Frozen Food Express Industries on Thursday, April 26, announced its financial and operating results for the three-month period ending March 31. FFEX incurred a net loss from continuing operations of $233,000 as compared to net income from continuing operations of $2.1 million during the same quarter of 2006. During 2006, FFEX incurred a loss from discontinued operations of $145,000.
For the quarter, revenue was $106.5 million, as compared to $123.6 million during the same quarter of 2006. Excluding fuel surcharge, revenue declined 13.9 percent, to $91.8 million from $106.6 million of the first quarter of 2006. Of this decline, $1.7 million related to trailer rental from disaster-relief efforts associated with the aftermath of hurricanes Katrina and Rita during the 2006 quarter. There was no such revenue during the 2007 period. Revenue from freight brokerage operations increased by 6.9 percent to $3.1 million as compared to $2.9 million for the first quarter of 2006.
“Our financial results for the first quarter of 2007 are not surprising, as we anticipated lower utilization levels in a buyer’s market for over-the-road freight transportation services,” said Stoney M. Stubbs, president and chief executive officer of Dallas-based FFEX. “Our full-truckload services generated nearly 15 percent fewer linehaul loaded miles on relatively flat pricing. Utilization was also negatively impacted, as our average length of haul was 38 miles less than it was at this point last year. Also, some of our direct operating costs were up from the same period last year.”
Stubbs said that during the second quarter of 2006, FFEX began to change its employee-driver compensation programs and the arrangements it has with its full-truckload independent contractor fleets. “As a result, driver wages and certain costs associated with purchased transportation on a percent of revenue basis, net of fuel surcharge, were higher in the first quarter of 2007 as compared to the same quarter of 2006,” Stubbs said. “The rising costs of diesel fuel throughout the first quarter of 2007 also contributed towards an increase in costs. On a positive note and as history tells us, there were favorable volume indicators in the later part of the quarter, which is a sign that shipper’s inventory levels are starting to neutralize the effects of extra capacity in our niche as we head into the warmer months of the year.”
Regarding the company’s LTL operation, FFEX was able to counteract the impact of lower freight volumes through more effective use of yield management techniques, Stubbs said. “Tonnage was down 2 percent, as was the number of LTL shipments,” he said. “However, our tonnage on a per-truck basis remained the same as during the first quarter of 2006. We adjusted our pricing in the short run, generating enough demand to make a positive contribution on equipment and some fixed overhead costs. As a result, revenue per hundredweight decreased by 4 percent to $14.81 from $15.43 during the same quarter of last year. We believe that as freight volumes pick up over the balance of the year, we will be able to work with our customers to increase pricing levels. These plans are under way, and we should see the effects in the second quarter.”
Stubbs said FFEX was encouraged by the results coming from its brokerage operation. “Our three-year strategy calls for expansion of our core business through building agent and brokerage relationships that will enhance our nonasset-based business,” Stubbs said. “Our brokerage operation for the quarter outperformed expectations, both at the top-line and net margin level.
“I want to make it clear that we are making progress with our strategic initiatives,” Stubbs said. “That, together with the increasing business levels we saw late in the quarter, help us be optimistic that we are headed in the right direction and are on track to improve shareholder value on the schedule we have previously communicated.”