-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PZL2fcHsXD06tE/15gl/qA8mNCG5NRVHss91GwMDvF9NRpkt7IkEtqNJNnPeNw9x Edo28SDFE+ChB0kBgq5Avw== 0000039273-01-500012.txt : 20010511 0000039273-01-500012.hdr.sgml : 20010511 ACCESSION NUMBER: 0000039273-01-500012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FROZEN FOOD EXPRESS INDUSTRIES INC CENTRAL INDEX KEY: 0000039273 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 751301831 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10006 FILM NUMBER: 1628533 BUSINESS ADDRESS: STREET 1: 1145 EMPIRE CENTRAL PLACE CITY: DALLAS STATE: TX ZIP: 75247 BUSINESS PHONE: 2146308090 10-Q 1 q110q01.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the period ended March 31, 2001 -------------- or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ---------- to ------------- Commission File Number 1-10006 Frozen Food Express Industries, Inc. - --------------------------------------------------------------- (Exact name of registrant as specified on its charter) Texas 75-1301831 - --------------------------------------------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 1145 Empire Central Place Dallas, Texas 75247-4309 - --------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (2l4) 630-8090 - --------------------------------------------------------------- (Registrant's telephone number, including area code) None - --------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. [X] Yes [ ] No As of May 8, 2001, 16,357,000 shares of the Registrant's Common Stock, $1.50 par value, were outstanding. INDEX PART I. FINANCIAL INFORMATION - ------------------------------ Page No. -------- Item l. Financial Statements Consolidated Condensed Balance Sheets - March 31, 2001 and December 31, 2000 2 Consolidated Statements of Income - Three months ended March 31, 2001 and 2000 3 Consolidated Condensed Statements of Cash Flows - Three months ended March 31, 2001 and 2000 4 Notes to Consolidated Condensed Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. OTHER INFORMATION - --------------------------- Item 6. Exhibits and Reports on Form 8-K 11 FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Condensed Balance Sheets (In thousands) (Unaudited) Mar. 31, Dec. 31, 2001 2000 Assets ------ ------ Current assets Cash $ 3,189 $ 1,222 Accounts receivable, net 43,490 47,652 Inventories 16,130 17,208 Tires 4,194 4,424 Other current assets 6,031 7,546 ------- ------- Total current assets 73,034 78,052 Property and equipment, net 61,760 61,899 Other assets 14,246 14,778 ------- ------- $149,040 $154,729 ======= ======= Liabilities and Shareholders' Equity Current liabilities Trade accounts payable $ 21,460 $ 22,209 Accrued claims liabilities 5,196 8,101 Accrued payroll 5,662 5,834 Other 4,023 4,892 ------- ------- Total current liabilities 36,341 41,036 Long-term debt 15,000 14,000 Deferred federal income tax 1,010 1,551 Other and deferred credits 15,588 16,125 ------- ------- Total liabilities and deferred credits 67,939 72,712 ------- ------- Shareholders' equity Common stock 25,921 25,921 Paid-in capital 4,191 4,655 Retained earnings 57,183 58,187 ------- ------- 87,295 88,763 Less - Treasury stock 6,194 6,746 ------- ------- Total shareholders' equity 81,101 82,017 ------- ------- $149,040 $158,729 ======= ======= See accompanying notes. FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Statements of Income (In thousands, except per-share amounts) (Unaudited) For the Three Months Ended March 31, --------------- 2001 2000 ---- ---- Revenue Freight revenue $78,309 $76,891 Non-freight revenue 11,179 15,525 ------ ------ 89,488 92,416 ------ ------ Costs and expenses Freight operating expenses Salaries, wages and related expenses 21,744 21,045 Purchased transportation 17,826 18,059 Supplies and expenses 24,079 21,606 Revenue equipment rent 6,122 6,253 Depreciation 2,744 3,007 Communications and utilities 963 1,172 Claims and insurance 3,038 3,379 Operating taxes and licenses 1,017 1,408 Miscellaneous expense 931 939 ------ ------ 78,464 76,868 Non-freight costs and operating expenses 11,855 15,290 ------ ------ 90,319 92,158 ------ ------ (Loss) income from operations (831) 258 Interest and other expense, net 714 1,124 ------ ------ Loss before income tax (1,545) (866) Income tax benefit (541) (303) ------ ------ Net loss $(1,004) $ (563) ====== ====== Net loss per share of common stock Basic $ (.06) $ (.03) ====== ====== Diluted $ (.06) $ (.03) ====== ====== Weighted average shares outstanding Basic 16,343 16,321 ====== ====== Diluted 16,343 16,321 ====== ====== See accompanying notes. FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows (In thousands) (Unaudited) For the Three Months Ended March 31, --------------- 2001 2000 ---- ---- Net cash provided by operating activities $ 2,116 $ 2,575 ------ ------ Cash flows from investing activities Expenditures for property and equipment (1,678) (1,313) Proceeds from sale of property and equipment 698 2,134 Company owned life insurance and other (265) 57 ------ ------ Net cash (used in) provided by investing activities (1,245) 878 ------ ------ Cash flows from financing activities Borrowings under revolving credit agreement 5,000 7,000 Payments against revolving credit agreement (4,000) (9,000) Net treasury stock activity 96 (81) ------ ------ Net cash provided by (used in) financing activities 1,096 (2,081) ------ ------ Net increase in cash and cash equivalents 1,967 1,372 Cash and cash equivalents at January 1 1,222 1,613 ------ ------ Cash and cash equivalents at March 31 $ 3,189 $ 2,985 ====== ====== See accompanying notes. FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Condensed Financial Statements March 31, 2001 and 2000 (Unaudited) 1. BASIS OF PRESENTATION --------------------- The consolidated financial statements include Frozen Food Express Industries, Inc. (FFEX) and its subsidiary companies, all of which are wholly owned. All significant intercompany accounts and transactions have been