FROZEN FOOD EXPRESS INDUSTRIES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 23, 1998
TO THE SHAREHOLDERS OF
FROZEN FOOD EXPRESS INDUSTRIES, INC.:
Notice is hereby given that the Annual Meeting of Shareholders (the
"Annual Meeting") of Frozen Food Express Industries, Inc. (the "Company"),
a Texas corporation, will be held on Thursday, April 23, 1998, at
3:30 p.m., Dallas, Texas time, in the offices of Wells Fargo Bank, Fountain
Place, 1445 Ross Avenue, 4th Floor, Dallas, Texas 75202 for the following
purposes:
1. Electing nine (9) directors to serve until the next Annual
Meeting of Shareholders and until their respective successors are
elected and qualified; and
2. Transacting such other business as may properly be brought before
the Annual Meeting or any adjournment thereof.
You are encouraged to attend the Annual Meeting in person. Whether or
not you plan to attend the Annual Meeting, please complete, date, sign and
return the accompanying proxy at your earliest convenience. A reply
envelope is provided for this purpose, which needs no postage if mailed in
the United States. Your immediate attention is requested in order to save
your Company additional solicitation expense.
Information regarding the matters to be acted upon at the Annual
Meeting is contained in the Proxy Statement attached to this Notice.
Only shareholders of record at the close of business on March 3, 1998,
are entitled to notice of and to vote at such meeting or any adjournment
thereof.
By Order of the Board of Directors
Dallas, Texas LEONARD W. BARTHOLOMEW
March 30, 1998 Secretary
<PAGE>
FROZEN FOOD EXPRESS INDUSTRIES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 23, 1998
FROZEN FOOD EXPRESS INDUSTRIES, INC.
1145 Empire Central Place
P. O. Box 655888
Dallas, Texas 75265-5888
Telephone: (214) 630-8090
PROXY STATEMENT FOR ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD APRIL 23, 1998
SOLICITATION OF PROXIES
The accompanying proxy is solicited by the management of Frozen Food
Express Industries, Inc. (the "Company") for use at the Annual Meeting of
Shareholders to be held at Dallas, Texas, on the 23rd day of April, 1998
(the "Annual Meeting"), and at any adjournment thereof, for the purposes
set forth in the accompanying Notice of Annual Meeting of Shareholders.
This Proxy Statement and accompanying proxy are being mailed or delivered
to shareholders on or about March 30, 1998. Solicitations of proxies may be
made by personal interview, mail, telephone or telegram by directors,
officers and regular employees of the Company. The Company may also
request banking institutions, brokerage firms, custodians, trustees,
nominees and fiduciaries to forward solicitation material to the beneficial
owners of the Company's $1.50 par value Common Stock (the "Common Stock")
held of record by such persons and may reimburse such forwarding expenses.
All costs of preparing, printing, assembling and mailing the form of proxy
and the material used in the solicitation thereof and all clerical and
other expenses of solicitation will be borne by the Company.
ANNUAL REPORT
The Company's Annual Report to Shareholders, covering the fiscal year
ended December 31, 1997, including audited financial statements, is also
being mailed to the shareholders entitled to notice of and vote at the
Annual Meeting in the envelope containing this Proxy Statement. The Annual
Report does not form any part of the material for solicitation of proxies.
SIGNATURES OF PROXIES IN CERTAIN CASES
If a shareholder is a corporation, the accompanying proxy should be
signed in its full corporate name by the President or another authorized
officer who should indicate his title. If a shareholder is a partnership,
the proxy should be signed in the partnership name by an authorized person.
If stock is registered in the name of two or more trustees or other
persons, the proxy should be signed by each of them. If stock is registered
in the name of a decedent, the proxy should be signed by an executor or an
administrator. The executor or administrator should attach to the proxy
appropriate instruments showing his qualification and authority. Proxies
signed by a person as agent, attorney, administrator, executor, guardian or
trustee should indicate such person's full title following his signature.
<PAGE>
REVOCATION OF PROXY
All shares represented by a valid proxy will be voted. A proxy may be
revoked at any time before it is voted by the giving of written notice to
that effect to the Secretary of the Company, by executing and delivering a
later-dated proxy or by attending the Annual Meeting and voting in person.
OUTSTANDING CAPITAL STOCK; PRINCIPAL SHAREHOLDERS
At the close of business on the 3rd day of March, 1998, the record
date for determination of shareholders entitled to notice of, and to vote
at, the Annual Meeting, there were outstanding and entitled to be voted
16,902,217 shares of Common Stock. The following table sets forth certain
information, as of March 3, 1998, with respect to each person known to the
management of the Company to be a beneficial owner of more than five
percent of the outstanding Common Stock.
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of Beneficial Percent
Of Beneficial Owner Ownership (1) of Class
- ------------------------------------ ----------------- --------
<S> <C> <C>
FFE Transportation Services, Inc. (2) 2,549,020 15.08
Employee Stock Ownership Trust
Chase Bank of Texas, NA, Trustee
1700 Pacific Avenue
Dallas, Texas 75201
Savings Plan For Employees of 1,855,906 10.98
Frozen Food Express Industries, Inc.
Chase Bank of Texas, NA, Trustee
1700 Pacific Avenue
Dallas, Texas 75201
Sarah M. Daniel (3) 1,457,210 8.62
612 Linda
El Paso, Texas 79922
Stoney M. Stubbs, Jr.(4) 1,448,023 (5) 8.45
158 Jellico Circle
Southlake, Texas 76092
Royce & Associates, Inc. 1,391,603 (6) 8.23
and Royce Management Company
1414 Avenue of the Americas
New York, New York 10019
Lucile B. Fielder (3) 1,337,924 7.92
Countrywide Abstract & Title, Inc.
