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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, 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 (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
- ---------------------------------------------------------------------------
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 change Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.
[X]
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-(2).
Yes [ ] No [X]
As of March 22, 2003 16,904,762 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 as of
June 28, 2002 was $34,655,000. This amount is based on the closing
sale price of the registrant's common stock as reported by
Nasdaq on such date.
DOCUMENTS INCORPORATED BY REFERENCE
The sections "Outstanding Capital Stock; Principal Shareholders",
"Nominees for Directors", "Executive Compensation", and "Transactions with
Management and Directors" of the Proxy Statement for the Annual Meeting of
Shareholders to be held April 24, 2003, 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, 2002, 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 to us unless the context requires otherwise, include
Frozen Food Express Industries, Inc. and our subsidiaries, all of which are
wholly owned. 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. According to industry
publications and based on 2001 revenue, we are one of the 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 our customers 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, 1998 through 2002 (LTL data also includes
distribution shipments):
2002 2001 2000 1999 1998
Revenue* ---- ---- ---- ---- ----
Full-truckload and
dedicated fleet $245.9 $236.4 $221.6 $211.5 $206.1
Less-than-truckload 92.7 90.9 101.9 99.4 100.0
Non-freight 12.3 51.1 68.9 61.2 43.8
----- ----- ----- ---- -----
Total $350.9 $378.4 $392.4 $372.1 $349.9
===== ===== ===== ===== =====
Freight operating ratio 98.9% 99.2% 100.3% 105.2% 95.1%
Full-truckload
Loaded miles* 175.3 166.3 158.0 157.2 155.0
Shipments** 191.0 178.5 173.9 165.0 166.0
Revenue per shipment** $ 1.3 $ 1.3 $ 1.3 $ 1.3 $ 1.2
Loaded miles per load 918 932 919 953 934
Less-than-truckload
Hundredweight* 7.6 7.4 8.3 8.1 8.5
Revenue per hundredweight $12.14 $12.31 $12.29 $12.30 $11.76
Shipments** 259.9 253.0 284.4 277.9 293.1
Revenue per shipment $ 356 $ 359 $ 358 $ 358 $ 341
*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 ---------------------------
- ----- 2002 2001 2000 1999 1998
---- ---- ---- ---- ----
Full-truckload and dedicated fleet 73% 72% 68% 68% 67%
LTL and distribution 27 28 32 32 33
== == == == ==
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.
MARKETS WHICH WE SERVE
- ----------------------
- FREIGHT SEGMENT: Our refrigerated and non-refrigerated ("dry")
truck operations serve more than 7,000 customers in the United States,
Mexico and Canada. Our refrigerated division accounts for more than 80% of
our total freight revenue. Our customers are involved in a variety of
products including food products, pharmaceuticals, medical supplies and
household goods. Our customer base is diverse in that our 5, 10 and 20
largest customers accounted for 26%, 34%, and 43%, respectively, of our
total freight revenue during 2002. None of our markets is dominated by any
single competitor. We compete with several thousand other trucking
companies. The principal method of competition are price, quality of
service and availability of equipment needed to satisfy customer
requirements.
For decades, most of the market for nationwide refrigerated LTL
service has been shared between one other company and ourselves. We
competed primarily on price and breadth of services. In recent years, the
competitor's annual LTL revenue was about one half as much as our LTL
revenue. During December 2002, the competitor announced that it planned to
cease operations and liquidate, a process that began in January 2003. As a
result, we have experienced a significant increase in our LTL volume of
shipments. In order to provide service to our expanded LTL customer base,
in December 2002, we opened terminals near Miami, FL and Modesto, CA.
Although we expect this increased activity to carry over into future
periods, there can be no assurance that will occur.
Increased competition from logistics outsourcing and freight
consolidators mitigated our penetration of the market for refrigerated LTL
services during 2000, 2001 and most of 2002.
- Refrigerated Trucking: 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 2001, 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").
High-volume 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 recent years, 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.
