Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Covenant Transportation Group (NASDAQ:CVTI)

Q1 2013 Earnings Call

April 25, 2013 11:00 am ET

Executives

Richard B. Cribbs - Chief Financial Officer and Senior Vice President

David R. Parker - Chairman, Chief Executive Officer and President

Joey B. Hogan - Chief Operating Officer, Senior Executive Vice President and President of Covenant Transport Inc

Analysts

Ben Hearnsberger - Stephens Inc., Research Division

Reena E. Krishnan - Wolfe Trahan & Co.

Ryan Cieslak - KeyBanc Capital Markets Inc., Research Division

Donald Broughton - Avondale Partners, LLC, Research Division

Nick Farwell

Operator

Welcome to the Covenant Transportation Group First Quarter Conference Call. We now have our speakers in conference. [Operator Instructions] I would now like to turn the conference over to Richard Cribbs. Please begin.

Richard B. Cribbs

Good morning, and welcome to our first quarter call. Joining me on the call this morning are David Parker, Joey Hogan, along with various members of our management team.

This conference call will contain forward-looking statements within the meaning of Section 27 of the Securities Act as amended, and Section 21E of the Securities Exchange Act of 1934 as amended. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. Please review our disclosures and filings with the SEC.

As a reminder to everyone, a copy of our prepared comments and additional financial information is available on our website at ctgcompanies.com. Our prepared comments will be brief, and then we will open up the call for questions.

In summary, the key highlights of the quarter were: Even with 2 less business days in the current-year quarter, our asset-based division's revenue, excluding fuel, increased 4% due to a 7.6% increase in average freight revenue per truck, offset by a 3.9% decrease in average tractors. Our revenue per truck increased versus year ago for the fifth consecutive quarter. Versus the year-ago period, our miles per truck were up 3.3%, while average freight revenue per total mile was up $0.059 per mile or 4.2%.

Our largest subsidiary, Covenant Transport, experienced a year-over-year freight revenue per tractor increase of 10.9%. The execution of strategic initiatives at our Star Transportation subsidiary resulted in an increase of almost 25%, while our refrigerated subsidiary, SRT, experienced a small year-over-year decline of 3.7%.

Compared to the year-ago period, the asset-based division's operating cost per mile, net of surcharge revenue, were up mainly due to higher driver wages and owner-operator settlement amounts, workers' compensation expense, revenue equipment rental expense and reduced gains on sale as the prior year quarter included a $2.4 million gain on sale of a terminal facility. These increases were partially offset by lower depreciation and interest expense, primarily due to the shift to a greater percentage of owner-operators in our fleet and reduced casualty insurance expense.

The asset-based operating ratio contracted 30 basis points to 100.4%, when the benefit of the $2.4 million gain from the sale of real estate is excluded from the 2012 quarter.

Our Solutions logistics subsidiary increased revenue by 50 -- almost 55% due to the combination of higher purchased transportation expense and continued investment in additional personnel, locations and related startup expenses that have expanded the capacity and range of services offered to our customers and carrier base, the operating ratio increased to 103.7% from 100% in the year-ago quarter.

Additionally, our minority investment in Transport Enterprise Leasing produced a $480,000 contribution to pretax earnings or $0.02 per share.

Since March 31, 2012, total indebtedness, net of cash and including the present value of off-balance sheet lease obligations, decreased by approximately $15 million to $253 million. We increased net lease-adjusted indebtedness during the first quarter of 2013 by just over $9 million versus December 31, 2012.

The average age of our tractor fleet continues to be very young at 2.1 years as of the end of the first quarter. With available borrowing capacity of $48.9 million under our revolving credit facility, we do not expect to be required to test our fixed charge covenant in the foreseeable future. Excluding the $2.4 million gain on sale of our Long Beach terminal in the prior year quarter, our consolidated operating ratio contracted by 50 basis points to 100.6, while adjusted net loss was approximately equal in each period.