100 East Market Street, #212
Lockhart, Texas 78644
</TABLE>
______________________
(1) Except as otherwise noted, each beneficial owner has sole voting and
investment power with respect to all shares owned by him, and all
shares are directly held by the person named.
(2) FFE Transportation Services, Inc., ("FFE") is the principal operating
subsidiary of the Company.
<PAGE>
(3) Information concerning the number of shares beneficially owned by
Sarah M. Daniel and Lucile B. Fielder was based upon a Schedule 13D,
dated November 22, 1996, which was jointly filed with the Securities
and Exchange Commission and has been adjusted to reflect the sale
during 1997 of 5,000 shares as to which Ms. Daniel had sole voting and
dispositive power and 2,000 shares as to which Ms. Daniel had joint
voting and dispositive power with her husband. Ms. Daniel has sole
voting and dispositive power over 63,047 shares, of which 730 shares
are held as custodian for her daughter, and joint voting and
dispositive power with her husband over 60,831 shares, and shared
voting and dispositive power with Ms. Fielder over 1,333,332 shares
owned by Weller Investment Ltd. Ms. Fielder has sole voting and
dispositive power over 4,592 shares, of which 730 shares are held as
custodian for her daughter and 950 shares are held as custodian for
her niece, and shared voting and dispositive power with Ms. Daniel
over 1,333,332 shares owned by Weller Investment Ltd.
(4) Mr. Stubbs holds, and has held for the past eighteen years, the
offices of Chairman of the Board, President and Chief Executive
Officer of the Company and FFE. Mr. Stubbs is the nephew of Edgar O.
Weller, a director of the Company.
(5) Includes 235,055 shares Mr. Stubbs has the right to acquire pursuant
to options exercisable within 60 days, 144,967 shares allocated to his
account in the FFE Transportation Services, Inc., Employee Stock
Ownership Plan, 43,522 shares allocated to his account in the Savings
Plan for Employees of Frozen Food Express Industries, Inc., and
769,387 shares held in family partnerships controlled by Mr. Stubbs.
(6) Information concerning the number of shares beneficially owned by
Royce & Associates, Inc. ("Royce") and Royce Management Company
("RMC") is as of December 31, 1997, and was obtained from a Schedule
13G, dated February 5, 1998, jointly filed by Royce, RMC and Charles
M. Royce with the Securities and Exchange Commission (the "SEC"). The
Schedule 13G confirms that Royce and RMC are both investment advisers
and members of a "group". Royce has sole voting and dispositive power
over 1,294,963 shares and RMC has sole voting and dispositive power
over 96,640 shares. Mr. Royce may be deemed to be a controlling
person of Royce and RMC and as such may be deemed to beneficially own
the shares beneficially owned by Royce and RMC. The Schedule 13G
indicates that Mr. Royce does not own any shares outside of Royce and
RMC and disclaims beneficial ownership of the shares held by Royce and
RMC.
QUORUM AND VOTING
The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock entitled to vote is necessary to
constitute a quorum at the Annual Meeting. Abstentions and broker non-
votes will be counted in determining the presence of a quorum. A "broker
non-vote" occurs when a nominee holding shares for a beneficial owner has
voted on certain matters at the Annual Meeting pursuant to discretionary
authority or instructions from the beneficial owner but may not have
received instructions or exercised discretionary voting power with respect
to other matters.
<PAGE>
Each holder of Common Stock will be entitled to one vote, in person or
by proxy, for each share of such stock owned of record at the close of
business on March 3, 1998. As to the election of directors, a shareholder
may, by checking the appropriate box on the proxy: (i) vote for all
director nominees as a group; (ii) withhold authority to vote for all
director nominees as a group; or (iii) vote for all director nominees as a
group except those nominees identified by the shareholder in the
appropriate area.
ACTION TO BE TAKEN UNDER THE PROXY
The accompanying proxy, if properly executed and returned, will be
voted (i) unless otherwise specified thereon, FOR the election of the nine
nominees, named in the next succeeding table, as directors of the Company,
and (ii) in the transaction of such other business as may properly come
before the Annual Meeting or any adjournment thereof in accordance with the
judgment of the proxies. The management of the Company does not know of
any such other matter or business. Should any nominee named herein for the
office of director become unable or be unwilling to accept nomination for
or election to such position, the persons acting under the proxy will vote
for the election, in his stead, of such other person as the management of
the Company may recommend. The management of the Company has no reason to
believe that any of the nominees will be unable or unwilling to serve if
elected to office. To be elected, each director must receive the
affirmative vote of the holders of a plurality of the issued and
outstanding shares of Common Stock represented in person or by proxy at the
Annual Meeting. Abstentions and broker non-votes will have no effect in
the election of directors.
NOMINEES FOR DIRECTORS
The Company's Bylaws provide that the Board of Directors shall consist
of a minimum of seven and a maximum of fifteen directors. Nine directors
will be elected at the Annual Meeting. Each director elected will serve
until the next Annual Meeting of Shareholders and until his successor has
been elected and qualified.
The persons named below are the Board of Directors' nominees for
election as directors. Each nominee has served continuously as a director
since the date of his first election to the Board. Further items of
information with respect to the nominees and all directors and officers of
<PAGE>
the Company as a group, including the beneficial ownership of Common Stock
as of March 3, 1998, by such persons and group, are set forth below:
<TABLE>
<CAPTION>
Principal Occupation Amount and
During Past Five First Nature of Percent
Years Became a Beneficial of
Name Age and Directorships Director Ownership (1) Class
- ----------------------- --- ------------------------------- -------- --------------- -------
<S> <C> <C> <C> <C> <C>
Stoney M. Stubbs, Jr. 61 Chairman of the Board, 1977 1,448,023 (2) 8.45%
President and Chief Executive
Officer of the Company
Edgar O. Weller 80 Vice Chairman of the Board 1969 550,435 (3) 3.26%
of the Company
W. Grogan Lord 83 Senior Chairman of the Board, 1975 5,625 (4) *
TeleCom Corporation
Leroy Hallman 82 Of counsel to the law firm 1975 20,525 (6) *
of Storey Armstrong Steger &
Martin, P.C. until May, 1997,
subsequently retired (5)
Brian R. Blackmarr 56 President, 1990 25,625 (7) *
B. R. Blackmarr &
Associates, Inc.
