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, 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
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1145 Empire Central Place Dallas, Texas 75247-4309
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(Address of principal executive offices) (Zip Code)
(2l4) 630-8090
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(Registrant's telephone number, including area code)
None
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(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 5, 1997, 16,689,000 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, 1997 and December 31, 1996 2
Consolidated Statements of Income -
Three months ended March 31, 1997 and 1996 3
Consolidated Condensed Statements of Cash Flows -
Three months ended March 31, 1997 and 1996 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
</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,
1997 1996
-------- --------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 1,020 $ 6,670
Accounts receivable, net 44,433 39,464
Inventories 7,807 8,440
Tires on equipment in use 5,233 5,517
Other current assets 5,737 5,395
------- -------
Total current assets 64,230 65,486
Property and equipment, net 58,529 51,880
Other assets 12,483 12,188
------- -------
$135,242 $129,554
======= =======
Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable $ 10,392 $ 13,997
Accrued claims liabilities 6,295 6,887
Accrued payroll 3,044 4,950
Other 6,433 5,490
------- -------
Total current liabilities 26,164 31,324
Long-term debt 9,000 --
Deferred credits and non-current liabilities 14,700 14,277
------- -------
Total liabilities and deferred credits 49,864 45,601
------- -------
Shareholders' equity
Common stock 25,921 25,921
Paid-in capital 3,765 3,462
Retained earnings 58,257 57,386
------- -------
87,943 86,769
Less - Treasury stock 2,565 2,816
------- -------
Total shareholders' equity 85,378 83,953
------- -------
$135,242 $129,554
======= =======
</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,
-----------------------
1997 1996
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<S> <C> <C>
Revenue
Freight revenue $67,826 $67,809
Non-freight revenue 4,860 6,364
------ ------
72,686 74,173
------ ------
Operating Expenses
Freight operating expenses
Salaries, wages and related expenses 16,517 17,227
Purchased transportation 15,924 15,752
Supplies and expenses 19,069 19,190
Revenue equipment rent 5,612 4,836
Communications and utilities 833 867
Insurance and claims 2,925 3,428
Depreciation 2,432 2,511
Operating taxes and licenses 1,193 1,281
Gain on sale of equipment (552) (168)
Miscellaneous expense 811 644
------ ------
64,764 65,568
Non-freight costs and operating expenses 4,974 6,262
------ ------
69,738 71,830
------ ------
Income from operations 2,948 2,343
Interest and other expense 978 582
------ ------
Income before income tax 1,970 1,761
Provision for income tax 599 411
------ ------
Net income $ 1,371 $ 1,350
====== ======
Net income per share of common stock
Primary and fully diluted $ .08 $ .08
====== ======
Weighted average fully diluted shares 16,672 16,835
====== ======
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>
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
-------------------------
1997 1996
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<S> <C> <C>
Net cash used in operating activities $ (5,176) $(1,564)
------- ------
Cash flows from investing activities
Expenditures for property and equipment (10,615) (2,652)
Proceeds from sale of property and equipment 1,800 400
Company owned life insurance and other (466) (876)
------- ------
Net cash used in investing activities (9,281) (3,128)
------- ------
Cash flows from financing activities
Borrowings under revolving credit agreement 10,000 8,000
Payments against revolving credit agreement (1,000) (6,000)
Dividends paid (500) (492)
Net treasury stock activity 307 468
------- ------
Net cash provided by financing activities 8,807 1,976
------- ------
Net decrease in cash and cash equivalents (5,650) (2,716)
Cash and cash equivalents at beginning of year 6,670 7,480
------- ------
Cash and cash equivalents at end of quarter $ 1,020 $ 4,764
======= ======
</TABLE>
See accompanying notes.
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<PAGE>
FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
March 31, 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 three months ended March 31, 1997 and 1996, the company funded
contributions to its Employee Savings Plan by transferring 27,052 and 25,005
shares, respectively, of treasury stock to the Plan trustee. The fair market
value of the transferred shares was approximately $250,000 for 1997 and
approximately $225,000 for 1996.
3. SHAREHOLDERS' EQUITY
As of March 31, 1997 and 1996, respectively, there were 16,705,000 and
16,376,000 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-
<PAGE>
5. EARNINGS PER SHARE
The company intends to adopt Financial Accounting Standard No. 128, "Earnings
Per Share" (FAS 128) effective December 15, 1997. 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 the
company adopted FAS No. 128 for the quarter ended March 31, 1997, there would
have been no impact on reported earnings per share.
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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, 1997 and 1996.
<TABLE>
<CAPTION>
Three Months
Ended March 31,
-------------------
1997 1996
---- ----
<S> <C> <C>
Salaries, wages and related expenses 24.4% 25.4%
Purchased transportation 23.5 23.2
Supplies and expenses 28.1 28.3
Revenue equipment rent 8.3 7.1
Insurance and claims 4.3 5.1
Depreciation 3.6 3.7
Other 3.3 3.9
---- ----
Total freight operating expenses 95.5% 96.7%
==== ====
During the first quarter of 1997, revenue fell by 2.0% to $72,685,000 with
freight revenue up $17,000 and non-freight revenue down $1.5 million. Less-
than-truckload (LTL) revenue was 1.9% higher while full-truckload revenue
declined by less than 1% as compared to the same period of 1996.
