes are held to maturity. Refer to Note 7, "Debt" of the accompanying consolidated financial statements for further information.
(4)	Represents future monthly rental payment obligations under operating leases for tractors, 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. These leases generally run for a period of three to five years for tractors and five to seven years for trailers. Refer to Note 8, "Leases" of the accompanying consolidated financial statements for further information.
(5)	Represents principal and interest payments owed at December 31, 2012. The borrowings consist of capital leases with several finance companies, with fixed borrowing amounts and fixed interest rates. Borrowings in 2014 and thereafter include the residual value guarantees on the related equipment as balloon payments. Refer to Note 7, "Debt" of the accompanying consolidated financial statements for further information.
(6)	Represents purchase obligations for revenue equipment totaling approximately $74.3 million in 2013. These commitments are cancelable, subject to certain adjustments in the underlying obligations and benefits. Additionally, 2013 purchase obligations includes $0.5 million related to TEL earn-out payments to be paid in 2013 related to 2012 performance. We also had commitments outstanding at December 31, 2012, to acquire computer software totaling $0.4 million in 2013. These purchase commitments are expected to be financed by operating leases, capital leases, long-term debt, proceeds from sales of existing equipment, and/or cash flows from operations. Refer to Notes 7 and 8, "Debt" and "Leases", respectively, of the accompanying consolidated financial statements for further information.

•	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 eligible for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)		(b)		(c)
Equity compensation plans approved by security holders		332,863(1) 764,295 (2)	$ $	15.70 -		- 224,731
Equity compensation plans not approved by security holders		-		-		-
Total		1,097,158	$	15.70		224,731

(1)	Stock options granted under our 1994, 2003, and 2006 Incentive Plans.
(2)	Restricted stock granted under the 2006 Omnibus Incentive Plan, as amended.

(a)	1.	Financial Statements.

		Our audited consolidated financial statements are set forth at the following pages of this report:
		Report of Independent Registered Public Accounting Firm	43
		Consolidated Balance Sheets	44
		Consolidated Statements of Operations	45
		Consolidated Statements of Comprehensive Income (Loss)	46
		Consolidated Statements of Stockholders' Equity	47
		Consolidated Statements of Cash Flows	48
		Notes to Consolidated Financial Statements	50

	2.	Financial Statement Schedules.

		Financial statement schedules are not required because all required information is included in the financial statements or is not applicable.

	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 Form 10-K or incorporated by reference to the document set forth next to the exhibit listed below.

Exhibit Number	Reference	Description
3.1		Amended and Restated Articles of Incorporation (Incorporated by reference to Exhibit 99.2 to the Company's Report on Form 8-K, filed May 29, 2007)
3.2		Second Amended and Restated Bylaws, dated February 22, 2011 (Incorporated by reference to Exhibit 3.2 to the Company's Form 10-Q, filed May 13, 2011)
4.1		Amended and Restated Articles of Incorporation (Incorporated by reference to Exhibit 99.2 to the Company's Report on Form 8-K, filed May 29, 2007)
4.2		Second Amended and Restated Bylaws, dated February 22, 2011 (Incorporated by reference to Exhibit 3.2 to the Company's Form 10-Q, filed May 13, 2011)
10.1		401(k) Plan (Incorporated by reference to Exhibit 10.10 to the Company's Form S-1, Registration No. 33-82978, effective October 28, 1994)
10.2		Master Lease Agreement, dated April 15, 2003, between Transport International Pool, Inc. and Covenant Transport, Inc. (Incorporated by reference to Exhibit 10.4 to the Company's Form 10-Q/A, filed October 31, 2003)
10.3	*	Form of Indemnification Agreement between Covenant Transport, Inc. and each officer and director, effective May 1, 2004 (Incorporated by reference to Exhibit 10.2 to the Company's Form 10-Q, filed August 5, 2004)
10.4		Purchase and Sale Agreement, dated April 3, 2006, between Covenant Transport, Inc., a Tennessee corporation, and CT Chattanooga TN, LLC (Incorporated by reference to Exhibit 10.4 to the Company's Form 10-K, filed March 30, 2010)
10.5		Lease Agreement, dated April 3, 2006, between Covenant Transport, Inc., a Tennessee corporation, and CT Chattanooga TN, LLC (Incorporated by reference to Exhibit 10.5 to the Company's Form 10-K, filed March 30, 2010)
10.6		Lease Guaranty, dated April 3, 2006, by Covenant Transport, Inc., a Nevada corporation, for the benefit of CT Chattanooga TN, LLC (Incorporated by reference to Exhibit 10.20 to the Company's Report on Form 8-K, filed April 7, 2006)
10.7	*	Form of Restricted Stock Award Notice under the Covenant Transport, Inc. 2006 Omnibus Incentive Plan (Incorporated by reference to Exhibit 10.22 to the Company's Form 10-Q, filed August 9, 2006)
10.8	*	Form of Restricted Stock Special Award Notice under the Covenant Transport, Inc. 2006 Omnibus Incentive Plan (Incorporated by reference to Exhibit 10.23 to the Company's Form 10-Q, filed August 9, 2006)
10.9	*	Form of Incentive Stock Option Award Notice under the Covenant Transport, Inc. 2006 Omnibus Incentive Plan (Incorporated by reference to Exhibit 10.24 to the Company's Form 10-Q, filed August 9, 2006)

