-----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, OJ/UTvA4FG62MO1Q72NMky3dTzV9R+S1YJyZmFwcFRWnkTy8bm214jJElhB9hSno 24nl+bg+SXDUqIxG1ZAdGQ== /in/edgar/work/20000811/0001019687-00-001102/0001019687-00-001102.txt : 20000921 0001019687-00-001102.hdr.sgml : 20000921 ACCESSION NUMBER: 0001019687-00-001102 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FROZEN FOOD EXPRESS INDUSTRIES INC CENTRAL INDEX KEY: 0000039273 STANDARD INDUSTRIAL CLASSIFICATION: [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: 692965 BUSINESS ADDRESS: STREET 1: 1145 EMPIRE CENTRAL PLACE CITY: DALLAS STATE: TX ZIP: 75247 BUSINESS PHONE: 2146308090 10-Q 1 0001.txt FROZEN FOOD EXPRESS INDUSTRIES, INC. 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, 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) (214) 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 7, 2000, 16,316,000 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 - June 30, 2000 and December 31, 1999 2 Consolidated Statements of Income - Three and six months ended June 30, 2000 and 1999 3 Consolidated Condensed Statements of Cash Flows - Six months ended June 30, 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 4. Submission of Matters to Vote of Security Holders 10 Item 6. Exhibits and Reports on Form 8-K 11 Exhibit 27.1 - Financial Data Schedule 13 -1- FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Condensed Balance Sheets (In thousands) (Unaudited) June 30, Dec. 31, 2000 1999 -------- -------- ASSETS Current assets Cash $ 4,077 $ 1,613 Accounts receivable, net 47,361 52,312 Inventories 20,554 17,719 Tires 4,622 5,036 Other current assets 6,512 4,267 -------- -------- Total current assets 83,126 80,947 Property and equipment, net 67,200 73,640 Other assets 17,841 15,496 -------- -------- $168,167 $170,083 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 24,109 $ 24,797 Accrued claims 5,750 6,631 Accrued payroll 6,263 5,890 Short-term debt -- 26,500 Other 4,773 5,075 -------- -------- Total current liabilities 40,895 68,893 Long-term debt 24,000 -- Deferred federal income tax 2,754 2,795 Other and deferred credits 17,250 15,274 -------- -------- Total liabilities and deferred credits 84,899 86,962 -------- -------- Shareholders' equity Common stock 25,921 25,921 Paid-in capital 4,903 5,056 Retained earnings 59,589 59,399 -------- -------- 90,413 90,376 Less - Treasury stock 7,145 7,255 -------- -------- Total shareholders' equity 83,268 83,121 -------- -------- $168,167 $170,083 ======== ======== 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, ------------------------ ------------------------ 2000 1999 2000 1999 ---------- ---------- ---------- ---------- Revenue Freight revenue $ 81,033 $ 78,843 $ 157,924 $ 152,667 Non-freight revenue 18,966 17,975 34,491 32,408 ---------- ---------- ---------- ---------- 99,999 96,818 192,415 185,075 ---------- ---------- ---------- ---------- Costs and expenses Freight operating expenses Salaries, wages & related expenses 21,856 21,656 42,901 42,295 Purchased transportation 20,011 17,369 38,070 33,686 Supplies and expenses 22,653 21,756 44,259 41,273 Revenue equipment rent 6,328 6,419 12,581 12,889 Depreciation 2,888 2,918 5,895 5,614 Communications and utilities 1,183 816 2,355 1,732 Claims and insurance 3,841 4,401 7,220 7,463 Operating taxes and licenses 1,358 1,180 2,766 2,546 Gain on sale of equipment (705) (450) (1,020) (711) Miscellaneous expense 570 915 1,824 1,740 ---------- ---------- ---------- ---------- 79,983 76,980 156,851 148,527 Non-freight costs & operating expenses 18,112 17,262 33,402 31,537 ---------- ---------- ---------- ---------- 98,095 94,242 190,253 180,064 ---------- ---------- ---------- ---------- Income from operations 1,904 2,576 2,162 5,011 Interest and other expense, net 745 485 1,869 916 ---------- ---------- ---------- ---------- Income before income tax 1,159 2,091 293 4,095 Provision for income tax 406 774 103 1,515 ---------- ---------- ---------- ---------- Net income $ 753 $ 1,317 $ 190 $ 2,580 ========== ========== ========== ========== Net income per share of common stock Basic $ .05 $ .08 $ .01 $ .16 ========== ========== ========== ========== Diluted $ .05 $ .08 $ .01 $ .16 ========== ========== ========== ========== Weighted average shares outstanding Basic 16,321 16,334 16,320 16,386 ========== ========== ========== ========== Diluted 16,372 16,463 16,354 16,537 ========== ========== ========== ========== 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, 2000 1999 --------- --------- Net cash provided by(used in)operating activities $ 7,450 $(16,614) --------- --------- Cash flows from investing activities Expenditures for property and equipment (3,908) (22,325) Proceeds from sale of property and equipment 4,640 7,532 Company owned life insurance and other (3,175) (2,621) --------- --------- Net cash used in investing activities (2,443) (17,414) --------- --------- Cash flows from financing activities Borrowings under revolving credit agreement 17,000 37,000 Payments against revolving credit agreement (19,500) (2,000) Dividends paid -- (985) Net treasury stock activity (43) (1,575) --------- --------- Net cash (used in) provided by financing activities (2,543) 32,440 --------- --------- Net increase (decrease) in cash and cash equivalents 2,464 (1,588) Cash and cash equivalents at January 1 1,613 6,023 --------- --------- Cash and cash equivalents at June 30 $ 4,077 $ 4,435 ========= ========= See accompanying notes. -4- FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Condensed Financial Statements June 30, 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 28, 