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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Covenant Transportation Group Inc | NASDAQ:CVTI | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 13.95 | 8.50 | 14.25 | 0 | 01:00:00 |
[X]
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
[ ]
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Nevada
|
88-0320154
|
|
(State or other jurisdiction of incorporation
|
(I.R.S. Employer Identification No.)
|
|
or organization)
|
||
400 Birmingham Hwy.
|
||
Chattanooga, TN
|
37419
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Yes [X]
|
No [ ]
|
Yes [X]
|
No [ ]
|
Large accelerated filer [ ]
|
|
Accelerated filer [X]
|
Non-accelerated filer [ ]
|
Smaller reporting company [ ]
|
|
Emerging growth company [ ]
|
Yes [ ]
|
No [X]
|
PART I
FINANCIAL INFORMATION
|
||
Page
Number
|
||
Item 1.
|
Financial Statements
|
|
3
|
||
4
|
||
5
|
||
6
|
||
7
|
||
8
|
||
Item 2.
|
24
|
|
Item 3.
|
40
|
|
Item 4.
|
41
|
|
PART II
OTHER INFORMATION
|
||
Page
Number
|
||
Item 1.
|
42
|
|
Item 1A.
|
42
|
|
Item 2.
|
42
|
|
Item 3.
|
42
|
|
Item 4.
|
42
|
|
Item 5.
|
42
|
|
Item 6.
|
43
|
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
|
||||||||
ASSETS
|
September 30, 2018
(unaudited)
|
December 31, 2017
(unaudited)
|
||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
19,612
|
$
|
15,356
|
||||
Accounts receivable, net of allowance of $1,817 in 2018 and $1,460 in 2017
|
134,957
|
104,153
|
||||||
Drivers' advances and other receivables, net of allowance of $672 in 2018 and $496 in 2017
|
15,340
|
15,062
|
||||||
Inventory and supplies
|
4,337
|
4,232
|
||||||
Prepaid expenses
|
12,045
|
8,699
|
||||||
Assets held for sale
|
1,325
|
1,444
|
||||||
Income taxes receivable
|
1,585
|
11,551
|
||||||
Other short-term assets
|
2,333
|
1,817
|
||||||
Total current assets
|
191,534
|
162,314
|
||||||
Property and equipment, at cost
|
635,909
|
650,988
|
||||||
Less: accumulated depreciation and amortization
|
(187,144
|
)
|
(186,916
|
)
|
||||
Net property and equipment
|
448,765
|
464,072
|
||||||
Goodwill
|
41,086
|
-
|
||||||
Other intangibles, net
|
33,269
|
-
|
||||||
Other assets, net
|
32,828
|
23,282
|
||||||
Total assets
|
$
|
747,482
|
$
|
649,668
|
||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Current liabilities:
|
||||||||
Checks outstanding in excess of bank balances
|
605
|
-
|
||||||
Accounts payable
|
21,488
|
11,857
|
||||||
Accrued expenses
|
47,797
|
26,520
|
||||||
Current maturities of long-term debt
|
27,643
|
24,596
|
||||||
Current portion of capital lease obligations
|
5,074
|
2,962
|
||||||
Current portion of insurance and claims accrual
|
24,785
|
15,042
|
||||||
Other short-term liabilities
|
-
|
243
|
||||||
Total current liabilities
|
127,392
|
81,220
|
||||||
Long-term debt
|
169,037
|
164,465
|
||||||
Long-term portion of capital lease obligations
|
33,877
|
21,777
|
||||||
Insurance and claims accrual
|
16,291
|
21,836
|
||||||
Deferred income taxes
|
73,347
|
63,344
|
||||||
Other long-term liabilities
|
1,388
|
1,825
|
||||||
Total liabilities
|
421,332
|
354,467
|
||||||
Commitments and contingent liabilities
|
-
|
-
|
||||||
Stockholders' equity:
|
||||||||
Class A common stock, $.01 par value; 20,000,000 shares authorized; 15,996,066 shares issued and outstanding as of September 30, 2018 and 15,979,703 shares issued and outstanding as of December 31, 2017
|
171
|
171
|
||||||
Class B common stock, $.01 par value; 5,000,000 shares authorized; 2,350,000 shares issued and outstanding
|
24
|
24
|
||||||
Additional paid-in-capital
|
140,404
|
137,242
|
||||||
Accumulated other comprehensive income
|
1,487
|
293
|
||||||
Retained earnings
|
184,064
|
157,471
|
||||||
Total stockholders' equity
|
326,150
|
295,201
|
||||||
Total liabilities and stockholders' equity
|
$
|
747,482
|
$
|
649,668
|
Three months ended
September 30,
(unaudited)
|
Nine months ended
September 30,
(unaudited)
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Revenue:
|
||||||||||||||||
Freight revenue
|
$
|
214,623
|
$
|
159,500
|
$
|
535,721
|
$
|
445,212
|
||||||||
Fuel surcharge revenue
|
28,680
|
19,131
|
77,466
|
56,489
|
||||||||||||
Total revenue
|
$
|
243,303
|
$
|
178,631
|
$
|
613,187
|
$
|
501,701
|
||||||||
Operating expenses:
|