- Non-Refrigerated Trucking: Our non-refrigerated trucking operation
conducts business under the name American Eagle Lines ("AEL"). During 2002,
AEL accounted for about 20% of our total freight revenue, as compared to 15%
as recently as 2000. AEL serves the dry full-truckload market throughout
the United States and Canada. During 2002, a Fortune 50 company that is one
of AEL's principal customers named AEL its "Carrier of the Year".
- 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 Wabash trailers and Carrier Transicold brand
truck and trailer refrigeration equipment. We sold this dealership in
December 2001 retaining a 19.9% ownership interest in the buyer. This dealer
continues to provide 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.
OPERATIONS
- ----------
From the beginning of 1998 through 2002, our company-operated, full-
truckload tractor fleet increased from about 1,130 units to 1,340 units.
During the same period, we have emphasized expansion of our fleet of
independent contractor ("owner-operator") provided full-truckload tractors.
As of December 31, 2002, our full-truckload fleet also included approximately
540 tractors provided by owner-operators as compared to approximately 380 at
the beginning of 1998.
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
2002, we had contracts for approximately 540 owner-operator tractors in our
full-truckload divisions and approximately 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
------------------------------
2002 2001 2000 1999 1998
---- ---- ---- ---- ----
Full-truckload and dedicated fleet 30% 26% 28% 25% 24%
LTL and distribution 64% 68% 69% 69% 69%
== == == == ==
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 decreased by
approximately 5% in 2002, but did not change significantly in 2001. Such
costs increased by 35% in 2000 from 1999. 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.
Since the end of 2002, fuel costs have increased by 35%-40% or more.
We do not hedge our exposure to volatile energy prices, but we are able to
mitigate the impact of such volatility by adding fuel adjustment charges to
the basic rates for the freight services we provide. The adjustment charges
are designed to, but often do not, fully offset the increased fuel expenses
we incur when the prices escalate as rapidly as they have during the first
three months of 2003.
- Risk Management: Liability for accidents is a significant concern
in the trucking industry. Exposure can be large and occurrences can be
unpredictable. The cost and human impact of work-related injury claims can
also be significant. 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.
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 14% during
2002 and 10% in 2001. The reduced claims and insurance expense was due
primarily to improved claims experience, particularly for physical damage to
our tractors and trailers.
Prior to December 2001 our retained liability for injury to persons
was limited to $1 million per occurrence. During 2001, our industry was
subjected to cost prohibitive renewal prices for a deductible below $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 and 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.
Our risk management program is founded on the continual 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 to a tractor.
Student drivers undergo a more extensive training program as a second driver
with an experienced instructor-driver. Drivers and applicants who test
positive for drugs are turned away and drivers who test positive for such
substances are immediately disqualified from driving. 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.
- Customer Service: 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 continue to 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.
Temperature-controlled, full-truckload service requires a
substantially lower capital investment for terminals and lower costs of
shipment handling and information management than does LTL. Pricing is based
primarily on mileage, weight and type of commodity. At the end of 2002, our
full-truckload tractor fleet consisted of approximately 1,340 tractors owned
or leased by us and approximately 540 tractors contracted to us by owner-
operators, making us one of the seven largest temperature-controlled, full-
truckload carriers in North America.
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 our 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 6% of our company-
operated full-truckload fleet is now engaged in such operations.
Temperature-controlled LTL trucking requires a system of
terminals, capable of holding refrigerated and frozen products. LTL
terminals are strategically located in or near New York City, Philadelphia,
Atlanta, Lakeland (Florida), Miami, Chicago, Dallas, Salt Lake City, Modesto
and Los Angeles. Some 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 other locations. The Miami and
Modesto terminals were added late in 2002 in order to help us manage
increased LTL traffic to and from the south Florida and northern California
markets.
In addition to the LTL terminals, which also serve as full-
truckload employee-driver centers, full-truckload activities are also
conducted from a terminal in Fort Worth, Texas. 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.
