-----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, MdD/oJ1wXoojeoQZzp5mT1S8SA+vDw0dDqMJds+6MiWCklAdgl9uDO5j7WoOPkAS pcqxsJJiAjADxxYWilc4nQ== 0000039273-01-500020.txt : 20020410 0000039273-01-500020.hdr.sgml : 20020410 ACCESSION NUMBER: 0000039273-01-500020 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011113 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: 1934 Act SEC FILE NUMBER: 001-10006 FILM NUMBER: 1785176 BUSINESS ADDRESS: STREET 1: 1145 EMPIRE CENTRAL PLACE CITY: DALLAS STATE: TX ZIP: 75247 BUSINESS PHONE: 2146308090 10-Q 1 q310q.txt 3RD QTR REPORT 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 September 30, 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 Identification No.) incorporation or organization) 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 November 1, 2001, 16,535,000 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 - September 30, 2001 and December 31, 2000 2 Consolidated Statements of Income - Three and Nine months ended September 30, 2001 and 2000 3 Consolidated Condensed Statements of Cash Flows - Nine months ended September 30, 2001 and 2000 4 Notes to Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Item 3. Fair Value of Financial Instruments 11 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 12 FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Condensed Balance Sheets (In thousands) (Unaudited) Sept. 30, Dec. 31, 2001 2000 Assets ---- ---- Current assets Cash $ 970 $ 1,222 Accounts receivable, net 50,955 47,652 Inventories 16,080 17,208 Tires 4,505 4,424 Other current assets 7,084 7,546 ------- ------- Total current assets 79,594 78,052 Property and equipment, net 58,959 61,899 Other assets 13,740 14,778 ------- ------- $152,293 $154,729 ======= ======= Liabilities and Shareholders' Equity Current liabilities Accounts payable $ 24,333 $ 22,209 Accrued claims 7,103 8,101 Accrued payroll 5,934 5,834 Current maturities of long-term debt 938 - Other 2,527 4,892 ------- ------- Total current liabilities 40,835 41,036 Long-term debt 14,062 14,000 Other and deferred credits, net 15,755 17,676 ------- ------- Total liabilities and deferred credits 70,652 72,712 ------- ------- Shareholders' equity Common stock 25,921 25,921 Paid-in capital 4,046 4,655 Retained earnings 57,468 58,187 ------- ------- 87,435 88,763 Less - Treasury stock 5,794 6,746 ------- ------- Total shareholders' equity 81,641 82,017 ------- ------- $152,293 $154,729 ======= ======= 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 For the Nine Months Ended Sept. 30, Ended Sept. 30, --------------- --------------- 2001 2000 2001 2000 ---- ---- ---- ---- Revenue Freight revenue $ 83,903 $ 82,189 $246,835 $240,113 Non-freight revenue 14,226 19,213 40,055 53,704 ------- ------- ------- ------- 98,129 101,402 286,890 293,817 Costs and expenses ------- ------- ------- ------- Freight operating expenses Salaries, wages and related expenses 22,158 22,884 66,105 65,785 Purchased transportation 18,890 20,012 55,963 58,082 Supplies and expenses 25,213 25,126 75,890 69,385 Revenue equipment rent 7,107 6,321 19,913 18,902 Depreciation 2,994 2,848 8,560 8,743 Communications and utilities 984 977 3,026 3,332 Claims and insurance 4,932 5,037 12,670 12,257 Operating taxes and licenses 995 444 2,803 3,210 Miscellaneous expense, net 258 670 1,493 1,474 ------- ------- ------- ------- 83,531 84,319 246,423 241,170 Non-freight costs and operating expenses 13,780 18,454 39,624 51,856 ------- ------- ------- ------- 97,311 102,773 286,047 293,026 ------- ------- ------- ------- Income/(loss) from operations 818 (1,371) 843 791 Interest and other expense, net 576 890 1,951 2,759 ------- ------- ------- ------- Income/(loss) before income tax 242 (2,261) (1,108) (1,968) Provision for income tax 85 (792) (389) (689) ------- ------- ------- ------- Net income/(loss) $ 157 $ (1,469) $ (719) $ (1,279) ======= ======= ======= ======= Net income/(loss) per share of common stock Basic $ 0.01 $ (0.09) $ (0.04) $ (0.08) ======= ======= ======= ======= Diluted $ 0.01 $ (0.09) $ (0.04) $ (0.08) ======= ======= ======= ======= Weighted average shares outstanding Basic 16,388 16,317 16,364 16,319 ======= ======= ======= ======= Diluted 16,405 16,317 16,364 16,319 ======= ======= ======= ======= See accompanying notes. FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows (In thousands) (Unaudited) For the Nine Months Ended Sept. 30, --------------- 2001 2000 ---- ---- Net cash provided by operating activities $ 3,305 $ 7,841 ------ ------ Cash flows from investing activities Expenditures for property and equipment (9,518) (5,088) Proceeds from sale of property and equipment 4,878 6,279 Other (176) (1,268) ------ ------ Net cash used in investing activities (4,816) (77) ------ ------ Cash flows from financing activities Borrowings under revolving credit agreement 17,000 19,000 Payments against revolving credit agreement (16,000) (25,500) Net treasury stock activity 259 (64) ------ ------ Net cash(used in)provided by financing activities 1,259 (6,564) ------ ------ Net(decrease)increase in cash and cash equivalents (252) 1,200 Cash and cash equivalents at January 1 1,222 1,613 ------ ------ Cash and cash equivalents at September 30 $ 970 $ 2,813 ====== ====== See accompanying notes. FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES Notes to Financial Statements September 30, 2001 and 2000 (Unaudited) 