Covenant Transportation Group, Chattanooga, Tenn., reported a net loss of $7.8 million for the first quarter, even though freight revenue (excluding fuel surcharges) increased 3.5 percent.


For the quarter, total revenue increased 9.2, to $181.7 million from $166.4 million in the same quarter of 2007. Freight revenue, which excludes fuel surcharges, increased 3.5 percent, to $148.6 million in the 2008 quarter from $143.5 million in the 2007 quarter.

The company reported net loss of $7.8 million in the first quarter of 2008 compared to a net loss of $2.1 million for the first quarter of 2007.

The actual loss for the quarter was worse than the anticipated range primarily as a result of poor workers' compensation experience in the quarter and higher than expected final quarterly adjustments based on the completion of quarter-end internal actuarial analysis of self-insured claims accruals.

The company's operating ratio (operating expenses, net of fuel surcharge revenue, as a percentage of revenue, excluding fuel surcharge revenue) was 106.5% for the first quarter of 2008 compared with 101.9% for the first quarter of 2007. Excluding the cost of fuel, however, the company's operating results in the first quarter of 2008 were slightly better than the operating results in the first quarter of 2007.

Company officials noted the freight market continued to be very challenging during the first quarter of 2008. Trucking capacity continued to exceed demand, which allowed shippers to remain reluctant to increase freight rates or fuel surcharge reimbursement programs. Many shippers used bid processes to maintain downward pressure on freight rates. During the quarter, Covenant participated in 245 freight bid packages compared with 52 in the first quarter of 2007 and 595 in the entire year of 2007. Several significant bids remain currently outstanding.

Freight was soft across all service offerings. In this environment, the Company moved assets out of the Expedited, Star Transportation, Dedicated, and SRT service offerings. On a temporary basis, these assets were either disposed or allocated to the Covenant Regional operation. The southeastern United States remained the weakest area of the country, as the downturns in housing and automobile-related industries disproportionately affect that region.