||||||||||||||||
Salaries, wages, and related expenses
|
86,249
|
60,732
|
211,621
|
178,639
|
||||||||||||
Fuel expense
|
33,428
|
25,998
|
89,817
|
76,310
|
||||||||||||
Operations and maintenance
|
16,457
|
13,046
|
40,783
|
37,504
|
||||||||||||
Revenue equipment rentals and purchased transportation
|
47,445
|
36,361
|
115,525
|
90,719
|
||||||||||||
Operating taxes and licenses
|
3,377
|
2,364
|
8,649
|
7,197
|
||||||||||||
Insurance and claims
|
12,675
|
7,681
|
31,269
|
24,313
|
||||||||||||
Communications and utilities
|
1,810
|
1,747
|
5,216
|
5,081
|
||||||||||||
General supplies and expenses
|
6,391
|
3,729
|
16,833
|
10,919
|
||||||||||||
Depreciation and amortization, including gains and losses on disposition of property and equipment
|
19,290
|
17,932
|
56,803
|
57,707
|
||||||||||||
Total operating expenses
|
227,122
|
169,590
|
576,516
|
488,389
|
||||||||||||
Operating income
|
16,181
|
9,041
|
36,671
|
13,312
|
||||||||||||
Interest expense, net
|
2,460
|
2,174
|
6,360
|
6,216
|
||||||||||||
Income from equity method investment
|
(2,142
|
)
|
(750
|
)
|
(5,407
|
)
|
(2,575
|
)
|
||||||||
Income before income taxes
|
15,863
|
7,617
|
35,718
|
9,671
|
||||||||||||
Income tax expense
|
4,249
|
2,985
|
9,716
|
3,530
|
||||||||||||
Net income
|
$
|
11,614
|
$
|
4,632
|
$
|
26,002
|
$
|
6,141
|
||||||||
Income per share:
|
||||||||||||||||
Basic net income per share
|
$
|
0.63
|
$
|
0.25
|
$
|
1.42
|
$
|
0.34
|
||||||||
Diluted net income per share
|
$
|
0.63
|
$
|
0.25
|
$
|
1.41
|
$
|
0.33
|
||||||||
Basic weighted average shares outstanding
|
18,343
|
18,288
|
18,337
|
18,275
|
||||||||||||
Diluted weighted average shares outstanding
|
18,497
|
18,404
|
18,448
|
18,366
|
Three months ended
September 30,
(unaudited)
|
Nine months ended
September 30,
(unaudited)
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Net income
|
$
|
11,614
|
$
|
4,632
|
$
|
26,002
|
$
|
6,141
|
||||||||
Other comprehensive income (loss):
|
||||||||||||||||
Unrealized gain (loss) on effective portion of cash flow hedges, net of tax of $133 and $782 in 2018 and $1,050 and $796 in 2017, respectively
|
353
|
1,678
|
2,065
|
(1,271
|
)
|
|||||||||||
Reclassification of cash flow hedges (gain) loss into statement of operations, net of tax of $155 and $330 in 2018 and $424 and $1,546 in 2017, respectively
|
(406
|
)
|
677
|
(868
|
)
|
2,469
|
||||||||||
Unrealized holding loss on investments classified as available-for-sale
|
(3
|
)
|
-
|
(3
|
)
|
-
|
||||||||||
Total other comprehensive income (loss)
|
(56
|
)
|
2,355
|
1,194
|
1,198
|
|||||||||||
Comprehensive income
|
$
|
11,558
|
$
|
6,987
|
$
|
27,196
|
$
|
7,339
|
Additional
|
Accumulated
Other
|
Total
|
||||||||||||||||||||||
Common Stock
|
Paid-In
Capital
|
Comprehensive
Income
|
Retained
Earnings
|
Stockholders'
Equity
|
||||||||||||||||||||
Class A
|
Class B
|
|||||||||||||||||||||||
Balances at December 31, 2017
|
$
|
171
|
$
|
24
|
$
|
137,242
|
$
|
293
|
$
|
157,471
|
$
|
295,201
|
||||||||||||
Net income
|
-
|
-
|
-
|
-
|
26,002
|
26,002
|
||||||||||||||||||
Effect of adoption of ASU 2014-09
|
-
|
-
|
-
|
-
|
591
|
591
|
||||||||||||||||||
Other comprehensive income
|
-
|
-
|
-
|
1,194
|
-
|
1,194
|
||||||||||||||||||
Stock-based employee compensation expense
|
-
|
-
|
2,868
|
-
|
-
|
2,868
|
||||||||||||||||||
Issuance of restricted shares
|
-
|
-
|
294
|
-
|
-
|
294
|
||||||||||||||||||
Balances at September 30, 2018
|
$
|
171
|
$
|
24
|
$
|
140,404
|
$
|
1,487
|
$
|
184,064
|
$
|
326,150
|
Nine months ended September 30,
(unaudited)
|
||||||||
2018
|
2017
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income
|
$
|
26,002
|
$
|
6,141
|
||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Provision for losses on accounts receivable
|
168
|
241
|
||||||
Reversal of gain on sales to equity method investee
|
(185
|
)
|
(153
|
)
|
||||
Depreciation and amortization
|
56,370
|
54,489
|
||||||
Amortization of deferred financing fees
|
111
|
206
|
||||||
Deferred income tax expense
|
9,172
|
16,437
|
||||||
Income tax benefit arising from restricted share vesting
|
19
|
96
|
||||||
Stock-based compensation expense
|
3,243
|
896
|
||||||
Equity in income of affiliate
|
(5,407
|
)
|
(2,575
|
)
|
||||
Return on investment in affiliated company
|
-
|
1,960
|