10.10		Form of Lease Agreement used in connection with Daimler Facility (Incorporated by reference to Exhibit 10.3 to the Company's Form 10-Q, filed August 11, 2008)
10.11		Amendment to Lease Agreement (Open End) (Incorporated by reference to Exhibit 10.4 to the Company's Form 10-Q, filed August 11, 2008)
10.12		Form of Direct Purchase Money Loan and Security Agreement used in connection with Daimler Facility (Incorporated by reference to Exhibit 10.5 to the Company's Form 10-Q, filed August 11, 2008)
10.13		Amendment to Direct Purchase Money Loan and Security Agreement (Incorporated by reference to Exhibit 10.6 to the Company's Form 10-Q, filed August 11, 2008)
10.14		Third Amended and Restated Credit Agreement, dated September 23, 2008, among Covenant Transportation Group, Inc., Covenant Transport, Inc., CTG Leasing Company, Covenant Asset Management, Inc., Southern Refrigerated Transport, Inc., Covenant Transport Solutions, Inc., Star Transportation, Inc., Bank of America, N.A., JPMorgan Chase Bank, N.A., and Textron Financial Corporation (Incorporated by reference to Exhibit 10.14 to the Company's Form 10-K, filed March 30, 2010)
10.15	*	Covenant Transportation Group, Inc. Amended and Restated 2006 Omnibus Incentive Plan (Incorporated by reference to Appendix A to the Company's Schedule 14A, filed April 10, 2009)
10.16		First Amendment to Third Amended and Restated Credit Agreement, dated March 27, 2009 among Covenant Transportation Group, Inc., Covenant Transport, Inc., CTG Leasing Company, Covenant Asset Management, Inc., Southern Refrigerated Transport, Inc., Covenant Transport Solutions, Inc., Star Transportation, Inc., Bank of America, N.A., JPMorgan Chase Bank, N.A., and Textron Financial Corporation (Incorporated by reference to Exhibit 10.1 to the Company's Form 10-Q, filed May 15, 2009)
10.17		Second Amendment to Third Amended and Restated Credit Agreement, dated February 25, 2010, among Covenant Transportation Group, Inc., Covenant Transport, Inc., CTG Leasing Company, Covenant Asset Management, Inc., Southern Refrigerated Transport, Inc., Covenant Transport Solutions, Inc., Star Transportation, Inc., Bank of America, N.A., JPMorgan Chase Bank, N.A., and Textron Financial Corporation (Incorporated by reference to Exhibit 10.1 to the Company's Form 10-Q, filed May 17, 2010)
10.18		Third Amendment to Third Amended and Restated Credit Agreement dated July 30, 2010 among Covenant Transportation Group, Inc., Covenant Transport, Inc., CTG Leasing Company, Covenant Asset Management, Inc., Southern Refrigerated Transport, Inc., Covenant Transport Solutions, Inc., Star Transportation, Inc., and Bank of America, N.A., as agent (Incorporated by reference to Exhibit 10.1 to the Company's Form 10-Q, filed November 9, 2010)
10.19		Fourth Amendment to Third Amended and Restated Credit Agreement dated August 31, 2010 among Covenant Transportation Group, Inc., Covenant Transport, Inc., CTG Leasing Company, Covenant Asset Management, Inc., Southern Refrigerated Transport, Inc., Covenant Transport Solutions, Inc., Star Transportation, Inc., and Bank of America, N.A., as agent (Incorporated by reference to Exhibit 10.2 to the Company's Form 10-Q, filed November 9, 2010)
10.20		Letter Agreement, dated October 28, 2010, between Transport International Pool, Inc., Covenant Transport, Inc. and CTG Leasing Company (Incorporated by reference to Exhibit 10.22 to the Company's Form 10-K, filed March 1, 2011)
10.21		Fifth Amendment to Third Amended and Restated Credit Agreement dated September 1, 2011 among Covenant Transportation Group, Inc., Covenant Transport, Inc., CTG Leasing Company, Covenant Asset Management, Inc., Southern Refrigerated Transport, Inc., Covenant Transport Solutions, Inc., Star Transportation, Inc., and Bank of America, N.A., as agent (Incorporated by reference to Exhibit 10.1 to the Company's Report on Form 8-K, filed October 28, 2011)
10.22		Sixth Amendment to Third Amended and Restated Credit Agreement dated effective as of October 24, 2011 among Covenant Transportation Group, Inc., Covenant Transport, Inc., CTG Leasing Company, Covenant Asset Management, Inc., Southern Refrigerated Transport, Inc., Covenant Transport Solutions, Inc., Star Transportation, Inc., and Bank of America, N.A., as agent (Incorporated by reference to Exhibit 10.2 to the Company's Report on Form 8-K, filed October 28, 2011)

