EXHIBIT 99.2
CONWELL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
December 31, 1999 and 1998
1999 1998
----- -----
Money market fund $ 14,366 $ 24,880
Frozen Food Express Industries, Inc.
Common Stock 369,625 818,370
Due from related trust 30,107 97,283
Employer Receivable 15,736 159
Other Receivable
75 0
------- -------
Total assets 429,909 940,692
------- -------
Less:
Benefits payable 129,521 196,792
Trustee payable 3,481 0
------- -------
Net assets available for plan $296,907 $743,900
benefits ======= =======
See accompanying notes and report of independent public
accountants.
CONWELL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
Years Ended December 31, 1999, 1998 and 1997
1999 1998 1997
----- ----- -----
Investment income:
Dividend income $ 9,292 $ 13,096 $ 15,072
Interest income 699 593 1,678
-------- ------- --------
9,991 13,689 16,750
Net unrealized depreciation
in market value of
Investments (430,493) (122,284) (16,495)
(Loss) gain realized on
sale of stock (10,396) (11,212) 1,436
Recordkeeping fees (3,481) 0 0
--------- --------- --------
(434,379) (119,807) 1,691
(Decrease) increase in fair
market value of plan
benefits payable to
Participants (12,614) 21,139 (125,881)
-------- ------- -------
Net decrease (446,993) (98,668) (124,190)
Net assets available for
plan benefits at
beginning of year 743,900 842,568 966,758
-------- -------- --------
Net assets available for
plan benefits at
end of year $ 296,907 $ 743,900 $ 842,568
======== ======== ========
See accompanying notes and report of independent public
accountants.
CONWELL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
1.Description of the Plan
------------------------
The Conwell Corporation Employee Stock Ownership Plan (the
"Conwell Plan") is a defined contribution plan designed to
provide retirement income to employees of Conwell Corporation
(the "Employer") in compliance with the Employee Retirement
Income Security Act of 1974 ("ERISA"). The Conwell Plan is
designed to invest primarily in Common Stock of Frozen Food
Express Industries, Inc. ("FFEX"), the parent corporation of
the Employer. Participants should refer to the Conwell Plan
agreement for a more complete description of the Conwell
Plan's provisions.
Contributions - Contributions by the Employer are at the
discretion of its Board of Directors. No participant shall be
required or permitted to make contributions.
Eligibility - Employees become eligible for participation in
the Conwell Plan as of the first entry date, as defined,
concurrent with or next following the employees' completion of
1,000 hours of service.
Benefits and vesting - Participants are entitled to vested
benefits upon attainment of normal or early retirement age,
disability, or other termination of employment, whether
voluntary or involuntary. Participants' beneficiaries are
entitled to benefits if the participant was vested at the time
of death. Participants' benefits from company 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 Conwell Plan.
Participants' accounts - A separate account is maintained for
each participant. If no restrictions apply, the participant's
account is adjusted annually for the participant's allocable
share of employer contributions, earnings on employer
contributions, plan forfeitures, realized and unrealized gains
and losses, and any amounts distributed to the participant or
participant's beneficiary from such account. Allocation of
employer contributions and plan forfeitures are based on
annual compensation. Conwell Plan earnings are allocated
based on participants' account balances.
Administration - The Conwell Plan is administered by a
committee appointed by the Board of Directors of FFEX.
Administrative expenses not paid by the Employer are paid by
the Conwell Plan.
Tax status - The United States Treasury Department has advised
that the Conwell 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. Employer contributions and
plan earnings are not includable in the participant's taxable
income until such amounts are distributed to the participant
or to the participant's beneficiary.
2.Summary of significant accounting policies
------------------------------------------
Basis of accounting - The financial statements of the Conwell
Plan are under the accrual method of accounting.
Accounting estimates - The preparation of financial statements
in conformity with generally accepted accounting principles
requires the Conwell 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 - Investment in FFEX Common Stock,
consisting of 95,387 and 103,920 shares at December 31, 1999
and 1998, respectively, is valued at the quoted market price
on the last day of the year.
3.Net unrealized (depreciation) in market value of investments
------------------------------------------------------------
The 1999, 1998 and 1997 net unrealized depreciation in market
value of investments was determined as follows:
For the Year Ended December 31,
------------------------------------
1999 1998 1997
----- ----- -----
Investment at market $ 369,625 $ 818,370 $1,013,670
Investment at cost (587,227) (605,479) (678,495)
-------- -------- --------
Unrealized (depreciation)
appreciation at end of year (217,602) 212,891 335,175
Unrealized depreciation at
beginning of year (212,891) (335,175) (351,670)
-------- -------- --------
Net unrealized depreciation
in market value of
investments
during the year $(430,493) $(122,284) $ (16,495)
======== ======== ========
4.Trust Agreement
----------------
As of December 31, 1999 pursuant to a trust agreement, Chase
Bank of Texas, N.A. held all investment assets of the Conwell
Plan and executed all transactions therein.
5.Subsequent Event
----------------
On January 1, 2000, the Conwell Plan was merged into the
Frozen Food Express Industries, Inc. 401(k) Savings Plan (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 accounts of the Conwell Plan. No
employer contributions were made to the Conwell Plan during
the year and no future employer contributions will be made.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
The Administrative Committee of the Conwell Corporation
Employee Stock Ownership Plan:
We have audited the accompanying statements of net assets
available for plan benefits of the Conwell Corporation Employee
Stock Ownership Plan (the "Plan") as of December 31, 1999 and
1998, 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, 1999. 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 generally accepted
auditing standards. 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 Conwell Corporation Employee
Stock Ownership Plan, as of December 31, 1999 and 1998, and the
changes in net assets available for plan benefits for each of the
three years in the period ended December 31, 1999 in conformity
with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The supplemental
schedules on the following pages 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 the following pages 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, RLLP
- -------------------------------------
July 12, 2000
ADDITIONAL INFORMATION
CONWELL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD
FOR INVESTMENT PURPOSES
December 31, 1999
(a) (b) Identity (c) Description (d) Cost (e) Current
of Issue of Investment Value
---------------- ------------------ ------- --------
Chase Bank of Money Market Fund $ 14,366 $ 14,366
Texas, NA
* FFEX 95,387 shares
Common Stock of
Frozen Food Express
Industries,
Inc. $587,227 $369,625
* Party-in-interest to the plan.
CONWELL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
ITEM 27a - SCHEDULE OF ASSETS ACQUIRED AND SOLD
December 31, 1999
(a) (b) (c) (d)
Identity of Description of
Issue Investment Cost Proceeds
- ------------- ----------------------- -------- --------
FFEX *6,480 shares
Common Stock $61,271 $51,030
* 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 which were both acquired and
disposed of during the plan year were interests issued by
money market funds. Therefore, these transactions are
excluded from this schedule in accordance with the Specific
Instructions for Form 5500.
CONWELL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
Years Ended December 31, 1999 and 1998
Purchases
------------------
Identity of Party Shares/ Market
Involved Description Units Cost Value
- ------------------- ----------- ------- ----- ------
1999
- ----
None N/A N/A N/A N/A
1998
- ----
FFEX N/A N/A N/A N/A