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 June 30, 2000 and December 31, 1999, respectively, there were 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: 2000 1999 ---- ---- For the three months ended June 30 51,000 129,000 For the six months ended June 30 34,000 151,000 -5- 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. Financial information for each reportable segment for the six-month periods ended June 30, 2000 and 1999 is as follows (in millions): 2000 1999 ---- ---- Freight Operations Total Revenue $157.9 $152.7 Operating Income 1.1 4.1 Total Assets 158.8 171.4 Non-Freight Operations Total Revenue $ 38.3 $ 39.2 Operating Income 1.1 0.9 Total Assets 38.4 38.8 Intercompany Eliminations Revenue $ (0.8) $ (6.8) Operating Income - - Assets (29.0) (23.7) Consolidated Revenue $195.4 $185.1 Operating Income 2.2 5.0 Assets 168.2 186.5 Intercompany elimination of revenue relates to transfers at cost of inventory such as trailers and refrigeration units from the non-freight segment for use by the freight segment. -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, 2000 and 1999.
Three Months Six Months Ended June 30, Ended June 30, -------------------- ----------------- 2000 1999 2000 1999 ---- ---- ---- ---- Salaries, wages and related expense 27.0% 27.5% 27.2% 27.7% Purchased transportation 24.7 22.0 24.1 22.1 Supplies and expenses 28.0 27.6 28.0 27.0 Revenue equipment rent 7.8 8.1 8.0 8.4 Depreciation 3.6 3.7 3.7 3.7 Claims and insurance 4.7 5.6 4.6 4.9 Other 2.9 3.1 3.7 3.5 ----- ----- ----- ----- Total freight operating expenses 98.7% 97.6% 99.3% 97.3% ===== ===== ===== =====
SECOND QUARTER OF 2000 VS. 1999 During the second quarter of 2000, revenue increased by 3.3% to $100.0 million with freight revenue up $2.2 million or 2.8%. Non-freight revenue aggregated 19.0% and 18.6% of total revenue during the second quarter of 2000 and 1999, respectively. Less-than-truckload (LTL) revenue was 5.2% higher and full-truckload revenue increased by 1.7% as compared to the same period of 1999. The increase in freight revenue resulted from significantly increased fuel adjustment revenue during the second quarter of 2000. During the second quarter of 2000, the company transported 6.3% more full-truckload shipments and 1.7% more LTL shipments than during the comparable 1999 quarter. Full-truckload average miles per shipment declined by 5.0% and during the 2000 second quarter. Total LTL hundredweight increased by 1.7% as compared to the second 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. Full-truckload activities, which contributed 69.4% and 70.1%, respectively, of freight revenue during the second 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 second quarter of 2000, the percent of freight revenue absorbed by salaries, wages and related expense was 27.0%, as compared to 27.5% during the year-ago quarter. This was due primarily to the reduced quantity of employee-driven, company-operated equipment. Conversely, purchased transportation expense as a percent of freight revenue rose from 22.0% in the second quarter of 1999 to 2000's 24.7%. -7- During the second quarter of 2000, the number of full-truckload trucks provided by independent contractors averaged approximately 540, as compared to approximately 460 during the comparable 1999 period. The impact of this increase was effectively offset by a reduction in the number of company-owned full-truckload tractors. Increased use of equipment provided by independent contractors also impacts other categories of operating expenses. An independent contractor is responsible for providing a truck together with all resources necessary for the operation of the truck. Accordingly, costs associated with labor, equipment rental or depreciation, fuel, maintenance and other such activities associated with independent contractors are not present in the various categories of operating expenses, but are reflected in purchased transportation expense. Costs associated with operating supplies and expenses rose by 4.1% between the two quarters. For the second quarters of 2000 and 1999, respectively, 41% and 35% of such costs were associated with fuel consumed by the company-operated fleet of trucks. Per-gallon fuel costs paid by the company rose by 41% during the second 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 of the company. With regard to fuel expenses for company-operated equipment, the company attempts to mitigate the effect of fluctuating fuel costs by purchasing more fuel-efficient tractors and aggressively managing fuel purchasing. Also, certain rates charged by the company for its service are adjustable by reference to market fuel prices. Relatively high or low per-gallon market 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 fell from 5.6% of freight revenue during the second quarter of 1999, to 4.7% for 2000. Claims against the company for vehicular accidents are the primary component of claims and insurance expense. These expenses tend to vary with miles traveled and changes in the mix between full-truckload versus LTL operations. Income from operations fell by $672,000 during the second quarter of 2000 as compared to 1999. Interest and other expense, net rose from $485,000 to $745,000 between the two quarters. Increased interest costs associated with borrowed funds and reduced interest income on invested funds were the principal factors affecting this net increase. The company earned pre-tax income of $1,159,000 during the second quarter of 2000 as compared to $2,091,000 during the comparable 1999 period. Due primarily to the reduced level of profitability, the provision for income tax was 