Yellow (YELLQ) 10-Q 2004 Q3 Quarterly report

Exhibit 99.1

CONSOLIDATED  FINANCIAL    STATEMENTS

Roadway LLC and Subsidiaries

A wholly owned subsidiary of Yellow Roadway Corporation

Consolidated Balance Sheets as of September 30, 2004 and December 31, 2003;

Statements of Consolidated Operations for the three and nine months ended September 30, 2004 and

twelve and thirty-six weeks ended September 13, 2003;

Statements of Consolidated Cash Flows for the nine months ended September 30, 2004

and thirty-six weeks ended September 13, 2003.

CONSOLIDATED BALANCE SHEETS

Roadway LLC and Subsidiaries

A wholly owned subsidiary of Yellow Roadway Corporation

(Amounts in thousands)

(Unaudited)

	September 30, 2004		December 31, 2003
Assets
Current Assets:
Cash and cash equivalents	$	11,275	$	49,879
Accounts receivable, net		23,023		343,231
Accounts receivable from parent and affiliate		396,744		—
Prepaid expenses and other		65,761		34,388
Total current assets		496,803		427,498
Property and Equipment:
Cost		885,355		824,747
Less – accumulated depreciation		54,499		3,285
Net property and equipment		830,856		821,462
Goodwill		603,553		596,845
Intangibles, net		461,645		460,372
Other assets		26,917		32,314
Total assets	$	2,419,774	$	2,338,491
Liabilities and Parent Company Investment
Current Liabilities:
Accounts payable	$	122,058	$	118,701
Advances payable to parent		—		56,067
Wages, vacations and employees’ benefits		251,784		186,400
Other current and accrued liabilities		119,737		88,653
Total current liabilities		493,579		449,821
Other Liabilities:
Long-term debt		245,250		248,895
Deferred income taxes, net		204,370		213,689
Accrued pension and postretirement		193,668		210,596
Claims and other liabilities		125,872		123,725
Total other liabilities		769,160		796,905
Parent Company Investment:
Capital surplus		1,098,292		1,097,221
Retained earnings		58,301		(4,558	)
Accumulated other comprehensive loss		442		(898	)
Total parent company investment		1,157,035		1,091,765
Total liabilities and parent company investment	$	2,419,774	$	2,338,491

The accompanying notes are an integral part of these statements.

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STATEMENTS OF CONSOLIDATED OPERATIONS

Roadway LLC and Subsidiaries

A wholly owned subsidiary of Yellow Roadway Corporation

(Amounts in thousands)

(Unaudited)

	Three Months Ended September 30, 2004		Twelve Weeks Ended September 13, 2003
Operating Revenue	$	883,040	$	751,594
Operating Expenses:
Salaries, wages and employees’ benefits		548,746		477,174
Operating expenses and supplies		122,912		122,412
Operating taxes and licenses		19,676		18,515
Claims and insurance		15,430		15,133
Depreciation and amortization		20,488		16,658
Purchased transportation		90,704		77,246
Losses (gains) on property disposals, net		380		(5,068	)
Acquisition expenses		—		24,337
Total operating expenses		818,336		746,407
Operating Income		64,704		5,187
Nonoperating (Income) Expenses:
Interest expense		3,522		4,735
Other		11,173		1,544
Nonoperating expenses, net		14,695		6,279
Income (Loss) From Continuing Operations Before Income Taxes		50,009		(1,092	)
Income tax provision		19,489		2,309
Income (Loss) From Continuing Operations		30,520		(3,401	)
Loss from discontinued operations		—		—
Net Income (Loss)	$	30,520	$	(3,401	)

The accompanying notes are an integral part of these statements.

Refer to Note 2 for the difference in accounting policies between the periods presented.