During the first three months of 1997 freight revenue included fuel adjustment
charges, the amount of which was negligible during the 1996 quarter. These
charges, which are triggered by increases in the market price of fuel, are the
primary cause of 1997's slightly higher revenue.
The 1997 decline in non-freight revenue was primarily attributable to an
unusually large sale of trailer refrigeration units which occurred during the
first quarter of 1996.
During the first quarter of 1997 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. In addition, higher diesel fuel prices during the
1997 first quarter increased the company's per-gallon fuel costs by almost 7%
over 1996's first quarter. During the 1997 quarter, the higher cost of fuel
was only partially offset by increased revenue from fuel adjustment charges.
Severe winter weather in the midwest and northeast also slowed operations
during the first quarter.
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<PAGE>
The industry oversupply of refrigerated trucks, higher fuel costs and severe
winter weather were the primary factors which adversely impacted operating
results during the first quarters of 1997 and 1996 as net income for the first
three months of 1997 was almost equal to that for the same period of 1996 which
was $436,000 less than the same quarter of 1995.
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 1,135
by the end of the quarter, while the number of full-truckload tractors provided
by owner-operators decreased by about 30 units to a total of about 400 by
quarter end.
Full-truckload activities, which contributed 68% of freight revenue during both
first quarters 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 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.
During the first quarter of 1997, the percentage of freight revenue absorbed by
salaries, wages and related expenses was 24.4%, as compared to 25.4% during the
year-ago quarter. Conversely, the portion of freight revenue absorbed by
purchased transportation, which consists principally of payments to owner-
operators, rose from 23.2% in 1996 to 23.5% in 1997.
Insurance and claims expenses fell from 5.1% to 4.3% of freight revenue between
the first quarters of 1996 and 1997 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 7.1% to 8.3% of freight revenue while
depreciation expense declined from 3.7% to 3.6% 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 rose from $168,000 to $552,000 between the quarters. The volume of
owned equipment dispositions tends to vary between quarters.
Income from operations rose by 26% during the first quarter of 1997.
Interest and other expense rose from $582,000 to $978,000 between the two
quarters. This increase is related to increased borrowings during the 1997
quarter to finance capital expenditures and working capital and to an increase
in borrowings during the 1997 quarter to finance capital expenditures and
working capital and to an increase in net expenses associated with the company-
owned life insurance (COLI) program.
Pre-tax income rose by 12% during the first quarter of 1997.
The provision for income tax was 30.4% of pre-tax income for the first quarter
of 1997, as compared to 23.3% for 1996. The lower 1996 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. The increased 1997 tax
provision resulted primarily from the impact of recent legislation which limits
deductibility of interest expenses associated with COLI programs.
-8-
<PAGE>
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, 1997,
working capital was $38.1 million as compared to $34.2 million at December 31,
1996.
During the first quarter of 1997, net cash used in operating activities was
$5,176,000, as compared to $1,564,000 in the same period of 1996. The
increased consumption of cash was related primarily to increased working
capital requirements.
As of March 31, 1997, the unused portion of the company's $50,000,000 revolving
credit facility totaled approximately $36,000,000. This availability was
approximately $45,000,000 at December 31, 1996.
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<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, 1997.
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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 12, 1997 By: /s/Stoney M. Stubbs, Jr.
------------------------------------------
Stoney M. Stubbs, Jr.
Chairman of the Board
May 12, 1997 By: /s/Burl G. Cott
------------------------------------------
Burl G. Cott
Senior Vice President
Principal Financial and Accounting Officer
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</TABLE>
<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, 1997, AND THE CONSOLIDATED STATEMENTS OF INCOME
AND CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1997, 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-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,020
<SECURITIES> 0
<RECEIVABLES> 39,811
<ALLOWANCES> 2,540
<INVENTORY> 7,807
<CURRENT-ASSETS> 64,230
<PP&E> 104,783
<DEPRECIATION> 46,254
<TOTAL-ASSETS> 135,242
<CURRENT-LIABILITIES> 26,164
<BONDS> 0
0
0
<COMMON> 25,921
<OTHER-SE> 59,457
<TOTAL-LIABILITY-AND-EQUITY> 135,242
<SALES> 4,860
<TOTAL-REVENUES> 72,686
<CGS> 0
<TOTAL-COSTS> 69,738
<OTHER-EXPENSES> 978
<LOSS-PROVISION> 576
<INTEREST-EXPENSE> 140
<INCOME-PRETAX> 1,970
<INCOME-TAX> 599
<INCOME-CONTINUING> 1,371
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,371
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
