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, 2001
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
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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: NONE
Securities registered pursuant to section 12(g) of the Act:
i) Common Stock $1.50 par value ii) Rights to purchase common stock
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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.
[ ]
As of March 22, 2002 16,624,936 shares of the registrant's common
stock, $l.50 par value, were outstanding. The aggregate market value of
voting and non-voting common equity held by non-affiliates on such date was
$35,920,000.
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 May 8, 2002, 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, 2001, are incorporated by reference into Parts I and II of this
Form 10-K.
PART I
ITEM 1. BUSINESS.
Frozen Food Express Industries, Inc. is the largest full-service,
publicly-owned, temperature-controlled trucking company in North America.
References herein, unless the context requires otherwise, include Frozen
Food Express Industries, Inc., and our subsidiaries, all of which are wholly
owned. In our 55 years of operation, 2001, 2000 and 1999 are the only years
we were not profitable. We are 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 shipment has a single destination, although we
are also able to provide multiple deliveries. Management believes we are one
of the five largest temperature-controlled, full-truckload carriers in North
America.
- DEDICATED FLEETS: In providing certain full-truckload services,
we enter 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 we 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 ("LTL"): 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 to multiple receivers. Our
temperature-controlled LTL operation is the largest in the United States and
the only one offering regularly scheduled nationwide service. We are 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 services generally involve 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, 1997 through 2001 (LTL data also includes
distribution shipments):
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
Revenue*
Full-truckload and
dedicated fleet $236.4 $221.6 $211.5 $206.1 $190.6
Less-than-truckload 90.9 101.9 99.4 100.0 95.5
Non-freight 51.1 68.9 61.2 43.8 30.5
----- ----- ----- ----- -----
Total $378.4 $392.4 $372.1 $349.9 $316.6
===== ===== ===== ===== =====
Operating ratio 99.6% 99.6% 104.1% 95.2% 95.2%
Full-truckload
Loaded miles* 166.3 159.9 157.2 155.0 143.9
Shipments** 178.5 173.9 165.0 166.0 156.9
Revenue per shipment** $ 1.3 $ 1.3 $ 1.3 $ 1.2 $ 1.2
Loaded miles per load 932 919 953 934 917
Less-than-truckload
Hundredweight* 7.4 8.3 8.1 8.5 8.5
Revenue per hundredweight $12.31 $12.29 $12.30 $11.76 $11.19
Shipments** 253.0 284.4 277.9 293.1 293.1
Revenue per shipment $ 359 $ 358 $ 358 $ 341 $ 326
* In millions
** 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:
Percent of Total Freight Revenue
---------------------------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
Full-truckload and dedicated fleet 72% 68% 68% 67% 67%
LTL and distribution 28 32 32 33 33
--- --- --- --- ---
Total 100% 100% 100% 100% 100%
=== === === === ===
We offer nationwide "one call does all" services to about 7,000
customers, each of which accounted for less than 10% of total revenue during
each of the past five years.
Freight revenue from international activities was less than 10% of
total freight revenue during each of the past five years.
TEMPERATURE-SENSITIVE MARKET
- ----------------------------
More than 80% of the cargo we transport 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 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 10
temperature-controlled carriers generated $100 million or more of revenue in
2000, the most recent year for which data is available. In addition, many
major food companies, food distribution firms and grocery chains transport a
portion of their freight with their own fleets ("private carriage").
Large shippers have traditionally sought 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 core carriers continue to improve their service capabilities
through such means as satellite communications systems and electronic data
interchange, some shippers have abandoned their private carriage fleets in
favor of common or contract carriage. We believe that the temperature-
controlled private carriage segment accounts for more than 40% of the total
temperature-controlled portion of the motor carrier industry.
During 2000 and continuing into 2001, a number of refrigerated motor
carriers reduced the scale of or ceased their operations. Others have
entered reorganization proceedings. We believe that our substantial capital
strength will enable us to gain market penetration as the industry continues
to consolidate.
GROWTH STRATEGY
- ---------------
We have pursued a growth strategy that combines both internal growth
and selected acquisitions.
From the beginning of 1997 through 2001, our company-operated, full-
truckload tractor fleet increased from about 1,110 units to 1,300 units.
During the same period, we have emphasized expansion of its fleet of
independent contractor ("owner-operator") provided full-truckload tractors.
As of December 31, 2001, our full-truckload fleet also included 510 tractors
provided by owner-operators as compared to 440 at the beginning of 1997.