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STATEMENTS OF CONSOLIDATED OPERATIONS

Roadway LLC and Subsidiaries

A wholly owned subsidiary of Yellow Roadway Corporation

(Amounts in thousands)

(Unaudited)

	Nine Months Ended September 30, 2004		Thirty-six Weeks Ended September 13, 2003
Operating Revenue	$	2,488,797	$	2,247,192
Operating Expenses:
Salaries, wages and employees’ benefits		1,552,820		1,420,832
Operating expenses and supplies		376,162		382,846
Operating taxes and licenses		60,691		57,069
Claims and insurance		44,552		44,774
Depreciation and amortization		59,926		50,827
Purchased transportation		259,562		227,755
Losses (gains) on property disposals, net		194		(4,227	)
Acquisition expenses		—		24,337
Total operating expenses		2,353,907		2,204,213
Operating Income		134,890		42,979
Nonoperating (Income) Expenses:
Interest expense		10,523		14,616
Other		21,368		4,501
Nonoperating expenses, net		31,891		19,117
Income From Continuing Operations Before Income Taxes		102,999		23,862
Income tax provision		40,139		12,790
Income From Continuing Operations		62,860		11,072
Loss from discontinued operations		—		(155	)
Net Income	$	62,860	$	10,917

The accompanying notes are an integral part of these statements.

Refer to Note 2 for the difference in accounting policies between the periods presented.

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STATEMENTS OF CONSOLIDATED CASH FLOWS

Roadway LLC and Subsidiaries

A wholly owned subsidiary of Yellow Roadway Corporation

(Amounts in thousands)

(Unaudited)

	Nine Months Ended September 30, 2004			Thirty-six Weeks Ended September 13, 2003
Operating Activities:
Net income	$	62,860		$	11,072
Noncash items included in net income:
Depreciation and amortization		59,926			53,226
Losses (gains) on property disposals, net		194			(4,227	)
Deferred income tax provision, net		(6,482	)		(2,692	)
Changes in assets and liabilities, net:
Accounts receivable		320,208			(11,462	)
Accounts payable		(26,492	)		27,417
Other working capital items		55,188			(59,933	)
Claims and other		2,064			4,838
Other, net		1,516			36,314
Net cash from operating activities		468,982			54,553
Investing Activities:
Acquisition of property and equipment		(64,644	)		(37,427	)
Proceeds from disposal of property and equipment		9,868			9,516
Business disposal		—			47,430
Net cash provided by (used in) investing activities		(54,776	)		19,519
Financing Activities:
Treasury stock activity, net		—			6,724
Dividends paid		—			(2,941	)
Repayment of long-term debt		—			(51,851	)
Advances payable to parent, net		(452,810	)		—
Net cash used in financing activities		(452,810	)		(48,068	)
Net Increase (Decrease) In Cash and Cash Equivalents From Continuing Operations		(38,604	)		26,004
Net Decrease In Cash and Cash Equivalents From Discontinued Operations		—			(39	)
Cash and Cash Equivalents, Beginning of Period		49,879			106,929
Cash and Cash Equivalents, End of Period	$	11,275		$	132,894

The accompanying notes are an integral part of these statements.

Refer to Note 2 for the difference in accounting policies between the periods presented.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Roadway LLC and Subsidiaries

A wholly owned subsidiary of Yellow Roadway Corporation

(Unaudited)

1. Description of Business

Roadway LLC (also referred to as “Roadway,” the “Company,” “we” or “our”) is a holding company with two primary segments, Roadway Express, Inc. and Roadway Next Day Corporation. The segments are described as follows:

• Roadway Express, Inc. (“Roadway Express”) is a leading transportation services provider that offers a full range of regional, national and international services for the movement of industrial, commercial and retail goods, primarily through decentralized management and customer facing organizations. Roadway Express owns 100 percent of Reimer Express Lines Ltd. located in Canada that specializes in shipments into, across and out of Canada.

• Roadway Next Day Corporation is a holding company focused on business opportunities in the regional and next-day delivery lanes. Roadway Next Day Corporation owns 100 percent of New Penn Motor Express, Inc. (“New Penn”), which provides regional, next-day ground services through a network of facilities located in the Northeastern United States, Quebec, Canada and Puerto Rico.

On December 11, 2003, Yellow Corporation completed the acquisition of Roadway Corporation. The combined company was renamed Yellow Roadway Corporation (“Yellow Roadway”). Roadway Corporation was merged with and into Roadway LLC, a newly formed limited liability company and a wholly owned subsidiary of Yellow Roadway. Consideration for the acquisition included $494 million in cash and 18.0 million shares of Yellow Roadway common stock for a total purchase price of approximately $1.1 billion.

