Covenant Logistics Group Profile
Covenant Logistics Group, Inc. provides expedited freight transportation, primarily using two-person driver teams in transcontinental lanes.
The company’s wholly owned subsidiaries include Covenant Transport, Inc.; Star Transportation, LLC, each doing business as Covenant Transport Services and Covenant Logistics; Southern Refrigerated Transport, LLC; Covenant Transport Solutions, LLC; Covenant Logistics, Inc.; Covenant Asset Management, LLC; CTG Leasing Company; IQS Insurance Risk Retention Group, Inc.; Heritage Insurance, Inc.; Landair Holdings, Inc.(collectively Landair); Landair Transport, Inc.; Landair Logistics, Inc.; Landair Leasing, Inc.; AAT Carriers, Inc. (AAT), Lew Thompson & Son Trucking, Inc., Lew Thompson & Son Leasing, Inc., Lew Thompson & Son Dedicated Leasing Inc., Josh Thompson Trucking, Inc. (collectively LTST); Sims Transport Services LLC; and Transport Management Services, LLC. Landair is a leading dedicated truckload carrier and supplier of transportation management, warehousing, and logistics inventory management systems. AAT Carriers, Inc. (AAT) specializes in highly regulated, time-sensitive loads for the U.S. government. LTST specializes in poultry feed and live haul transportation. Sims is a specialized brokerage company.
The company-owned tractor fleet has an average age of approximately 1.6 years, compared to an average U.S. Class 8 tractor age of approximately 6.4 years in 2023. Some of the technologies the company employs include the following: freight optimization software that can perform sophisticated analyses of profitability and other measures on each customer, route, and load; routing software that selects the best route, identifies fuel stops, and warns of deviations from routing instructions; a tracking and communications system that permits direct communication between drivers and fleet managers, as well as constant location and delivery updates; electronic logging devices (ELDs) in all of its tractors; aerodynamics and other fuel efficiency systems that have significantly improved fuel mileage; and safety technology, including rollover stability control, collision mitigation, adaptive cruise control, and lane-change warning.
Segments and Service Offerings
The company’s asset based transportation services include two segments: Expedited and Dedicated, both of which transport full trailer loads of freight from origin to destination with minimal intermediate stops or handling. The company provides truckload transportation services primarily throughout the continental United States utilizing equipment it owns or leases or equipment owned by independent contractors. The company’s Expedited reportable segment transports freight over nonroutine routes. Its Dedicated reportable segment provides similar transportation services, but does so pursuant to agreements whereby the company makes its equipment available to a specific customer for shipments over particular routes at specified times.
To complement its asset based transportation services, the company also offers non-asset based or asset light logistics services through its Managed Freight reportable segment. The company’s Managed Freight reportable segment relies heavily on technology and provides: freight brokerage (Brokerage) and transportation management services (TMS) to its customers.
The company offers day-to-day warehouse management services through its Warehousing reportable segment. The company’s combined asset based and non-asset based capabilities, allow it to transport many types of freight for a diverse customer base. The primary service offerings are further described below:
Expedited: In its Expedited business, the company operates approximately 900 tractors substantially all of which are driven by two-person driver teams. The Expedited reportable segment primarily provides truckload services to customers with high service freight and delivery standards, such as 1,000 miles in 22 hours, or 15-minute delivery windows. Expedited services generally require two-person driver teams on equipment either owned or leased by the company.
Dedicated: In its Dedicated business, the company operates approximately 1,200 tractors, substantially all of which are driven by a solo driver. The Dedicated reportable segment provides customers with committed truckload capacity over contracted periods with the goal of three to five years in length. Equipment is either owned or leased by the company.
Managed Freight: The company’s Managed Freight reportable segment, includes its brokerage services and TMS. Brokerage services provide logistics capacity by outsourcing the carriage of customers' freight to third-parties. TMS provides comprehensive logistics services on a contractual basis to customers who prefer to outsource their logistics needs.
Warehousing: The Warehousing reportable segment provides day-to-day warehouse management services to customers who have chosen to outsource this function. The company also provides shuttle and switching services related to shuttling containers and trailers in or around freight yards and to/from warehouses.
