Covenant Transportation Group Inc. on Tuesday, April 28, announced financial and operating results for the first quarter ended March 31, 2009. For the quarter, total revenue decreased 26.4 percent to $133.8 million from $181.7 million in the same quarter of 2008. Freight revenue, which excludes fuel surcharges, decreased 17.8 percent to $122.1 million from $148.6 million. The company reported a net loss of $5.5 million compared to a net loss of $7.8 million.
“Our results for the quarter reflected the economic and business trends we had anticipated at the beginning of the year,” said David R. Parker, chairman, president and chief executive officer of the Chattanooga, Tenn.-based company. “Weak freight demand, excess tractor and trailer capacity in the truckload industry, and significant rate pressure from customers and freight brokers led to an approximately 8.2 percent reduction in average freight revenue per tractor per week. This reduction in asset utilization was partially offset by lower fuel expense, strong safety performance and cost-control efforts across all of our companies.”
Parker said the company’s cost per mile decreased just more than one cent per mile to keep the line item at 44.9 percent of revenue in both the 2008 and 2009 quarters. “Our entire company shared in the sacrifices to manage these expenses through a combination of pay reductions, staffing reductions and benefits management,” he said. “It was no small feat to hold this steady as a percentage of freight revenue at a time when revenue was falling sharply.”
Parker said the company’s asset-based subsidiaries did a good job of addressing controllable expenses. “There is no doubt, however, that we need to increase freight volumes and pricing, when the overall economy and truckload industry allow it, to generate the level of profitability we ultimately desire,” he said.
Richard B. Cribbs, senior vice president and chief financial officer, said the company believes its overall capital position remains secure. “At March 31, 2009, we had $28 million of available borrowing capacity under our revolving credit facility,” Cribbs said. “We also have financing commitments from the financial arms of our main tractor suppliers to fund our expected tractor purchases in 2009.”
Cribbs said that upon evaluation of the light first quarter freight demand and the continued light freight demand forecasted over the next few quarters, the company has decided to reduce its expected 2009 new tractor purchases by about 100 units. “Our tractor fleet plan for 2009 now includes the purchase of approximately 950 tractors and disposal of approximately 1,250 tractors, for expected net capital expenditures of approximately $50 million to $60 million,” he said.
Parker said the company still expects to operate at a loss for the first half of the year, and that its goal remains to make money for the full year of 2009. “After the first quarter, we are running modestly behind the results we anticipated were necessary to reach our goal,” he said. “Although we believe our goal of profitability for 2009 remains achievable, it has become incrementally more difficult to reach. To attain our goal, we will need to rapidly implement additional identified cost savings, hold steady or experience only a small further reduction in rates, and slightly improve utilization of our remaining fleet of trucks for the remainder of the fiscal year.”