||||||
Loss on disposition of property and equipment
|
433
|
3,217
|
||||||
Loss on investment in available-for-sale securities
|
(6
|
)
|
-
|
|||||
Changes in operating assets and liabilities:
|
||||||||
Receivables and advances
|
(4,717
|
)
|
(19,975
|
)
|
||||
Prepaid expenses and other assets
|
(2,763
|
)
|
1,439
|
|||||
Inventory and supplies
|
(102
|
)
|
(69
|
)
|
||||
Insurance and claims accrual
|
1,553
|
837
|
||||||
Accounts payable and accrued expenses
|
17,723
|
(400
|
)
|
|||||
Net cash flows provided by operating activities
|
101,614
|
62,787
|
||||||
Cash flows from investing activities:
|
||||||||
Acquisition of Landair Holdings, Inc., net of cash acquired
|
(106,060
|
)
|
-
|
|||||
Purchase of available-for-sale securities
|
(1,496
|
)
|
-
|
|||||
Acquisition of property and equipment
|
(44,528
|
)
|
(89,917
|
)
|
||||
Proceeds from disposition of property and equipment
|
49,302
|
32,739
|
||||||
Net cash flows used in investing activities
|
(102,782
|
)
|
(57,178
|
)
|
||||
Cash flows from financing activities:
|
||||||||
Change in checks outstanding in excess of bank balances
|
605
|
1,325
|
||||||
Proceeds from issuance of notes payable
|
83,746
|
110,762
|
||||||
Repayments of notes payable
|
(73,376
|
)
|
(101,717
|
)
|
||||
Repayments of capital lease obligations
|
(2,608
|
)
|
(6,689
|
)
|
||||
Proceeds under revolving credit facility
|
1,153,310
|
930,161
|
||||||
Repayments under revolving credit facility
|
(1,156,162
|
)
|
(938,667
|
)
|
||||
Payment of minimum tax withholdings on stock compensation
|
(81
|
)
|
(257
|
)
|
||||
Debt refinancing costs
|
(10
|
)
|
-
|
|||||
Net cash provided by (used in) financing activities
|
5,424
|
(5,082
|
)
|
|||||
Net change in cash and cash equivalents
|
4,256
|
527
|
||||||
Cash and cash equivalents at beginning of period
|
15,356
|
7,750
|
||||||
Cash and cash equivalents at end of period
|
$
|
19,612
|
$
|
8,277
|
||||
Supplemental disclosure of cash flow information:
|
||||||||
Cash paid during the year for:
|
||||||||
Equipment purchased under capital leases
|
$
|
16,820
|
$
|
9,953
|
Three Months Ended September 30, 2018
|
||||||||||||
Financial Statement Line Item (in thousands)
|
As reported
|
Adjustments
|
Balances without adoption of Topic 606
|
|||||||||
Consolidated Balance Sheet
|
||||||||||||
Accounts receivable, net of allowances
|
$
|
134,957
|
$
|
(1,276
|
)
|
$
|
133,681
|
|||||
Total assets
|
747,482
|
(1,276
|
)
|
746,206
|
||||||||
Accrued expenses
|
47,797
|
(236
|
)
|
47,561
|
||||||||
Deferred income taxes
|
73,347
|
(286
|
)
|
73,061
|
||||||||
Total liabilities
|
421,332
|
(522
|
)
|
420,810
|
||||||||
Retained earnings
|
184,064
|
(754
|
)
|
183,310
|
||||||||
Total stockholders’ equity
|
326,150
|
(754
|
)
|
325,396
|
||||||||
Total liabilities and stockholders’ equity
|
747,482
|
(1,276
|
)
|
746,206
|
||||||||
Consolidated Statement of Operations
|
||||||||||||
Freight revenue
|
214,623
|
49
|
214,672
|
|||||||||
Total revenue
|
243,303
|
49
|
243,352
|
|||||||||
Salaries, wages and related expenses
|
86,249
|
(1
|
)
|
86,248
|
||||||||
Revenue equipment rentals and purchased transportation
|
47,445
|
(95
|
)
|
47,350
|
||||||||
Total operating expenses
|
227,122
|
(96
|
)
|
227,026
|
||||||||
Income tax expense
|
4,249
|
40
|
4,289
|
|||||||||
Net income
|
11,614
|
105
|
11,719
|
|||||||||
Consolidated Statement of Comprehensive Income
|
||||||||||||
Net income
|
11,614
|
105
|
11,719
|
|||||||||
Comprehensive income
|
11,558
|
105
|
11,663
|
|||||||||
Consolidated Statement of Cash Flows
|
||||||||||||
Operating Cash Flows
|
||||||||||||
Net income
|
11,614
|
105
|
11,719
|
|||||||||
Deferred income tax expense
|
2,676
|
40
|
2,716
|
|||||||||
Change in: Receivables and advances
|
(16,537
|
)
|
(49
|
)
|
(16,586
|
)
|
||||||
Change in: Accounts payable and accrued expenses
|
16,087
|
(96
|
)
|
15,991
|
||||||||
Net cash flows provided by operating activities
|
38,981
|
-
|
38,981
|
Nine Months Ended September 30, 2018
|
||||||||||||
Financial Statement Line Item (in thousands)
|
As reported
|
Adjustments
|
Balances without adoption of Topic 606
|
|||||||||
Consolidated Balance Sheet
|
||||||||||||
Accounts receivable, net of allowances
|
$
|
134,957
|
$
|
(1,276
|
)
|
$
|
133,681
|
|||||
Total assets
|
747,482