The main positives in the first quarter were: A 4.2% increase in rates versus last year; a 3.3% increase in utilization versus last year; a year-over-year reduction in open trucks from 5.4% at March 31, 2012 to 4.1% at March 31, 2013; significant improvement in the revenue statistics at our Star Transportation subsidiary; and more efficient use of company-owned assets and owner-operators to reduce overall capital needs.

The main negatives in the quarter were: A lack of profitable results from our Solutions subsidiary; cost increases across most of the business; and accident costs that negatively impacted the progress we expected in workers' compensation and casualty insurance expense.

Among the asset-based service offerings, we reduced capacity allocated to our regional service offering, while maintaining capacity levels in our expedited, reefer and dedicated offerings. The expedited and regional service offerings experienced year-over-year double-digit positive revenue per truck growth percentages, while our refrigerated and dedicated service offerings had a decline in revenue per truck as compared to the prior year quarter. The domestic freight market was strong for January, average for February and finished weak for March.

Freight results for the first 3 weeks of April 2013 have not been a strong as preferred. However, we continue to utilize improved systems and processes to challenge our sales and operations employees to improve profitability through improved yields, better driver retention and appropriate allocation of valuable capital resources. We believe that our disciplined approach to continuous improvement will drive positive results. Based on our first quarter results, we still expect our earnings per share for 2013 to increase over full year 2012, excluding the approximately $0.10 per share gain from the sale of real estate during the first quarter of 2012.

Thank you for your time, and we will now open up the call for any questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Brad Delco with Stephens.

Ben Hearnsberger - Stephens Inc., Research Division

It's actually Ben on for Brad. So first, could you kind of put some numbers around the effect that the accidents had on earnings power? By our math, we think it was around $0.09. Is that the right way to think about it?

Richard B. Cribbs

Yes, I'd say it's really closer to $0.08. We had 2 -- well, we had a couple of significant accidents that basically we've reserved our deductible on, which is $1 million. And so it's $2 million of operating expense that we have reserved toward that small number of significant claims. And so the impact of that after tax is about $0.08 a share.

Ben Hearnsberger - Stephens Inc., Research Division

Okay. And then when you look at the effect that weather had on your business, is there any way that you guys can quantify that?

David R. Parker

Ben, we don't. This is Dave. We have not. But I can tell you, starting the third week of February, I mean it was every week for 6 consecutive weeks that we had anywhere from 100 to 300 trucks that missed multiple days of operating, predominantly anywhere from the Interstate 40, Arizona, New Mexico, Amarillo, Oklahoma City and then the state of Wyoming, going up to the Northwest, Iowa, Minnesota, it was just -- I've never seen anything like it for about a 6-week period of time. So no, we have not put any numbers behind that, but it was every week for 6 weeks. It was anywhere from 100, 200, to 300 trucks that were affected anywhere from 24 to 72 hours.

Ben Hearnsberger - Stephens Inc., Research Division

And are you still seeing any weather effects into the second quarter?

David R. Parker

I will say that this week is much better. I mean, there's been some snow, as you know, out in Colorado and Wyoming's had a day that was shutdown. They shut down the interstate. That just killed our Northern California northwest trucks when that happened. But it's not to the effect that it was for 6 weeks. This week, it's been a little bit, but it's not been as bad. I think that we probably had about 100 trucks this week that were down during the course of this week.

Ben Hearnsberger - Stephens Inc., Research Division

Okay. And then as you think about what you need to be profitable from a freight environment perspective in 2Q, do you guys need a lot of help there? Do you guys have enough going on internally that you can get over the hump even in a tougher environment?

David R. Parker

We expect to be profitable in the second quarter, number one. But we don't need the last 4 weeks of March. Even I was pretty happy with -- actually, even though with snow in the first week of March, it was not bad, but then the next 3 weeks of March revenue dropped to about 5% during that period of time. So we don't need the whole quarter to be like that. I mean, you can't overcome if revenues were to drop 5% for 12 weeks. I'm not going to overcome that. And I don't expect that. I really believe as I look at our freight environment now that the produce side has run -- started to run pretty nice now. It never did get terrible, but just a little bit, a little slow out on the West Coast. The Northwest is not being good, and I'm talking about California right now. Then as the quarter progresses, those will get stronger and stronger, and when we don't have any weather delay, I expect that, that will give us some positive momentum for the remainder of the quarter. But I'm not happy with the first 3 weeks of April from a standpoint that the first 10 days had weather in it. But this week's revenue is the best that we've had in about 5 or 6 weeks. So I'm not discouraged by that. I really believe that the freight environment is not bad if we could get a free flow of trucks going from A to B like they properly should.