T. Michael O'Connor 43 Managing Partner, 1992 24,821 (8) *
T.J. O'Connor Cattle Co.
and Vice Chairman of
Texas A & M University
Board of Regents
W. Mike Baggett 51 Chairman, President and CEO 1998
Winstead Sechrest & Minick P.C.
Charles G. Robertson (9) 56 Executive Vice President 1982 549,478 (10) 3.22%
of the Company
Burl G. Cott (9) 57 Senior Vice President 1990 137,179 (11) *
of the Company
All directors and 2,761,712 (12) 15.87%
executive officers,
as a group (9 people)
</TABLE>
______________________
* less than 1%
(1) Except as otherwise noted, all shares are held directly, and the owner
has sole voting and investment power.
<PAGE>
(2) Includes 235,055 shares Mr. Stubbs has the right to acquire pursuant
to options exercisable within 60 days, 144,967 shares allocated to his
account in the FFE Transportation Services, Inc., Employee Stock
Ownership Plan, 43,522 shares allocated to his account in the Savings
Plan for Employees of Frozen Food Express Industries, Inc., and
769,387 shares held in family partnerships controlled by Mr. Stubbs.
(3) Includes 1,875 shares which Mr. Weller has the right to acquire
pursuant to options exercisable within 60 days.
(4) Represents 5,625 shares which Mr. Lord has the right to acquire
pursuant to options exercisable within 60 days.
(5) Mr. Hallman, and firms of which he was a member for more than 40
years, served as the Company's principal attorneys in interstate and
intrastate trucking matters.
(6) Includes 1,875 shares which Mr. Hallman has the right to acquire
pursuant to options exercisable within 60 days and 6,975 shares held
by a trust of which Mr. Hallman is the Trustee.
(7) Includes 5,625 shares which Mr. Blackmarr has the right to acquire
pursuant to options exercisable within 60 days.
(8) Represents 24,821 shares which Mr. O'Connor has the right to acquire
pursuant to options exercisable within 60 days.
(9) Mr. Robertson is also Executive Vice President and a director of FFE.
Mr. Cott is also Senior Vice President and a director of FFE.
(10) Includes 156,047 shares Mr. Robertson has the right to acquire
pursuant to options exercisable within 60 days, 82,236 shares
allocated to his account in the FFE Transportation Services, Inc.,
Employee Stock Ownership Plan, 36,887 shares allocated to his account
in the Savings Plan for Employees of Frozen Food Express Industries,
Inc., and 192,236 shares held by a family partnership which is
controlled by Mr. Robertson.
(11) Includes 67,172 shares Mr. Cott has the right to acquire pursuant to
options exercisable within 60 days, 21,963 shares allocated to his
account in the FFE Transportation Services, Inc., Employee Stock
Ownership Plan and 12,581 shares allocated to his account in the
Savings Plan for Employees of Frozen Food Express Industries, Inc.
(12) Includes 498,095 shares which executive officers and directors have
the right to acquire pursuant to options exercisable within 60 days,
249,166 shares allocated to the accounts of executive officers
pursuant to the FFE Transportation Services, Inc., Employee Stock
Ownership Plan, 92,990 shares allocated to the accounts of executive
officers pursuant to the Savings Plan for Employees of Frozen Food
Express Industries, Inc., and 961,623 shares held by family
partnerships controlled by directors and executive officers, and 6,975
shares held by a trust controlled by a director.
<PAGE>
The Company's Board of Directors held five meetings during 1997. Each
incumbent director attended during 1997 at least 75% of the aggregate of
(i) the total number of meetings of the Board of Directors held during the
period that he was a director and (ii) the total number of meetings held by
all committees of the Board on which he served (during the periods that he
served).
The Company's Board of Directors has standing compensation, audit and
information services committees, but does not have a standing nominating
committee.
The Compensation Committee consists of Messrs. Blackmarr, Chairman,
and Lord. The Committee is charged with recommending compensation
arrangements for the directors and executive officers of the Company and
recommending compensation programs for FFE. The Committee met twice during
1997.
The Audit Committee of the Board of Directors consists of Messrs.
Hallman, Chairman, Weller and O'Connor. During 1997, the Committee held
three meetings at which it reviewed with representatives of Arthur Andersen
LLP the results of its 1996 annual audit, and plans for the 1997 annual
audit and reviewed other services provided by the Company's accountants.
The Information Services Committee of the Board of Directors consists
of Messrs. Stubbs, Chairman, Blackmarr, Cott and Robertson. The Committee
is charged with reviewing the Company's information systems and making
recommendations to the Board of Directors regarding possible improvements
to such systems. The Committee held six meetings during 1997.
DIRECTOR COMPENSATION
As consideration for services as a director, each director who is not
an executive officer of the Company receives fees of $1,000 for each
meeting attended and $500 for each telephonic meeting in which he
participates. Members of the Audit, Compensation and Information Services
Committees who are not executive officers of the Company receive fees of
$500 for each committee meeting attended which does not occur on the same
day as a Board meeting.