- Information Management: Superior 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 2002, the LTL operation
handled about 260,000 individual shipments.
- International Operations: During 2002, the North American Free
Trade Agreement ("NAFTA") was expected to be fully implemented with regard
to the ability of Mexico and United States-based trucking companies to
operate to and from one another's nation. 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. NAFTA does not expand the ability for American or Mexican
trucking companies to haul freight between points within one another's
countries.
For more than a decade, we have partnered with Mexico-based
truckers to facilitate freight moving both ways across the southern United
States border. Freight moving from Mexico is hauled in our 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
approximately 10 years. 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. Less than 5% of our
consolidated freight revenue during 2002 involved international shipments,
all of which was billed in United States currency.
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 routine 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. The manufacturer began expressing
concern about its obligation to buy used trucks for which there was little,
if any, demand. After extensive discussions with the manufacturer, in 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. We will determine which trucks will be returned at 42 or
48 months as those dates approach, but we are obliged to return no more than
50% of our trucks at 42 months. We expect this extended replacement cycle to
increase our maintenance expenses by minor amounts. Most of our tractors
which were put into service before 2002 are leased for 36 month terms. We
approached our equipment lessors to request extended lease terms to match
the extended trade-back schedule. Only one lessor refused to do so, and we
were able to extend the maturity of those leases with financing provided by
the financial services division of the manufacturer. During their primary
term, the original leases qualified as off-balance sheet operating leases
under GAAP. The lease extensions qualify as financing leases under GAAP.
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 2003. 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.
REGULATION
- ----------
The Federal Motor Carrier Safety Administration (FMCSA) has proposed
to make numerous changes to the regulations which goven drivers' hours of
service. As of the date of this filing, the specific provisions of the FMCSA
proposal have not been made public. Hours of Service ("HOS") rules issued by
the FMCSA, in effect since 1939, generally limit the number of consecutive
hours and consecutive days that a driver may work. If the FMCSA were to
amend the rules to reduce those number of hours or days, the reduced
availability of our drivers and equipment to generate revenue could
negatively impact our operating results. Until the FMCSA issues it's
proposed amendment to the HOS rules, we are unable to predict the impact, if
any, such an amendment may have on us.
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 refrigerated 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. 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. In addition, severe winter
driving conditions such as those witnessed in the northern and eastern
United States, can be hazardous and impair all of our trucking
operations from time to time.
EMPLOYEES
- ---------
The number of our employees, none of which are subject to collective
bargaining arrangements, as of December 31, 2002 and 2001, was as follows:
2002 2001
Freight Operations: ----- -----
Drivers and trainees 1,624 1,515
Non-driver personnel
Full time 798 646
Part time 65 87
----- -----
Total Freight Operations 2,487 2,248
Non-Freight Operations 95 192
----- -----
Total 2,582 2,440
===== =====
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 and 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, actual results could differ
materially from the expectations reflected in such forward-looking
statements. 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.
Factors that are not within our control that could contribute to
such differences and that may have a bearing on operating results include
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.
INTERNET WEB SITE
- -----------------
We maintain a web site on the Internet through which additional
information about FFEX is available. Our web site address is www.ffex.net.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, press releases, earnings releases and other reports
filed with the Securities and Exchange Commission. Pursuant to Section 13 or
15 (d) of the Exchange Act are available, free of charge, on our web site as
soon as practical after they are filed.
SEC FILINGS
- -----------
We file annual, quarterly and special reports, proxy statements
and other information with the Securities and Exchange Commission (SEC).
Our reports and any materials we file with the SEC are available at the
Public Reference Room, located at 450 Fifth Street, N.W., Washington, D.C.
20549. Information may be obtained from the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site at
www.sec.gov that contains information we file with the agency. Our common
stock is traded in the Nasdaq Stock Market under the symbol "FFEX".
