VideoIf you think it's tough trying to guide a company through a recession, how about two companies? But Scott Mattox, CFO of a pair of trucking firms with a common part-owner, is comfortable with their financial performances this year. Both had solid bottom-line gains through August compared with last year, even though one of them saw revenue shrink by 17%.
To a large extent, the results are a product of the business the companies are in. This year's drastic drop in the price of diesel fuel provided a $3 million boon to one of them, Truline Corp. — a massive savings for a company with an expected revenue base of just $30 million this year. The other entity, Estenson Logistics, with revenue on pace to approach $90 million, got a $4 million bump-up from fuel costs.
Fuel is a bigger share of Truline's expenses, not only because it's a third of Estenson's size, saleswise, but also because the smaller company provides long-haul, full-truckload services. Estenson, by contrast, provides such companies as Home Depot, Simmons Mattresses, and Capital Lumber with dedicated trucks for hauling goods from distribution centers to stores within relatively small geographic areas.
Aside from the fuel bounce, the recession has been tougher on Truline, because the demand for freight hauling has nosedived. Estenson, on the other hand, has been somewhat shielded by its business model, which involves multiyear contracts with its customers. Its top and bottom lines were up 3% through August.
In any event, Mattox, who has been with the companies for three and a half years, says they have been operated the same way during the recession as they were before. That includes a strong bent toward not spending a dime unless it's for something that is absolutely needed, which the CFO credits for helping keep cash flow healthy.
Indeed, he says, that thrifty orientation goes back to 1962, when Grant Truman launched Truline as a one-truck company. Today Truman's son Paul owns part of both companies — 20% of Estenson Logistics (Tim Estenson owns the other 80%), and Truline, which Paul and two brothers bought from their father in 2004. The two companies share, in addition to the CFO, accounting, accounts payable and receivable, and payroll personnel, as well as employee-benefits programs and general liability insurance.
Here is an edited version of CFO.com's interview with Mattox.
What is the value proposition for Estenson's customers? Why does a big company like Home Depot use someone else's trucks?
They don't have to be in the transportation business and worry about the rules, taxes, and maintenance. They [otherwise] would have to have their own maintenance directors, safety directors, and transportation risk managers. [But] they're on the hook for the equipment. If they want out of the contract they can get out, but they either have to pay us for it or let us sell it, and if we sell it for less than the contracted amortized value, they have to make up the difference. If we sell it for more than that, they get the difference.
What effect has the recession had on your businesses?
With Estenson, all the equipment that's contracted gets paid for whether it's in use or not. But we contract at a level where we're confident that the assets will be utilized continuously. So when there are peaks, we bring in additional equipment — either we rent it or we use some additional equipment that we have for when our [contracted] tractors and trailers are down for repairs. That revenue is what we lost during the recession. But our margins stayed good based on our contractual agreements.
We've continued to sign new contracts. When people started looking at controlling costs, we started getting a lot of phone calls. In 2009 we've added more than 100 employees, and we'll add about 75 tractors to our fleet.
On the Truline side, truckload carriers have been hurt by the recession because there's been very little freight. When there is not enough supply to go around, there are price pressures. A lot of the other smaller truckload companies have taken whatever business they could get their hands on just to cover their fixed costs. But if you do that you're not covering all your costs, so you can only do it for so long.
Have you gotten more vigilant on costs during the recession?
No. Truline has been around since 1962 and has always been very conservative. The owners and I have very similar finance philosophies. Our expenditures, including capex, are based on need, not on desires or typical [trucking] industry patterns. All petty cash reimbursements have to be approved by me before AP issues the check. When I see an expense for Starbucks coffee, I tell them to stop it — go out and buy a can of Folgers instead. We believe that by watching the pennies, the dollars will take care of themselves.
You personally approve all petty cash reimbursements? How is that wieldy for a $90 million company?
It really doesn't take that long. We don't use petty cash for everything. We use it for, say, tolls, meals for safety meetings, and for scale tickets in areas where we don't have a contract with a scale company to get the tractors weighed. I look to make sure it is not an old receipt, that it is an original, and make sure that we're not paying some guy three times to get his truck weighed. We have over 50 sites. That could add up to be a huge area of abuse.
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