-----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, NRvGwS0vHlXP5RNSKvhFIQa8ikJgxzcf/ZNP6SK8N9ij0Hfuoy9FLRqU/vKSIn6m gBpYAr/hYFM3pIUEI7YvnA== 0000039273-97-000014.txt : 19970815 0000039273-97-000014.hdr.sgml : 19970815 ACCESSION NUMBER: 0000039273-97-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 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: 97660355 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 June 30, 1997 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 August 4, 1997, 16,807,603 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 - June 30, 1997 and December 31, 1996 2 Consolidated Statements of Income - Three and six months ended June 30, 1997 and 1996 3 Consolidated Condensed Statements of Cash Flows - Six months ended June 30, 1997 and 1996 4 Notes to Consolidated Condensed Financial Statements 5 Item 2. Management's Discussion and Analysis of 7 Financial Condition and Results of Operations PART II - OTHER INFORMATION Item 4. Submission of Matters to Vote of Security Holders 10 Item 6. Exhibits and Reports on Form 8-K 10 Exhibit 27.1 - Financial Data Schedule 12
-1- FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Condensed Balance Sheets (In thousands) (Unaudited)
June 30, Dec. 31, 1997 1996 -------- -------- ASSETS Current assets Cash $ 5,510 $ 6,670 Accounts receivable, net 40,853 39,464 Inventories 9,491 8,440 Tires 4,675 5,517 Other current assets 2,852 5,395 ------- ------ Total current assets 63,381 65,486 Property and equipment, net 57,516 51,880 Other assets 13,796 12,188 ------- ------- $134,693 $129,554 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Trade accounts payable $ 12,141 $ 13,997 Accrued claims liabilities 6,287 6,887 Accrued payroll 4,185 4,950 Other 7,073 5,490 ------- ------- Total current liabilities 29,686 31,324 Long-term debt 1,000 - Other and deferred credits 15,698 14,277 ------- ------- Total liabilities and deferred credits 46,384 45,601 ------- ------- Shareholders' equity Common stock 25,921 25,921 Paid-in capital 4,298 3,462 Retained earnings 60,526 57,386 ------- ------- 90,745 86,769 Less - Treasury stock 2,436 2,816 ------- ------- Total shareholders' equity 88,309 83,953 ------- ------- $134,693 $129,554 ======= =======
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 Six Months Ended June 30, Ended June 30, -------------------- ------------------ 1997 1996 1997 1996 ------- ------- -------- -------- Revenue Freight revenue $72,017 $72,662 $139,843 $140,471 Non-freight revenue 9,239 6,747 14,099 13,111 ------ ------ ------- ------- 81,256 79,409 153,942 153,582 ------ ------ ------- ------- Costs and expenses Freight operating expenses Salaries, wages and related expenses 18,170 18,273 34,687 35,500 Purchased transportation 16,665 17,775 32,589 33,527 Supplies and expenses 19,876 19,375 38,945 38,565 Revenue equipment rent 5,506 5,357 11,118 10,193 Communications and utilities 834 917 1,667 1,784 Insurance and claims 2,843 2,910 5,768 6,338 Depreciation 2,476 2,229 4,908 4,740 Operating taxes and licenses 1,184 1,277 2,377 2,558 Gain on sale of equipment (113) (317) (665) (485) Miscellaneous expense 918 712 1,729 1,356 ------ ------ ------- ------- 68,359 68,508 133,123 134,076 Non-freight costs and operating expenses 8,783 6,330 13,757 12,592 ------ ------ ------- ------- 77,142 74,838 146,880 146,668 ------ ------ ------- ------- Income from operations 4,114 4,571 7,062 6,914 Interest and other expense 161 921 1,139 1,503 ------ ------ ------- ------- Income before income tax 3,953 3,650 5,923 5,411 Provision for income tax 1,181 896 1,780 1,307 ------ ------ ------- ------- Net income $ 2,772 $ 2,754 $ 4,143 $ 4,104 ====== ====== ======= ======= Net income per share of common stock Primary and fully diluted $ .17 $ .16 $ .25 $ .24 ====== ====== ======= ======= Weighted average fully diluted shares 16,738 16,840 16,705 16,801 ====== ====== ======= =======
See accompanying notes. -3- FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows (In thousands) (Unaudited)
For the Six Months Ended June 30, ----------------------- 1997 1996 -------- -------- Net cash provided by operating activities $ 10,216 $ 478 ------- ------- Cash flows from investing activities Expenditures for property and equipment (11,573) (3,373) Proceeds from sale of property and equipment 2,868 944 Company owned life insurance and other (2,747) (5,737) ------- ------- Net cash used in investing activities (11,452) (8,166) ------- ------- Cash flows from financing activities Borrowings under revolving credit agreement 19,000 20,000 Payments against revolving credit agreement (18,000) (15,000) Dividends paid (1,003) (985) Net treasury stock activity 79 425 ------- ------- Net cash provided by financing activities 76 4,440 ------- ------- Net decrease in cash and cash equivalents (1,160) (3,248) Cash and cash equivalents at beginning of year 6,670 7,480 ------- ------- Cash and cash equivalents at end of quarter $ 5,510 $ 4,232 ======= =======
