EX-99.3 OTHER FIN ST 6 ex993.txt PLAN EXHIBIT 99.3 FROZEN FOOD EXPRESS INDUSTRIES, INC. 401(k) SAVINGS PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS December 31, 2002 and 2001 2002 2001 ---- ---- Investments $16,325,132 $16,295,625 Participant notes receivable 1,318,015 1,215,761 Employer contributions receivable 58,232 43,239 Employee contributions receivable 146,816 143,697 ---------- ---------- Total investments 17,848,195 17,698,322 Less: Benefits payable 1,691,987 1,893,432 ---------- ---------- Net assets available for plan benefits $16,156,208 $15,804,890 ========== ========== See accompanying notes and report of independent public accountants. FROZEN FOOD EXPRESS INDUSTRIES, INC. 401(k) SAVINGS PLAN STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS Years Ended December 31, 2002, 2001 and 2000 2002 2001 2000 ---- ---- ---- Investment income: Dividend income $ 67,851 $ 94,463 $ 200,154 Interest income 187,686 219,148 198,558 ---------- ---------- --------- 255,537 313,611 398,712 ---------- ---------- --------- Administration expense (189,212) (158,408) (196,995) Realized loss (1,440,830) (1,450,177) (1,329,717) Net unrealized appreciation (depreciation)in market value of investments 2,630,175 1,519,821 (3,898,991) Employee contributions 1,759,504 2,159,034 2,371,661 Employer contributions 581,903 991,054 1,309,519 ---------- ---------- ---------- 3,341,540 3,061,324 (1,744,523) Decrease in fair market value of plan benefits payable to participants (2,555,376) (1,547,380) (3,248,303) ---------- ---------- ---------- Net increase (decrease) 1,041,701 1,827,555 (4,594,114) Assets transferred from: FFE Transportation Services, Inc. Employee Stock Ownership Plan -- -- 5,063,801 Conwell Corporation Employee Stock Ownership Plan -- -- 541,720 Assets transferred to W&B (690,383) -- -- Net assets available for plan benefits at beginning of year 15,804,890 13,977,335 12,965,928 ---------- ---------- ---------- Net assets available for plan benefits at end of year $16,156,208 $15,804,890 $13,977,335 ========== ========== ========== See accompanying notes and report of independent public accountants. FROZEN FOOD EXPRESS INDUSTRIES, INC. 401(k) SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS December 31, 2002 1. Description of the Savings Plan ------------------------ The Frozen Food Express Industries, Inc. 401(k) Savings Plan (the "Savings Plan") is a defined contribution plan covering substantially all employees of Frozen Food Express Industries, Inc. ("FFEX") and its wholly-owned subsidiaries (the "Employer"). The Savings Plan is designed to comply with the Employee Retirement Income Security Act of 1974 ("ERISA") and to allow employees the option of investing in common stock of the Employer or in other investment funds designated by the Savings Plan committee. Participants should refer to the Savings Plan agreement for a more complete description of the Savings Plan's provisions. Contributions - Participants may elect to contribute to the Savings Plan through periodic payroll deductions, subject to limits defined by the Savings Plan. Employee contributions, excluding rollovers, amounted to $1,665,054, $2,126,687, and $2,072,414, in 2002, 2001, and 2000, respectively. In addition, Employer cash contributions to the Savings Plan amounted to $1,084, $928,615, and $1,309,519 in 2002, 2001 and 2000, respectively. During 2002, 2001, and 2000, 243,028, 29,059 shares, and 0 shares, respectively, of FFEX treasury stock, valued at $580,819 and $62,439 and 0 respectively, were contributed to the Savings Plan. Eligibility - An Employee who completes 90 days of employment with an Employer may enter the Savings Plan on the first business day of the month thereafter. Participants' accounts - Each Participant account is credited with the Participant's contributions and an allocation of (a) the Employer's contributions, and (b) plan earnings. Allocations of plan earnings are based on Participants' account balances, allocation of Employers' contri- butions are based on Participants' quarterly contributions, and allocations of forfeitures are based on the participants' annual compensation. Participant Notes Receivable - Participants may borrow from their fund accounts an amount not to exceed the lesser of $50,000 or 50% of the Participant's vested account balance. Loan transactions are treated as a transfer to (from) the investment fund and from (to) Participant Notes Receivable. Loan terms range from one to five