2. Principles of Consolidation and Summary of Accounting Policies

The accompanying consolidated financial statements include the accounts of Roadway LLC and its wholly owned subsidiaries. We have prepared the consolidated financial statements, without audit by independent public accountants, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In management’s opinion, all normal recurring adjustments necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods included herein have been made. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted from these statements pursuant to SEC rules and regulations. Accordingly, the accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements included as Exhibit 99.2 to the Yellow Roadway Corporation Annual Report on Form 10-K for the year ended December 31, 2003.

Prior to the acquisition of Roadway Corporation by Yellow Corporation on December 11, 2003, Roadway Corporation and all of its wholly owned subsidiaries operated on thirteen four-week accounting periods with twelve weeks in each of the first three quarters and sixteen weeks in the fourth quarter. As part of the acquisition, Roadway LLC adopted a calendar-quarter reporting basis as well as the significant accounting policies of Yellow Roadway Corporation. In addition, we utilized independent third party appraisers to revalue significant assets and liabilities to fair market value, therefore these financial statements are not comparable to prior periods. For accounting policies related to the Consolidated Balance Sheets as of September 30, 2004 and December 31, 2003, for the Statements of Consolidated Operations for the three and nine months ended September 30, 2004, and for the Statement of Consolidated Cash Flows for the nine months ended September 30, 2004 and the related notes to financial statements, please refer to the Yellow Roadway Corporation Annual Report on Form 10-K for the year ended December 31, 2003. For accounting policies related to the Statements of Consolidated Operations for the twelve and thirty-six weeks ended September 13, 2003 and the Statement of Consolidated Cash Flows for the thirty-six weeks ended September 13, 2003 and related notes to financial statements, please refer to the Roadway Corporation financial statements and related notes at December 11, 2003, filed as Exhibit 99.1 to the Yellow Roadway Corporation Annual Report on Form 10-K for the year ended December 31, 2003.

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3. Goodwill and Intangibles

Goodwill is recognized for the excess of the purchase price over the fair value of tangible and identifiable intangible net assets of businesses acquired. The following table shows the amount of goodwill attributable to our operating segments with goodwill balances and changes therein:

(in thousands)	December 31, 2003		Purchase Accounting Reclasses/Other			September 30, 2004
Roadway Express	$	474,513	$	70,085		$	544,598
New Penn		122,332		(63,377	)		58,955
Goodwill	$	596,845	$	6,708		$	603,553

As the acquisition of Roadway Corporation by Yellow Corporation occurred in December 2003, the allocation of the purchase price included in the December 31, 2003 Consolidated Balance Sheets was preliminary and subject to refinement. During the nine months ended September 30, 2004, an independent asset valuation was received and certain reallocations were made related to tangible and intangible assets. In addition, the fair value of certain post-employment benefit obligations was determined by an actuary. The purchase price allocation has been modified to reflect the results of these analyses. These changes did not have an impact on our consolidated results of operations.

As of September 30, 2004, refinements to the purchase price allocation are substantially complete. Additional changes during the fourth quarter of 2004, if any, are not expected to have an impact on our consolidated results of operations.

The components of amortizable intangible assets are as follows:

	Weighted Average Life (years)	September 30, 2004				December 31, 2003
(in thousands)		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Customer related	17	$	110,000	$	5,329	$	111,800	$	356
Technology based	3		16,000		4,116		16,000		273
Intangible assets		$	126,000	$	9,445	$	127,800	$	629

Total marketing related intangible assets with indefinite lives were $345.1 million at September 30, 2004 and $333.2 million at December 31, 2003. These intangible assets are not subject to amortization. The change between periods related to a reclassification arising from modifications to the purchase price allocation, as discussed above, and foreign currency translation adjustments.

