Although the company imposed fuel surcharges, the extra revenue didn’t fully cover increased fuel costs during second quarter. “We had to eat the remainder and it has had quite a negative impact on our margins,” said Chairman and CEO Stoney (Mit) Stubbs Jr.
He also estimated that from 3% to 4% of the fleet was parked during the quarter due to the lack of drivers. Early in June Frozen Food Express implemented a new compensation package including pay raises for drivers, which should help recruiting and ease turnover, but will also drive up costs.
“The shortage of qualified drivers is so severe that everyone in our business has, or will have to, grant drivers significant raises,” Stubbs noted. “To cover this increased cost, freight rates will have to rise.” He said some of their customers have accepted the higher rates but others have not, and Frozen Food Express has been forced to turn down loads. “We’ll continue this policy,” he stated.
Increased interest expenses also negatively impacted the company’s second quarter results. “Our level of debt during this year is significantly higher than it was last year,” Stubbs explained. “Layer rising interest rates on top of this higher debt and the effect on our earnings is negative.” He added that they will continue to focus on strategies to enhance cash flow, thus enabling the company to reduce its debt and interest expeses.
The Dallas-based temperature control carrier reported net income of $753,000 on revenues of just under $100 million for the second quarter of 2000, compared to net income of $1.3 million on $96.8 million for secnd quarter 1999. For the first six months of 2000, the company reported net income of $190,000 on revenues of $192.4 million, compared to $$2.6 million on $185.1 million for the same period in 1999.