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During its third quarter earnings call, Covenant Logistics announced Thursday the next steps in its ongoing management transition.
Paul Bunn, formerly Senior Executive Vice President and COO of Truck Carriers, will be promoted to President on January 1, 2023 and will retain his COO title.
The management changes also include President Joey Hogan moving to the role of part-time Executive Vice President, who will be responsible for “strategic planning, leadership of the leadership team, government relations, and other special duties.” We are focused on projects,” according to a prepared statement about the company’s earnings and personnel changes.
Covenant’s leadership is moving away from Chairman and CEO David Parker, who is also the company’s largest shareholder, and transitioning to the next generation of leaders. Parker, Vann and Hogan were reorganized into the “CEO’s Office” last year. In April 2020, Hogan and John Tweed were named co-presidents and Bunn was named executive vice-his president and CFO. Tweed eventually left the company when Hogan became president and Bunn was promoted to COO.
“After 25 years, Joey has earned the right to withdraw his terms,” Parker said in a statement. It was proved when I said, ‘It’s done.
In terms of Covenant’s revenues, one trucking segment, Expedited, deteriorated significantly in the quarter as measured by utilization, while another trucking segment, Dedicated, showed improvement.
Expedited’s Adjusted OR deteriorated to 88.2% from 84.8% in Q3 2021, while Dedicated’s Adjusted OR improved to 96.8% from 100.1% a year ago.
The total impact was the adjusted OR of all truckloads, which improved slightly from 92.4% to 92.1%. Expedited accounts for approximately 55% of total trucking revenue.
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Overall operating expenses benefited from a one-time gain on the sale of a California property for $38.7 million, but excluding it from the calculation showed the impact of inflation.
Expenses, excluding one-time benefits, were $291 million for the quarter, compared with $255 million in the year-ago quarter, an increase of 14.1% year-over-year. (The $255 million also excludes a small gain from the third quarter of 2021.)
In a statement, Bunn said the company’s operating costs per mile, excluding sales, increased by 27 cents per mile, or 13.6%. He cited a variety of factors including salaries, wages, operations, maintenance costs and insurance premiums.
About 70% of these increases are related to driver salaries, with non-driver salaries accounting for 18%.
Operating and maintenance costs increased by 10 cents per mile compared to last year.
Higher fares from last year increased from $274.5 million to $311.8 million, leading to a 13.5% revenue increase. However, much of that was related to fuel costs, and net of surcharges, earnings were up just 6.5% year-on-year.
Adjusted net income, excluding the sale of California, increased from $17.2 million to $22.6 million, an increase of 30.8%.
Bunn said this profitability was due to a 17.7% increase in average freight revenue per tractor.
Managed Freight, the company’s brokerage arm, saw revenue drop to $78.4 million from $90 million a year ago. Its adjusted OR improved slightly from 89.5% to 89%.In a statement, Bang said the decline in revenue was “due to a reduction in overflow volumes.”
Freight from both express and dedicated trucking operations. We expect both revenues and operating profit attributable to overflow cargo to continue to decline as the cargo market softens. ”
Parker’s outlook on the future was not bullish for the freight market as a whole. “Looking into 2023, we expect a challenging cargo environment combined with higher costs to weigh on margins,” he said. “However, we believe a more resilient operating model, along with diligent execution and teamwork, will reduce volatility across economic and freight market cycles.”
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