1. BASIS OF PRESENTATION --------------------- These 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 by independent public accountants. In the opinion of management, all adjustments (which consisted only of normal recurring accruals) necessary to present fairly our 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 accounting principles generally accepted in the United States have been condensed or omitted from these statements unless significant changes have taken place since the end of the most recent fiscal year. We believe that the disclosures contained herein, when read in conjunction with the financial statements and notes included, or incorporated by reference, in our 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 our report on Form 10-K. 2. SHAREHOLDERS' EQUITY -------------------- As of September 30, 2001 and December 31, 2000, respectively, there were 16,529,000 and 16,395,000 shares of stock outstanding. 3. COMMITMENTS AND CONTINGENCIES ----------------------------- We have accrued for costs related to liability, cargo 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 our 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: 2001 2000 ---- ---- For the three months ended September 30 17,000 - For the nine months ended September 30 - - For the nine months ended September 30, 2001, 15,000 common stock equivalent shares were excluded because inclusion would have been anti-dilutive. 5. OPERATING SEGMENTS ------------------ Our 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. Financial information for each reportable segment for the nine month periods ended September 30, 2001 and 2000 is as follows (in millions): 2001 2000 Freight Operations ---- ---- Total Revenue $246.8 $240.1 Operating Income (loss) 0.4 (1.0) Total Assets 145.3 153.2 Non-Freight Operations Total Revenue $ 43.6 $ 58.2 Operating Income 0.4 1.8 Total Assets 29.9 36.0 Intercompany Eliminations Revenue $ (3.5) $ (4.5) Operating Income - - Assets (22.9) (28.4) Consolidated Revenue $286.9 $293.8 Operating Income 0.8 0.8 Assets 152.3 160.8 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. 6. NEW ACCOUNTING STANDARDS ------------------------ In July 2001 the Financial Accounting Standards Board issued SFAS No. 142 "Goodwill and Other Intangible Assets" (FAS 142). FAS 142 will be effective for fiscal years beginning after December 15, 2001. Under this pronouncement, goodwill and intangible assets with indefinite lives will no longer be amortized but reviewed at least annually for impairment. Separable intangible assets that are not deemed to have indefinite lives will continue to be amortized over their useful lives. In addition, the useful lives of recognized intangible assets acquired in transactions completed before July 1, 2001 will be reassessed and the remaining amortization periods adjusted accordingly. We have evaluated the impact of adopting FAS 142 on our consolidated financial statements and, because the amount of goodwill and other intangible assets in our financial statements is minimal, we do not expect to see a significant impact from the adoption of FAS 142. 7. PRIOR PERIOD AMOUNTS -------------------- Certain amounts reported for prior periods have been reclassified in order to conform with the current period presentation. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - --------------------- The following table summarizes, as a percentage of freight revenue, certain operating expenses for the three- and nine-month periods ended September 30, 2001 and 2000. Three Months Ended Nine Months Ended Sept. 30, Sept. 30, -------- -------- 2001 2000 2001 2000 ---- ---- ---- ---- Salaries, wages and related expenses 26.4% 27.8% 26.8% 27.4% Purchased transportation 22.5 24.3 22.7 24.2 Supplies and expenses 30.1 30.6 30.7 28.9 Revenue equipment rent 8.5 7.7 8.1 7.9 Depreciation 3.6 3.5 3.5 3.6 Claims and insurance 5.9 6.1 5.1 5.1 Other 2.6 2.6 2.9 3.3 Total freight operating ---- ----- ---- ----- expenses 99.6% 102.6% 99.8% 100.4% ==== ===== ==== ===== Third Quarter of 2001 vs. 2000 - ------------------------------ During the third quarter of 2001, our freight revenue increased by 2.1% to $83.9 million. Our non-freight segment generated 14.5% and 18.9% of total revenue during the third quarter of 2001 and 2000, respectively. Full-truckload revenue increased by 7.8% between the two quarters. Factors contributing to the $4.3 million increase in full-truckload revenue were increases in our average length of haul and in the number of shipments we transported. Our less-than-truckload (LTL) revenue declined by $2.6 million between the third quarters of 2000 and 2001. Slackening demand for the refrigerated LTL service we offer, reflected by a 9.5% drop in the number of shipments we hauled, was the primary contributor to this variance. 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 1,280 by the end of the third quarter. The number of full- truckload tractors provided to us by owner-operators increased by about 20 to about 565. As of September 30, 2000, there were approximately 1,170 and 515 tractors, respectively, in our company-operated and independent contractor-provided full-truckload fleets. 