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