For: Frozen Food Express From: Mike Engleman
Industries, Inc. Mike Engleman/Associates
Listed: Nasdaq (FFEX) 11308 Valleydale
Company Contacts: Dallas, TX 75230
Stoney M. (Mit) Stubbs, Jr. (CEO) (214) 373-6464
F. Dixon McElwee, Jr. (CFO)
(214) 630-8090
For Immediate Release
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Frozen Food Express Industries Reports 2002 Results
and Adjustments to Prior 2002 Quarters
Dallas, Texas, March 10, 2003-Frozen Food Express Industries, Inc.
(Nasdaq: FFEX) today reported improved results from its trucking operations
and better net income for the year 2002, when compared to 2001.
Stoney M. (Mit) Stubbs, Jr., chairman and CEO said results from the
company's trucking operations for 2002, "and especially in the fourth quarter
give us reason to be somewhat encouraged about the prospects for our trucking
business in 2003.
"Since most of the freight we haul is temperature-sensitive, requiring
some level of refrigeration, our business is best during the warmer months.
The first quarter of our year is typically the weakest and the fourth quarter
is the most unpredictable and is almost always weaker than the warm-weather
quarters.
Freight Revenue and Income from Operations
Mr. Stubbs added, "Freight revenue of $88,428,000 in the fourth quarter
of 2002 was the strongest for us in recent years. Excluding the impact of
fuel adjustment charges, fourth-quarter revenue from our freight operations
was up by about 8%, when compared to the fourth quarter of 2001, and our
freight revenue for all of 2002 was up by about 4.5%. Including our fuel
adjustment charges, freight revenue was up by 10% for the fourth quarter and
3.4% for the year.
"We also have a division, American Eagle Lines, that specializes in non-
refrigerated, or 'dry' full-truckload freight. In fact, a Fortune 50 company
that is one of AEL's major customers named AEL their 'Carrier of the Year' for
2002. We are proud of that," Mr. Stubbs said. Of FFEX's 2002 total freight
revenue of $338.6 million, AEL accounted for nearly $67 million.
Mr. Stubbs noted that much of the 4th quarter increase in total freight
revenue "came from our less-than-truckload (LTL) operation. For years, our
LTL business has been disappointing us in terms of revenue growth. We and one
other company were the only two refrigerated LTL providers with a national
presence. Then, in December of 2002, that other provider announced that it
was quitting the business. That served to increase our LTL volumes and
revenue during the fourth quarter of 2002, and we are going to do all that we
can to ensure we keep that business in 2003 and beyond.
"For the first time in a number of years, we've been able to raise
some of our freight rates. And our 2002 results show it." Mr. Stubbs
pointed out. "Freight revenue, excluding fuel adjustment charges, was up
about 4.5% over that of 2001, while freight operating income was up by
$1.3 million."
The company's improved freight operations generated operating income
for 2002 of $3,755,000, compared to $2,470,000 for 2001. However, due to
losses in the company's non-freight operations, consolidated operating income
for 2002 was $647,000, which was $1,011,000 less than for 2001.
Mr. Stubbs cautioned that the recent explosive rise in fuel costs and the
prospect of another war in the Middle East could impede the recent
improvement in the company's freight operations during 2003. "We add fuel
adjustment charges to our freight rates to help offset price rises such as the
recent 35% to 40% we have witnessed," Mr. Stubbs said. "However, there's no
telling where we are headed, and we are concerned about factors such as this,
which are beyond our control."
Non-freight Revenue and Operating Loss
Due to the sale of a major non-freight subsidiary in December of 2001,
total revenue for 2002 of $350.9 million was 7.3% lower than that of 2001.
The company's remaining non-freight business generated revenue of $12,350,000
during 2002 and incurred an operating loss of $3,108,000, of which 53% was
incurred in the fourth quarter. "During the third quarter of 2002, we wrote
down the value of some slow-moving inventories in our non-freight business.
Then, in 2002's fourth quarter, we further lowered our expectations as to what
those inventories are worth by about $400,000 due to further weakening demand
for the inventory. The fall and winter months are seasonally weak months for
the sales of air-conditioning products. The lower revenues served to magnify
the impact of the adjustments on the fourth quarter.
"While we are pleased with our improved freight operations", said Mr.
Stubbs, "the same is not the case for our non-freight business. During the
coming year, we will be taking action designed to remedy what has become a
drain on our overall operating results."
Income Taxes and Net Income
Primarily as a result of weakness in its non-freight business, FFEX
reported a pre-tax loss of $809,000 for 2002, compared to a pre-tax loss of
$52,000 for 2001.
The company reported a benefit from income taxes of $4 million for
2002. As mentioned in its third quarter report, in certain prior years, the
company recorded income tax deductions for interest paid on loans against
insurance policies as allowed under the US Tax Code. Due to uncertainty
regarding such deductions, FFEX maintained a $4 million reserve for the
contingent expense that could have resulted from any related tax assessments.
By September 30, 2002, the risk of a tax assessment had ended and the
reserve was no longer required.
Net income for 2002 was $3,176,000, or 19 cents a share, diluted,
compared to a loss of $154,000, or 1 cent a share for 2001. Net income for
the 4th quarter of 2002 was $576,000 as compared to $205,000 during the same
quarter of 2001.
Adjustment to Prior 2002 Quarters
While closing its books for the year 2002, FFEX discovered the omission
of certain expenses incurred in the prior quarters of the year. "We consider
the impact of the omission not to be material to the financial statements we
filed on Forms 10-Q for any of the three quarters ended September 30, 2002,
but we have adjusted for that impact in the table appearing at the end of this
press release", said Mr. Stubbs. "When we file our annual report, for the first
quarter of 2002, we will report an increase of $130,000 in our loss from
operations to reflect expenses that should have been recorded by our non-
freight subsidiary during that quarter. Similar adjustments of $149,000 and
$70,000 will be made to the second and third quarters of 2002, respectively.
Net of benefit from income taxes, the impact of the adjustments was to increase
our first quarter of 2002 consolidated net loss by $85,000 and to reduce our
consolidated net income for the second and third quarters of 2002 by $97,000
and $45,000, respectively. In addition, during the fourth quarter of 2002 the
company recognized $227,000 of related expenses that it was unable to determine
the quarter of 2002 in which the expenses were actually incurred, which the
company also deems to be immaterial.
Neither net loss per share for the first quarter of 2002 nor income per
share for the third quarter of 2002 were impacted by the adjustments. Net
income per share for the second quarter of 2002 has been reduced by $0.01. The
incremental fourth quarter expense reduced that quarter's net income by
$148,000 and net income per share by $0.01.
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
distribution 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 arm,
American Eagle Lines.
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.
For the three months ended December 31: 2002 2001
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Revenue $90,494,000 $91,519,000
Income from Operations 886,000 815,000
Net Income 576,000 205,000
Net Income per share
Basic 0.03 0.01
Diluted 0.03 0.01
Weighted average shares outstanding:
Basic 16,670,000 16,419,000
Diluted 16,880,000 16,443,000
For the twelve months ended December 31: 2002 2001
---- ----
Revenue $350,934,000 $378,409,000
Income from Operations 647,000 1,658,000
Net Income (Loss) 3,176,00 (154,000)
Net Income (Loss) per share
Basic 0.19 (0.01)
Diluted 0.19 (0.01)
Weighted average shares outstanding:
Basic 16,576,000 16,378,000
Diluted 16,738,000 16,378,000