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 independent contractor-provided tractors resulted primarily from our continuing efforts to increase the size of the independent contractor full- truckload fleet. Full-truckload activities, which contributed about 71% and 67% of freight revenue during the third quarter of 2001 and 2000, respectively, are conducted primarily with company-operated equipment, while LTL activities primarily involve 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 third quarter of 2001, the percent of freight revenue absorbed by salaries, wages and related expense was 26.4%, as compared to 27.8% during the year-ago quarter. Total salaries and wages fell by 3.2%, but payroll expenses related to drivers, which represent more than half of our payroll, increased by approximately $3 million between the quarters. The increased driver payroll costs resulted primarily from an increase in the average number of company-operated trucks as compared to the year-ago quarter and the continuing impact of driver pay rate increases introduced during mid 2000. Substantially offsetting the increase in driver pay were reductions in non-driver staffing and improvements regarding work-related injuries. During the fourth quarter of 2001, we implemented some changes to our 401(k) savings plan. The changes are designed to reduce the expenses and cashflows associated with company contributions to the 401(k). Purchased transportation, as a percent of freight revenue, fell from 24.3% during the third quarter of 2000 to 22.5% during the comparable 2001 period. Purchased transportation expense includes payments to independent contractors and other service providers such as railroad companies for intermodal services and other motor carriers for linehaul service involving remote locations where 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 has declined by about 1% in this year's third quarter. This resulted from the decreased use of independent contractor equipment. Supplies and expenses decreased from 30.6% to 30.1% of freight revenue between the third quarters of 2000 and 2001. This decrease was related to fuel consumed by our company-operated fleet. Per-gallon costs we paid for fuel fell by 9.1% during the third quarter of 2001 as compared to 2000, but the average number of tractors in the company-operated fleet increased by 8.4% between the two quarters. 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 not willing 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 and 2001, we have been 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. The total of depreciation and revenue equipment rent expense rose from 11.2% of freight revenue for the third quarter of 2000 to 12.1% for the comparable 2001 quarter. This change resulted primarily from the increased use of company-operated equipment in our refrigerated full- truckload operations. Also, during 2001, the market for transportation equipment has deteriorated. For several years, we have sourced a significant portion of our trailer fleet through long-term operating leases. The trailer leases are typically fair market value (FMV) leases where the lessor realizes any gain or loss on the disposition of the leased asset at the end of the lease term. During 2001, as the market values of used trailers declined, many lessors have suffered losses upon the disposition of the assets. This has caused lessors to either withdraw from the market or become more conservative with their residual value expectations when quoting for leases of new trailers. Both of these lessor strategies have resulted in significant increases in the monthly cost of new leased trailers. During 2001, several motor carriers have ceased or curtailed their level of operations. This has resulted in a surplus of two-to-three year old trucking assets available in the marketplace, at deeply discounted prices, relative to the price of new equipment. We have been able to benefit from this situation by acquiring some high-quality previously- owned trailers at attractive prices. With regard to tractors, we are also active in leasing. Our tractor leases have fixed residuals, where the lessor is not at significant risk for the end of the term FMV. Tractor lease residuals are set at an amount that the tractor manufacturer has agreed to pay for the tractor at the end of our 3-year replacement cycle. Such tractor "tradeback" and "buyback" arrangements are commonplace in the trucking industry. During 2001 as the market for used transportation assets softened, our primary tractor manufacturer has been required to buy used equipment at prices well above FMV. Industry publications have reported that some manufacturers might not be able to honor their existing obligations. We have had some communications with our primary manufacturer about this situation and we believe that the issue will be resolved without material financial detriment with regard to tractors that are presently in our fleet. Claims and insurance expense fell from 6.1% of freight revenue during the third quarter of 2000, to 5.9% for 2001. This resulted from a variety of factors, including but not limited to fewer physical damage losses. In December 2000, we renewed our liability insurance coverage. Previously, we had incurred significant but fairly predictable insurance premiums and a comparatively low deductible for accident claims. During 1999 and 2000, however, insurance companies generally began to increase premiums by as much as 40 to 50 percent. At the same time, our overall accident frequency (measured as incidents per million miles) improved, but