|
(1,276
|
)
|
746,206
|
||||||||
Accrued expenses
|
47,797
|
(236
|
)
|
47,561
|
||||||||
Deferred income taxes
|
73,347
|
(286
|
)
|
73,061
|
||||||||
Total liabilities
|
421,332
|
(522
|
)
|
420,810
|
||||||||
Retained earnings
|
184,064
|
(754
|
)
|
183,310
|
||||||||
Total stockholders’ equity
|
326,150
|
(754
|
)
|
325,396
|
||||||||
Total liabilities and stockholders’ equity
|
747,482
|
(1,276
|
)
|
746,206
|
||||||||
Consolidated Statement of Operations
|
||||||||||||
Freight revenue
|
535,721
|
(266
|
)
|
535,455
|
||||||||
Total revenue
|
613,187
|
(266
|
)
|
612,921
|
||||||||
Salaries, wages and related expenses
|
211,621
|
13
|
211,634
|
|||||||||
Revenue equipment rentals and purchased transportation
|
115,525
|
(54
|
)
|
115,471
|
||||||||
Total operating expenses
|
576,516
|
(41
|
)
|
576,475
|
||||||||
Income tax expense
|
9,716
|
(62
|
)
|
9,654
|
||||||||
Net income
|
26,002
|
(164
|
)
|
25,838
|
||||||||
Consolidated Statement of Comprehensive Income
|
||||||||||||
Net income
|
26,002
|
(163
|
)
|
25,838
|
||||||||
Comprehensive income
|
27,196
|
(163
|
)
|
27,032
|
||||||||
Consolidated Statement of Cash Flows
|
||||||||||||
Operating Cash Flows
|
||||||||||||
Net income
|
26,002
|
(163
|
)
|
25,838
|
||||||||
Deferred income tax expense
|
9,172
|
(62
|
)
|
9,110
|
||||||||
Change in: Receivables and advances
|
(4,717
|
)
|
266
|
(4,451
|
)
|
|||||||
Change in: Accounts payable and accrued expenses
|
17,723
|
(41
|
)
|
17,682
|
||||||||
Net cash flows provided by operating activities
|
101,613
|
-
|
101,612
|
(in thousands)
|
Three Months ended
September 30,
|
Nine Months ended
September 30,
|
||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Total Revenues:
|
||||||||||||||||
Truckload: Covenant Transport
|
$
|
108,223
|
$
|
95,100
|
$
|
309,583
|
$
|
272,387
|
||||||||
Truckload: SRT
|
47,866
|
41,382
|
134,163
|
123,905
|
||||||||||||
Truckload: Star Transportation
|
19,887
|
16,584
|
57,489
|
50,030
|
||||||||||||
Truckload: Landair
|
21,077
|
-
|
21,077
|
-
|
||||||||||||
Managed Freight
|
46,250
|
25,565
|
90,875
|
55,379
|
||||||||||||
Total
|
$
|
243,303
|
$
|
178,631
|
$
|
613,187
|
$
|
501,701
|
Note 2. |
Income Per Share
|
(in thousands except per share data)
|
Three Months ended
September 30,
|
Nine Months ended
September 30,
|
||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Numerator:
|
||||||||||||||||
Net income
|
$
|
11,614
|
$
|
4,632
|
$
|
26,002
|
$
|
6,141
|
||||||||
Denominator:
|
||||||||||||||||
Denominator for basic earnings per share – weighted-average shares
|
18,343
|
18,288
|
18,337
|
18,275
|
||||||||||||
Effect of dilutive securities:
|
||||||||||||||||
Equivalent shares issuable upon conversion of unvested restricted stock
|
154
|
116
|
111
|
91
|
||||||||||||
Denominator for diluted earnings per share – adjusted weighted-average shares and assumed conversions
|
18,497
|
18,404
|
18,448
|
18,366
|
||||||||||||
Basic income per share:
|
$
|
0.63
|
$
|
0.25
|
$
|
1.42
|
$
|
0.34
|
||||||||
Diluted income per share: | $ | 0.63 | $ | 0.25 | $ | 1.41 | $ | 0.33 |
Note 3. |
Segment Information
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Total Revenues:
|
||||||||||||||||
Truckload
|
$
|
197,053
|
$
|
153,066
|
$
|
522,312
|
$
|
446,322
|
||||||||
Managed Freight
|
46,250
|
25,565
|
90,875
|
55,379
|
||||||||||||
Total
|
$
|
243,303
|
$
|
178,631
|
$
|
613,187
|
$
|
501,701
|
||||||||
Operating Income:
|
||||||||||||||||
Truckload
|
$
|
11,960
|
$
|
6,573
|
$
|
29,055
|
$
|
7,812
|
||||||||
Managed Freight
|
4,221
|
2,468
|
7,616
|
5,500
|
||||||||||||
Total
|
$
|
16,181
|
$
|
9,041
|
$
|
36,671
|
$
|
13,312
|
Note 4. |
Income Taxes
|
●
|
Level 1. Observable inputs such as quoted prices in active markets;
|
●
|
Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
|
●
|
Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
|
(in thousands)
|
||||||||
Hedge derivatives
|
September 30, 2018
|
December 31, 2017
(1)
|
||||||
Net Fair Value of Derivatives
|
$
|
2,055
|
$
|
393
|
||||
Quoted Prices in Active Markets (Level 1)
|
$ |
-
|
$ |
-
|
||||
Significant Other Observable Inputs (Level 2)
|
$
|
2,055
|
$
|
393
|
||||
Significant Unobservable Inputs (Level 3)
|
$ |
-
|
$ |
-
|
(1)
|
Includes derivative liabilities of $487 at December 31, 2017.
