Covenant Transportation Group Announces Appointment of New Director; Third Quarter Financial and Operating Results

Covenant Transportation Group Announces Appointment of New Director; Third
Quarter Financial and Operating Results

CHATTANOOGA, Tenn., Oct. 17, 2013 (GLOBE NEWSWIRE) -- Covenant Transportation
Group, Inc. (Nasdaq:CVTI) announced today the appointment of industry veteran,
Mr. Herbert J. Schmidt to its Board of Directors. The company also announced
financial and operating results for the third quarter ended September 30,
2013.

Appointment of Additional Board Member

Mr. Herbert ("Herb") J. Schmidt has been elected to Covenant Transportation
Group's Board of Directors. Mr. Schmidt, age 57, served as the Executive Vice
President of Con-way Inc. and President of Con-way Truckload from 2007 to
2012. Prior to the merger of Contract Freighters, Inc. ("CFI") with Con-way
Inc. in 2007, Mr. Schmidt held positions at CFI as President and CEO from 2005
to 2007 and President from 2000 to 2005. Prior to his becoming President and
CEO in 2005, he was employed in a series of progressively more responsible
positions at CFI where he gained extensive knowledge in risk management, as
well as leading the sales and operations functions as Senior Vice President of
Operations. Mr. Schmidt also serves as a member of the Board of Directors of
Empire District Electric Company (NYSE:EDE). His extensive knowledge of the
truckload industry, along with its customers, vendors and stockholders is
expected to bring valuable insight to our Board of Directors.

Third Quarter Financial and Operating Results

Highlights for the quarter included the following:

  *Total revenue of $170.8 million, an increase of 1.4% compared with the
    third quarter of 2012;
  *Freight revenue of $135.2 million (excludes revenue from fuel surcharges),
    an increase of 1.7% compared with the third quarter of 2012;
  *Operating income of $5.9 million and an operating ratio of 95.6%, compared
    with operating income of $4.6 million and an operating ratio of 96.5% in
    the third quarter of 2012; and
  *Net income of $2.0 million, or $0.13 per share, compared with net income
    of $1.0 million, or $0.07 per share in the third quarter of 2012.

Management Discussion—Asset-Based Operations

Chairman, President, and Chief Executive Officer, David R. Parker, made the
following comments: "Operating results were favorable as our asset-based
operating ratio improved to 95.6% compared with 96.1% in last year's third
quarter.

"For the quarter, total revenue in our asset‑based operations decreased to
$160.1 million, a decrease of $1.5 million compared with the third quarter of
2012.This decrease consisted of lower freight revenue of $1.7 million,
partially offset by higher fuel surcharge revenue of $0.2 million. The $1.7
million decrease in freight revenue related to a 1.7% decrease in our average
tractor fleet and a 0.6% decrease in average freight revenue per tractor per
week, partially offset by an increase of freight revenue contributed from our
refrigerated intermodal service offering.

"Average freight revenue per tractor per week decreased to $3,387 during the
2013 quarter from $3,408 during the 2012 quarter.Average freight revenue per
total mile increased by 1.1 cents per mile (or 0.8%) compared to the 2012
quarter, but average miles per unit decreased by 1.3%. The main factors
impacting the lower utilization were a higher unseated truck percentage and
new hours of service regulations.On average, approximately 5.7% of our fleet
lacked drivers during the 2013 quarter, compared with approximately 3.5%
during the 2012 quarter.

"We experienced cost pressure in several areas. Salaries, wages and related
expenses increased approximately 1.4 cents per mile due to employee pay
adjustments since the third quarter of 2012 and higher workers' compensation
expense.

"Operations and maintenance expenses increased approximately 1.6 cents per
mile due primarily to higher driver recruiting expenses and additional repair
expense for replacing DEF particulate filters on our earlier group of owned
tractors.

