-----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, VZnSCoRZ+mLXmx4YY4MiKYcFnlU5BG2wxCpAo/mquHMYREQeJzxBRa8tlM6JPA2/ HRkQVpirgsIl1OAnX1mLdg== 0000039273-00-000008.txt : 20000516 0000039273-00-000008.hdr.sgml : 20000516 ACCESSION NUMBER: 0000039273-00-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 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: SEC FILE NUMBER: 001-10006 FILM NUMBER: 630455 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 March 31, 2000 -------------- 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 May 11, 2000, 16,329,000 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 - March 31, 2000 and December 31, 1999 2 Consolidated Statements of Income - Three months ended March 31, 2000 and 1999 3 Consolidated Condensed Statements of Cash Flows - Three months ended March 31, 2000 and 1999 4 Notes to Consolidated Condensed Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 11 Exhibit 27.1 - Financial Data Schedule 13 FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Condensed Balance Sheets (In thousands) (Unaudited) Mar. 31, Dec. 31, 2000 1999 Assets ------ ------ Current assets Cash $ 2,985 $ 1,613 Accounts receivable, net 51,488 52,312 Inventories 17,168 17,719 Tires 4,755 5,036 Deferred federal income tax 253 289 Other current assets 3,960 3,978 ------- ------- Total current assets 80,609 80,947 Property and equipment, net 70,116 73,640 Other assets 14,770 15,496 ------- ------- $165,495 $170,083 ======= ======= Liabilities and Shareholders' Equity Current liabilities Trade accounts payable $ 21,428 $ 24,797 Accrued claims liabilities 5,544 6,631 Accrued payroll 6,293 5,890 Short-term debt 24,500 26,500 Other 6,441 5,075 ------- ------- Total current liabilities 64,206 68,893 Deferred federal income tax 2,456 2,795 Other and deferred credits 16,356 15,274 ------- ------- Total liabilities and deferred 83,018 86,962 credits ------- ------- Shareholders' equity Common stock 25,921 25,921 Paid-in capital 4,975 5,056 Retained earnings 58,836 59,399 ------- ------- 89,732 90,376 Less - Treasury stock 7,255 7,255 ------- ------- Total shareholders' equity 82,477 83,121 ------- ------- $165,495 $170,083 ======= ======= See accompanying notes. FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Statements of Income (In thousands, except per-share amounts) (Unaudited) For the Three Months Ended March 31, ------------------ 2000 1999 ------ ------ Revenue Freight revenue $76,891 $ 73,824 Non-freight revenue 15,525 14,433 ------ ------ 92,416 88,257 ------ ------ Costs and expenses Freight operating expenses Salaries, wages and related 21,045 20,639 expenses Purchased transportation 18,059 16,317 Supplies and expenses 21,606 19,517 Revenue equipment rent 6,253 6,470 Depreciation 3,007 2,696 Communications and utilities 1,172 916 Claims and insurance 3,379 3,062 Operating taxes and licenses 1,408 1,366 Gain on sale of equipment (316) (261) Miscellaneous expense 1,255 825 ------ ------ 76,868 71,547 Non-freight costs and operating 15,290 14,275 expenses ------ ------ 92,158 85,822 ------ ------ Income from operations 258 2,435 Interest and other expense, net 1,124 431 ------ ------ (Loss)income before income tax (866) 2,004 Income tax (benefit) provision (303) 741 ------ ------ Net (loss) income $ (563) $ 1,263 ====== ====== Net (loss) income per share of common stock Basic $ (.03) $ .08 ====== ====== Diluted $ (.03) $ .08 ====== ====== Weighted average shares outstanding Basic 16,321 16,439 ====== ====== Diluted 16,321 16,610 ====== ====== See accompanying notes. FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows (In thousands) (Unaudited) For the Three Months Ended March 31, --------------- 2000 1999 ------ ------ Net cash provided by (used in) operating $ 2,575 $(9,857) activities ------ ------- Cash flows from investing activities Expenditures for property and equipment (1,313) (4,642) Proceeds from sale of property and 2,134 1,170 equipment Company owned life insurance and other (706) 57 ------ ------ Net cash provided by (used in) investing 878 (4,178) activities ------ ------- Cash flows from financing activities Borrowings under revolving credit agreement 7,000 19,000 Payments against revolving credit agreement (9,000) (6,000) Dividends paid - (494) Net treasury stock activity (81) (1,148) ------- ------- Net cash (used in) provided by financing (2,081) 11,358 activities ------- ------- Net increase (decrease) in cash and cash 1,372 (2,677) equivalents Cash and cash equivalents at January 1 1,613 6,023 ------- ------- Cash and cash equivalents at March 31 $ 2,985 $ 3,346 ======= ======= See accompanying notes. FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Condensed Financial Statements March 31, 2000 and 1999 (Unaudited) 1. BASIS OF PRESENTATION The consolidated 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 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 30, 2000, 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. SHAREHOLDERS' EQUITY As of March 31, 2000 and December 31, 1999, respectively, there were 16,314,000 and 16,321,000 shares of stock outstanding. 3. 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, cash flows or results of operations. 