Ben Hearnsberger - Stephens Inc., Research Division

Yes, got you. Okay.

Richard B. Cribbs

Hey, Ben, just to follow up on your first question. I probably need to comment that we did have a couple of significant accidents. But still from a frequency standpoint, we actually had a record first quarter of less accidents and we're down 7% in frequency of accidents from last year's first quarter. And so because of that, as well as not having as much prior period reserve increases in the quarter, we were able to actually show improvement on the cost line, cost per mile basis. And it's still not where we want it to be though.

Operator

Our next question comes from Scott Group with Wolfe Trahan.

Reena E. Krishnan - Wolfe Trahan & Co.

This is actually Reena Krishnan sitting in for Scott Group. So I guess the other side of just kind of -- you mentioned that you don't think the freight environment is that bad. It's more just there's been inclement weather conditions. But in general, I think a little bit choppy, too. Am I understanding that correctly?

David R. Parker

Yes, could we use freight, yes, we could. As I think about expedited, reefer and regional, I've been a little bit more let down on the refrigerated side on the pure reefer, not the produce side, but on the pure reefer side than what I would like to see. I think that we won some business in the last couple of weeks that we're expecting to be starting. I think it will give us a nice boost on that, but I'm not happy with what I'm seeing on the refrigerated side of it. And overall, freight is okay. It's not pitiful, but it's not robust out there today. But we do have some leaks that need just a little bit more uptick in business.

Richard B. Cribbs

Reena, I think the important part of that is that, he's saying today it's pretty strong, and the first 2 weeks of April were quite slow. But what we've seen in the last week and what we see loading currently, has really improved. And again, not robust, but it's okay.

Reena E. Krishnan - Wolfe Trahan & Co.

And where are you seeing more of that strength, is it any particular region, or just generally?

David R. Parker

I mean, as I think actually throughout the country, I mean, I think that the state of California is now starting to at least move the trucks on a daily basis. So I'm pretty pleased with what I'm seeing there. The Northwest is weak. It has been weak all year, continues to be weak out in the Northwest. The East Coast has been pretty solid all year long. I can't complain about the East Coast. The Southeast has been okay. We would have a day that would be weak, followed by a day of strong -- of strength in the Southeast. And the same thing can be said for the central states, predominantly the state of Texas, Southwest area that we would have a weak day followed by a good day. The Midwest has been weaker than what I would expect the Midwest to be. It has -- it's probably been the weakest of all the regions, excluding the Northwest.

Reena E. Krishnan - Wolfe Trahan & Co.

Okay. So with that, I guess how should we think about pricing going forward? I mean, you guys are, obviously, you saw some really strong pricing last year throughout the year and still put up pretty strong growth this quarter, is this sort of -- is this sustainable going forward? Or should -- are you guys thinking of it accelerating? How do you view pricing?

David R. Parker

No. It's not going to be accelerating. We got 2 or 3 major accounts that we've got to get done in the next 45 days to assist us on pricing. But I could see the pricing could slow. That's what I'm seeing, that pricing could slow. But we've got to do a couple of things on a couple of 3 large accounts that could assist us in that area. But we're still another 2 or 3 weeks away from a couple of big accounts hitting that could boost it pretty nicely. As well, we also had one large account that affected our rate. I don't know Richard, probably about 1% that just happened in the last 2 or 3 weeks. They took a large account. It went down to a 0 fuel base. It's going to help our fuel surcharge recovery. But it actually reduced the rate -- their rate, $0.20 a mile on a very -- on a top 5 account by $0.20 a mile that got -- that's getting shifted to the fuel line. But it is going to affect the rate by over 1%. So that's one headwind. When it just comes to looking at numbers, but we pick it up on the fuel line.