accidents involving personal injury became more common. Because of these factors, we selected a liability insurance product that features a higher deductible and a higher premium. In December 2001, we will again be renewing this insurance. During the first 8 months of 2001, the marketplace for such coverage continued to harden. The September 11 attacks on America have resulted in an unpredictable and costly insurance market. Trucking and other transportation companies have recently reported significant cost increases in their insurance premiums. It is probable that our December 1, 2001 renewal will involve significant increases in premium expenses, policy deductibles or both. We intend to recover as much of these increases as we can by lowering policy limits, increasing the amount of insurance expenses we charge to our independent contractor fleet and/or increasing the rates our customers pay for our services. We will continue to emphasize operational safety in an effort mitigate the impact of these cost increases. Claims and insurance expenses vary significantly from year to year. The amount of open claims is significant. We believe that these claims will be settled or litigated without a material adverse effect on our financial position or our results of operations. Our operating income was $818,000 during the third quarter of 2001 as compared to an operating loss of $1.4 million in the third quarter of 2000. Interest and other expense, net fell from $890,000 to $576,000 between the two quarters. Decreased interest costs associated with lower levels of borrowed funds was the principal factor affecting this decrease. We earned a pre-tax income of $242,000 during the third quarter of 2001 as compared to a pre-tax loss of $2.3 million during the comparable 2000 period. The provision for income tax was approximately 35% of pre-tax income for both the third quarters of 2001 and 2000. First Nine Months of 2001 vs. 2000 - ---------------------------------- For the first nine months of 2001, revenue from our full-truckload operations rose by $14.2 million, or 8.6%, while revenue from our LTL operations declined by $7.5 million, or 9.9%. Excluding the impact of fuel adjustment charges, freight revenue increased by $4.7 million, or 2%. During the first nine months of 2001, as compared to 2000, revenue from our non-freight segment fell by $13.6 million, or 25.4%. During the first nine months of 2000, our non-freight segment earned an operating profit of $1.8 million, as compared to $431,000 during the comparable 2001 period. Our non-freight segment primarily sells and services trailers and mobile refrigeration equipment. As demand for trucking services has slackened during 2001, so too has the demand for equipment used by providers of such service. This reduction in the demand for the services and products offered by our non-freight segment was a primary contributor to the decline in our total revenue during the first nine months of 2001. In our freight business, our full-truckload operations have continued to expand during 2001, while our LTL operation has continued to contract. Increased competition from logistics outsourcing and freight consolidators has negatively impacted our penetration of the market for refrigerated LTL services. Reduced demand for such services, together with the increased presence of competitors capable of arranging such services have resulted in a 11.6% decrease in the number of LTL shipments we transported this year, as compared to 2000. While LTL operations offer the opportunity to earn higher revenue on a per-mile and per-hundredweight basis than do full-truckload operations, the level of investment and fixed costs associated with LTL activities significantly exceed those of full-truckload activities. Accordingly, as LTL revenue fluctuates, many costs remain fixed, leveraging the impact from such revenue fluctuations on operating income. During 2001, as LTL activity and revenue have declined, many LTL-related costs have remained static. In order to address this challenge, we are exploring and are implementing a number of strategies designed to reduce the level of fixed costs in our LTL operations. The attacks on the World Trade Center and Pentagon in September and the following use of biological agents to disrupt America's political, legal and economic systems has not yet had a measurable impact on our operations. 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, with regard to non-freight operations inventory are present. We had long-term debt of $15 million as of September 30, 2001. The unused portion of the company's $50,000,000 revolving credit facility was approximately $30.8 million. During the nine months ended September 30, 2001, net cash provided by operating activities was $3.3 million as compared to $7.8 million in 2000. This decrease was due primarily increased levels of accounts receivable as well as the settlement during 2001 of certain accrued liabilities that were recorded as expenses during prior years. We believe that our current cash position, funds from operations, and the availability of funds under our credit agreements will be sufficient to meet anticipated liquidity requirements for the next twelve months. At September 30, 2001, working capital was $38.8 million as compared to $39.9 million at September 30, 2000 and $37 million at December 31, 2000. Our revolving