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, 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
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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 11, 2000, 16,329,000 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 -
March 31, 2000 and December 31, 1999 2
Consolidated Statements of Income -
Three months ended March 31, 2000 and 1999 3
Consolidated Condensed Statements of Cash
Flows -
Three months ended March 31, 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 6. Exhibits and Reports on Form 8-K 11
Exhibit 27.1 - Financial Data Schedule 13
FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(In thousands)
(Unaudited)
Mar. 31, Dec. 31,
2000 1999
Assets ------ ------
Current assets
Cash $ 2,985 $ 1,613
Accounts receivable, net 51,488 52,312
Inventories 17,168 17,719
Tires 4,755 5,036
Deferred federal income tax 253 289
Other current assets 3,960 3,978
------- -------
Total current assets 80,609 80,947
Property and equipment, net 70,116 73,640
Other assets 14,770 15,496
------- -------
$165,495 $170,083
======= =======
Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable $ 21,428 $ 24,797
Accrued claims liabilities 5,544 6,631
Accrued payroll 6,293 5,890
Short-term debt 24,500 26,500
Other 6,441 5,075
------- -------
Total current liabilities 64,206 68,893
Deferred federal income tax 2,456 2,795
Other and deferred credits 16,356 15,274
------- -------
Total liabilities and deferred 83,018 86,962
credits ------- -------
Shareholders' equity
Common stock 25,921 25,921
Paid-in capital 4,975 5,056
Retained earnings 58,836 59,399
------- -------
89,732 90,376
Less - Treasury stock 7,255 7,255
------- -------
Total shareholders' equity 82,477 83,121
------- -------
$165,495 $170,083
======= =======
See accompanying notes.
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,
------------------
2000 1999
------ ------
Revenue
Freight revenue $76,891 $ 73,824
Non-freight revenue 15,525 14,433
------ ------
92,416 88,257
------ ------
Costs and expenses
Freight operating expenses
Salaries, wages and related 21,045 20,639
expenses
Purchased transportation 18,059 16,317
Supplies and expenses 21,606 19,517
Revenue equipment rent 6,253 6,470
Depreciation 3,007 2,696
Communications and utilities 1,172 916
Claims and insurance 3,379 3,062
Operating taxes and licenses 1,408 1,366
Gain on sale of equipment (316) (261)
Miscellaneous expense 1,255 825
------ ------
76,868 71,547
Non-freight costs and operating 15,290 14,275
expenses ------ ------
92,158 85,822
------ ------
Income from operations 258 2,435
Interest and other expense, net 1,124 431
------ ------
(Loss)income before income tax (866) 2,004
Income tax (benefit) provision (303) 741
------ ------
Net (loss) income $ (563) $ 1,263
====== ======
Net (loss) income per share of common stock
Basic $ (.03) $ .08
====== ======
Diluted $ (.03) $ .08
====== ======
Weighted average shares outstanding
Basic 16,321 16,439
====== ======
Diluted 16,321 16,610
====== ======
See accompanying notes.
FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
For the Three Months
Ended March 31,
---------------
2000 1999
------ ------
Net cash provided by (used in) operating $ 2,575 $(9,857)
activities ------ -------
Cash flows from investing activities
Expenditures for property and equipment (1,313) (4,642)
Proceeds from sale of property and 2,134 1,170
equipment
Company owned life insurance and other (706) 57
------ ------
Net cash provided by (used in) investing 878 (4,178)
activities ------ -------
Cash flows from financing activities
Borrowings under revolving credit agreement 7,000 19,000
Payments against revolving credit agreement (9,000) (6,000)
Dividends paid - (494)
Net treasury stock activity (81) (1,148)
------- -------
Net cash (used in) provided by financing (2,081) 11,358
activities ------- -------
Net increase (decrease) in cash and cash 1,372 (2,677)
equivalents
Cash and cash equivalents at January 1 1,613 6,023
------- -------
Cash and cash equivalents at March 31 $ 2,985 $ 3,346
======= =======
See accompanying notes.
FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
March 31, 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 30, 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 March 31, 2000 and December 31, 1999, respectively, there
were 16,314,000 and 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 (in thousands):
2000 1999
----- -----
For the three months ended March 31 - 171
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.
Following is information for each reportable segment for the
three month periods ended March 31, 2000 and 1999 is as follows
(in millions):
March 31,
2000 1999
----- -----
Freight Operations
Total Revenue $ 76.9 $ 73.8
Operating Income - 2.3
Total Assets 156.8 145.7
Non-Freight Operations
Total Revenue $ 15.8 $ 18.1
Operating Income .2 .1
Total Assets 33.5 31.7
Intercompany Eliminations
Revenue $ (.3) $ (3.6)
Operating Income .1 -
Assets (24.8) (19.7)
Consolidated
Revenue $ 92.4 $ 88.3
Operating Income .3 2.4
Assets 165.5 157.7
Intercompany elimination of revenue relate to transfers at cost
of inventory such as trailers and refrigeration units from the
non-freight segment for use by the freight segment.
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-month periods ended March
31, 2000 and 1999.
Three Months
Ended March. 31,
----------------
2000 1999
----- ----
Salaries, wages and related 27.4% 28.0%
expense
Purchased transportation 23.5 22.1
Supplies and expenses 28.1 26.4
Revenue equipment rent 8.1 8.8
Depreciation 3.9 3.7
Claims and insurance 4.4 4.1
Other 4.6 3.8
----- ----
Total freight operating expenses 100.0% 96.9%
===== ====
First Quarter of 2000 vs. 1999
During the first quarter of 2000, revenue increased by 4.7% to
$92.4 million with freight revenue up $3.1 million or 4.2%. Non-
freight revenue aggregated 16.8% and 16.4% of total revenue
during the first three months of 2000 and 1999, respectively.
