exhibit992.htm

Exhibit 99.2

PRECISION INDUSTRIES, INC. AND AFFILIATES

Unaudited Condensed Consolidated Financial Statements

Table of Contents

FINANCIAL INFORMATION

Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets as of June 25, 2007 (unaudited) and December 27, 2006

Condensed Consolidated Statements of Income for the Six Months Ended June 25, 2007 and June 23, 2006, (unaudited)

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 25, 2007 and June 23, 2006, (unaudited)

Notes to Condensed Consolidated Financial Statements (unaudited)

PRECISION INDUSTRIES, INC. AND AFFILIATES Condensed Consolidated Balance Sheets June 25, 2007 (unaudited) and December 27, 2006
Assets			June 25, 2007	December 27, 2006
Current assets:
	Cash and cash equivalents	$	318,341	572,753
	Accounts receivable, net of allowance for doubtful accounts
	of $248,295 at June 25, 2007 and December 27, 2006, respectively		25,705,361	27,269,380
	Other receivables		1,431,230	2,768,889
	Inventories		40,195,702	43,839,363
	Prepaid expenses		1,356,402	798,737
	Total current assets		69,007,036	75,249,122
Property, plant, and equipment, net			15,741,605	15,775,023
Other assets			6,624,831	4,875,406
	Total assets	$	91,373,472	95,899,551
Liabilities and Stockholder’s Equity
Current liabilities:
	Current maturities of long-term debt	$	1,718,202	1,478,202
	Trade accounts payable		23,177,264	26,977,881
	Cash overdraft		1,133,311	2,824,680
	Accrued liabilities		984,893	1,095,447
	Payroll and related withholding taxes		1,649,785	1,771,247
	Total current liabilities		28,663,455	34,147,457
Long-term debt, excluding current maturities			55,735,117	57,156,850
	Total liabilities		84,398,572	91,304,307
Stockholder’s equity:
	Class A common stock, $100 par value, 1,500 shares authorized; 1,158 and 1,166 shares issued at June 25, 2007 and December 27, 2006 respectively		115,800	116,600
	Class B common stock, $100 par value, 500 shares authorized; 160 and 152 shares issued at June 25, 2007 and December 27, 2006, respectively		16,000	15,200
	Paid-in capital		203,399	203,399
	Retained earnings		13,135,791	10,756,135
			13,470,990	11,091,334
	Treasury stock (686 shares), at cost		(2,300,000)	(2,300,000)

	Class B common stock held by affiliates (69 shares), at cost		(4,196,090)	(4,196,090)
	Total stockholders’ equity		6,974,900	4,595,244
	Total liabilities and stockholders’ equity	$	91,373,472	95,899,551
See accompanying notes to unaudited condensed consolidated financial statements.

PRECISION INDUSTRIES, INC. AND AFFILIATES Condensed Consolidated Statements of Income Six months ended June 25, 2007 and June 23, 2006 (unaudited)
			2007	2006
Net revenues:
	Distribution revenue	$	36,895,474	36,045,291
	Contracted custom solutions revenue		41,466,876	44,939,408
	Supply chain management revenues/fees		59,860,571	68,813,329
	Rental revenues		22,864	22,864
	Total net revenues		138,245,785	149,820,892
Cost of sales			104,502,591	113,732,650
	Gross profit		33,743,194	36,088,242
Selling, general, and administrative expenses			28,668,753	31,503,066
	Operating income		5,074,441	4,585,176
Other income (expenses):
	Interest income		14,354	77,757
	Interest expense		(2,236,623)	(1,874,182)
	Total other expenses		(2,222,269)	(1,796,425)
	Income before minority interest		2,852,172	2,788,751
Minority interest in (income) loss of consolidated affiliates			27,484	(139,217)
	Net income	$	2,879,656	2,649,534
See accompanying notes to unaudited condensed consolidated financial statements.

