Celadon Group on Wednesday, Jan. 24, reported its financial and operating results for the three and six months ended Dec. 31, the second fiscal quarter of the company’s fiscal year ending June 30, 2007.
For the quarter, revenue increased 2.2 percent to $122.9 million in the 2006 quarter from $120.3 million in the 2005 quarter. Freight revenue, which excludes fuel surcharges, was up 4.5 percent to $107.5 million in the 2006 quarter from $102.9 million in the 2005 quarter. Net income increased 27.1 percent to $6.1 million in the 2006 quarter from $4.8 million for the same quarter last year.
For the six months ended Dec. 31, revenue increased 5.2 percent to $250.6 million in 2006 from $238.2 million for the same period last year. Freight revenue was up 4.3 percent to $215.1 million in 2006 from $206.2 million for the same period last year. Net income increased 38.9 percent to $13.2 million in 2006 from $9.5 million for the same period last year.
“We are pleased with the results of the December quarter, during what turned out to be a more challenging freight environment than the industry has seen in the past several years,” said Steve Russell, chairman and chief executive officer of Indianapolis-based Celadon. The company’s average revenue per loaded mile, excluding fuel surcharge, increased by 4.0 percent, to $1.55 from $1.49, while average revenue per total mile, excluding fuel surcharge, improved 2.2 percent, to $1.40 from $1.37, Russell said.
Reduced miles per week per truck and increased deadhead were both a result of the decline in freight levels during the latter part of the quarter, Russell said. “As a result of excellent drivers, disciplined management and strong cost control, our operating ratio improved 260 basis points to 89.8 percent from 92.4 percent,” he said.
Celadon acquired certain assets of Digby Truck Lines last October, and the onboarding of Digby’s former customers and drivers was accomplished successfully during the company’s second quarter, Russell said. “We are in the process of disposing of the older tractors and trailers that we are not intending to retain,” he said.
Russell said Celadon believes capacity in the industry continues to be constrained by a shortage of qualified drivers. “We address the driver shortage by recruiting safe and experienced drivers, providing newer equipment and offering competitive compensation and lifestyle programs,” Russell says. “We believe our continued commitment to the quality of life of our drivers helps keep our trucks seated, reduces our costs, improves customer service and contributes to improved safety for the driving public.
“We believe carefully managing the average age of our fleet allows us greater flexibility in addressing the cost and reliability issues involving tractor engines designed to comply with stricter emissions requirements in 2007, and generally lowers our operating expenses,” Russell said.
Russell told investors during a conference call today, Jan. 25, that he sees a big opportunity to improve 2007 financial results by reducing deadhead percentage – that is, the loaded rate per mile divided by the total rate per mile. This metric increased from 7.7 to 9.9 percent, year over year, in the fourth quarter of 2006. “That cost us a ton of money,” Russell said. “We had 1.3 million more deadhead miles than last year.”
Another opportunity for 2007, Russell said, is to increase freight density in its lanes through acquiring other carriers. In the past four years, Celadon has been able to buy four companies; the transactions, spaced about 18 months apart, have been purely for the value of equipment. Until now, Celadon has been unwilling to pay extra for goodwill. “There are a lot of fleets that are suffering,” Russell said. “It is fair to assume that we will make acquisitions much more rapidly.”