Frozen Food Express Industries Inc (Nasdaq:FFEX) has announced plans to restore profitability during fiscal 2012. In addition, the motor carrier announced fourth quarter and fiscal 2011 financial results.
“It is important that we communicate with our investors to assure them that we have a solid plan to return to the profitable operations we have enjoyed in the past,” said Russell Stubbs, president and chief executive officer of the company. “We faced strong headwinds during 2011 with an uncertain economy, unstable fuel costs, driver shortages, and increased commodity costs. In addition, we made several decisions and incurred expenses to implement our strategic plan in the third and fourth quarters, which had a temporary negative effect on our financial results. Nevertheless, we have repositioned the company, maintained a well-capitalized balance sheet, and are confident that we have the right plan in place to restore meaningful profitability.”
Key elements of the company’s strategic plan to restore profitability during fiscal 2012 include:
•Exit low-margin/low-return businesses—As previously announced, the company no longer provides dry van services via a dedicated fleet of dry van trailers. We have sold about 435 dry van trailers and 228 tractors, netting around $13.6 million in cash proceeds. This action removes a line of lower margin services, and by lowering the average age of the fleet, is expected to improve operating efficiency.
•Reinvest in growth businesses—The company began providing bulk tank water transportation services for the crude oil drilling industry during fourth quarter 2011. FFE plans to expand its fleet of trucks that provide this service from about 40 to 70 by the end of fiscal 2012. Due to the 24/7 nature of drilling operations, equipment utilization rates are very high and present attractive return characteristics. These new services are expected to add approximately $40 million in incremental annual gross revenue.
•Improve operating efficiencies—The firm expects to realize annualized cost savings of about $5 million as the result of its previously announced 12% reduction in non-driver staffing levels. Additional operating efficiencies are expected from a reduction in the average fleet age from 2.8 years to 2.1 years. With a younger fleet, FFE expects to reduce tractor maintenance expense by 2 to 4 cents per mile and overall improvement in fuel economy of around 5%.
•Improving yields in core temperature-controlled business—Market conditions are improving in the core truckload (TL) and less-than-truckload (LTL) shipping markets. As a result, the company expects to benefit from both volume and rate increases during fiscal 2012.
Highlights of fourth quarter and 2011 financial results:
•4Q11 operating revenue, net of fuel surcharges, was $74.2 million, compared with $78.6 million during 4Q10.
•2011 operating revenue, net of fuel surcharges, was $307.8 million, versus $311.4 million during fiscal 2010.
•4Q11 net loss was $11.8 million, compared with a net loss of $1.5 million during 4Q10.
•2011 net loss was $36.7 million, versus a net loss of $11.9 million during fiscal 2010.
Additional information can be found at www.ffeinc.com.