<PAGE>
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, 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 May 10, 1996, 16,446,695 shares of the Registrant's Common Stock, $1.50
par value, were outstanding.
<PAGE>
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Page No.
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<S> <C> <C>
Item l. Financial Statements
Consolidated Condensed Balance Sheets -
March 31, 1996 and December 31, 1995 2
Consolidated Statements of Income -
Three months ended March 31, 1996 and 1995 3
Consolidated Condensed Statements of Cash Flows -
Three months ended March 31, 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
</TABLE>
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<PAGE>
FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
March 31, Dec. 31,
1996 1995
--------- --------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 4,764 $ 7,480
Accounts receivable, net 39,558 37,093
Inventories 8,832 8,221
Tires 5,252 5,217
Other 4,208 3,636
------- -------
Total current assets 62,614 61,647
Property and equipment, net 52,164 52,430
Other assets 10,922 9,585
------- -------
$125,700 $123,662
======= =======
Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable $ 16,781 $ 17,529
Accrued claims liabilities 8,262 8,401
Accrued payroll 4,654 4,679
Other 4,381 6,014
------- -------
Total current liabilities 34,078 36,623
Long-term debt 2,000 --
Deferred credits and non-current liabilities 13,069 12,018
------- -------
Total liabilities and deferred credits 49,147 48,641
------- -------
Shareholders' equity
Common stock 25,921 25,921
Paid-in capital 2,052 1,992
Retained earnings 51,688 50,830
------- -------
79,661 78,743
Less - Treasury stock 3,108 3,722
------- -------
Total shareholders' equity 76,553 75,021
------- -------
$125,700 $123,662
======= =======
</TABLE>
See accompanying notes.
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<PAGE>
FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands, except per-share amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
-----------------------
1996 1995
------- -------
<S> <C> <C>
Revenue
Freight revenue $67,809 $62,042
Non-freight revenue 6,364 4,936
------ ------
74,173 66,978
------ ------
Operating Expenses
Freight operating expenses
Salaries, wages and related expenses 17,227 16,358
Purchased transportation 15,752 12,950
Supplies and expenses 19,190 17,250
Revenue equipment rent 4,836 4,253
Communications and utilities 867 897
Insurance and claims 3,428 3,262
Depreciation 2,511 2,692
Operating taxes and licenses 1,281 1,233
Gain on sale of equipment (168) (163)
Miscellaneous expense 644 617
------ ------
65,568 59,349
Non-freight costs and operating expenses 6,262 4,656
------ ------
71,830 64,005
------ ------
Income from operations 2,343 2,973
Interest and other expense (582) (380)
------ ------
Income before income tax 1,761 2,593
Provision for income tax 411 807
------ ------
Net income $ 1,350 $ 1,786
====== ======
Net income per share of common stock
Primary and fully diluted $ .08 $ .11
====== ======
Weighted average fully diluted shares 16,835 16,625
====== ======
</TABLE>
See accompanying notes.
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<PAGE>
FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
Net cash (used in) provided by operating activities $(1,564) $ 2,564
------ -------
Cash flows from investing activities
Business dispositions -- 1,925
Expenditures for property and equipment (2,652) (4,673)
Proceeds from sale of property and equipment 400 822
Company owned life insurance and other (876) (45)
------ -------
Net cash used in investing activities (3,128) (1,971)
------ -------
Cash flows from financing activities
Borrowings under revolving credit agreement 8,000 12,000
Payments against revolving credit agreement (6,000) (14,000)
Dividends paid (492) (479)
Net treasury stock activity 468 191
------ -------
Net cash provided by (used in) financing activities 1,976 (2,288)
------ -------
Net decrease in cash and cash equivalents (2,716) (1,695)
Cash and cash equivalents at beginning of year 7,480 4,381
------ -------
Cash and cash equivalents at end of quarter $ 4,764 $ 2,686
====== =======
</TABLE>
See accompanying notes.
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<PAGE>
FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
March 31, 1996 and 1995
(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 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 three months ended March 31, 1996 and 1995, the company funded
contributions to its Employee Savings Plan by transferring 25,005 and 16,360
shares, respectively, of treasury stock to the Plan trustee. The fair market
value of the transferred shares was approximately $225,000 for 1996 and
approximately $204,000 for 1995.
3. SHAREHOLDERS' EQUITY
As of March 31, 1996 and 1995, respectively, there were 16,376,000 and
16,045,000 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.
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<PAGE>
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, 1996 and 1995.
<TABLE>
<CAPTION>
Three Months
Ended March 31,
----------------
1996 1995
---- ----
<S> <C> <C>
Salaries, wages and related expenses 25.4% 26.4%
Purchased transportation 23.2 20.9
Supplies and expenses 28.3 27.8
Revenue equipment rent 7.1 6.9
Insurance and claims 5.1 5.3
Depreciation 3.7 4.3
Other 3.9 4.1
---- ----
Total freight operating expenses 96.7% 95.7%
==== ====
</TABLE>
During the first quarter of 1996, revenue increased by 10.7% to $74,173,000
with freight revenue up $5.7 million or 9.3% and non-freight revenue up $1.4
million or about 28.9%. Less-than-truckload (LTL) revenue was 5% higher while
full-truckload revenue increased by 11.4% as compared to the same period of
1995.
