UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934. For the quarterly period ended
September 30, 2002
--------------
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
- -----------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1145 Empire Central Place Dallas, Texas 75247-4309
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(2l4) 630-8090
- -----------------------------------------------------------------------------
(Registrant's telephone number, including area code)
None
- -----------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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.
[X] Yes [ ] No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
[ ] Yes [X] No
As of November 6, 2002, 16,799,000 shares of the Registrant's Common Stock,
$1.50 par value, were outstanding.
INDEX
PART I - FINANCIAL INFORMATION
Page No.
--------
Item l. Financial Statements
Consolidated Condensed Balance Sheets -
September 30, 2002 and December 31, 2001 2
Consolidated Condensed Statements of Income -
Three and nine months ended September 30, 2002 and 2001 3
Consolidated Condensed Statements of Cash Flows -
Nine months ended September 30, 2002 and 2001 4
Notes to Consolidated Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
Item 4. Controls and Procedures 11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
Certifications 12
FROZEN FOOD EXPRESS INDUSTRIES, INC.
AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(Unaudited)
Sep. 30, Dec. 31,
2002 2001
------- -------
Assets (In thousands)
Current assets
Cash and cash equivalents $ 10,188 $ 3,236
Accounts receivable, net 46,528 39,600
Inventories 6,380 7,409
Tires 5,010 4,558
Other current assets 7,113 5,246
------- -------
Total current assets 75,219 60,049
Property and equipment, net 61,769 55,154
Other assets 11,978 11,334
------- -------
$148,966 $126,537
======= =======
Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable $ 23,112 $ 19,056
Accrued claims liabilities 5,247 7,960
Accrued payroll 4,556 5,471
Current maturities of long-term debt -- 250
Other 1,613 2,188
------- -------
Total current liabilities 34,528 34,925
Long-term debt 20,000 1,750
Accrued claims liabilities and other 16,544 15,286
------- -------
71,072 51,961
------- -------
Shareholders' equity
Common stock 25,921 25,921
Paid-in capital 2,779 3,753
Retained earnings 53,230 50,403
------- -------
81,930 80,077
Less - Treasury stock 4,036 5,501
------- -------
Total shareholders' equity 77,894 74,576
------- -------
$148,966 $126,537
======= =======
See accompanying notes.
FROZEN FOOD EXPRESS INDUSTRIES, INC.
AND SUBSIDIARIES
Consolidated Condensed Statements of Income
Three and Nine Months Ended
September 30, 2002 and 2001
(Unaudited)
Three Months Nine Months
------------------- -------------------
2002 2001 2002 2001
------ ------ ------- -------
(In thousands, except per-share amounts)
Revenue
Freight revenue $88,282 $83,903 $250,156 $246,835
Non-freight revenue 4,573 14,226 10,284 40,055
------- ------- ------- -------
92,855 98,129 260,440 286,890
------- ------- ------- -------
Costs and expenses
Freight operating expenses
Salaries, wages and related
expenses 23,225 22,158 68,975 66,105
Purchased transportation 21,230 18,890 57,686 55,963
Supplies and expenses 25,848 25,213 72,825 75,890
Revenue equipment rent 5,738 7,107 20,579 19,913
Depreciation 3,607 2,994 9,204 8,560
Communications and utilities 1,001 984 2,917 3,026
Claims and insurance 4,907 4,932 11,686 12,670
Operating taxes and licenses 1,042 995 3,077 2,803
Miscellaneous expense, net 641 258 1,650 1,493
------- ------- ------- -------
87,239 83,531 248,599 246,423
Non-freight costs and operating
expenses 5,659 13,780 11,731 39,624
------- ------- ------- -------
92,898 97,311 260,330 286,047
------- ------- ------- -------
(Loss)income from operations (43) 818 110 843
Interest and other expense, net 497 344 1,250 1,255
------- ------- ------- -------
(Loss) income before income tax (540) 474 (1,140) (412)
(Benefit from)provision for income
tax (3,923) 197 (3,967) (53)
------- ------- ------- -------
Net income(loss) $ 3,383 $ 277 $ 2,827 $ (359)
======= ======= ======= =======
Net income(loss) per share of
common stock
Basic $ .20 $ .02 $ .17 $ (.02)
======= ======= ======= =======
Diluted $ .20 $ .02 $ .17 $ (.02)
======= ======= ======= =======
Weighted average shares outstanding
Basic 16,604 16,388 16,545 16,364
======= ======= ======= =======
Diluted 16,741 16,405 16,691 16,364
======= ======= ======= =======
See accompanying notes.
