-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TUb8jQ74Pt0GLB8YgKE6vknbSFg5gIqDhMBdIWieA4ekSy7ucMqFc6DwcRNe51hK ltOM+j/PAYTakKMdvANBBQ== 0000039273-96-000008.txt : 19961115 0000039273-96-000008.hdr.sgml : 19961115 ACCESSION NUMBER: 0000039273-96-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FROZEN FOOD EXPRESS INDUSTRIES INC CENTRAL INDEX KEY: 0000039273 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 751301831 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10006 FILM NUMBER: 96661568 BUSINESS ADDRESS: STREET 1: 1145 EMPIRE CENTRAL PLACE CITY: DALLAS STATE: TX ZIP: 75247 BUSINESS PHONE: 2146308090 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the period ended September 30, 1996 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ________ to ________ Commission File Number 1-10006 Frozen Food Express Industries, Inc. - --------------------------------------------------------------------------- (Exact name of registrant as specified on its charter) Texas 75-1301831 - --------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 1145 Empire Central Place Dallas, Texas 75247-4309 - --------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (2l4) 630-8090 - --------------------------------------------------------------------------- (Registrant's telephone number, including area code) None - --------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. [X] Yes [ ] No As of November 5, 1996, 16,544,047 shares of the Registrant's Common Stock, $1.50 par value, were outstanding. INDEX
PART I - FINANCIAL INFORMATION Page No. Item l. Financial Statements Consolidated Condensed Balance Sheets - September 30, 1996 and December 31, 1995 2 Consolidated Statements of Income - Three and nine months ended September 30, 1996 and 1995 3 Consolidated Condensed Statements of Cash Flows - Nine months ended September 30, 1996 and 1995 4 Notes to Consolidated Condensed Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 9 Exhibit 27.1 - Financial Data Schedule 11
FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Condensed Balance Sheets (In thousands) (Unaudited)
Sept. 30, Dec. 31, 1996 1995 --------- -------- ASSETS Current assets Cash $ 2,776 $ 7,480 Accounts receivable, net 43,929 37,093 Inventories 9,403 8,221 Tires 5,737 5,217 Other current assets 8,255 3,636 ------- ------- Total current assets 70,100 61,647 Property and equipment, net 50,571 52,430 Other assets 13,563 9,585 ------- ------- $134,234 $123,662 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Trade accounts payable $ 20,139 $ 17,529 Accrued claims liabilities 7,692 8,401 Accrued payroll 6,465 4,679 Other 7,682 6,014 ------- ------- Total current liabilities 41,978 36,623 Long-term debt _ _ Other and deferred credits 10,946 12,018 ------- ------- Total liabilities and deferred credits 52,924 48,641 ------- ------- Shareholders' equity Common stock 25,921 25,921 Paid-in capital 2,786 1,992 Retained earnings 55,909 50,830 ------- ------- 84,616 78,743 Less - Treasury stock 3,306 3,722 ------- ------- Total shareholders' equity 81,310 75,021 ------- ------- $134,234 123,662 ======= =======
See accompanying notes. -2- FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Statements of Income (In thousands, except per-share amounts) (Unaudited)
For the Three Months For the Nine Months Ended September 30, Ended September 30, -------------------- ------------------- 1996 1995 1996 1995 ------- ------- -------- ------- Revenue Freight revenue $74,802 $68,646 $215,273 $197,614 Non-freight revenue 6,022 7,132 19,133 18,979 ------ ------ ------- ------- 80,824 75,778 234,406 216,593 ------ ------ ------- ------- Costs and Expenses Freight operating expenses Salaries, wages and related expenses 18,150 17,346 53,650 50,270 Purchased transportation 18,212 15,364 51,739 42,771 Supplies and expenses 20,425 19,315 58,990 54,533 Revenue equipment rent 5,391 3,647 15,584 12,357 Communications and utilities 946 935 2,730 2,592 Insurance and claims 3,480 4,622 9,818 11,213 Depreciation 2,446 2,671 7,186 8,003 Operating taxes and licenses 1,198 1,252 3,756 3,756 Gain on sale of equipment (283) (191) (768) (659) Miscellaneous expense 707 620 2,063 1,822 ------ ------ ------- ------- 70,672 65,581 204,748 186,658 Non-freight costs and operating expenses 5,839 6,614 18,431 17,313 ------ ------ ------- ------- 76,511 72,195 223,179 203,971 ------ ------ ------- ------- Income from operations 4,313 3,583 11,227 12,622 Interest and other expense (928) (634) (2,431) (1,614) ------ ------ ------- ------- Income before income tax 3,385 2,949 8,796 11,008 Provision for income tax 931 847 2,238 3,311 ------ ------ ------- ------- Net income $ 2,454 $ 2,102 $ 6,558 $ 7,697 ====== ====== ======= ======= Net income per share of common stock Primary and fully diluted $ .15 $ .13 $ .39 $ .47 ====== ====== ======= ======= Weighted average fully diluted shares 16,892 16,538 16,803 16,494 ====== ====== ======= =======