On April 27, 1995, the shareholders adopted the Frozen Food Express
Industries, Inc., 1995 Non-Employee Director Stock Option Plan (the "1995
Director Plan"). The purpose of the 1995 Director Plan is to advance the
interest of the Company and its shareholders by strengthening the Company's
ability to attract and retain experienced and able individuals to serve as
independent directors of the Company and to furnish additional incentive to
such individuals to expend their best efforts on behalf of the Company.
On the day of a non-employee director's initial appointment or
election (whichever comes first) to the Board, such individual will be
granted, without any further action on the part of the Board or such
individual, an option to purchase 9,375 shares of Common Stock (subject to
adjustment to reflect certain changes in capitalization). Upon the
reelection of any non-employee director to the Board (including the non-
employee director's first election by shareholders if such director was
initially appointed to the Board) such individual will be granted, without
<PAGE>
any further action on the part of the Board or such individual, an option
to purchase 1,875 shares of Common Stock (subject to adjustment to reflect
certain changes in capitalization). No option shall be granted pursuant to
the 1995 Director Plan after March 3, 2005.
To the extent that a non-employee director has served as a director
for one or more years prior to the grant of an option, the option is
immediately exercisable for the number of shares equal to the product of
one-seventh (1/7) of the number of shares subject to the option multiplied
by the number of full years such non-employee director has served as a
director. Thereafter, one-seventh of the number of shares subject to the
option become exercisable on each anniversary of the date of grant until
the option becomes fully exercisable. No option granted under the 1995
Director Plan may be exercised after the tenth anniversary of its grant.
In the event that an optionee dies while serving on the Board of Directors,
all options granted to such optionee under the 1995 Director Plan become
fully exercisable as of the date of his or her death and may be exercised
by the beneficiary under the optionee's will or the executor of such
optionee's estate at any time prior to the second anniversary of his or her
death, and his or her unexercised options expire at the end of such period.
In the event that an optionee ceases to be a director for any reason other
than death, such optionee may exercise the vested portion of his or her
option at any time prior to the second anniversary of the date he or she
ceases to be a director, and his or her unexercised options expire at the
end of such period. Should an optionee die during the first six months
from the date such optionee ceases to be a director, his or her option may
be exercised by the beneficiary under the optionee's will or the executor
of such optionee's estate for two years after death and unexercised options
expire at the end of such period. In no event, however, shall the period
during which options may be exercised extend beyond the terms of the
options. No shares underlying the options, however, may be sold until the
expiration of six months after the date of grant.
The exercise price under each option is fifty percent (50%) of the
fair market value of the Common Stock at the close of business on the last
business day prior to the date the option is granted. Options may be
exercised by tendering to the Company the purchase price in cash, check, or
shares of Common Stock already owned by the non-employee director having a
fair market value equal to the purchase price.
In accordance with the 1995 Director Plan, each of the Company's non-
employee directors (with the exception of Mr. Baggett) was granted an
option to purchase 1,875 shares of Common Stock for $4.53 per share on
April 24, 1997. Mr. Baggett upon his appointment to the Board of Directors
on February 11, 1998 was granted an option to purchase 9,375, shares of
Common Stock for $5.00 per share.
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Blackmarr and Lord.
The Committee is charged with recommending compensation arrangements for
the directors and executive officers of the Company and recommending
compensation programs for FFE. No payments other than director fees were
made to Compensation Committee members during 1997, and no member of the
Compensation Committee had any relationships during 1997 requiring
disclosure according to applicable rules and regulations of the Securities
and Exchange Commission.
FIVE-YEAR SHAREHOLDER RETURN COMPARISON
The graph below compares the cumulative total shareholder return on
the Common Stock of the Company for the last five fiscal years with the
cumulative total return on the S&P 500 Index and the Media General Industry
Group Index #221 - Trucking Companies, consisting of the Company and 55
other trucking companies (assuming the investment of $100 in the Company's
Common Stock, the S&P 500 Index and the Media General Index on December 31,
1992, and reinvestment of all dividends).
COMPARISON OF FIVE-YEAR TOTAL RETURN AMONG
FROZEN FOOD EXPRESS INDUSTRIES, INC., MEDIA GENERAL
INDUSTRY GROUP #221 - TRUCKING COMPANIES AND S&P 500 INDEX
PERFORMANCE GRAPPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period Frozen Food Express MG Industry S&P 500
(Fiscal Year Covered) Industries, Inc. Group Index Index
- --------------------- ------------------- ----------- -------
<S> <C> <C> <C>
FYE December 31, 1992 $100.00 $100.00 $100.00
FYE December 31, 1993 146.59 107.30 110.08
FYE December 31, 1994 125.42 98.96 111.54
FYE December 31, 1995 89.47 85.27 153.45
FYE December 31, 1996 93.11 81.19 188.69
FYE December 31, 1997 94.31 108.08 251.64
</TABLE>
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information with respect to the
compensation paid by the Company for services rendered during the fiscal
years ended December 31, 1997, 1996 and 1995, to each executive officer
(collectively, the "Executive Officers") of the Company:
<TABLE>
<CAPTION>
Annual Compensation Compensation Awards
----------------------------- ------------------------------
Restricted Securities
Stock Underlying All Other
Name and Principal Position Year Salary Bonus Total (1) Awards (2) Options/SARs# (3) Compensation (4)
- --------------------------- ---- --------- -------- --------- ----------- ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Stoney M. Stubbs, Jr. 1997 $291,175 $121,648 $412,823 $107,007 10,500 $23,078
Chairman of the Board 1996 $263,495 $110,582 $374,077 $ 88,556 25,000 $25,877
President and Chief 1995 $258,099 $224,281 $492,380 $ 84,652 81,250 $41,172
Executive Officer of
the Company and FFE
Charles G. Robertson 1997 $221,019 $ 92,317 $313,33 $ 82,266 10,500 $13,535
Executive Vice President 1996 $198,842 $ 83,446 $282,288 $ 61,820 20,000 $16,904
of the Company and FFE 1995 $194,364 $132,145 $326,509 $ 52,314 58,000 $23,371
Burl G. Cott 1997 $137,801 $ 57,238 $195,039 $ 51,057 10,500 $ 2,800
Senior Vice President 1996 $123,269 $ 51,734 $175,003 $ 35,134 10,000 $ 6,000
of the Company and FFE 1995 $120,490 $ 72,328 $192,818 $ 23,820 21,000 $13,668
______________________
(1) Personal benefits provided to each of the named individuals under
various Company programs do not exceed the disclosure thresholds
established under SEC rules and are not included in this total.