4. Restructuring Costs

In connection with the acquisition of Roadway Corporation by Yellow Corporation, we incurred $13.4 million of restructuring costs as a result of severance (administrative, sales and operations personnel) and relocation of workforce and contract terminations. We have recognized such costs as a liability assumed as of the acquisition date, resulting in additional goodwill. These restructuring costs consisted of $12.2 million of employee termination (including wages, health benefits and outplacement services) for approximately 800 employees and related relocation costs and $1.2 million for contract terminations. All of these restructuring items will have been effectuated within one year of the acquisition date in accordance with purchase accounting requirements. During the nine months ended September 30, 2004, we paid $5.6 million of restructuring costs resulting in an $7.8 million accrued liability at September 30, 2004.

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5. Employee Benefits

Components of Net Periodic Pension Cost

In December 2003, the Financial Accounting Standards Board revised Statement of Financial Accounting Standards (“SFAS”) No. 132, Employers’ Disclosures about Pensions and Other Postretirement Benefits (“SFAS No. 132R”). SFAS No. 132R requires the disclosure of the components of the net periodic pension cost recognized during interim periods. The following table sets forth the components of our net periodic pension cost for the three and nine months ended September 30, 2004 and the twelve and thirty-six weeks ended September 13, 2003:

(in thousands)	Three Months ended September 30, 2004			Twelve Weeks ended September 13, 2003			Nine Months ended September 30, 2004			Thirty-six Weeks ended September 13, 2003
Service cost	$	5,412		$	4,704		$	16,236		$	14,112
Interest cost		7,360			6,285			22,080			18,855
Expected return on plan assets		(6,195	)		(5,059	)		(18,585	)		(15,177	)
Amortization of net transition obligation		—			(330	)		—			(990	)
Amortization of prior service cost		—			1,298			—			3,894
Amortization of net loss		16			32			48			96
Net periodic pension cost	$	6,593		$	6,930		$	19,779		$	20,790

The following table sets forth the components of our other postretirement costs for the three and nine months ended September 30, 2004 and the twelve and thirty-six weeks ended September 13, 2003:

(in thousands)	Three Months ended September 30, 2004		Twelve Weeks ended September 13, 2003			Nine Months ended September 30, 2004		Thirty-six Weeks ended September 13, 2003
Service cost	$	141	$	466		$	856	$	1,398
Interest cost		234		788			1,469		2,364
Amortization of prior service cost		—		(445	)		—		(1,335	)
Amortization of net loss		—		134			—		402
Total other postretirement cost	$	375	$	943		$	2,325	$	2,829

Employer Contributions

We made a $20 million contribution to our defined benefit pension plan on September 15, 2004.

6. Related Party Transactions

Yellow Roadway maintains an asset backed securitization (“ABS”) facility that involves receivables of Yellow Transportation and Roadway Express. The ABS facility is operated by Yellow Roadway Receivables Funding Corporation (“YRRFC”), a special purpose entity wholly owned by Yellow Roadway. As the receivables of Roadway Express are transferred to YRRFC, the accompanying balance sheet at September 30, 2004 reflects these amounts as accounts receivable from affiliate, net of certain financing costs.

7. Business Segments

Roadway reports financial and descriptive information about its reportable operating segments on a basis consistent with that used internally for evaluating segment performance and allocating resources to segments. We manage the segments separately because each requires different operating, marketing and technology strategies. We evaluate performance primarily on adjusted operating income and return on capital.

Roadway has two reportable segments, which are strategic business units that offer complementary transportation services to their customers. Roadway Express is a unionized carrier that provides comprehensive regional, national and international transportation services. New Penn is also a unionized carrier that focuses on business opportunities in the regional and next-day delivery lanes.

The accounting policies of the segments are the same as those described in Exhibit 99.2 to the Yellow Roadway Corporation Annual Report on Form 10-K for the year ended December 31, 2003. Yellow Roadway charges management fees and other corporate services to its segments based on the direct benefits received or as a percentage of revenue. Roadway LLC identifiable assets primarily refer to cash, cash equivalents and miscellaneous investments.