See accompanying notes. -3- FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows (In thousands) (Unaudited)
For the Nine Months Ended Sept. 30, ---------------------- 1996 1995 -------- -------- Net cash provided by operating activities $ 7,685 $ 12,548 ------- ------- Cash flows from investing activities Business dispositions 375 2,050 Expenditures for property and equipment (8,867) (9,328) Proceeds from sale of property and equipment 3,234 1,735 Company owned life insurance and other (6,192) (4,240) ------- ------- Net cash used in investing activities (11,450) (9,783) ------- ------- Cash flows from financing activities Borrowings under revolving credit agreement 25,000 29,000 Payments against revolving credit agreement (25,000) (32,000) Dividends paid (1,479) (1,449) Net treasury stock activity 540 894 ------- ------- Net cash used in financing activities (939) (3,555) ------- ------- Net decrease in cash and cash equivalents (4,704) (790) Cash and cash equivalents at beginning of year 7,480 4,381 ------- ------- Cash and cash equivalents at end of quarter $ 2,776 $ 3,591 ======= =======
See accompanying notes. -4- FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Condensed Financial Statements September 30, 1996 and 1995 (Unaudited) 1. BASIS OF PRESENTATION The consolidated condensed financial statements include Frozen Food Express Industries, Inc. (FFEX) and its subsidiary companies (the company), all of which are wholly owned. All significant intercompany accounts and transactions have been eliminated in consolidation. The condensed financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and have not been audited or reviewed by independent public accountants. In the opinion of management, all adjustments (which consisted only of normal recurring accruals) necessary to present fairly the financial position and results of operations have been made. Pursuant to SEC rules and regulations, certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted from these statements unless significant changes have taken place since the end of the most recent fiscal year. FFEX believes that the disclosures contained herein, when read in conjunction with the financial statements and notes included, or incorporated by reference, in FFEX's Form 10-K filed with the SEC on March 29, 1996, are adequate to make the information presented not misleading. It is suggested, therefore, that these statements be read in conjunction with the statements and notes (included, or incorporated by reference), in the aforementioned report on Form 10-K. 2. FINANCING AND INVESTING ACTIVITIES NOT AFFECTING CASH During the nine months ended September 30, 1996 and 1995, the company funded contributions to its Employee Savings Plan and one of its Employee Stock Ownership Plans and Trusts by transferring 110,930 and 131,471 shares, respectively, of treasury stock to the Plan trustee. The fair market value of the transferred shares was approximately $1,157,000 for 1996 and approximately $1,406,455 for 1995. 3. SHAREHOLDERS' EQUITY As of September 30, 1996 and 1995, respectively, there were 16,516,257 and 16,229,347 shares of stock outstanding. 4. COMMITMENTS AND CONTINGENCIES The company has accrued for costs related to public liability and work- related injury claims, some of which involve litigation. The aggregate amount of these claims is significant. In the opinion of management, these actions can be successfully defended or resolved, and any additional costs incurred over amounts accrued will not have a material adverse effect on the company's financial position or results of operations. -5- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The table sets forth, as a percentage of freight revenue, certain major operating expenses for the three- and nine-month periods ended September 30, 1996 and 1995.
