Covenant Transport announced that for the third quarter of 2006, total revenue increased 4.0% to $176.7 million from $169.9 million in the same quarter of 2005. Freight revenue, which excludes fuel surcharges, was essentially flat at $144.1 million in the 2006 quarter and $144.7 million in the 2005 quarter. The company reported net income of $795,000, compared to net income of $1.2 million for the third quarter of 2005.
For the nine months ended Sept. 30, total revenue increased 7.1%, to $497.5 million from $464.6 million during 2005. Freight revenue increased 1.5%, to $412.9 million in 2006 from $407.0 million in 2005. The company generated a net loss of $488,000, compared with a $1.2 million profit for the same period of 2005.
“Our earnings came in better than expected at the time of our preannouncement on September 14, primarily because of a 30-cents-per-gallon drop in the price of diesel fuel over the last few weeks of the quarter,” said David R. Parker, chairman, president and chief executive officer of Chattanooga, Tenn.-based Covenant. “From a freight standpoint, we have not seen the expected level of peak shipping activity typically seen by the end of August. In fact, shipping demand is still not where it should be as of this point in October. Despite a somewhat less robust freight environment than we would like, our business realignment is showing incremental improvement in several significant areas.”
Regarding Covenant’s recent acquisition of Nashville, Tenn.-based Star Transportation, Parker said the first month of the transition has gone “exceptionally well. Jim Brower and his staff have done an outstanding job in retaining the majority if not all of the customers and in-house personnel, while the driver turnover, which is always a concern in acquisitions, has remained below the industry average. In only 16 days of being included in our results, Star was able to contribute slightly to earnings during the quarter. Star’s management feels good about their position in Covenant and in the market and is already planning for growth opportunities for 2007.”
Parker said a key part of Covenant’s strategy surrounding the Star acquisition was to reduce the size of its least profitable operations. “We reduced our Covenant staffing by approximately 150 positions and closed two terminals,” Parker said. “We expect the savings from these actions to be meaningful and to contribute to earnings beginning in the fourth quarter.”