FROZEN FOOD EXPRESS INDUSTRIES, INC.
AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
Nine Months Ended September 30, 2002 and 2001
(Unaudited)
2002 2001
---- ----
(In thousands)
Net cash provided by operating activities $ 6,564 $ 4,001
------ ------
Cash flows from investing activities
Expenditures for property and equipment (23,121) (9,518)
Proceeds from sale of property and equipment 6,020 4,878
Other (511) (872)
------ ------
Net cash used in investing activities (17,612) (5,512)
------ ------
Cash flows from financing activities
Borrowings under revolving credit agreement 35,700 17,000
Payments against revolving credit agreement (17,700) (16,000)
Net treasury stock activity -- 259
------ ------
Net cash provided by financing activities 18,000 1,259
------ ------
Net increase (decrease) in cash and cash equivalents 6,952 (252)
Cash and cash equivalents at January 1 3,236 1,222
------ ------
Cash and cash equivalents at September 30 $ 10,188 $ 970
====== ======
See accompanying notes.
FROZEN FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
September 30, 2002 and 2001
(Unaudited)
1. BASIS OF PRESENTATION
---------------------
These consolidated financial statements include Frozen Food Express
Industries, Inc. (FFEX) and its subsidiary companies, all of which are
wholly-owned. All significant intercompany accounts and transactions have
been eliminated in consolidation. The financial statements included herein
have been prepared pursuant to the rules and regulations of the Securities
and Exchange Commission (SEC). In the opinion of management, all adjustments
(which consisted only of normal recurring accruals) necessary to present
fairly our financial position and results of operations have been made.
Pursuant to SEC rules and regulations, certain information and disclosures
normally included in financial statements prepared in accordance with
accounting principles generally accepted in the United States of America,
have been condensed or omitted from these statements unless significant
changes have taken place since the end of the most recent fiscal year. We
believe that the disclosures contained herein, when read in conjunction with
the financial statements and notes included, or incorporated by reference,
in our Form 10-K filed with the SEC on April 9, 2002, are adequate to make
the information presented not misleading. It is suggested, therefore, that
these statements be read in conjunction with the statements and notes
(included, or incorporated by reference), in our report on Form 10-K.
2. SHAREHOLDERS' EQUITY
--------------------
As of September 30, 2002 and December 31, 2001, respectively, there were
16,773,000 and 16,573,000 shares of our common stock outstanding.
3. COMMITMENTS AND CONTINGENCIES
-----------------------------
We have accrued for costs related to liability, cargo and work-related
injury claims which had occurred prior to the date of the financial
statements. Some of these involve litigation. The aggregate amount of
these claims is significant. In the opinion of management, these actions
can be successfully defended or resolved, and any additional costs incurred
over amounts accrued will not have a material adverse effect on our
financial position, cash flows or results of operations.
4. EARNINGS PER SHARE
------------------
Common stock equivalents included in diluted weighted average shares, all of
which result from dilutive stock options, were as follows:
2002 2001
------- ------
For the three months ended September 30 137,000 17,000
For the nine months ended September 30 146,000 --
5. INCOME TAXES
------------
During the third quarter of 2002, we reported a benefit from income taxes of
$3.9 million. In certain prior years, we recorded income tax deductions for
interest paid on loans against insurance policies as allowed under the U.S.
