Covenant reports lower 4Q net loss

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Covenant Transportation Group on Wednesday, Jan. 3, announced financial and operating results for the quarter and year ended Dec. 31, 2009. Highlights for the fourth quarter included the following:

  • Total revenue of $157.8 million, a decrease of 7.7 percent from $171.0 million;
  • Freight revenue, excluding fuel surcharges, of $135.8 million, a decrease of 5.6 percent;
  • Operating loss of $0.8 million and an operating ratio of 100.6 percent compared with an operating loss of $45.1 million and an operating ratio of 131.3 percent; and
  • Net loss of $2.7 million compared with a net loss of $39.8 million. Excluding impairment charges recorded in the fourth quarter of 2008, non-GAAP net loss would have been $6.2 million in the fourth quarter of 2008.

For the year, total revenue decreased 23.9 percent to $588.7 million from $773.9 million. Freight revenue decreased 15.5 percent to $520.5 million from $615.8 million. Including impairment charges, the company generated net loss of $25.0 million compared to reported net loss of $53.4 million. On a non-GAAP basis, without impairment charges, the company’s net loss would have been $13.5 million compared to net loss of $19.0 million.

“During the quarter, we continued to demonstrate solid performance in cost control and efficiency,” said David R. Parker, chairman, president and chief executive officer of Chattanooga, Tenn.-based Covenant. “Through meaningful effort and contribution by our entire team, we gained overall compensation reductions while achieving the highest ratio of tractors per nondriving employee since becoming a public company in 1994. The reduction in tractor fleet and increase in miles per tractor also helped spread fixed costs per mile more effectively. In addition, we finished the year with the lowest quarterly number of DOT-reportable accidents per million miles in our history. These accomplishments more than offset a 3.1 cent-per-mile increase in fuel expense, net of fuel surcharge revenue.”

Richard B. Cribbs, senior vice president and chief financial officer, said that at Dec. 31, 2009, the company’s total balance sheet debt and capital lease obligations, net of cash, was $202.8 million, and the discounted value of future obligations under off-balance sheet operating lease obligations was about $72.9 million, including the residual value guarantees under those leases. Since the end of fiscal 2008, the company’s balance sheet debt and capital lease obligations, net of cash, has increased by $42.1 million, while the present value of financing provided by operating leases has decreased by about $23.8 million, Cribbs said.

“At December 31, 2009, our ratio of net debt to total capitalization was 68.1 percent,” he said. “Our annual tractor fleet plan for 2010 includes the purchase of approximately 900 tractors and disposal of approximately 900 tractors, for expected full-year net capital expenditures of approximately $60 million to $70 million. However, we regularly evaluate our tractor replacement cycle and new tractor purchase requirements. With an average fleet age of 22 months, we have significant flexibility to manage our fleet.”

At Dec. 31, 2009, Covenant had $27.7 million of available borrowing capacity under its revolving credit facility and was in compliance with its financial covenant, Cribbs said. “In addition, we have financing available from the captive financial subsidiaries of our main tractor suppliers to fund our expected tractor purchases in 2010,” he said.