Reena E. Krishnan - Wolfe Trahan & Co.

Okay. And what are you guys thinking about in terms of hours-of-service at this point? What are you guys anticipating in terms of the impact on utilization and pricing? Just can you discuss...

David R. Parker

Here's what we know. First of all, we're still -- we're about 2.5 weeks into a pretty significant test that all 3 company, all 3 asset companies are doing. And so we got another couple of weeks before really going to have a good feel. What -- it's strictly throwing darts. I have not even seen any number, but just throwing darts, I mean, I think it's a negative 2% to 4%. One thing I do know, high mile utilization team and high mile utilization singles, whatever that represents that you got within your company is going to be affected. The lower singles, the ones that you're not happy with on the utilization are getting or the team that you're not happy with, they're not going to be affected as much. It's just going to be those trucks that are putting a lot of miles on them will be affected.

Reena E. Krishnan - Wolfe Trahan & Co.

Okay. And do you guys anticipate getting any price to offset that or are you...

David R. Parker

We'll have to go to the market. We will absolutely be going to the market as we and the industry get our hands around it because you cannot, nobody can absorb a negative 2% to 4% or 3% or whatever the number is going to be. You can't afford it, to absorb it. Because these drivers are going to have to get paid more money.

Reena E. Krishnan - Wolfe Trahan & Co.

So are you -- I mean, how are you anticipating the net impact at this time? I know you're still kind of...

David R. Parker

I don't. I got to figure out how much it's going to affect us first, and I have no idea. We're probably -- it is probably another, a mid-May kind of timeframe before we get our hands around it.

Reena E. Krishnan - Wolfe Trahan & Co.

Okay. And then just one more question as it relates to CapEx. How are you guys thinking about net CapEx and gains on sales for the year?

Richard B. Cribbs

Net CapEx is probably now -- I don't know if you noticed, we increased our truck order. We were going to purchase 600 trucks. That's what we had on our fourth quarter release. We're now purchasing 900 trucks during this year. CapEx is probably going to range between $35 million and $45 million. We'll still be able to -- should at those levels and at the profitability levels that we expect should be able to still pay down some debt during the year. So that's about where we are. From a gains perspective, we're still, see a good used truck, and used equipment market and so we expect to still have nice gains on our disposals of equipment.

Operator

Our next question will come from Ryan Cieslak with KeyBanc Capital Markets.

Ryan Cieslak - KeyBanc Capital Markets Inc., Research Division

I wanted to first ask a question on the rates in just the overall bid environment that you're seeing here year-to-date. I know there's obviously, potentially some mix impacting the revenue per mile numbers, but what have you been able to maybe get from a rate increase on the contractual side? And I mean, how does that compare to your expectations? And I know you made some comments about pricing easing some going forward. Is that more of a mix thing? Is that more of just the environment itself?

David R. Parker

I think it's more of the environment, Ryan. As I think about the first quarter, I was very pleased on the expedited side of the business. I'm pleased with the bid results. I think there is a couple of things going on. I do believe that customers are concerned about capacity, whether it's today or whether it's in September or next year. They do know 2 plus 2 equals 4. And there is a day that capacity is going to be extremely tight. And so they are worried about it. And what I believe we are seeing, what we have seen is that our existing base of business has been one that has allowed us to be able to raise rates. And you can see about what we've been able to raise them on the expedited side pretty nicely, pretty nicely. And on the bid so far, on the refrigerated side, it's not been as nice. I'm not happy with what we have seen on the refrigerated side of the business on the first quarter bid results. Now as we get into the second quarter, I do think it's not going to be as strong as the first quarter because we are seeing the new bids are coming in, I think it's more to keep existing carriers in line than it is trying to find extra capacity because the customers are fairly like, they got to take care of -- everybody is sensing a slowdown. I mean, everybody -- if the customer is sensing a slowdown in their business, so therefore, they're trying to take care of their existing carrier base. But at the same time, they're trying to keep their existing carrier base from increasing rates dramatically. And so we are seeing that pressure that I think on a business bid that we're not doing business with, I think that we're basically being used as one to help drive down or keep rate increase to a minimum. I think that number is a 2% or 3% kind of number, kind of what I'm reading out there that most carriers are saying. I probably don't disagree that it's more going into a 2% or 3% line item.