4. EARNINGS PER SHARE Common stock equivalents included in diluted weighted average shares, all of which result from dilutive stock options granted by the company, were as follows (in thousands): 2000 1999 ----- ----- For the three months ended March 31 - 171 5. OPERATING SEGMENTS The company's operations consist of two reportable segments. The freight segment is engaged primarily in the motor carrier freight transportation business. The smaller segment is primarily engaged in non-freight business relating to the sale and service of refrigeration equipment and of trailers used in freight transportation. Following is information for each reportable segment for the three month periods ended March 31, 2000 and 1999 is as follows (in millions): March 31, 2000 1999 ----- ----- Freight Operations Total Revenue $ 76.9 $ 73.8 Operating Income - 2.3 Total Assets 156.8 145.7 Non-Freight Operations Total Revenue $ 15.8 $ 18.1 Operating Income .2 .1 Total Assets 33.5 31.7 Intercompany Eliminations Revenue $ (.3) $ (3.6) Operating Income .1 - Assets (24.8) (19.7) Consolidated Revenue $ 92.4 $ 88.3 Operating Income .3 2.4 Assets 165.5 157.7 Intercompany elimination of revenue relate to transfers at cost of inventory such as trailers and refrigeration units from the non-freight segment for use by the freight segment. 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-month periods ended March 31, 2000 and 1999. Three Months Ended March. 31, ---------------- 2000 1999 ----- ---- Salaries, wages and related 27.4% 28.0% expense Purchased transportation 23.5 22.1 Supplies and expenses 28.1 26.4 Revenue equipment rent 8.1 8.8 Depreciation 3.9 3.7 Claims and insurance 4.4 4.1 Other 4.6 3.8 ----- ---- Total freight operating expenses 100.0% 96.9% ===== ==== First Quarter of 2000 vs. 1999 During the first quarter of 2000, revenue increased by 4.7% to $92.4 million with freight revenue up $3.1 million or 4.2%. Non- freight revenue aggregated 16.8% and 16.4% of total revenue during the first three months of 2000 and 1999, respectively. Less-than-truckload (LTL) revenue was 7.7% higher and full- truckload revenue increased by 2.6% as compared to the same period of 1999. Approximately 67% of the increase in full-truckload revenue and 35% of the increase in LTL revenue resulted from significantly increased fuel adjustment revenue during the first quarter of 2000. Other factors impacting the increase in freight revenue were increased volumes of 10% for full-truckload shipments and 8% for LTL shipments. During the 2000 first quarter, total LTL hundredweight increased by 8.1% as compared to the first quarter of 1999. The 2000 increase in non-freight revenue was due to improvement in the market for refrigeration equipment and to the continued expansion of the company's non-freight subsidiary into new geographical and product market areas. The number of tractors in the fleet of company-operated, full- truckload equipment fell from approximately 1,150 at the beginning of 2000 to about 1,130 by the end of the first quarter. The number of full-truckload tractors provided by owner-operators increased by about 75 to about 550. Full-truckload activities, which contributed 70% of freight revenue during the first quarter of 2000 and 1999, are conducted primarily with company-operated equipment, while LTL activities are conducted primarily with equipment provided by owner- operators. Changes in the mix of LTL versus full-truckload revenue as well as fluctuations in the amount of total freight handled on 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 first quarter of 2000, the percent of freight revenue absorbed by salaries, wages and related expense was 27.4%, as compared to 28% during the year-ago quarter, due primarily to the reduced quantity of employee-driven, company-operated equipment. Conversely, purchased transportation expense as a percent of freight revenue rose from 22.1% in the first quarter of 1999 to 2000's 23.5%. Per-gallon fuel costs paid by the company increased by 53% during the first quarter of 2000 as compared to 1999. Sudden and dramatic fuel price volatility can impact the company's cost structure and profitability. A number of factors tend to diminish the impact of such volatility. Owner-operators are responsible for all costs associated with their equipment, including fuel. Therefore, the cost of such fuel is not a direct expense to the company. With regard to fuel expenses for company- operated equipment, the company attempts to mitigate the impact of fluctuating fuel costs by purchasing more fuel-efficient tractors and aggressively managing fuel purchasing. Also, certain rates charged by the company for its services are adjustable by reference to fuel prices. Relatively high or low per-gallon fuel prices can result in upward or downward adjustment of freight rates, further mitigating the impact of such volatility on the company's profits. Such fluctuations result from many external market factors that cannot be influenced or predicted by the company. In addition, each year several states increase fuel taxes. Recovery of future increases or realization of future decreases in fuel prices and fuel taxes, if any, will continue to depend upon competitive freight-market conditions. Claims and insurance expense rose from 4.1% of freight revenue during the first quarter of 1999, to 4.4% for 2000. The increase resulted from a variety of factors, including but not limited to an increase in the frequency of physical damage losses. Income from operations fell by $2.2 million during the first quarter of 2000 as compared to 1999. Interest and other expense, net rose from $431,000 to $1,124,000 between the two quarters. Increased interest costs associated