Tax Code. Due to the uncertainty of such deductions, we maintained a $4
million reserve for the contingent expense that could have resulted from any
related tax assessments. By September 30, 2002, the risk of a tax
assessment had ended and the reserve for any related expense was no longer
required. Accordingly, during the quarter ended September 30, 2002, we
reversed the amount of the reserve as a non-recurring reduction of our
income tax expense.
6. OPERATING SEGMENTS
------------------
Our operations consist of two reportable segments. The freight segment is
engaged primarily in the motor carrier freight transportation business. The
smaller segment is primarily engaged in non-freight activities relating to
the sale and service of air conditioning and refrigeration components.
Following is information for each reportable segment for the three and nine-
month periods ended September 30, 2002 and 2001 (in millions):
Three Months Nine Months
------------- -------------
2002 2001 2002 2001
----- ------ ------ ------
Freight Operations
Total Revenue $ 88.3 $ 83.9 $250.2 $246.8
Operating Income 1.0 0.4 1.6 0.4
Total Assets 148.2 138.4 148.2 138.4
Non-Freight Operations
Total Revenue $ 4.6 $ 16.4 $ 10.3 $ 43.6
Operating Income (1.1) 0.4 (1.4) 0.4
Total Assets 18.5 29.9 18.5 29.9
Intercompany Eliminations
Revenue $ -- $ (2.2) $ -- $ (3.5)
Operating Income -- -- -- --
Total Assets (17.7) (22.9) (17.7) (22.9)
Consolidated
Revenue $ 92.9 $ 98.1 $260.4 $286.9
Operating Income -- 0.8 0.1 0.8
Total Assets 149.0 145.4 149.0 145.4
Intercompany elimination of revenue relates to transfers at cost of
inventory such as trailers and refrigeration units from the non-freight
segment for use by the freight segment.
7. NEW ACCOUNTING STANDARDS
------------------------
In July 2001 the Financial Accounting Standards Board issued SFAS No. 142
"Goodwill and Other Intangible Assets" (FAS 142). Under this pronouncement,
which we adopted as of January 1, 2002, goodwill and intangible assets with
indefinite lives are not amortized but are to be reviewed at least annually
for impairment. Separable intangible assets that are not deemed to have
indefinite lives will continue to be amortized over their useful lives.
The impact of adopting FAS 142 on our consolidated financial statements was
not significant because the amount of goodwill and other intangible assets
in our financial statements is minimal. We did not experience a significant
impact from the adoption of FAS 142.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of freight revenue, certain
major operating expenses for the three-month and nine-month periods ended
September 30, 2002 and 2001.
Three Months Nine Months
------------- ---------------
2002 2001 2002 2001
---- ---- ---- ----
Salaries, wages and related expenses 26.3% 26.4% 27.6% 26.8%
Purchased transportation 24.0 22.5 23.1 22.7
Supplies and expenses 29.3 30.1 29.1 30.7
Revenue equipment rent 6.5 8.5 8.2 8.1
Depreciation 4.1 3.6 3.7 3.5
Claims and insurance 5.6 5.9 4.7 5.1
Other 3.0 2.6 3.0 2.9
---- ---- ---- ----
Total freight operating expenses 98.8% 99.6% 99.4% 99.8%
==== ==== ==== ====
Third Quarter of 2002 vs. 2001
During the third quarter of 2002, our freight revenue increased by $4.4
million as compared to the third quarter of 2001 to $88.3 million. Non-
freight revenue aggregated 4.9% and 14.5% of total revenue during the third
quarter of 2002 and 2001, respectively.
Excluding the impact of reduced fuel adjustment revenue, during the third
quarter of 2002, freight revenue improved by $5.2 million or 6.4% when
compared with the third quarter of 2001. Full truckload revenue rose by $4.4
million between the third quarters of 2001 and 2002, on an 8.4% increase in
the number of full truckload shipments we transported.
