Frozen Food Express Industries Inc plans to restructure its dry freight service offerings. The Dallas TX-based motor carrier will continue to offer dry freight options in certain lanes via its temperature-controlled trailers; however, it will no longer provide dry freight services via a dedicated fleet of dry van trailers.
“Streamlining our dry freight services will greatly reduce—but not eliminate—our ability to handle dry freight. We will continue to move dry freight via our temperature-controlled trailers, as it meets the needs of customers and provides a profitable contribution margin,” said Russell Stubbs, the company’s president and chief executive officer. “At the same time, these actions should greatly improve our operating efficiency and allow us to focus in other areas where we offer differentiated service.
“We are in the process of notifying customers that are impacted by this change and will do all we can to make this a smooth transition for them,” said Stubbs. “Regrettably, the economics of the transportation world do not promote maintaining equipment offerings in non-core, lower-margin services. This will allow us to concentrate on core services that allow better margins due to product differentiation.”
The plan includes the sale of about 435 dry van trailers, which account for all of the company’s dry van trailer fleet. Frozen Food Express will maintain its current fleet of around 3,250 leased and owned temperature-controlled trailers to provide truckload, intermodal, and less-than-truckload services. Additionally, the firm intends to reduce its tractor fleet by approximately 290 tractors during fourth quarter 2011 as a result of the reduction in the dry van services. Sales of these tractors and trailers are expected to be completed during fourth quarter 2011. The company will use the proceeds of these sales, which it anticipates to be roughly $15.5 million, to reduce debt.
To reduce overall tractor fleet age, Frozen Food Express will also trade another 240 of its oldest tractors for new units, which will reduce the average fleet age significantly.
“Fleet age is one of the largest drivers of cost in our company,” said Stubbs. “The cost to maintain an aged fleet has seriously deteriorated our operating results in 2011 and had to be addressed. Due to higher maintenance costs, loss of warranty, and reduced fuel efficiency, older-model tractors cost considerably more to operate than newer models. Additionally, a younger fleet significantly improves driver morale and retention, which is an industrywide challenge.”