credit facility expires on June 1, 2002. We are considering alternatives to provide liquidity beyond that date. The existing facility allows us to convert the amount we owe at expiration into a 4-year term loan with principal payments due in equal monthly installments (in arrears). Accordingly, as of September 30, 2001, 3/48 of the loan balance has been classified as a current liability. OUTLOOK - ------- Certain statements contained herein which are not historical facts are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995 ("PSLRA"). Certain statements contained herein including statements regarding the anticipated development and expansion of the company's business or the industry in which the company operates, the intent, belief or current expectations of the company, its directors or its officers, primarily with respect to the future operating performance of the company 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 demand for the company's services and products, and the company's abilities 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 company's 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 by the company and the other risks and uncertainties described in the company's filings with the Securities and Exchange Commission. FAIR VALUE OF FINANCIAL INSTRUMENTS - ----------------------------------- As of September 30, 2001, debt stood at $15 million, which approximated fair market value. We sponsor a Rabbi Trust for benefit of participants in a supplemental executive retirement plan. As of September 30, 2001, the trust had about 120,000 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 September 30, 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 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.1 First through Fourth Amendments to Frozen Food Express Industries, Inc. 401(k) Savings Plan. (b) No reports on Form 8-K were filed during the quarter ended September 30, 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) November 12,2001 By: /s/Stoney M. Stubbs, Jr. ------------------------------------ Stoney M. Stubbs, Jr. Chairman of the Board November 12, 2001 By: /s/F. Dixon McElwee, Jr. ------------------------------------ F. Dixon McElwee, Jr. Senior Vice President Principal Financial and Accounting Officer EX-10 3 ex103q.txt AMENDMENTS TO 401(K) SAVINGS PLAN Exhibit 10.1 First through Fourth Amendments To the Frozen Food Express Industries, Inc. 401(k) Savings Plan AMENDMENT NUMBER ONE TO THE FROZEN FOOD EXPRESS INDUSTRIES, INC. 401(K) SAVINGS PLAN This amendment, is hereby adopted by Frozen Food Express Industries, Inc. (the "Corporation"), a Texas Business Corporation organized under the laws of the State of Texas, having its principal office in Dallas, Texas. RECITALS WHEREAS, the Corporation previously adopted the Frozen Food Express Industries, Inc. 401(k) Plan (the "Plan"); and WHEREAS, the Corporation desires to amend the Plan in order to change the effective date of certain provisions of the Plan; NOW, THEREFORE, pursuant to Section 15.1 of the Plan, the following provisions shall be effective as of September 10, 1987. 1. Section 3.4 shall be restated to hereinafter be and read as follows: "Section 3.4 Notification of Eligibility and Commencement of Participation. As soon as administratively feasible prior to each Entrance Date, the Employers shall furnish the Committee with a list of all Employees who become eligible or re- eligible to participate in the Plan as of that Entrance Date. The Committee shall promptly notify each such Employee of his prospective participation and provide each such Employee with such explanation of the Plan as the Committee may provide for that purpose, together with such forms as the Committee may prescribe for elections to participate in the Plan. Such forms shall include elections for (1) Savings Contributions (via payroll deduction); (2) investment direction of a Participant's accounts and (3) Beneficiary designation. Each Employee shall be eligible to have Savings Contributions made on his behalf as of the Entrance Date concurrent with or next following the date on which he (1) becomes a Participant in accordance with Plan Section 3.1, and (2) has signed and returned all election forms as required by the Employer. In accordance with Plan Section 4.1(b), if the Employee has not submitted all election forms as of the Entrance Date concurrent with or next following the date on which he becomes a Participant, the Employee shall be eligible to have Savings Contributions made on his behalf as of the payroll period concurrent with or next following the date the Employee submits such election forms." 