Also excluding the impact of reduced fuel adjustment charges, revenue from
our less-than-truckload (LTL) activities improved by 3.7% between the third
quarters of 2001 and 2002 to $24.7 million. During 2001, and through the
first quarter of 2002, the number of LTL shipments we transported fell
significantly from comparable prior-year levels. However, during the third
quarter of 2002, we hauled 1.7% more LTL shipments than during the third
quarter of 2001, and the average weight of those shipments was 3% more than
it was during the comparable quarter of last year.
While LTL operations offer the opportunity to earn higher revenue on a per-
mile and per-hundredweight basis than do full-truckload operations, the
level of investment and fixed costs associated with LTL activities
significantly exceed those of full-truckload activities. Accordingly, as
LTL revenue fluctuates, many costs remain fixed, leveraging the impact from
such revenue fluctuations on operating income. In recent years, as LTL
activity and revenue declined, many LTL-related costs have remained static.
In order to address this challenge, we are exploring and are implementing a
number of strategies designed to reduce the level of fixed costs associated
with our LTL operations.
We are starting to see some diminished pressure on our freight rates which
has negatively impacted our results during recent years. As market
conditions permit, during 2002, we have begun to increase certain of our
freight rates.
The number of tractors in our fleet of company-operated, full-truckload
equipment increased from approximately 1,300 at the beginning of 2002 to
about 1,320 by the end of the third quarter of 2002. As of September 30,
2001 we had approximately 1,280 such trucks. The number of full-truckload
tractors provided to us by owner-operators has increased in 2002 by 100 to
about 610. As of September 30, 2001, there were approximately 560 tractors
in our owner-operator-provided full-truckload fleets. The increased number
of company-operated full-truckload tractors resulted from an increase in the
level of our dedicated fleet operations.
Full-truckload activities, which contributed more than 70% of freight
revenue during the third quarters of both 2002 and 2001, are conducted
primarily with company-operated equipment, while LTL activities are
conducted primarily with equipment provided by owner-operators. Changes in
the mix of LTL versus full-truckload revenue as well as fluctuations in the
amount of total freight handled on company-operated versus owner-operator
provided equipment, impact the percent of freight revenue absorbed by the
various categories of operating expenses between the two quarters.
During the third quarter of 2002, the percent of freight revenue absorbed by
salaries, wages and related expense was 26.3%, as compared to 26.4% during
the year-ago quarter. Of the $1.1 million increase in salaries, wages and
related expense, about 50% was related to increased driver payroll expenses
and about 33% was related to increased payroll for non-driver employees. The
remainder was due to increases in other costs associated with employment,
such as health insurance and payroll taxes.
Purchased transportation expenses primarily represent payments to owner-
operators who own trucks which we use to haul some of our freight. Owner-
operators are responsible for all costs and expenses associated with the
operation of their trucks including fuel, maintenance, insurance and labor.
During the third quarter of 2002, purchased transportation expenses
increased by $2.3 million, or 12% when compared to the year-ago quarter. We
have increased the size of our owner-operator provided full-truckload fleet
during 2002 by about 100 units, or nearly 20%. Virtually all of that
increase occurred during the third quarter of 2002. The increase in the
size of the owner-operator provided full-truckload fleet was a primary
contributor to the increase in purchased transportation expense.
Supplies and expenses primarily represent costs we incur for fuel,
maintenance, tires, driver over-the-road expenses and freight handling
expenses. Such costs are for company-operated equipment. Supplies and
expenses increased by $635,000 between the third quarters of 2001 and 2002.
The amount we spent for fuel to operate the company-operated fleet declined
by $115,000 or 1% between the quarters. Although per-gallon costs we paid
for fuel decreased by 3% during the third quarter of 2002 as compared to
the same quarter of 2001, the average number of miles traveled by our fleet
increased. Sudden and dramatic fuel price volatility enhances or diminishes
our profitability.We have in place a number of strategies designed to address
such volatility.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. With regard to fuel expenses for company-operated
equipment, we attempt to mitigate the impact of fluctuating fuel costs by
purchasing more fuel-efficient tractors and aggressively managing fuel
purchasing. During the third quarter of 2002, our equipment repair expenses
increased by about $500,000 as compared to the year-ago quarter. Much of
this increase is related to our having extended the length of time we keep
tractors before turning them in.