(2) The awards reported in this column include restricted phantom stock
units and, with regard to 1997, also include amounts awarded to
executive officers which will be converted to phantom stock units
during 1998, relating to the achievement of performance goals under
the FFE Transportation Services, Inc. Executive Bonus and Phantom
Stock Plan (the "Executive Plan") or in accordance with the Company's
Supplemental Executive Retirement Plan (the "SERP") or FFE
Transportation Services, Inc. 401(k) Wrap Plan (the "Wrap Plan").
Amounts reported represent the sum of the amounts to be converted in
1998 plus the product of the aggregate number of phantom stock units
awarded and the market price of a share of Common Stock at December
31, 1997. The number of phantom stock units allocated to an officer
generally will be adjusted to prevent dilution in the event of certain
cash and non-cash dividends, recapitalizations and similar
transactions affecting the Common Stock. An officer may generally
elect to "cash out" any number or all of the phantom stock units
allocated to such officer between December 1 and December 15 of any
calendar year, in which event an amount equal to the fair market value
of a share of Common Stock on the last business day of the year in
<PAGE>
which such election is made multiplied by the number of phantom stock
units that the officer elected to "cash out" shall be paid to the
officer. Additionally, in the event of certain mergers, the sale of
all or substantially all of the Company's assets and certain similar
transactions (a "Reorganization") within six months after the date an
officer has been paid for phantom stock units and as a result of such
Reorganization the holders of Common Stock receive cash for each share
so held in an amount in excess of the amount paid to such officer for
such phantom stock units, then such excess shall be paid to the
officer. As of the date hereof, none of the executive officers have
elected to "cash out" any of the phantom stock units.
The following table sets forth the total number of phantom stock units
awarded under the Executive Plan, the SERP and the Wrap Plan for
services rendered during the fiscal years ended December 31, 1997,
1996 and 1995, to each executive officer of the Company:
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
------ ----- -----
<S> <C> <C> <C>
Stoney M. Stubbs, Jr. 10,674 8,145 9,675
Charles G. Robertson 8,215 5,595 5,979
Burl G. Cott 3,077 3,096 2,722
</TABLE>
The total amount of 1997 awards which will be converted to phantom
stock units in the accounts of Messrs. Stubbs, Robertson, and Cott in
1998 is $10,939, $8,327 and $5,364, respectively. As of December 31,
1997, the total number of phantom stock units allocated to the
accounts of Messrs. Stubbs, Robertson, and Cott was 80,554, 50,503 and
26,624, respectively. The total value of such accounts, based upon the
market price of a share of Common Stock on December 31, 1997 was
$724,987, $454,530, and $239,612, respectively, for Messrs. Stubbs,
Robertson and Cott.
(3) Options to acquire shares of the Company's Common Stock.
(4) Company contributions to the FFE Employee Stock Ownership Plan (the
"ESOP") and the Savings Plan for Employees of Frozen Food Express
Industries, Inc. (the "Savings Plan") and the value of benefits, as
determined under a methodology required by the SEC for valuing such
benefits, ascribed to life insurance policies whose premiums are paid
<PAGE>
by the Company for the benefit of the persons indicated below. Set
forth below is a summary of such compensation:
<TABLE>
<CAPTION>
Savings Split Dollar
Name Year ESOP Plan Life Insurance
- -------------------- ---- ------ ------- --------------
<S> <C> <C> <C> <C>
Stoney M. Stubbs, Jr. 1997 -- $2,800 $20,278
1996 -- $6,000 $19,877
1995 $7,668 $6,000 $27,484
Charles G. Robertson 1997 -- $2,800 $10,735
1996 -- $6,000 $10,904
1995 $7,668 $6,000 $ 9,703
Burl G. Cott 1997 -- $2,800 --
1996 -- $6,000 --
1995 $7,668 $6,000 --
</TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the grant of stock
options to the Executive Officers in the last fiscal year under the
Company's 1992 Incentive and Nonstatutory Stock Option Plan:
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------
% of Total Potential Realizable Value
Number of Options/SARs at Assumed Annual Rates
Securities Granted to of Stock Price Appreciation
Underlying Employees Exercise or For Option Term (1)
Options/SARs in Fiscal Base Price Expiration ---------------------------
NAME Granted (#)(2) Year ($/Sh) Date 5% 10%
- -------------------- -------------- ------------ ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stoney M. Stubbs, Jr. 7,000 0.5% $8.810 01/01/07 $ 38,784 $ 98,286
3,500 0.3% $8.875 07/01/07 $ 19,535 $ 49,506
Charles G. Robertson 7,000 0.5% $8.810 01/01/07 $ 38,784 $ 98,286
3,500 0.3% $8.875 07/01/07 $ 19,535 $ 49,506
Burl G. Cott 7,000 0.5% $8.810 01/01/07 $ 38,784 $ 98,286
3,500 0.3% $8.875 07/01/07 $ 19,535 $ 49,506
All Holders of
Common Stock (3) N/A N/A $8.875 N/A $94,338,707 $239,072,806
</TABLE>
______________________
(1) These amounts represent certain assumed rates of appreciation only.
