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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



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FORM 10-Q



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|x | QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------



For the Quarterly Period Ended September 30, 2004



OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|- | ------------------------------------------------------------------------------------------



For the transition period from  to



Commission File Number 001-14171



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TOTAL LOGISTICS, INC.

(Exact name of registrant as specified in its charter.)



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|                                                      |  |                                  
|----------------------------------------------------- |  | ---------------------------------
|Wisconsin                                             |  | 39-1915787                       
|(State of Incorporation)                              |  | (IRS Employer Identification No.)
|                                                      | 
|700 N. Water Street, Suite 1200, Milwaukee, Wisconsin |  | 53202                            
|(Address of principal executive offices)              |  | (Zip Code)                       



Registrants
telephone number, including area code (414) 291-9000



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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes ̈No



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act). ̈Yes    x  No



|                             |  |                                   
|---------------------------- |  | ----------------------------------
|Common Stock $0.01 par value |  | 5,391,864                         
|(Class)                      |  | (Outstanding at November 10, 2004)



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PART I - FINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS



TOTAL LOGISTICS, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

(In thousands except share and per share data)



|                                                                                                                                    |  |                    |         |   |                   |   |         |  
|----------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------- | - | ----------------- | - | ------- | -
|                                                                                                                                    |  | September 30, 2004 |         |   | December 31, 2003 |  
|ASSETS:                                                                                                                             |  |                    |         |   |                   |   |         |  
|                                                                                                                                    |  |                   
|Current Assets:                                                                                                                     |  |                    |         |   |                   |   |         |  
|Cash and cash equivalents                                                                                                           |  | $                  | 1,902   |   |                   | $ | 2,225   |  
|Accounts receivable, net                                                                                                            |  |                    | 46,740  |   |                   |   | 28,659  |  
|Unbilled receivables                                                                                                                |  |                    | 5,871   |   |                   |   |        |  
|Inventories                                                                                                                         |  |                    | 11,719  |   |                   |   | 9,355   |  
|Prepaids and other                                                                                                                  |  |                    | 3,793   |   |                   |   | 3,203   |  
|                                                                                                                                    |  |                    |         |   |                   |   |         |  
|Total Current Assets                                                                                                                |  |                    | 70,025  |   |                   |   | 43,442  |  
|                                                                                                                                    |  |                    |         |   |                   |   |         |  
|Long-Term Assets:                                                                                                                   |  |                    |         |   |                   |   |         |  
|Fixed assets, net                                                                                                                   |  |                    | 62,034  |   |                   |   | 62,058  |  
|Goodwill                                                                                                                            |  |                    | 16,202  |   |                   |   | 16,202  |  
|Other assets                                                                                                                        |  |                    | 3,688   |   |                   |   | 2,631   |  
|                                                                                                                                    |  |                    |         |   |                   |   |         |  
|Total Long-Term Assets                                                                                                              |  |                    | 81,924  |   |                   |   | 80,891  |  
|                                                                                                                                    |  |                    |         |   |                   |   |         |  
|                                                                                                                                    |  | $                  | 151,949 |   |                   | $ | 124,333 |  
|                                                                                                                                    |  |                    |         |   |                   |   |         |  
|LIABILITIES AND SHAREHOLDERS EQUITY:                                                                                               |  |                    |         |   |                   |   |         |  
|                                                                                                                                    |  |                   
|Current Liabilities:                                                                                                                |  |                    |         |   |                   |   |         |  
|Current maturities of long-term debt                                                                                                |  | $                  | 2,296   |   |                   | $ | 2,792   |  
|Line of credit                                                                                                                      |  |                    | 5,034   |   |                   |   | 2,661   |  
|Accounts payable                                                                                                                    |  |                    | 19,513  |   |                   |   | 15,436  |  
|Accrued liabilities                                                                                                                 |  |                    | 28,039  |   |                   |   | 19,658  |  
|                                                                                                                                    |  |                    |         |   |                   |   |         |  
|Total Current Liabilities                                                                                                           |  |                    | 54,882  |   |                   |   | 40,547  |  
|                                                                                                                                    |  |                    |         |   |                   |   |         |  
|Long-Term Liabilities:                                                                                                              |  |                    |         |   |                   |   |         |  
|Long-term debt, less current maturities                                                                                             |  |                    | 50,334  |   |                   |   | 42,932  |  
|Other liabilities                                                                                                                   |  |                    | 3,441   |   |                   |   | 3,376   |  
|                                                                                                                                    |  |                    |         |   |                   |   |         |  
|Total Long-Term Liabilities                                                                                                         |  |                    | 53,775  |   |                   |   | 46,308  |  
|                                                                                                                                    |  |                    |         |   |                   |   |         |  
|Total Liabilities                                                                                                                   |  |                    | 108,657 |   |                   |   | 86,855  |  
|                                                                                                                                    |  |                    |         |   |                   |   |         |  
|Shareholders Equity:                                                                                                               |  |                    |         |   |                   |   |         |  
|Preferred stock, par value $.01 per share, 10,000,000 shares authorized, none issued or outstanding                                 |  |                    |        |   |                   |   |        |  
|Common stock, par value $.01 per share; 50,000,000 shares authorized, 5,379,864 and 5,275,864 issued in 2004 and 2003,
respectively |  |                    | 54      |   |                   |   | 53      |  
|Additional paid-in capital                                                                                                          |  |                    | 23,102  |   |                   |   | 22,483  |  
|Deferred compensation                                                                                                               |  |                    | (223    | ) |                   |   | (98     | )
|Accumulated other comprehensive loss                                                                                                |  |                    | (407    | ) |                   |   | (640    | )
|Retained earnings                                                                                                                   |  |                    | 20,766  |   |                   |   | 15,680  |  
|                                                                                                                                    |  |                    |         |   |                   |   |         |  
|Total Shareholders Equity                                                                                                          |  |                    | 43,292  |   |                   |   | 37,478  |  
|                                                                                                                                    |  |                    |         |   |                   |   |         |  
|                                                                                                                                    |  | $                  | 151,949 |   |                   | $ | 124,333 |  
|                                                                                                                                    |  |                    |         |   |                   |   |         |  