|
(in thousands)
|
||||||||
Available-for-sale securities
|
September 30, 2018
|
December 31, 2017
|
||||||
Net Fair Value of Derivatives
|
$
|
1,493
|
$
|
-
|
||||
Quoted Prices in Active Markets (Level 1)
|
$
|
1,493
|
$ |
-
|
||||
Significant Other Observable Inputs (Level 2)
|
$ |
-
|
$ |
-
|
||||
Significant Unobservable Inputs (Level 3)
|
$ |
-
|
$ |
-
|
(in thousands)
|
September 30, 2018
|
December 31, 2017
|
||||||||||||||
Current
|
Long-Term
|
Current
|
Long-Term
|
|||||||||||||
Borrowings under Credit Facility; interest rate of 5.8% at September 30, 2018
|
$
|
-
|
$
|
6,155
|
$
|
-
|
$
|
-
|
||||||||
Revenue equipment installment notes with finance companies; weighted average interest rate of 3.6% and 3.3% at September 30, 2018 and December 31, 2017, respectively, due in monthly installments with final maturities at various dates ranging from October 2018 to July 2023, secured by related revenue equipment
|
26,752
|
139,044
|
23,732
|
130,946
|
||||||||||||
Real estate note; interest rate of 3.8% and 3.1% at September 30, 2018 and December 31, 2017, respectively, due in monthly installments with a fixed maturity at August 2035, secured by related real estate
|
1,037
|
24,029
|
1,004
|
24,810
|
||||||||||||
Deferred loan costs
|
(146
|
)
|
(191
|
)
|
(140
|
)
|
(298
|
)
|
||||||||
Total debt
|
27,643
|
169,037
|
24,596
|
164,465
|
||||||||||||
Principal portion of capital lease obligations, secured by related revenue equipment
|
5,074
|
33,877
|
2,962
|
21,777
|
||||||||||||
Total debt and capital lease obligations
|
$
|
32,717
|
$
|
202,914
|
$
|
27,558
|
$
|
186,242
|
(in thousands)
|
As of September 30, 2018
|
As of December 31, 2017
|
||||||
Current Assets
|
$
|
23,276
|
$
|
19,660
|
||||
Non-current Assets
|
255,352
|
183,905
|
||||||
Current Liabilities
|
15,451
|
53,981
|
||||||
Non-current Liabilities
|
219,878
|
117,135
|
||||||
Total Equity
|
$
|
43,299
|
$
|
32,449
|
For the three months ended
September 30, 2018
|
For the three months ended
September 30, 2017
|
For the nine
months ended
September 30, 2018
|
For the nine
months ended
September 30, 2017
|
|||||||||||||
Revenue
|
$
|
25,437
|
$
|
18,299
|
$
|
74,152
|
$
|
64,543
|
||||||||
Operating Expenses
|
19,061
|
15,439
|
58,060
|
55,753
|
||||||||||||
Operating Income
|
6,376
|
2,860
|
16,092
|
8,790
|
||||||||||||
Net Income
|
$
|
4,369
|
$
|
1,499
|
$
|
10,850
|
$
|
5,188
|
Details about OCI Components
|
Amount Reclassified from OCI for the three months ended September 30, 2018
|
Amount Reclassified from OCI for the nine months ended September 30, 2018
|
Affected Line Item in the Statement of Operations
|
||||||
Losses (gains) on cash flow hedges
|
|||||||||
Commodity derivative contracts
|
$
|
(580
|
)
|
$
|
(1,312
|
)
|
Fuel expense
|
||
160
|
361
|
Income tax expense
|
|||||||
$
|
(420
|
)
|
$
|
(951
|
)
|
Net of tax
|
|||
Interest rate swap contract
|
$
|
19
|
$
|
114
|
Interest expense
|
||||
(5
|
)
|
(31
|
)
|
Income tax benefit
|
|||||
$
|
14
|
$
|
83
|
Net of tax
|
(in thousands) |
|
|||||||
Cash paid
|
$
|
106,700
|
||||||
Allocated to:
|
||||||||
Historical book value of Landair’s assets and liabilities
|
$
|
25,589
|
||||||
Adjustments to recognize assets and liabilities at acquisition-date fair value:
|
||||||||
Property, plant, and equipment
|
(7,450
|
)
|
||||||
Other assets
|
(1,094
|
)
|
||||||
Liabilities
|
(829
|
)
|
||||||
Fair value of tangible net assets acquired
|
16,216
|
|||||||
Post-acquisition goodwill adjustments
|
(114
|
)
|
||||||
Identifiable intangibles at acquisition-date fair value
|
34,000
|
|||||||
Debt paid at closing
|
15,512
|
|||||||
Excess of consideration transferred over the net amount of assets and liabilities recognized
|
$
|
41,086
|
||||||
Cash paid pursuant to Stock Purchase Agreement
|
$
|
106,700
|
||||||
Cash acquired included in historical book value of Landair assets and liabilities
|
(754
|
)
|
||||||
Net purchase price
|
$
|
