EXHIBIT 99.1
FROZEN FOOD EXPRESS INDUSTRIES, INC.
401(k) SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
December 31, 2003 and 2002
2003 2002
------------ ------------
Investments $32,054,610 $16,325,132
Participant notes receivable 1,489,667 1,318,015
Employer contributions receivable 51,014 58,232
Employee contributions receivable 135,609 146,816
Other 21,515 --
------------ ------------
Total investments 33,752,415 17,848,195
------------ ------------
Less:
Benefits payable 3,557,532 1,691,987
Other 17,651 --
------------ ------------
3,575,183 1,691,987
------------ ------------
Net assets available for plan benefits $30,177,232 $16,156,208
============ ============
See accompanying notes and report of independent registered public
accounting firm.
10
FROZEN FOOD EXPRESS INDUSTRIES, INC.
401(k) SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
Years Ended December 31, 2003, 2002 and 2001
2003 2002 2001
------------- ------------- -------------
Investment income:
Dividend income $ 44,063 $ 67,851 $ 94,463
Interest income 164,106 187,686 219,148
------------- ------------- -------------
208,169 255,537 313,611
------------- ------------- -------------
Administration expense (67,908) (189,212) (158,408)
Realized gain (loss) 1,022,083 (1,440,830) (1,450,177)
Net unrealized appreciation
in market value of
investments 14,554,076 2,630,175 1,519,821
Employee contributions 1,966,932 1,759,504 2,159,034
Employer contributions 492,169 581,903 991,054
------------- ------------- -------------
17,967,352 3,341,540 3,061,324
Decrease in fair market
value of plan benefits
payable to participants (4,154,497) (2,555,376) (1,547,380)
------------- ------------- -------------
Net increase 14,021,024 1,041,701 1,827,555
Assets transferred to the
Savings Plan of W&B -- (690,383) --
Net assets available for plan
benefits at beginning of year 16,156,208 15,804,890 13,977,335
------------- ------------- -------------
Net assets available for plan
benefits at end of year $ 30,177,232 $ 16,156,208 $ 15,804,890
============= ============= =============
See accompanying notes and report of independent registered public
accounting firm.
11
FROZEN FOOD EXPRESS INDUSTRIES, INC.
401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
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
$1,634,013, $1,665,054, and $2,126,687, in 2003, 2002, and 2001,
respectively. In addition, Employer cash contributions to the Savings Plan
amounted to 0, $1,084, and $928,615 in 2003, 2002 and 2001, respectively.
During 2003, 2002, and 2001, 133,674, 243,028 and 29,059 shares,
respectively of FFEX stock, valued at $492,169, $580,819 and $62,439,
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'
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 2003 and 2002 ranged from 5.00% to 5.75%, 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
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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,
2003, Participants could direct employee contributions in any of ten
investment options, as follows:
o 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 ABN AMRO Income Plus Fund as
the investment vehicle for this fund.
o 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.
o 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 ABN AMRO Balanced Class N
Fund as the investment vehicle for this fund.
o 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 ABN AMRO S&P 500
Index Fund as the investment vehicle for this fund.
o Large Cap Growth 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 ABN
AMRO Growth Class N Fund as the investment vehicles for this fund.
o Large Cap Value Stock Fund - The fund seeks capital by investing in
large companies that are currently considered undervalued or
demonstrate growth in earnings and revenue. The Savings Plan Committee
has selected the Van Kampen Growth and Income Fund as the investment
vehicle for this fund.
o Small Cap 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
ABN AMRO/Veredus Aggressive Growth Fund as the investment vehicle for
this fund.
o Small Cap Value 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 Royce Low Priced Stock Fund as the
investment vehicle for this fund.
o International Stock Fund - The fund invests primarily in stocks and
debt securities of companies and governments outside the United
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States. The Savings Plan committee has selected the Julius Baer
International Equity Fund as the investment vehicle for this fund.
o Frozen Food Express Industries, Inc. Unitized Stock Fund - Funds that
are invested in the common stock of FFEX and a very modest amount of
cash and cash equivalents.
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 Participant's
beneficiary.
Forfeited accounts - At December 31, 2003, forfeited nonvested accounts
totaled $42,391. These accounts will be used to reduce Employer expenses.
During 2003, Employer contributions were reduced by $24,721 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 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.
