-----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, W0LkFD1SaHIqCBVT1gqnrZiAvWjI4qDDMru07efWjW7Wg+N57Jy1pL68EG/GeEZQ PtxAaglCi2d0a1optuHqwQ== 0000039273-98-000008.txt : 19980511 0000039273-98-000008.hdr.sgml : 19980511 ACCESSION NUMBER: 0000039273-98-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980508 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: SEC FILE NUMBER: 001-10006 FILM NUMBER: 98613438 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, 1998 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 4, 1998, 16,893,007 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, 1998 and December 31, 1997 2 Consolidated Statements of Income - Three months ended March 31, 1998 and 1997 3 Consolidated Condensed Statements of Cash Flows- Three months ended March 31, 1998 and 1997 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 10 Exhibit 27.1 - Financial Data Schedule 12
-1- FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Condensed Balance Sheets (In thousands) (Unaudited)
March 31, Dec. 31, 1998 1997 --------- -------- Assets Current assets Cash and cash equivalents $ 17,149 $ 23,318 Accounts receivable, net 39,057 35,028 Inventories 9,913 10,608 Tires on equipment in use 4,717 4,775 Other current assets 4,647 3,253 ------- ------- Total current assets 75,483 76,982 Property and equipment, net 55,219 53,333 Other assets 12,578 12,433 ------- ------- $143,280 $142,748 ======= ======= Liabilities and Shareholders' Equity Current liabilities Trade accounts payable $ 17,022 $ 14,389 Accrued claims liabilities 5,633 5,843 Accrued payroll 3,832 5,242 Other 4,308 6,529 ------- ------- Total current liabilities 30,795 32,003 Long-term debt -- -- Deferred credits and non-current liabilities 17,923 17,668 ------- ------- Total liabilities and deferred credits 48,718 49,671 ------- ------- Shareholders' equity Common stock 25,921 25,921 Paid-in capital 5,260 4,779 Retained earnings 65,926 65,038 ------- ------- 97,107 95,738 Less - Treasury stock 2,545 2,661 ------- ------- Total shareholders' equity 94,562 93,077 ------- ------- $143,280 $142,748 ======= =======
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 Ended March 31, -------------------- 1998 1997 ------- ------- Revenue Freight revenue $70,641 $67,826 Non-freight revenue 6,870 4,860 ------ ------ 77,511 72,686 ------ ------ Operating Expenses Freight operating expenses Salaries, wages and related expenses 18,997 16,517 Purchased transportation 15,648 15,924 Supplies and expenses 19,780 19,069 Revenue equipment rent 5,999 5,612 Communications and utilities 959 833 Insurance and claims 2,842 2,925 Depreciation 2,346 2,432 Operating taxes and licenses 1,282 1,193 Gain on sale of equipment (236) (552) Miscellaneous expense 560 811 ------ ------ 68,177 64,764 ------ ------ Non-freight costs and operating expenses 7,177 4,974 ------ ------ 75,354 69,738 ------ ------ Income from operations 2,157 2,948 Interest and other expense 106 978 ------ ------ Income before income tax 2,051 1,970 Provision for income tax 656 599 ------ ------ Net income $ 1,395 $ 1,371 ====== ====== Net income per share of common stock Basic and diluted $ .08 $ .08 ====== ====== Weighted average diluted shares 17,154 16,971 ====== ======
See accompanying notes. -3- FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows (In thousands) (Unaudited)
For the Three Months Ended March 31, --------------------- 1998 1997 ------- --------- Net cash provided by (used in) operating activities $ 607 $ (5,176) ------ ------- Cash flows from investing activities Expenditures for property and equipment (7,282) (10,615) Proceeds from sale of property and equipment 1,364 1,800 Company-owned life insurance and other (131) (466) ------ ------- Net cash used in investing activities (6,049) (9,281) ------ ------- Cash flows from financing activities Borrowings under revolving credit agreement -- 10,000 Payments against revolving credit agreement -- (1,000) Dividends paid (507) (500) Net treasury stock activity (220) 307 ------ ------- Net cash (used in) provided by financing activities (727) 8,807 ------ ------- Net decrease in cash and cash equivalents (6,169) (5,650) Cash and cash equivalents at beginning of year 23,318 6,670 ------ ------- Cash and cash equivalents at end of quarter $17,149 $ 1,020 ====== =======
See accompanying notes. -4- FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Condensed Financial Statements March 31, 1998 and 1997 (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, 1998, 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 three months ended March 31, 1998 and 1997, the company funded contributions to its Employee Savings Plan by transferring 86,671 and 27,052 shares, respectively, of treasury stock to the Plan trustee. The fair market value of the transferred shares was approximately $819,000 for 1998 and approximately $250,000 for 1997. 3. SHAREHOLDERS' EQUITY As of March 31, 1998 and December 31, 1997, respectively, there were 16,904,000 and 16,836,000 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. EARNINGS PER SHARE During 1997, the company adopted Financial Accounting Standard No. 128, "Earnings Per Share" (FAS 128). FAS 128 requires the replacement of "primary" earnings per share with "basic" earnings per share and "fully -5- diluted" earnings per share with "diluted" earnings per share. Accordingly, weighted average shares outstanding for 1997 have been restated to conform with FAS 128. For the first three months of 1997 and 1998, basic shares outstanding were (in thousands) 16,671 and 16,860, respectively. Differences between the number of basic and diluted weighted average shares outstanding, all of which result from dilutive stock options granted by the company, were (in thousands) 300 in 1997 and 294 in 1998 -6- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The table below sets forth, as a percentage of freight revenue, certain major operating expenses for the three-month periods ended March 31, 1998 and 1997.