eliminated in consolidation. The financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and have not been audited or reviewed by independent public accountants. In the opinion of management, all adjustments (which consisted only of normal recurring accruals) necessary to present fairly the financial position and results of operations have been made. Pursuant to SEC rules and regulations, certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted from these statements unless significant changes have taken place since the end of the most recent fiscal year. FFEX believes that the disclosures contained herein, when read in conjunction with the financial statements and notes included, or incorporated by reference, in FFEX's Form 10-K filed with the SEC on March 27, 2001, are adequate to make the information presented not misleading. It is suggested, therefore, that these statements be read in conjunction with the statements and notes (included, or incorporated by reference), in the aforementioned report on Form 10-K. 2. SHAREHOLDERS' EQUITY -------------------- As of March 31, 2001 and December 31, 2000, respectively, there were 16,343,000 and 16,321,000 shares of stock outstanding. 3. COMMITMENTS AND CONTINGENCIES ----------------------------- We have accrued for costs related to public liability and work-related injury claims, some of which involve litigation. The aggregate amount of these claims is significant. In the opinion of management, these actions can be successfully defended or resolved, and any additional costs incurred over amounts accrued will not have a material adverse effect on the company's financial position, cash flows or results of operations. 4. EARNINGS PER SHARE ------------------ Common stock equivalents included in diluted weighted average shares, all of which result from dilutive stock options granted by the company, were as follows (in thousands): 2001 2000 ---- ---- For the three months ended March 31 - - 5. OPERATING SEGMENTS ------------------ The company's operations consist of two reportable segments. The freight segment is engaged primarily in the motor carrier freight transportation business. The smaller segment is primarily engaged in non-freight business relating to the sale and service of refrigeration equipment and of trailers used in freight transportation. Following is information for each reportable segment for the three month periods ended March 31, 2001 and 2000 (in millions): March 31, 2001 2000 ---- ---- Freight Operations Total Revenue $ 78.3 $ 76.9 Operating Income (0.2) - Total Assets 144.0 156.8 Non-Freight Operations Total Revenue $ 12.2 $ 15.8 Operating Income (0.7) 0.2 Total Assets 30.1 33.5 Intercompany Eliminations Revenue $ (1.0) $ (0.3) Operating Income 0.1 0.1 Assets (25.1) (24.8) Consolidated Revenue $ 89.5 $ 92.4 Operating (Loss) Income (0.8) 0.3 Assets 149.0 165.5 Intercompany elimination of revenue relates to transfers at cost of inventory such as trailers and refrigeration units from the non-freight segment for use by the freight segment. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - --------------------- The following table sets forth, as a percentage of freight revenue, certain major operating expenses for the three-month periods ended March 31, 2001 and 2000. Three Months Ended March. 31, --------------- 2001 2000 ---- ---- Salaries, wages and related expense 27.8% 27.4% Purchased transportation 22.8 23.5 Supplies and expenses 30.7 28.1 Revenue equipment rent 7.8 8.1 Depreciation 3.5 3.9 Claims and insurance 3.9 4.4 Other 3.7 4.6 ----- ----- Total freight operating expenses 100.2% 100.0% ===== ===== First Quarter of 2001 vs. 2000 - ------------------------------ During the first quarter of 2001, our freight revenue increased by 1.8% to $78.3 million. Non-freight revenue aggregated 12.5% and 16.8% of total revenue during the first three months of 2001 and 2000, respectively. Approximately 25% of our $4.0 million increase in full-truckload revenue resulted from increased fuel adjustment revenue during the first quarter of 2001. Also impacting the increase in full-truckload revenue was an increased average length of haul. Less-than-truckload (LTL) revenues declined by $2.6 million between the first quarters of 2000 and 2001. Slackening demand for the refrigerated LTL service we offer, reflected by a 13.4% drop in the number of shipments we hauled, was the primary contributor to this variance. The 2001 decrease in non-freight revenue was due to deterioration in the market for refrigeration equipment. During the first quarter of 2000, our non-freight operation sold an unusually high number of mechanical refrigeration equipment. That has not recurred during 2001, as the demand for such products has fallen in line with a general oversupply of new and used transportation equipment. The number of tractors in our fleet of company-operated, full-truckload equipment increased from approximately 1,190 at the beginning of 2001 to about 1,250 by the end of the first quarter. The number of full-truckload tractors provided to us by owner-operators increased by about 50 to about 585. The increased number of company-operated full-truckload tractors resulted from an increase in our level of dedicated fleet operations. The increase was also a result of a temporary imbalance between the scheduled retirement and replacement of trucks. The increased number of owner- operator-provided tractors resulted primarily from our continuing efforts to increase the size of the owner-operator full-truckload fleet. Full-truckload activities, which contributed about 70% of freight revenue during the first quarter of 2001 and 2000, are conducted primarily with company-operated equipment, while LTL activities are conducted primarily with equipment provided by owner-operators. Changes in the mix of LTL versus full-truckload revenue as well as fluctuations in the amount of total freight handled on company-operated versus owner-operator provided equipment, impact the