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The following table summarizes our operations by business segment:

(in thousands)	Roadway Express		New Penn			Roadway LLC/ Eliminations				Consolidated
As of September 30, 2004
Identifiable assets	$	2,137,195	$	247,818		$	34,761			$	2,419,774
As of December 31, 2003									��
Identifiable assets		2,002,421		340,713			(4,643	)			2,338,491
Three months ended September 30, 2004
External revenue		812,360		70,680			—				883,040
Operating income		52,097		10,284			2,323				64,704
Adjustments to operating income(a)		341		39			—				380
Adjusted operating income		52,438		10,323			2,323				65,084
Nine months ended September 30, 2004
External revenue		2,297,700		191,102			(5	)			2,488,797
Operating income		103,494		25,229			6,167				134,890
Adjustments to operating income(a)		202		(8	)		—				194
Adjusted operating income		103,696		25,221			6,167				135,084
Twelve weeks ended September 13, 2003
External revenue		700,668		50,926			—				751,594
Operating income		557		4,630			—				5,187
Adjustments to operating income(a)		18,305		964			—				19,269
Adjusted operating income		18,862		5,594			—				24,456
Thirty-six weeks ended September 13, 2003
External revenue		2,097,068		150,124			—				2,247,192
Operating income		30,108		12,871			—				42,979
Adjustments to operating income(a)		19,086		1,024			—				20,110
Adjusted operating income		49,194		13,895			—				63,089

(a) Management excludes these items when evaluating operating income and segment performance to better evaluate the results of our core operations. In the periods presented, adjustments consisted of property gains and losses and compensation and other expenses related to the acquisition.

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8. Comprehensive Income

Our comprehensive income for the periods presented includes net income and foreign currency translation adjustments. Comprehensive income for the three months ended September 30, 2004 and twelve weeks ended September 13, 2003 follows:

(in thousands)	September 30, 2004			September 13, 2003
Net income (loss)	$	30,520		$	(3,401	)
Changes in foreign currency translation adjustments		(2,169	)		(707	)
Comprehensive income	$	28,351		$	(4,108	)

Comprehensive income for the nine months ended September 30, 2004 and thirty-six weeks ended September 13, 2003 follows:

(in thousands)	September 30, 2004			September 13, 2003
Net income	$	62,860		$	10,917
Changes in foreign currency translation adjustments		(1,340	)		5,195
Comprehensive income	$	61,520		$	16,112

9. Rental Expenses

Roadway incurs rental expenses under noncancelable lease agreements for certain buildings and operating equipment. Rental expense is charged to “operating expenses and supplies” on the Statements of Consolidated Operations. The following table represents the actual rental expense, as reflected in operating income, incurred for the three and nine months ended September 30, 2004 and the twelve and thirty-six weeks ended September 13, 2003:

(in thousands)	Three Months ended September 30, 2004		Twelve Weeks ended September 13, 2003		Nine Months ended September 30, 2004		Thirty-six Weeks ended September 13, 2004
Rental expense	$	13,805	$	12,539	$	40,536	$	37,823

10. Multi-Employer Pension Plans

Roadway Express and New Penn contribute to multi-employer health, welfare and pension plans for employees covered by collective bargaining agreements (approximately 77 percent of total employees). The largest of these plans, the Central States Southeast and Southwest Areas Pension Plan (the “Central States Plan”) provides retirement benefits to approximately 53 percent of our total employees. The amounts of these contributions are determined by contract and established in the agreements. The health and welfare plans provide health care and disability benefits to active employees and retirees. The pension plans provide defined benefits to retired participants. We recognize as net pension cost the required contribution for the period and recognize as a liability any contributions due and unpaid.

Under current legislation regarding multi-employer pension plans, a termination, withdrawal or partial withdrawal from any multi-employer plan in an under-funded status would render us liable for a proportionate share of the multi-employer plans’ unfunded vested liabilities. This potential unfunded pension liability also applies to our unionized competitors who contribute to multi-employer plans. Based on the limited information available from plan administrators, which we cannot independently validate, we believe that our portion of the contingent liability in the case of a full withdrawal or termination would be material to our financial position and results of operations. Roadway Express and New Penn have no current intention of taking any action that would subject us to obligations under the legislation.