See notes to
consolidated condensed financial statements



2



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TOTAL LOGISTICS, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except share and per share data)



|                                             |  |                                  |           |   |                                 |   |           |      |  |   |           |   |  |   |           |  
|-------------------------------------------- |  | -------------------------------- | --------- | - | ------------------------------- | - | --------- | ---- |  | - | --------- | - |  | - | --------- | -
|                                             |  | Three Months Ended September 30, |           |   | Nine Months Ended September 30, |  
|                                             |  | 2004                             |           |   | 2003                            |   |           | 2004 |  |   | 2003      |  
|Revenues:                                    |  |                                  |           |   |                                 |   |           |      |  |   |           |   |  |   |           |  
|Logistic services                            |  | $                                | 71,256    |   |                                 | $ | 53,394    |      |  | $ | 192,876   |   |  | $ | 152,226   |  
|Product sales                                |  |                                  | 21,471    |   |                                 |   | 17,701    |      |  |   | 60,456    |   |  |   | 50,354    |  
|                                             |  |                                  |           |   |                                 |   |           |      |  |   |           |   |  |   |           |  
|                                             |  |                                  | 92,727    |   |                                 |   | 71,095    |      |  |   | 253,332   |   |  |   | 202,580   |  
|                                             |  |                                  |           |   |                                 |   |           |      |  |   |           |   |  |   |           |  
|Costs and Expense:                           |  |                                  |           |   |                                 |   |           |      |  |   |           |   |  |   |           |  
|Logistic expenses                            |  |                                  | 64,555    |   |                                 |   | 46,649    |      |  |   | 174,595   |   |  |   | 134,868   |  
|Cost of product sales                        |  |                                  | 16,915    |   |                                 |   | 14,120    |      |  |   | 47,884    |   |  |   | 41,307    |  
|Depreciation and amortization                |  |                                  | 1,791     |   |                                 |   | 1,952     |      |  |   | 5,116     |   |  |   | 5,780     |  
|Selling, general and administrative expenses |  |                                  | 5,235     |   |                                 |   | 4,931     |      |  |   | 15,216    |   |  |   | 13,746    |  
|                                             |  |                                  |           |   |                                 |   |           |      |  |   |           |   |  |   |           |  
|                                             |  |                                  | 88,496    |   |                                 |   | 67,652    |      |  |   | 242,811   |   |  |   | 195,701   |  
|                                             |  |                                  |           |   |                                 |   |           |      |  |   |           |   |  |   |           |  
|Earnings from Operations:                    |  |                                  | 4,231     |   |                                 |   | 3,443     |      |  |   | 10,521    |   |  |   | 6,879     |  
|                                             |  |                                  |           |  
|Other Expenses:                              |  |                                  |           |   |                                 |   |           |      |  |   |           |   |  |   |           |  
|Interest expense, net                        |  |                                  | (671      | ) |                                 |   | (707      | )    |  |   | (1,989    | ) |  |   | (2,222    | )
|Other expense                                |  |                                  |          |   |                                 |   |          |      |  |   | (55       | ) |  |   |          |  
|                                             |  |                                  |           |   |                                 |   |           |      |  |   |           |   |  |   |           |  
|                                             |  |                                  | (671      | ) |                                 |   | (707      | )    |  |   | (2,044    | ) |  |   | (2,222    | )
|                                             |  |                                  |           |   |                                 |   |           |      |  |   |           |   |  |   |           |  
|Earnings before income taxes                 |  |                                  | 3,560     |   |                                 |   | 2,736     |      |  |   | 8,477     |   |  |   | 4,657     |  
|                                             |  |                                  |           |  
|Income tax provision                         |  |                                  | 1,424     |   |                                 |   | 1,168     |      |  |   | 3,391     |   |  |   | 2,009     |  
|                                             |  |                                  |           |   |                                 |   |           |      |  |   |           |   |  |   |           |  
|Net earnings                                 |  | $                                | 2,136     |   |                                 | $ | 1,568     |      |  | $ | 5,086     |   |  | $ | 2,648     |  
|                                             |  |                                  |           |   |                                 |   |           |      |  |   |           |   |  |   |           |  
|Basic net earnings per share                 |  | $                                | 0.40      |   |                                 | $ | 0.30      |      |  | $ | 0.95      |   |  | $ | 0.50      |  
|                                             |  |                                  |           |   |                                 |   |           |      |  |   |           |   |  |   |           |  
|Diluted net earnings per share               |  | $                                | 0.38      |   |                                 | $ | 0.28      |      |  | $ | 0.91      |   |  | $ | 0.48      |  
|                                             |  |                                  |           |   |                                 |   |           |      |  |   |           |   |  |   |           |  
|Average number of shares outstanding         |  |                                  | 5,379,864 |   |                                 |   | 5,275,864 |      |  |   | 5,348,266 |   |  |   | 5,273,875 |  
|                                             |  |                                  |           |   |                                 |   |           |      |  |   |           |   |  |   |           |  
|Diluted number of shares outstanding         |  |                                  | 5,606,542 |   |                                 |   | 5,509,397 |      |  |   | 5,591,009 |   |  |   | 5,523,021 |  
|                                             |  |                                  |           |   |                                 |   |           |      |  |   |           |   |  |   |           |  