The management of a number of factors is critical to a trucking
company's growth and profitability, including:
- EMPLOYEE-DRIVERS: Driver shortages and high turnover can reduce
revenue and increase operating expenses through reduced operating efficiency
and higher recruiting costs. Until 2000, operations were not significantly
affected by driver shortages. During 2000, due to historically low
unemployment, competition for skilled labor intensified. As a result, we
were unable in 2000 to attract and retain a sufficient number of qualified
drivers. We maintain an active driver-recruiting program. During the summer
of 2000, employee-driver mileage-based pay rates were significantly
increased in an effort to better attract and retain quality employee-
drivers. As the labor market began to soften in 2001, however, the
availability of drivers increased, alleviating the driver shortage of 2000.
- OWNER-OPERATORS: We actively seek to expand our fleet with equipment
provided by owner-operators. The owner-operator provides the tractor and
driver to pull our 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 2001, we
had contracts for 510 owner-operator tractors in our full-truckload
divisions and 195 in our 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
------------------------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
Full-truckload and dedicated fleet 26% 27% 25% 24% 26%
LTL and distribution 68% 69% 69% 69% 71%
We have traditionally relied on owner-operator-provided equipment to
transport much of our customers' freight. As competition for employee-
drivers has increased, other trucking companies have initiated or expanded
owner-operator fleets. Accordingly, we became more aggressive in our
solicitation for and retention of owner-operator-provided equipment.
- FUEL: The average per-gallon fuel cost we paid increased by
approximately 35% during 2000 and did not change significantly in 2001. Such
costs increased by 10% in 1999 from 1998. 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 ours. Fuel price
fluctuations result from many external market factors that cannot be
influenced or predicted by us. 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, we maintain 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, we carry insurance policies under which we retain liability for up
to $5 million on each property, casualty and general liability claim, $1
million for substantially all individual work-related injury claims and
$250,000 on each cargo claim.
Prior to December 1, 2001 our retained liability was limited to $1
million per occurrence (other than cargo claims). During 2001, our industry
was subjected to cost prohibitive renewal prices for a deductible below the
$5 million. Because of our retained liability, a series of very serious
traffic accidents, work-related injuries or unfavorable developments in the
outcomes of existing claims could materially adversely affect our operating
results. Claims and insurance expense can vary significantly from year to
year. Reserves representing our 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. We
believe that these claims can be resolved without a material adverse effect
on our financial position or our results of operations.
A major component of our risk management program is the enhancement of
safety in our operations. Our safety department conducts programs that
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 our training program,
which includes tests for motor vehicle safety and over-the-road driving.
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, we conduct drug tests on all driver candidates and
maintain a continuing program of random testing for use of such substances.
Drivers and applicants who test positive for drugs are turned away and
drivers who test positive for such substances are immediately disqualified
from driving.
Insurance premiums do not significantly contribute to our costs,
partially because we carry large deductibles under our policies of liability
insurance. Claims and insurance costs on a per-mile basis fell by 10% during
2001. The reduced 2001 claims and insurance expense was due primarily to
improved claims experience.
OPERATING STRATEGY
- ------------------
Our "one call does all" full-service capability, combined with the
service-oriented corporate culture we gained from our many years as a
successful LTL carrier, enables us to compete on the basis of service,
rather than solely on price. We also believe 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.
Our full-truckload fleets use 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 is
relayed by the drivers to our computers via the satellite.
We plan to add up to 50 trucks to our company-operated, full-truckload
fleet during 2002. Changes in the fleet depend upon acquisitions, if any, of
other motor carriers, developments in the nation's economy, demand for our
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.
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. We have 9 such LTL terminals.
Terminals are located in or near New York City, Philadelphia, Atlanta,
Orlando, Memphis, Chicago, Dallas, Salt Lake City and Los Angeles. Several
of these LTL terminals also serve as full-truckload driver centers where
company-operated, full-truckload fleets are based. During 2000 and 2001, we
closed terminals in several other locations.
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 our trailers, which are picked up by
a Mexican trucking company for movement into Mexico's interior. We also
maintain, in various locations, small centers for employee-driver
recruitment.
During 2002, the North American Free Trade Agreement ("NAFTA") is
expected to be fully-implemented with regard to the ability of Mexico and
United States-based trucking companies to operate in one another's nations.
We do not anticipate altering our method of service into Mexico nor do we
expect NAFTA to generate a significant presence of Mexico-based carriers
transporting freight into the United States.