Roadway Express and New Penn each have collective bargaining agreements with their unions that stipulate the amount of contributions each company must make to union-sponsored, multi-employer pension plans. The Internal Revenue Code and related regulations establish minimum funding requirements for these plans. Under recent legislation, qualified multi-employer plans are permitted to exclude certain recent investment losses from the minimum funding formula through 2005. The Central States Plan, in particular, has informed us that its recent investment performance has adversely affected its funding levels and that the fund is seeking corrective measures to address its funding. During the benefit period of the recent legislation, the Central States Plan is expected to meet the minimum funding requirements. If any of these plans, including the Central States Plan, fails to meet minimum funding requirements and the trustees of such a plan are unable

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to obtain a waiver of the requirements or certain changes in how the applicable plan calculates its funding level from the Internal Revenue Service (“IRS”) or reduce pension benefits to a level where the requirements are met, the IRS could impose an excise tax on all employers participating in these plans and contributions in excess of our contractually agreed upon rates could be required to correct the funding deficiency. If an excise tax were imposed on the participating employers and additional contributions required, it could have a material adverse impact on the financial results of Roadway LLC.

11. Guarantees of the Senior Notes Due 2008

Roadway LLC, the primary obligor of the senior notes due 2008, and its following wholly owned subsidiaries issued guarantees in favor of the holders of the notes: Roadway Next Day Corporation, New Penn Motor Express, Inc., Roadway Express, Inc., Roadway Reverse Logistics, Inc. and Roadway Express International, Inc. In addition, Yellow Roadway Corporation issued a guarantee in favor of the holders of the notes. Each of the guarantees is full and unconditional and joint and several.

The summarized consolidating financial statements are presented in lieu of separate financial statements and other related disclosures of the subsidiary guarantors and issuer because management does not believe that such separate financial statements and related disclosures would be material to investors. There are currently no significant restrictions on the ability of Roadway LLC or any guarantor to obtain funds from its subsidiaries by dividend or loan.

The following represents summarized condensed consolidating financial information of Roadway LLC and its subsidiaries as of September 30, 2004 and December 31, 2003 with respect to the financial position, for the three and nine months ended September 30, 2004 and twelve and thirty-six weeks ended September 13, 2003 for results of operations, and for the nine months ended September 30, 2004 and twenty-four weeks ended September 13, 2003 for the statements of cash flows. The primary obligor column presents the financial information of Roadway LLC. The Guarantor Subsidiaries column presents the financial information of all guarantor subsidiaries of the senior notes due 2008 with the exception of Yellow Roadway, the holding company. The Non-Guarantor Subsidiaries column presents the financial information of all non-guarantor subsidiaries, including those subsidiaries that are governed by foreign laws, Yellow Roadway Receivables Funding Corporation and Roadway Funding, Inc., the special-purpose entities that are or were associated with our asset backed securitization agreements.

Condensed Consolidating Balance Sheets

September 30, 2004 (in thousands)	Primary Obligor			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash and cash equivalents	$	—		$	7		$	4		$	—		$	11
Accounts receivable, net		—			3			20			—			23
Accounts receivable (payable) from parent and affiliate		729			391			(4	)		(719	)		397
Prepaid expenses and other		—			65			1			—			66
Total current assets		729			466			21			(719	)		497
Property and equipment		—			864			21			—			885
Less – accumulated depreciation		—			(52	)		(2	)		—			(54	)
Net property and equipment		—			812			19			—			831
Investment in subsidiaries		639			52			—			(691	)		—
Goodwill, intangibles and other assets		20			1,037			35			—			1,092
Total assets	$	1,388		$	2,367		$	75		$	(1,410	)	$	2,420
Accounts payable	$	—		$	112		$	10		$	—		$	122
Wages, vacations and employees’ benefits		—			248			4			—			252
Other current and accrued liabilities		(11	)		129			2			—			120
Total current liabilities		(11	)		489			16			—			494
Due to affiliate		7			711			1			(719	)		—
Long-term debt		245			—			—			—			245
Deferred income taxes, net		(10	)		208			6			—			204
Claims and other liabilities		—			320			—			—			320
Parent company investment		1,157			639			52			(691	)		1,157
Total liabilities and parent company investment	$	1,388		$	2,367		$	75		$	(1,410	)	$	2,420