See accompanying notes. -4- FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Condensed Financial Statements June 30, 1997 and 1996 (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 27, 1997, 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 six months ended June 30, 1997 and 1996, the company funded contributions to its Employee Savings Plan by transferring 126,483 and 46,958 shares, respectively, of treasury stock to the Plan trustee. The fair market value of the transferred shares was approximately $1,137,000 for 1997 and approximately $506,000 for 1996. 3. SHAREHOLDERS' EQUITY As of June 30, 1997 and December 31, 1996, respectively, there were 16,792,000 and 16,642,000 shares of stock outstanding. During both of the quarters ended June 30, 1996 and 1997, the company declared dividends on the common stock of three cents per share. 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- 5. EARNINGS PER SHARE The company is required to adopt Financial Accounting Standard No. 128, "Earnings Per Share" (FAS 128) in its December 31, 1997, financial statements. FAS 128 requires the replacement of "primary" earnings per share with "basic" earnings per share and "fully diluted" earnings per share with "diluted" earnings per share. Had FAS. 128 been in effect for the quarter and six months ended June 30, 1997, reported earnings per share would have been as follows: For the Three Months For the Six Months Ended June 30, Ended June 30, -------------------- ------------------ 1997 1996 1997 1996 ---- ---- ---- ---- Basic $.17 $.17 $.25 $.25 Diluted $.16 $.16 $.24 $.24 -6- 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 six-month periods ended June 30, 1997 and 1996.
Three Months Six Months Ended June 30, Ended June 30, -------------- -------------- 1997 1996 1997 1996 ----- ----- ----- ----- Salaries, wages and related expense 25.2% 25.1% 24.8% 25.3% Purchased transportation 23.1 24.5 23.3 23.9 Supplies and expenses 27.6 26.7 27.8 27.5 Revenue equipment rent 7.6 7.4 8.0 7.3 Insurance and claims 3.9 4.0 4.1 4.5 Depreciation 3.4 3.1 3.5 3.4 Other 4.1 3.5 3.7 3.5 ---- ---- ---- ---- Total freight operating expenses 94.9% 94.3% 95.2% 95.4% ==== ==== ==== ====
SECOND QUARTER OF 1997 VS. 1996 During the second quarter of 1997, revenue increased by 2.3% to $81,256,000 with freight revenue down $0.6 million or 0.9% and non-freight revenue up about 36.9%. Less-than-truckload (LTL) revenue was 1.3% lower and full-truckload revenue decreased by 0.7% as compared to the same period of 1996. The decline in full-truckload revenue was due primarily to a 1.8% decline in average per shipment revenue and a minor reduction in average length of haul. Per shipment revenue declined, in part, to lower fuel adjustment charges during the 1997 quarter. The primary factor in 1997's lower LTL revenue was a reduction in the number of LTL shipments, which was partially offset by increases in average shipment weight and revenue. The 1997 increase in non-freight revenue was due to improvement in the market for refrigeration equipment and the expansion of the company's non-freight subsidiary into new geographical areas. During much of the 1997 second quarter available refrigerated trucking capacity exceeded the demand for refrigerated motor carrier transportation services. This oversupply of trucks, which also existed during most of 1995 and 1996, decreased utilization and productivity and placed downward pressure on full- truckload freight rates. -7- The industry oversupply of refrigerated trucks was the primary factor which adversely impacted operating results during the second quarters of 1997 and 1996 as net income for the second quarter of 1997 was only slightly above that for the same period of 1996. The number of tractors in the fleet of company-operated, full-truckload equipment rose from approximately 1,110 at the beginning of 1997 to about 1,140 by the end of the quarter, while the number of full-truckload tractors provided by owner-operators decreased by 72 units to a total of about 370 by quarter end. Full-truckload activities, which contributed 68% of freight revenue during the second quarter of 1997 and 1996, are conducted primarily with company-operated equipment, while LTL activities are conducted primarily with equipment provided by owner-operators. 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 second quarter of 1997, the percent of freight revenue absorbed by salaries, wages and related expenses was approximately 25.2%, as compared to 25.1% during the year-ago quarter. Purchased transportation expenses as a percent of freight revenue fell from 24.5% in the second quarter of 1996 to 1997's 23.1%. This is due primarily to the decline in the number of owner-operator provided tractors. Insurance and claims expenses fell from 4.0% to 3.9% of freight revenue between the second quarters of 1996 and 1997 as a result of more favorable experience with regard to claims associated with vehicular accidents. Income from operations fell by 10% during the second quarter of 1997. Interest and other expense fell from $921,000 to $162,000 between the two quarters. This decrease is related to reduced net pre-tax expenses associated with the company-owned life insurance (COLI) program, together with lower interest expense associated with reduced borrowings under the company's line of credit. As a result of legislation which