The total of depreciation and revenue equipment rent expense fell from 12.1%
of freight revenue for the third quarter of 2001 to 10.6% for the comparable
2002 quarter. This change resulted primarily from the increased use of
owner-operator provided trucks in our full-truckload operations.
Claims and insurance expense was $4.9 million during the third quarter of
2002, about the same as the third quarter of 2001. Claims and insurance
expense was about 50% more than in 2002's second quarter. During 2002's
third quarter, one of our trucks was involved in a major accident. The
accident resulted in significant injuries to several occupants of the other
vehicle. That event was the primary contributor to the increase in claims
and insurance expenses during the third quarter of 2002. Factors mitigating
the impact of the July 2002 accident included improvement with regard to
cargo and physical damages claims.
Operating income from our freight hauling activities increased by $671,000
or 180% to $1,043,000 during the three months ended September 30, 2002 as
compared to the second quarter of 2001.
During the third quarter of 2002, our non-freight operation incurred a loss
of $1,086,000, as compared to an operating profit of $446,000 in the same
quarter of 2001. We sold most of our non-freight business in December of
2001. The remaining business has significant inventories of refrigeration
equipment and air conditioning parts that are slow-moving. Because customer
demand for such parts is usually strongest during the summer and early fall
we intensified our efforts to sell these parts during this year's third
quarter. Our success was limited by a number of factors. Accordingly,
during the third quarter of 2002, we lowered our expectations about how much
those parts are worth, and we recorded as expense the difference between the
amount we expect to receive on sale or other disposition of the parts and
what we paid for them. The inventory write-down was the cause of our third
quarter loss from non-freight operations.
Including the results from both freight and non-freight operations, our loss
from operations for the third quarter of 2002 was $43,000 as compared to an
operating profit of $818,000 for the same period of 2001.
Interest and other expense, net rose from $344,000 to $497,000 between the
two quarters. Although the interest expense we have incurred on our debt
decreased by $90,000 to $145,000 the components of miscellaneous non-operating
expenses related to certain life insurance investments rose by about $200,000
between the two quarters.
We incurred a pre-tax loss of $540,000 during the third quarter of 2002 as
compared to pre-tax income of $474,000 during the comparable 2001 period.
During the third quarter of 2002, we reported a benefit from income taxes of
$3.9 million. In certain prior years, we recorded income tax deductions for
interest paid on loans against insurance policies as allowed under the U.S.
Tax Code. Due to the uncertainty of such deductions, we maintained a $4
million reserve for the contingent expense that could have resulted from any
related tax assessments. By September 30, 2002, the risk of a tax
assessment had ended and the reserve for any related expense was no longer
required. Accordingly, during the quarter ended September 30, 2002, we
reversed the amount of the reserve as a non-recurring reduction of our
income tax expense.
Under accounting principles generally accepted in the United States of
America, if we can reliably estimate our expectations of full year pre-tax
and taxable income, we are obligated to record our interim period income tax
expense based on that full year estimate. Because we are at this time
unable to reliably predict our full year pre-tax and taxable income (or
loss), we have computed our year-to-date income tax expense based on our
year-to-date pre-tax and taxable income.
First Nine Months of 2002 vs. 2001
Items not specifically discussed with regard to the nine-month period
fluctuated on a year-to-date basis in a manner and for reasons similar to
those outlined in the above discussion regarding the three-month period.
Excluding the impact of decreased fuel adjustment charges, for the first
nine months of 2002, revenue from our full-truckload operations rose by $7.7
million, or 4.4%, while revenue from our LTL operations rose by $350,000 or
0.5%, in each case when compared to the prior year comparable period.
Including the impact of fuel adjustment charges, total freight revenue
increased by $3.3 million, or 1.3%.
