Covenant Transportation Group, Chattanooga, Tenn., reported improved fourth-quarter 2010 numbers compared to the fourth quarter of 2009.


Freight revenue of $136.6 million was an increase of 0.6% compared with the fourth quarter of 2009. Operating income of $6 million and an operating ratio of 95.6%, compared with an operating loss of $0.8 million and an operating ratio of 100.6% in the fourth quarter of 2009. And net income of $0.7 million, or $0.05 per share, compared with a net loss of $2.7 million, or ($0.19) per share in the fourth quarter of 2009.

"I am pleased to report a profitable fourth quarter and full year for 2010," said Chairman, President, and CEO David R. Parker. "This performance marks the mid-point of a dramatic turnaround in Covenant's performance over the past several years. I use the word midpoint to emphasize that much work remains to be done to achieve acceptable margins and returns on our investment."

For the year, total revenue increased 10.4%, to $649.7 million from $588.7 million for 2009. Freight revenue increased 5%, to $546.3 million in 2010 from $520.5 million in 2009. The company reported net income of $3.3 million, or $0.23 per share, for 2010 compared to a net loss, including impairment charges, of $25 million, or ($1.77) per share in 2009.

For the quarter, total revenue in Covenant's asset-based operations increased $9.6 million, or 6.6%, compared with the fourth quarter of 2009. Of this increase, $5.3 million related to higher fuel surcharge revenue. The remaining $4.3 million related to a 3% increase in average freight revenue per tractor per week and a minor 14 truck (or 0.5%) increase in the average tractor fleet. Average freight revenue per tractor per week improved to $3,113 during the 2010 quarter from $3,023 during the 2009 quarter due to an improved rate environment, partially offset by an approximately 2.1% decrease in miles per tractor.

Average freight revenue per total mile increased 6.6 cents per mile (or 5.2%) compared with the fourth quarter of 2009, which was especially favorable given a 6.3% increase in average length of haul from 846 miles to 899 miles.

Fixed costs decreased for the quarter. This was due to reduction of leased trailers, improved terms on a large portion of the remaining dry van trailers, and an improving market for used tractors.

Driver wages increased as various incentive pay items were improved.

Covenant Transport Solutions, the company's freight brokerage subsidiary, also improved its profitability over the 2009 quarter. Although total revenue decreased 27.5%, to $9.1 million from $12.6 million in the same quarter of 2009, this was related primarily to a decision to eliminate unprofitable freight and agents. Net revenue (total revenue less purchased transportation) for the quarter decreased 20.1% compared to the 2009 quarter, but gross margins improved as purchased transportation was 80.9% of total revenue in the current quarter, down from 82.7% of total revenue in the prior year quarter.

"Our existing annual tractor fleet plan for 2011 includes the purchase and disposal of approximately 850 tractors," Parker said. "With a relatively young average fleet age of 19 months at December 31, 2010, 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.

"We had $37.8 million of available borrowing capacity under our revolving credit facility at December 31, 2010. We were in compliance with our financial covenant at December 31, 2010. In addition, we believe we have sufficient financing available from the captive finance subsidiaries of our main tractor suppliers to fund most of our expected tractor purchases in 2011."