percent of freight revenue absorbed by the various categories of operating expenses between the two quarters. During the first quarter of 2001, the percent of freight revenue absorbed by salaries, wages and related expense was 27.8%, as compared to 27.4% during the year-ago quarter. Total salaries and wages rose by 3.3%, but payroll expenses related to drivers increased by 15% between the quarters. The increased driver payroll costs resulted primarily from a general driver pay increase we introduced during the second quarter of last year. Substantially offsetting the increase in driver pay were reductions in non- driver staffing and improvements regarding work-related injuries. Supplies and expenses rose by $2.5 million between the first quarters of 2000 and 2001. Almost 40% of this increase was related to fuel consumed by our company-operated fleet. Per-gallon costs we paid for fuel increased by 3% during the first quarter of 2001 as compared to 2000. Sudden and dramatic fuel price volatility impacts our profitability. We have in place a number of strategies designed to address such volatility. Owner-operators are responsible for all costs associated with their equipment, including fuel. Therefore, the cost of such fuel is not a direct expense of ours. With regard to fuel expenses for company-operated equipment, we attempt to mitigate the impact of fluctuating fuel costs by purchasing more fuel- efficient tractors and aggressively managing fuel purchasing. Last year, energy prices began to rise at an alarming rate. Pursuant to the contracts and tariffs by which our freight rates are determined, those rates automatically fluctuate as diesel fuel prices rise and fall. Also last year, we began to ask shippers to accept increases in basic freight rates to compensate us for the increased employee-driver payroll costs. Many shippers were unwilling to accept those increases. The shippers felt rates had already increased as much as they were willing to pay because of the impact of energy prices. Therefore, for most of 2000, we were forced to incur the increased employee-driver payroll costs with little of the expected offsetting revenue. Future recovery of such labor and fuel cost increases will depend largely on competitive freight market conditions. Purchased transportation, as a percent of freight revenue, fell from 23.5% during the first quarter of 2000 to 22.8% during the comparable 2001 period. Purchased transportation expense includes payments to other service providers such as railroad companies for intermodal services and other motor carriers for linehaul service to remote locations to which we infrequently provide direct service. Payments to these other service providers have declined significantly during 2001 as compared to 2000. The portion of freight revenue we paid to independent contractors for purchased transportation, as a percent of revenue, has not changed appreciably since last year. The total of depreciation and revenue equipment rent expense fell from 12% of freight revenue for the first quarter of 2000 to 11.3% for the comparable 2001 quarter. This change resulted primarily from the increased use of independent contractors in our refrigerated full-truckload operations. Claims and insurance expense fell from 4.4% of freight revenue during the first quarter of 2000, to 3.9% for 2001. The decrease resulted from a variety of factors, including but not limited to changes in the frequency of physical damage losses. Our loss from operations was $831,000 during the first quarter of 2001 as compared to income from operations of $258,000 in the first quarter of 2000. Interest and other expense, net fell from $1,124,000 to $714,000 between the two quarters. Decreased interest costs associated with lower levels of borrowed funds was the principal factor affecting this decrease. We incurred a pre-tax loss of $1,545,000 during the first quarter of 2001 as compared to a pre-tax loss of $866,000 during the comparable 2000 period. The provision for income tax was 35% of pre-tax income for both the first quarters of 2001 and 2000. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Our primary needs for capital resources are to finance working capital, capital expenditures and, from time to time, acquisitions. Working capital investment typically increases during periods of sales expansion when higher levels of receivables and, with regard to non-freight operations, inventory are present. We had long-term debt of $15 million as of March 31, 2001. The unused portion of the company's $50 million revolving credit facility was approximately $32 million. During the three months ended March 31, 2001, net cash provided by operating activities was $2.1 million as compared to $2.6 million in 2000. We believe that our current cash position, funds from operations, and the availability of funds under our credit agreement will be sufficient to meet anticipated liquidity requirements for the next twelve months. At March 31, 2001, working capital was $36.7 million as compared to $37.0 million at December 31, 2000. OUTLOOK - ------- Statements contained herein which are not historical facts are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act ("PSLRA") of 1995. Certain statements contained herein including statements regarding the anticipated development and expansion of our business or the industry in which we operate, our intent, plans, belief or current expectations of the company, our directors or our officers, primarily with respect to the future operating performance or our financial position and other statements contained herein regarding matters that are not historical facts, are "forward-looking" statements (as such term is defined in PSLRA). Because such statements involve risks and uncertainties, actual results may differ materially from those expressed or implied from such forward-looking statements. These risks and uncertainties include competition, weather conditions and the general economy; the