UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ________
COMMISSION FILE NUMBER 1-10006
FROZEN FOOD EXPRESS INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 75-1301831
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1145 EMPIRE CENTRAL PLACE, DALLAS, TEXAS 75247-4309
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (214) 630-8090
Securities registered pursuant to Section 12(b) of the Act:
Common Stock $1.50 Par Value Nasdaq Stock Market
- --------------------------------------------------------------------------------
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Securities registered pursuant to section 12(g) of the Act:
None
Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
[X]
As of March 9, 2000, 16,497,259 shares of the registrant's common
stock, $l.50 par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The sections "Outstanding Capital Stock; Principal Shareholders",
"Nominees for Directors", "Executive Compensation", and "Transactions with
Management" of the Proxy Statement for the Annual Meeting of Shareholders to be
held April 27, 2000, are incorporated by reference into Part III of this Form
10-K.
Portions of the Annual Report to Shareholders for the year ended
December 31, 1999, are incorporated by reference into Parts I and II of this
Form 10-K.
PART I
ITEM 1. BUSINESS.
Frozen Food Express Industries, Inc. (the "Company" or "FFEX") is the
largest full-service publicly-owned temperature-controlled trucking company in
North America. References to the company herein, unless the context requires
otherwise, include Frozen Food Express Industries, Inc., and its subsidiaries,
all of which are wholly owned. In its 54 years of operation, 1999 was the first
year the company experienced an unprofitable year. The company is also the only
nationwide, full-service, temperature-controlled trucking company in the United
States offering all of the following services:
- FULL-TRUCKLOAD: A load, typically weighing between 20,000 and 40,000
pounds and usually from a single shipper, filling the trailer. Normally, a
full-truckload has a single destination, although the company is also able to
provide multiple deliveries. Management believes the company is one of the five
largest temperature-controlled, full-truckload carriers in North America.
- DEDICATED FLEETS: In providing certain full-truckload services, the
Company enters into a contract with a customer to provide service involving the
assignment of specific trucks and drivers to handle certain of the customer's
transportation needs. Frequently the Company and customer anticipate that
dedicated fleet logistics services will both lower the customer's transportation
costs and improve the quality of service the customer receives.
- LESS-THAN-TRUCKLOAD: A load, typically consisting of 18 to 30
shipments, each weighing as little as 50 pounds or as much as 20,000 pounds,
from multiple shippers destined for various deliveries across the United States,
Canada and Mexico. The company's temperature-controlled "LTL" operation is the
largest in the United States and the only one offering regularly scheduled
nationwide LTL service. The company is the only major LTL carrier which uses
multi-compartment refrigerated trailers to carry goods requiring different
temperatures on one trailer, enhancing customer service and operating
efficiencies.
- DISTRIBUTION: Distribution generally involves the delivery of cargo
within a 50-to-75-mile radius of a company terminal. Full-truckload or large LTL
loads are divided into smaller shipments at a terminal and delivered by
distribution trucks to "end users," such as grocery stores, food brokers or drug
stores, typically within a single metropolitan area.
Following is a summary of certain financial and statistical data for
the years ended December 31, 1995 through 1999 (LTL data also includes
distribution shipments):
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
Revenue*
Full-truckload $211,545 $206,098 $190,576 $195,458 $180,598
Less-than-truckload 99,357 100,015 95,522 92,496 87,783
Non-freight 61,247 43,819 30,470 23,474 23,964
-------- -------- -------- -------- --------
Total $372,149 $349,932 $316,568 $311,428 $292,345
======== ======== ======== ======== ========
Operating ratio 104.1% 95.2% 95.2% 95.1% 94.7%
Full-truckload
Loaded miles* 157,248 155,045 143,902 145,785 135,469
Shipments* 165.0 166.0 156.9 158.1 142.9
Revenue per shipment $ 1,282 $ 1,242 $ 1,215 $ 1,236 $ 1,264
Loaded miles per load 953 934 917 922 948
Less-than-truckload
Hundredweight* 8,075 8,502 8,537 8,652 8,296
Revenue per hundredweight $ 12.30 $ 11.76 $ 11.19 $ 10.69 $ 10.58
Shipments* 277.9 293.1 293.1 304.6 292.1
Revenue per shipment $ 358 $ 341 $ 326 $ 304 $ 301
* In thousands
The percent of total freight revenue contributed by full-truckload
operations and by LTL operations during the past five years is summarized below:
2
Percent of Total Freight Revenue
----------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Full-truckload 68% 67% 67% 68% 67%
LTL and distribution 32 33 33 32 33
---- ---- ---- ---- ----
Total 100% 100% 100% 100% 100%
==== ==== ==== ==== ====
The company offers nationwide "one call does all" services to about
7,000 customers, none of which accounted for more than 10% of total revenue
during any of the past five years.