For the nine months ended September 30, 2002, salaries, wages and related
expenses were 27.6% of freight revenues as compared to 26.8% for the
comparable year-ago period. Total salaries and wages increased by 4.3%,
but salaries for employee-drivers, which represent more than half of the
total, increased by only 2.3% between the nine-month periods ender September
30, 2002 and 2001. Non-driver payroll costs rose by 4.8%, primarily due to
merit increases. On a year-to-date basis, costs associated with work-related
injuries have increased about $700,000 in 2002 vs. 2001.
In December 2001, we sold the largest component of our non-freight
operations. The business we sold is a dealership engaged in the sale and
service of refrigeration equipment and of trailers used in freight
transportation. Products offered included trailers manufactured by Wabash
and mobile trailer refrigeration machinery manufactured by Carrier
Transicold. Because revenue and expenses from the dealership were present in
our financial statements during 2001, but not in 2002, our non-freight
revenue has declined by $29.8 million this year. However, our non-freight
expense fell by only $27.9 million between the same two periods. Our remaining
non-freight operation is engaged in the sale and service of air conditioning
and refrigeration components. For the first nine months of 2002, we incurred
an operating loss from our non-freight activities of $1.4 million as compared
to an operating profit of $431,000 during the first nine months of 2001. This
substantially offset the $1.1 million increase in operating income from our
freight activities between the same periods.
Because we carry large deductibles for personal injury claims, insurance
premiums are not a primary determinant of claims and insurance expense.
Individual events which result in our exposure for significant liability for
personal injury occur infrequently. Because of this irregular timing of
larger claims, our claims and insurance expense will demonstrate significant
volatility over time. Accordingly, during 2002, 42% of our September 30
year-to-date claims and insurance expense was incurred during the third
quarter as compared to 39% during 2001.
During the first nine months of 2002, we reported a benefit from income
taxes of $4.0 million. In certain prior years, we recorded income tax
deductions for interest paid on loans against insurance policies as allowed
under the U.S. Tax Code. Due to the uncertainty of such deductions, we
maintained a $4 million reserve for the contingent expense that could have
resulted from any related tax assessments. By September 30, 2002, the risk
of a tax assessment had ended and the reserve for any related expense was no
longer required. Accordingly, during the quarter ended September 30, 2002,
we reversed the amount of the reserve as a non-recurring reduction of our
income tax expense.
LIQUIDITY AND CAPITAL RESOURCES
Our primary needs for capital resources are to finance working capital,
capital expenditures and, from time to time, acquisitions. Working capital
investment typically increases during periods of sales expansion when
seasonally high levels of receivables and, with regard to non-freight
operations, inventory are present. In May of 2002, we entered into a new
$40 million 3-year credit facility with Comerica Bank-Texas and LaSalle
Bank. The new credit agreement is initially secured by our accounts
receivable. To the extent that our receivables do not support our borrowing
needs, we may, subject to the $40 million limit, pledge a portion of our
tractors or trailers to support additional borrowing. The new agreement
limits capital expenditures, our ability to pay dividends and the amount of
fixed charges and debt we may incur. At September 30, 2002, we had long-term
debt of $20 million. The unused portion of the company's $40 million
revolving credit facility was approximately $15 million. Also, as of
September 30, 2002 we had $10.2 million of cash on hand. On October 1,
2002, we repaid $7 million of our debt, which we expect lower our borrowing
costs for the balance of the year.
During the nine months ended September 30, 2002, net cash provided by
operating activities was $6.6 million as compared to $4.0 million in 2001.
We believe that our current cash position, funds from operations, and the
availability of funds under our credit agreement will be sufficient to meet
anticipated liquidity requirements for the next twelve months. As of
September 30, 2002, our working capital was $40.7 million as compared to
$25.1 million at the end of 2001. This includes an increase of $7.0 million
in the amount of our cash and cash equivalents. On October 1, 2002, we
repaid $7 million of our long-term debt. Also serving to increase working
capital at September 30, 2002 was a seasonal increase in our accounts
receivable.