2. Section 4.1(b) shall be restated to hereinafter be and read as follows: "(b) A Participant who does not have an election to have Savings Contributions made on his behalf in effect, or any Participant who would like to amend his election, may make such election or amend such election, effective as of the next following payroll period by filing an election with the Plan Administrator within a reasonable time prior to commencement of such payroll period. The Plan Administrator may permit a participant to make an election under this Section through any written, electronic or telephonic means authorized by the Committee. Any such election or amendment of an election shall be effective only with respect to Compensation payable after the Plan Administrator receives such election." IN WITNESS WHEREOF, this instrument was executed on this the 23 day of February, 2001. EMPLOYER: FROZEN FOOD EXPRESS INDUSTRIES, INC. ----------------------------------------- By: /s/ Stoney M. Stubbs, Jr . ----------------------------------- Name: Stoney M. Stubbs, Jr. ----------------------------------- Its: President and Chairman of the Board ----------------------------------- Second Amendment to Frozen Food Express Industries, Inc. 401(k) Savings Plan This Amendment is adopted by Frozen Food Express Industries, Inc. (the "Company"), a Texas Corporation, having its principal office in Dallas, Texas. R E C I T A L S: WHEREAS, the Company has previously established the Frozen Food Express Industries, Inc. 401(k) Savings Plan (the "Plan") for the benefit of those employees who qualify thereunder and for their beneficiaries; and WHEREAS, the Company desires to amend the Plan to provide that if an employee terminates employment and is subsequently re-employed after incurring a Break in Service, Service prior to the Break in Service will be taken into account immediately upon re-employment; and WHEREAS, the Company desires to amend the Plan to provide that if a participant who was not entitled to any vested percentage prior to a Break in Service later resumes employment, he will be credited with pre- break Years of Service; and WHEREAS, the Company desires to amend the Plan to provide that a participant who receives a hardship withdrawal from the Plan will neither be required to suspend Savings Contributions (as defined in the Plan) for 12 months after receipt of the hardship distribution nor be limited in the amount of Savings Contributions he may make in the taxable year following the taxable year of the distribution, other than the otherwise applicable limit in Internal Revenue Code Section 402(g); and WHEREAS, the Company desires to amend the Plan to provide that hardship distributions are not eligible rollover distributions; NOW, THEREFORE, pursuant to Section 15.1 of the Plan, the following amendments are hereby made and shall be effective January 1, 2001, or as otherwise indicated: 1. Section 2.68 of the Plan is amended to hereafter be and read as follows: "2.68 Year of Service. (a) For purposes of eligibility, a Year of Service means the twelve (12) consecutive month period commencing on an Employee's Employment Commencement Date and ending on the anniversary of the Employee's Employment Commencement Date. If an Employee fails to complete a Year of Service on the first anniversary of the Employment Commencement Date, the Employee shall be deemed to complete a Year of Service upon the completion of twelve (12) months of Service. An Employee shall receive credit for the aggregate of all time periods commencing with the first day the Employee is entitled to credit for an Hour of Service, including the Re-Employment Commencement Date, and ending on the date a Break in Service begins. An Employee also shall receive credit for any Period of Severance of less than twelve (12) consecutive months. Fractional periods of a year shall be expressed in terms of months, with credit for a month of service being given for each thirty (30) days of Elapsed Time. (b) For purposes of vesting, and subject to Section 6.3, a Year of Service means twelve (12) months of Service. For purposes of determining an Employee's Years of Service for vesting purposes, an Employee shall receive credit for the aggregate of all time periods commencing on an Employee's Employment Commencement Date, including the Re-Employment Commencement Date, and ending on the date a Break in Service begins. An Employee also shall receive credit for any Period of Severance of less than twelve (12) consecutive months. Fractional periods of a year shall be expressed in terms of months, with credit for a month of service being given for each thirty (30) days of Elapsed Time. In computing an Employee's Years of Service, the following rules shall apply: (i) For an Employee who terminates employment and is subsequently re-employed after incurring a Break in Service, Service prior to the Break in Service shall be taken into account immediately upon re-employment. (ii) For a Participant who terminates employment and who subsequently is re-employed after incurring five (5) consecutive Breaks in Service, Years of Service after the Break in Service shall not be taken into account for purposes of determining the Nonforfeitable percentage of an Employee's Account Balance derived from Employer Contributions which accrued before the Break in Service. (iii) For a Participant who terminates employment without any vested right to his Discretionary Employer Contribution Account or Matching Employer Contribution Account and who is re-employed after a Break in Service, Service before the Break in Service shall be taken into account for purposes of determining the Nonforfeitable percentage of an Employee's Account Balance derived from Employer Contributions which accrue after the Break in Service. (iv) Years of Service, for purposes of vesting, shall include all Years of Service of the Employee with any Predecessor Employer. (v) Years of Service with the Employer before a Participant enters the Plan shall be considered for purposes of vesting. (vi) If the Employer is a member of a group of Related Employers, then Year of Service for purposes of vesting