EXHIBIT 99.1
FFE TRANSPORTATION SERVICES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
December 31, 1998 and 1997
1998 1997
----------- -----------
Money market fund $ 285,960 $ 318,878
Frozen Food Express Industries, Inc.
Common stock 19,731,828 23,305,860
Other receivables 1,270 1,512
----------- -----------
Total assets 20,019,058 23,626,250
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Less:
Benefits payable 4,827,428 5,481,717
Due to related trust 65,303 57,818
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Total liabilities 4,892,731 5,539,535
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Net assets available for plan benefits $15,126,327 $18,086,715
=========== ===========
See accompanying notes and report of independent public accountants.
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FFE TRANSPORTATION SERVICES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
Years Ended December 31, 1998, 1997 and 1996
1998 1997 1996
----------- ----------- ------------
Investment income:
Dividend income $ 303,550 $ 316,981 $ 328,981
Interest income 9,957 10,504 10,700
----------- ----------- ------------
Net investment income 313,507 327,485 339,681
Net unrealized (depreciation)
appreciation in market value of
Investments (3,439,863) (915,106) 50,547
Realized gain on sale of stock 19,350 15,099 --
Total (reductions) additions (3,107,006) (572,522) 390,228
Increase (decrease) in fair market value
of plan benefits payable to
Participants 146,618 (866,100) (2,971,767)
----------- ----------- ------------
Net decrease (2,960,388) (1,438,622) (2,581,539)
Net assets available for plan
benefits at beginning of year 18,086,715 19,525,337 22,106,876
----------- ----------- ------------
Net assets available for plan
benefits at end of year $15,126,327 $18,086,715 $ 19,525,337
=========== =========== ============
See accompanying notes and report of independent public accountants.
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FFE TRANSPORTATION SERVICES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
1. Description of the Plan
-----------------------
The FFE Transportation Services, Inc. Employee Stock Ownership Plan (the
"FFE Plan") is a defined contribution plan designed to provide retirement
income to employees of FFE Transportation Services, Inc. and other
affiliated participating companies (the "Employer") in compliance with the
Employee Retirement Income Security Act of 1974 ("ERISA"). The FFE Plan is
designed to invest primarily in stock of Frozen Food Express Industries,
Inc. ("FFEX"), the parent corporation of the Employer. Participants should
refer to the FFE Plan agreement for a more complete description of the FFE
Plan's provisions.
Contributions - Contributions by the Employer are at the discretion of its
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Board of Directors. No participant shall be required or permitted to make
contributions.
Eligibility - Employees become eligible for participation in the FFE 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 retirement age, 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 FFE 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. FFE Plan earnings are allocated based on participants'
account balances.
Administration - The FFE Plan is administered by a committee appointed by
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the Board of Directors of FFEX. Administrative expenses not paid by the
Employer are paid by the FFE Plan.
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Termination of the Plan - Although no Employer contributions were made
-----------------------
during the year ended December 31, 1998, the Employer has not expressed any
intent to permanently discontinue its contributions. The FFE Plan provides
that the Employer may suspend, terminate, or completely discontinue
contributions. In the event the FFE Plan is terminated or contributions are
permanently discontinued:
(a) ERISA provides that each participant's interest in the trust becomes
fully vested.
(b) The FFE Plan provides that the net assets of the FFE Plan shall be
allocated among the participants and beneficiaries of the FFE Plan as
provided by ERISA.
Tax status - The United States Treasury Department has advised that the FFE
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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
FFE 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 FFE Plan are under
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the accrual method of accounting.
Accounting estimates - The preparation of financial statements in
--------------------
conformity with generally accepted accounting principles requires the FFE
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
------------------------
2,506,265 and 2,589,540 shares at December 31, 1998 and 1997, respectively,
is valued at the quoted market price on the last day of the year.
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3. Net unrealized appreciation in market value of investments
----------------------------------------------------------
The 1998, 1997 and 1996 net unrealized (depreciation) appreciation in
market value of investments was as follows:
For the Year Ended
-----------------------------------------------------------
1998 1997 1996
------------------ ------------------ -------------------
Investment at market $ 19,731,828 $ 23,305,860 $ 24,332,526
Investment at cost (5,558,794) (5,692,963) (5,804,523)
------------ ------------ ------------
Unrealized appreciation at end of year 14,173,034 17,612,897 18,528,003
Unrealized appreciation at
beginning of year (17,612,897) (18,528,003) (18,477,456)
------------ ------------ ------------
Net unrealized (depreciation)
appreciation in market value
of investments during the year $ (3,439,863) $ (915,106) $ 50,547
============ ============ ============
4. Trust Agreement
---------------
As of 12/31/98 pursuant to a trust agreement, Chase Bank of Texas, N.A.
held all investment assets of the FFE Plan and executed all transactions
therein.
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
The Administrative Committee of the FFE Transportation Services, Inc.
Employee Stock Ownership Plan:
We have audited the accompanying statements of net assets available for plan
benefits of the FFE Transportation Services, Inc. Employee Stock Ownership Plan
(the "Plan") as of December 31, 1998 and 1997, 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, 1998. 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 Savings
Plan for Employees of Frozen Food Express Industries, Inc., as of December 31,
1998 and 1997, and the changes in net assets available for plan benefits for
each of the three years in the period ended December 31, 1998 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 basic financial statements taken as a whole.
/s/ Waters, Murray & Associates
June 28, 1999
124
FFE TRANSPORTATION SERVICES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD
FOR INVESTMENT PURPOSES
December 31, 1998
(a) (b) Identity of Issue (c) Description of Investment (d) Cost (e) Current Value
------------------------ ------------------------------ ---------- -----------------
Chase Bank of Texas NA Money Market Fund $ 285,960 $ 285,960
* FFEX 2,506,265 shares common stock $5,558,794 $19,731,828
* Party-in-interest to the plan.
126
FFE TRANSPORTATION SERVICES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
ITEM 27a - SCHEDULE OF ASSETS ACQUIRED AND SOLD
December 31, 1998
(a) Identity of Issue (b) Description of Investment (c) Cost (d) Proceeds
----------------- ------------------------- -------- -----------
None N/A N/A N/A
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.
127
FFE TRANSPORTATION SERVICES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
Years Ended December 31, 1998 and 1997
Purchases
------------------------------
Shares/ Market
Identity of Party Involved Description Units Cost Value
- --------------------------- ----------------------- -------------- -------------- --------------
1998
- ----
None N/A N/A N/A N/A
1997
- ----
None N/A N/A N/A N/A
128