EXHIBIT 99.2
FROZEN FOOD EXPRESS INDUSTRIES, INC.
401(k) SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
December 31, 2001 and 2000
2001 2000
---- ----
Investments $16,295,625 $14,968,072
Participant notes receivable 1,215,761 1,096,355
Employer contributions receivable 43,239 94,173
Employee contributions receivable 143,697 121,333
---------- ----------
Total investments 17,698,322 16,279,933
Less:
Benefits payable 1,893,432 2,302,598
---------- ----------
Net assets available for plan benefits $15,804,890 $13,977,335
========== ==========
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, 2001, 2000 and 1999
2001 2000 1999
---- ---- ----
Investment income:
Dividend income $ 94,463 $ 200,154 $ 231,742
Interest income 219,148 198,558 161,774
---------- ---------- ---------
313,611 398,712 393,516
---------- ---------- ---------
Administration expense (158,408) (196,995) (137,977)
Realized (loss) gain (1,450,177) (1,329,717) 175,135
Net unrealized appreciation
(depreciation)in market value of
investments 1,519,821 (3,898,991) (8,236,868)
Employee contributions 2,159,034 2,371,661 2,154,142
Employer contributions 991,054 1,309,519 1,361,160
---------- ---------- ----------
3,061,324 (1,744,523) (4,684,408)
Decrease in fair
Market value of plan benefits
Payable to participants (1,547,380) (3,248,303) (1,591,272)
---------- ---------- ----------
Net increase (decrease) 1,827,555 (4,594,114) (5,882,164)
Assets transferred from:
FFE Transportation Services, Inc.
Employee Stock Ownership Plan -- 5,063,801 --
Conwell Corporation Employee
Stock Ownership Plan (Note 4) -- 541,720 --
Net assets available for plan
Benefits at beginning of year 13,977,335 12,965,928 18,848,092
---------- ---------- ----------
Net assets available for plan
Benefits at end of year $15,804,890 $13,977,335 $12,965,928
========== ========== ==========
See accompanying notes and report of independent public accountants.
FROZEN FOOD EXPRESS INDUSTRIES, INC.
401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2001
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
$2,126,687, $2,072,414, and $1,848,504, in 2001, 2000, and 1999,
respectively. In addition, Employer cash contributions to the Savings
Plan amounted to $928,615, $1,309,519 and $1,361,160 in 2001, 2000 and
1999, respectively. During 2001, 29,059 shares of FFEX treasury stock,
valued at $62,439 were contributed to the Savings Plan.
Eligibility - An Employee who completes 90 days of employment with an
Employer will 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, (b) plan earnings, and (c) forfeitures of terminated
participants' non-vested accounts. Allocations of plan earnings are based
on participants' account balances, allocation of Employer's 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 2001 and 2000 ranged from 5.75% 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,
2001, participants could direct employee contributions in any of ten
investment options.
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. 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, 2001, forfeited nonvested accounts
totaled $90,635. These accounts will be used to reduce Employer expenses.
Also, in 2001, Employer contributions were reduced by $229,482 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 Generally Accepted Accounting Principles 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.
3. The following presents net assets of investments at December 31, 2001 and
2000:
2001 2000
----- -----
Frozen Food Express Industries, Inc. Common Stock
4,358,964 and 4,538,307 shares, respectively $8,025,443* $ 7,542,338*
Deutsche International Equity Fund,
13,775 and 7,440 shares, respectively 241,725 171,932
Baron Asset Fund,
9,752 and 5,803 shares, respectively 405,329 299,835
Dreyfus Appreciation Fund,
16,895 and 12,248 shares, respectively 591,261 472,039
Schwab S&P 500 Index Fund,
35,961 and 26,760 shares, respectively 603,865 507,497
MFS Massachusetts Investment Trust Fund - Class A,
64,590 and 57,940 shares, respectively 979,689 1,072,259
Janus Balanced Fund,
71,456 and 54,302 shares, respectively 1,333,973 1,048,161
PIMCO Total Return Institutional Fund,
91,637 and 61,388 shares, respectively 899,202 596,504
Invesco Technology II,
1,788 and 289 shares, respectively 58,182 17,243
Managers Special Equity Fund,
1,765 and 99 shares, respectively 123,609 7,623
Schwab Institutional Advantage Money Fund,
1,387,412 and 1,226,442 shares, respectively 1,326,851 1,145,549
--------- ----------
$ 14,589,129 $12,880,980
========== ==========
* Nonparticipant-directed shares at December 31, 2001 and 2000
respectively were 2,542,634, and 3,211,860 with net asset value of
$5,441,236, and $6,323,511.