Less-than-truckload (LTL) revenue was 7.7% higher and full-
truckload revenue increased by 2.6% as compared to the same
period of 1999.
Approximately 67% of the increase in full-truckload revenue and
35% of the increase in LTL revenue resulted from significantly
increased fuel adjustment revenue during the first quarter of
2000. Other factors impacting the increase in freight revenue
were increased volumes of 10% for full-truckload shipments and 8%
for LTL shipments.
During the 2000 first quarter, total LTL hundredweight increased
by 8.1% as compared to the first 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.
The number of tractors in the fleet of company-operated, full-
truckload equipment fell from approximately 1,150 at the
beginning of 2000 to about 1,130 by the end of the first quarter.
The number of full-truckload tractors provided by owner-operators
increased by about 75 to about 550.
Full-truckload activities, which contributed 70% of freight
revenue during the first 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 first quarter of 2000, the percent of freight revenue
absorbed by salaries, wages and related expense was 27.4%, as
compared to 28% during the year-ago quarter, due primarily to the
reduced quantity of employee-driven, company-operated equipment.
Conversely, purchased transportation expense as a percent of
freight revenue rose from 22.1% in the first quarter of 1999 to
2000's 23.5%.
Per-gallon fuel costs paid by the company increased by 53% during
the first 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 to the company. With regard to fuel expenses for company-
operated equipment, the company attempts to mitigate the impact
of fluctuating fuel costs by purchasing more fuel-efficient
tractors and aggressively managing fuel purchasing. Also,
certain rates charged by the company for its services are
adjustable by reference to fuel prices. Relatively high or low
per-gallon 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 rose from 4.1% of freight revenue
during the first quarter of 1999, to 4.4% for 2000. The increase
resulted from a variety of factors, including but not limited to
an increase in the frequency of physical damage losses.
Income from operations fell by $2.2 million during the first
quarter of 2000 as compared to 1999.
Interest and other expense, net rose from $431,000 to $1,124,000
between the two quarters. Increased interest costs associated
with borrowing funds was the principal factor affecting this
increase.
The company incurred a pre-tax loss of $866,000 during the first
quarter of 2000 as compared to a pre-tax profit of $2,004,000
during the comparable 1999 period.
The provision for income tax was 35% of pre-tax income for the
first quarter of 2000, as compared to 37% for 1999.
LIQUIDITY AND CAPITAL RESOURCES
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 short-term debt of $24.5 million as
of March 31, 2000. The unused portion of the company's $50
million revolving credit facility was approximately $20 million.
During the first quarter of 2000, the company continued to
negotiate for a credit facility to replace the existing credit
facility, which expires on June 1, 2000. As previously
disclosed, the expiring credit facility has three participating
banks, one of which has elected not to participate in a proposed
replacement credit facility. On April 28,2000, the company
received confirmation from another major bank that it is willing
to replace the bank which declined to participate in the credit
facility. On May 11, 2000, the company and the agent bank
executed a term sheet outlining the structure of the proposed
replacement credit facility, which the company expects to enter
into prior to June 1,2000. There can be no assurance, however,
that such a facility will be in place by June 1, 2000.
Accordingly, the company is considering alternative strategies
that would accommodate the company's financial requirements
beyond June 1, 2000.
During the three months ended March 31, 2000, net cash provided
by operating activities was $2.6 million. During the three months
ended March 31, 1999, cash used in operating activities was $9.9
million. This change related to the timing of certain payments to
vendors during the quarters and fluctuations in other components
of working capital.
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 March 31, 2000,
working capital was $16.4 million as compared to $12.1 million at
December 31, 1999.
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 March 31, 2000, debt stood at $24.5 million, which
approximated fair market value. Also, as of March 31, 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
Items 1 through 5 of Part II are omitted due to a lack of updated
information to disclose pursuant to said items.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
No reports on Form 8-K were filed during the quarter ended March
31, 2000.
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, 2000 By: /s/Stoney M. Stubbs, Jr.
------------------------
Stoney M. Stubbs, Jr.
Chairman of the Board
May 12, 2000 By: /s/F. Dixon McElwee, Jr.
------------------------
F. Dixon McElwee, Jr.
Senior Vice President
Principal Financial and
Accounting Officer
<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, 2000, AND THE CONSOLIDATED STATEMENTS OF INCOME,
CASH FLOWS AND STOCKHOLDERS' EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2000,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,985
<SECURITIES> 0
<RECEIVABLES> 58,674
<ALLOWANCES> 8,815
<INVENTORY> 17,168
<CURRENT-ASSETS> 80,609
<PP&E> 117,919
<DEPRECIATION> 47,803
<TOTAL-ASSETS> 165,495
<CURRENT-LIABILITIES> 64,206
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0
0
<COMMON> 25,921
<OTHER-SE> 56,556
<TOTAL-LIABILITY-AND-EQUITY> 165,495
<SALES> 15,525
<TOTAL-REVENUES> 92,416
<CGS> 76,868
<TOTAL-COSTS> 92,158
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<LOSS-PROVISION> 719
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<INCOME-PRETAX> (866)
<INCOME-TAX> (303)
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