years or up to ten years for the purchase of a primary residence. The loans are secured by the balance in the participant's account and bear interest at a reasonable rate as determined by the Savings Committee. The interest rates charged for loans made in 2002 and 2001 ranged from 5.25% to 10.50%, respectively. Principal and interest payments are due in substantially level amortized payments payable not less than quarterly through payroll deductions. Vesting - Upon termination of employment, participants are entitled to receive 100% of their contributions and any earnings thereon. Participants' benefits from Employer contributions begin to vest subsequent to completion of three years of credited service and vest 100% at completion of seven years of credited service as defined by the Savings Plan. Investment options - During each of the three years ending December 31, 2002, Participants could direct employee contributions in any of ten investment options, as follows: Stable Value Fund - The fund invests in assets whose principal value remains stable regardless of stock and bond market fluctuations. The Savings Plan committee has selected the Schwab Institutional Advantage Money Fund as the investment vehicle for this fund. Intermediate Bond Fund - The fund invests in fixed-income securities including corporate bonds, U.S. government securities, mortgage- related securities, and money-market instruments. The Savings Plan committee has selected the PIMCO Total Return Institutional Fund as the investment vehicle for this fund. Mixed Investment Fund - The fund may invest a large portion of its assets in common stock and convertible securities. Prospective dividends and earnings are major considerations in these purchases. The Savings Plan committee has selected the Janus Balanced Fund as the investment vehicle for this fund. Stock Index Fund - The fund attempts to replicate the aggregate return and risk of the Standard & Poor's 500 index. The fund will purchase all, or a representative sample of all the stocks held in the S&P 500 index. The Savings Plan committee has selected the Schwab S&P 500 Index Fund as the investment vehicle for this fund. Basic Stock Fund - The fund seeks capital appreciation by investing primarily in securities that are expected to grow at an above- average rate. The Savings Plan committee has selected the MFS Massachusetts Investment Trust Fund-Class A and the Dreyfus Appreciation fund as the investment vehicles for this fund. Growth Stock Fund - The fund invests primarily in common stocks and favors securities of companies expected to benefit from special favors or trends. The Savings Plan committee has selected the Managers Special Equity Fund as the investment vehicle for this fund. Small Cap Stock Fund - The fund seeks capital growth by investing in small-sized companies that are currently considered undervalued or demonstrate growth in earnings and revenue. The Savings Plan committee has selected the Baron Asset Fund as the investment vehicle for this fund. International Stock Fund - The fund invests primarily in stocks and debt securities of companies and governments outside the United States. The Savings Plan committee has selected the Deutsche International Equity Investment Fund as the investment vehicle for this fund. Technology Sector Fund - This fund invests primarily in stocks of companies engaged in technology-related fields, such as computers, communications, video and electronics. The Savings Plan committee has selected Investco Technology II Fund as the investment vehicle for this fund. Frozen Food Express Industries, Inc. Common Stock - Funds that are invested in the common stock of FFEX. Administration - The Savings Plan is administered by a committee appointed by the Board of Directors of FFEX. Administrative expenses not paid by FFEX are paid by the Savings Plan. Termination of the Plan - While no Employer has not expressed any intent to discontinue its contributions, Employers are free to discontinue contributions and FFEX may terminate the Savings Plan at any time. If terminated, net assets of the Savings Plan would be distributed to Participants and beneficiaries as prescribed by the terms of the Savings Plan, in accordance with ERISA. Upon termination of the Savings Plan, Participants' accounts become 100% vested. Tax status - The United States Treasury Department has advised that the Savings Plan constitutes a qualified trust under Section 401(a) of the Internal Revenue Code (the "Code") and is therefore exempt from federal income tax under provisions of Section 501(a) of the Code. The plan has been amended since receiving the determination letter to conform with recent changes in the tax code. The plan administrator and the plan's tax counsel believe that the plan is currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code. Participant contributions, Employer contributions, and earnings from the Savings Plan are not includable in the Participant's taxable income until such amounts are distributed to the Participant or to the Partici- pant's beneficiary. Forfeited accounts - At December 31, 2002, forfeited nonvested accounts totaled $23,762. These accounts will be used to reduce Employer expenses. During 2002, Employer contributions were reduced by $148,507 from forfeited nonvested accounts. 2. Summary of significant accounting policies ------------------------------------------- Basis of accounting - The financial statements of the Savings Plan are under the accrual method of accounting. Accounting estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Savings Plan committee to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the re- ported period. Actual outcomes may vary from these estimates. Valuation of investments - Investments are valued based on the quoted market price on the last day of the year. The change in the difference between current market value and cost of the investment is reflected in the statement of changes in net assets available for plan benefits by investment fund as net unrealized appreciation or depreciation in market value of investments. 3. The following presents net assets of investments at December 31, 2002 and 2001: 2002 2001 ----- ----- Frozen Food Express Industries, Inc. Common Stock 3,794,603 and 4,358,964 shares, respectively $8,690,769 $8,025,443* Scudder International Equity Fund, 14,090 and 13,775 shares, respectively 213,859 241,725 Baron Asset Fund, 11,780 and 9,752 shares, respectively 390,337 405,329 Dreyfus Appreciation Fund, 18,615 and 16,895 shares, respectively 551,187 591,261 Schwab S&P 500 Index Fund, 45,462 and 35,961 shares, respectively 590,422 603,865 MFS Massachusetts Investment Trust Fund - Class A, 64,448 and 64,590 shares, respectively 778,211 979,689 Janus Balanced Fund, 76,987 and 71,456 shares, respectively 1,303,684 1,333,973 PIMCO Total Return Institutional Fund, 113,406 and 91,637 shares, respectively 1,152,218 899,202 Invesco Technology II, 2,847 and 1,788 shares, respectively 48,932 58,182 Managers Special Equity Fund, 2,945 and 1,765 shares, respectively 162,090 123,609 Schwab Institutional Advantage Money Fund, 956,484 and 1,387,412 shares, respectively 956,484 1,326,851 --------- ---------- $14,838,193 $ 14,589,129 ========== ========== * Nonparticipant-directed shares at December 31, 2002 and 2001 respectively were 1,783,689 and 2,542,634 with net asset value of $4,632,242 and $5,441,236. During 2002, the Plan's investments (including gains and losses on investments bought and sold, as well held during the year) appreciated in value by $249,064 as follows: Mutual Funds $(416,262) Common Stock 665,326 -------- $ 249,064 ======== 4. Merger ----------- On January 1, 2000, the Conwell Corporation and FFE Transportation Services, Inc. Employee Stock Ownership Plans (the "ESOPs") were merged into the Savings Plan. The transfer of net assets was credited to separate participant accounts of the Savings Plan as of January 1, 2000, in amounts equal to their balances as previously carried in the separate accounts of the ESOPs. 5. Income Tax Status ------------------ The Savings Plan obtained its latest determination letter on August 29, 1996, in which the Internal Revenue Service stated that the plan, as then designed, was in compliance with the applicable requirements of the Internal Revenue Code. The Savings Plan has been amended since receiving the determination letter. However, the Savings Plan administrator and the tax counsel believe that the Savings Plan is currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code. Therefore, no provision for income taxes has been reflected in the Savings Plan's financial statements. 6. Plan Amendment -------------- During the year, the plan was amended to conform with certain changes in the tax code as a result of the Economic Growth and Tax Relief Reconciliation Act of 2001. Changes to the plan included catch-up provisions, new vesting schedule, increases in salary deferral limits and other related items. 