Exhibit 99.2
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Roadway Next Day Corporation
Quarters ended June 15, 2002 (Successor Period) and June 30, 2001 (Predecessor
Period)
Roadway Next Day Corporation
Condensed Consolidated Balance Sheets (Unaudited)
June 15, 2002 December 31, 2001
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(in thousands)
Assets
Current assets:
Cash and cash equivalents $ 19,591 $ 41,909
Accounts receivable, net 39,403 36,867
Other current assets 11,654 9,994
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Total current assets 70,648 88,770
Carrier operating property, at cost 191,444 185,608
Less allowance for depreciation 14,610 2,334
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Net carrier operating property 176,834 183,274
Goodwill, net 253,532 253,532
Other assets 18,299 20,060
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Total assets $ 519,313 $ 545,636
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Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 49,736 $ 37,261
Salaries and wages 11,544 9,668
Payable to Roadway Corporation 18,700 18,000
Other current liabilities 9,877 6,662
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Total current liabilities 89,857 71,591
Long-term liabilities:
Casualty claims and other 3,920 3,887
Deferred income taxes 34,595 36,292
Payable to Roadway Corporation 303,800 307,000
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Total long-term liabilities 342,315 347,179
Parent company investment 87,141 126,866
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Total liabilities and shareholders' equity $ 519,313 $ 545,636
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Note: The balance sheet at December 31, 2001 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed consolidated financial statements.
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Roadway Next Day Corporation
Condensed Statements of Consolidated Income (Unaudited)
Second Quarter
Successor Predecessor
Company Company
Twelve weeks ended Three months ended
June 15, 2002 June 30, 2001
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(in thousands)
Revenue $ 90,740 $ 114,101
Operating expenses 83,497 100,898
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Operating income 7,243 13,203
Other (expense) income, net (5,867) 28
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Income before income taxes 1,376 13,231
Provision for income taxes 407 4,893
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Net income $ 969 $ 8,338
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Two Quarters
Successor Predecessor
Company Company
Twenty-four weeks ended Six months ended
June 15, 2002 June 30, 2001
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(in thousands)
Revenue $ 174,350 $ 225,108
Operating expenses 163,645 200,562
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Operating income 10,705 24,546
Other (expense) income, net (11,727) 318
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(Loss) income before income taxes (1,022) 24,864
(Benefit) provision for income taxes (383) 9,139
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Net (loss) income $ (639) $ 15,725
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See notes to condensed consolidated financial statements.
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Roadway Next Day Corporation
Condensed Statements of Consolidated Cash Flows (Unaudited)
First Quarter
Successor Predecessor
Company Company
Twenty-four weeks ended Six months ended
June 15, 2002 June 16, 2001
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(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $ (639) $ 15,725
Depreciation 12,932 16,525
Other operating adjustments 13,293 2,447
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Net cash provided by operating activities 25,586 34,697
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of carrier operating property (6,666) (24,089)
Sales of carrier operating property 348 2,894
Other - 431
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Net cash (used) by investing activities (6,318) (20,764)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid - (5,444)
Transfer to parent (41,586) -
Debt repayment - (2,997)
Treasury stock activity, net - 1,927
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Net cash (used) by financing activities (41,586) (6,514)
Net (decrease) increase in cash and cash equivalents (22,318) 7,419
Cash and cash equivalents at beginning of period 41,909 37,334
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Cash and cash equivalents at end of period $ 19,591 $ 44,753
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See notes to condensed consolidated financial statements.
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Roadway Next Day Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
Note 1--Basis of Presentation
Effective November 30, 2001 (the acquisition date), the shareholders of Arnold
Industries, Inc. (Arnold) approved a definitive agreement for Roadway
Corporation (Roadway) to acquire all of the outstanding shares of Arnold for
$21.75 per share in cash. Aggregate cash consideration was $558,831,000
including direct acquisition costs. Included in the acquired assets of Arnold
was $50,763,000 in cash which was used to partially finance the acquisition.
Under the terms of the agreement, Arnold and its subsidiaries, New Penn Motor
Express (New Penn), Arnold Transportation Services (ATS) and Arnold Logistics,
Inc. (ARLO) became a wholly owned subsidiary of Roadway Corporation. Also on the
acquisition date, concurrent with the acquisition of Arnold, Roadway entered
into an agreement with the former management team at ARLO and E.H. Arnold,
Chairman, President and CEO of Arnold, to sell the Arnold's logistics business
to E.H. Arnold and Arnold Logistics LLC for $105,000,000 in cash. Arnold's
warehouse/logistics services ended concurrent with the sale of ARLO. On the
acquisition date, Arnold Industries, Inc. was renamed Roadway Next Day
Corporation (the Company).
The Company operates in the motor carrier industry, principally in the eastern
United States and provides next-day less-than-truckload (LTL) and truckload (TL)
freight services through its direct subsidiaries, New Penn and ATS. New Penn is
a leading regional next-day ground LTL carrier operating primarily in New
England and the Middle Atlantic states. Approximately 78% of New Penn's
employees are represented by various labor unions, primarily the International
Brotherhood of Teamsters (IBT). The current agreement with the IBT expires on
March 31, 2003. ATS operates as an inter-regional irregular route and dedicated
TL carrier, conducting operations east of the Mississippi and in the
southwestern United States. None of ATS' employees are represented by labor
unions.