Three Months Ended March 31, ------------------ 1998 1997 ----- ----- Salaries, wages and related expenses 26.9% 24.4% Purchased transportation 22.2 23.5 Supplies and expenses 28.0 28.1 Revenue equipment rent 8.5 8.3 Insurance and claims 4.0 4.3 Depreciation 3.3 3.6 Other 3.6 3.3 ---- ---- Total freight operating expenses 96.5% 95.5% ==== ====
During the first quarter of 1998, revenue rose by 6.6% to $77,511,000 with freight revenue up $2,815,000, or 4.2% and non-freight revenue up $2,010,000. Less-than-truckload (LTL) revenue increased by 3.2% while full- truckload revenue rose by 4.6% as compared to the same period of 1997. During the first three months of 1997 freight revenue included fuel adjustment charges, the amount of which was negligible during the 1998 quarter. These charges, which are triggered by increases in the market price of fuel, impacted the percentage gain in freight revenue, which, excluding 1997's fuel adjustment charges, rose by 5.2% during 1998. The 1998 increase in non-freight revenue was primarily attributable to increased sales of new trailers and refrigeration units. The number of tractors in the fleet of company-operated, full-truckload equipment rose by approximately 70 to about 1,200 by the end of the first quarter of 1998, while the number of full-truckload tractors provided by owner-operators fell by almost 40 to approximately 340. Full-truckload activities, which contributed 68% of freight revenue during both first quarters of 1998 and 1997, 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 by company-operated versus owner-operated provided equipment impacted the percent of freight revenue absorbed by the various categories of operating expenses between the two quarters. The proportion of full-truckload revenue generated by company-operated trucks during the -7- first quarter of 1998 was 75.1%, as compared to 73.1% during the first quarter of 1997. Company-operated trucks generated 29.9% and 27.2% of total LTL revenue for the first three months of 1998 and 1997, respectively. During the first quarter of 1998, the percentage of freight revenue absorbed by salaries, wages and related expenses was 26.9%, as compared to 24.4% during the year-ago quarter. This increase is primarily the result of the increase in the percent of total freight hauled in company-operated trucks, increased cost associated with work-related injuries and other fringe benefits, and decreased revenue per mile (primarily related to the decline in fuel adjustment charges). The portion of freight revenue absorbed by purchased transportation, which consists principally of payments to owner-operators, fell from 23.5% in 1997 to 22.2% in 1998. This decrease is the result of the decrease in the percent of total freight hauled by owner-operator-provided trucks. Supplies and expenses, which include costs associated with fuel for and maintenance of company-operated equipment, fell from 28.1% of freight revenue during the first three months of 1997 to 28.0% for the comparative 1998 period. Savings from 1998's falling per-gallon fuel prices were substantially offset by increased expenditures related to maintenance of company-operated equipment and increased costs associated with driver recruiting. Insurance and claims expenses fell from 4.3% to 4.0% of freight revenue between the first quarters of 1997 and 1998 as a result of more favorable experience with regard to claims associated with vehicular accidents. Revenue equipment rent, which is primarily related to the company-operated, full-truckload fleet, rose from 8.3% to 8.5% of freight revenue while depreciation expense declined from 3.6% to 3.3% of freight revenue. These changes resulted primarily from the addition of new leased tractors and from the replacement of owned equipment with new leased tractors. Gains on sale of equipment fell from $552,000 to $236,000 between the quarters. The volume of owned equipment dispositions tends to vary between quarters. Income from operations fell by 26.8% during the first quarter of 1998. Interest and other expense declined from $978,000 to $106,000 between the two quarters. This decrease is related to increased income from the investment of cash during the 1998 quarter and to lower net expenses associated with the company-owned life insurance (COLI) program. Pre-tax income rose by 4.1% during the first quarter of 1998. The provision for income tax was 32% of pre-tax income for the first quarter of 1998, as compared to 30.4% for 1997. The increased effective income tax rate is primarily attributable to reduced tax savings related to the impact of legislation which limits deductibility of interest expenses associated with COLI programs. In addition, the Internal Revenue Service has initiated other challenges of COLI programs. In light of these developments, the company has begun a phase-out of its COLI program. -8- LIQUIDITY AND CAPITAL RESOURCES The company continues to maintain a strong financial structure with a good working capital position and strong capital resources. At March 31, 1998, working capital was $44.7 million as compared to $45.0 million at December 31, 1997. During the first quarter of 1997, net cash used in operating activities was $5.2 million, as compared to net cash provided by operating activities of $607,000 for 1998. This change is related primarily to fluctuations in working capital requirements. As of March 31, 1998 and December 31, 1997, the unused portion of the company's $50,000,000 revolving credit facility totaled approximately $45,000,000. OUTLOOK Certain statements contained in this Report on Form 10-Q, including statements regarding the anticipated development and expansion of 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 and other statements contained herein regarding matters that are not historical facts, are "forward-looking" statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Because such statements involve risks and uncertainties, actual results may differ materially from those expressed or implied from such forward-looking statements. These risks and uncertainties include demand for the company's services and products, which may be affected by, among other things, competition, weather conditions and the general economy, the availability and cost of labor, equipment, fuel and supplies, 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 which was filed with the Commission on March 27, 1998. -9- 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 March 31, 1998. -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) May 08, 1998 By: /s/Stoney M. Stubbs, Jr. ------------------------------------------ Stoney M. Stubbs, Jr. Chairman of the Board May 08, 1998 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 MARCH 31, 1998, AND THE CONSOLIDATED STATEMENTS OF INCOME AND CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1998 MAR-31-1998 17,149 0 41,903 2,846 9,913 75,483 97,984 42,765 143,280 30,795 0 0 0 25,921 68,641 143,280 6,870 77,511 0 75,354 106 446 0 2,051 656 1,395 0 0 0 1,395 .08 .08
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