Ryan Cieslak - KeyBanc Capital Markets Inc., Research Division

Okay, that's truly great color. I appreciate it. And then the other question, just to piggyback on the hours of service question before, and I appreciate your prior comments. I just wanted to see how quickly do you think you can actually adjust rates once -- assuming that the hours of service changes do go in. Is this -- are you already having conversations with your shippers and would it be a couple of month lag? Would it be a couple of quarter lag? Just some commentary on that would be helpful.

David R. Parker

Yes, that's a great question, Ryan. Yes, are we having conversations with customers? Absolutely. Only that this is happening -- this will be happening. It's going to be negative. Basically, the same thing I've told you all. And that is, we don't know the answer yet. So we are -- they are absolutely alert and understand that we are coming back to them for discussions. I think that's going to be very similar to 2004 when detention and process has started, it literally took 2 or 3 months before the industry settled in to what the existing rules on detention are. So I have no reason to think that it's not going to be because we're going to have carriers that are anywhere from 1% to 5% and the market will end up being something that you're able to sell because of this onetime event. So as much as I think all of us will be in the next 2 to 3 weeks getting our hands around it, then we'll be hitting the street, I think that I don't think that we'll be hitting a July 1st target date. We're going to try. We're going to try our best. But based upon history, I think it's probably going to be August, September deal. So I think it's going to have a negative effect into the third quarter.

Ryan Cieslak - KeyBanc Capital Markets Inc., Research Division

Okay, that's helpful. And then the last one that I have and then I'll hand it over is, just maybe some color on the current driver market right now and what you're seeing with overall driver availability, maybe relative to what you saw at the end of last year and maybe some expectations going forward?

Joey B. Hogan

Ryan, this is Joey. It's continuing to be probably -- I believe there's no question, the most difficult driver market the industry has seen. And I don't see any reason that, that's going to loosen up if you're getting ready to hit a driver again for pay with having less miles. I think the regulatory environment continues to push towards less drivers. I think the age, average age of the drivers continues to get older. And there's not a steady influx of new people dying to go drive a truck. And so I think that it's been -- it's more difficult than it was last year. We've been able to manage it just through some things, as well as reducing the overall fleet size. You just can't have -- you can't afford to have a bunch of trucks sitting, not producing revenue. So I think the name of the game is retention. It's really not recruiting. Everybody's trying to fish for the same folks, good quality drivers, good, clean and safe records, and so I think the industry is extremely focused on keeping what you have and doing the best you can to keep what you have and try to improve your retention faster than you're able to bring new people in the doors. So I just think it's just a battle, and it's going to be there for a while, and I don't see it loosening up. It's going to be a natural -- lid on capacity irrespective of anything else, and I think that it's just something that the industry is going to have on its plate for quite a while.

Operator

Our next question will come from Donald Broughton with Avondale Partners.

Donald Broughton - Avondale Partners, LLC, Research Division

This is Donald Broughton sitting in for Donald Broughton. In all seriousness now, I'd like to follow on to the previous question. We've heard actually the driver turnover rates have actually gotten significantly worse just even in the last 4 to 6 weeks. Driver retention's a bigger and bigger headache for everyone. Had a number of people suggest that maybe that it was the slight uptick in the construction might be one of the causes. And I'd love to just kind of get your own insights, indeed, is that what you're seeing as well? And do you have any possible reasons why it's happening?