Roadway's acquisition of the Company was accounted for as a purchase business
combination and accordingly, the assets acquired and liabilities assumed were
recorded at their estimated fair values on the acquisition date. The excess of
the purchase price paid over the fair value of the net assets acquired, totaling
approximately $253,532,000, has been recorded as goodwill. The purchase price
allocation reflected in these financial statements for the acquisition is
preliminary and may be adjusted as estimated fair values of assets acquired and
liabilities assumed are finalized. The financial statements for the twenty-four
weeks ended June 15, 2002 are presented on the Company's new basis of accounting
("Successor Company" or "Successor Period"), while the results of its operations
for the six months ended June 30, 2001 reflect the historical results of the
predecessor company ("Predecessor Company" or "Predecessor Period").
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards (SFAS) No. 141, Business Combinations, and No.
142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001. SFAS No. 141 also includes guidance on the initial
recognition and measurement of goodwill and other intangible assets arising from
business combinations completed after June 30, 2001. SFAS No. 142 prohibits the
amortization of goodwill and intangible assets with indefinite useful lives.
SFAS No. 142 requires that these assets be reviewed for impairment at least
annually. Intangible assets with finite lives will continue to be amortized over
their estimated useful lives. Additionally, SFAS No. 142 requires that goodwill
included in the carrying value of equity method investments no longer be
amortized.
The Company adopted the provisions of SFAS No. 142 effective January 1, 2002. At
that date, the carrying value of consolidated goodwill reflected in the balance
sheet amounted to approximately $253.5 million. Had SFAS No. 142 not been in
effect, amortization of goodwill would have reduced net income by approximately
$3.4 million and $0.6 million for the two quarters ended June 15, 2002 and the
one month successor period December 31, 2001, respectively.
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Note 1--Basis of Presentation (continued)
The Company performed the transitional impairment test of goodwill and
indefinite lived intangible assets as of January 1, 2002. This assessment
included completing a comparison of the carrying value of goodwill at the
reporting unit level (as defined by SFAS No. 142) to the estimated fair values
of the individual reporting units based on unleveraged, discounted cash flow
valuation models developed by management. Based on the results of the valuation
procedures performed by the Company, the carrying value of goodwill does not
appear to be in excess of fair value at the January 1, 2002 measurement date.
Accordingly, no goodwill impairment has been recognized in the Company's
consolidated results of operations for the twelve-week and twenty-four week
periods ended June 15, 2002.
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the twelve weeks ending June 15, 2002 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2002. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Roadway Corporation
Annual Report on Form 10-K for the year ended December 31, 2001.
Note 2--Accounting Period
The Company operates on 13 four-week accounting periods with 12 weeks in each of
the first three quarters and 16 weeks in the fourth quarter.
Note 3--Segment information
The following tables present information about reported segments for the
twelve-week Successor Period and the 3-month Predecessor Period:
Twelve weeks ended June 15, 2002
Second Quarter (Successor Period)
New Penn ATS Segment Total
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(in thousands)
Revenue $ 49,594 $ 41,146 $ 90,740
Operating expense 44,042 39,466 83,508
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Operating income $ 5,552 $ 1,680 $ 7,232
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Reconciliation of segment operating income to consolidated income before taxes:
(in thousands)
Segment operating income $ 7,232
Unallocated corporate income 11
Interest (expense) (5,197)
Other (expense), net (670)
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Consolidated net income before taxes $ 1,376
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Note 3--Segment information (continued)
Three months ended June 30, 2001
Second Quarter 2001 (Predecessor Period)
New Penn ATS ARLO Segment Total
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( in thousands)
Revenue $ 55,705 43,894 14,502 $ 114,101
Operating expense 46,876 41,729 12,289 100,894
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Operating income $ 8,829 2,165 2,213 $ 13,207
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Reconciliation of segment operating income to consolidated income before taxes:
(in thousands)
Segment operating income $ 13,207
Unallocated corporate (loss) (4)
Interest (expense) (58)
Other income, net 86
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Consolidated net income before taxes $ 13,231
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The following tables present information about reported segments for the
twenty-four week Successor Period and the 6-month Predecessor Period:
Twenty-four weeks ended June 15, 2002
Two Quarters (Successor Period)
New Penn ATS Segment Total
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(in thousands)
Revenue $ 95,003 $ 79,347 $ 174,350
Operating expense 86,140 77,505 163,645
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Operating income $ 8,863 $ 1,842 $ 10,705
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Total assets $ 336,587 $ 180,792 $ 517,379
Reconciliation of segment operating income to consolidated (loss) before taxes:
(in thousands)
Segment operating income $ 10,705
Unallocated corporate income -
Interest (expense) (10,396)
Other (expense), net (1,331)
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Consolidated net loss before taxes $ (1,022)
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Note 3--Segment information (continued)
Six months ended June 30, 2001
Two Quarters (Predecessor Period)
New Penn ATS ARLO Segment Total
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( in thousands)
Revenue $ 110,362 86,032 28,714 $ 225,108
Operating expense 92,430 83,308 24,817 200,555
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Operating income $ 17,932 2,724 3,897 $ 24,553
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Reconciliation of segment operating income to consolidated income before taxes:
(in thousands)
Segment operating income $ 24,553
Unallocated corporate (loss) (7)
Interest (expense) (113)
Other income, net 431
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Consolidated net income before taxes $ 24,864
====================
Reconciliation of total segment assets to total consolidated assets at June 15,
2002:
(in thousands)
Total segment assets $ 517,379
Unallocated corporate assets 14,951
Elimination of intercompany balances (13,017)
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Consolidated assets $ 519,313
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