EX-99 4 ex992.txt EXHIBIT 99.2 Exhibit 99.2 Transportation Resources, Inc. Consolidated Balance Sheet June 30, 2007 (Unaudited) Assets Current Assets Cash and cash equivalents $ 13,284,738 Short-term investments - U.S. Treasury bills 898,000 Trade receivables, net of allowance for doubtful accounts of $1,863,469 54,011,700 Other receivables 1,225,078 Prepaid tires 4,440,443 Other prepaid expenses 5,953,450 Operating supplies, fuel and parts 1,968,654 -------------- Total current assets 81,782,063 -------------- Property and Equipment, at Cost Land 11,957,223 Structures and land improvements 45,202,605 Revenue equipment 392,968,587 Other operating equipment 9,557,724 Furniture, fixtures and data processing equipment 7,506,520 Construction in progress 180,396 -------------- Total property and equipment 467,373,055 Less accumulated depreciation 202,941,313 -------------- Net property and equipment 264,431,742 -------------- Other Assets 1,418,736 -------------- $ 347,632,541 ============== Liabilities and Shareholders' Equity Current Liabilities Accounts payable $ 9,825,733 Accounts payable - interline 7,421,229 Customer credit balances 3,393,888 Salaries and wages payable 5,886,857 Claims and insurance accruals 12,242,934 Other current and accrued liabilities 8,570,723 -------------- Total current liabilities 47,341,364 -------------- Long-term Obligations Long-term debt 1,100,000 Claims and insurance accruals 5,189,272 Stock based awards 20,302,811 Other long-term obligations 4,777,914 -------------- Total long-term obligations 31,369,997 -------------- Shareholders' Equity Common stock, $0.01 par value; 15,000,000 shares authorized; 6,014,327 shares issued and outstanding 55,656 Additional paid-in capital 152,764,748 Earnings reinvested in the business 116,037,834 Accumulated other comprehensive income 62,942 -------------- Total shareholders' equity 268,921,180 -------------- $ 347,632,541 ============== See Notes to Condensed Consolidated Financial Statements 1 Transportation Resources, Inc. Consolidated Statements of Income Six Months Ended June 30, 2007 and 2006 (Unaudited) 2007 2006 ------------------ ------------------ Operating Revenues $ 218,484,060 $ 210,985,753 ------------------ ------------------ Operating Expenses Salaries, wages and fringe benefits 91,699,266 85,036,840 Fuel and supplies 34,609,166 30,839,839 Depreciation 24,108,796 22,085,600 Equipment rent and purchased transportation 13,421,510 17,991,533 Operating taxes and licenses 16,094,365 14,148,323 Insurance and claims 10,370,723 9,382,455 Communications and utilities 1,572,774 1,435,965 Gains on asset disposition (3,181,857) (7,799,781) Other operating expenses 2,124,603 2,068,502 ------------------ ------------------ Total operating expenses 190,819,346 175,189,276 ------------------ ------------------ Operating Income 27,664,714 35,796,477 ------------------ ------------------ Other Income (Expense) Interest income 348,286 405,600 Interest expense (205,340) (237,880) Other (635,530) (85,792) ------------------ ------------------ Total other income (expense) (492,584) 81,928 ------------------ ------------------ Income Before Income Taxes 27,172,130 35,878,405 ------------------ ------------------ Provision for Income Taxes State income taxes 479,935 548,685 Foreign income taxes 161,984 91,115 ------------------ ------------------ Net Income $ 26,530,211 $ 35,238,605 ================== ================== See Notes to Condensed Consolidated Financial Statements 2 Transportation Resources, Inc. Consolidated Statements of Cash Flows Six Months Ended June 30, 2007 and 2006 (Unaudited) 2007 2006 ---------------- ---------------- Operating Activities Net income $ 26,530,211 $ 35,238,605 Items not requiring (providing) cash Depreciation 24,108,796 22,085,600 Gain on disposition of operating property (2,769,761) (7,783,394) Non-cash compensation expense 1,126,671 1,923,047 Changes in Accounts receivable (6,340,754) (6,021,927) Prepaid expenses 832,810 (2,294,122) Accounts payable 2,427,175 4,939,604 Other current and accrued liabilities 1,307,143 947,907 Other assets and liabilities 1,542,384 877,817 ---------------- ---------------- Net cash provided by operating activities 48,764,675 49,913,137 ---------------- ---------------- Investing Activities Proceeds from maturities of short-term investments 917,000 916,000 Purchases of short-term investments (898,000) (913,000) Purchases of property and equipment (29,592,644) (60,225,330) Proceeds from disposition of operating property 17,039,485 21,449,811 ---------------- ---------------- Net cash used in investing activities (12,534,159) (38,772,519) ---------------- ---------------- Financing Activities Net payments under line of credit agreement (6,440,000) -- Principal payments on long-term debt (2,055,953) (3,152,513) Proceeds from issuance of long-term debt -- 1,056,511 Outstanding checks in excess of bank balance (3,342,083) -- Cash distributions (15,389,173) (12,194,595) ---------------- ---------------- Net cash used in financing activities (27,227,209) (14,290,597) ---------------- ---------------- Increase (Decrease) in Cash and Cash Equivalents 9,003,307 (3,149,979) Cash and Cash Equivalents, Beginning of Period 4,281,431 13,291,638 ---------------- ---------------- Cash and Cash Equivalents, End of Period $ 13,284,738 $ 10,141,659 ================ ================ Supplemental Cash Flows Information Interest paid $ 177,667 $ 223,325 Income taxes paid 146,740 1,301,516 See Notes to Condensed Consolidated Financial Statements 3 Exhibit 99.2 Transportation Resources, Inc. Notes to Consolidated Financial Statements (Unaudited) 1. Principal Accounting Policies Nature of Operations Transportation Resources, Inc. (the Company) is a holding company whose majority-owned subsidiaries and primary business activities are: Subsidiary Business Activity ------------------------------------------------------------------------------ Contract Freighters, Inc. Truckload carrier Transportation Equipment Leasing, LLC Transportation equipment leasing Transportation Property Leasing, LLC Property leasing Orcas Aircraft Leasing, Inc. Aircraft leasing CFI Custom Freight Management, Inc. Transportation logistics Orcas Logistics, Inc. Transportation logistics The Company and the above subsidiaries operate primarily in the United States of America (U.S.) and Canada. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. All significant intercompany transactions have been eliminated. Basis of Presentation These interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and Rule 10-01 of Regulation S-X, and should be read in conjunction with the Company's financial statements for the year ended December 31, 2006. Accordingly, significant accounting policies and other disclosures normally provided have been omitted. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, including normal recurring adjustments, necessary to present fairly the Company's financial position as of June 30, 2007, and the Company's results of operations and cash flows for the six-month periods ended June 30, 2007 and 2006. Operating results and cash flows for the six-month periods are not necessarily indicative of the operating results and cash flows that may be expected for the year ending December 31, 2007. New Accounting Standards In February 2007, the FASB issued SFAS 159, "The Fair Value Option for Financial Assets and Financial Liabilities," which permits an entity to choose to measure many financial instruments and certain other items at fair value at specified election dates. Subsequent unrealized gains and losses on items for which the fair-value option has been elected will be reported in earnings. The effective date for SFAS 159 is the first fiscal year beginning after November 15, 2007, which for the Company is the first quarter of 2008. The Company is currently evaluating the elective option under SFAS 159, but does not expect that adoption will have a material effect on its financial statements. 4 Reclassification Certain amounts in the prior-period financial statements have been reclassified to conform to the current-period presentation. 2. Comprehensive Income Comprehensive income, which is a measure of all changes in equity except those resulting from investments by owners and distributions to owners, was as follows: (Dollars in thousands) Six Months Ended June 30, ------------------------ 2007 2006 ----------- ----------- Net income $ 26,530 $ 35,239 Other comprehensive income (loss): Foreign currency translation adjustment 63 (68) ----------- ----------- Comprehensive income $ 26,593 $ 35,171 =========== =========== 3. Income Taxes The Company is a Subchapter S Corporation under the Internal Revenue Code, as amended in 1986. Accordingly, the federal income taxes associated with the Company are passed through to its shareholders. However, the Company is subject to certain state, local and foreign income taxes based on the tax regulations in those jurisdictions. In June 2006, the FASB issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an interpretation of SFAS 109" ("FIN 48"), which clarifies the accounting for uncertainty in tax positions. FIN 48 is a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return. Tax positions shall be recognized in the financial statements only when it is more likely than not that the position will be sustained upon examination by a taxing authority. If the position meets the more-likely-than-not criteria, it should be measured using a probability-weighted approach as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement. It requires previously recognized tax positions that no longer meet the more- likely-than-not recognition threshold to be derecognized in the first subsequent financial reporting period in which the threshold is no longer met. The Company adopted the provisions of FIN 48 on January 1, 2007. At the adoption date, the Company recognized a $4.1 million increase in other long- term obligations and an equal decrease in retained earnings, primarily for the gross tax-affected unrecognized tax benefits related to tax positions taken in certain state tax jurisdictions in which the Company operates. The Company's adoption-related liability of $4.1 million included $1.3 million of accrued interest and penalties. Interest and penalties related to state and local income taxes are a component of income tax expense. At June 30, 2007, the Company's estimate of gross tax-affected unrecognized tax benefits increased to $4.6 million. In the next 12 months, the Company does not expect a significant increase or decrease to its estimates of unrecognized tax benefits. The Company files income tax returns in various states. The years from 2003 to 2006 remain subject to examination in the relevant jurisdictions. Where no return has been filed, no statute of limitations applies. Accordingly, if a tax jurisdiction reaches a conclusion that a filing requirement does exist, additional years may be reviewed by the tax authority. 5 4. Subsequent Event On July 13, 2007, the Company entered into an agreement under which Con-way Inc. would acquire the common stock of the Company for an aggregate purchase price of $750 million, subject to adjustment. The boards of directors of both companies approved the transaction, and the transaction was concluded during the third quarter 2007. 6