availability and cost of labor; interest rates and the company's ability to negotiate favorably with lenders and lessors; the availability and cost of new equipment, fuel and supplies; the market for previously-owned equipment; the impact of changes in the tax and regulatory environment in which we operate, operational risks, insurance and risks associated with the technologies and systems we use. FAIR VALUE OF FINANCIAL INSTRUMENTS - ----------------------------------- As of March 31, 2001, debt stood at $15 million, which approximated fair market value. We sponsor a Rabbi Trust for benefit of participant in a supplemental executive retirement plan. As of March 31, 2001, the trust had about 100,000 shares of our stock. To the extent that trust assets are invested in our stock, our future pre-tax income will reflect changes in the market value of our stock. Other than the impact of our stock owned by the Rabbi Trust, as of March 31, 2001, we held no material market risk sensitive instruments (for trading as well as non-trading purposes) which would involve significant foreign currency exchange rate risk, commodity price risk or other relevant market risks, such as equity price risk. Accordingly, the potential loss to us in future earnings, fair values or cash flows of market risk sensitive investments resulting from changes in interest rates, foreign currency exchange rates, commodity prices and other relevant market rates or prices, other than discussed above, is not significant. PART II - OTHER INFORMATION - --------------------------- Items 1 through 5 of Part II are omitted due to a lack of updated information to disclose pursuant to said items. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.1 Second Amendment to Second Amended and Restated Credit Agreement No reports on Form 8-K were filed during the quarter ended March 31, 2001. SIGNATURES - ---------- Pursuant to the requirements of the Securities and Exchange Act of l934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. Frozen Food Express Industries, Inc. ------------------------------------ (Registrant) May 9, 2001 By: /s/Stoney M. Stubbs, Jr. ------------------------ Stoney M. Stubbs, Jr. Chairman of the Board May 9, 2001 By: /s/F. Dixon McElwee, Jr. ------------------------ F. Dixon McElwee, Jr. Senior Vice President Principal Financial and Accounting Officer EX-10 2 exh10.txt EXHIBIT 10.1 Exhibit 10.1 SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT THIS SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this "Amendment") is entered into as of April ___, 2001, by and among FFE TRANSPORTATION SERVICES, INC., a Delaware corporation ("Borrower"), FROZEN FOOD EXPRESS INDUSTRIES, INC., a Texas corporation ("Parent"), FFE, INC., a Delaware corporation ("FFE"), CONWELL CORPORATION, a Delaware corporation ("Conwell"), W & B REFRIGERATION SERVICE COMPANY, a Delaware corporation ("W&B"), LISA MOTOR LINES, INC., a Delaware corporation ("LML"), FROZEN FOOD EXPRESS, INC., a Texas corporation ("Express"), CONWELL CARTAGE, INC., a Texas corporation ("Cartage"), MIDDLETON TRANSPORTATION COMPANY, a Texas corporation ("Middleton"), COMPRESSORS PLUS, INC., a Texas corporation ("CPI"), AEL TRANSPORTS, INC., a Delaware corporation ("AEL"), FLEET NATIONAL BANK (formerly known as BANKBOSTON, N.A.) ("Fleet"), a national banking association, COMERICA BANK ("Comerica"), WELLS FARGO BANK TEXAS, NATIONAL ASSOCIATION (successor by consolidation to Wells Fargo Bank (Texas), National Association), a national banking association ("Wells Fargo"), each other entity which may from time to time become party hereto as a lender hereunder or any successor or assignee thereof (collectively, other than the Companies, the "Banks") and Wells Fargo as agent for the Banks (in such capacity, "Agent") RECITALS A. Borrower, Parent, FFE, Conwell, W&B, LML, Express, Cartage, Middleton, CPI, AEL, Fleet, Wells Fargo and Comerica (as successor by assignment from Chase Bank of Texas, National Association) are parties to that certain Second Amended and Restated Credit Agreement, dated as of March 1, 2000 (as the same has been and may be further amended, restated or otherwise modified from time to time, the "Credit Agreement"). B. Pursuant to the written request of Fleet National Bank, the Banks have exercised their option under Section 5.1(q)(ii)(A) of the Credit Agreement. C. In connection with the Banks' exercising their option under Section 5.1(q)(ii)(A) of the Credit Agreement, the parties to the Credit Agreement desire to amend the Credit Agreement as hereinafter set forth. NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows: ARTICLE I Definitions Section 1.1 Terms that are used in this Amendment and that are defined in the Credit Agreement are used herein as defined therein, unless otherwise stated. ARTICLE II Amendments Section 2.1 Amendment to Definition of "Borrowing Base". As of the date of this Amendment, the Credit Agreement is amended as follows: The definition of "Borrowing Base" in Article I of the Credit Agreement is amended and restated to read in its entirety as follows: "Borrowing Base" means the sum of (i) an amount equal to ninety percent (90%) of the Net Book Value of Vehicles that are not subject to any Lien other than Liens in favor of Agent and the Banks, plus (ii) eighty percent (80%) of the aggregate Eligible Accounts; all calculated in accordance with GAAP based upon consolidated financial information of Parent and the Subsidiaries, provided, however, that none of the trucks, tractors, trailers, buses, passenger cars, and other automotive vehicles (including, without limitation, any Vehicles) owned or held for sale or lease by W&B shall be included in the calculation of the Borrowing Base. The Borrowing Base shall be determined by Agent from time to time in its good faith judgment. Section 2.2 Addition of Definition of "Hedge Agreement". As of the date of this Amendment, the Credit Agreement is amended as follows: Article I of the Credit Agreement