Freight revenue from international activities was less than 5% of total
freight revenue during each of the five years ending December 31, 1999.
TEMPERATURE-SENSITIVE MARKET
More than 80% of the cargo transported by the company is
temperature-sensitive. Examples are meat, poultry, seafood, processed foods,
candy and other confectioneries, dairy products, pharmaceuticals, medical
supplies, fruits and vegetables, cosmetics, film and heat-sensitive aerospace
manufacturing materials.
The common and contract hauling of temperature-sensitive cargo is
highly fragmented and comprised primarily of carriers generating less than $50
million in annual revenue. Industry publications report that only 12
temperature-controlled carriers generated $100 million or more of revenue in
1998. In addition, many major food companies, food distribution firms and
grocery chains continue to transport a portion of their freight with their own
fleets ("private carriage").
Large shippers are continuing to seek to lower their cost structures by
reducing their private carriage capabilities and turning to common and contract
carriers ("core carriers") for their transportation needs. As these core
carriers continue to improve their service capabilities through such means as
satellite communications systems and electronic data interchange, shippers are
expected to reduce their private carriage fleets in favor of common or contract
carriage. Management believes that the temperature-controlled private carriage
segment accounts for more than 40% of the total temperature-controlled portion
of the motor carrier industry.
GROWTH STRATEGY
The company has pursued a growth strategy that combines both internal
growth and selected acquisitions.
From the beginning of 1995 through 1999, the company-operated,
full-truckload tractor fleet increased from about 1,060 units to 1,150 units.
During the same period, the company has emphasized expansion of its fleet of
independent contractor ("owner-operator") provided full-truckload tractors. As
of December 31, 1999, the company's full-truckload fleet also included 475
tractors provided by owner-operators as compared to 407 at the beginning of
1995. From 1995 through 1999, revenue from full-truckload operations increased
from 67% to 68% of total freight revenue.
The management of a number of factors is critical to a trucking
company's growth and profitability, including:
- DRIVERS: Driver shortages and high turnover can reduce revenue and
increase operating expenses through reduced operating efficiency and higher
recruiting costs. Until 1999, operations were not significantly affected by
driver shortages. During 1999, due to historically low unemployment, competition
for skilled labor intensified. As a result, the company was unable to attract
and retain a sufficient number of qualified drivers. The company maintains an
active driver-recruiting program and bases its employee-driver incentive pay
package on longevity, safety, fuel efficiency and other operational goals. In
addition, the company has continued to intensify its recruitment of truck
driving school graduates. These "student-drivers" train with an experienced
instructor-driver by riding as "second driver" and are paid student-driver wages
by the company. They are assigned a tractor only after they have been qualified
to become single drivers.
3
- OWNER-OPERATORS: The company actively seeks to expand its fleet with
equipment provided by owner-operators. The owner-operator provides the tractor
and driver to pull the company's loaded trailer. The owner-operator pays the
drivers' wages, fuel, equipment-related expenses and other transportation
expenses and receives a portion of the revenue from each load. At the end of
1999, the company had contracts for 475 owner-operator tractors in its
full-truckload divisions and 215 in its LTL operations.
The percent of full-truckload and LTL revenue generated from shipments
transported by owner-operators during each of the last five years is summarized
below:
Percent of Revenue from Shipments
Transported by Owner-Operators
----------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Full-truckload 25% 24% 26% 28% 24%
Less-than-truckload 69% 69% 71% 71% 68%
The company has traditionally relied on owner-operator-provided
equipment to transport much of its customers' freight. As competition for
employee-drivers has increased, other trucking companies have initiated or
expanded owner-operator fleets. During 1998, the company became more aggressive
in its solicitation for and retention of owner-operator-provided equipment.