During 2001, the Plan's investments (including gains and losses on
investments bought and sold, as well held during the year) appreciated in
value by $1,708,149 as follows:
Mutual Funds $ 1,225,044
Common Stock 483,105
---------
$ 1,708,149
=========
4. Merger
-----------
On January 1, 2000, the Conwell Corporation and FFE Transportation
Services, Inc. Employee Stock Ownership Plans (the "ESOP'S") 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 ESOP'S.
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 included in
the Savings Plan's financial statements.
6. Divesture
----------
In December 2001, most of the operating assets of one of our subsidiaries
were sold. In connection with the sale, the buyer of the assets hired
several employees who had been participants in the Savings Plan. These
employees became ineligible to participate in the Savings Plan. As of
December 31, 2001, net Plan assets which were available to these employees
totaled $1,369,502.
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 Savings Plan for Exmployees of Frozen Food Express
Industries,Inc. (the "Plan") as of December 31, 2001 and 2000, 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, 2001. 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 31,2001 and 2000, and the changes in net assets available for plan
benefits in each of the three years in the period ended December 31, 2001 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 21, 2002
ADDITIONAL INFORMATION
FROZEN FOOD EXPRESS INDUSTRIES, INC.
401(k) SAVINGS PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD
FOR INVESTMENT PURPOSES
December 31, 2001
(a) (b) (c) (d) (e)
Identity of Issue Description of Investment Cost Current Value
- -------------------- ------------------------ ----- ------------
Cash United States Dollars $ 1,009 $ 1,009
* Frozen Food Express
Industries, Inc.
Common Stock 4,358,964 shares 16,943,891 9,328,183
Deutsche International
Equity Fund 13,375 shares 322,161 252,386
Baron Asset Fund 9,752 shares 509,582 433,557
Dreyfus Appreciation
Fund 16,895 shares 719,693 642,345
Schwab S&P 500 Index
Fund 35,961 shares 726,277 635,797
MFS Massachusetts
Investment Trust Fund -
Class A 64,590 shares 1,276,483 1,070,895
Janus Balanced Fund 71,456 shares 1,528,634 1,402,691
PIMCO Total Return
Institutional Fund 91,637 shares 946,307 958,527
Invesco Technology II 1,788 shares 70,300 58,241
Managers Special Equity
Fund 1,765 shares 130,147 124,582
Schwab Institutional
Advantage Money Fund 1,387,412 shares 1,387,412 1,387,412
--------- ----------
$24,561,896 $16,295,625
========== ==========
Participants' notes Interest bearing notes at
receivable 5.75%-10.50% N/A $ 1,215,761
* Party-in-interest to the plan.
FROZEN FOOD EXPRESS INDUSTRIES, INC.
401(k) SAVINGS PLAN
ITEM 27a - SCHEDULE OF ASSETS ACQUIRED AND SOLD
December 31, 2001
(a) (b) (c) (d)
Identity of Issue Description of Investment Cost Proceeds
- ----------------- ------------------------- ---------- ---------
Frozen Food
Express
Industries, Inc.
Common Stock 691,399 shares FFEX Common Stock* $2,660,850 $1,380,723
* 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
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
Years Ended December 31, 2001
Purchases
--------------------------
Identity Of Shares/ Market
Party Involved Description Units Cost Value
------------- ---------- ------ ----- --------
2001
----
Frozen Food
Express
Industries,
Inc. * Common Stock 571,272 $1,289,635 $1,222,522
MFS Trust Large-cap Stock 23,801 418,989 394,621
Schwab Stable Value 605,809 605,809 605,809
PIMCO Intermediate Bond 49,277 523,035 515,437
Baron Mid-cap Stock 5,927 283,909 263,514
Deutsche International Stock 9,790 211,662 184,737
Dreyfus Large-cap Stock 9,079 359,620 345,184
Janus Balanced Investment 39,823 802,428 781,725
Schwab Stock Index 19,155 354,502 338,660
Invesco Technology 2,639 109,447 85,952
Managers Small-cap Stock 1,766 129,612 124,680
* Party in interest to the Plan