is amended to add the following definition of "Hedge Agreement" to read in its entirety as follows: "Hedge Agreement" means, with respect to Borrower or any other Company, any and all transactions, agreements, documents, or arrangements between Borrower or any other Company and one or more Banks, now existing or hereafter entered into, which provide for an interest rate, credit, commodity, or equity swap, cap, floor, collar, forward foreign exchange transaction, currency swap, cross currency rate swap, currency option, or any combination of, or option with respect to, these or other similar transactions, for the purpose of hedging exposure to fluctuations in interest or exchange rates, loan, credit exchange, security, or currency valuations, or commodity prices or other similar risks. Section 2.3 Amendment to Definition of "Loan Papers". As of the date of this Amendment, the Credit Agreement is amended as follows: The definition of "Loan Papers" in Article I of the Credit Agreement is amended and restated to read in its entirety as follows: "Loan Papers" means this Agreement, the Notes, the Guaranty Agreements, the Custodial Agreement and any and all certificates, mortgages, deeds of trust, security agreements and other documents and agreements executed and/or delivered in connection with the making of Loans or the issuing of Letters of Credit or otherwise pursuant to the terms of this Agreement and any future amendments and supplements thereto and restatements thereof. The "Custodial Agreement" means that certain Custodial Agreement dated as of April ___, 2001, between Agent and Parent, as the "Custodial Agent" thereunder, as agreed and consented to by the Subsidiaries of Parent (including, without limitation, Borrower) and as such agreement may be amended or otherwise modified from time to time. Section 2.4 Amendment to Definition of "Obligations". The definition of "Obligations" in Article I of the Credit Agreement is amended and restated to read in its entirety as follows: "Obligations" means all present and future indebtedness, obligations and liabilities, and all renewals and extensions thereof, or any part thereof, of Borrower or any other Company to Agent and/or any one or more of the Banks and created or evidenced by or existing or arising out of or pursuant to this Agreement, the Revolving Credit Notes, the Swingline Note, any one or more of the other Loan Papers (including, without limitation, the Principal Obligation, the Reimbursement Obligation arising pursuant to any Letters of Credit, and all other indebtedness, obligations, fees and liabilities arising pursuant to this Agreement, or otherwise) and pursuant to or under any Hedge Agreement that Borrower or any other Company may enter into with the express written consent of Agent and the Required Banks, and all interest accruing thereon and costs, expenses and attorneys' fees incurred in the enforcement or collection thereof, regardless of whether such indebtedness, obligations and liabilities are direct, indirect, fixed, contingent, liquidated, unliquidated, joint, several, or joint and several, including, but not limited to, the obligations and liabilities arising pursuant to any of the Loan Papers or Hedge Agreements, and all renewals and extensions thereof, or any part thereof, and all present and future amendments thereto. Section 2.5 Amendment to Definition of "Vehicles". The definition of "Vehicles" in Article I of the Credit Agreement is amended and restated to read in its entirety as follows: "Vehicles" means any and all of the following, whether now owned or hereafter acquired by Parent, Borrower, or any Subsidiary: (i) all trucks, tractors, trailers, buses, passenger cars, and other similar units and automotive vehicles registered in accordance with any Law for public roadway use in the operation of Parent's, Borrower's or any Subsidiary's motor carrier business, and (ii) all related equipment and accessories to any such Vehicles intended for permanent attachment to such Vehicles, including, without limitation, all refrigeration units, tires and tubes; provided, that "Vehicles" shall not include any such property described in the foregoing clauses (i) and (ii) that (x) is leased to any Company by any Person other than another Company, (y) is a vehicle which is intended for use, and is in fact used, solely on location at Parent's, Borrower's or any Subsidiary's place of business (commonly known as "yard hosses"), provided, however, that the aggregate fair market value of all such vehicles shall not at any time exceed $100,000, or (z) constitutes "inventory" as such term is defined in Chapter or Article 9 of the Code, provided, however, that any property that at any time constitutes a Vehicle without giving effect to the foregoing clause (z), but later constitutes "inventory" as such term is defined in Chapter or Article 9 of the Code, shall nevertheless continue to be subject to the provisions of Section 4.2(b) of that certain Amended and Restated Security Agreement dated as of April __, 2001, by and among Borrower, Parent, the Subsidiaries and Agent for and on behalf of the Banks and shall continue to constitute a Vehicle for such purposes. Section 2.6 Amendment to Section 2.7(b). Section 2.7(b) of the Credit Agreement is amended and restated to read in its entirety as follows: (b) Vehicle Sales. Borrower shall prepay the outstanding Loans in an amount equal to the Net Book Value of any Vehicle that is disposed of after a Default or Potential Default has occurred and is continuing. Section 2.7 Amendment to Section 2.15. Section 2.15 of the Credit Agreement is amended and restated in its entirety to read as follows: Section 2.15 Method of Payment. All payments of principal, interest, fees and other amounts to be made by Borrower, Parent or any Subsidiary under this Agreement or any other Loan Paper shall be made via wire transfer of funds to Agent c/o Wells Fargo Bank, NA, San Francisco, California, ABA # 1210-00248, for