- FUEL: Per-gallon fuel costs paid by the company increased by
approximately 10% during 1999 as compared to 1998. Such costs decreased by 15%
in 1998 from 1997. Owner-operators are responsible for all costs associated with
their equipment, including fuel. Therefore, the cost of such fuel is not a
direct expense of the company. Fuel price fluctuations result from many external
market factors that cannot be influenced or predicted by the company. In
addition, each year several states increase fuel taxes. Recovery of future
increases or realization of future decreases in fuel prices and fuel taxes, if
any, will continue to depend upon competitive freight-market conditions.
- RISK MANAGEMENT: Liability for accidents is a significant concern in
the trucking industry. Exposure can be large and occurrences unpredictable. The
cost and human impact of work-related injury claims are also significant
concerns. To address these concerns, the company maintains a risk management
program designed to minimize the frequency and severity of accidents and to
manage insurance coverage and claims. As part of the program, the company
carries insurance policies under which it retains liability for up to $750,000
on each property, casualty and general liability claim, substantially all
individual work-related injury claims and $100,000 on each cargo claim. Because
of this retained liability, a series of very serious traffic accidents,
work-related injuries or unfavorable developments in or outcomes of existing
claims could materially adversely affect the company's operating results. Claims
and insurance expense can vary significantly from year to year. Reserves
representing the company's estimate of ultimate claims outcomes are established
based on the information available at the time of an incident. As additional
information regarding the incident becomes available, any necessary adjustments
are made to previously recorded amounts. The aggregate amount of open claims,
some of which involve litigation, is significant. In the opinion of management,
however, these claims can be resolved without a material adverse effect on the
company's financial position or its results of operations.
A major component of the company's risk management program is the
enhancement of safety in its operations. The company's safety department
conducts programs which include driver education and over-the-road observation.
All drivers must meet or exceed specific guidelines relating to safety records,
driving experience and personal standards, including a physical examination and
mandatory drug testing. Drivers must also complete the company's training
program, which includes tests for motor vehicle safety and over-the-road
driving, and they must have a current Commercial Drivers License before being
assigned a tractor. Student drivers undergo a more extensive training program as
a second driver with an experienced instructor-driver. In accordance with
federal regulations, the company conducts drug tests on all driver candidates
and maintains a continuing program of random testing for use of such substances.
Applicants who test positive for drugs are turned away and drivers who test
positive for such substances are immediately disqualified from driving.
4
OPERATING STRATEGY
The company's "one call does all" full-service capability, combined
with the service-oriented corporate culture it gained from its many years as a
successful LTL carrier, enables it to compete on the basis of service, rather
than solely on price. Management also believes that major shippers will require
increasing levels of service and that they will rely on their core carriers to
provide transportation and logistics solutions, such as providing the shipper
real-time information about the movement and condition of any shipment.
During 1996, the company completed the conversion of its full-truckload
fleets to the use of computer and satellite technology to enhance efficiency and
customer service. The satellite-based communications system provides automatic
hourly position updates of each full-truckload tractor and permits real-time
communication between operations personnel and drivers. Dispatchers relay
pick-up, delivery, weather, road and other information to the drivers while
shipment status and other information are relayed by the drivers to the
company's computers via the satellite.
The company does not plan to alter the size of its company-operated,
full-truckload fleet during 2000. Changes in the fleet will depend upon
acquisitions, if any, of other motor carriers, developments in the nation's
economy, demand for the company's services and the availability of qualified
employee drivers. Continued emphasis will be placed on improving the operating
efficiency and increasing the utilization of this fleet through enhanced driver
training and retention and reducing the percentage of empty, non-revenue
producing miles.
- LESS-THAN-TRUCKLOAD: Temperature-controlled LTL trucking is service
and capital intensive. LTL freight rates are higher than those for
full-truckload and are based on mileage, weight, type of commodity, space
required in the trailer and pick-up and delivery. Management believes that only
one other refrigerated LTL motor carrier competes with the company on a
nationwide basis.
Temperature-controlled LTL trucking requires a system of terminals,
capable of holding refrigerated and frozen products, located at strategic
distribution points across the United States. The company has 15 such LTL
terminals. Terminals are located in or near New York City, Philadelphia,
Atlanta, Orlando, Memphis, Nashville, Cincinnati, Chicago, Kansas City, Dallas,
Houston, Denver, Salt Lake City, Oakland and Los Angeles. Several of these LTL
terminals also serve as full-truckload driver centers where company-operated,
full-truckload fleets are based.