Additionally, the company participates in the market for used equipment sales and leasing through its 49% ownership of Transport Enterprise Leasing, LLC (TEL).
Customers and Operations
The company focuses on targeted markets throughout the United States. The company is a major carrier for transportation companies such as parcel freight forwarders, less-than-truckload carriers, and third-party logistics providers that require a high level of service to support their businesses, as well as for traditional truckload customers, such as manufacturers, retailers, and food and beverage shippers. Additionally, the company provides poultry feed and live haul transportation, as well as highly regulated, time sensitive loads for the U.S. government.
The company had one customer, serviced by its Expedited and Managed Freight reportable segments, that accounted for more than 10% of its consolidated revenue in 2023. Within its asset based transportation service offerings (Expedited and Dedicated), the company operates tractors driven by a single driver and also tractors assigned to two-person driver teams. The company has one primary financial system and continue to focus on cloud based solutions for data storage versus storing on local servers when possible.
Revenue Equipment
As of December 31, 2023, the company operated 2,139 tractors and 5,880 trailers. Of such tractors, 1,961 tractors were owned, 48 tractors were financed under operating or finance leases, and 130 tractors were provided by independent contractors, who own and drive their own tractors. Of such trailers, 5,665 trailers were owned, 215 trailers were held under operating or finance leases. Furthermore, at December 31, 2023, approximately 86% of the company’s trailers were dry vans, 11% of its trailers were refrigerated vans, and the remaining trailers were specialty trailers related to its poultry business.
The company operates a modern fleet of tractors, with the majority of tractors under warranty, to minimize repair and maintenance costs and reduce service interruptions caused by breakdowns. The company also orders most of its equipment with uniform specifications to reduce its parts inventory and facilitate maintenance. At December 31, 2023, the company’s tractor fleet had an average age of approximately 1.6 years, and its trailer fleet had an average age of approximately 5.9 years. The company equips its tractors with a satellite-based tracking and communications system that permits direct communication between drivers and fleet managers. As of December 31, 2023, all of the company’s tractors were equipped with ELDs, which electronically monitor tractor miles and facilitate enforcement of hours-of-service regulations.
Seasonality
The company’s tractor productivity decreases during the winter season because inclement weather impedes operations, and some shippers reduce their shipments after the winter holiday season. Its Expedited reportable segment has historically experienced a greater reduction in first quarter demand than the company’s other operations, however, this trend has lessened following the growth of AAT, which is part of the Expedited reportable segment, and its work with long-term customers to improve the stability of contracted capacity in its Expedited fleet. Operating expenses increase and fuel efficiency declines because of engine idling and harsh weather creating higher accident frequency, increased claims, and more equipment repairs. In addition, many of its customers, particularly those in the retail industry where the company has a large presence, demand additional capacity during the fourth quarter (year ended December 31, 2023), which limits its ability to take advantage of more attractive spot market rates that generally exist during such periods.
Regulation
The company’s drivers and independent contractors must comply with the safety and fitness regulations of the U.S. Department of Transportation (DOT), including those relating to drug and alcohol testing and hours-of-service. Other agencies, such as the Environmental Protection Agency (EPA), the Department of Homeland Security (DHS), and the U.S. Department of Defense also regulate the company’s equipment, operations, drivers, and environment.
The DOT, through the Federal Motor Carrier Safety Administration (FMCSA), imposes safety and fitness regulations on the company and its drivers, including rules that restrict driver hours-of-service. All of the company’s subsidiaries with operating authority have a satisfactory DOT safety rating under this method.
In 2011, the National Highway Traffic Safety Administration (NHTSA) and the EPA adopted final rules that established the first-ever fuel economy and greenhouse gas standards for medium-and heavy-duty vehicles, including the tractors that the company employs (the ‘Phase 1 Standards’).
History
The company was founded in 1986. It was incorporated in the state of Nevada in 1994. The company was formerly known as Covenant Transportation Group, Inc. and changed its name to Covenant Logistics Group, Inc. in 2020.