shall include Service with any Related Employer. (vii) For purposes of determining Years of Service for vesting, the following definitions shall apply: (A) Employment Commencement Date means the date on which an Employee is first entitled to credit for an Hour of Service. (B) Period of Severance means the period of time commencing on the Severance from Service Date and ending on the date on which the Employee again performs an Hour of Service for the Employer. (C) Re-Employment Commencement Date means the first date, following a Period of Severance which is not required to be considered under the Service rules, on which the Employee performs an Hour of Service for the Employer. (D) Severance from Service Date means the date on which occurs the earlier of: (i) the date on which an Employee quits, retires, is discharged or dies; or (ii) the first anniversary of the first date of a period in which an Employee remains absent from Service, with or without pay, with the Employer for any other reason, such as vacation, holiday, sickness, disability, leave of absence or layoff. (c) For purposes of vesting, an Employee's years of service with W & B Refrigeration Service Co., Inc. shall be counted as Years of Service under this Plan to the extent that such service was counted as years of service under the W & B Refrigeration Service Co., Inc. Employees' Profit Sharing Plan and Trust. (d) For purposes of determining vesting of a Participant's ESOP Transfer Account, the Service crediting provisions of Section 2.56 of the Plan shall apply. (e) The terms defined in this Section 2.68 shall include Years of Service performed by an Employee prior to the Effective Date." 2. Section 6.3 of the Plan is amended to hereafter be and read as follows: "6.3 Computation of Years of Service for Vesting. (a) General. For purposes of computing a Participant's or Former Participant's Vested Percentage of his Discretionary Employer Contribution Account, Matching Employer Contribution Account, and ESOP Transfer Account, each Participant or Former Participant shall be credited with all Years of Service to which he is entitled pursuant to Section 2.68. (b) Forfeitures. When a Participant has Separated from Service, his Matching Employer Contribution, Discretionary Employer Contribution, and ESOP Transfer Accounts shall be divided into two portions, one representing the vested portion, and the other representing the forfeiture portion, of such accounts. Such accounts shall continue to receive income allocations pursuant to Section 5.2 until distributed in full. A Participant shall forfeit the forfeiture portion of his Matching Employer Contribution, Discretionary Employer Contribution, and ESOP Transfer Accounts on the earlier of the date on which the Participant incurs five (5) consecutive one year Breaks-in- Service or the date on which the Participant receives a Cashout Distribution. A "Cashout Distribution" means a lump sum distribution pursuant to Section 11.1 that occurs concurrently with or at any time subsequent to the date on which the Participant separates from Service. For purposes of this Section, a Participant who separates from Service without a nonforfeitable percentage in the Participant's Matching Employer Contribution, Discretionary Employer Contribution, and ESOP Transfer Accounts shall be deemed to have received a distribution of such Accounts on the date of separation from Service, or if the Participant is entitled to an allocation of Matching Employer Contributions for the Plan Year in which he separates from Service, on the last day of that Plan Year. The amount forfeited under this Section shall remain in the Trust Fund and shall be allocated as provided in Section 5.5. (c) Benefit Accruals and Repayments. (i) For purposes of determining a Participant's Vested Percentage under the Plan, the Plan will disregard service performed by the Participant with respect to which he has received a distribution if the present value of his entire Vested Percentage of such distribution was not more than $5,000. This paragraph (i) shall apply, however, only if such distribution was made on termination of the Participant's participation in the Plan. (ii) For purposes of determining a Participant's Vested Percentage under the Plan, the Plan will not disregard service as provided in paragraph (c)(i) above if the Participant repays the full amount of the distribution described in such paragraph (c)(i). Upon such repayment, the Participant's account balance prior to the distribution will be restored (unadjusted by any gains or losses between the time of distribution and the time of repayment) and his Vested Percentage will be recomputed by taking into account service so disregarded. This paragraph (ii) shall apply, however, only in the case of a Participant who -- (A) resumes employment before the date on which he would have incurred five (5) consecutive Breaks-in-Service; and (B) repays the full amount of such distribution before the date on which he would have incurred five (5) consecutive Breaks-in-Service. The Employer will make a special restoration contribution to the Plan in order to restore any account balances hereunder. For purposes of Plan Section 5.6 and Code Section 415(c), the repayment by the Participant and the restoration will not be treated as "annual additions."" 