Joey B. Hogan

Don, I would say, for all of CTG, our turnover is -- I wouldn't say it's gotten worse. I would say it's been about the same the last -- your context was the last 4 to 6 weeks. We are -- we did not go up last year as a group as much as the industry as a whole end up over the "large carriers" as reported by the ATA. We did not go up 20 points. We were able actually to hold ours. This year, I would say, in total, we've seen a few periods of weeks where we've actually been able to improve it nicely. But I would say, the last 4 or 6 weeks it's about the same. I do know that, again, each company is a little different. For our model, especially on our expedited side. We battle people wanting to be home more frequently. And as construction slowly improves and there's no question is it, that there's more at-home opportunities, whether it's locals or construction or things of that nature that people are willing to trade-down for to be home more regularly. And so it's something that our reefer business and our solo business has been a little better. The last month or so when our expedited business the last month or so has gotten a little worse. But in total, the expedited business was about what it was last year. So we were making some nice strides on the expedited, and I will agree the last 4 or 5 weeks has gotten a little worse, but the regional and reefer is doing a little better.

Operator

Our next question will come from Nick Farwell with Arbor Group.

Nick Farwell

Gentlemen, another quick follow-up on the question of tight driver market. I'm a little surprised given the conditions, especially as you highlighted with the recovery in construction. Why there hasn't been greater pressure on the part of industry in general to lift rates? And I think that especially in -- but I don't think it's highly differentiated between long-haul but also with dedicated, since dedicated competes primarily directly with the construction of the local distribution of construction materials.

Joey B. Hogan

I think, Nick, just from -- I think the general -- there's no question, the general freight market is softer than we would have expected coming into this year. The combination of what people are saying publicly now, and that's a concern. And so you battle -- I 100% agree with your question. And the other side of it is, if capacity is tight enough, you can raise your rates if your service is good. And so I think everybody has been -- although we're at the upper end of the scale as far as rate movement, I think everybody is pretty -- is not happy with where -- them being able to move their pricing thus far through the first quarter this year. And that can only lead to capacity. And so it's been mushy enough throughout the first quarter and April for the industry as a whole to not be able to move -- be able to move pricing as much as it wanted to. So whether it's the extremely -- extremely. Weather has been much cooler than we all have expected. We get some weeks of some decent weather, warm weather out there, but at the end of the day, we've had a 2% tax increase and the largest employer in company is laying -- in country, is laying off people, i.e., the government. And so we've got some headwinds as far as the consumer is concerned that it's just the facts. And so I think it's affecting freight. It's affecting capacity. And we haven't been able to move pricing as much as the group would as a whole.

Nick Farwell

Joey, you and David would certainly remember -- I wish I can remember the year. But there have been periods in the past where we've had relatively similar circumstances before the economy -- not that the economy, and I'm able to predict it in any way. But before the economy demonstrated some kind of improvement, especially after early cyclical industries have improved, construction being the primary example. Where all of a sudden capacity gets very tight and people scramble. I'm not suggesting that's going to happen again. But I think David made a comment earlier that there are certainly some large customers who are somewhat sophisticated in transportation who understand that it probably doesn't take much of an uptick in capacity -- I'm sorry, in utilization for all of a sudden capacity starts to disappear if you don't price in a reasonable economic return, just like you guys are using owner-operators. I mean, it doesn't take a brain scientist to figure this out.

Joey B. Hogan

Yes. And Nick, and you're exactly right. And could it be hours of service that are coming? Could 1%, 2%, 3%, 4% utilization change? Does that move the needle enough to where all of a sudden there's not enough capacity to move the freight that's out other. We're all focused about our drivers and cost and all that which we should, but could the other side of that be, depending on whatever your view economically is for the second half, could that be enough to tilt it to where there's capacity problems. Now July is not the best time to be doing that, but how does that affect August and September and October? If it is 1% to 4% of the capacity coming out, i.e., miles you've got available to move, that effect the capacity point where it tilts it, and it could. It just depends on the underlying economic environment.

