Frozen Food Express Industries, Inc. Fourth Quarter Net Income Up
163% DALLAS, March 16 /PRNewswire-FirstCall/ -- Frozen Food Express
Industries, Inc. (NASDAQ:FFEX) today announced its financial and
operating results for the fourth quarter and year ended December
31, 2004. For the quarter ended December 31, 2004, total revenue
increased by nearly 14%, to $124.2 million from $109.1 million for
the same quarter of 2003. Fourth quarter 2004, total revenue
included fuel surcharge revenue of $11.5 million, compared to $4.1
million for the same quarter of 2003. Also included in fourth
quarter 2004 total revenue was $14.8 million from dedicated
services, freight brokerage services and equipment rental, compared
to $9.8 million for the same three months of 2003. Total revenue
also included $1.3 million from non-freight operations, compared to
$2.5 million for the same quarter of 2003. Income from operations
more than tripled during the fourth quarter of 2004, as compared to
the same period of 2003. Net income increased by 163%, to $1.8
million from $0.7 million. Earnings per diluted share increased to
$.10 from $.04. Fourth quarter 2004 results were impacted by two
expense items of approximately $3.1 million ($2.0 million,
after-tax) or $.11 per diluted share, due to increased reserves
associated with the results of an actuarial study regarding
over-the-road accidents and work related injuries, and due to an
increase in deferred compensation liabilities. For the 12 months
ended December 31, 2004, total revenue increased by 12.4%, to
$474.4 million from $422.0 million for 2003. During 2004, total
revenue included fuel surcharge revenue of $31.7 million, compared
to $15.7 million during 2003. Total revenue for 2004 included $51.1
million from dedicated services, freight brokerage services and
equipment rental, compared to $34.9 million during 2003. Net income
for 2004 was $10.8 million as compared to $4.3 million for 2003.
For 2004, earnings per diluted share increased by 146%, to $.59
from $.24 for 2003. Income from non-freight operations for 2004's
fourth quarter was $0.3 million as compared to a loss of $3.8
million for the same quarter of 2003. For the 12 months ended
December 31, 2004, income from non-freight operations was $0.8
million as compared to a loss of $5.4 million during 2003.
President and CEO Stoney M. ("Mit") Stubbs, Jr. commented: "2004
was a very good year for FFEX. For net income, it was one of the
most profitable years in our 59-year history. During 1994, our best
year, our net income was $11.9 million. Absent the claims reserve
and deferred compensation adjustments, 2004 would have exceeded
that by $1 million. For cash flow from operations, it was a record
year. Over the years we have learned, although it is important to
grow top line performance, it is more important to grow
margin-enhancing revenues and cash flow if we plan on improving
long-term growth. We were successful on those counts -- revenue
growth and margin expansion in 2004 as we move on to what should be
another good year in 2005. "A major contributing factor to our 2004
successes was our ability to increase average linehaul revenue per
total mile. We saw much better yields during 2004, as freight
demand ran high while overall industry supply of capacity ran low,
resulting in favorable pricing conditions. We enjoyed rate
increases throughout the year and we may be able to increase rates
again in 2005. Excluding fuel-surcharge revenue, full-truckload
linehaul revenue per total mile for 2004 increased 4.6% to $1.37
from $1.31 for 2003. Fourth quarter 2004 full-truckload revenue was
$1.45 per total mile, up 9.0% from $1.33 for the same quarter of
2003. This gives further evidence of the pricing trends in today's
marketplace. Our average linehaul and dedicated revenue per truck
per week which measures equipment and revenue productivity
increased for the year 6.7%, to $3,374 from $3,161 for 2003,
including our less-than-truckload ("LTL") operations. "We saw some
of the same improvements in LTL during 2004 as we did for
full-truckload. Excluding fuel surcharges, LTL revenue increased 7%
to $123.2 million during 2004 as compared to $115.5 million during
2003. LTL revenue per total mile, for example, improved by 4.5% as
compared to 2003. "Our management team continues to focus on
profitability. We are a full- service provider of freight
transportation services in an industry rich in freight demand.
Strategically, we plan to better position our assets in our "sweet
spots", targeting on maximum profitability. Our operations and
sales teams are constantly working together on ways to identify the
right mix of customers and the lanes in which they ship.