3. Section 10.1(a)(i)(C) of the Plan is amended to hereafter be and read as follows: "(C) In addition to the conditions above, any hardship withdrawal to a Participant made pursuant to this Section shall be increased by an amount equal to the lesser of: (1) all federal, state, and local income taxes and associated penalties (including, if applicable, the additional income tax described in Code Section 72(t) imposed with respect to such hardship withdrawal); or (2) the amount, if any, in such Participant's Savings Account in excess of such hardship withdrawal." 4. Effective January 1, 1999, Section 11.5(b)(i) of the Plan is amended as underlined to hereafter be and read as follows: "(i) An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Code Section 401(a)(9); the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to Employer Securities); and, effective January 1, 1999, hardship distributions made pursuant to Section 10.1(a)(i)." IN WITNESS WHEREOF, FROZEN FOOD EXPRESS INDUSTRIES, INC. has caused this First Amendment to be executed on this 22 day of June, 2001, effective as of January 1, 2001, by the undersigned duly appointed and authorized officer. FROZEN FOOD EXPRESS INDUSTRIES, INC. ----------------------------------------- By: /s/ Stoney M. Stubbs, Jr. ------------------------------------ Name: Stoney M. Stubbs, Jr. ------------------------------------ Title: President and Chairman of the Board ------------------------------------ Third Amendment to Frozen Food Express Industries, Inc. 401(k) Savings Plan This Amendment is adopted by Frozen Food Express Industries, Inc. (the "Company"), a Texas Corporation, having its principal office in Dallas, Texas. R E C I T A L S: WHEREAS, the Company has previously established the Frozen Food Express Industries, Inc. 401(k) Savings Plan (the "Plan") for the benefit of those employees who qualify thereunder and for their beneficiaries; and WHEREAS, the Company desires to amend the Plan to provide, effective January 1, 2001, that the Plan Administrator shall be the Company; NOW, THEREFORE, pursuant to Section 15.1 of the Plan, the following amendment is hereby made and shall be effective January 1, 2001: Section 2.3 of the Plan is amended to hereafter be and read as follows: "2.3 Administrator. Administrator means the Company, unless the Company designates another person to hold the position of Administrator by written action." IN WITNESS WHEREOF, FROZEN FOOD EXPRESS INDUSTRIES, INC. has caused this Third Amendment to be executed on this 31 day of October, 2001, effective as of January 1, 2001, by the undersigned duly appointed and authorized officer. FROZEN FOOD EXPRESS INDUSTRIES, INC. ------------------------------------------ By: /s/ Stoney M. Stubbs, Jr. ----------------------------------- Name: Stoney M. Stubbs, Jr. ----------------------------------- Title: President and Chairman of the Board ----------------------------------- Fourth Amendment to Frozen Food Express Industries, Inc. 401(k) Savings Plan This Amendment is adopted by Frozen Food Express Industries, Inc. (the "Company"), a Texas Corporation, having its principal office in Dallas, Texas. R E C I T A L S: WHEREAS, the Company has previously established the Frozen Food Express Industries, Inc. 401(k) Savings Plan (the "Plan") for the benefit of those employees who qualify thereunder and for their beneficiaries; and WHEREAS, the Company desires to amend the Plan to provide, effective November 1, 2001, that employer matching contributions to the Plan will equal fifty percent (50%) of each participant's savings contribution for each payroll period that does not exceed four percent (4%) of such participant's compensation for the payroll period; and WHEREAS, the Company desires to further amend the Plan to provide, effective November 1, 2001, that employer matching contributions to the Plan will be made in Company Stock (as defined in the Plan), not cash; NOW, THEREFORE, pursuant to Section 15.1 of the Plan, Section 4.2(a) of the Plan is amended as underlined to be and read as follows, effective November 1, 2001: "(a) Matching Employer Contributions. In addition to the total amount of Savings Contributions elected for each month pursuant to Section 4.1, but subject to the limits of Section 4.2(c), each Employer shall, as a Matching Employer Contribution to the Plan, pay to the Trustee for each calendar quarter an amount equal to fifty percent (50%) of each Participant's Savings Contributions for each payroll period pursuant to Section 4.1 hereof which does not exceed four percent (4%) of his Compensation for such payroll period. Matching Employer Contributions shall be made in Company Stock in accordance with the closing market price on the business day immediately preceding the day such Contributions are made. In accordance with Section 7.2(a), such Contributions may be re-invested by the Trustee in accordance with Participant direction." IN WITNESS WHEREOF, FROZEN FOOD EXPRESS INDUSTRIES, INC. has caused this Fourth Amendment to be executed on this 31 day of October 2001, effective as of November 1, 2001, by the undersigned duly appointed and authorized officer. FROZEN FOOD EXPRESS INDUSTRIES, INC. ------------------------------------------ By: /s/ Stoney M. Stubbs, Jr. ----------------------------------- Name: Stoney M. Stubbs, Jr. ----------------------------------- Title: President and Chairman of the Board ----------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----