"Higher costs were partially offset by an overall reduction in fuel and
insurance costs. Net fuel expense was approximately 14.6 cents per company
mile in the 2013 quarter compared with 17.0 cents per company mile in the 2012
quarter due primarily to improved fuel economy and more stable fuel prices in
the 2013 quarter (which avoided last year's unfavorable lag impact on fuel
surcharge recovery when fuel prices increased steeply over the course of the
2012 quarter). These improvements were partially offset by increased usage of
fuel for refrigeration units associated with the growth of our refrigerated
service offerings. We expect to continue investing in more fuel-efficient
tractors, and partnering with customers to adjust fuel surcharge programs
which are inadequate to recover a fair portion of fuel costs. In addition, we
expect to continue using fuel price hedges periodically to mitigate the
potential volatility in fuel prices relating to the portion of our fuel usage
that is not covered by fuel surcharges, which may result in positive or
negative results in any given quarter.

"Insurance and claims per mile cost was 8.3 cents per mile in the third
quarter of 2013 versus 9.7 cents per mile in the third quarter of 2012.
Improved safety performance, measured by accidents per million miles, and good
claims experience, contributed to the cost savings in this area."

Management Discussion—Non-Asset Based Brokerage and Other Operations

Mr. Parker offered the following comments concerning Covenant Transport
Solutions, Inc. ("Solutions"), the Company's non-asset based subsidiary:"For
the quarter, Solutions' total revenue increased 57.8%, to $10.7 million from
$6.8 million in the same quarter of 2012. Operating income was approximately
$366,000 for an operating ratio of 96.6%, compared with an operating loss of
$221,000 and an operating ratio of 103.2% in the third quarter of 2012.
Solutions' gross margins expanded, as purchased transportation was 74.9% of
total revenue in the current quarter, compared with 80.6% of total revenue in
the prior year quarter. Solutions' other operating expenses as a percentage of
revenue decreased to 21.7% of total revenue in the third quarter of 2013 from
22.7% of total revenue in the third quarter of 2012. In addition, our 49%
equity investment in Transport Enterprise Leasing ("TEL") contributed
approximately $1.2 million of pre-tax income in the third quarter."

Cash Flow and Liquidity

Richard B. Cribbs, the Company's Senior Vice President and Chief Financial
Officer, added the following comments: "At September 30, 2013, our total
balance sheet debt and capital lease obligations, net of cash, were $186.6
million, our stockholders' equity was $96.0 million, and our tangible book
value was $95.6 million, or $6.43 per basic share.At September 30, 2013, our
ratio of net debt to total balance sheet capitalization was 66.0%.Also at
September 30, 2013, the discounted value of future obligations under
off-balance sheet operating lease obligations was approximately $81.6 million,
including the residual value guarantees under those leases, and we believe the
value of the leased equipment was approximately equal to the present value of
such lease obligations.Since the end of 2012, the Company's balance sheet
debt and capital lease obligations, net of cash, has increased by $18.5
million, while the present value of financing provided by operating leases
increased by approximately $7.3 million. At September 30, 2013, we had
approximately $40.0 million of borrowing availability under our revolving line
of credit.

"Our current tractor fleet plan for 2013 includes the disposal of
approximately 1,100 used tractors and, the delivery of approximately 1,000 new
company tractors. As the pace at which we have been able to on-board
additional owner-operators has slowed, we now expect the average fleet size
for the 2013 year to be approximately 3%-4% below the 2012 year. With a
relatively young average company tractor fleet age of 2.1 years at September
30, 2013, we believe there is significant flexibility to manage our fleet, and
we plan to regularly evaluate our tractor replacement cycle and new tractor
purchase requirements. In addition, we believe we have sufficient financing
available from the captive finance subsidiaries of our main tractor suppliers,
our revolving credit facility, and other sources to fund our expected revenue
equipment purchases in 2013."

Conference Call Information

The Company will host a live conference call tomorrow, October 18, 2013, at
11:00 a.m. Eastern time to discuss the quarter.Individuals may access the
call by dialing 800-351-4894 (U.S./Canada) and 334-323-7224 (International),
access code CTG3.An audio replay will be available for one week following the
call at 877-919-4059, access code 30129790. For additional financial and
statistical information regarding the Company that is expected to be discussed
during the conference call, please visit our website at
www.ctgcompanies.com/investor-relations under the icon "Earnings Info."

Covenant Transportation Group, Inc. is the holding company for several
transportation providers that offer premium transportation services for
customers throughout the United States. The consolidated group includes
operations from Covenant Transport and Covenant Transport Solutions of
Chattanooga, Tennessee; Southern Refrigerated Transport of Texarkana,
Arkansas; and Star Transportation of Nashville, Tennessee.In addition,
Transport Enterprise Leasing, of Chattanooga, Tennessee is an affiliated
company providing revenue equipment sales and leasing services to the trucking
industry. The Company's Class A common stock is traded on the NASDAQ Global
Select under the symbol, "CVTI".