35% of pre-tax income for the second quarter of 2000, as compared to 37% for 1999. -8- FIRST SIX MONTHS OF 2000 VS. 1999 For the six months ended June 30, 2000, revenue increased by 4%, but income from operations fell by 57%. Of the $7.3 million increase in total revenue, revenue generated by the company-operated, full-truckload fleet fell by $1.7 million, and full-truckload revenue generated by owner-operator provided equipment rose by $4.0 million, or 14.4%. LTL revenue rose by $2.9 million, and non-freight revenue increased by $2.1 million. For the first six months of 2000 and 1999, respectively, the combination of depreciation and revenue equipment rent expense was 11.7% and 12.1%, respectively. During the six months ended June 30, 2000 the company-operated fleet numbered an average of approximately 1,230 tractors, as compared to approximately 1,350 for the comparable 1999 period, a reduction of 9%. The dollar amount of revenue equipment rent and depreciation expense for the first six months of 2000 did not significantly decrease. Factors impacting this situation include but are not limited to (i) an increased proportion of leased equipment, (ii) a general increase in lessor rates of return imbedded in equipment leases and (iii) the replacement of less expensive (3 year old) tractors with more expensive (year model 2000) tractors. Equipment rentals include a component of interest expense which would be excluded from operating expense (but reported as non-operating interest expense) if the company had purchased rather than leased a particular asset. The company's equipment leases qualify as operating and not capital leases. The impact of such arrangements is to reduce operating income, but favorably impact pre-tax income and net income. LIQUIDITY AND CAPITAL RESOURCES On June 1, 2000, the company entered into a new $50 million credit agreement with a group of three banks. The new credit agreement is for a period of two years, but the company may elect to convert the outstanding balance into a term loan with quarterly amortization over 4 years following date of such an election. The new credit agreement is secured by qualified accounts receivable and certain inventories of the company. Also, the banks may elect to perfect liens against revenue equipment owned (but not leased) by the company. The new credit agreement amended and replaced an agreement that had been in place since 1992. Due to changes in the capital markets and other factors, the new credit agreement also imposes interest rate margins and commitment fees which are significantly higher than those the company had enjoyed since 1992. 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 long-term debt of $24 million as of June 30, 2000. The unused portion of the company's $50 million revolving credit facility was approximately $20 million. During the six months ended June 30, 2000, net cash provided by operating activities was $7.5 million. During the six months ended June 30, 1999, cash used in operating activities was $16.6 million. This change related to an improvement in the timing of accounts receivable collections and fluctuations in other components of working capital. -9- 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 June 30, 2000, working capital was $42.2 million as compared to $12.1 million at December 31, 1999. This change resulted primarily from the reclassification of debt from current to long-term liabilities. 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 June 30, 2000, debt stood at $24.0 million, which approximated fair market value. Also, as of June 30, 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 Item 4. Submission of Matters to Vote of Security Holders The Annual Meeting of Shareholders of the company was held on April 27, 2000. At the meeting, the following persons were elected as directors of the company: Stoney M. Stubbs, Jr. T. Michael O'Connor W. Mike Baggett Edgar O. Weller Brian R. Blackmarr Charles G. Robertson Leroy Hallman F. Dixon McElwee, Jr. The above listed individuals comprise all directors of the company. -10- Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27.1 Financial Data Schedule (b) The following reports on Form 8-K were filed during the quarter ended June 30, 2000: i) On June 9, 2000, the company filed a Form 8-K pertaining to a new credit agreement. ii) On June 28, 2000, the company filed a Form 8-K pertaining to: 1) the execution of change in control agreements between the company and certain key executives and; 2) an amendment approved by the company's board of directors whereby the number of directors is set as nine and the division of such directors is into three classes of three directors each. The terms of directors to be elected at the 2001 annual meeting will be 1, 2 or 3 years, depending upon the class in which each director belongs. -11- 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 11, 2000 By: /s/ Stoney M. Stubbs, Jr. -------------------------------- Stoney M. Stubbs, Jr. Chairman of the Board August 11, 2000 By: /s/F. Dixon McElwee, Jr. -------------------------------- F. Dixon McElwee, Jr. Senior Vice President Principal Financial and Accounting Officer -12- EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
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, 2000, AND THE CONSOLIDATED STATEMENTS OF INCOME, CASH FLOWS AND STOCKHOLDERS' EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 4,077 0 56,062 8,701 20,554 83,126 115,640 48,440 168,167 40,895 0 0 0 25,921 57,347 168,167 34,491 192,415 33,402 190,253 740 1,415 1,129 293 103 190 0 0 0 190 .01 .01
-----END PRIVACY-ENHANCED MESSAGE-----