Covenant Transportation Group Announces Updated Expectations Concerning Second Quarter Financial Results
July 17 2019 - 1:00PM
Covenant Transportation Group, Inc. (NASDAQ/GS: CVTI) (“CTG”)
announced today its expectations regarding financial results for
the second quarter of 2019.
Chairman, President and Chief Executive Officer,
David R. Parker, offered the following comments: “After reviewing
preliminary operating and financial information through the end of
June, we expect to report earnings per diluted share (“EPS”) in the
range of $0.32 to $0.33 and adjusted earnings per diluted share
(“Adjusted EPS”)(1) in the range of $0.34 to $0.35. This is an
update from our previous statement that we expected second quarter
2019 Adjusted EPS to be fairly consistent with the prior year
quarter (we reported EPS and Adjusted EPS of $0.54 for the second
quarter of 2018) based on an expectation of the freight market
staying consistent and an occurrence of normal seasonal
patterns.
Contrary to normal seasonal patterns, the
truckload freight environment remained sluggish through most of the
second quarter. We attribute the softer freight environment to
factors such as continued excess inventory levels, a soft produce
season, and the extra capacity of Class 8 tractors that entered the
U.S. market over the last 9-12 months. For the second quarter of
2019, consolidated freight revenue is expected to increase
approximately 14% compared with the second quarter of 2018,
primarily reflecting the acquisition of Landair in July 2018. We
are starting to see the early favorable impact on freight
availability of the marginal correction of overcapacity and expect
capacity reduction to continue throughout the remainder of 2019.
Our contract logistics’ customers have maintained steady freight
for the first half of the year and we expect their business to
remain steady through the end of the year.”
- In addition to EPS, we use Adjusted
EPS, a non-GAAP measure, as a key measure of profitability.
Adjusted EPS is not a substitute for EPS measured in accordance
with GAAP. There are limitations to using non-GAAP financial
measures. We believe our presentation of this non-GAAP financial
measure is useful because it provides investors and securities
analysts supplemental information that we use internally for
purposes of assessing profitability. Further, our Board and
management use non-GAAP EPS on a supplemental basis to remove items
that may not be an indicator of performance from period-to-period.
Although we believe that Adjusted EPS improves comparability in
analyzing our period-to-period performance, they could limit
comparability to other companies in our industry, if those
companies define such measures differently. Because of these
limitations, Adjusted EPS should not be considered a measure of
income generated by our business or discretionary cash available to
us to invest in the growth of our business. Management compensates
for these limitations by primarily relying on GAAP results and
using non-GAAP financial measures on a supplemental basis. Our
calculation of Adjusted EPS starts with U.S. GAAP EPS and adds back
the after-tax impact of non-cash intangible asset amortization,
reconciled as follows:
|
|
Three Months Ended June 30, 2019 |
EPS |
|
$ |
0.32 |
- |
$ |
0.33 |
Add back: After-tax impact of non-cash intangible asset
amortization |
|
|
0.02 |
- |
|
0.02 |
Adjusted EPS |
|
$ |
0.34 |
- |
$ |
0.35 |
|
|
|
|
|
|
|
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;
Landair Transport and Landair Logistics of Greeneville, Tennessee;
and Star Transportation of Nashville, Tennessee. In addition,
Transport Enterprise Leasing, of Chattanooga, Tennessee is an
integral 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 market 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,
and such statements are subject to the safe harbor created by those
sections and the Private Securities Litigation Reform Act of 1995,
as amended. Such statements may be identified by their use of terms
or phrases such as "expects," "estimates," "projects," "believes,"
"anticipates," "plans," "intends," “outlook,” 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 the estimated range of earnings
per diluted share and Adjusted EPS and other expected financial and
operating measures are forward-looking statements. Such items have
not been subjected to all the review procedures associated with the
release of actual financial results and are premised on certain
assumptions. The following factors, among others, could cause
actual results to differ materially from those in the
forward-looking statements: estimates and adjusting entries made
during the review process; the completion of all review procedures
and preparation of financial statements in accordance with
generally accepted accounting principles; the rates and volumes
realized during the remainder of 2019, elevated experience in the
frequency and severity of claims relating to accident, cargo,
workers' compensation, health, and other claims,
increased insurance 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; government regulations imposed on our captive
insurance companies; 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 respond to
changes in our industry or business in light of our substantial
indebtedness and lease obligations; our ability to sustain or
increase profitability in the future; the risks related to our
receivables factoring arrangements; 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 and hedging contracts;
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; our
ability to retain our key employees; the risks associated with
engaging independent contractors to provide a portion of our
capacity; seasonal factors such as harsh weather conditions that
increase operating costs; competition from trucking, rail, and
intermodal competitors; our dependence on third-party providers,
particularly in our Managed Freight segment; regulatory
requirements that increase costs, decrease efficiency, or impact
the availability or effective driving time of our drivers and other
drivers in the industry, including the terms and exemptions from
hours-of-service and electronic log requirements for drivers and
the Federal Motor Carrier Safety Administration’s Compliance,
Safety, Accountability program applicable to driver standards and
the methodology for determining a carrier’s Department of
Transportation safety rating; the proper functioning and
availability of our management information and communication
systems and other information technology assets; volatility of our
stock price; remediation of a material weakness in our internal
controls, including our ability to remediate the material weakness
by December 31, 2019; our ability to implement internal controls at
Landair, including the our implement internal controls by December
31, 2019; impairment of goodwill and other intangible assets; our
ability to effectively manage the challenges associated with doing
business internationally; future outcomes of litigation;
uncertainties in the interpretation of the 2017 Tax Cuts and Jobs
Act and other tax laws; 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 (including our
acquisition of Landair); our ability to achieve our strategic plan;
fluctuations in the results of Transport Enterprise Leasing, which
are included as equity in income (loss) of affiliate in our
financial statements; our Chairman of the Board and Chief Executive
Officer and his wife control a large portion of our stock and have
substantial control over us, which could limit other stockholders'
ability to influence the outcome of key transactions, including
changes of control; and future share repurchases, if any. 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.
For further information contact:Richard B.
Cribbs, Executive Vice President and Chief Financial
Officer RCribbs@covenanttransport.com
For copies of Company information
contact:Theresa Ives, Executive Administrative
AssistantTIves@covenanttransport.com
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