For more than a decade, FFEX has partnered with Mexico-based truckers
to facilitate freight moving both ways across the border. Freight moving
from Mexico is hauled in FFEX trailers to the border by the Mexico-based
carrier. There, the trailer is exchanged. Southbound shipments work much the
same way. This system has been in place for a long time. Often, we have
sold used trailer equipment to these carriers for use in the intra-Mexico
operations. Based on discussions with our Mexico-based partners, we do not
anticipate a need to change our manner of dealing with southbound
international freight. About 7% of our consolidated freight revenue during
2001 involved international shipments, all of which was billed in United
States currency.
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. We believe that only one other refrigerated LTL motor
carrier competes with us on a nationwide basis.
Efficient information management is essential to a successful
temperature-controlled LTL operation. On a typical day, our LTL system
handles about 5,000 shipments - about 3,000 on the road, 1,000 being
delivered and 1,000 being picked up. In 2001, the LTL operation handled
about 253,000 individual shipments.
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 2001, our full-truckload tractor fleet consisted of
1,300 tractors owned or leased by us and 510 tractors contracted to us by
owner-operators, making us one of the seven largest temperature-controlled,
full-truckload carriers in North America.
We offer a wide range of transportation and logistics services that
include railroad-based intermodal long-haul transportation. In providing
such service, we contract with railroads to transport loaded full-truckload
trailers on railroad flat cars. During 1998, our ability to offer intermodal
service was negatively impacted by the reduced capacity of railroad
companies. During 2000 and 2001, these constraints were somewhat alleviated
and we recommenced our efforts to provide intermodal service to our
customers. Less than 5% of our domestic full-truckload shipments are
transported in this manner. In intermodal transportation services we
transport more loaded trailers (which require relatively lower capital
investment) while engaging fewer tractors (which involve relatively higher
capital investment). 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.
Prior to 1998, we conducted limited operations involving "dedicated
fleets". In such an arrangement, we contract with a customer to provide
service involving the assignment of specific trucks to handle transportation
needs of its customers. Frequently we 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 1998,
we improved our capability to provide and expanded efforts to market
dedicated fleet services. About 10% of our company-operated full-truckload
fleet is now engaged in such operations.
EQUIPMENT
- ---------
We operate 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 our customers.
We believe that the higher initial investment for our equipment is recovered
through more efficient vehicle performance and improved resale value. Prior
to 2002, we had a three-year replacement policy for most of our full-
truckload tractors. Repair costs are mostly recovered through efficient
vehicle performance and manufacturers' warranties. But routing and
preventative maintenance is our expense.
During 2001, the demand for and value of previously-owned trucks
plummeted. When we acquired such assets three years previously, the truck
manufacturer agreed to buy the trucks back for a specified price at the end
of our three-year replacement cycle. By mid-2001, the manufacturer began
expressing concern about its obligation to buy used trucks for which there
was little, if any, demand. After extensive discussions between us and the
manufacturer, in January 2002, we agreed to extend the turn-in dates of two-
thirds of our trucks and to proportionally reduce the price we will be paid
for those used trucks. Concurrently, we agreed that new trucks purchased
during 2002 and 2003 will be returned at predetermined prices to the
manufacturer after 42 or 48 months of service, at our option. We expect
this extended replacement cycle to increase our maintenance expenses by
minor amounts. Most of our tractors are leased for 36 month terms. We will
approach our equipment lessors to request extended lease terms to match the
extended trade-back schedule. The first such affected lessor has indicated
its willingness to do so.
REGULATION
- ----------
Our interstate operations are subject to regulation by the United
States Department of Transportation, which regulates driver qualifications,
safety, equipment standards and insurance requirements. We are also subject
to regulation of various state regulatory agencies with respect to certain
aspects of our operations. State regulations generally involve safety and
the weight and dimensions of equipment.
SEASONALITY
- -----------
Our 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 our operations from
time to time in certain portions of our service areas. Our 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.