Three Months Nine months Ended Sept. 30, Ended Sept. 30, --------------- --------------- 1996 1995 1996 1995 ----- ----- ----- ----- Salaries, wages and related expence 24.3% 25.3% 24.9% 25.4% Purchased transportation 24.3 22.4 24.0 21.6 Supplies and expenses 27.3 28.1 27.4 27.6 Revenue equipment rent 7.2 5.3 7.2 6.3 Insurance and claims 4.7 6.7 4.6 5.7 Depreciation 3.3 3.9 3.3 4.0 Other 3.4 3.8 3.7 3.9 ---- ---- ---- ---- Total freight operating expenses 94.5% 95.5% 95.1% 94.5% ==== ==== ==== ====
THIRD QUARTER OF 1996 VS. 1995 During the third quarter of 1996, revenue increased by 6.6% to $80,824,000 with freight revenue up $6.2 million or 9% and non-freight revenue down $1.1 million or 15.6%. Less-than-truckload (LTL) revenue was 7.3% higher while full-truckload revenue increased by 9.5% as compared to the same quarter of 1995. An increased number of shipments transported and the inclusion of fuel adjustment charges combined to increase LTL revenue while the increase in full-truckload revenue resulted primarily from a 12% increase in the number of shipments transported and the addition of fuel adjustment charges, partially offset by a decline of about 2% in average length of haul. During the third quarter of 1996 available trucking capacity exceeded the demand for motor carrier transportation services. This industry-wide oversupply of trucks decreased equipment utilization and productivity and placed downward pressure on full-truckload freight rates. In addition, a rise in diesel fuel prices which began in the 1996 first quarter increased the company's per-mile fuel costs by about 10% over 1995's third quarter. The higher fuel costs, which were only partially recovered through fuel adjustment charges, and the oversupply of trucks were the primary factors which impacted operating results during the 1996 third quarter. Only about half of the increase in fuel prices were recovered by the fuel adjustment charges. -6- The number of tractors in the fleet of company-operated, full-truckload equipment rose from approximately 1,100 at the end of 1995's third quarter to about 1,150 by the end of the 1996 third quarter, while the number of full-truckload tractors provided by owner-operators increased by about 55 units to about 445. Full-truckload activities, which contributed 67.1% and 66.6% of freight revenue during the third quarters of 1996 and 1995, respectively, are conducted primarily with company-operated equipment, while LTL activities are conducted primarily with equipment provided by owner-operators. This increase in the percentage of freight revenue derived from full-truckload shipments, as well as the change in mix of company-operated versus owner- operator-provided equipment, impacted the percent of freight revenue absorbed by the various categories of operating expenses between the two quarters. During the third quarters of 1996 and 1995, the percentage of freight revenue absorbed by salaries, wages and related expenses was 24.3% and 25.3%, respectively while the portion of freight revenue absorbed by purchased transportation, which consists principally of payments to owner- operators, rose from 22.4% in 1995 to 24.3% in 1996. These changes resulted primarily from more rapid growth in the quantity of tractors provided by owner-operators as compared to the rate of growth in the company-operated, full-truckload fleet. Increased use of intermodal transportation and one-way trippers also contributed to the increased percent of freight revenue absorbed by purchased transportation. Insurance and claims expense, as a percentage of freight revenue, was 4.7% during the third quarter of 1996 as compared to 6.7% during the third quarter of 1995. Partially because the company carries significant deductibles under its policies of liability insurance, premiums paid to insurance companies do not significantly contribute to overall insurance costs. Claims against the company for over-the-road accidents are the primary component of insurance and claims expense and these expenses tend to vary in relation to miles traveled. Revenue equipment rent, which is primarily related to the company-operated full-truckload fleet, rose from 5.3% to 7.2% of freight revenue while depreciation expense declined from 3.9% to 3.3% of freight revenue. These changes resulted primarily from the replacement of owned tractors and trailers with new equipment financed with operating leases. Interest and other expense rose from $634,000 to $928,000 between the two quarters. Due to substantially lower borrowings under the company's line of credit, interest expense associated with bank debt was significantly less