Efficient information management is essential to a successful
temperature-controlled LTL operation. On a typical day, the company's LTL system
handles about 5,000 shipments - about 3,000 on the road, 1,000 being delivered
and 1,000 being picked up. In 1999, the LTL operation handled about 278,000
individual shipments.
- FULL-TRUCKLOAD: Temperature-controlled, full-truckload service
requires a substantially lower capital investment for terminals and lower costs
of shipment handling and information management than that of LTL. Pricing is
based primarily on mileage, weight and type of commodity.
At the end of 1999, the company's full-truckload tractor fleet
consisted of 1,150 tractors owned or leased by the company and 475 tractors
contracted to the company by owner-operators, making it one of the five largest
temperature-controlled, full-truckload carriers in North America.
The company provides a wide range of transportation and logistics
services which include railroad-based intermodal long-haul transportation. In
providing such service, the company contracts with railroads to transport loaded
full-truckload trailers on railroad flat cars. During 1998, the company's
ability to offer intermodal service was negatively impacted by the reduced
capacity of railroad companies. During 1999, these constraints were somewhat
alleviated and the company recommenced its efforts to provide intermodal service
to its customers. Less than 5% of the company's domestic full-truckload
shipments is transported in this manner.
5
By providing intermodal transportation services, the company is able to
transport more loaded trailers (which require relatively lower capital
investment) while engaging fewer tractors (which involve relatively higher
capital investment). When the emphasis on intermodal transportation is renewed,
it is probable that the company's trailer fleet will continue to expand more
rapidly than its tractor fleet. Also contributing to the increase in the
trailer-to-tractor ratio from 1.5:1 at January 1, 1995 to 1.74:1 at December 31,
1999 were continued expansion of dedicated fleet and short-haul, full-truckload
services and, in general, the more rapid expansion of the company's
full-truckload services in relation to its LTL service. Full-truckload services
generally involve the utilization of more trailers to enable tractors to remain
in service while idle trailers are being loaded and unloaded.
During the fourth quarter of 1999, the company announced that a
restructuring charge of $3.7 million, of which $2.9 million was related to
anticipated payments to lessors for the cancellation of long-term trailer
operating leases and associated costs to refurbish such trailers to be retired
ahead of schedule. Success in the company's renewed efforts to provide
intermodal service to its customers would cause the company to reevaluate the
necessity of such early leased trailer retirements.
Prior to 1999, the company conducted limited operations involving
"dedicated fleets". In such an arrangement, the company contracts with a
customer to provide service involving the assignment of specific trucks to
handle transportation needs of its customers. Frequently the company and
customer anticipate that dedicated fleet logistics services will both lower the
customer's transportation costs and improve the quality of the service the
customer receives. In late 1999, the company improved its capability to provide
and expanded efforts to market such services.
In addition to the LTL terminals, which also serve as full-truckload
employee-driver centers, full-truckload activities are conducted from terminals
in Fort Worth and Laredo, Texas. Laredo, located on the Texas-Mexico border, is
a drop-off point for company trailers, which are picked up by a Mexican trucking
company for movement into Mexico's interior. The company also maintains in
various locations small centers for employee-driver recruitment.
EQUIPMENT
The company acquires premium company-operated tractors in order to help
attract and retain qualified employee-drivers, promote safe operations, minimize
maintenance and repair costs and assure dependable service to its customers.
Management believes that the higher initial investment for its equipment is
recovered through more efficient vehicle performance and improved resale value.
The company has a three-year replacement policy for most of its full-truckload
tractors. As a result, repair costs are partially recovered through efficient
vehicle performance and manufacturers' warranties. The three-year replacement
policy also enables the company to maximize its fuel efficiency by benefiting
from technological improvements in both drivetrain efficiency and aerodynamics.
REGULATION
The company's interstate operations are subject to regulation by the
United States Department of Transportation, which regulates driver
qualifications, safety, equipment standards and insurance requirements. The
company is also subject to regulation of various state regulatory agencies with
respect to certain aspects of its operations. State regulations generally
involve safety and the weight and dimensions of equipment.
