The company reported base revenue of $103.7 million for the three months ended Sept. 30, 2008, an increase of 4.4 percent from $99.3 million for the same quarter of 2007. Net income increased from $16,000 for the 2007 quarter to $2.4 million for the same quarter of 2008. Diluted earnings per share increased to $0.23, net of a one-time adjustment of $0.02 per share for a non-operating asset impairment charge, for the quarter ended September 30, 2008 from $0.00 for the same quarter of 2007.
Base revenue also increased for the first nine months of the year, rising 3.1%, from $295.5 million last year to $304.7 million this year. Net income increased 48% from $1.7 million for the first nine months of 2007 to $2.5 million for the same period of 2008. Diluted earnings per share increased 56.3 percent, from $0.16 for the 2007 period to $0.25 for the same period of 2008.
"Freight availability declined throughout the quarter from its highs in June," noted Clifton R. Beckham, president and CEO. "Although lower diesel fuel prices
certainly helped our third quarter earnings, the diesel price decrease prevented some weak carriers from failing or encouraged them to bring on capacity that had been idled, both of which contributed to more competition for less freight."
He notes that the base revenue for the quarter grew 4.4% despite 1.2% fewer tractors in the fleet.
"Consistent with our strategic plan, our base revenue growth resulted from aggressive expansion in our asset-light division, Strategic Capacity Solutions, and from improving efficiencies in our Trucking division."
In the Trucking Division, Velocity, which measures the number of times the company loads its fleet each week, improved 7.2% year-over-year, thanks iin part to a reduction in average length-of-haul and in empty miles.
"Our Yield Management initiative is focused on increasing the profitability of individual loads and can best be measured by improvements in base revenue per mile," Beckham explained. "As we continue to refine the management of our freight network in this difficult freight and economic environment, we experienced a 3.7% improvement in
our base revenue per total mile. The net result of these operational improvements was a 2.9% boost in base Trucking revenue per truck per week, which we were able to achieve despite a slight reduction in mileage utilization.
"However, our lower tractor mileage utilization was not entirely the result of challenging freight conditions. We idled nearly 4% more tractors this quarter than a year ago to facilitate yield management and in response to our heightened driver hiring standards, which is an integral component of our "War on Accidents" safety initiative. We count every truck in our fleet in our operating metrics regardless of whether or not it has an
assigned driver. So, we are pleased with how well we utilized the 94% of the fleet that was available for dispatch during the quarter. We expect to make a determination during the fourth quarter as to whether or not we will downsize the fleet permanently or put those available tractors back into service depending on whether freight demand improves and on the availability of qualified drivers."
"Our long-term strategic plan calls for a halt to fleet growth until we consistently earn at least a 10% return on capital. Our goal is to achieve that return by the end of 2010. We have launched eight supporting initiatives to help attain this goal. These initiatives are designed to help us expand our margins in our asset-intensive Trucking operations through more efficient revenue production and cost control. The initiatives are also designed to position our business model to resume asset-based growth in 2011 after improving our asset-based margins and by building sizeable asset-light platforms for rail intermodal and truck brokerage services, both of which should produce a
higher return on capital.
"While we are pleased with our progress toward our goals, we are keeping an eye on the global economic situation. These past few weeks have been quite fluid and our ability to predict the near-term future is murky at best. We believe freight demand is likely to deteriorate further over the next few quarters, and that less freight, inflated
equipment prices and tightening credit will further shrink industry capacity. Falling fuel prices are the only material factor we see that aids industry-wide capacity retention, and we do not expect that to be sufficient to outweigh the negative factors for underperforming and undercapitalized competitors. We realize that the U.S.
economy is enormous, and that a tremendous amount of freight must be moved even in a slow-growth or even slightly contracting environment. Thus, improving industry fundamentals may emerge next year for those trucking companies that weather the difficult times and survive to compete.
"To that end, we are poised to weather the uncertainty of the next few quarters. Our balance sheet leverage, less cash, represents just 43.9% of our total capitalization, and we have no off-balance sheet debt. We have financed most of our 2008 tractor purchases with 42-month, fixed-rate capital leases. Our capital leases currently represent 59.5% of our total debt and carry an average fixed rate of 4.1%. Not only does that provide us with a natural hedge against recent LIBOR volatility, but it has also freed up availability on our revolving credit line on which we could currently borrow up to an additional $45.7 million without violating any of our current financial covenants. During the third quarter, we did produce positive free cash flow (cash flow from operations less net capital expenditures) that we used to retire revolving debt. We also expect our capital expenditures to be conservative for the remainder of 2008 and all of 2009. In summary, we are comfortable with our liquidity situation right now.
"While we continue progressing towards our long-term goals, we will also manage our capital and our business operations conservatively in the uncertain near-term. We believe that our long-term strategic plan positions our business well for performance in difficult times, but it will require intensity and execution on the part of our team.
That will be our focus as the fourth quarter unfolds."