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3. The following presents net assets of investments at December 31, 2003 and
-------------------------------------------------------------------------
2002:
-----
2003 2002
------------ ------------
Frozen Food Express Industries, Inc. Unitized
Stock Fund, 1,782,014 shares $20,066,918
ABN AMRO Income Plus Fund,
247,511 shares 1,467,784
PIMCO Total Return Institutional Fund,
147,519 and 113,406 shares, respectively 1,449,494 $ 1,152,218
ABN AMRO Balanced Class N Fund, 152,386 shares 1,507,990
ABN AMRO S&P 500 Index Fund,
196,075 shares 799,912
ABN AMRO Growth Class N Fund, 47,848 shares 910,520
Van Kampen Growth & Income Fund,
56,896 shares 894,899
Julius Baer International Equity Fund,
25,919 shares 481,738
ABN AMRO/Veredus Aggressive Growth Fund,
57,052 shares 810,623
Royce Low Price Stock Fund,
27,323 shares 297,687
Frozen Food Express Industries, Inc. Common
Stock, 3,794,603 shares 8,690,769
Scudder International Equity Fund,
14,090 shares 213,859
Baron Asset Fund, 11,780 shares 390,337
Dreyfus Appreciation Fund, 18,615 shares 551,187
Schwab S&P 500 Index Fund, 45,462 shares 590,422
MFS Massachusetts Investment Trust Fund-
Class A, 64,448 shares 778,211
Janus Balanced Fund, 76,987 shares 1,303,684
Invesco Technology II, 2,847 shares 48,932
Managers Special Equity Fund, 2,945 shares 162,090
Schwab Institutional Advantage Money Fund,
956,484 shares 956,484
------------ ------------
$28,687,565 $14,838,193
============ ============
* Nonparticipant-directed shares at December 31, 2003 and 2002 respectively were
1,233,046 and 1,783,689 with net asset value of $8,187,425 and $4,632,242.
During 2003, the Plan's investments (including gains and losses on investments
bought and sold, as well as held during the year) appreciated in value by
$13,849,372 as follows:
Mutual Funds $11,566,636
Common Stock 2,282,736
------------
$13,849,372
============
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4. 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.
5. 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.
6. 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.
16
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------
The Administrative Committee of the
Frozen Food Express Industries, Inc. 401(k) Savings Plan;
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, 2003 and 2002, 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, 2003. 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 2002 audit in accordance with generally accepted accounting
standards in the United States. We conducted our 2003 audit in accordance with
the standards of the Public Company Accounting Oversight Board (United States).
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 Plan as
of December 31,2003 and 2002, and the changes in net assets available for plan
benefits in each of the three years in the period ended December 31, 2003 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 25, 2004
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SUPPLEMENTAL SCHEDULES
18
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, 2003
(a) (b) (c) (d)
Description of Current
Identity of Issue Investment Cost Value
- ------------------------ --------------------- ------------ ------------
Cash United States Dollars $ 13,162 $ 13,162
* Frozen Food Express
Industries, Inc.
Unitized Stock Fund 1,782,014 shares 10,317,874 22,613,208
ABN AMRO Income
Plus Fund 247,511 shares 1,312,467 1,354,815
PIMCO Total Return
Institutional Fund 147,519 shares 1,582,130 1,579,928
ABN AMRO Balanced
Class N Fund 152,386 shares 1,562,228 1,731,104
ABN AMRO S&P 500
Index Fund 196,075 shares 726,099 879,590
ABN AMRO Growth
Class N Fund 47,848 shares 900,154 1,051,210
VAN Kampen Growth
And Income Fund 56,896 shares 859,352 1,026,411
ABN AMRO/Veredus
Aggressive Growth Fund 57,052 shares 689,508 887,731
Royce Low Priced
Stock Fund 27,323 shares 314,892 381,971
Julius Baer
International Equity
Fund 25,919 shares 443,537 535,480
------------ ------------
$18,721,403 $32,054,610
============ ============
Participants' notes Interest bearing notes at
receivable 5.00%-5.75% N/A $ 1,489,667
* Party-in-interest to the plan.
19
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, 2003
(a) (b) (c) (d)
Description of
Identity of Issue Investment Cost Proceeds
- ------------------------ --------------------- ------------ ------------
Frozen Food
Express
Industries, Inc.
Common Stock * 2,173 Shares $ 7,891 $ 5,592
Frozen Food
Express
Industries, Inc.
Unitized Stock Fund *588,941 shares $ 3,096,625 $ 5,243,622
* 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 register ed under the
Investment Company Act of 1940. Therefore, these transactions are excluded
from this schedule in accordance with the Specific Instructions for Form
5500.
20
FROZEN FOOD EXPRESS INDUSTRIES, INC.
401(k) SAVINGS PLAN
PLAN 001
EIN 75-1031831
SCHEDULE H, LINE 4j-SCHEDULE OF REPORTABLE TRANSACTIONS
December 31, 2003
Purchases
---------------------------------
(a) (b) (g) (h)
Identity of Shares/ Market Net Gain
Party Involved Description Units Cost Value or (Loss)
- -------------- ----------- ------- ---- -------- ----------
Frozen Food
Express
Industries,
Inc. * Unitized Stock 2,370,954 $13,414,499 $30,086,677 $16,672,178
ABN AMRO Stable Value 380,889 2,025,673 2,084,893 59,220
ABN AMRO Intermediate Bond 210,269 2,257,603 2,251,986 (5,617)
ABN AMRO Balanced 193,716 1,984,997 2,200,618 215,621
ABN AMRO Stock Index 247,615 916,239 1,110,801 194,562
ABN AMRO Large-cap Growth 68,032 1,278,142 1,494,663 216,521
Van Kampen Large-cap Value 71,059 1,071,702 1,281,898 210,196
ABN AMRO Small-cap Growth 88,050 1,054,456 1,370,056 315,600
Royce Small-cap Value 35,749 408,834 499,768 90,934
Julius Baer International Stock 32,378 550,877 668,932 118,055
* Party in interest to the Plan
21