Wolf6 cx- financial canditlon to continue to

n 1993 Morristom Driver's Setvice was losirgg mmey &-by
its
own Irdmissim-in complete disalray with only a handful of customers. Today is a dflefent story, hawever, thanks to caneful phning abd a
sound strategy that helped n turn the
company around. Revtnucs have increased by 126% in Lhe last six
and consolidated revema for 1998
were more than $12 mil8011corn1jm.d
to $5.3 million h 1993-EWI Ihe campany is profitable1
On paper it q p a m the r u m w n d
occurred rather suddenb in 1998, but
"this is not the case," says MDS
President Terry K. Wolfe.
"We purchased rhe ampany with
the idea of turrdng i t mund h u g h
an aggressive reslrwturin~ of the
operations and fin-,"
Wolf6 cxplains. "We estimated that it would
take approximately three yem, and
*.
we expected to see positive financial
rwlts by the end of 1996. Although
the company posted occasional pdf-
financial canditlon to continue to
improve.
"Overall our Vecedt' turnaround is
the result of several p a n d dedication and
in adhaslng
and solving gm&ms," W d h mys.
itable months, the profits were not
consistent, and the losses were so significant that they wiped out any previously accumulated profits."
4
Due to unexpected hdusny probHere%R clnsec look the evolulems and numerous intwnai ~ c k t ~ - tion of this swxsfcll mice-semitive t r u d d &r
that transports a
cies, the company's 19% perfwmmw
wide range of p~ml
commodities in
was a disappointment, so murqpmot
both inter ad
wmmrtree.
decided to take an even more aggregsive approach by expanding its fleet
How It Started
operation to meet customers' needs
Morristown Driver's Service, Inc.,
and to cover its fixed costs. This was
was founded in Morristown, Tenn., in
done by combining purchases and
1983 by Thomas J. Mayes as a supplioperating leases and increasing leaseer of drivers to the many tmcking
operator units and drives.
companies in east Tennessee. Mayes
The approach pmved to be quite
recognized the demand for drivers and
successful. The company has shown
vucks in the au0anop;ue industry and
consecutive positive ftnancial results
began to purchase a few tractors and
since September, 1997,and expects its
trailers to meet it.
~~
APRIL1999 SOUTHERN MOTOR CARGO
,
N $ O A F k 3 (I-r): FIRSTROW, ~EAE~-BarbaraRose,
*Oc 1 0 W . ~ A t w ~ ~ - J e rhbneI
ry
Sday 1
Personnel Piyxtor; Phil Newh u h YP;
n, stockholder; firer Wok, ~esiQent;
s, Chairman of tht bard;
Mike Marg@, VP Sales.
'Tti&
. .!Ii..~w
*..& a d Franklin; Larry Green; Tony Watson;
'Irlan Stiefel, all in maintenance; Gary
--
,.., ,.
&~M@e
i,
-
kbsund.l*
&brok.
4
nance Supervisor; Tim Payne, Dispatcher;
Operations Manager; John Lawson,
& C u m ; Tracy Cutshall Logistics
The Road Back,
1993
%M ,smkhdder;
;LC?p
*n@%hnafi
,
d the
LAto
~ewsonw,L u t i v e
Board; and Terry Wolfe, President.
By late 1985, tebedh u t 36 tractors and 75 trailen, dl deefwted to the
Big Three auto makers (Ford, GM,
and Chrysler). When his trucks left
east Tennessee for a delivery k Ohio,
Michigan, Pennsylvania, Louisiana,
New Jersey, or California, they were
already booked with a return load.
Big l b e e lastThis dedicath ta f.l&
ed until late 1989.
That's when Ter~yWolfe was
hired by Mayes as General Manager.
Wolfe led the company into diversification and other areas of businesses,
which proved to be a wise move because in early 1991, MDS lost some of
its Ford business. Even so, the company continued to serve the auto industry
until 1993, when it began to break
away from the Big Three at a rapid
pace.
And in March, 1993, Mayes sold
SOUTHERN MOTOR CARGO APRIL1999
100% of his corporate stock to the current owners: ~
~ Jenkins,
~ Teny~
Wolfe, and Charles Morgan.
Jenkins, 73, is Chairman of the
Board, His more than 50 years of business experience helped to provide a
growth,
sound basis for the
and even though he does not participate in day-to-day company operations, MDS cites his support and stability as among the main reasons it has
survived and is looking forward to
thriving years ahead.