See notes to
consolidated condensed financial statements.



3



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TOTAL LOGISTICS, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS EQUITY

NINE MONTHS ENDED
SEPTEMBER 30, 2004

(Unaudited)

(In thousands, except share amounts)



|                                                                        |  |              |    |                            |   |                       |  |   |                                             |   |  |                   |      |                                   |  |   |        |  |   |      
|----------------------------------------------------------------------- |  | ------------ | -- | -------------------------- | - | --------------------- |  | - | ------------------------------------------- | - |  | ----------------- | ---- | --------------------------------- |  | - | ------ |  | - | -----
|                                                                        |  | Common Stock |    | Additional Paid-In Capital |   | Deferred Compensation |  |   | Accumulated Other Comprehensive Gain (Loss) |   |  | Retained Earnings |      | Current Year Comprehensive Income
|Balance, December 31, 2003                                              |  | $            | 53 |                            | $ | 22,483                |  | $ | (98                                         | ) |  | $                 | (640 | )                                 |  | $ | 15,680 |  |   |      
|                                                                        |  |              |    |                            |   |                      
|Exercise of options to purchase 104,000 shares of common stock          |  |              | 1  |                            |   | 464                   |  |   |                                            |   |  |                   |     |                                   |  |   |       |  |   |      
|                                                                        |  |              |    |                            |   |                      
|Issuance of 8,124 shares of restricted stock                            |  |              |   |                            |   | 155                   |  |   | (155                                        | ) |  |                   |     |                                   |  |   |       |  |   |      
|                                                                        |  |              |    |                            |   |                      
|Vesting of restricted stock                                             |  |              |    |                            |   |                       |  |   | 30                                          |   |  |                   |      |                                   |  |   |        |  |   |      
|                                                                        |  |              |    |                            |   |                      
|Change in fair value of interest rate swaps, net of tax expense of $156 |  |              |    |                            |   |                       |  |   |                                             |   |  |                   | 233  |                                   |  |   |        |  |   | 233  
|                                                                        |  |              |    |                            |   |                      
|Net Earnings                                                            |  |              |    |                            |   |                       |  |   |                                             |   |  |                   |      |                                   |  |   | 5,086  |  |   | 5,086
|                                                                        |  |              |    |                            |   |                       |  |   |                                             |   |  |                   |      |                                   |  |   |        |  |   |      
|Total Comprehensive Income                                              |  |              |    |                            |   |                       |  |   |                                             |   |  |                   |      |                                   |  |   |        |  | $ | 5,319
|                                                                        |  |              |    |                            |   |                       |  |   |                                             |   |  |                   |      |                                   |  |   |        |  |   |      
|Balance, September 30, 2004                                             |  | $            | 54 |                            | $ | 23,102                |  | $ | (223                                        | ) |  | $                 | (407 | )                                 |  | $ | 20,766 |  |   |      
|                                                                        |  |              |    |                            |   |                       |  |   |                                             |   |  |                   |      |                                   |  |   |        |  |   |      