PRECISION INDUSTRIES, INC. AND AFFILIATES Condensed Consolidated Statements of Cash Flows Six months ended June 25, 2007 and June 23, 2006 (unaudited)
							2007	2006
Cash flows from operating activities:
	Net income					$	2,879,656	2,649,534
	Adjustments to reconcile net income to net cash provided by (used in) operating activities:
		Gain on sale of property, plant, and equipment					(17,724)	(7,820)
		Depreciation and amortization					1,660,643	1,514,006
		Minority interest in income (loss) of consolidated affiliates					(27,484)	139,217
		Changes in assets and current liabilities:
			Decrease (increase) in:
				Accounts receivable			1,564,019	(3,354,553)
				Other receivables			1,337,659	(386,267)
				Inventories			3,643,661	(2,688,783)
				Prepaid expenses			(557,665)	(1,195,391)
				Other assets			(1,671,941)	895,018
			Increase (decrease) in:
				Trade accounts payable			(3,800,617)	1,559,413
				Accrued liabilities			(110,555)	148,084
				Payroll and related withholding taxes			(121,461)	(65,447)
					Net cash provided by (used in) operating activities		4,778,191	(792,989)
Cash flows from investing activities:
	Proceeds from sales of property, plant, and equipment						18,934	15,734
	Additions to property, plant, and equipment						(1,628,435)	(1,828,342)
					Net cash used in investing activities		(1,609,501)	(1,812,608)
Cash flows from financing activities:
	Distribution to stockholder						(500,000)	(3,525,000)
	Debt issuance costs						(50,000)	(35,550)
	Increase (decrease) in cash overdraft						(1,691,369)	2,078,838
	Net borrowings (payments) under revolving line of credit						(1,504,650)	3,646,160
	Proceeds from long-term borrowings						1,230,104	1,500,000
	Payments on long-term borrowings						(907,187)	(872,960)
					Net cash (used in) provided by financing activities		(3,423,102)	2,791,488
					Net increase (decrease) in cash and cash equivalents		(254,412)	185,891
Cash and cash equivalents at beginning of period							572,753	334,294
Cash and cash equivalents at end of period						$	318,341	520,185
Supplemental disclosure of cash paid for:
Interest						$	2,390,902	2,458,044
Income taxes							106,200	85,120
See accompanying notes to unaudited condensed consolidated financial statements.

PRECISION INDUSTRIES, INC. AND AFFILIATES

Notes to Unaudited Condensed Consolidated Financial Statements

(unaudited)

(1) Summary of Significant Accounting Policies

(a) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information pursuant to rules and regulations of the Securities and Exchange Commission (SEC). The condensed consolidated balance sheet as of December 27, 2006 has been derived from the audited consolidated financial statements at that date. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the financial position of Precision Industries, Inc. as of June 25, 2007, and the results of operations and cash flows for the six month periods ended June 25, 2007 and June 23, 2006, have been included. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to SEC rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited financial statements included elsewhere in this Form 8-K/A.

Operating results for the six month period ended June 25, 2007 are not necessarily indicative of the results that may be expected for the remainder of the fiscal year.

(b)

Description of Business

Precision Industries, Inc. and affiliates (collectively, Precision or the Company) engages in the distribution, contracted custom solutions, and supply chain management of industrial maintenance, repair, and operating (MRO) products. Precision’s contracted custom solutions cover procurement programs customized to requirements of the individual client/partner. Precision’s supply chain management programs cover all facets of total supply chain management as requested by the customer.

(2)

Long-term Debt

Long-term debt consists of the following:

Description			Entity		June 25, 2007	December 27, 2006
Revolving line of credit, secured by inventory and accounts receivable			Precision	$	45,075,124	46,579,774
Variable-rate notes payable to GE Capital, principal and
	interest payments totaling $16,556 due monthly, maturity
	dates ranging from October 2011 through June 2012,
	secured by buildings and improvements		Precision		2,083,164	2,119,770
Variable-rate notes payable to GE Capital, principal and
	interest payments totaling $77,140 due monthly, maturity
	dates ranging from October 2009 through June 2019,
	secured by buildings and improvements		VIEs		3,692,166	3,815,136
Nonrecourse notes to former members, principal and
	interest payments totaling $475,000, due annually
	through May 2013		VIEs		2,287,069	2,679,374
Variable-rate note payable to stockholder, due $15,312
	monthly, including interest through April 2012, (fixed
	rate of 7.03% at June 25, 2007) secured by a
	Westwind airplane		VIEs		1,660,499	1,689,223
Variable-rate note payable to bank, due $3,736 monthly,
	including interest through May 31, 2015 (6.63% at
	June 25, 2007, based on 5-year Federal Home Loan
	Bank rate plus 2.15%), secured by buildings
	and improvements		Precision		466,495	473,184
Note payable to GE Capital, principal and interest payment
	of $46,802 due monthly through January 2009, secured by
	equipment		Precision		835,001	1,078,417
Note payable to GE Capital, principal and interest payment
	of $29,742 due monthly through April 2011, secured by
	vehicles		Precision		1,163,627	—
Variable-rate notes payable to banks, principal and interest
	payments totaling $5,705 due monthly, maturity dates
	ranging from June 2007 through November 2016		VIEs		101,326	111,326
Variable-rate note payable to bank, monthly interest
	payments and annual principal payments of $90,000 due
	through July 2007		VIEs		88,848	88,848
		Total long-term debt			57,453,319	58,635,052
Less current maturities of long-term debt					1,718,202	1,478,202
		Long-term debt, excluding current maturities		$	55,735,117	57,156,850

Maturities of the long-term debt are as follows:

			Precision	VIEs	Total
Year ending:
	2008	$	829,820	888,382	1,718,202
	2009		897,067	570,871	1,467,938
	2010		633,146	1,596,202	2,229,348
	2011		433,455	529,088	962,543
	2012		45,369,743	2,790,822	48,160,565
	Thereafter		1,460,180	1,454,543	2,914,723
		$	49,623,411	7,829,908	57,453,319

Precision has a $62,000,000 revolving line of credit with an agent bank and two participating banks. The line of credit requires Precision to pay interest at LIBOR plus 2.75% (7.60% as of June 25, 2007) based on Precision’s fixed charge coverage ratio (1.33% at June 25, 2007) through the December 29, 2011 maturity date. The amount available under the revolving line of credit is based on eligible accounts receivable and inventory. Total availability exceeded borrowings by approximately $4,521,000 as of June 25, 2007.

(3)

Related-Party Transactions

The Company advances funds to related parties and officers/employees. Due from related parties and officers/employees totaled $1,270,421 and $1,238,034 at June 25, 2007 and December 27, 2006, respectively. The balance due at June 25, 2007 and December 27, 2006 consisted of $256,444 and $421,939 due to Precision and $1,013,977 and $816,095 due to VIEs, respectively. These receivables are recorded in other assets at June 25, 2007 and December 27, 2006. The Company recorded interest income on the advances totaling $14,354 for the six months ended June 25, 2007 and $77,757 for the six months ended June 23, 2006. Interest receivable from related parties of $80,395 and $66,041 are recorded in other receivables at June 25, 2007 and December 27, 2006, respectively.

(4)

Variable Interest Entities

The effect on the Company’s consolidated balance sheets from the consolidation of the VIEs as of June 25, 2007 and December 27, 2006 is an increase in assets of $3,703,451 and $2,755,782 and an increase in liabilities of $7,899,541 and $8,453,540, respectively. With the consolidation of the VIEs, $1,529,152 and $1,501,668 of unallocated accumulated deficits has been added to other assets on the consolidated balance sheets as of June 25, 2007 and December 27, 2006, respectively. The VIEs are obligated to fund the unallocated accumulated deficit to Precision. Management believes the primary funding of this obligation would come from unrealized appreciation of assets held by the VIEs.

(5)

Comprehensive Income

The Company’s comprehensive income consists of net income and changes in fair value of a cash flow hedge, which was terminated in August 2006, as shown below.

		June 25, 2007	June 23, 2006
Net income	$	2,879,656	2,649,534
Change in fair value of cash flow hedge		—	116,673
Comprehensive income	$	2,879,656	2,766,207

(6)

Subsequent event

On September 10, 2007, the stockholders of the Company sold all outstanding common stock of Precision Industries, Inc. under terms of a stock purchase agreement dated August 19, 2007.