105,946
|
||||||
(in thousands)
|
||||
July 3, 2018
|
||||
Cash and cash equivalents
|
$
|
754
|
||
Accounts receivable
|
12,610
|
|||
Driver advances and other receivables
|
4,295
|
|||
Inventory and supplies
|
3
|
|||
Prepaid expenses
|
1,010
|
|||
Assets held for sale
|
128
|
|||
Net property and equipment
|
26,164
|
|||
Other assets, net
|
22
|
|||
Other intangibles, net
|
34,000
|
|||
Total identifiable assets acquired
|
78,986
|
|||
Accounts payable
|
(5,475
|
)
|
||
Accrued expenses
|
(5,015
|
)
|
||
Insurance and claims accrual
|
(2,645
|
)
|
||
Other short-term liabilities
|
(123
|
)
|
||
Total liabilities assumed
|
(13,258
|
)
|
||
Net identifiable assets acquired
|
65,728
|
|||
Goodwill
|
40,972
|
|||
Net assets acquired
|
106,700
|
|||
(in thousands)
|
Three months ended
|
|||
September 30, 2018
|
||||
Total revenue
|
$
|
41,490
|
||
Net income
|
$
|
1,956
|
(in thousands)
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Total revenue
|
$
|
243,303
|
$
|
208,842
|
$
|
687,937
|
$
|
592,333
|
||||||||
Net income
|
$
|
11,614
|
$
|
4,882
|
$
|
28,886
|
$
|
6,892
|
||||||||
Basic net income per share
|
$
|
0.63
|
$
|
0.27
|
$
|
1.58
|
$
|
0.38
|
||||||||
Diluted net income per share
|
$
|
0.63
|
$
|
0.27
|
$
|
1.57
|
$
|
0.38
|
(in thousands)
|
September 30, 2018
|
|||||||||||||||
Gross intangible assets
|
Accumulated amortization
|
Net intangible assets
|
Life (months)
|
|||||||||||||
Trade name
|
$
|
4,400
|
$
|
(73
|
)
|
$
|
4,327
|
180
|
||||||||
Non-Compete agreement
|
1,400
|
(70
|
)
|
1,330
|
60
|
|||||||||||
Customer relationships
|
28,200
|
(588
|
)
|
27,612
|
144
|
|||||||||||
Total
|
$
|
34,000
|
$
|
(731
|
)
|
$
|
33,269
|
(In thousands)
|
||||
2018
|
$
|
731
|
||
2019
|
2,923
|
|||
2020
|
2,923
|
|||
2021
|
2,923
|
|||
2022
|
2,923
|
|||
2023
|
2,783
|
|||
Thereafter
|
18,063
|
(in thousands)
|
September 30, 2018
|
|||||||||||
Amortized cost basis
|
Gross unrealized losses (less than 12 months)
|
Fair value
|
||||||||||
US corporate securities, maturing within one to five years
|
$
|
396
|
$
|
(2
|
)
|
$
|
394
|
|||||
Certificates of deposit, maturing in less than one year
|
600
|
(0
|
)
|
600
|
||||||||
Certificates of deposit, maturing within one to five years
|
500
|
(1
|
)
|
499
|
||||||||
Total available-for-sale securities
|
$
|
1,496
|
$
|
(3
|
)
|
$
|
1,493
|
●
|
Total revenue of $243.3 million, an increase of 36.2% compared with the third quarter of 2017 and freight revenue (which excludes revenue from fuel surcharges) of $214.6 million, an increase of 34.6% compared with the third quarter of 2017;
|
●
|
Operating income of $16.2 million, an operating ratio of 93.3%, and an adjusted operating ratio of 92.1%, compared with operating income of $9.0 million, an operating ratio of 94.9%, and an adjusted operating ratio of 94.3% in the third quarter of 2017;
|
●
|
Net income of $16.2 million, or $0.63 per diluted share, compared with net income of $4.6 million, or $0.25 per diluted share, in the third quarter of 2017;
|
●
|
With available borrowing capacity of $59.9 million under our Credit Facility as of September 30, 2018, we do not expect to be required to test our fixed charge covenant in the foreseeable future;
|
●
|
Our Managed Freight segment’s total revenue increased by 80.9% to $46.3 million, compared to $25.6 million for the third quarter of 2017, and their operating income increased to $4.2 million compared to the 2017 quarter at $2.5 million;
|
●
|
Our equity investment in TEL provided $2.1 million of pre-tax earnings compared to $0.8 million in the third quarter of 2017;
|
●
|
Since December 31, 2017, aggregate lease-adjusted indebtedness (which includes the present value of off-balance sheet lease obligations), net of cash, increased by $22.2 million to $242.4 million; and
|
●
|
Stockholders’ equity at September 30, 2018 was $326.2 million, and tangible book value was $251.8 million, or $13.72 per basic share.