"We couldn't have done it without
him," says Wolfe. "He stood by us all
the way."
Wolfe, 42, spent most of his early
career with Builders Transport, Inc., in
Camden, S. C. He realized early on
that he would have to use every ounce
of his 20 years of experience in the
motor carrier industry-ranging from
driver, salesman, and manager-to
become a productive president.
Morgan, 63, who retired in March
1995, had been an active member of
management from March, 1993, as
Executive Vice President.
The inevitable
assessment of
"Where UE we
now?"; "Where
do we want to
be?" and "How
att we going to
get there?'revealed the need
for change.
An h m u l review revealed
thad the mmpany S finuncial it$ormatiwz w m grossly inaccumtk, due iA
part to a &lay in the itnplemn~tion
of a major soflware cmwmion. It also
k c o m p a n y did
became a P w
"Ot
~ havet a staffh qualified to Oversee
the conversion and the accounting
Process. And becaug it w a unsucC ~ S S ~inUhiring
~
an l%XOUdm
for
t that
PurPose3 it turned to an auldde
accounting firm and spent in excess of
$60?000.
* In dealing wirh its circumstances
cO-Y
saw no choice but solicit u ~ r 0 - k b ~ ~ f r e kd ~ o n
teWorWY bask until it could be
mp&d with solid mtdpmfitable cwtomrfreigk
Road equipment was old mrd in
poor conditian, resutting in a d w i t hemare in mpairs and tnaintenaace
costs.
"We felt it was QW rwponsibility
as new owners to k a p the road equipment in safe condition and without
risk to our drivers," Wolfe says, "but
we didn't have the bay shops to perform our own maintenance, and we
felt we had no control over maintenance issues."
So, the company estddisked the
position of w i n t e a m e fireman-
S U C C ~ ul
SS~
Turnaround
For A _ - 3
(conthued)
which inter evolved into the position
of&tvctor of m a i ~ m c e - be4
gan plans to build its own ma&raarncefacilities.
A Work m Progress- 1994
A new logo &an to fly on all
power units and trailers.
Gary Ifelton joined the company
0s Director of M a h f e m e in M a d .
Previously, he had b c a wi# Pmike
ABOVE(I-rb Wendell Hi shirer,
John lawson, Tmqr dkhalb
a d IhtlTim h p e w.heiob,
RIGHT: In fronf d o qw
1W Pbrwbih -r) Phil Newsomr,
JQRY Mb one, Gary Helton,
T ~ c b b ~ h g k 1 4 ) ' ~ ~ % ~ h &
wd krry Wolfe.
1
tor of Maintenance.
Due to rhe mly-cnrnfed maintenance dimtor position and the
addtion of a &-bay m&wtmce
facility, the company dgt@cant@ Hduced mpair and lplcl~emnceexpense.
By mid-year; it had h i 4 an
in-house CPA to oversee thefvlancial
opratiom.
"By the end of 1EM we were
begionlng IO haw s much better
unckrstanthg of the numbem and
what was happening fram a finawial
standpoint," Wolb says.
"During 1994, the trucking industry thrived in terms of available
freight and revenue. Companies with
a solid customer base posted record
profits. Unfortunately, we were still in
the process of replacing the freight
lost in 1993 and didn't get to take advantage of this short-run boom."
In addition to the freight lost in
1993, the company lost another significant customer, Pretty Products,
which had represented 25% of revenues.
"It became clear that to survive
for the long term, we would have to
build a solid and more diversified customer base," Wolfe says. "Our goal
was to diversify sufficiently enough
so that no one customer would represent more than 10% of our business.
We also decided to concentrate on
quality service. To achieve this goal,
we hired a full-time sales person."
Profitr HW bL h - 1 P 9 5
In 1 9 9 5 L h e m p a r i y m ' ~ show soma
matbs.
However, there samwd to be AO m*
siskncy to the trend, and the lasses uE
timtely wiped out h a p d b .
W e developed irrtemd financial
pmjeccions," WoUe m U e , %at we
tested agalmt m a 1financial ttsults to
try to determine in advsnce Y we were
making the right decisions ia tcrms of
equipment utilization, pwchww, leases, etc. In the long-run, these financial
projections played an irnpOrCanl part in
the turnaround process because they
gave us the ability to project QanrIKI
lyze the data to help Rnd aolutim."