ITEM 2. PROPERTIES
----------
At December 31, 2002, 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
Dallas, TX 100,000 80.0 O
Ft. Worth, TX 34,000 7.0 O
Chicago, IL 37,000 5.0 O
Lakeland, FL 26,000 15.0 O
Newark, NJ 17,000 5.0 O
Atlanta, GA 40,000 7.0 L
Los Angeles, CA 40,000 6.0 L
Salt Lake City, UT 25,000 7.0 L
Miami, FL 17,500 N/A L
Non-Freight Division
Dallas, 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, 2002 and 2001:
Age in Years
------------------------------------
Tractors Less than 1 1 thru 3 4 or more Total
- -------- ----------- -------- --------- -----
2002 2001 2002 2001 2002 2001 2002 2001
---- ---- ---- ---- ---- ---- ---- ----
Company owned and leased 276 482 975 890 160 17 1,411 1,389
Owner-operator provided 8 77 127 225 602 402 737 704
--- --- --- --- --- --- ----- -----
Total 284 559 1,102 1,115 762 419 2,148 2,093
=== === ===== ===== === === ===== =====
Age in Years
------------------------------------
Trailers Less than 1 1 thru 5 6 or more Total
- -------- ----------- -------- --------- -----
2002 2001 2002 2001 2002 2001 2002 2001
---- ---- ---- ---- ---- ---- ---- ----
Company owned and leased 301 214 1,925 2,163 1,063 705 3,289 3,082
Owner-operator provided 1 2 12 12 6 7 19 21
--- --- ----- ----- ----- --- ----- -----
Total 302 216 1,937 2,175 1,069 712 3,308 3,103
=== === ===== ===== ===== === ===== =====
Approximately 80% of 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. Temp-
erature controlled operations are conducted with both 48 and 53 foot refrig-
erated trailers.
Our general policy is to replace our company-operated, heavy-duty
tractors after 42 or 48 months, subject to cumulative mileage and condition.
Our trailers are usually retired after seven years of service. Occasionally,
we retain retired equipment 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 ordinary and routine 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.
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 2002.
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 "Common Stock Information
and Unaudited Quarterly Financial Data" appearing on page 28 of the Annual
Report to Shareholders for the year ended December 31, 2002, 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, 2002, 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, 2002, 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 13 of the Annual Report to Shareholders for the year
ended December 31, 2002 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 Reports of Independent Public Accountants,
with respect thereto set forth on pages 17 through 28 of the Annual Report
to Shareholders for the year ended December 31, 2002, are incorporated by
reference into this Report:
Consolidated Statements of Income --
Years ended December 31, 2002, 2001, and 2000
Consolidated Balance Sheets --
As of December 31, 2002 and 2001
Consolidated Statements of Cash Flows --
Years ended December 31, 2002, 2001, and 2000
Consolidated Statements of Shareholders' Equity --
Years ended December 31, 2002, 2001, and 2000
Notes to Consolidated Financial Statements
Reports of Independent Public Accountants
Supplementary Information - Quarterly Financial Data (unaudited)
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
--------------------------------------------------------------
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
--------------------------------------------------
In accordance with General Instruction G to Form 10-K, the
information required by Item 10 is incorporated herein by reference from the
portion of our Proxy Statement for the Annual Meeting of Shareholders to be
held April 24, 2003, 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 April 24, 2003, appearing under the captions "Executive Compensation"
and "Transactions with Management and Directors".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
-------------------------------------------------------------------
The following table provides information concerning all of our
equity compensation plans. Specifically, the number of shares of common
stock subject to outstanding options, warrants and rights and the exercise
price thereof, as well as the number of shares of common stock available for
issuance under all of our equity compensation plans.
Number of securities
remaining available
Number of securities to Weighted-average future issuance under
be issued upon exercise exercise price of equity compensation plan
Plan of outstanding options, outstanding options, (excluding securities
Category warrants and rights warrants and rights reflected in column (a)
- -------------------------------------------------------------------------------
Equity
compensation
plans approved
by security
holders 1,844,802 $2.97 871,250
Equity
compensation
plans not
approved by
security
holders 1,027,800 $8.88 -
--------- ------- -------
Total 2,872,602 $5.09 871,250
========= ======= =======
We have signed change in control agreements with each of our
executive officers. Pursuant to those agreements, in the event of a change
in control (as defined therein), all unvested stock options would become
immediately and fully vested.
