Frozen Food Express Industries announced its financial and operating results for the three-month and six-month periods ended June 30.
Much of the temperature-controlled trucking company’s loss from operations during the three months ended June 30 was from expenses that were not present in the first quarter of 2007. Sequentially, the temperature-controlled trucking company’s loss from operations increased by $2.5 million from the first quarter of 2007 to $3.2 million for the three months ended June 30. Among the expenses that were incurred during the second quarter of 2007 were about $2.2 million from adjustments to claims reserves and $1.0 million associated with severance pay.
“Since we installed our new management team about a year ago, we have focused, among other things, on nondriver headcount reductions, primarily by not replacing many of those employees who either had resigned, retired or been terminated,” said Stoney M. “Mit” Stubbs Jr., president and chief executive officer of the Dallas-based company.
“Through the first quarter of 2007, that had helped us cut our nondriver payroll on an annualized basis, but those cuts alone were not sufficient to fully achieve our goals,” Stubbs said. “So, during the second quarter, we offered a voluntary program designed to eliminate nondriver positions and help us achieve those goals. This program was fully implemented inside the quarter, at a cost of about $1 million. Had the increased expenses for the severance pay and the insurance and work-related injury claims not been incurred, our second quarter 2007 operating ratio (operating expenses divided by revenue) would have come in at close to break-even.”
Including fuel surcharges of $18.1 million and $20.2 million during the second quarters of 2007 and 2006, respectively, revenue declined by $10.5 million between the quarters. For the three months ended June 30, revenue decreased by 8.5 percent to $113.1 million from $123.6 million for the second quarter of 2006. Revenue, before fuel surcharges, decreased 8.1 percent to $95.0 million from $103.4 million for the same period of 2006. Revenue present in the second quarter of 2006 that was absent in the 2007 quarter was $300,000 related to trailer rental from disaster relief efforts associated with the aftermath of hurricanes Katrina and Rita.
“We have been saying for the past few quarters that we intend to focus on improving our profitability in the long run, even if that means sacrificing some revenue in the short run, particularly with regard to our asset-based, full-truckload service offerings,” Stubbs said. “If we cannot get a fair price for hauling a load, we are not going to haul it. We have had plenty of practice hauling freight over the past 60-some years. We have also said for the past year or so that we intend to focus on ‘asset-lite’ activities, such as our freight brokerage. We find customers who have freight but no truck and match them with carriers who have trucks but no freight. We eliminate the cost of running the truck, collect the revenue, pay the carrier and earn a profit in the process.”
Excluding the impact of fuel surcharges, less-than-truckload revenue increased 3.9 percent to $31.9 million from $30.7 million, compared to the second quarter of 2006. Full-truckload revenue, consisting of revenue from truckload linehaul services and dedicated fleets, decreased 14.6 percent to $57.8 million from $67.7 million during the same period of 2006.
Excluding insignificant income from non-freight operations that were sold during the fourth quarter of 2006, FFEX incurred an operating loss of $3.2 million in the second quarter of 2007 as compared to operating income of $3.4 million for the same quarter of 2006. Included in the company’s operating expenses were depreciation and amortization expenses of $6.5 million for the 2007 quarter compared to $6.0 million for the 2006 quarter.
For the first six months of 2007, revenue, including the effect of a $4.4 million decline in fuel surcharges, decreased 11.2 percent to $219.6 million from $247.2 million during the same period of 2006. Included in year-to-date revenue for 2006 was $2.0 million from disaster relief efforts associated with hurricane relief activities. There was no such revenue during the first six months of 2007. Included in the year-to-date operating expenses for both 2006 and 2007 were depreciation and amortization expenses of $12.8 million. For the six months ended June 30, 2006, proceeds from the sale of retired capital assets (primarily tractors and trailers) exceeded expenditures for new capital assets by almost $900,000. For the comparable period of 2006, net capital expenditures were positive, at $14.0 million.
Excluding the discontinued operation, for the six months ended June 30, FFEX incurred a net loss of $894,000 as compared to net income of $4.0 million during the same period of 2006.
“Our industry continued facing challenges in the second quarter, particularly on the truckload side as more capacity has entered the market than there is freight to go around,” Stubbs said.