The company u c q u i ~ dadditional equzpm@rat updated existing equipment, and eqwmkd the number of
owner-operators.
"Alhugh 1995 showed a loss, the
company believed that it understood
the reasons for the losses and had
already taken corrective action," Wolfe
says. "We were very optimistic about
the upcoming year of 1996, and
expected to see positive financial results."
Mike Morgan (no r e l a t h to
Charles), who had been Tennkral
Manager since 1992, was mnde Ac-
count Erecum've in Charge of Saks.
prwviding tRB
se*
that castomers
d e m d H6 w l d mre customers
and pmntial dimts that MDS could
live up to a
r commitment of quality
and personal service."
A Devastatin
~isa~pointment-1996
The h o r n in business in 1995 led
to an overcapacity of truck which
then led to increased competition and
mduced r t e s . It seemed as though the
flow of freight had come to a complete
halt.
"Bven though wc had made sigdicant improvements In dversifylng
our customer base," Wolfe says, "the
rates were just not high enough to
cover all the cost."
The early part of 1996 saw
extremely bad weathes which multed
APRIL1999 SOUTHERN MOTOR CARGO
high level3 arad W M i i lamah
wpy
dm@wut the y#ii Fuei syebaqgs
that were in@]dtpu&hllhe
year did little to&-tmpacr,
"By this U
h W w k we Iwd
rtwhed O u r ' g a l
mr
customer bq@j@ut&rShtt
C Q ~
tomer r e 1 - w
Wd.@pptb#Wt
'We felt bat-&a
akNtwwWbM
ajlow our c
n ro,Jluq a me
&
L$$&@&j
ABOVE:Gary Helton (left) examines
the en ine In a new 1999
k '?k
!tad
peterbat with Jerry M a b e .
MainkABOVE-&
Franklin s
of the
refused fa men, addms h e hue of a
settlement;" Wo& says. "As a res&
case went to trial. To e ~ v q m t ' s
shock and dismay, )the pldntiff Wxs
awarded $1.8 million! Obvh~sl$-~
&e
inswgnce mmpany appealed.md.dm5sion, and it was latex r e d ,and
thrown out Hoyever? it
mately one year from the tbi%d
the
initial mad in 1996 to the time-of the
reversal in 1997.
"Knowlag that the case woutd
*,,--
in a loss o-f production and an
i t l c m e &a iniadsnts.
company's bad debt ratio
begatr to i w ~ a s edue a7 the p m v h
year's high vslunee 'of brokered
wght.
rn wntpany was nosj?%dtfroi
tks Worker's Compm&on for the
years ending 1992 and 1993 W
never h m paid Tkis was an oversight on the part of & & q r ~ o e com-
pany, and in 1993 MBB;did nolhave a
good enough handle bn it6 finances to
realize that the premium had gone
unpaid.
An irtdustry-wide shorn&? of
driver's f o n d MDS to incnase ifs
driver pay-per-& at a time when the
mes where not high enough to support such un incrvase. The driver
turnover rate became m W d y high
because the c o m p w wcas nat paying
It MkWd the
competitive waonly alternative was €0 raise driver
Pay.
In the Wrpmtoftheyear&l
p h begm to i r p c ~ e(and wo&
lrltimadely become worse in 1997).
.~&&&W1t-m w ~ m a w ~
d&Y
E
I C-
Q *'g%@?&&y
b
more tian Siely b;e levi is kid' ba .sp
p d , the hmps fsr *.+&id
be
aaS: ofw,-wts
gap-g
~ ~ , ~ a r ~ t b e o u g h
m
t
u
c
k
y
.At that thq & had sever-
&stohm#iai t
k&r+o itwas
@.&mid
en-g
dttually @
-
it &M t
b ~ e a gIV&'~~~I&.W
v d , the Wk of Kaneucki &;ad
impounded four tractors and six Waders.
"In addition to the loss in revenue
that these units would have generated,
countless hours were spent by management trying to ~+&tthb .h e .
This, of course, LaOk the IllZllIdwent
focus off of the day-to-day actigties
~
of the operations as well &S f l longrange plaming."
Denise Miller; a cerk'fzed public
a c c o with
~ 17 years accounting,
audithg und tax e;cpe&nce, joined
the company in No&r
Carttrdler & St$)cPemruzeI Dimtol:
%covnpanywusrso\tifiedofa
pending injury suit frcMt f989 durt
w a d be heani by jwy in the state of
K&y.