Actual gains, if any, on stock option exercises and Common Stock
holdings are dependent on the future performance of the Common Stock
<PAGE>
and overall stock market conditions. There can be no assurance that
the amounts reflected in this table will be achieved.
(2) All options granted to Executive Officers were granted on January 1
and July 1, 1997, under the 1992 Incentive and Nonstatutory Stock
Option Plan, first become exercisable one year from the date of grant,
and are exercisable for a period of ten years from the date of grant.
All options were granted with an exercise price equal to 100% of the
market price of the Common Stock on the date of grant of such stock
option.
(3) Assumes a total of 16,902,217 shares of Common Stock outstanding with
a value of $8.875 (the closing sales price of the Common Stock on July
1, 1997) per share held from July 1, 1997, until July 1, 2007.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND YEAREND OPTION/SAR
VALUES
The following table provides information, with respect to each
Executive Officer, concerning the exercise of options during the last
fiscal year and unexercised options held as of the end of the fiscal year
ending December 31, 1997:
<TABLE>
<CAPTION>
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at Fiscal Yearend at Fiscal Yearend
Shares (#) ($)
Acquired Value (Exercisable/ (Exercisable/
Name On Exercise (#) Realized ($) Unexercisable) Unexercisable) (1)
- --------------------- --------------- ------------ ----------------- ------------------
<S> <C> <C> <C> <C>
Stoney M. Stubbs, Jr. -- $ -- 235,055/3,500 $115,427/$438
Charles G. Robertson -- $ -- 156,047/3,500 $ 66,553/$438
Burl G. Cott -- $ -- 67,172/3,500 $ 32,698/$438
</TABLE>
______________________
(1) The closing price for the Company's Common Stock as reported by the
Nasdaq Stock Market on December 31, 1997, was $9.00. Value is
calculated on the basis of the difference between $9.00 and the option
exercise price of an "in-the-money" option multiplied by the number of
shares of Common Stock underlying the option.
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report on the compensation policies, programs, and decisions
relating to the Company's executive officers has been prepared by Messrs.
Brian R. Blackmarr, Chairman, and W. Grogan Lord, serving as the Company's
Compensation Committee (the "Committee") during 1997. The Committee has
been delegated the responsibility to oversee the development and
administration of all compensation policies and programs for executive
officers of the Company.
The Committee seeks to design compensation programs that align the
interests of the executive officers with the Company's shareholders.
Accordingly, the Committee has implemented compensation programs it
believes will enhance the profitability of the Company, and based on such
profitability reward executive officers for efforts resulting in such
enhanced profitability. The Committee believes the compensation programs
allow the Company to attract, motivate, and retain the services of its key
executive officers.
The Company's executive compensation package is designed to retain
senior management by providing total compensation comparable to the
compensation packages offered to the top executives at the Company's
competitors. In an effort to better align the interests of the Company's
executives with the interests of shareholders, a substantial portion of
each executive's total compensation is provided through annual and long-
term incentive plans. The incentive plans place a substantial portion of
the executives' compensation packages at risk and serve as an integral
component of the Company's executive compensation philosophy. The Company
believes the executives' attentions are better balanced between achieving
short-term business goals and increasing the long-term value of the Company
with a "pay-at-risk" policy (tying payments to the Company's performance).
The annual and long-term executive compensation programs appropriately
reward executive officers for successful leadership when certain levels of
Company performance are achieved. In addition to the pay-at-risk
components, the Company's executive officer compensation program provides
base salary, supplemental retirement benefits, and other benefits,
including medical and retirement plans generally available to all Company
employees.
As part of the Committee's process of administering the executive
officers' compensation programs, the Committee periodically retains the
services of an outside consulting firm to review the Company's executive
compensation practices. The last such review was completed in February of
1996 for the compensation program provided during calendar year 1995, and
was discussed in detail in that year's proxy disclosure. These recurring
periodic reviews cover base salary, annual bonus payments, long-term
incentives (stock options, restricted stock shares, etc.), and retirement
benefits for the Company's executive officers as measured against the
competitive pay practices of a peer group of publicly-traded trucking
companies. The Committee currently plans to retain a compensation
consultant to update the periodic compensation study to ensure the
continued alignment of the executive officers' compensation programs with
the Company's compensation philosophy. Based on the results of the
previous compensation study, the Committee believes the Company's executive
compensation program continues to be competitive with its target market,
and to achieve the goals previously described.
<PAGE>
The major components of executive compensation are detailed below.
BASE SALARY
As part of the compensation review performed for the Company by
outside consultants, the base salary levels of the executives are reviewed
to ensure the base salary available to each executive is comparable to the
base salaries provided to executives in comparable positions within
publicly-traded trucking companies selected as its peer group. Base salary
levels of executive officers have been set below the market median of the
amounts paid to comparable executives within the peer group in the past,
and the Committee is confident the base salary levels set for 1997 are
consistent with this philosophy. The Committee believes that many of the
41 companies included in the market index for the five-year shareholder
return comparison are substantially different from the Company in size and
nature of services provided. Therefore, the Committee has directed its
outside consultants to compare compensation practices with a peer group of
twelve publicly traded companies with operations similar to the Company's.