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
our business or the industry in which we operate, our intent, plans, belief
or current expectations of the company, our directors or our officers,
primarily with respect to the future operating performance or our financial
position and other statements contained herein regarding matters that are
not historical facts, are "forward-looking" statements (as such term is
defined in PSLRA). 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,
but not limited to, 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
new 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, insurance and risks associated with the
technologies and systems we use.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of September 30, 2002, debt stood at $20 million, which approximated fair
market value. We sponsor a Rabbi Trust for the benefit of participants in a
supplemental executive retirement plan. As of September 30, 2002, the trust
had about 133,000 shares of our stock. To the extent that trust assets are
invested in our stock, our future pre-tax income will reflect changes in the
market value of our stock.
We own life insurance policies that have cash surrender value. The
investment returns earned by the insurance company serve to pay insurance
costs and increase cash surrender value, which is a key determinant of the
amount that we could receive pursuant to the policy as of the date of our
financial statements. Accordingly, changes in the market value of and
returns from those investments could impact the value of our life insurance
policies.
We held no other material market risk sensitive instruments (for trading or
non-trading purposes) that would involve significant relevant market risks,
such as equity price risk. Accordingly, the potential loss in our future
earnings resulting from changes in such market rates or prices is not
significant.
Item 4. Controls and Procedures
Within 90 days prior to the date of filing of this report, the company
carried out an evaluation, under the supervision and with the
participation of the company's management, including the Chief
Executive Officer and the Chief Financial Officer, of the effectiveness
of, the design and the operation of the company's disclosure controls and
procedures pursuant to Exchange Act Rules 13a-14 and 15d-14. Based on the
evaluation, the company's Chief Executive Officer and Chief Financial Officer
concluded that the company's disclosure controls and procedures are effective
for gathering, analyzing and disclosing the information the company is
required to disclose in the reports it files under the Securities Exchange Act
of 1934, within the time periods specified in the SEC's rules and forms. There
have been no significant changes in the company's internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of their evaluation.
PART II - OTHER INFORMATION
Items 1, 2, 3, 4 and 5 of Part II are omitted due to a lack of updated
information to disclose pursuant to said items.
Item 6. Exhibits and reports on Form 8-K.
a. Exhibits
None
b. On July 16, 2002, we filed a current report on Form 8-K announcing a
change in our certified independent public accountant, which we
amended on a Form 8-K/A filed on July 19, 2002.
On August 15, 2002 we filed a current report on Form 8-K in which we
filed the certifications as of June 30, 2002 of our Chief Executive
Officer (as Exhibit 99.1) and our Chief Financial Officer (as Exhibit
99.2) pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of l934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Frozen Food Express Industries, Inc.
------------------------------------
(Registrant)
November 12, 2002 By: /s/ Stoney M. Stubbs, Jr.
------------------------------------
Stoney M. Stubbs, Jr.
Chairman of the Board and
Chief Executive Officer
November 12, 2002 By: /s/ F. Dixon McElwee, Jr.
------------------------------------
F. Dixon McElwee, Jr.
Senior Vice President and
Chief Financial Officer
CERTIFICATION
I, Stoney M. Stubbs, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Frozen Food Express
Industries, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent function):
a) All significant deficiencies (if any) in the design or operation of
internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 12, 2002
/s/ Stoney M. Stubbs, Jr.
- -------------------------
Stoney M. Stubbs, Jr.
Chairman of the Board and
Chief Executive Officer
See also the certification pursuant to Section 906 of the Sarbanes Oxley Act
of 2002, which is filed on Form 8-K on the date of this report.
CERTIFICATION
I, F. Dixon McElwee, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Frozen Food Express
Industries, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entites,
particularly during the period in which this quarterly report is being
prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors(or persons performing the
equivalent function):
a) All significant deficiencies (if any) in the design or operation of
internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 12, 2002
/s/ F. Dixon McElwee, Jr.
- -------------------------
F. Dixon McElwee, Jr.
Senior Vice President and
Chief Financial Officer
See also the certification pursuant to Section 906 of the Sarbanes Oxley Act
of 2002, which is filed on Form 8-K on the date of this report.