Taking Shape- 1997
A g m &id if mrtnag-)S
lime conhued & be &witon re~olving the kgd k t ~ lin
l ~K-b,
pmtdcitla@ &rktg fhi?&ot t h e q w ~ i ~ofr s
"Our insurance company felt that
we had such a good case that they
1997.
Fuel prices hnmd to mcord
SOUTHERN MOTOR CARGO APRILI999
tbsf-w
iqptfa p r t r e a d & ~ ~ ad ~ q
p&d*..SrrSu~
the ptraonatl
and operations of NDS?
* J e l 4 y J k w # L & M ~ @ ~
P e r s m l a d S'qfei~ m d h&
m
r
m po&im Zn Scptdnrba~He
kgau hi~caroerin 1977.oanM ~ h f
Ray Wfdaer M m L h . i n MIitlb
ma.H e a l e a + ~ ~ ~ ~ n y t m a r m
OW
rrndjchdBiQ9h
Heh s bden
miEZZ&.met
i ~ l ~ d i n ~ u a e f : 3 ~ ,
including dis@tch. (Today; het ,and
Barbara Rose, Ms assi~taitlt, .in
charge of hiring&vm, drivet orientation, maintemnce of driver files, and
(continued)
MAJOR VENDORS
Peterbilt of Knoxville
Carson Standifur, Sales
Howard Rutherford.
Support Servlce
5218 Rutledge Pike
Knoxville, TN 37924
(800) 552-7779
Great Dane Trailers
Johnny Foust, Sales
Joe Coffey. SupporVService
Mabry Hood Rd.
Knoxville, TN 37933
(423) 690-8350
White Tire Distributors
Allen Quinn. SalesJSupport
920 S. Wilcox Dr.
Kingsport. TN 37660
(800) 948-5970
And Toda)r ...
Freightliner of Knoxville
Mckey Koontz, Parts
1429 Ault Rd.
Knoxville, TN 37914
(800) 443-2324
Covington Detroit Diesel
Robb Pratt, Sales
Doug Mitchell, Support
80 Cleveland St.
Nashville. TN 37242
(615) 262-4 14 I
Kelso Oil Co.
Mark Settle. Sales/Support
641 Atlantic Ave.
Knoxville, TN 37927
(423) 525-712
making sure drivers are in compliance
with DOT rules and regulations. Driver logs and other data are electronically monitored.)
Lisa Duvbfn was himd as an
accounr executive handling tfte
Cify amaj h m the company's a c e irr
Johrrsan Cdty, Tern
In July, 1997 Morristown Driver's Servke, Im, ucqui~d100% of
ths m c k of MDS LugIstics, Inc. MDS
m-
Lo&rics is ufreight bmkering cornpany. Since the acquisition date all income and expenses have been consolidated. Annual revenue for MDS
Logistics, Inc., for 1997 was $90,689.
For 1998, $156,190.
Today MDS operates a power unit
fleet of 70 late model conmdbnnl
tractors and 200 vented dry van ttailers and refrigerated units. In the company's short-haul Bast Coast operation
over-the-road tractas operate on a regional linehaul basis Lrr lanes of traffic
balanced within a 600-mile radius of
Morristown, hauling a wide mgo a6
commodities, including textiles, medical supplies, aluminum, and glass,
The company atgo o$xrntur a
long-haul, refrigerated van division
with approximately 16 power units
manned with double-team operations
hauling general commodity freight to
the We&t Coast a d produce back b
%nnrmx and the eastern seaboard.
The shm-haul operation gives the
company the ability to attract quality
Mwrs who wait to be home on tbe
and h e long-baul operafim
gives it the abiliry to attract those who
prefer to nm coast-to-coast on a weekly basis.
'Ih MDS k m n n e l Department
hiring qualification standards and procedures were deveIoped with two
goals in mind: one, for the company to
meet or to exceed all Federal Motor
Carrier Safety Regulations (FMCSR)
concerning driver qualifications; and
two, to select only the best available
drivers, drivers who share the company's values and goals of operating in a
safe, legal, and professional manner.
All new drivers are also required
to complete a company orientation
program, which consists of comprehensive instructions and training covering a variety of subjects including
company policies and procedures and
safety and regulatory compliance.