EMPLOYEES
- ---------
The number of our employees as of December 31, 2001 and 2000, was as
follows:
Dec. 31, 2001 Dec. 31, 2000
------------- -------------
Freight Operations:
Drivers and Trainees 1,515 1,470
Non-driver personnel
Full time 646 709
Part time 87 136
----- -----
Total Freight Operations 2,248 2,315
Non-freight Operations 192 332
----- -----
Total 2,440 2,647
===== =====
NON-FREIGHT SEGMENT
- -------------------
We are engaged in a non-freight business segment, which until December
2001 consisted primarily of a franchised dealer and repair facility for
Wabashr trailers and Carrier Transicoldr brand truck and trailer
refrigeration equipment. We sold this dealership in December 2001. This
dealer also provides refrigeration units and repair service for our
trailers. The non-freight segment will continue to distribute motor vehicle
air conditioning parts and to re-manufacture mechanical air conditioning and
refrigeration components. We sold the dealership business during December
2001, retaining a 19.9% ownership interest in the buyer's entity.
OUTLOOK
- -------
This report contains information and forward-looking statements that
are based on management's current beliefs and expectations and assumptions
we made based upon information currently available. Forward-looking
statements include statements relating to our plans, strategies, objectives,
expectations, intentions, and adequacy of resources, may be identified by
words such as "will", "could", "should", "believe", "expect", "intend",
"plan", "schedule", "estimate", "project" and similar expressions. These
statements are based on our current expectations and are subject to
uncertainty and change.
Although we believe that the expectations reflected in such forward-
looking statements are reasonable, we can give no assurance that such
expectations will be realized. Should one or more of the risks or
uncertainties underlying such expectations not materialize, or should
underlying assumptions prove incorrect, actual results may vary materially
from those we expect.
Among the key factors that are not within our control and that may
have a bearing on operating results are demand for our services and
products, and our ability to meet that demand, which may be affected by,
among other things, competition, weather conditions and the general economy,
the availability and cost of labor, our ability to negotiate favorably with
lenders and lessors, the effects of terrorism and war, the availability and
cost of equipment, fuel and supplies, the market for previously-owned
equipment, the impact of changes in the tax and regulatory environment in
which we operate, operational risks and insurance, risks associated with the
technologies and systems we use and the other risks and uncertainties
described elsewhere in our filings with the Securities and Exchange
Commission.
ITEM 2. PROPERTIES
----------
At December 31, 2001, we maintained terminals or office facilities of
10,000 square feet or more in or near the following cities:
Approximate
----------- (O)wned or
Division/Location Square Feet Acreage (L)eased
----------------- ----------- ------- --------
Freight Division
Lancaster, TX 100,000 80.0 O
Ft. Worth, TX 34,000 7.0 O
Bridgeview, IL 37,000 5.0 O
Dundee, FL 26,000 15.0 O
Avenel, NJ 17,000 5.0 O
Doraville, GA 40,000 7.0 L
Downey, CA 40,000 6.0 L
Salt Lake City, UT 25,000 7.0 L
Non-Freight Division
Mesquite, TX 103,000 8.5 O
Oklahoma City, OK 20,000 2.0 O
Corporate Office
Dallas, TX 34,000 1.7 O
Lease terms range from one month to twelve years. We expect that
present facilities are sufficient to support our operations. We also own
three properties in Texas that we lease to W&B Service Company, LP, an
entity in which we hold a 19.9% ownership interest.
The following table sets forth certain information regarding our
revenue equipment at December 31, 2001 and 2000:
Age in Years
------------------------------------
Tractors Less than 1 1 thru 3 4 or more Total
- -------- ----------- -------- --------- -----
2001 2000 2001 2000 2001 2000 2001 2000
---- ---- ---- ---- ---- ---- ---- ----
Company owned and leased 482 380 890 848 17 37 1,389 1,265
Owner-operator provided 77 83 225 248 402 422 704 753
--- --- --- --- --- --- ----- -----
Total 559 463 1,115 1,096 419 459 2,093 2,018
=== === ===== ===== === === ===== =====
Age in Years
------------------------------------
Trailers Less than 1 1 thru 5 6 or more Total
----------- -------- --------- -----
2001 2000 2001 2000 2001 2000 2001 2000
---- ---- ---- ---- ---- ---- ---- ----
Company owned and leased 214 78 2,163 2,473 705 599 3,082 3,150
Owner-operator provided 2 4 12 16 7 5 21 25
--- -- ----- ----- ---- --- ----- -----
Total 216 82 2,175 2,489 712 604 3,103 3,175
=== == ===== ===== === === ===== =====
Approximately 80% of the our 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. We
also operate a fleet of non-refrigerated trailers in our "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.
Our general policy is to replace our company-operated, heavy-duty
tractors every three and one-half to four years. Company-operated, full-
truckload trailers are usually retired after seven years of service.