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December 31, 2003 (in thousands)	Primary Obligor			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Cash and cash equivalents	$	—		$	44	$	6	$	—		$	50
Accounts receivable, net		—			326		17		—			343
Intercompany advances receivable		38			56		103		(197	)		—
Prepaid expenses and other		—			34		—		—			34
Total current assets		38			460		126		(197	)		427
Property and equipment		—			811		13		—			824
Less – accumulated depreciation		—			3		—		—			3
Net property and equipment		—			808		13		—			821
Investment in subsidiaries		593			29		—		(622	)		—
Receivable from affiliate		650			—		—		(650	)		—
Goodwill, intangibles and other assets		21			1,034		35		—			1,090
Total assets	$	1,302		$	2,331	$	174	$	(1,469	)	$	2,338
Accounts payable	$	1		$	111	$	7	$	—		$	119
Intercompany advances payable		—			127		126		(197	)		56
Wages, vacations and employees’ benefits		1			182		3		—			186
Other current and accrued liabilities		(31	)		118		2		—			89
Total current liabilities		(29	)		538		138		(197	)		450
Due to affiliate		—			650		—		(650	)		—
Long-term debt		249			—		—		—			249
Deferred income taxes, net		(11	)		218		7		—			214
Claims and other liabilities		1			333		—		—			334
Parent company investment		1,092			592		29		(622	)		1,091
Total liabilities and parent company investment	$	1,302		$	2,331	$	174	$	(1,469	)	$	2,338
Condensed Consolidating Statements of Operations
For the three months ended September 30, 2004 (in thousands)	Primary Obligor			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Operating revenue	$	—		$	848	$	36	$	(1	)	$	883
Operating expenses:
Salaries, wages and employees’ benefits		—			538		11		—			549
Operating expenses and supplies		—			116		8		(1	)		123
Operating taxes and licenses		—			19		1		—			20
Claims and insurance		—			15		—		—			15
Depreciation and amortization		—			20		—		—			20
Purchased transportation		—			79		12		—			91
Losses (gains) on property disposals, net		—			—		—		—			—
Total operating expenses		—			787		32		(1	)		818
Operating income (loss)		—			61		4		—			65
Nonoperating (income) expenses:
Interest expense		3			13		1		(13	)		4
Other, net		(13	)		10		1		13			11
Nonoperating (income) expenses, net		(10	)		23		2		—			15
Income (loss) before income taxes		10			38		2		—			50
Income tax provision		4			15		—		—			19
Subsidiary earnings		31			2		—		(33	)		—
Net income (loss)	$	37		$	25	$	2	$	(33	)	$	31

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For the twelve weeks ended September 13, 2003 (in thousands)	Primary Obligor			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenue	$	—		$	722		$	30		$	(1	)	$	751
Operating expenses:
Salaries, wages and employees’ benefits		2			465			10			—			477
Operating expenses and supplies		(2	)		120			6			(1	)		123
Operating taxes and licenses		—			17			1			—			18
Claims and insurance		—			15			—			—			15
Depreciation and amortization		—			15			1			—			16
Purchased transportation		—			69			9			—			78
Losses on property disposals, net		—			(5	)		—			—			(5	)
Acquisition expense		—			24			—			—			24
Total operating expenses		—			720			27			(1	)		746
Operating income (loss)		—			2			3			—			5
Nonoperating (income) expenses:
Interest expense		1			5			(1	)		—			5
Other, net		—			—			1			—			1
Nonoperating (income) expenses, net		1			5			—			—			6
Income (loss) before income taxes		(1	)		(3	)		3			—			(1	)
Income tax provision		—			1			1			—			2
Subsidiary earnings		(2	)		2			—			—			—
Net income (loss)	$	(3	)	$	(2	)	$	2		$	—		$	(3	)
Condensed Consolidating Statements of Operations
For the nine months ended September 30, 2004 (in thousands)	Primary Obligor			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenue	$	—		$	2,383		$	107		$	(1	)	$	2,489
Operating expenses:
Salaries, wages and employees’ benefits		—			1,519			34			—			1,553
Operating expenses and supplies		—			357			20			(1	)		376
Operating taxes and licenses		—			59			2			—			61
Claims and insurance		—			44			—			—			44
Depreciation and amortization		—			58			2			—			60
Purchased transportation		—			225			35			—			260
Losses (gains) on property disposals, net		—			—			—			—			—
Total operating expenses		—			2,262			93			(1	)		2,354
Operating income (loss)		—			121			14			—			135
Nonoperating (income) expenses:
Interest expense		10			40			1			(40	)		11
Other, net		(40	)		18			3			40			21
Nonoperating (income) expenses, net		(30	)		58			4			—			32
Income (loss) before income taxes		30			63			10			—			103
Income tax provision		11			27			2			—			40
Subsidiary earnings		44			8			—			(52	)		—
Net income (loss)	$	63		$	44		$	8		$	(52	)	$	63