SEASONALITY
The company's full-truckload operations are somewhat affected by
seasonal changes. The early winter, late spring and summer growing seasons for
fruits and vegetables in California and Texas typically create increased demand
for trailers equipped to transport cargo requiring refrigeration. In addition,
winter driving conditions can be hazardous and impair the company's operations
from time to time in certain portions of the company's service areas. The
company's LTL operations are also impacted by the seasonality of certain
commodities. As a result, LTL shipment volume during the winter months is
normally lower than other months. Shipping volumes of LTL freight are usually
highest during July through October.
6
EMPLOYEES
The number of company employees as of December 31, 1999 and 1998, was
as follows:
Dec. 31, 1999 Dec. 31, 1998
------------- -------------
Freight Operations:
Drivers and Trainees 1,450 1,537
Non-driver personnel
Full time 758 746
Part time 150 164
----- -----
Total Freight Operations 2,358 2,447
Non-freight Operations 283 187
----- -----
Total 2,641 2,634
===== =====
NON-FREIGHT SEGMENT
The company is engaged in a non-freight business segment, which is a
franchised dealer and repair facility for Wabash trailers and Carrier-Transicold
brand truck and trailer refrigeration equipment. This dealer also provides
refrigeration units and repair service for the company's trailers. The
non-freight segment also sells used tractors and trailers and distributes motor
vehicle air conditioning parts and remanufactures mechanical air conditioning
and refrigeration components.
OUTLOOK
Statements contained herein which are not historical facts are
forward-looking statements as that term is defined in the Private Securities
Litigation Reform Act ("PSLRA") of 1995. Certain statements contained herein
including statements regarding the anticipated development and expansion of the
company's business or the industry in which the company operates, the intent,
belief or current expectations of the company, its directors or its officers,
primarily with respect to the future operating performance of the company and
other statements contained herein regarding matters that are not historical
facts, are "forward-looking" statements (as such term is defined in the PSLRA of
1995). Because such statements involve risks and uncertainties, actual results
may differ materially from those expressed or implied from such forward-looking
statements. These risks and uncertainties include competition, weather
conditions and the general economy; the availability and cost of labor; interest
rates and the company's ability to negotiate favorably with lenders and lessors;
the availability and cost of equipment, fuel and supplies; the impact of changes
in the tax and regulatory environment in which the company operates, operational
risks, insurance and risks associated with the technologies and systems used by
the company.
YEAR 2000 (Y2K)
Neither the Company nor its significant suppliers nor customers
experienced any significant malfunctions or errors in its operating or business
systems when the date changed from 1999 to 2000. Based on operations since
January 1, 2000, the Company does not expect any significant impact to its
ongoing business as a result of the Y2k issue. The Company is not aware of any
significant Y2k issues or problems that may have arisen for its significant
customers and suppliers.
7
ITEM 2. PROPERTIES.
At December 31, 1999, the company also maintained leased terminals or
office facilities of 10,000 square feet or more in or near the following cities:
Approximate
----------- (O)wned or Segment
Location Function Square Feet Acreage (L)eased Utilizing
-------- -------- ----------- ------- -------- ---------
Dallas, TX Corporate Office 34,000 1.7 O All
Lancaster, TX Freight Operations 100,000 80.0 O Freight
Ft. Worth, TX Freight Operations 34,000 7.0 O Freight
Mesquite, TX Product Service & Sales 103,000 8.5 O Non-Freight
Bridgeview, IL Freight Operations 37,000 5.0 O Freight
Dundee, FL Freight Operations 35,000 15.0 O Freight
Avenel, NJ Freight Operations 17,000 5.0 O Freight
Doraville, GA Freight Operations 40,000 7.0 L Freight
Commerce City, CA Freight Operations 35,000 4.0 L Freight
Houston, TX Product Service & Sales 25,000 9.5 O Non-Freight
Kansas City, MO Freight Operations 125,000 3.0 L Freight
Downey, CA Freight Operations 40,000 6.0 L Freight
Salt Lake City, UT Freight Operations 25,000 7.0 L Freight
Dallas, TX Product Service & Sales 39,000 7.0 O Non-Freight
Ft. Worth, TX Product Service & Sales 13,000 4.0 O Non-Freight
Springdale, AR Product Service & Sales 12,000 3.5 L Non-Freight
Pharr, TX Product Service & Sales 12,000 2.0 L Non-Freight
El Paso, TX Product Service & Sales 14,000 1.5 L Non-Freight
Lease terms range from one month to twelve years. These terminals range
in size from a small amount of office space to a terminal with office and dock
facilities totaling approximately 44,000 square feet. The company expects that
present facilities are sufficient to support its operations.