Occasionally, retired equipment is kept by us for use in local delivery
operations.
ITEM 3. LEGAL PROCEEDINGS.
-----------------
We are party to routine litigation incidental to our businesses,
primarily involving claims for personal injury and property damage incurred
in the transportation of freight. The aggregate amount of these claims is
significant. We maintain insurance programs and accrue for expected losses
in amounts designed to cover liability resulting from personal injury and
property damage claims. We do not believe that adverse results in one or
more of these pending cases would have a material effect on our financial
condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
---------------------------------------------------
No matters were submitted to a vote of our shareholders during the
fourth quarter of 2001.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS.
-------------------------------------------------------------
The information regarding common stock price per share and common
stock trading volume set forth under the caption "Quarterly Financial, Stock
and Dividend Information" appearing on page 26 of the Annual Report to
Shareholders for the year ended December 31, 2001, is incorporated by
reference into this Report.
ITEM 6. SELECTED FINANCIAL DATA.
-----------------------
The information set forth under the caption "Five-Year Financial and
Statistical Information" appearing on page 16 of the Annual Report to
Shareholders for the year ended December 31, 2001, 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 8 through 15 of the Annual Report to Shareholders for the year ended
December 31, 2001, is incorporated by reference into this Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
---------------------------------------------------------
The information set forth under the caption "Fair Value of Financial
Instruments" on page 14 of the Annual Report to Shareholders for the year
ended December 31, 2001 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 17 through 25 of the Annual Report to
Shareholders for the year ended December 31, 2001, are incorporated by
reference into this Report:
Consolidated Statements of Income --
Years ended December 31, 2001, 2000, and 1999
Consolidated Balance Sheets -- As of December 31, 2001 and 2000.
Consolidated Statements of Cash Flows --
Years ended December 31, 2001, 2000, and 1999
Consolidated Statements of Shareholders' Equity --
Years ended December 31, 2001, 2000, and 1999
Notes to Consolidated Financial Statements.
Report of Independent Public Accountants.
Supplementary Information - Quarterly Financial Data (unaudited)
Financial Statements previously filed with regard to 1999 and 2000
have been refiled herein to reflect a retroactive change in the
Company's manner of accounting for a life insurance investment.
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
our Proxy Statement for the Annual Meeting of Shareholders to be held May 8,
2002, appearing under the captions "Nominees for Directors" and "Section
16(a) Beneficial Ownership Reporting Compliance".
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
our Proxy Statement for the Annual Meeting of Shareholders to be held May 8,
2002 appearing under the captions "Executive Compensation" and "Transactions
with Management and Directors".
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
our Proxy Statement for the Annual Meeting of Shareholders to be held May 8,
2002, 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
our Proxy Statement for the Annual Meeting of Shareholders to be held May 8,
2002, appearing under the captions "Nominees for Directors", "Transactions
with Management and Directors" and "Executive Compensation".
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 Statements previously filed with
regard to 1999 and 2000 have been refiled herein to
reflect a retroactive change in the Company's manner of
accounting for a life insurance investment.
Financial statement schedules are omitted since the
required information is not present, 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 Number 1-10006 and
incorporated herein by reference).
3.2 Bylaws of the Registrant (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).
3.3 Amendment to Bylaws of the Registrant, dated June 14,2000
(filed as Exhibit 3.1 to Registrant's Report on Form 8-K
filed with the Commission on June 28, 2000 and
incorporated herein by reference).
3.4 Amendment to Bylaws of the Registrant, dated April 3, 2002.
4.1 Rights Agreement dated as of June 14, 2000, between the
Registrant and Fleet National Bank, which includes as
exhibits, the form of the Rights Certificate and the
Summary of Rights (filed as Exhibit 4.1 to Registrant's
Form 8-A Registration Statement filed on June 19, 2000 and
incorporated herein by reference).
10.1 Frozen Food Express Industries, Inc. 1995 Non-Employee
Director Stock Plan (filed as Exhibit 4.3 to Registrant's
Registration Statement #033-59645 as filed with the
Commission 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 (filed as
Exhibit 10.2 to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1999; SEC File
Number 1-10006 and incorporated herein by reference).
10.3 First Amendment to Second Amended and Restated Credit
Agreement (filed as Exhibit 10.1 to Registrant's report on
Form 8-K filed with the Commission on June 9, 2000 and
incorporated herein by reference).