10.23		Seventh Amendment to Third Amended and Restated Credit Agreement dated effective as of March 29, 2012 among Covenant Transportation Group, Inc., Covenant Transport, Inc., CTG Leasing Company, Covenant Asset Management, Inc., Southern Refrigerated Transport, Inc., Covenant Transport Solutions, Inc., Star Transportation, Inc., and Bank of America, N.A., as agent (Incorporated by reference to Exhibit 10.1 to the Company's Report on Form 8-K, filed April 2, 2012)
10.24		Eighth Amendment to Third Amended and Restated Credit Agreement dated effective as of December 31, 2012 among Covenant Transportation Group, Inc., Covenant Transport, Inc., CTG Leasing Company, Covenant Asset Management, Inc., Southern Refrigerated Transport, Inc., Covenant Transport Solutions, Inc., Star Transportation, Inc., and Bank of America, N.A., as agent (Incorporated by reference to Exhibit 10.1 to the Company's Report on Form 8-K, filed January 31, 2013)
10.25	* #	Description of 2011 Bonus Plan
10.26	* #	Description of 2012 Bonus Plan
10.27	* #	Description of Director Compensation Program
21	#	List of Subsidiaries
23.1	#	Consent of Independent Registered Public Accounting Firm – KPMG LLP
23.2	#	Consent of Independent Auditor – Lattimore Black Morgan & Cain, PC
31.1	#	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 Principal Executive Officer
31.2	#	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 Richard B. Cribbs, the Company's Principal Financial Officer
32.1	#	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
32.2	#	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Richard B. Cribbs, the Company's Chief Financial Officer
99	#	Financial Statements of Transport Enterprise Leasing, LLC
101.INS	**	XBRL Instance Document
101.SCH	**	XBRL Taxonomy Extension Schema Document
101.CAL	**	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	**	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	**	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE	**	XBRL Taxonomy Extension Presentation Linkbase Document

#	Filed herewith
*	Management contract or compensatory plan or arrangement.
**	In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Annual Report on Form 10-K shall be deemed to be "furnished" and not "filed."

	COVENANT TRANSPORTATION GROUP, INC.


Date: March 28, 2013	By:	/s/ Richard B. Cribbs
		Richard B. Cribbs
		Senior Vice President and Chief Financial Officer in his capacity as such and on behalf of the issuer.

Signature and Title		Date

/s/ David R. Parker		March 28, 2013
David R. Parker
Chairman of the Board, President, and Chief Executive Officer (principal executive officer)

/s/ Richard B. Cribbs		March 28, 2013
Richard B. Cribbs
Senior Vice President and Chief Financial Officer (principal financial officer)

/s/ M. Paul Bunn		March 28, 2013
M. Paul Bunn
Chief Accounting Officer (principal accounting officer)

/s/ Bradley A. Moline		March 28, 2013
Bradley A. Moline
Director

/s/ William T. Alt		March 28, 2013
William T. Alt
Director

/s/ Robert E. Bosworth		March 25, 2013
Robert E. Bosworth
Director

/s/ Niel B. Nielson		March 28, 2013
Niel B. Nielson
Director