Revenue up, but Covenant Transport has net loss for 2Q

Covenant Transport, Inc. announced that second-quarter total revenue increased 8%, to $169.4 million from $156.8 million in the same quarter of 2005.

Freight revenue, which excludes fuel surcharges, was essentially flat at $139.3 million in the 2006 quarter and $138.7 million in the 2005 quarter. The company measures freight revenue because management believes that fuel surcharges tend to be a volatile source of revenue and the removal of such surcharges affords a more consistent basis for comparing results of operations from period to period.

Covenant reported a net loss of $398,000, or $.03 per share, compared to net income of $652,000, or $.05 per share. The second quarter of 2006 included a $650,000 after-tax increase, or $.05 per share, to income taxes related to the previously disclosed settlement with the Internal Revenue Service and a contingency reserve concerning an uncertain tax position.

For the six months ended June 30, total revenue increased 8.9%, to $320.9 million from $294.7 million during 2005. Freight revenue increased 2.5%, to $268.8 million in 2006 from $262.3 million in 2005. The company generated a net loss of $1.3 million, or $.09 per share, compared with a $3,000 profit for the same period of 2005.

Said Chairman, President, and Chief Executive Officer David R. Parker: "From a freight standpoint, the second quarter started slow and gained momentum. April was soft, May was good, and June was really strong. Average freight revenue per tractor per week, which is our main measure of asset productivity, improved 5%, to $3,109 from $2,961 in the second quarter of 2005. This was consistent with one of our major goals for the year -- to increase our average freight revenue per tractor per week at least five percent over the year ago period for each quarter of this year. On a consolidated basis, average miles per tractor improved 4.3% and average freight revenue per total mile improved 0.7%. Average freight revenue per loaded mile was flat with last year at approximately $1.50 per mile, while non-revenue miles percentage improved. In general, the changes in freight mix as a result of the business realignment expanded the portions of our business with longer lengths of haul, more miles per tractor, and generally lower rate structures, while shrinking the regional service offering, which had the highest rate structure but significantly lower miles per tractor.

"From an earnings perspective, our results were not much different than we had expected on a pre-tax basis. In April, we stated that our earnings goal was to approximate the same results as last year. For the quarter, our income before income taxes was within $130,000 of last year's number, which is pretty close considering fuel increased $.30 per gallon since April and we have all the moving parts of the business realignment. The increase to income taxes related to the settlement with the IRS regarding the audit of fiscal 2001 and 2002 and the disallowance of a deduction of certain expenses incurred in respect of our 2003 stock offering. Additionally an amount was booked to a contingency reserve concerning an uncertain tax position for fiscal 2006."

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