The following table sets forth certain information regarding revenue
equipment utilized by the company at December 31, 1999 and 1998:
Age in Years
----------------------------------------------------------
Tractors Less than 1 1 thru 3 4 or more Total
- -------- ---------------- ----------------- ---------------- ----------------
1999 1998 1999 1998 1999 1998 1999 1998
----- ----- ----- ----- ----- ----- ----- -----
Company owned and leased 682 467 539 826 19 35 1,240 1,328
Owner-operator provided 126 67 271 222 293 383 690 672
----- ----- ----- ----- ----- ----- ----- -----
Total 808 534 810 1,048 312 418 1,930 2,000
===== ===== ===== ===== ===== ===== ===== =====
Age in Years
----------------------------------------------------------
Trailers Less than 1 1 thru 5 6 or more Total
- -------- ---------------- ----------------- ---------------- ----------------
1999 1998 1999 1998 1999 1998 1999 1998
----- ----- ----- ----- ----- ----- ----- -----
Company owned and leased 477 706 2,670 2,024 188 210 3,335 2,940
Owner-operator provided -- -- 8 11 15 11 23 22
----- ----- ----- ----- ----- ----- ----- -----
Total 477 706 2,678 2,035 203 221 3,358 2,962
===== ===== ===== ===== ===== ===== ===== =====
Approximately 80% of the company's trailers are insulated and equipped
with refrigeration units capable of providing the temperature control necessary
to handle perishable freight. Trailers that are used primarily in LTL operations
are equipped with movable partitions permitting the transportation of goods
requiring maintenance of different temperatures. The company also operates a
fleet of non-refrigerated trailers in its "dry freight" full-truckload
operation. Company-operated trailers are primarily 102 inches wide.
Full-truckload trailers used in dry freight operations are 53 feet long.
Temperature controlled operations are conducted with both 48 and 53 foot
refrigerated trailers.
8
The company's general policy is to replace its company-operated,
heavy-duty tractors every three years. Company-operated, full-truckload trailers
are usually retired after seven years of service. Occasionally, retired
equipment is kept by the company for use in local delivery operations.
ITEM 3. LEGAL PROCEEDINGS.
The company is party to routine litigation incidental to its
businesses, primarily involving claims for personal injury and property damage
incurred in the transportation of freight. The aggregate amount of these claims
is significant. The company maintains insurance programs and accrues for
expected losses in amounts designed to cover liability resulting from personal
injury and property damage claims. The company does not believe that adverse
results in one or more of these pending cases would have a material effect on
the financial condition of the company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of shareholders of the company
during the fourth quarter of 1999.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.
The information regarding cash dividends, common stock price per share
and common stock trading volume set forth under the caption "Quarterly
Financial, Stock and Dividend Information" appearing on page 20 of the Annual
Report to Shareholders for the year ended December 31, 1999, is incorporated by
reference into this Report.
ITEM 6. SELECTED FINANCIAL DATA.
The information set forth under the caption "Ten-Year Statistics and
Financial Data" appearing on pages 10 and 11 of the Annual Report to
Shareholders for the year ended December 31, 1999, is incorporated by reference
into this Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information set forth under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operations" appearing on
pages 7 through 10 of the Annual Report to Shareholders for the year ended
December 31, 1999, is incorporated by reference into this Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The information set forth under the caption "Quantitative and
Qualitative Disclosure about Market Risk" on page 18 of the Annual Report to
Shareholders for the year ended December 31, 1999 is incorporated by reference
into this report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
(a) The following Consolidated Financial Statements of Frozen Food
Express Industries, Inc., and Report of Independent Public Accountants, with
respect thereto set forth on pages 12 through 20 of the Annual Report to
Shareholders for the year ended December 31, 1999, are incorporated by reference
into this Report:
Consolidated Statements of Income -- Years ended December 31, 1999,
1998, and 1997.
Consolidated Balance Sheets -- As of December 31, 1999 and 1998.
9
Consolidated Statements of Cash Flows -- Years ended December 31, 1999,
1998 and 1997.
Consolidated Statements of Shareholders' Equity -- Years ended December
31, 1999, 1998 and 1997.
Notes to Consolidated Financial Statements.
Report of Independent Public Accountants.
