Plunging freight market thins Covenant billfolds

Executives at Covenant Transportation Group will take a voluntary 5 percent to 10 percent pay cut this year because of revenue declines in 2008.

“We lost a good bit of money,” said Richard Cribbs, chief financial officer at Covenant, a Chattanooga-based trucking company. “We are all sharing in some pain. We are making good strides to get this turnaround.”

Mr. Cribbs said the company had a net loss of $53 million in 2008.

“No one received a bonus for the 2008 year because the company underperformed compared to our goals,” he said.

Fuel costs and a poor freight economy drove much of the company’s losses.

“Freight was terrible in the forth quarter when the economy dropped off a cliff,” he said. “We didn’t experience our normal large Christmas season. There wasn’t much freight opportunities out there.”

However, Mr. Cribbs said there were several impairment charges pushing Covenant into the negative.

The purchase of Star Transportation in 2006 resulted in a good will impairment charge that was on the books in 2008. In addition, Covenant faced an equipment impairment charge of $9.7 million, said Mr. Cribbs.

“That is where our tractors were on our books for more than they could be sold for,” he said. “Those were big pieces of our losses.”

Also, Mr. Cribbs said the company had $8 million in charges associated with severe accidents, which made Covenant’s insurance expenses increase.

In the last three years, David Parker, the company’s chief executive officer, hasn’t received a raise. However, the salary of Joey Hogan, Covenant’s chief operating officer, has been bumped up several times in the last few years.

Mr. Cribbs said Mr. Hogan was promoted to chief operating officer of Covenant Transportation Group and president of Covenant Transport in 2008, which explains his salary increase from $252,273 annually to $275,000 annually.

“That was a raise related to that promotion,” he said. “Outside of promotions, nobody got raises.”

Tony Smith, president of Southern Refrigerated Transport receive a bonus in 2007 because his business unit performed above their goals, Mr. Cribbs said.

Paul Lapides, director for the corporate governance center at Kennesaw State University, said few American executive are taking voluntary pay cuts. It is more common for company to look for savings through furloughs, reduced pay or layoffs.

“I really applaud executives that take pay cut, and it restores my faith in the possibility of having a great America again,” he said.

Historically executives would receive large bonuses when they have mass layoffs. Some have received as much as $20 million, he said.

“It is one of the bizarre things in our marketplace,” he said. “Why would anyone accept that amount of money? Why wouldn’t they say, ‘Thank you but no thank you?’”