This press release contains certain statements that may be considered
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. Such statements may be identified by their use of terms or
phrases such as "expects," "estimates," "projects," "believes," "anticipates,"
"plans," "intends," and similar terms and phrases. Forward-looking statements
are based upon the current beliefs and expectations of our management and are
inherently subject to risks and uncertainties, some of which cannot be
predicted or quantified, which could cause future events and actual results to
differ materially from those set forth in, contemplated by, or underlying the
forward-looking statements. In this press release, the statements relating to
equipment purchases and disposals, the use of fuel hedges, the value of leased
equipment versus the present value of such lease obligations, fleet size, the
availability of sufficient financing for equipment purchases, and Mr.
Schmidt's contributions to our Board are forward-looking statements. The
following factors, among others, could cause actual results to differ
materially from those in the forward-looking statements: elevated experience
in the frequency and severity of claims relating to accident, cargo, workers'
compensation, health, and other claims, increasedinsurance premiums,
fluctuations in claims expenses that result from our self-insured retention
amounts, including in our excess layers and in respect of claims for which we
commute policy coverage, and the requirement that we pay additional premiums
if there are claims in certain of those layers, differences between estimates
used in establishing and adjusting claims reserves and actual results over
time, adverse changes in claims experience and loss development factors, or
additional changes in management's estimates of liability based upon such
experience and development factors that cause our expectations of insurance
and claims expense to be inaccurate or otherwise impacts our results; changes
in the market condition for used revenue equipment and real estate that impact
our capital expenditures and our ability to dispose of revenue equipment and
real estate on the schedule and for the prices we expect; increases in the
prices paid for new revenue equipment that impact our capital expenditures and
our results generally; changes in management's estimates of the need for new
tractors and trailers; the effect of any reduction in tractor purchases on the
number of tractors that will be accepted by manufacturers under tradeback
arrangements; our inability to generate sufficient cash from operations and
obtain financing on favorable terms to meet our significant ongoing capital
requirements; our ability to maintain compliance with the provisions of our
credit agreements, particularly financial covenants in our revolving credit
facility; excess tractor or trailer capacity in the trucking industry;
decreased demand for our services or loss of one or more of our major
customers; our ability to renew dedicated service offering contracts on the
terms and schedule we expect; surplus inventories, recessionary economic
cycles, and downturns in customers' business cycles; strikes, work slowdowns,
or work stoppages at the Company, customers, ports, or other shipping related
facilities; increases or rapid fluctuations in fuel prices, as well as
fluctuations in hedging activities and surcharge collection, including, but
not limited to, changes in customer fuel surcharge policies and increases in
fuel surcharge bases by customers; the volume and terms of diesel purchase
commitments; interest rates, fuel taxes, tolls, and license and registration
fees; increases in compensation for and difficulty in attracting and retaining
qualified drivers and independent contractors; seasonal factors such as harsh
weather conditions that increase operating costs; competition from trucking,
rail, and intermodal competitors; regulatory requirements that increase costs,
decrease efficiency, or reduce the availability of drivers, including revised
hours-of-service requirements for drivers and the Comprehensive Safety
Analysis 2010 that implemented new driver standards and modified the
methodology for determining a carrier's DOT safety rating; the ability to
reduce, or control increases in, operating costs; changes in the Company's
business strategy that require the acquisition of new businesses, and the
ability to identify acceptable acquisition candidates, consummate
acquisitions, and integrate acquired operations. Readers should review and
consider these factors along with the various disclosures by the Company in
its press releases, stockholder reports, and filings with the Securities and
Exchange Commission. We disclaim any obligation to update or revise any
forward-looking statements to reflect actual results or changes in the factors
affecting the forward-looking information.

