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Frozen Food Express Industries Inc. Reports Operating Results (10-Q)

November 14, 2012 | About:
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10qk

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Frozen Food Express Industries Inc. (FFEX) filed Quarterly Report for the period ended 2012-09-30.

Frozen Food Express Industries has a market cap of $30.1 million; its shares were traded at around $1.63 with and P/S ratio of 0.1.

Highlight of Business Operations:

Our revenue results for the three months ended September 30, 2012 were partially in line with our plans to improve our revenue yields through improved pricing decisions, elimination of services that were not profitable, increase our truck utility to gain more revenue and enhance our margin profile through focused offerings, such as our logistics water transport services provided to oil field drilling companies. For the third quarter of 2012, our total operating revenue declined $7.2 million, or 7.0%, from the same period of 2011. The main elements to this decline were a $4.9 million decrease from our decision to exit our dry van services in the fourth quarter of 2011, a decrease of $3.9 million in our temperature controlled truckload services, and a $2.3 million decline in fuel surcharge revenue, all of which was partially offset by a $3.7 million increase in our LTL service revenues. During the three months ended September 30, 2012, our total operating revenue, net of fuel surcharges, decreased $4.8 million, or 6.0%, to $76.7 million from $81.5 million for the same period in 2011. Excluding fuel surcharges, our average revenue per tractor per week for the third quarter of 2012 increased 8.4% to $3,499, due to a 10.0% increase in LTL tonnage, a 1.9% increase in LTL rates and a 3.5% increase in truckload revenue per total mile compared to the same period last year.

Truckload revenue decreased $8.3 million in the third quarter of 2012, or 18.6%, as a result of our decision to exit certain dry van related services in the fourth quarter of 2011, which reduced dry freight revenue by $4.9 million in the third quarter of 2012, our increased emphasis in providing linehaul support to our growing refrigerated LTL operations, an inability to fully seat available tractors due to a tightening driver market, and lower than expected yields related to reduced shipping demand from our contract customers. These contract customers were replaced by lower yielding non-contract rates, thus changing our freight profile. We continued to handle a limited amount of dry freight on our temperature controlled trailers during the third quarter of 2012 to fill backhaul lanes and provide requested services if capacity was available. The Company's ongoing focus on improving truckload service rates was reflected in truckload revenue per loaded mile, which grew to $1.70 per mile compared to $1.63 over the same period in 2011, an increase of 4.3%, but less than the Company's expectations due to the changed freight profile during the quarter. LTL rates also improved during the third quarter of 2012, with revenue per hundredweight increasing 1.9% to $14.72 from $14.44 in the same period of 2011. LTL shipments and tonnage levels improved 11.0% and 10.0%, respectively, during the third quarter of 2012 compared to the third quarter in 2011. During the three months ended September 30, 2012, brokerage and logistics revenue decreased by $0.7 million or 12.7% compared to the same period in 2011, primarily due to a decision to exit an unprofitable line of service in the first quarter of 2012. The resulting revenue decrease was partially offset by $3.3 million of revenue in our oil field water transport services, which had negligible operating activity during the same period of 2011.

The sale of the dry van services related equipment in the fourth quarter of 2011 is the primary reason for a reduction in average weekly trucks in service with 1,536 in the third quarter of 2012 compared to 1,772 the same period in 2011. The number of truckload shipments decreased 27.1% to 20,296 in the third quarter of 2012 from 27,842 in 2011. Truckload revenue, excluding fuel surcharges, decreased $8.3 million, or 18.6%, to $36.2 million from $44.5 million in 2011. Truckload revenues decreased primarily as a result of the sale of 228 trucks and 415 trailers in the fourth quarter of 2011. This reduction in revenue equipment was partially offset by improved revenue per loaded mile of $1.70 for the third quarter of 2012 compared to $1.63 for the same quarter last year. The sale of the dry van services revenue equipment served to reduce our loaded miles 25.2% to 18.5 million from 24.8 million in the same period in 2011, while the empty mile ratio increased slightly to 12.6% in the third quarter of 2012 compared to 11.4% in the same period in 2011.

The sale of the dry van services related equipment in the fourth quarter of 2011 is the primary reason for a decline in average weekly trucks in service with 1,504 trucks in the nine months ended September 30, 2012 compared to 1,772 the same period in 2011. The number of truckload shipments decreased 29.5% to 60,870 in the nine months ended September 30, 2012 from 86,364 in 2011. Truckload revenue, excluding fuel surcharges, decreased $28.2 million, or 20.6%, to $108.6 million from $136.8 million in 2011. Truckload revenues decreased primarily as a result of the sale of 228 trucks and 415 trailers in the fourth quarter of 2011. This reduction in revenue equipment was partially offset by improved revenue per loaded mile of $1.69 for the nine months ended September 30, 2012 compared to $1.59 for the same period last year. The sale of the dry van services revenue equipment contributed to decreased loaded miles of 28.2% to 55.9 million from 77.9 million in the same period in 2011. The empty mile ratio increased to 12.1% in the nine months ended September 30, 2012 compared to 11.2% in the same period in 2011.

Total operating expenses for the nine months ended September 30, 2012 decreased $34.1 million, or 10.6%, to $288.2 million from $322.3 million compared to the same period in 2011. The operating ratio decreased to 103.2% from 108.8% compared to the same period in 2011 as our operating expenses decreased at a higher rate than our revenue. Contributing to the decrease in operating expenses were lower costs attributable to fuel, insurance, salaries, wages and related expenses and supplies and maintenance. All expenditure categories declined, with the exception of revenue equipment rent. Fuel costs decreased due to reduced trucks, reducing miles driven, and we experienced improved fuel efficiency due to our replacement of old tractors with new, more fuel efficient tractors. However this decrease was somewhat offset by an approximately 3.1% increase in the fuel price per gallon in the nine months ended September 30, 2012 compared to the same period last year. This fuel price increase was largely offset by a 37.5% reduction in depreciation expense. Additionally, we benefited from increased gains on the sale of property and equipment. Even though overall operating costs declined $34.1 million, or 10.6%, we continue to maintain a strict cost control program as we continue to see increases in costs associated with insurance claims and expenses, and tires, tractors and trailers. Our wage rates remain at previous levels, and we continue to monitor and control discretionary expenditures.

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