|
Operating Ratio ("OR") For Three and Nine Months Ended September 30, 2017 and 2018, respectively
|
||||||||||||||||||||||||||||||||
Three months ended
September 30,
|
Nine months ended
September 30, |
|||||||||||||||||||||||||||||||
GAAP Operating Ratio:
|
2018
(1)(2)
|
OR %
|
2017
(2)
|
OR %
|
2018
(1)
(2)
|
OR %
|
2017
(2)
|
OR %
|
||||||||||||||||||||||||
Total revenue
|
$
|
243,303
|
$
|
178,631
|
$
|
613,187
|
$
|
501,701
|
||||||||||||||||||||||||
Total operating expenses
|
227,122
|
93.3
|
%
|
169,590
|
94.9
|
%
|
576,516
|
94.0
|
%
|
488,389
|
97.3
|
%
|
||||||||||||||||||||
Operating income
|
$
|
16,181
|
$
|
9,041
|
$
|
36,671
|
$
|
13,312
|
||||||||||||||||||||||||
Adjusted Operating Ratio:
|
2018
|
Adj.
OR %
|
2017
|
Adj.
OR %
|
2018
|
Adj.
OR %
|
2017
|
Adj.
OR %
|
||||||||||||||||||||||||
Total revenue
|
$
|
243,303
|
$
|
178,631
|
$
|
613,187
|
$
|
501,701
|
||||||||||||||||||||||||
Less: Fuel surcharge revenue:
|
(28,680
|
)
|
19,131
|
(77,466
|
)
|
56,489
|
||||||||||||||||||||||||||
Revenue (excluding fuel surcharge revenue)
|
214,623
|
159,500
|
535,721
|
445,212
|
||||||||||||||||||||||||||||
Total operating expenses
|
227,122
|
169,590
|
576,516
|
488,389
|
||||||||||||||||||||||||||||
Less: Fuel surcharge revenue
|
(28,680
|
)
|
19,131
|
(77,466
|
)
|
56,489
|
||||||||||||||||||||||||||
Less: Amortization of intangibles
(3)
|
(731
|
)
|
-
|
(731
|
)
|
-
|
||||||||||||||||||||||||||
Total operating expenses (net of fuel surcharge revenue)
|
197,711
|
92.1
|
%
|
150,459
|
94.3
|
%
|
498,319
|
93.0
|
%
|
431,900
|
97.0
|
%
|
||||||||||||||||||||
Operating income
|
$
|
16,912
|
$
|
9,041
|
$
|
37,402
|
$
|
13,312
|
||||||||||||||||||||||||
(1)
Includes impact of adoption of ASU 2014-09. See Note 1. for the related impact to total revenue and operating expenses.
(2)
The reported results do not include the results of operations of Landair on and prior to its acquisition by the Company on July 3, 2018 in accordance with the
accounting treatment applicable to the transaction.
(3)
“Amortization of intangibles” reflects the non-cash amortization expense relating to intangible assets identified in the July 3, 2018 acquisition of Landair.
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Revenue:
|
||||||||||||||||
Freight revenue
|
$
|
214,623
|
$
|
159,500
|
$
|
535,721
|
$
|
445,212
|
||||||||
Fuel surcharge revenue
|
28,680
|
19,131
|
77,466
|
56,489
|
||||||||||||
Total revenue
|
$
|
243,303
|
$
|
178,631
|
$
|
613,187
|
$
|
501,701
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Salaries, wages, and related expenses
|
$
|
86,249
|
$
|
60,732
|
$
|
211,621
|
$
|
178,639
|
||||||||
% of total revenue
|
35.4
|
%
|
34.0
|
%
|
34.5
|
%
|
35.6
|
%
|
||||||||
% of freight revenue
|
40.2
|
%
|
38.1
|
%
|
39.5
|
%
|
40.1
|
%
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Total fuel expense
|
$
|
33,428
|
$
|
25,998
|
$
|
89,817
|
$
|
76,310
|
||||||||
% of total revenue
|
13.7
|
%
|
14.6
|
%
|
14.6
|
%
|
15.2
|
%
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Total fuel surcharge
|
$
|
28,680
|
$
|
19,131
|
$
|
77,466
|
$
|
56,489
|
||||||||
Less: Fuel surcharge revenue reimbursed to independent contractors and other third parties
|
3,388
|
2,002
|
9,214
|
5,586
|
||||||||||||
Company fuel surcharge revenue
|
$
|
25,292
|
$
|
17,129
|
$
|
68,252
|
$
|
50,903
|
||||||||
Total fuel expense
|
$
|
33,428
|
$
|
25,998
|
$
|
89,817
|
$
|
76,310
|
||||||||
Less: Company fuel surcharge revenue
|
25,292
|
17,129
|
68,252
|
50,903
|
||||||||||||
Net fuel expense
|
$
|
8,136
|
$
|
8,869
|
$
|
21,565
|
$
|
25,407
|
||||||||