with borrowing funds was the principal factor affecting this increase. The company incurred a pre-tax loss of $866,000 during the first quarter of 2000 as compared to a pre-tax profit of $2,004,000 during the comparable 1999 period. The provision for income tax was 35% of pre-tax income for the first quarter of 2000, as compared to 37% for 1999. LIQUIDITY AND CAPITAL RESOURCES The company's primary needs for capital resources are to finance working capital, capital expenditures and, from time to time, acquisitions. Working capital investment typically increases during periods of sales expansion when higher levels of receivables and, with regard to non-freight operations, inventory are present. The company had short-term debt of $24.5 million as of March 31, 2000. The unused portion of the company's $50 million revolving credit facility was approximately $20 million. During the first quarter of 2000, the company continued to negotiate for a credit facility to replace the existing credit facility, which expires on June 1, 2000. As previously disclosed, the expiring credit facility has three participating banks, one of which has elected not to participate in a proposed replacement credit facility. On April 28,2000, the company received confirmation from another major bank that it is willing to replace the bank which declined to participate in the credit facility. On May 11, 2000, the company and the agent bank executed a term sheet outlining the structure of the proposed replacement credit facility, which the company expects to enter into prior to June 1,2000. There can be no assurance, however, that such a facility will be in place by June 1, 2000. Accordingly, the company is considering alternative strategies that would accommodate the company's financial requirements beyond June 1, 2000. During the three months ended March 31, 2000, net cash provided by operating activities was $2.6 million. During the three months ended March 31, 1999, cash used in operating activities was $9.9 million. This change related to the timing of certain payments to vendors during the quarters and fluctuations in other components of working capital. The company believes that its current cash position, funds from operations, and the availability of funds under its credit agreement will be sufficient to meet anticipated liquidity requirements for the next twelve months. At March 31, 2000, working capital was $16.4 million as compared to $12.1 million at December 31, 1999. OUTLOOK Certain statements contained in this Report on Form 10-Q, except for the historical information, are forward-looking statements regarding the anticipated development of and changes in the company's business or the industry in which the company operates. The intent, belief or current expectations of the company, its directors or its officers, primarily with respect to the future operating performance of the company are dependent upon a number of risks and uncertainties that could cause actual results to differ materially from those conveyed in such forward looking statements. These risks and uncertainties include competition, weather conditions and the general economy, the availability and cost of labor, equipment, fuel and supplies, the ability of the company to negotiate favorably with lenders and equipment lessors, the impact of changes in the tax and regulatory environment in which the company operates, operational risks and insurance, risks associated with the technologies and systems used by the company and the other risks and uncertainties described in the company's Annual Report on Form 10-K and other reports which was filed with the Securities and Exchange Commission. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK As of March 31, 2000, debt stood at $24.5 million, which approximated fair market value. Also, as of March 31, 2000, the company held no material market risk sensitive instruments (for trading as well as non-trading purposes) which would involve significant foreign currency exchange rate risk, commodity price risk or other relevant market risks, such as equity price risk. Accordingly, the potential loss to the company in future earnings, fair values or cash flows of market risk sensitive investments resulting from changes in interest rates, foreign currency exchange rates, commodity prices and other relevant market rates or prices is not significant. PART II - OTHER INFORMATION Items 1 through 5 of Part II are omitted due to a lack of updated information to disclose pursuant to said items. Item 6 Exhibits and Reports on Form 8-K (a) Exhibits 27.1 Financial Data Schedule No reports on Form 8-K were filed during the quarter ended March 31, 2000. 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) May 12, 2000 By: /s/Stoney M. Stubbs, Jr. ------------------------ Stoney M. Stubbs, Jr. Chairman of the Board May 12, 2000 By: /s/F. Dixon McElwee, Jr. ------------------------ F. Dixon McElwee, Jr. Senior Vice President Principal Financial and Accounting Officer 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 MARCH 31, 2000, AND THE CONSOLIDATED STATEMENTS OF INCOME, CASH FLOWS AND STOCKHOLDERS' EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 3-MOS DEC-31-2000 MAR-31-2000 2,985 0 58,674 8,815 17,168 80,609 117,919 47,803 165,495 64,206 0 0 0 25,921 56,556 165,495 15,525 92,416 76,868 92,158 1,124 719 592 (866) (303) (563) 0 0 0 (563) (0.03) (0.03)
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