EX-99.1 7 ffex_10kex99-1.txt EXHIBIT 99.1 FROZEN FOOD EXPRESS INDUSTRIES, INC. 401(k) SAVINGS PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS December 31, 2003 and 2002 2003 2002 ------------ ------------ Investments $32,054,610 $16,325,132 Participant notes receivable 1,489,667 1,318,015 Employer contributions receivable 51,014 58,232 Employee contributions receivable 135,609 146,816 Other 21,515 -- ------------ ------------ Total investments 33,752,415 17,848,195 ------------ ------------ Less: Benefits payable 3,557,532 1,691,987 Other 17,651 -- ------------ ------------ 3,575,183 1,691,987 ------------ ------------ Net assets available for plan benefits $30,177,232 $16,156,208 ============ ============ See accompanying notes and report of independent registered public accounting firm. 10 FROZEN FOOD EXPRESS INDUSTRIES, INC. 401(k) SAVINGS PLAN STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS Years Ended December 31, 2003, 2002 and 2001 2003 2002 2001 ------------- ------------- ------------- Investment income: Dividend income $ 44,063 $ 67,851 $ 94,463 Interest income 164,106 187,686 219,148 ------------- ------------- ------------- 208,169 255,537 313,611 ------------- ------------- ------------- Administration expense (67,908) (189,212) (158,408) Realized gain (loss) 1,022,083 (1,440,830) (1,450,177) Net unrealized appreciation in market value of investments 14,554,076 2,630,175 1,519,821 Employee contributions 1,966,932 1,759,504 2,159,034 Employer contributions 492,169 581,903 991,054 ------------- ------------- ------------- 17,967,352 3,341,540 3,061,324 Decrease in fair market value of plan benefits payable to participants (4,154,497) (2,555,376) (1,547,380) ------------- ------------- ------------- Net increase 14,021,024 1,041,701 1,827,555 Assets transferred to the Savings Plan of W&B -- (690,383) -- Net assets available for plan benefits at beginning of year 16,156,208 15,804,890 13,977,335 ------------- ------------- ------------- Net assets available for plan benefits at end of year $ 30,177,232 $ 16,156,208 $ 15,804,890 ============= ============= ============= See accompanying notes and report of independent registered public accounting firm. 11 FROZEN FOOD EXPRESS INDUSTRIES, INC. 401(k) SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS December 31, 2003 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 $1,634,013, $1,665,054, and $2,126,687, in 2003, 2002, and 2001, respectively. In addition, Employer cash contributions to the Savings Plan amounted to 0, $1,084, and $928,615 in 2003, 2002 and 2001, respectively. During 2003, 2002, and 2001, 133,674, 243,028 and 29,059 shares, respectively of FFEX stock, valued at $492,169, $580,819 and $62,439, 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' contributions 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 2003 and 2002 ranged from 5.00% to 5.75%, 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 12 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, 2003, Participants could direct employee contributions in any of ten investment options, as follows: o 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 ABN AMRO Income Plus Fund as the investment vehicle for this fund. o 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. o 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 ABN AMRO Balanced Class N Fund as the investment vehicle for this fund. o 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 ABN AMRO S&P 500 Index Fund as the investment vehicle for this fund. o Large Cap Growth 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 ABN AMRO Growth Class N Fund as the investment vehicles for this fund. o Large Cap Value Stock Fund - The fund seeks capital by investing in large companies that are currently considered undervalued or demonstrate growth in earnings and revenue. The Savings Plan Committee has selected the Van Kampen Growth and Income Fund as the investment vehicle for this fund. o Small Cap 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 ABN AMRO/Veredus Aggressive Growth Fund as the investment vehicle for this fund. o Small Cap Value 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 Royce Low Priced Stock Fund as the investment vehicle for this fund. o International Stock Fund - The fund invests primarily in stocks and debt securities of companies and governments outside the United 13 States. The Savings Plan committee has selected the Julius Baer International Equity Fund as the investment vehicle for this fund. o Frozen Food Express Industries, Inc. Unitized Stock Fund - Funds that are invested in the common stock of FFEX and a very modest amount of cash and cash equivalents. 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 Participant's beneficiary. Forfeited accounts - At December 31, 2003, forfeited nonvested accounts totaled $42,391. These accounts will be used to reduce Employer expenses. During 2003, Employer contributions were reduced by $24,721 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 reported 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. 