Account No. 4518-151444, Payee Name Syndic/WFBCORP/FFE Transportation; Reference: FFE Transportation, for the account of each Bank's Applicable Lending Office in Dollars and in immediately available funds, without setoff, deduction or counterclaim, not later than 12:00 noon (Dallas, Texas time) on the date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day). Borrower or such other Person shall, at the time of making each such payment, specify to Agent the sums payable by such Person under this Agreement or the other Loan Document to which each such payment is to be applied (and in the event that such Person fails to so specify, or if an Default has occurred and is continuing or if a Potential Default would exist after the making of such payment, Agent may apply such payment to such Person's Loans, Reimbursement Obligations and other Obligations in such order and manner as Agent may elect, subject to Section 2.16). Upon the occurrence and during the continuation of a Default, all proceeds of any Collateral and all other funds of Borrower, Parent or any Subsidiary in the possession of Agent or any Bank may be applied by Agent to the Obligations in such order and manner as Agent may elect, subject to the provisions of Section 2.16. Notwithstanding the foregoing, if a Default has occurred and is continuing, Agent and the Banks agree among themselves that all such payments, proceeds and funds, shall be applied (or, in the case of Letter of Credit Liabilities consisting of the undrawn face amount of Letters of Credit, held by Agent as cash collateral for application against) pro rata to the unpaid Obligations then due. Each payment received by Agent under this Agreement or any other Loan Paper for the account of a Bank shall be paid promptly to such Bank, in immediately available funds, for the account of such Bank's Applicable Lending Office. Whenever any payment under this Agreement or any other Loan Paper shall be stated to be due on a day that is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of the payment of interest and commitment fee, as the case may be. Section 2.8 Amendments to Section 5.1. Section 5.1 of the Credit Agreement is hereby amended as follows: (i) Clause (l) is hereby amended and restated to read in its entirety as follows: (l) Borrowing Base Reports and Inspections. Deliver to each Bank, concurrently with the delivery of the Financial Statements under Subsection 5.1(a) and the Financial Statements under Subsection 5.1(b), a Borrowing Base Report dated as of the end of the immediately preceding calendar quarter. In addition, no more than once per calendar quarter per Company, each Company shall permit Agent, accompanied by any Bank which so elects (or any representative of Agent or any such Bank), at any reasonable time during regular business hours after prior written notice and at the sole reasonable cost and expense of Borrower in each case, to have access to, examine, audit, make extracts from or copies of, and inspect any or all of Borrower's or any other Company's property, records, files, books of account, and documents relating to, evidencing or constituting any part of the Borrowing Base (each a "Borrowing Base Inspection"); provided, that a Borrowing Base Inspection may be made at any time without restriction when a Potential Default or Default exists; and provided further, that in making any Borrowing Base Inspection, whether or not a Potential Default or Default exists, Agent shall in good faith endeavor to comply with each Company's reasonable standard procedures relating to the security and confidentiality of such property, records, files, books of account and documents. (ii) Clause (q) is hereby amended by deleting clause (iii) therein in its entirety. (iii)the following clause (s) is added thereto immediately following clause (r): (s) Vehicle Reports. Within forty-five (45) days after the end of each fiscal quarter, or after otherwise being requested by Agent from time to time, a list certified by Borrower and an officer of Parent as being true and correct, to the best of such officer's knowledge, and identifying in a form acceptable to Agent all Vehicles owned as of such fiscal quarter end, the identity of the owner of each such Vehicle and all Vehicles acquired or disposed of during the fiscal quarter then ended and, with respect to each Vehicle owned as of such fiscal quarter end, a description of such Vehicle and its Initial Cost and Net Book Value, and, with respect to each Vehicle disposed of, the Net Book Value of such Vehicle. Section 2.9 Amendment to Section 5.2(f). Section 5.2(f) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: (f) Indebtedness. Assume, create or suffer to exist any Indebtedness except (i) Indebtedness owed to the Banks pursuant to this Agreement, (ii) additional Indebtedness not for borrowed money incurred in the ordinary course of business constituting trade payables and accrued liabilities, including, without limitation, accrued Taxes and payroll obligations, (iii) Existing Indebtedness, (iv) Indebtedness under Hedge Agreements and (v) additional Indebtedness for borrowed money incurred in the ordinary course of business not to exceed at any time $1,000,000 in aggregate amount with respect to all Companies. Section 2.10 Amendment to Section 5.2(g). Section 5.2(g) of the Credit Agreement is hereby amended and restated to read in its entirety as follows: (g) Sales of Assets. Be a party to any sale, transfer, or other disposition of all or any substantial part of Borrower's or any other Company's property, assets or business, and in any event will not sell, transfer or otherwise dispose of any of Parent's interest in the Subsidiaries (including, without limitation, any of the stock of the Subsidiaries); provided, however, that neither Borrower nor any other Company may sell, transfer, or dispose of any Vehicle except in compliance with that certain Amended and Restated Security Agreement dated as of April ____, 2001 by and among