MDS employs 70 over-the-road
bBVm mid
101x11drivem met
c~wtractsw h 3 [ l . l e a s p q x m b o ~ ' h
d t I u a c ' c ~ & ~ y ~ f D t a
most wnwm, which is me teasdn
tcactbn i d u & hit-rfdB wapmipn,
power
a d aEr &tlonlng,
features that also serve to boost morale
and to provide a more comfortable
work placs. Mlers are 48 to 53 feet
long and 102 inches wide, allowing
for maximum capacity.
"
MDS headquarters i s located on
five sms io Morrktwm, Ttm.,with a
4,OWsp~mtoot
and a rirc-bay
mintenaxe facinty, Them is another
office and mainteaaxe focility on the
prqmty I
d to Pensb wMah bas
lbnr yesrs r#aaInhg on its Iww.
W dm bave a f1~6dcrn
lot aearIqourhea&quattorshtwe~8easm
eguipment dmp yard," Wolfe says.
'We have me satePk cperatim. A
hli-service facility located in Alcoa,
Tmn., Ach inel& a d i w h office,lofa1d i m s , and drivex facilities.
n i s site is near the McGw peon
Aiwrt. We also bve a d e s WTrc6 in
J o b m CEcy, Ten*."
me oorapany emglop six dispatcbare, two night watchmcu, lws
safety personnel, and five clerical and
accounting staff.
Maintenance
"While overseeing maintenance
operations at Morristown Drivers Service for the past five years, I've seen a
lot of changes," says Gary Helton, Director of Maintenance. '"rechnology
has changed the way equipment is
purchased as well as the up-front cost.
Therefore, the way each unit is maintained is structured around the way it's
spec'ed.
"Competition creates change as
well, and only those in the trucking industry with foresight and good management survive," Helton says. "With
all the different carriers on the road
today customer satisfaction becomes
APRIL1999 SOUTHERN MOTOR CARGO
the key selling point, and o w cornpany slogan, 'Service, its in our name,'
is supported with a w d l maintained
unit. We pride ourselves an tb &ecs
tiveness of our p r m t i v a n]&&nance program, tom We perform oil
changes on each of a r power mi&
every 16,000 miles. Trailers are serviced every 60 days, and each unit has
a post-~pinspection by a tochdclan.
Out drivers are required b do a pee
trip i n s p t i o n befm each brip a d are
also rtspomibte fw a pastdip i m p tion. Our primary emphasis Is an safe
option, minimal d h h q and a
high level of customer service,"
HeIran says that before the company's acquisition, equipment varied
greatly from different truck and
engim rpani~facturersto tire brands
and sim.
'rWrty our equlpmentis'srandardized," he saps, '?dlowingUS t~ stock
l e s inventmy, which in turn helps the
technician UI be m m ~ficient. The
electronkaHy-oonCroUed engines allow us to monW ZU& Mngs as idle
time, m i l e s - p e ~ g o l b n , and cruise
houm. We can dso pmxe a road
speed so that we have some cmtro!
over the tractor. The cornpuler in thc
engine acts as the brah n d as a diasy
and can tell you dmast anything tbe
truck has done within its life-This also
allows you to see driver .sbw&w and
gives you flexibility to change your
program as needed."
The company employs seven
mechanics.
Looking Ahead
The deregulation of the trucking
industry resulted in serious problems
for a number of carriers, but Morristown Driver's Service saw it as a
golden opportunity.
"We believe that the key to a turnaround is preparation," Wolfe says.
"We looked at what was expected for
the industry and planned business
strategies accordingly.
SOUTHERN MOTOR CARGO APRIL1999
'We nxagnlzt Qhat others outside
our wmpany-many of whom srood
by us during the bad times-are also
wponsiMe for helping us grw, companies such as Pilot Corp., Great Dane
Trailers. Peterbilt, White Tires. and
our bank, Hamblen County Bank."
The company expects growth to
continue through 1999 with the expansion of its fleet and the replacement of
obsolete equipment.
"We have built our reputation on
providing customized service through
dependability, professionalism, and
innovative management," Wolfe says.
"Since being chartered in 1983, we
have been able to tailor our service
level to our customers and to price that
service accordingly. We have experienced a strong growth in traffic coming out of private carriage. We believe
that the high service truck market is
and will continue to be a large segment of the trucking indand that
MDS is In an excellent p i t i o n to take