In accordance with General Instruction G to Form 10-K, the remainder
of 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 April 24, 2003, 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 April 24, 2003, appearing under the captions "Nominees for Directors",
"Transactions with Management and Directors" and "Executive Compensation".
Item 14. CONTROLS AND PROCEDURES
-----------------------
Within 90 days prior to the date of the 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 IV
ITEM 15. 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
set forth below in this Item 15 are filed as part of this Annual
Report on Form 10-K.
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:
--------
3.1 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 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 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 of Bylaws of the Registrant, dated April 3, 2002
(filed as Exhibit 3.4 to Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 2001 and
incorporated herein by reference).
3.5 Amendment to Bylaws of Registrant dated March 25, 2003.
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 #033-59465 as filed with the Commission and
incorporated herein by reference).
10.2 Credit Agreement among Comerica Bank-Texas as administrative
agent for itself and other banks, LaSalle Bank National
Association, as collateral agent and syndication agent for
itself and other banks and FFE Transportation Services, Inc.
as Borrower and certain of its affiliates as of May 30, 2002
(filed as Exhibit 10.1 to Registrant's Quarterly Report on Form
10-Q for the period ended June 30, 2002).
10.3* 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).
10.4* Amendment No. 1 to Frozen Food Express Industries, Inc. 1992
Incentive and Nonstatutory Stock Option Plan (filed as Exhibit
4.4 to Registrant's Registration Statement #333-38133 and
incorporated herein by reference).
10.5* Amendment No. 2 to Frozen Food Express Industries, Inc. 1992
Incentive and Nonstatutory Stock Option Plan (filed as Exhibit
4.5 to Registrant's Registration Statement #333-38133 and
incorporated herein by reference).
10.6* Amendment No. 3 to Frozen Food Express Industries, Inc. 1992
Incentive and Nonstatutory Stock Option Plan (filed as Exhibit
4.6 to Registrant's Registration Statement #333-87913 and
incorporated herein by reference).
10.7* FFE Transportation Services, Inc. 1994 Incentive Bonus Plan,
as amended (filed as Exhibit 10.6 to Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1994 and
incorporated herein by reference).
10.8* 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 and incorporated herein by reference).
10.9* Frozen Food Express Industries, Inc. 401(k) Savings Plan
(filed as Exhibit 10.13 to Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 2001 and
incorporated herein by reference).
10.10* First Amendment to the Frozen Food Express Industries, Inc.
401(k) Savings Plan (filed as Exhibit 10.14 to Registrant's
Annual Report on Form 10-K for the fiscal year ended December
31, 2001 and incorporated herein by reference).
10.11* Frozen Food Express Industries, Inc. Employee Stock Option
Plan (filed as Exhibit 4.1 to Registrant's Registration
Statement #333-21831 as filed with the Commission and
incorporated herein by reference).
10.12* 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).
10.13* 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).
10.14* 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).
10.15* Frozen Food Express Industries, Inc. 2002 Incentive and
Nonstatutory Stock Option Plan.
11.1 Computation of basic and diluted net income or loss per
share of common stock (incorporated by reference to Footnote
10 to the financial statements appearing in the Annual Report
to Shareholders of the Registrant for the year ending December
31, 2002).
13.1 Annual Report to Shareholders of the Registrant for the year
ended December 31, 2002. Except for those portions of such
Annual Report to Shareholders expressly incorporated by
reference to 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.
99.1 Certification of Chief Executive Officer
99.2 Certification of Chief Financial Officer
* Executive compensation plans and arrangements required to be filed
as an exhibit on this Form 10-K.
(b) REPORTS ON FORM 8-K:
-------------------
On October 28, 2002, we filed a current report on Form 8-K setting
forth our results of operations for the 3 and 9 month periods ended
September 30, 2002 as compared to the same periods of 2001.