ANNUAL INCENTIVE/BONUS COMPENSATION
The Company's shareholders approved the incentive compensation program
at its 1994 annual meeting. The program is designed to reward key
employees for the Company's performance based on the achievement of
performance goals established prior to the particular year. Components of
annual incentive compensation include an Incentive Bonus Plan (the
"Incentive Plan") covering all full-time FFE employees (including executive
officers) and the Company's Executive Bonus and Phantom Stock Plan (the
"Executive Plan"), which covers only the key executive leadership. Both
plans focus on operational efficiencies, with Incentive Plan pay-outs based
upon a formula tied to the Company's operating ratio, and Executive Plan
payouts based upon a calculated percentage of an individual's annual base
salary (provided targeted operating ratios are met). Each executive
officer's total cash compensation opportunity rises above the peer group
market median as the Company's performance rises above the median
performance of the Company's peer group. For the 1997 fiscal year,
reflecting Company performance, total cash bonuses averaged approximately
42% of each executive officer's base salary as compared to 42% in 1996, and
27% in 1995.
LONG-TERM INCENTIVE COMPENSATION
The Company's long-term incentive compensation is comprised of awards
from the stock option and phantom equity programs. These programs serve to
align the interests of the executive officers and other key employees
participating in the programs with the interests of shareholders by linking
executive pay with shareholder return. These programs also act as a
counter-balance to the short-term goals and responsibilities of the
Incentive Plan and Executive Plan.
The 1992 Incentive and Nonstatutory Stock Option Plan (the "1992
Plan") allows for the grant of both incentive stock options and
nonstatutory stock options, as approved by the Company's shareholders at
its 1994 annual meeting. The exercise price for incentive stock options
granted may not be less than 100% of the fair market value of the Company's
<PAGE>
Common Stock on the date of grant. The Committee or the Board determines
the exercise price of nonstatutory stock options under the 1992 Plan.
However, the exercise price may not be less than 50% of the fair market
value of a share of the Company's Common Stock on the date of grant.
Options granted under the 1992 Plan may not be outstanding for a period of
greater than ten years as determined by the Committee or the Board at the
time of grant. Fiscal year 1997 awards were determined by the Committee
with consideration given to the value of the awards and each executive's
performance and the predicted level of awards provided to comparable
executives from the peer group analysis completed during 1996 by an outside
compensation consultant.
SUPPLEMENTAL EXECUTIVE RETIREMENT AND 401(k) WRAP PLANS
In order to provide supplemental retirement benefits to select members
of the Company's senior management, the Company maintains the FFE
Transportation Services, Inc. Supplemental Executive Retirement Plan (the
"SERP") and the FFE Transportation Services, Inc. 401(k) Wrap Plan (the
"Wrap Plan"), as adopted in 1993 and 1996, respectively. The Company's
SERP is designed to provide select members of senior management with
benefits limited by Sections 401(a)(17) and 415 of the Internal Revenue
Code of 1986, as amended (the "Code") by awarding phantom stock units. The
Wrap Plan is designed to supplement the Company's 401(k) Plan by allowing a
select group of senior management to supplement those benefits limited by
Sections 401(k) and 401(m) of the Code.
Both the SERP and the Wrap Plan are operated as unfunded deferred
compensation arrangements that are not subject to the annual reporting and
disclosure requirements of the Employee Retirement Income Security Act of
1974 ("ERISA"). Amounts awarded under both the SERP and the Wrap Plan for
fiscal year 1997 are disclosed in the Summary Compensation Table.
COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
During the Company's fiscal year 1997, Mr. Stoney M. Stubbs, Jr. was
elected to serve the Company as the Chairman of the Board, President, and
Chief Executive Officer. For 1997, the Committee adjusted Mr. Stubbs' base
salary to $291,175, as compared to $263,495 and $258,099 for 1996 and 1995,
respectively. In keeping with the Company's philosophy of aligning the
financial interests of executives with the interests of shareholders, Mr.
Stubbs received payments totaling $121,648 under the Company's Incentive
Plan and Executive Plan for performance measured against pre-established
criteria.
During 1997, Mr. Stubbs also received grants of options to purchase a
total of 10,500 shares of the Company's Common Stock under the 1992 Plan.
In determining the number of options to grant to Mr. Stubbs, consideration
was given to the value of annual long-term incentive awards to chief
executive officers in the previous peer group study, recent Company
performance, and the Committee's subjective review of Mr. Stubbs'
individual performance and value to the Company. All options granted to
Mr. Stubbs have an exercise price equal to the fair market value of the
Company's Common Stock as of the date of grant.
<PAGE>
The Committee evaluates Mr. Stubbs' performance by the same criteria
established for all Company executives to determine his total compensation.
Ultimately, the Committee made a subjective assessment of Mr. Stubbs'
contributions to enhancing the Company's performance, his individual
performance, and the compensation paid to chief executive officers of the
Company's peer group to set the level of Mr. Stubbs' total compensation
package.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
In 1993, Section 162(m) was added to the Code pursuant to the Omnibus
Budget Reconciliation Act of 1993. This section generally limits the
corporate deduction for compensation paid to the chief executive officer
and certain other high paid executive officers as listed in the Summary
Compensation Table to $1 million per year unless certain requirements are
met. The Committee has analyzed the effect of section 162(m) and
anticipates no financial impact for 1997. The Company will continue to
reevaluate this issue and recommend changes to the compensation program
where appropriate in order to maximize earnings and shareholder value.
Brian R. Blackmarr, Chairman
W. Grogan Lord
Members of the Compensation Committee
<PAGE>
TRANSACTIONS WITH MANAGEMENT
During 1995, 1996 and 1997, a subsidiary of the Company entered into
lease agreements whereby Stoney M. Stubbs, Jr., Chairman of the Board,
President and Chief Executive Officer of the Company, Charles G. Robertson,
the Executive Vice President and a director of the Company, and a family
partnership controlled by Mr. Stubbs leased certain tractors to the
subsidiary. Lease payments were determined by reference to amounts the
subsidiary was paying to unaffiliated lessors for similar equipment leased
under similar terms. Each tractor is leased under a non-cancelable
operating lease for a period of thirty-six months. As of December 31,
1997, the subsidiary was also renting certain trailers from these officers.