14 3. The following presents net assets of investments at December 31, 2003 and ------------------------------------------------------------------------- 2002: ----- 2003 2002 ------------ ------------ Frozen Food Express Industries, Inc. Unitized Stock Fund, 1,782,014 shares $20,066,918 ABN AMRO Income Plus Fund, 247,511 shares 1,467,784 PIMCO Total Return Institutional Fund, 147,519 and 113,406 shares, respectively 1,449,494 $ 1,152,218 ABN AMRO Balanced Class N Fund, 152,386 shares 1,507,990 ABN AMRO S&P 500 Index Fund, 196,075 shares 799,912 ABN AMRO Growth Class N Fund, 47,848 shares 910,520 Van Kampen Growth & Income Fund, 56,896 shares 894,899 Julius Baer International Equity Fund, 25,919 shares 481,738 ABN AMRO/Veredus Aggressive Growth Fund, 57,052 shares 810,623 Royce Low Price Stock Fund, 27,323 shares 297,687 Frozen Food Express Industries, Inc. Common Stock, 3,794,603 shares 8,690,769 Scudder International Equity Fund, 14,090 shares 213,859 Baron Asset Fund, 11,780 shares 390,337 Dreyfus Appreciation Fund, 18,615 shares 551,187 Schwab S&P 500 Index Fund, 45,462 shares 590,422 MFS Massachusetts Investment Trust Fund- Class A, 64,448 shares 778,211 Janus Balanced Fund, 76,987 shares 1,303,684 Invesco Technology II, 2,847 shares 48,932 Managers Special Equity Fund, 2,945 shares 162,090 Schwab Institutional Advantage Money Fund, 956,484 shares 956,484 ------------ ------------ $28,687,565 $14,838,193 ============ ============ * Nonparticipant-directed shares at December 31, 2003 and 2002 respectively were 1,233,046 and 1,783,689 with net asset value of $8,187,425 and $4,632,242. During 2003, the Plan's investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated in value by $13,849,372 as follows: Mutual Funds $11,566,636 Common Stock 2,282,736 ------------ $13,849,372 ============ 15 4. 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. 5. 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. 6. 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. 16 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------------------------------------- The Administrative Committee of the Frozen Food Express Industries, Inc. 401(k) Savings Plan; 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, 2003 and 2002, 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, 2003. 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 2002 audit in accordance with generally accepted accounting standards in the United States. We conducted our 2003 audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 Plan as of December 31,2003 and 2002, and the changes in net assets available for plan benefits in each of the three years in the period ended December 31, 2003 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 19, 20, and 21 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 19, 20 and 21 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 25, 2004 17 SUPPLEMENTAL SCHEDULES 18 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, 2003 (a) (b) (c) (d) Description of Current Identity of Issue Investment Cost Value ------------------------ --------------------- ------------ ------------ Cash United States Dollars $ 13,162 $ 13,162 * Frozen Food Express Industries, Inc. Unitized Stock Fund 1,782,014 shares 10,317,874 22,613,208 ABN AMRO Income Plus Fund 247,511 shares 1,312,467 1,354,815 PIMCO Total Return Institutional Fund 147,519 shares 1,582,130 1,579,928 ABN AMRO Balanced Class N Fund 152,386 shares 1,562,228 1,731,104 ABN AMRO S&P 500 Index Fund 196,075 shares 726,099 879,590 ABN AMRO Growth Class N Fund 47,848 shares 900,154 1,051,210 VAN Kampen Growth And Income Fund 56,896 shares 859,352 1,026,411 ABN AMRO/Veredus Aggressive Growth Fund 57,052 shares 689,508 887,731 Royce Low Priced Stock Fund 27,323 shares 314,892 381,971 Julius Baer International Equity Fund 25,919 shares 443,537 535,480 ------------ ------------ $18,721,403 $32,054,610 ============ ============ Participants' notes Interest bearing notes at receivable 5.00%-5.75% N/A $ 1,489,667 * Party-in-interest to the plan. 19 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, 2003 (a) (b) (c) (d) Description of Identity of Issue Investment Cost Proceeds ------------------------ --------------------- ------------ ------------ Frozen Food Express Industries, Inc. Common Stock * 2,173 Shares $ 7,891 $ 5,592 Frozen Food Express Industries, Inc. Unitized Stock Fund *588,941 shares $ 3,096,625 $ 5,243,622 * 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 register ed under the Investment Company Act of 1940. Therefore, these transactions are excluded from this schedule in accordance with the Specific Instructions for Form 5500. 20 FROZEN FOOD EXPRESS INDUSTRIES, INC. 401(k) SAVINGS PLAN PLAN 001 EIN 75-1031831 SCHEDULE H, LINE 4j-SCHEDULE OF REPORTABLE TRANSACTIONS December 31, 2003 Purchases --------------------------------- (a) (b) (g) (h) Identity of Shares/ Market Net Gain Party Involved Description Units Cost Value or (Loss) -------------- ----------- ------- ---- -------- ---------- Frozen Food Express Industries, Inc. * Unitized Stock 2,370,954 $13,414,499 $30,086,677 $16,672,178 ABN AMRO Stable Value 380,889 2,025,673 2,084,893 59,220 ABN AMRO Intermediate Bond 210,269 2,257,603 2,251,986 (5,617) ABN AMRO Balanced 193,716 1,984,997 2,200,618 215,621 ABN AMRO Stock Index 247,615 916,239 1,110,801 194,562 ABN AMRO Large-cap Growth 68,032 1,278,142 1,494,663 216,521 Van Kampen Large-cap Value 71,059 1,071,702 1,281,898 210,196 ABN AMRO Small-cap Growth 88,050 1,054,456 1,370,056 315,600 Royce Small-cap Value 35,749 408,834 499,768 90,934 Julius Baer International Stock 32,378 550,877 668,932 118,055 * Party in interest to the Plan 21