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.
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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.
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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