% of freight revenue
|
3.8
|
%
|
5.6
|
%
|
4.0
|
%
|
5.7
|
%
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Operations and maintenance
|
$
|
16,457
|
$
|
13,046
|
$
|
40,783
|
$
|
37,504
|
||||||||
% of total revenue
|
6.8
|
%
|
7.3
|
%
|
6.7
|
%
|
7.5
|
%
|
||||||||
% of freight revenue
|
7.7
|
%
|
8.2
|
%
|
7.6
|
%
|
8.4
|
%
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Revenue equipment rentals and purchased transportation
|
$
|
47,445
|
$
|
36,361
|
$
|
115,525
|
$
|
90,719
|
||||||||
% of total revenue
|
19.5
|
%
|
20.4
|
%
|
18.8
|
%
|
18.1
|
%
|
||||||||
% of freight revenue
|
22.1
|
%
|
22.8
|
%
|
21.6
|
%
|
20.4
|
%
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Operating taxes and licenses
|
$
|
3,377
|
$
|
2,364
|
$
|
8,649
|
$
|
7,197
|
||||||||
% of total revenue
|
1.4
|
%
|
1.3
|
%
|
1.4
|
%
|
1.4
|
%
|
||||||||
% of freight revenue
|
1.6
|
%
|
1.5
|
%
|
1.6
|
%
|
1.6
|
%
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Insurance and claims
|
$
|
12,675
|
$
|
7,681
|
$
|
31,269
|
$
|
24,313
|
||||||||
% of total revenue
|
5.2
|
%
|
4.3
|
%
|
5.1
|
%
|
4.8
|
%
|
||||||||
% of freight revenue
|
5.9
|
%
|
4.8
|
%
|
5.8
|
%
|
5.5
|
%
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Communications and utilities
|
$
|
1,810
|
$
|
1,747
|
$
|
5,216
|
$
|
5,081
|
||||||||
% of total revenue
|
0.7
|
%
|
1.0
|
%
|
0.9
|
%
|
1.0
|
%
|
||||||||
% of freight revenue
|
0.8
|
%
|
1.1
|
%
|
1.0
|
%
|
1.1
|
%
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
General supplies and expenses
|
$
|
6,391
|
$
|
3,729
|
$
|
16,833
|
$
|
10,919
|
||||||||
% of total revenue
|
2.6
|
%
|
2.1
|
%
|
2.7
|
%
|
2.2
|
%
|
||||||||
% of freight revenue
|
3.0
|
%
|
2.3
|
%
|
3.1
|
%
|
2.5
|
%
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Depreciation and amortization
|
$
|
19,290
|
$
|
17,932
|
$
|
56,803
|
$
|
57,707
|
||||||||
% of total revenue
|
7.9
|
%
|
10.0
|
%
|
9.3
|
%
|
11.5
|
%
|
||||||||
% of freight revenue
|
9.0
|
%
|
11.2
|
%
|
10.6
|
%
|
13.0
|
%
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Interest expense, net
|
$
|
2,460
|
$
|
2,174
|
$
|
6,360
|
$
|
6,216
|
||||||||
% of total revenue
|
1.0
|
%
|
1.2
|
%
|
1.0
|
%
|
1.2
|
%
|
||||||||
% of freight revenue
|
1.1
|
%
|
1.3
|
%
|
1.2
|
%
|
1.4
|
%
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Income from equity method investment
|
$
|
2,142
|
$
|
750
|
$
|
5,407
|
$
|
2,575
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Income tax expense
|
$
|
4,249
|
$
|
2,985
|
$
|
9,716
|
$
|
3,530
|
||||||||
% of total revenue
|
1.7
|
%
|
1.7
|
%
|
1.6
|
%
|
0.7
|
%
|
||||||||
% of freight revenue
|
2.0
|
%
|
1.9
|
%
|
1.8
|
%
|
0.8
|
%
|
(in thousands)
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Total Revenues:
|
||||||||||||||||
Truckload
|
$
|
197,053
|
$
|
153,066
|
$
|
522,312
|
$
|
446,322
|
||||||||
Managed Freight
|
46,250
|
25,565
|
90,875
|
55,379
|
||||||||||||
Total
|
$
|
243,303
|
$
|
178,631
|
$
|
613,187
|
$
|
501,701
|
||||||||
Operating Income:
|
||||||||||||||||
Truckload
|
$
|
11,960
|
$
|
6,573
|
$
|
29,055
|
$
|
7,812
|
||||||||
Managed Freight
|
4,221
|
2,468
|
7,616
|
5,500
|
||||||||||||
Total
|
$
|
16,181
|
$
|
9,041
|
$
|
36,671
|
$
|
13,312
|
COVENANT TRANSPORTATION GROUP, INC.
|
||
Date: November 9, 2018
|
By:
|
/s/ Richard B. Cribbs
|
Richard B. Cribbs
|
||
Executive Vice President and Chief Financial Officer
in his capacity as such and as a duly authorized officer
on behalf of the issuer
|
1 Year Covenant Transportation Chart |
1 Month Covenant Transportation Chart |
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