Covenant Transportation Group, Inc.
Key Financial and Operating Statistics
                                                                 
                    INCOME STATEMENT DATA         INCOME STATEMENT DATA
                    Three Months Ended Sep 30,    Nine Months Ended Ended Sep
                                                   30,
($000s, except per   2013      2012       % Change 2013      2012      %
share data)                                                            Change
Freight revenue      $135,204  $132,961   1.7%     $401,251  $389,081  3.1%
Fuel surcharge       35,639   35,466            106,810  107,678  
revenue
Total revenue        $170,843  $168,427   1.4%     $508,061  $496,759  2.3%
                                                                 
Operating expenses:                                               
Salaries, wages, and 53,728   53,488            163,602  159,045  
related expenses
Fuel expense         46,540   48,601            141,734  145,174  
Operations and       13,077   12,151            37,460   34,076   
maintenance
Revenue equipment                                                 
rentals and
purchased            26,207   22,641            75,668   61,819   
transportation
Operating taxes and  2,780    2,863             8,215    8,297    
licenses
Insurance and claims 6,887    8,155             22,647   23,886   
Communications and   1,363    1,201             3,899    3,576    
utilities
General supplies and 3,882    3,976             12,182   11,575   
expenses
Depreciation and
amortization,                                                     
including gains and
losses on
disposition of       10,497   10,706            31,137   31,251   
property and
equipment
Total operating      164,961  163,782           496,544  478,699  
expenses
Operating income     5,882    4,645             11,517   18,060   
Other (income)                                                    
expenses:
Interest expense     2,386    3,056             7,636    9,929    
Interest income      (1)      --                (3)      --       
Other                --       (4)               --       (20)     
Other expenses, net  2,385    3,052             7,633    9,909    
Equity in income of  1,150    555               2,180    1,225    
affiliate
Income before income 4,647    2,148             6,064    9,376    
taxes
Income tax expense   2,674    1,146             4,159    4,764    
Net income           $1,973    $1,002             $1,905    $4,612    
                                                                 
                                                                 
Basic and diluted    $0.13     $0.07              $0.13     $0.31     
earnings per share
Basic weighted
average shares       14,864   14,757            14,827   14,737   
outstanding (000s)
Diluted weighted
average shares       15,043   14,807            15,023   14,773   
outstanding (000s)
                                                                 
                    Three Months Ended Sep 30,    Nine Months Ended Ended Sep
                                                   30,
                    2013      2012       % Change 2013      2012      %
                                                                       Change
($000s)              SEGMENT REVENUES              SEGMENT REVENUES
Asset-based trucking $124,468  $126,159   -1.3%    $372,701  $370,122  0.7%
revenues
Covenant Transport
Solutions non-asset  10,736   6,802     57.8%    28,550   18,959   50.6%
based revenues
Freight revenue      $135,204  $132,961   1.7%     $401,251  $389,081  3.1%
                                                                 
                    OPERATING STATISTICS          OPERATING STATISTICS
Average freight
revenue per loaded   $1.667    $1.646     1.2%     $1.640    $1.607    2.1%
mile
Average freight
revenue per total    $1.497    $1.486     0.8%     $1.477    $1.449    1.9%
mile
Average freight
revenue per tractor  $3,387    $3,408     -0.6%    $3,385    $3,259    3.9%
per week
Average miles per    29,746   30,148    -1.3%    89,385   88,025   1.5%
tractor per period
Weighted avg.        2,769    2,817     -1.7%    2,799    2,901    -3.5%
tractors for period
Tractors at end of   2,753    2,817     -2.3%    2,753    2,817    -2.3%
period
Trailers at end of   6,824    6,725     1.5%     6,824    6,725    1.5%
period
                    SELECTED BALANCE SHEET DATA                     
($000s, except per   9/30/2013 12/31/2012                           
share data)
Total assets         $424,865  $400,232                             
Total equity         $96,003   $94,673                              
Total balance sheet  $186,612  $168,098                             
debt, net of cash
Net Debt to          66.0%     64.0%                                
Capitalization Ratio
Tangible book value  $6.43     $6.38                                
per basic share
                                                                 

CONTACT: For further information contact:
         Richard B. Cribbs, Senior Vice President
         and Chief Financial Officer(423) 463-3331
         criric@covenanttransport.com
        
         For copies of Company information contact:
         Kim Perry, Administrative Assistant
         (423) 463-3357
         perkim@covenanttransport.com

company logo
 
Press spacebar to pause and continue. Press esc to stop.