Borrower, Parent, the Subsidiaries, Agent and the Banks. Section 2.10 Amendment to Schedule 4.3. Schedule 4.3 to the Credit Agreement is hereby amended and restated in its entirety as set forth in Schedule 4.3 attached to this Amendment. ARTICLE III Conditions Precedent Section 3.1 Conditions. The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent: (a) Agent shall have received all of the following, each dated (unless otherwise indicated) the date of this Amendment, fully executed and in form and substance satisfactory to the Agent and the Banks: (i) Amended and Restated Security Agreement. An Amended and Restated Security Agreement in the form of Exhibit A hereto; (ii) Custodial Agreement. A Custodial Agreement in the form of Exhibit B hereto; (iii) Vehicles. A list certified by Borrower and an authorized officer of Parent as being true and correct, to the best of such officer's knowledge, identifying all Vehicles owned by Parent or any of the Subsidiaries as of the date of this Amendment, along with the identity of the owner of each such Vehicle and each such Vehicle's Initial Cost and Net Book Value; and (iv) Additional Information. Such additional documentation and information as Agent may reasonably request; and (b) The representations and warranties contained herein and in all other Loan Papers, as amended hereby, shall be true and correct in all material respects as of the date hereof as if made on the date hereof, except for such representations and warranties limited by their terms to a specific date; (c) Agent shall have received all fees and expenses payable to it under Section 6.3 of this Amendment and all other fees and expenses payable to Agent on or before the date of this Amendment. (d) No Potential Default or Default shall have occurred and be continuing; and (e) All proceedings taken in connection with the transactions contemplated by this Amendment and all documentation and other legal matters incident thereto shall be reasonably satisfactory to Agent and each Bank. ARTICLE IV No Waiver Section 4.1 Except as otherwise specifically provided for in this Amendment, nothing contained herein shall be construed as a waiver by Agent or the Banks of any covenant or provision of the Credit Agreement, the other Loan Papers, this Amendment, or of any other contract or instrument between any Company, Agent and/or the Banks, and the failure of Agent or the Banks at any time or times hereafter to require strict performance by Borrower of any provision thereof shall not waive, affect or diminish any right of Agent or the Banks to thereafter demand strict compliance therewith. Agent and the Banks hereby reserve all rights granted under the Credit Agreement, the other Loan Papers, this Amendment and any other contract or instrument between any Company, Agent and/or the Banks. ARTICLE V Ratifications; Representations and Warranties Section 5.1 Ratifications. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Credit Agreement and the other Loan Papers, and, except as expressly modified and superseded by this Amendment, the terms and provisions of the Credit Agreement and the other Loan Papers are ratified and confirmed and shall continue in full force and effect. The Companies, Agent and the Banks agree that the Credit Agreement and the other Loan Papers, as amended hereby, shall continue to be legal, valid, binding and enforceable in accordance with their respective terms. Section 5.2 Representations and Warranties. Borrower and each other Company jointly and severally represent and warrant to Agent and the Banks that (a) the execution, delivery and performance of this Amendment and any and all other Loan Papers executed and/or delivered in connection herewith have been authorized by all requisite corporate action on the part of the Companies and will not violate the Articles of Incorporation or Bylaws of any Company; (b) the representations and warranties contained in the Credit Agreement, as amended hereby, and other Loan Papers are true and correct on and as of the date hereof and on and as of the date of execution hereof as though made on and as of each such date; (c) no Default under the Credit Agreement, as amended hereby, has occurred and is continuing, unless such Default has been specifically waived in writing by Agent and the Required Banks; (d) each Company is in full compliance with all covenants and agreements applicable to it contained in the Credit Agreement and the other Loan Papers, as amended hereby; and (e) none of the Companies have amended or rescinded or otherwise modified its resolutions attached to the Corporate Certificate delivered by such Company to Agent on March 1, 2000, in connection with the closing of the Credit Agreement. ARTICLE VI Miscellaneous Provisions Section 6.1 Survival of Representations and Warranties. All representations and warranties made in the Credit Agreement and any other Loan Papers, including, without limitation, the documents furnished in connection with this Amendment, shall survive the execution and delivery of this Amendment and the other Loan Papers, and no investigation by Agent or the Banks shsall affect the representations and warranties or the right of Agent or the Banks to rely upon them. Section 6.2 Reference to Credit Agreement. Each of the Credit Agreement and the other Loan Papers, and any and all other agreements, documents or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Credit Agreement, as amended hereby, are hereby amended so that any reference in the Credit Agreement and such other Loan Papers to the Credit Agreement shall mean a reference to the Credit Agreement as amended hereby. Section 6.3 Expenses of Agent and the Banks. As provided in the Credit Agreement, the Companies agree to pay on demand all reasonable costs and expenses incurred by Agent and the Banks in connection with the preparation, negotiation, and execution of this Amendment and the other Loan Papers executed pursuant hereto and any and all amendments, modifications, and supplements thereto, including, without limitation, the reasonable costs and fees of Agent's legal counsel, and all reasonable costs and expenses incurred by Agent in connection with the enforcement or preservation of any rights under the Credit Agreement, as amended hereby, or any other Loan Papers, including, without limitation, the costs and fees of Agent's and the Banks, legal counsel. Section 6.4 Severability. