Frozen Food Express Industries today, Aug. 1, announced its financial and operating results for the three-month and six-month periods ended June 30. “At first glance, the fact is that our operating results were down substantially from those for the first half of 2005,” said Stoney M. “Mit” Stubbs Jr., president and chief executive officer of Dallas-based FFE.
“We previously said that 2005 was going to be a tough act to follow, because certain events skewed the comparison between 2006 and 2005,” Stubbs said. “In the first half of last year, we had a $3.8 million pre-tax gain from the sale of a life insurance investment. In the first half of this year, we had $2.1 million in pre-tax expense from an investigation by our audit committee regarding certain billing practices and other operational issues. These two unusual events cloud the results of our normal operations.”
For the six months ended June 30, total revenue increased by 3.3 percent to $252.9 million from $244.7 million for the first half of 2005. Total revenue during the first six months included fuel surcharge revenue of $37.2 million, compared to $24.8 million during the comparable period of 2005. Total revenue for the six months ended June 30 included $2.1 million from disaster relief efforts.
Operating income for the six months ended June 30 decreased to $6.8 million from $11.7 million for the comparable period of 2005. The company said the effect of the investigation on the last six months of 2006 and beyond is not expected to be significant, as the investigation concluded during the second quarter of 2006. Lower gains on sale of equipment also served to increase net freight operating expenses by $1 million during the first six months of 2006 as compared to the same period of 2005. Net income for the six months ended June 30 was $4 million as compared to $9.1 million during the comparable period of 2005.
For the quarter ended June 30, total revenue was $126.8 million, as compared to $126.7 million during the same quarter of 2005. Second-quarter total revenue included fuel surcharge revenue of $20.2 million, compared to $14 million for the same quarter of 2005. Also included in second-quarter total revenue was $400,000 from disaster relief efforts in the aftermath of hurricanes Katrina and Rita.
Income from operations for the second quarter was $3.5 million, which declined from $6 million during the second quarter of 2005. Second-quarter operating expenses include $.9 million for professional fees and other expenses related to the audit committee investigation. Second-quarter 2005 interest and other income included the gain associated with the sale of the life insurance investment. Second-quarter pre-tax income decreased to $3.8 million from $9.5 million for the second quarter of 2005. Net income for the second quarter decreased to $2.1 million from $5.8 million for the second quarter of 2005.
“The company has initiated programs designed to do more with what we’ve got,” Stubbs says. “Just 6 percent of the company’s full-year 2005 revenue was generated by its intermodal operations. You put a loaded trailer on a railroad flatcar, and suddenly it’s like you’ve got another tractor and driver.” FFEX has brought in new leadership for its intermodal operation. “We expect to see an increase in intermodal revenue during the second half of this year,” Stubbs said.
Stubbs said the company is revising its LTL schedules with the aim of having more shipments per LTL truck. “We make pickup and deliveries in about 6,500 cities and towns,” he said. “To improve our efficiencies, we might lengthen the time between scheduled runs or eliminate a run altogether.” Stubbs also said that the company’s billing practices have been improved and that the company is beginning to streamline some of the back-office functions to improve operational effectiveness. “Our new chief operating officer and chief financial officer have only been on the case for about a month and a half. They’ve already begun to implement some of the changes that I’ve been looking for. I’m just going to continue to let them run and gun.”