Increases in the number of shipments transported and in the average revenue
per shipment combined to increase LTL revenue while the increase in full-
truckload revenue resulted primarily from a 10% increase in the number of
shipments transported, partially offset by a decline of about 2% in the
revenue per mile.
During the first quarter of 1996 available trucking capacity exceeded the
demand for motor carrier transportation services. This industry-wide
oversupply of trucks, which also existed during most of 1995, decreased
utilization and productivity and placed downward pressure on full-truckload
freight rates. In addition, a rise in diesel fuel prices during the 1996
first quarter increased the company's per-mile fuel costs by about 12 percent
over 1995's first quarter. Severe winter weather in the midwest and northeast
also slowed operations during the first quarter.
The oversupply of trucks, higher fuel costs and severe winter weather were the
primary factors which adversely impacted operating results during the 1996
first quarter as net income declined by $436,000 or 24% from the same quarter
of 1995 despite an increase in revenue of 10.7%
The number of tractors in the fleet of company-operated, full-truckload
equipment rose from approximately 1,060 at the beginning of 1996 to about
1,080 by the end of the quarter, while the number of full-truckload tractors
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<PAGE>
provided by owner-operators increased by about 25 units to a total of about
430 by quarter end.
Full-truckload activities, which contributed 68% and 67% of freight revenue
during the first quarter 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 fluctuations in the amount of total freight handled on 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.
During the first quarter of 1996, the percentage of freight revenue absorbed
by salaries, wages and related expenses was 25.4%, as compared to 26.4% during
the year-ago quarter. Conversely, the portion of freight revenue absorbed by
purchased transportation, which consists principally of payment to owner-
operators, rose from 20.9% in 1995 to 23.2% 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.
Supplies and expenses, which includes the cost of fuel consumed by the company-
operated fleet rose during the 1996 quarter to 28.3% of freight revenue from
27.8% for 1995's first quarter. During the first quarter of 1996, fuel prices
rose rapidly, resulting in 12% increase in the company's per-mile fuel cost.
This increase in per-mile fuel cost together with the 2% decline in full-
truckload revenue per mile resulted in a significant increase in the percent
of revenue absorbed by fuel expense.
Revenue equipment rent, which is primarily related to the company-operated,
full-truckload fleet, rose from 6.9% to 7.1% of freight revenue while
depreciation expense declined from 4.3% to 3.7% 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.
Interest and other expense rose from $380,000 to $582,000 between the two
quarters. This increase is related to net expenses associated with the company-
owned life insurance (COLI) program, partially offset by lower interest
expense associated with reduced borrowings under the company's line of credit.
The provision for income tax was 23.3% of pre-tax income for the first quarter
of 1996, as compared to 31.1% for 1995. This reduced effective income tax
rate is primarily attributable to permanent tax savings resulting from the
COLI program. The amount of the tax reduction exceeds the aforementioned net
COLI expenses included in interest and other expenses.
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, 1996,
working capital was $28.5 million as compared to $25.0 million at December 31,
1995.
During the first quarter of 1996, net cash used in operating activities was
$1,564,000, as compared to cash provided by operating activities of $2,564,000
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<PAGE>
in the same period of 1995. The increased consumption of cash was related
primarily to increased working capital requirements.
As of March 31, 1996, the unused portion of the company's $50,000,000
revolving credit facility totaled approximately $41,000,000. This
availability was approximately $43,000,000 at December 31, 1995.
-8-
<PAGE>
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,
1996.
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<PAGE>
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 10, 1996 By: /s/Stoney M. Stubbs, Jr.
-------------------------------------------
Stoney M. Stubbs, Jr.
Chairman of the Board
May 10, 1996 By: /s/Burl G. Cott
-------------------------------------------
Burl G. Cott
Senior Vice President
Principal Financial and Accounting Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS OF FROZEN FOOD EXPRESS INDUSTRIES, INC. AND
SUBSIDIARIES AS OF MARCH 31, 1996, AND THE CONSOLIDATED STATEMENTS OF INCOME AND
CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1996, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 4,764
<SECURITIES> 0
<RECEIVABLES> 41,273
<ALLOWANCES> 1,715
<INVENTORY> 8,832
<CURRENT-ASSETS> 62,614
<PP&E> 100,888
<DEPRECIATION> 48,724
<TOTAL-ASSETS> 125,700
<CURRENT-LIABILITIES> 34,078
<BONDS> 0
0
0
<COMMON> 25,921
<OTHER-SE> 50,632
<TOTAL-LIABILITY-AND-EQUITY> 125,700
<SALES> 6,364
<TOTAL-REVENUES> 74,173
<CGS> 0
<TOTAL-COSTS> 71,830
<OTHER-EXPENSES> 582
<LOSS-PROVISION> 478
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,761
<INCOME-TAX> 411
<INCOME-CONTINUING> 1,350
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,350
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