Supplementary Information - Quarterly Financial Data (unaudited)
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
In accordance with General Instruction G to Form 10-K, the information
required by Item 10 is incorporated herein by reference from the portion of the
company's Proxy Statement for the Annual Meeting of Shareholders to be held
April 27, 2000, appearing under the caption "Nominees for Directors".
ITEM 11. EXECUTIVE COMPENSATION.
In accordance with General Instruction G to Form 10-K, the information
required by Item 11 is incorporated herein by reference from the portions of the
company's Proxy Statement for the Annual Meeting of Shareholders to be held
April 27, 2000 appearing under the captions "Executive Compensation" and
"Transactions with Management".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
In accordance with General Instruction G to Form 10-K, the information
required by Item 12 is incorporated herein by reference from the portions of the
company's Proxy Statement for the Annual Meeting of Shareholders to be held
April 27, 2000, appearing under the captions "Outstanding Capital Stock;
Principal Shareholders" and "Nominees for Directors".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In accordance with General Instruction G to Form 10-K, the information
required by Item 13 is incorporated herein by reference from the portions of the
company's Proxy Statement for the Annual Meeting of Shareholders to be held
April 27, 2000, appearing under the captions "Nominees for Directors",
"Transactions with Management" and "Executive Compensation".
10
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. & 2. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES:
The financial statements listed in the index to financial
statements and financial statement schedules in Item 8 hereof
are filed as part of this Annual Report on Form 10-K.
Financial statement schedules are omitted since the required
information is not present or is not present in amounts
sufficient to require submission of the schedule, or because
the information required is included in the financial
statements and notes thereto.
3. EXHIBITS:
3.l Articles of Incorporation of the Registrant and all amendments
to date (filed as Exhibit 3.1 to Registrant's annual report on
Form 10-K for the fiscal year ended December, 31, 1993; SEC
File
3.2 Number 1-10006 and incorporated herein by reference). Bylaws
of the Registrant, as amended to date (filed as Exhibit 3.2 to
Registrant's annual report on Form 10-K for the fiscal year
ended December, 31, 1998; SEC File Number 1-10006 and
incorporated herein by reference).
10.1 Frozen Food Express Industries, Inc., 1987 Non-Employee
Director Stock Plan (filed as Exhibit 10.2 to Registrant's
Annual Report on Form 10-K for the fiscal year ended December
31, 1991; SEC File Number 1-10006 and incorporated herein by
reference).
10.2 Second Amended and Restated Credit Agreement among Wells Fargo
Bank (Texas) National Association as agent for itself and
other banks and FFE Transportation Services, Inc. as Borrower
and certain of its affiliates.
10.3 Frozen Food Express Industries, Inc., 1992 Incentive and
Nonstatutory Stock Option Plan (filed as Exhibit 4.3 to
Registrant's Registration #33-48494 as filed with the
Commission, and incorporated herein by reference).
10.4 Amendment No. 1 to Frozen Food Express Industries, Inc. 1992
Incentive and Nonstatutory Stock Option Plan (filed as Exhibit
4.4 to Registrant's Registration #333-38133 and incorporated
herein by reference).
10.5 Amendment No. 2 to Frozen Food Express Industries, Inc. 1992
Incentive Stock Option Plan (filed as Exhibit 4.5 to
Registrant's Registration #333-38133 and incorporated herein
by reference).
10.6 Amendment No. 3 to Frozen Food Express Industries, Inc. 1992
Incentive and Nonstatutory Stock Option Plan (filed as Exhibit
4.6 to Registrant's Registration Statement #333-87913 and
incorporated herein by reference).
10.7 FFE Transportation Services, Inc., 1994 Incentive Bonus Plan,
as amended (filed as Exhibit 10.6 to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
1994; SEC File Number 1-10006 and incorporated herein by
reference).
10.8 FFE Transportation Services, Inc., 1999 Executive Bonus and
Phantom Stock Plan.
10.9 Frozen Food Express Industries, Inc. 401(k) Savings Plan
11
10.10 Frozen Food Express Industries, Inc. Employee Stock Option
Plan (filed as Exhibit 4.1 to Registrant's Registration
#333-21831 as filed with the Commission, and incorporated
herein by reference).
10.11 Amendment to the Frozen Food Express Industries, Inc. Employee
Stock Option Plan (filed as Exhibit 4.4 to Registrant's
Registration Statement #333-52701 and incorporated herein by
reference).