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For the thirty-six weeks ended September 13, 2003 (in thousands)	Primary Obligor			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenue	$	—		$	2,157		$	91		$	(1	)	$	2,247
Operating expenses:
Salaries, wages and employees’ benefits		6			1,385			30			—			1,421
Operating expenses and supplies		(6	)		370			20			(1	)		383
Operating taxes and licenses		—			55			2			—			57
Claims and insurance		—			44			1			—			45
Depreciation and amortization		—			48			2			—			50
Purchased transportation		—			201			27			—			228
Losses on property disposals, net		—			(4	)		—			—			(4	)
Acquisition expenses		—			24			—			—			24
Total operating expenses		—			2,123			82			(1	)		2,204
Operating income (loss)		—			34			9			—			43
Nonoperating (income) expenses:
Interest expense		1			15			(1	)		—			15
Other, net		—			4			—			—			4
Nonoperating (income) expenses, net		1			19			(1	)		—			19
Income (loss) before income taxes		(1	)		15			10			—			24
Income tax provision		—			9			4			—			13
Subsidiary earnings		12			6			—			(18	)		—
Net income (loss)	$	11		$	12		$	6		$	(18	)	$	11

Condensed Consolidating Statements of Cash Flows

For the nine months ended September 30, 2004 (in thousands)	Primary Obligor			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations		Consolidated
Operating activities:
Net cash from operating activities	$	34		$	9		$	426		$	—	$	469
Investing activities:
Acquisition of property and equipment		—			(2	)		(63	)		—		(65	)
Proceeds from disposal of property and equipment		—			—			10			—		10
Net cash used in investing activities		—			(2	)		(53	)		—		(55	)
Financing activities:
Intercompany advances / repayments		(34	)		(9	)		(410	)		—		(453	)
Net cash used in financing activities		(34	)		(9	)		(410	)		—		(453	)
Net decrease in cash and cash equivalents		—			(2	)		(37	)		—		(39	)
Cash and cash equivalents, beginning of period		—			6			44			—		50
Cash and cash equivalents, end of period	$	—		$	4		$	7		$	—	$	11

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For the thirty-six weeks ended September 13, 2003 (in thousands)	Primary Obligor			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Operating activities:
Net cash from (used in) operating activities	$	(21	)	$	74		$	1		$	—	$	54
Investing activities:
Acquisition of property and equipment		—			(35	)		(2	)		—		(37	)
Proceeds from disposal of property and equipment		—			10			—			—		10
Business disposal		47			—			—			—		47
Net cash provided by (used in) investing activities		47			(25	)		(2	)		—		20
Financing activities:
Repayment of long-term debt		(52	)		—			—			—		(52	)
Treasury stock purchases		7			—			—			—		7
Dividends paid		(3	)		—			—			—		(3	)
Intercompany advances / repayments		57			(57	)		—			—		—
Net cash used in financing activities		9			(57	)		—			—		(48	)
Net increase (decrease) in cash and cash equivalents		35			(8	)		(1	)		—		26
Cash and cash equivalents, beginning of period		12			88			7			—		107
Cash and cash equivalents, end of period	$	47		$	80		$	6		$	—	$	133

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