Additionally, we are paying close attention to regional values and
opportunity cost decisions. We are taking every precaution in the
freight selection process to ensure that we maintain lane balance
and increase overall utilization of resources in those regions that
make the most sense economically -- as evidenced by our increased
productivity for 2004. To improve our day-to-day decision making
processes, we have invested in information tools to help us make
difficult decisions and balance market share with margins and to
find ways to take surgical price increases instead of across the
board -- all ways to drive bottom line profitability. "Our strong
financial position and improving cash flow from operations confirm
that we are well-positioned for the future. We nearly tripled our
cash flow from operations during 2004, to $40.5 million from $14.2
million for 2003. In addition to paying down our debt, we increased
our capital spending by $7.5 million. At December 31, 2004 our
shareholders' equity was $97.0 million, and our debt as a percent
of total capitalization was 2.0%." Fourth Quarter Activity During
the fourth quarter of 2004, FFEX, for the first time, retained an
independent actuarial firm to review its reserves for potential
liabilities related to over-the-road accidents and work-related
employee injuries. Upon completion of this review, the company
increased those reserves by about $1.5 million, reducing net income
by $1.0 million. FFEX sponsors deferred compensation plans for the
benefit of its employees. The amount of this deferred compensation
is adjustable based on the value of FFEX common stock. As the stock
appreciates in value, the liability for deferred compensation also
increases. During 2004, FFEX stock increased by $6.26 per share to
$12.90 which resulted in $1.7 million of additional pre-tax
expense. Approximately 90% of this increase occurred during the
fourth quarter of 2004, resulting in a reduction of net income by
$1.0 million. For the year ended December 31, 2004, net income was
reduced by $1.1 million. Certain Non-GAAP Measures Below is a table
showing the fourth quarter and full year 2004 net income and
earnings per diluted share results that exclude the increases to
claims reserves and deferred compensation liabilities. Such
exclusions are not in conformity with accounting principles
generally accepted in the United States ("non-GAAP measures").
Management believes such non-GAAP measures provide an alternative
presentation of results that more accurately reflects the
underlying operating results of the company and is furnishing these
measures because it believes some investors may be interested in
earnings exclusive of these items. In 2004, management engaged for
the first time the services of an independent actuary to conduct a
study of the company's reserves for over-the- road accidents and
work-related injuries. The reserve adjustment that resulted from
the study was not related to any specific event, injury or accident
that would have resulted in adjustments to such reserves, absent
the study. The results of the study led to a decision to increase
the claims reserves with the sole objective of presenting such
reserves using an actuarial method not used in previous periods.
Further, with regard to the increase in deferred compensation
liabilities, such expense was caused by the sudden increase in the
market price of the company's common stock during the fourth
quarter of 2004. Accordingly, the exclusion of the adjustments
resulting from the increase in reserves and liabilities, in the
view of management, more accurately reflects the company's
underlying operating results for the three and twelve months ended
December 31, 2004. These measures should be considered in addition
to, not as a substitute for, net income and earnings per diluted
share as shown on the accompanying consolidated statements of
income. The following table reconciles fourth quarter and full year
2004 net income and earnings per diluted share excluding the
expenses from the claims reserve and the deferred compensation
adjustments, to net income and earnings per diluted share
calculated in accordance with GAAP (in thousands, except per share
amounts): Three Months Ended Twelve Months Ended December 31, 2004
December 31, 2004 Diluted Diluted Net earnings Net earnings income
per share income per share Net income and earnings per diluted
share, excluding increases to claims reserve and deferred
compensation $3,792 $0.21 $12,854 $0.71 After tax increases to
claims reserves and deferred compensation $1,990 $0.11 $2,100 $0.12
As reported in accordance with GAAP $1,802 $0.10 $10,754 $0.59
FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES Consolidated
Statements of Income Three and Twelve Months Ended December 31,
(Unaudited and in thousands, except per-share amounts) Three Months
Twelve Months 2004 2003 2004 2003 Revenue Freight revenue $122,924
$106,581 $464,689 $405,901 Non-freight revenue 1,317 2,505 9,741
16,073 124,241 109,086 474,430 421,974 Cost and expenses Salaries,
wages and related expenses 32,360 29,445 123,298 117,453 Purchased
transportation 32,707 28,851 125,860 107,246 Fuel 16,578 12,094
60,124 47,451 Supplies and expenses 14,170 11,712 56,488 47,672
Revenue equipment rent 7,485 7,557 31,388 32,175 Depreciation 5,582
3,933 19,899 14,529 Communication and utilities 1,080 1,021 4,016
4,095 Claims and insurance 6,389 4,876 18,056 14,739 Operating
taxes and licenses 1,056 939 4,544 3,985 Miscellaneous expenses
2,077 1,119 4,986 4,628 119,484 101,547 448,659 393,973 Non-freight
costs and operating expenses 1,043 6,352 8,931 21,454 120,527
107,899 457,590 415,427 Operating income 3,714 1,187 16,840 6,547
Interest and other expense (income) 445 345 (252) 148 Pre-tax
income 3,269 842 17,092 6,399 Income tax 1,467 156 6,338 2,129 Net
income $1,802 $686 $10,754 $4,270 Net income per share of common
stock Basic $0.10 $0.04 $0.62 $0.25 Diluted $0.10 $0.04 $0.59 $0.24
Basic shares 17,290 17,020 17,219 16,829 Diluted shares 18,378
18,005 18,124 17,839 FROZEN FOOD EXPRESS INDUSTRIES, INC. AND
SUBSIDIARIES Operating Statistics Three and Twelve Months Ended
December 31, (Unaudited) Three Months Twelve Months 2004 2003 2004
2003 Freight revenue from Full truckload linehaul services [a]
$64.5 $62.6 $258.7 $239.8 Dedicated Fleets [a] 5.8 3.6 20.3 14.5
Total full-truckload [a] 70.3 66.2 279.0 254.3 Less-than-truckload
services [a] 32.1 30.1 123.2 115.5 Fuel adjustments [a] 11.5 4.1
31.7 15.7 Freight brokerage [a] 7.5 4.7 24.9 15.0 Equipment rental
[a] 1.4 1.5 5.9 5.4 Total freight revenue [a] $122.8 $106.6 $464.7
$405.9 Total full-truckload revenue [a] $70.3 $66.2 $279.0 $254.3
Less-than-truckload revenue [a] 32.1 30.1 123.2 115.5 Total
linehaul and dedicated fleet revenue [a] $102.4 $96.3 $402.2 $369.8
Weekly average trucks in service 2,300 2,305 2,292 2,250 Revenue
per truck per week [b] $3,427 $3,213 $3,374 $3,161 Full-truckload
linehaul miles [a] 44.4 47.1 188.5 183.4 Full-truckload linehaul
revenue per total mile $1.45 $1.33 $1.37 $1.31 Average
full-truckload linehaul miles per trip 980 1,006 990 992
Less-than-truckload miles [a] 11.8 11.0 44.6 43.7
Less-than-truckload revenue per total mile $2.72 $2.74 $2.76 $2.64
[a] In millions. [b] Total linehaul and dedicated fleet revenue
divided by number of weeks in period divided by the weekly average
trucks in service. Internal Controls over Financial Reporting FFEX
management identified three "material weaknesses" as defined by the
Public Company Accounting Oversight Board's Accounting Standard No.