10.4 Second Amendment to Second Amended and Restated Credit
Agreement (filed as Exhibit 10.1 to Registrant's report on
Form 10-Q for the period ended March 31, 2001 and
incorporated herein by reference).
10.5 Third Amendment to Second Amended and Restated Credit
Agreement.
10.6 Fourth Amendment to Second Amended and Restated Credit
Agreement and Waiver.
10.7 Frozen Food Express Industries, Inc., 1992 Incentive and
Nonstatutory Stock Option Plan (filed as Exhibit 4.3 to
Registrant's Registration Statement #33-48494 as filed
with the Commission, and incorporated herein by
reference).
10.8 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 Statement
#333-38133 and incorporated herein by reference).
10.9 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).
10.10 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).
10.11 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).
10.12 FFE Transportation Services, Inc. 1999 Executive Bonus and
Phantom Stock Plan (filed as Exhibit 10.8 to Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1999; SEC File Number 1-10006 and
incorporated herein by reference).
10.13 Frozen Food Express Industries, Inc. 401(k) Savings Plan.
10.14 First Amendment to the Frozen Food Express Industries, Inc.
401(k) Savings Plan.
10.15 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).
10.16 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).
10.17 FFE Transportation Services, Inc. 401(k) Wrap Plan (filed
as Exhibit 4.4 to Registrant's Registration Statement
#333-56248 and incorporated herein by reference).
10.18 Form of Change in Control Agreement (filed as Exhibit 10.1
to Registrant's report on Form 8-K filed with the
Commission on June 28, 2000 and incorporated herein by
reference).
10.19 Asset Purchase Agreement between W&B Refrigeration Service
Company and W&B Newco, LP.
11.1 Computation of basic and diluted net income per share of
common stock (incorporated by reference to Footnote 9 to
the financial statements appearing in the Annual Report to
Shareholders of the Registrant for the year ending
December 31, 2001).
13.1 Annual Report to Shareholders of the Registrant for the
year ended December 31, 2001. 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.
99.1 Confirmation of receipt of assurance from Arthur Andersen,
LLP.
(b) REPORTS ON FORM 8-K:
-------------------
On December 28, 2001, we filed a report on Form 8-K. The purpose of
that filing was to announce that we had sold a significant portion
of our non-freight operations.
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, 2001, 2000 and 1999 17
Consolidated Balance Sheets --
As of December 31, 2001 and 2000 18
Consolidated Statements of Cash Flows --
Years ended December 31, 2001, 2000 and 1999 19
Consolidated Statements of Shareholders' Equity --
Years ended December 31, 2001, 2000 and 1999 20
Notes to Consolidated Financial Statements 21
Report of Independent Public Accountants 26
Supplementary Information --
Quarterly financial data (unaudited) 26
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, 2001, are hereby
incorporated by reference, and are filed herewith as Exhibit 13.1.
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 Statements previously filed with
regard to 1999 and 2000 have been refiled herein to reflect a retroactive
change in the Company's manner of accounting for a life insurance
investment.
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 our behalf by the undersigned, thereunto duly authorized.
FROZEN FOOD EXPRESS INDUSTRIES, INC.
Date: April 3, 2002 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: April 3, 2002 /s/ Stoney M. Stubbs, Jr.
------------------------- ----------------------------------
Stoney M. Stubbs, Jr.,
Chairman of the Board of Directors
and President (Principal Executive
Officer)
Date: April 3, 2002 /s/ F. Dixon McElwee, Jr.
------------------------- ----------------------------------
F. Dixon McElwee, Jr.,
Senior Vice President and Director
(Principal Financial and Accounting
Officer)
Date: April 3, 2002 /s/ Charles G. Robertson
------------------------- ----------------------------------
Charles G. Robertson
Executive Vice President and Director
Date: April 3, 2002 /s/ Edgar O. Weller
------------------------- ----------------------------------
Edgar O. Weller
Vice Chairman of the Board of
Directors
Date: April 3, 2002 /s/ W. Mike Baggett
------------------------- ----------------------------------
W. Mike Baggett, Director
Date: April 3, 2002 /s/ Brian R. Blackmarr
------------------------- ----------------------------------
Brian R. Blackmarr, Director
Date: April 3, 2002 /s/ Leroy Hallman
------------------------- ----------------------------------
Leroy Hallman, Director
Date: April 3, 2002 /s/ T. Michael O'Connor
------------------------- ----------------------------------
T. Michael O'Connor, Director