David R. Parker

And also, I do believe that there's -- even though I'm not too happy about where I think the economy is at from a freight standpoint, I do think that the pent-up demand -- I mean, there has been no sprain. I mean, as I think about the folks that sell the patio equipment and getting ready for the swimming pool season. The base of the retailer on the spring clothing, it's just not happening. If you were to go down and look at our -- the freight that get us through for February to middle of February to the end of March on the spring, it just did not happen this year. Now eventually, somebody's going to buy a bathing suit. Eventually, somebody will buy a picnic table. And I think that we're going to go from 30 degrees to 80 degrees in a 2 week period of time. So I do believe it's the pent-up demand, so all of us are saying, hey, it's a little sloth, and it's a little slow out there, which is not where we want it to be. I do think there's some freight out there that's going to hit right on top or right in the same 60-day period of time that we've got some number, whether it's 1%, 4% some negative number of miles. And you're going to have an uptick in business and a negative situation. Because I don't -- I may not be a big pro economy, that 3% and those kind of numbers as it comes out in the first quarter, 3%. I don't believe it anyway. But I do believe we're in this 1.5% to 2% number, and I think what you enjoy are sitting or talking about. I think it's got a chance to push it over the cliff a little bit that capacity will not -- won't be there.

Nick Farwell

Is there a -- given the different markets between long-haul and dedicated as an extreme example, are you seeing different pricing between long-haul and dedicated, net of fuel charges, is it being differentiated now? Or your comments about pricing pretty much across the board given the capacity comments you and Joey have commented on.

David R. Parker

No, we are seeing some difference out there. Again, I'm seeing expedited lead the way and the folks that need these things and need this 1,000 miles a day, et cetera, et cetera, I'm seeing a very great conversation and we're able to get the pricing or we won't. I am seeing on the refrigerated, single refrigerated side, I'm not seeing. We're not happy with what we are seeing on the price increase. And on the dedicated side, we're winning some. We got -- I'm pleased with it. We're okay on the dedicated side. So I guess summing it up, it's really the refrigerated side that right now that I'm not happy with. And the last 4 or 5 years, as you know, Nick, it's been leading the way for the last 4 or 5 years, but I am seeing a slowdown on the business on the ability to increase pricing over there.

Nick Farwell

I see. One last, Richard, I noticed that while total debt to capital lease obligation was down modestly, I think I was $1.5 million. That if you take -- you add in your capitalized or not capitalized lease obligations, looking at all-in debt is what I'm trying to do. The debt was up a little over $11 million if my math is correct.

Richard B. Cribbs

That's correct.

Nick Farwell

Where would you expect that figure -- we don't even know what next quarter is going to be -- but in general, what would be your objective? And where do you see that number by year end?

Richard B. Cribbs

The total debt payment for the full year, including the off-balance sheet leases, if we hit the earnings numbers we're expecting to hit and if we have the CapEx kind of number that we're expecting to hit, then it's probably now more of a $5 million to $15 million debt payment at this point.

Nick Farwell

So would that mean at the end of the year, you'd be -- from here, you'd be down an incremental $5 million?

David R. Parker

From 12/31.

Nick Farwell

Okay. So from 12/31, you'd be up $5 million to $15 million not down?

Richard B. Cribbs

Down in debt. So paying down debt from end of year last year to the end of this year, about $5 million to $15 million. We were using the leases for the purchases of tractors that we had in the first quarter. Going forward, we'll probably see more on-balance sheet debt from second quarter, third quarter, fourth quarter versus being off-balance sheet.

Nick Farwell

Okay. So to make sure I understand, you end the year at a $168 million, and I'm using total debt to capital lease obligations, okay, just that. I'm not using off-balance sheet. That number would be -- you hope, if you hit all your objectives, will be less than $168 million?

Richard B. Cribbs

No. I'm saying the combined debt of on-balance sheet that you just talked about, plus our off-balance sheet lease present value. The 2 of those combined will be down $5 million to $15 million, or hope to be, down $5 million to $15 million by the end of -- on 12/31/13.

Operator

[Operator Instructions] We have no further questions at this time.

Richard B. Cribbs

All right. Thank you, everyone, for joining us on the call. And we will talk to you again in about 3 months.

Operator

Thank you. Ladies and gentlemen, that will conclude today's call. Please disconnect at this time.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Covenant Transportation Group Management Discusses Q1 2013 Results - Earnings Call Transcript
This Transcript
All Transcripts