2. The company has concluded that it lacked sufficient controls to
i) prevent a presentation error in the Commitments and
Contingencies note to the consolidated financial statements; ii)
ensure the reconciliation of certain accrued liability accounts;
iii) ensure the proper calculation of the deferred tax liability
attributable to differences in book and tax depreciation. The
results reported herein include the corrected effect of the latter
two items. Correction of the first item had no impact on the
company's results of operations as reported herein, nor did it have
any impact on the company's balance sheet or statement of cash
flows. Due to the delays in completing management's assessment of
the effectiveness of the company's internal controls over financial
reporting, the company will today file with the Securities and
Exchange Commission on form 12b-25 its notification of a late
filing of its Annual Report on Form 10-K. Conference Call and Web
Cast FFEX will hold a telephonic conference call tomorrow morning,
March 17, 2005 at 10:30 am Central Time (11:30 am Eastern Time) to
discuss the three months and twelve months 2004 operating results.
Individuals wishing to participate in the conference call may do so
by dialing (800) 320-2978 for domestic (617) 614-4923 for
international calls and entering the pass code 84408841 prior to
the beginning of the call. There will also be a live web cast of
the conference call that can be accessed by clicking on the web
cast icon http://www.ffex.net/ . A replay of the web cast will be
available on the company's website or by telephone at (888)
286-8010 for domestic calls and (617) 801-6888 for international
calls for 30 days following the live web cast. The pass code for
the replay will be 12628482. About FFEX Frozen Food Express
Industries, Inc. is the largest publicly-owned,
temperature-controlled carrier of perishable goods (primarily food
products, health care supplies and confectionery items) on the
North American continent. Its services extend from Canada,
throughout the 48 contiguous United States, into Mexico. The
refrigerated trucking company is the only one serving this market
that is full-service-providing full-truckload, less-than-truckload
and dedicated fleet transportation of refrigerated and frozen
products. Its refrigerated less-than-truckload operation is also
the largest on the North American continent. The company also
provides full-truckload transportation of non-temperature-sensitive
goods through its non-refrigerated trucking fleet, American Eagle
Lines. Additional information about Frozen Food Express Industries,
Inc. can be found at the company's web site, http://www.ffex.net/ .
Forward-Looking Statements This report contains information and
forward-looking statements that are based on management's current
beliefs and expectations and assumptions which are based upon
information currently available. Forward-looking statements include
statements relating to plans, strategies, objectives, expectations,
intentions, and adequacy of resources, and may be identified by
words such as "will", "could", "should", "believe", "expect",
"intend", "plan", "schedule", "estimate", "project", and similar
expressions. These statements are based on current expectations and
are subject to uncertainty and change. Although management believes
that the expectations reflected in such forward-looking statements
are reasonable, there can be no assurance that such expectations
will be realized. Should one or more of the risks or uncertainties
underlying such expectations not materialize, or should underlying
assumptions prove incorrect, actual results may vary materially
from those expected. Among the key factors that are not within
management's control and that may have a bearing on operating
results are demand for the company's services and products, and its
ability to meet that demand, which may be affected by, among other
things, competition, weather conditions and the general economy,
the availability and cost of labor, the ability to negotiate
favorably with lenders and lessors, the effects of terrorism and
war, the availability and cost of equipment, fuel and supplies, the
market for previously-owned equipment, 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 and the other risks and uncertainties
described in the company's filings with the Securities and Exchange
Commission. DATASOURCE: Frozen Food Express Industries, Inc.
CONTACT: Stoney M. "Mit" Stubbs, Jr., CEO, or F. Dixon McElwee,
Jr., CFO, both of Frozen Food Express Industries, Inc.,
+1-214-630-8090 Web site: http://www.ffex.net/
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