Trailer leases in effect on such date were cancelable without notice by
either party and are continuing on a month-to-month basis.
Total tractor and trailer rentals paid during 1997 by the subsidiary
pursuant to the lease agreements were as follows: Mr. Stubbs and the
family partnership - $1,024,111 and Mr. Robertson - $552,514. The leases
are triple-net leases which require the lessee to pay directly to third
parties all taxes, insurance and maintenance expenses. The leases grant the
subsidiary an option to purchase the leased equipment at the end of the
lease term for its fair market value. Fair market value is determined by
reference to prices at which the subsidiary is able to buy and sell similar
equipment of similar age and condition. During 1997, the Company purchased
tractors and trailers valued at $598,958 from Mr. Stubbs and the family
partnership and $332,452 from Mr. Robertson. The aggregate future minimum
lease payments to Mr. Stubbs and the family partnership and Mr. Robertson
under the tractor leases are $767,000 and $415,000, respectively, in 1998,
$535,000 and $294,000, respectively, in 1999 and $277,000 and $134,000,
respectively, in 2000.
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Arthur Andersen LLP served as the Company's independent
public accountants for fiscal year 1997. It is expected that
representatives of Arthur Andersen LLP will be present at the Annual
Meeting, with the opportunity to make a statement if they so desire, and
will be available to respond to appropriate questions. The Company intends
to select its independent public accountants to review and report on the
financial statements of the Company for the 1998 fiscal year after
receiving the recommendation of the Audit Committee of the Board of
Directors at the Audit Committee's May 1998 meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) promulgated under the Securities Exchange Act of 1934,
as amended, requires the Company's officers and directors and persons who
own more than ten percent of a registered class of the Company's equity
securities to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC") and Nasdaq. Officers and
directors and greater than ten-percent shareholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms
they file.
<PAGE>
Based solely on its review of such forms received by it, or written
representations from certain reporting persons that no Form 5 filings were
required for those persons, the Company believes that, during the year
ended December 31, 1997, all Section 16(a) filing requirements applicable
to its officers, directors and greater than ten-percent beneficial owners
were complied with.
SHAREHOLDER PROPOSALS AT 1999 ANNUAL MEETING
Shareholders intending to present proposals at the 1999 Annual Meeting
of Shareholders and desiring to have those proposals included in the
Company's proxy statement and form of proxy relating to that meeting must
deliver such proposals to the Secretary of the Company on or before
November 30, 1998.
By Order of the Board of Directors
Dallas, Texas LEONARD W. BARTHOLOMEW
March 30, 1998 Secretary
THE COMPANY WILL PROVIDE, UPON WRITTEN REQUEST AND WITHOUT CHARGE, A
COPY OF ITS ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES, FOR THE YEAR ENDED DECEMBER 31, 1997,
WHICH IT HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, TO ANY
RECORD OR BENEFICIAL OWNER OF THE COMPANY'S COMMON STOCK AT THE CLOSE OF
BUSINESS ON MARCH 3, 1998. REQUESTS SHOULD BE DIRECTED TO LEONARD W.
BARTHOLOMEW, SECRETARY OF THE COMPANY, P. O. BOX 655888, DALLAS, TEXAS
75265-5888.
<PAGE>
PROXY
FROZEN FOOD EXPRESS INDUSTRIES, INC.
Annual Meeting of Shareholders - April 23, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (1) acknowledges receipt of the notice, dated
March 30, 1998, of the Annual Meeting of Shareholders of Frozen Food
Express Industries, Inc. (herein called the "Company") to be held on
Thursday, April 23, 1998, at 3:30 p.m., Dallas, Texas time, in the offices
of Wells Fargo Bank, Fountain Place, 1445 Ross Avenue, 4th Floor, Dallas,
Texas 75202, and the Proxy Statement, also dated March 30, 1998, in
connection therewith (herein called the "Proxy Statement"), and (2)
constitutes and appoints Stoney M. Stubbs, Jr., and Burl G. Cott, and each
of them (if only one be present, then by that one alone), his attorneys and
proxies, with full power of substitution and revocation to each, for and in
the name, place and stead of the undersigned, to vote, and act with respect
to, all of the shares of capital stock of the Company standing in the name
of the undersigned or with respect to which the undersigned is entitled to
vote and act, at said meeting and at any adjournment thereof. The Board of
Directors recommends a vote FOR each of the Company's proposals set forth
on the reverse.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy
will be voted FOR all nominees listed in Proposal 1 and FOR Proposal 2.
- ----------- -----------
SEE REVERSE SEE REVERSE
SIDE SIDE
- ----------- CONTINUED AND TO BE SIGNED ON REVERSE SIDE -----------
<PAGE>
Please mark
/x/ votes as in
this example.
Please mark boxes in blue or black ink.
1. ELECTION OF DIRECTORS
Nominees: Stoney M. (Mit) Stubbs, Jr., Edgar O. Weller, W. Grogan Lord,
Leroy Hallman, Brian R. Blackmarr, Charles G. Robertson, Burl G. Cott, T.
Michael O'Connor and W. Mike Baggett.
FOR WITHHELD
/ / / /
/ / ______________________________________
For all nominees except as noted above
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
Please promptly complete, date, sign and return this proxy using the
enclosed envelope.
When shares are held by joint tenants, both should sign. When signing as
an agent, attorney, administrator, executor, guardian or trustee, please
give full title as such. If a corporation, please sign in full corporate
name by President or other authorized officer who should indicate his
title. If a partnership, please sign in partnership name by authorized
person. Please date, sign and mail this proxy card in the enclosed
envelope. No postage is required if mailed in the United States.
Signature: ________________________ Date: ____________________
Signature: ________________________ Date: ____________________