during the 1996 quarter. This reduction was more than offset by net expenses associated with a company-owned life insurance (COLI) program. The provision for income tax was 27.5% of pre-tax income for the third quarter of 1996, as compared to 28.7% for 1995. This reduced effective income tax rate is primarily attributable to the increased level of non- taxable book income from the COLI program. Offsetting this non-taxable income are interest costs associated with the COLI program. The combination of non-taxable COLI income and tax-deductible COLI interest expense has, since 1994, negatively impacted pre-tax income. The effect has been to reduce income tax expense through the deductibility of COLI -7- interest costs. In years prior to 1996, the tax savings have more than offset net pre-tax expense, resulting in increased net income. During 1996, the President signed legislation which, effective January 1, 1996, limits the deductibility of COLI-related interest. The adverse effect on 1996 is minimal. The effect on years after 1996 could be significant if the present COLI program is continued into those years. In light of these developments, management is currently exploring options available to discontinue the COLI program. FIRST THREE QUARTERS 1996 VS. 1995 For the nine months ended September 30, 1996, revenue increased by 8.2% while income from operations fell by 11.1%. Of the $17,813,000 increase in total revenue, revenue generated by the company-operated, full-truckload fleet increased by $3,287,000 or 3.3%, and full-truckload revenue generated by owner-operator provided equipment rose by $10,187,000, or 32.6%. LTL revenue increased by $4,185,000 and non-freight revenue increased by $154,000. Supplies and expenses, which include the cost of fuel consumed by the company-operated fleet fell to 27.5% of freight revenue during the first three quarters of 1996 as compared to 27.6% during 1995's first three quarters. During early 1996, fuel prices rose rapidly and have not appreciably relented. During the first three quarters of 1996, the company's per-mile fuel cost was about 11% above that of the first three quarters of 1995. The effect of the fuel price increase was mitigated in part by the more rapid increase in the fleet of tractors provided by owner- operators, who directly incur the cost of fuel consumed by their tractors and in part by fuel adjustment charges which were added to the company's freight rates during a portion of the year. The provision for income tax decreased from 30.1% of 1995's first three quarters' pre-tax income to 25.4% for 1996 (see above discussion of the third quarter effective tax rate). First three quarters' 1996 net income fell by 14.8% to $6,558,000. LIQUIDITY AND CAPITAL RESOURCES The company continues to maintain a strong financial structure with a good working capital position and strong capital resources. At September 30, 1996, working capital was $28.1 million as compared to $25.0 million at December 31, 1995. During the first three quarters of 1996, net cash provided by operating activities was $7,685,000, as compared to cash provided by operating activities of $12,548,000 in the same period of 1995. The decreased generation of cash was related primarily to increased working capital requirements. As of September 30, 1996, the unused portion of the company's $50,000,000 revolving credit facility totaled approximately $45,000,000. This availability was approximately $43,000,000 at December 31, 1995. -8- PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27.1 Financial Data Schedule (b) No reports on Form 8-K were filed during the quarter ended September 30, 1996. -9- SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of l934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. FROZEN FOOD EXPRESS INDUSTRIES, INC. ----------------------------------------------- (Registrant) November 13, 1996 By: /s/Stoney M. Stubbs, Jr. ------------------------------------------ Stoney M. Stubbs, Jr. Chairman of the Board November 13, 1996 By: /s/Burl G. Cott ------------------------------------------ Burl G. Cott Senior Vice President Principal Financial and Accounting Officer -10- EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS OF FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES AS OF SEPTEMBER 30, 1996, AND THE CONSOLIDATED STATEMENTS OF INCOME AND CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1996 SEP-30-1996 2,776 0 46,016 2,087 9,403 70,100 96,463 45,892 134,234 41,978 0 0 0 25,921 55,389 134,234 19,133 234,406 0 223,179 2,431 1,218 0 8,796 2,238 6,558 0 0 0 6,558 .39 .39
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