Covenant Reports Mixed Results for Q4 2020
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Covenant Logistics Group Inc. posted a net loss of $25.7 million, or minus $1.50 a diluted share, for the three months ending Dec. 31, the Chattanooga, Tenn.-based truckload carrier announced Jan. 25.
That compared with earnings of $1.2 million (6 cents) during the same time the previous year. Revenue fell to $225.2 million during the fourth quarter of 2020, a 2.3% decline from $230.6 million in the 2019 period.
Results were mixed in terms of Wall Street expectations. Analysts had been looking for 60 cents per share and quarterly revenue of $223.4 million, according to Zacks Consensus Estimate.
For the full year, Covenant reported a net loss of $42.7 million (minus $2.46) on revenue of $838.6 million. That compares with earnings of $8.5 million (45 cents) on revenue of $885.4 million in 2019.
“During 2020, we strategically repositioned our enterprise around our dedicated, expedited, managed freight and warehousing business units, reduced our fixed overhead and capital deployed in noncore businesses, flattened our management structure and improved our margins on an adjusted basis,” Covenant CEO David Parker said in a statement. “For perspective, our revenue was approximately the same on a fleet that is nearly 18% smaller than the same quarter last year.”
He added that the company also paid down more than $200 million in debt and lease obligations. Parker also noted that move will provide significant flexibility in making future capital-allocation decisions.
But he said the changes were not without cost.
“For the quarter, we incurred approximately $48 million in net cash and noncash restructuring-related charges, including an approximately $44 million contingent loss charge in relation to our discontinued TFS factoring business in the fourth quarter of 2020,” Parker said. “We exit 2020 more profitable and generating higher return on capital excluding the restructuring costs.”
He added that the mission for the year is to seat more tractors, continue to control costs and improve the profitability of certain legacy contracts in the dedicated segment that generate unacceptable returns.
“The fourth-quarter freight market was strong and continues to be strong into 2021 on a seasonal basis,” Parker said. “The asset-based results were somewhat muted by intense challenges in driver recruiting and retention, as well as COVID-19-related internal and external shop-staffing issues.”
Revenue by segments:
- Combined truckload — $145.7 million for the quarter compared with $176 million in the year-earlier period. The truckload segment includes expedited and dedicated shipments. Operating income for the segment was $3.1 million during the quarter compared with a loss of $914,000 during the same time in 2019.
- Expedited — $75.9 million for the quarter compared with $90.9 million during the same time in 2019. Operating income for the segment was $4.9 million during the quarter compared to $604,000.
- Dedicated services — $69.8 million compared with $85.1 million during the prior-year quarter. The operating loss for the segment was $1.7 million during the quarter compared to a loss of $1.5 million in Q4 2019.
The company’s subsidiaries include Southern Refrigerated Transport, Star Transportation, Landair Holdings and Covenant Transport Solutions.
Covenant Transport Services ranks No. 43 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.
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