Trucking company Frozen Food Express (Nasdaq:FFEX) reported second quarter 2010 results that demonstrate the difficult environment trucking businesses continue to experience in this economy. Despite the great management and operational improvement in the second quarter, FFEX could not avoid a loss making quarter. In spite of a 50% improvement, FFEX lost $3.3 million pre-tax in the second quarter.
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Waiting for Opportunity
FFEX did a lot of things right in the quarter. Operating expenses were reduced by 3.1% and the company experienced a 15.3% improvement in truckload revenue per laden mile. Quarterly revenue was down 5.3% quarter over quarter, but was up 9.1% on a sequential quarter basis. Until economic activity starts to improve, FFEX can only focus on what it can control. While the near term outlook doesn't look inspiring for trucking firms, FFEX can be comforted by a debt free balance sheet. More so, the company has nearly doubled the cash on the balance since the beginning of the year to $6.6 million from $3.6 million.
An Industry in Pain
To say trucking companies have suffered in this economy is a grave understatement. Four years ago, trucking outfit YRC Worldwide (Nasdaq:YRCW) was trading for over $40 a share. Today the shares trade for 33 cents. What was once a multi-billion enterprise is now a $346 million market cap company with over $1 billion in debt and $130 million in cash. While the entire industry is feeling the pinch, the one's with the cleaner balance sheet will likely be competitive the next go around. This includes name likes Arkansas Best (Nasdaq:ABFS), which - like FFEX - has no net debt. JB Hunt (Nasdaq:JBHT), the $4 billion giant will also be around. As for others with over levered balance sheets, time is a ticking bomb.
A Niche Need
Despite its $64 million market cap, FFEX remains a leading temperature-controlled truckload and less-than-truckload carrier in the United States. The company's core operations are in the transport of temperature-controlled products and perishable goods including food, health care and confectionery products. That's a stable product mix that should remain steady throughout the economic recovery. If Frozen Food can continue running a lean operation, it may ride out of this economic storm in better shape than it started. (For related reading, see Railroad, Trucking Earnings Growth Set To Keep Rolling.)
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