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable. Section 6.5 Successors and Assigns. This Amendment is binding upon and shall inure to the benefit of Agent, the Banks, Borrower and the other Companies and their respective successors and assigns, except that Borrower and the other Companies may not assign or transfer any of their rights or obligations hereunder without the prior written consent of Agent and the Banks. Section 6.6 Counterparts. This Amendment may be executed in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same instrument. Section 6.7 Effect of Waiver. No consent or waiver, express or implied, by Agent or the Banks to or for any breach of or deviation from any covenant or condition by Borrower or any other Company shall be deemed a consent to or waiver of any other breach of the same or any other covenant, condition or duty. Section 6.8 Headings. The headings, captions, and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment. Section 6.9 Applicable Law. THIS AMENDMENT AND ALL OTHER LOAN PAPERS EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE IN AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. CHAPTER 346 OF THE TEXAS FINANCE CODE SHALL NOT APPLY TO THE REVOLVING CREDIT LOANS. Section 6.10 Final Agreement. THE CREDIT AGREEMENT AND THE OTHER LOAN PAPERS, EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE EXPRESSION OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE THIS AMENDMENT IS EXECUTED. THE CREDIT AGREEMENT AND THE OTHER LOAN PAPERS, AS AMENDED HEREBY, MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NO MODIFICATION, RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY PROVISION OF THIS AMENDMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY AN AUTHORIZED OFFICER OF EACH COMPANY AND EACH OF THE REQUIRED BANKS. Section 6.11 Release. EACH COMPANY HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM AGENT OR THE BANKS, EACH COMPANY HEREBY VOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER DISCHARGES AGENT AND THE BANKS, THEIR PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH SUCH COMPANY MAY NOW OR HEREAFTER -HAVE AGAINST AGENT AND/OR THE BANKS, THEIR PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY LOANS, INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN AGREEMENT OR OTHER AGREEMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT. Section 6.12 Guarantor Consent and Ratification. Each of the Companies, other than Borrower, jointly and severally, hereby consents to the terms of this Amendment, confirms and ratifies the terms of each of the other Loan Papers to which it is a party, including the Guaranty Agreement, and acknowledges that each of the other Loan Papers to which it is a party, including the Guaranty Agreement, is in full force and effect on the date executed, that as of the date hereof it has no defense, counterclaim, set-off or any other claim to diminish its liability under such document(s), and that no consent by him/it is required for the effectiveness of any future amendment, modification, forbearance or other action with respect to the Loans, the Collateral, the Credit Agreement or any of the other Loan Papers. Section 6.13 Agreement for Binding Arbitration. Each party to this Amendment hereby acknowledges that it has agreed to be bound by the terms and provisions of the Arbitration Program, a copy of which is attached to the Credit Agreement as Exhibit H, and which is incorporated by reference herein and is acknowledged as received by the parties pursuant to which any and all disputes shall be resolved by mandatory binding arbitration upon the request of any party. IN WITNESS WHEREOF, this Amendment has been executed and is effective as of the date first above written. AGENT: WELLS FARGO BANK TEXAS, NATIONAL ASSOCIATION, successor by consolidation to Wells Fargo Bank (Texas), National Association, Individually and as Agent By: /s/Daniel T. Brown ---------------------- Name: Daniel T. Brown Title: Vice President BORROWER: FFE TRANSPORTATION SERVICES, INC. By: /s/Thomas G. Yetter ------------------------ Name: Thomas G. Yetter Title: Vice President - Finance OTHER BANKS: COMERICA BANK By: /s/ Donald P. Hellman ------------------------ Name: Donald P. Hellman Title: Senior Vice President FLEET NATIONAL BANK By: /s/ Katherine A. Brand ------------------------ Name: Katherine A. Brand Title: Vice President OTHER COMPANIES: FROZEN FOOD EXPRESS INDUSTRIES, INC. By: /s/ Thomas G. Yetter ----------------------- Name: Thomas G. Yetter Title: Treasurer FFE, INC. By: /s/ Thomas G. Yetter ------------------------- Name: Thomas G. Yetter Title: Vice President CONWELL CORPORATION By: /s/ Thomas G. Yetter ------------------------- Name: Thomas G. Yetter Title: Vice President W & B REFRIGERATION SERVICE COMPANY By: /s/ F. Dixon McElwee, Jr. ------------------------- Name: F. Dixon McElwee, Jr. Title: Vice President LISA MOTOR LINES, INC. By: /s/ L. W. Bartholomew -------------------------- Name: L. W. Bartholomew Title: Secretary FROZEN FOOD EXPRESS, INC. By: /s/ F. Dixon McElwee, Jr. -------------------------- Name: F. Dixon McElwee, Jr. Title: Vice President CONWELL CARTAGE, INC. By: /s/ L. W. Bartholomew -------------------------- Name: L. W. Bartholomew Title: Secretary MIDDLETON TRANSPORTATION COMPANY By: /s/ F. Dixon McElwee, Jr. --------------------------- Name: F. Dixon McElwee, Jr. Title: Vice President COMPRESSORS PLUS, INC. By: /s/ L. W. Bartholomew --------------------------- Name: L. W. Bartholomew Title: Secretary -----END PRIVACY-ENHANCED MESSAGE-----