Covenant Transportation Group has announced its financial and operating results for the third quarter ended September 30, 2014. It reported total revenue of $177.6m, an increase of 3.9% compared with the third quarter of 2013. The company also recorded operating income of $5.6m which represented a decline of 5.36% year-on-year. Accordingly the company’s margin stood at 3.15%.
Chairman, President, and Chief Executive Officer, David Parker said, “We were pleased that each of our asset-based truckload subsidiaries improved sequentially and year-over-year during the third quarter. Our Covenant Transport subsidiary, which focuses on expedited team service, and our Star Transportation subsidiary, which focuses on south east regional dedicated contract service, both operated solidly below a 90% operating ratio for the quarter. Our Southern Refrigerated Transport subsidiary, which focuses on refrigerated service, also improved significantly (excluding the cargo claim reserve). Throughout the third quarter, we experienced a significant increase in demand, particularly in our expedited team-driver operations and our dedicated contract automotive offering.”
The increase in revenue consisted of higher freight revenue of $7.7m, partially offset by lower fuel surcharge revenue of $1.0m. The $7.7m increase in freight revenue related to a 13.4% increase in average freight revenue per tractor per week and a $1.2m increase of freight revenue contributed from the refrigerated intermodal service offering, partially offset by a 6.7% decrease in the average size of the tractor fleet.
Operating income fell as costs were pressured by salaries, wages and related expenses, which increased approximately 6.3 cents per mile due to a higher percentage of team-driven tractors. Incentive compensation and higher group health insurance expenses also had an adverse effect on operating costs.In addition, operating income for the quarter included a previously announced $7.5m reserve for an adverse judgement in September 2014 stemming from a cargo loss in 2008.
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