10.12 FFE Transportation Services, Inc. 401(k) Wrap Plan (filed as
Exhibit 10.13 to Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996; SEC File Number
1-10006 and incorporated herein by reference).
11.1 Computation of basic and diluted net income per share of
common stock (incorporated by reference to Footnote 8 to the
financial statements appearing in the Annual Report to
Shareholders of the Registrant for the year ending December
31, 1999).
13.1 Annual Report to Shareholders of the Registrant for the year
ended December 31, 1999. Except for those portions of such
Annual Report to Shareholders expressly incorporated by
reference into this Report, such Annual Report to Shareholders
is furnished solely for the information of the Securities and
Exchange Commission and shall not be deemed a "Filed"
Document.
21.1 Subsidiaries of Frozen Food Express Industries, Inc.
23.1 Consent of Independent Public Accountants
25.1 A Power of Attorney is found on page 13 of this Report.
27.1 Financial Data Schedule for the fiscal year ending December
31, 1999.
(b) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed by the company during the last quarter
of the period covered by this Report.
12
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
COVERED BY REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
ANNUAL REPORT
TO SHAREHOLDERS
---------------
Consolidated Statements of Income -- Years ended December 31, 1999, 1998 and 1997 12
Consolidated Balance Sheets -- December 31, 1999 and 1998 13
Consolidated Statements of Cash Flows -- Years ended December 31, 1999, 1998 and 1997 14
Consolidated Statements of Shareholders' Equity --Years ended December 31, 1999, 1998 and 1997 15
Notes to Consolidated Financial Statements 15
Report of Independent Public Accountants 20
Supplementary Information -- Quarterly financial data (unaudited)
Financial statement schedules are omitted since the required
information is not present or is not present in amounts sufficient to require
submission of the schedule, or because the information required is included in
the financial statements and notes thereto.
The financial statements listed in the above index, which are included
in the Annual Report to Shareholders of Frozen Food Express Industries, Inc.,
for the year ended December 31, 1999, are hereby incorporated by reference, and
are filed herewith as Exhibit 13.1.
13
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each of the undersigned directors
and officers of Frozen Food Express Industries, Inc., hereby appoints Stoney M.
Stubbs, Jr., and F. Dixon McElwee, Jr. his true and lawful attorneys-in-fact and
agents, for him and in his name, place and stead, in any and all capacities,
with full power to act alone, to sign any and all amendments to this Annual
Report on Form 10-K and to file each such amendment to the Report, with all
exhibits thereto, and any and all other documents in connection therewith, with
the Securities and Exchange Commission, hereby granting unto said
attorneys-in-fact and agents full power and authority to do and perform any and
all acts and things requisite and necessary to be done in and about the premises
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents may lawfully
do or cause to be done by virtue hereof.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FROZEN FOOD EXPRESS INDUSTRIES, INC.
Date: March 29, 2000 By /s/ F. Dixon McElwee, Jr.
------------------------- ---------------------------------------
F. Dixon McElwee, Jr.
Senior Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: March 29, 2000 /s/ Stoney M. Stubbs, Jr.
------------------------- ---------------------------------------
Stoney M. Stubbs, Jr.,
Chairman of the Board of Directors and
President
(Principal Executive Officer)
Date: March 29, 2000 /s/ F. Dixon McElwee, Jr.
------------------------- ---------------------------------------
F. Dixon McElwee, Jr.,
Senior Vice President and Director
(Principal Financial and Accounting
Officer)
Date: March 29, 2000 /s/ Charles G. Robertson
------------------------- ---------------------------------------
Charles G. Robertson
Executive Vice President and Director
Date: March 29, 2000 /s/ Edgar O. Weller
------------------------- ---------------------------------------
Edgar O. Weller
Vice Chairman of the Board of Directors
Date: March 29, 2000 /s/ W. Mike Baggett
------------------------- ---------------------------------------
W. Mike Baggett, Director
Date: March 29, 2000 /s/ Brian R. Blackmarr
------------------------- ---------------------------------------
Brian R. Blackmarr, Director
Date: March 29, 2000 /s/ Leroy Hallman
------------------------- ---------------------------------------
Leroy Hallman, Director
Date: March 29, 2000 /s/ T. Michael O'Connor
------------------------- ---------------------------------------
T. Michael O'Connor, Director
14