Covenant Transportation Group, Inc. (CVTI)

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March 27, 2008 - 9:18 AM EDT

Covenant Transportation Group Announces Expectations Concerning First Quarter Financial Results
CHATTANOOGA, Tenn., March 27 /PRNewswire-FirstCall/ -- Covenant Transportation Group, Inc. (Nasdaq: CVTI) announced today its expectations regarding financial results for the first quarter of 2008.

Financial and Operating Results

Chairman, President and Chief Executive Officer, David R. Parker, offered the following comments: 'After reviewing preliminary financial and operating information through the third week of March, we expect to report consolidated results of operations in a range of a net loss of forty ($0.40) to fifty ($0.50) cents per share for the first quarter of 2008. The shortfall versus our expectations is attributable to the unprecedented run-up in the cost of diesel fuel, which more than overcame improvements in miles per truck and cost control efforts. Our expectations for the quarter compare to a reported fifteen ($0.15) cent net loss per share for the first quarter of 2007.'

'At the time of this release, the average DOE fuel cost per gallon is projected to have increased approximately 98 cents for the quarter ended March 31, 2008 above the DOE fuel cost per gallon for the quarter ended March 31, 2007. As of the end of last week, the DOE fuel cost per gallon was actually $1.31 higher than it was for the same week a year ago. The combination of high fuel prices, the lag time between the adjustment of fuel surcharges, and a slowing economy that has increased shipper resistance to paying surcharges, contributed to a significant increase in net fuel costs. For the first quarter 2008, we expect our fuel expense, net of fuel surcharge collection, to increase by approximately $0.085 cents per mile over the same quarter in 2007, which also equates to $0.06 cents per mile sequentially over the fourth quarter of 2007. With expectations of just over 100,000,000 miles being run by company trucks during the quarter, that increase negatively impacts our first quarter pre-tax operating income by approximately $8.5 million versus the 2007 quarter. Fuel prices alone are expected to negatively impact an estimated additional $0.37 of net loss per share in the 2008 quarter compared to the 2007 quarter on an after-tax basis.'

'Excluding the impact of fuel prices, we continued to progress in our plan to improve the Company's operating efficiency. Based on the quarter to date, we expect an improvement in average miles per tractor of approximately 2% compared to the first quarter of 2007. When coupled with flattish comparable rates per mile, the result has been improved average revenue per tractor per week, excluding fuel surcharge revenue.'

'In addition, the cost control efforts we initiated during the third quarter of 2007 are expected to reduce our costs of compensation and equipment ownership compared with those line items in the first quarter of 2007 on a per mile basis. We also have maintained our improvement in insurance costs related to a reduction in the severity and frequency of accidents.'

Senior Executive Vice President and Chief Operating Officer, Joey B. Hogan, then discussed the Company's balance sheet and liquidity: 'Covenant's financial condition and liquidity remain sound in our view. At March 31, we expect stockholders' equity in excess of $165 million with approximately $55 million of combined available borrowing capacity under our accounts receivable securitization facility and revolving line of credit. Based on our financial and operating results to date, and our present expectations for the quarter as a whole, we expect to comply with all of our financial debt covenants at and for the quarter ending March 31, 2008.'

'With continued cost pressures related to fuel, we will be working with our customers over the next few quarters with the intent of recovering an additional portion of the added fuel costs through additional fuel surcharge recovery or increased freight rates. The Company is reviewing the range of impacts of this customer initiative and certain other initiatives and will be developing a view toward expectations for the remainder of the year as discussions with customers progress and there is more visibility on freight expectations and fuel prices.'

The Company announced tentative plans to release its first quarter earnings after the market closes on Tuesday, April 22, 2008. We plan to hold a live conference call to discuss our first quarter earnings release on Wednesday, April 23, 2008, at 10:00 a.m. Eastern time. Dial-in and audio replay information will be furnished at a later date.

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; and Star Transportation of Nashville, Tennessee. The Company's Class A common stock is traded on the Nasdaq National Market under the symbol, 'CVTI'.