7. Divestiture ----------- In May 2002, approximately $690,000 was transferred to the Savings Plan of one of the Sponsor's former subsidiaries and is reflected on the Statement of Changes in Net Assets. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------- The Administrative Committee of the Savings Plan for Employees of Frozen Food Express Industries, Inc.: We have audited the accompanying statements of net assets available for plan benefits of the Frozen Food Express Industries, Inc. 401(K) Savings Plan (the "Plan") as of December 31, 2002 and 2001, and the related statements of changes in net assets available for plan benefits for each of the three years in the period ended December 31, 2002. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for plan benefits of the Savings Plan for Employees of Frozen Food Express Industries, Inc. as of December 31,2002 and 2001, and the changes in net assets available for plan benefits in each of the three years in the period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules on pages 23, 24, and 25 are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedules on pages 23,24 and 25 have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the foregoing basic financial statements taken as a whole. /s/ Waters, Wright & Associates, LLP ------------------------------------- Mansfield, Texas June 19, 2003 SUPPLEMENTAL SCHEDULES FROZEN FOOD EXPRESS INDUSTRIES, INC. 401(k) SAVINGS PLAN PLAN 001 EIN 75-1031831 SCHEDULE H, LINE 4i-SCHEDULE OF ASSETS (HELD AT END OF YEAR) December 31, 2002 (a) (b) (c) (d) (e) Identity of Issue Description of Investment Cost Current Value -------------------- ------------------------ ----- ------------ Cash United States Dollars $ 6,606 $ 6,606 * Frozen Food Express Industries, Inc. Common Stock 3,794,603 shares 14,289,071 9,854,585 Scudder International Equity Fund 14,090 shares 301,049 220,084 Baron Asset Fund 11,780 shares 558,053 405,455 Dreyfus Appreciation Fund 18,615 shares 738,765 580,796 Schwab S&P 500 Index Fund 45,462 shares 825,549 615,551 MFS Massachusetts Investment Trust Fund - Class A 64,448 shares 1,186,764 829,445 Janus Balanced Fund 76,987 shares 1,579,405 1,376,535 PIMCO Total Return Institutional Fund 113,406 shares 1,188,531 1,210,045 Invesco Technology II 2,847 shares 75,703 48,935 Managers Special Equity Fund 2,945 shares 196,847 162,212 Schwab Institutional Advantage Money Fund 1,014,883 shares 1,014,883 1,014,883 --------- ---------- $21,961,226 $16,325,132 ========== ========== Participants' notes Interest bearing notes at receivable 5.25%-10.50% N/A $ 1,318,015 * Party-in-interest to the plan. FROZEN FOOD EXPRESS INDUSTRIES, INC. 401(k) SAVINGS PLAN PLAN 001 EIN 75-1031831 SCHEDULE H, LINE 4i-SCHEDULE OF ASSETS (ACQUIRED AND DISPOSED OF WITHIN YEAR) December 31, 2002 (a) (b) (c) (d) Identity of Issue Description of Investment Cost Proceeds ----------------- ------------------------- ---------- --------- Frozen Food Express Industries, Inc. Common Stock 766,997 Shares $2,840,851 $1,691,885 * These are total shares sold within the plan year, not necessarily just those shares acquired and disposed within the plan year. All other investment assets that were both acquired and disposed of during the plan year were interests issued by a company registered under the Investment Company Act of 1940. Therefore, these transactions are excluded from this schedule in accordance with the Specific Instructions for Form 5500. FROZEN FOOD EXPRESS INDUSTRIES, INC. 401(k) SAVINGS PLAN PLAN 001 EIN 75-1031831 SCHEDULE H, LINE 4J-SCHEDULE OF REPORTABLE TRANSACTIONS December 31, 2002 Purchases -------------------------- Identity Of Shares/ Market Net Gain Party Involved Description Units Cost Value or (Loss) ------------- ----------- ------ ---- -------- -------- 2002 ---- Frozen Food Express Industries, Inc. * Common Stock 257,102 $630,957 $667,694 $36,737 MFS Trust Large-cap Stock 18,882 275,743 243,008 (32,735) Schwab Stable Value 511,845 511,845 511,845 - PIMCO Intermediate Bond 55,492 592,380 592,099 (281) Baron Mid-cap Stock 5,365 215,769 184,672 (31,097) Scudder International Stock 6,912 120,505 107,968 (12,537) Dreyfus Large-cap Stock 8,256 288,039 257,600 (30,439) Janus Balanced Investment 31,011 585,141 554,480 (30,661) Schwab Stock Index 22,095 341,344 299,173 (42,171) Invesco Technology 3,332 78,381 57,280 (21,101) Managers Small-cap Stock 2,121 133,388 116,826 (16,562) * Party in interest to the Plan