limits the deductibility of COLI- related interest, the company is phasing out its COLI program. Pre-tax income rose by 8.3% during the second quarter of 1997. The provision for income tax was 29.9% of pre-tax income for the second quarter of 1997, as compared to 24.5% for 1996. The higher 1997 effective income tax rate is primarily attributable to reduced permanent tax savings resulting from the COLI program. The increased 1997 tax provision resulted primarily from the impact of recent legislation which limits deductibility of interest expenses associated with COLI programs. The amount of the tax reduction exceeds the aforementioned net COLI expenses included in interest and other expenses. -8- FIRST HALF 1997 VS. 1996 For the six months ended June 30,1997, revenue increased by 0.2%, but income from operations increased by 2.1%. Of the $360,000 increase in total revenue, revenue generated by the company-operated, full-truckload fleet increased by $1,183,000, and full-truckload revenue generated by owner-operator provided equipment fell by $1,926,000, or 6.7%. LTL revenue increased by $115,000, and non-freight revenue increased by $998,000. Supplies and expenses, which include the cost of fuel consumed by the company- operated fleet rose to 27.8% of freight revenue during the first half of 1997 as compared to 27.5% during 1996's first six months. During early 1997, fuel prices rose rapidly and did not appreciably relent until the middle of 1997's second quarter. The effect of the fuel price increase was mitigated in part by fuel adjustment charges which were added to the company's freight rates. During the first half of 1997, revenue equipment rent, which is primarily related to the company-operated full truckload fleet, as a percentage of freight revenue was 8%, as compared to 7.3% during 1996. Depreciation expense, which is related to the company's operating fleets as well as other types of property, between the six month periods rose from 3.4% to 3.5% of freight revenue. Increased equipment rental expenses resulted primarily from increases in the proportion of tractors and trailers which are leased pursuant to long- term agreements. The 1997 increase in depreciation expense is primarily due to the implementation of satellite communications links in the company operated fleet. Insurance and claims expense, as a percentage of freight revenue, was 4.1% during the first half of 1997 as compared to 4.5% during the first half of 1996. 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. The provision for income tax increased from 24.2% of 1996's first-half pre-tax income to 30% for 1997 (see above discussion of the second quarter effective tax rate which is also applicable to the first half comparisons). First half 1997 net income rose by 1.0% to $4,143,000. LIQUIDITY AND CAPITAL RESOURCES The company continues to maintain a strong financial structure with a good working capital position and strong capital resources. At June 30, 1997, working capital was $33.7 million as compared to $34.2 million at December 31, 1996. During the first half of 1997, net cash provided by operating activities was $10,216,000, as compared to cash provided by operating activities of $478,000 in the same period of 1996. The increased generation of cash was related primarily to improved collections of accounts receivable and the expanded use of trade credit. As of June 30, 1997, the unused portion of the company's $50,000,000 revolving credit facility totaled approximately $44,000,000. This availability was approximately $45,000,000 at December 31, 1996. -9- PART II - OTHER INFORMATION Item 4. Submission of Matters to Vote of Security Holders The Annual Meeting of Shareholders of the company was held on April 24, 1997. At the meeting, the following persons were elected as directors of the company: Stoney M. Stubbs, Jr. T. Michael O'Connor Brian R. Blackmarr Edgar O. Weller Leroy Hallman Charles G. Robertson W. Grogan Lord Burl G. Cott The above listed individuals comprise all directors of the company. Also voted on at the meeting was a proposal to approve an amendment to the company's 1992 Incentive and Nonstatutory Stock Option Plan, as amended, increasing the total number of shares available for the grant of options from 1,256,944 to 2,006,944 shares (11,143,744 shares voted for and 986,476 shares voted against). 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 June 30, 1997. -10- 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) August 12, 1997 By: /s/Stoney M. Stubbs, Jr. -------------------------------------------- Stoney M. Stubbs, Jr. Chairman of the Board August 12, 1997 By: /s/Burl G. Cott -------------------------------------------- Burl G. Cott Senior Vice President Principal Financial and Accounting Officer -11- 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 JUNE 30, 1997, AND THE CONSOLIDATED STATEMENTS OF INCOME AND CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1997 JUN-30-1997 5,510 0 43,546 2,693 9,491 63,381 102,246 44,730 134,693 29,686 0 0 0 25,921 62,388 134,693 14,099 153,942 0 146,880 1,139 786 111 5,923 1,780 4,143 0 0 0 4,143 .25 .25
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