On November 13, 2002, we filed a current report on Form 8-K in which
we filed the certifications 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.
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
COVERED BY REPORTS OF INDEPENDENT
PUBLIC ACCOUNTANTS
Annual
Report to
Shareholders
----------
Consolidated Statements of Income --
Years ended December 31, 2002, 2001 and 2000 17
Consolidated Balance Sheets --
As of December 31, 2002 and 2001 18
Consolidated Statements of Cash Flows --
Years ended December 31, 2002, 2001 and 2000 19
Consolidated Statements of Shareholders' Equity --
Years ended December 31, 2002, 2001 and 2000 20
Notes to Consolidated Financial Statements 21-26
Reports of Independent Public Accountants 26-27
Supplementary Information --
Quarterly financial data (unaudited) 28
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, 2002, are hereby
incorporated by reference, and are filed herewith as Exhibit 13.1. The
financial statements listed in the index to financial statements in Item 8
hereof are filed as part of this Annual Report on Form 10-K.
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: March 27, 2003 /s/ Stoney M. Stubbs, Jr.
------------------------- ----------------------------------
Stoney M. Stubbs, Jr.,
Chairman of the Board of Directors
and President (Principal Executive
Officer)
Date: March 27, 2003 /s/ F. Dixon McElwee, Jr.
------------------------- ---------------------------------
F. Dixon McElwee, Jr.
Senior Vice President and Chief
Financial Officer
(Principal Financial and Accounting
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.
FROZEN FOOD EXPRESS INDUSTRIES, INC.
Date: March 27, 2003 /s/ Stoney M. Stubbs, Jr.
------------------------- ----------------------------------
Stoney M. Stubbs, Jr.,
Chairman of the Board of Directors
and President (Principal Executive
Officer)
Date: March 27, 2003 /s/ F. Dixon McElwee, Jr.
------------------------- ----------------------------------
F. Dixon McElwee, Jr.,
Senior Vice President and Director
(Principal Financial and Accounting
Officer)
Date: March 27, 2003 /s/ Charles G. Robertson
------------------------- ----------------------------------
Charles G. Robertson
Executive Vice President and Director
Date: March 27, 2003 /s/ Jerry T. Armstrong
------------------------- ----------------------------------
Jerry T. Armstrong, Director
Date: March 27, 2003 /s/ W. Mike Baggett
------------------------- ----------------------------------
W. Mike Baggett, Director
Date: March 27, 2003 /s/ Brian R. Blackmarr
------------------------- ----------------------------------
Brian R. Blackmarr, Director
Date: March 27, 2003 /s/ Leroy Hallman
------------------------- ----------------------------------
Leroy Hallman, Director
Date: March 27, 2003 /s/ T. Michael O'Connor
------------------------- ----------------------------------
T. Michael O'Connor, Director
CERTIFICATION
Pursuant to Section 302 of the Sarbanes Oxley Act of 2002
I, Stoney M. Stubbs, Jr., certify that:
1. I have reviewed this annual report on Form 10-K of Frozen Food Express
Industries, Inc.;
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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 those entities,
particularly during the period in which this annual 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 annual 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
annual 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: March 27, 2003 /s/ Stoney M. Stubbs, Jr.
--------------------------
Stoney M. Stubbs, Jr.
Chairman of the Board and
Chief Executive Officer
CERTIFICATION
Pursuant to Section 302 of the Sarbanes Oxley Act of 2002
I, F. Dixon McElwee, Jr., certify that:
1. I have reviewed this annual report on Form 10-Q of Frozen Food Express
Industries, Inc.;
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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 those entities,
particularly during the period in which this annual 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 annual report (the "Evaluation Date"); and
c) Presented in this annual 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
annual 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: March 27, 2003 /s/ F. Dixon McElwee, Jr.
------------------------
F. Dixon McElwee, Jr.
Senior Vice President and
Chief Financial Officer