See notes to
consolidated condensed financial statements



4



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TOTAL LOGISTICS, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)



|                                                                                              |  |                                |         |   |      |   |         |  
|--------------------------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                                                                              |  | Nine Months EndedSeptember 30, |        
|                                                                                              |  | 2004                           |         |   | 2003 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                         |  |                                |         |   |      |   |         |  
|Net earnings                                                                                  |  | $                              | 5,086   |   |      | $ | 2,648   |  
|Adjustments to reconcile net earnings to net cash (used in) provided by operating activities: |  |                                |         |   |      |   |         |  
|Depreciation and amortization                                                                 |  |                                | 5,116   |   |      |   | 5,780   |  
|Gain on sale of fixed assets                                                                  |  |                                | (17     | ) |      |   | (95     | )
|Loss on equity investment                                                                     |  |                                | 55      |   |      |   |        |  
|Deferred compensation                                                                         |  |                                | 30      |   |      |   | 10      |  
|Payment-in-kind interest                                                                      |  |                                | 74      |   |      |   | 70      |  
|Changes in assets and liabilities:                                                            |  |                                |         |   |      |   |         |  
|Accounts receivable                                                                           |  |                                | (18,081 | ) |      |   | (4,322  | )
|Inventories                                                                                   |  |                                | (2,364  | ) |      |   | 90      |  
|Unbilled receivables                                                                          |  |                                | (5,871  | ) |      |   |        |  
|Other assets                                                                                  |  |                                | (1,710  | ) |      |   | 197     |  
|Accounts payable, accrued liabilities and other liabilities                                   |  |                                | 12,674  |   |      |   | 2,574   |  
|                                                                                              |  |                                |         |   |      |   |         |  
|Net cash (used in) provided by operating activities                                           |  |                                | (5,008  | ) |      |   | 6,952   |  
|                                                                                              |  |                               
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                         |  |                                |         |   |      |   |         |  
|Purchase of fixed assets                                                                      |  |                                | (5,088  | ) |      |   | (2,853  | )
|Proceeds from sales of assets                                                                 |  |                                | 29      |   |      |   | 510     |  
|Other investment                                                                              |  |                                |        |   |      |   | (145    | )
|                                                                                              |  |                                |         |   |      |   |         |  
|Net cash used in investing activities                                                         |  |                                | (5,059  | ) |      |   | (2,488  | )
|                                                                                              |  |                                |         |   |      |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                         |  |                                |         |   |      |   |         |  
|Borrowing on credit lines, net                                                                |  |                                | 2,373   |   |      |   | 1,479   |  
|Proceeds from issuance of long-term debt                                                      |  |                                | 22,908  |   |      |   | 4,234   |  
|Payments on notes and loans payable                                                           |  |                                | (16,002 | ) |      |   | (11,000 | )
|Proceeds from the exercise of stock options                                                   |  |                                | 465     |   |      |   | 16      |  
|                                                                                              |  |                                |         |   |      |   |         |  
|Net cash provided by (used in) financing activities                                           |  |                                | 9,744   |   |      |   | (5,271  | )
|                                                                                              |  |                                |         |   |      |   |         |  
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                                     |  |                                | (323    | ) |      |   | (807    | )
|                                                                                              |  |                               
|BEGINNING CASH AND CASH EQUIVALENTS                                                           |  |                                | 2,225   |   |      |   | 4,483   |  
|                                                                                              |  |                                |         |   |      |   |         |  
|ENDING CASH AND CASH EQUIVALENTS                                                              |  | $                              | 1,902   |   |      | $ | 3,676   |  
|                                                                                              |  |                                |         |   |      |   |         |  
|Supplemental disclosures of cash flow information:                                            |  |                                |         |   |      |   |         |  
|Interest paid                                                                                 |  | $                              | 2,043   |   |      | $ | 2,344   |  
|                                                                                              |  |                                |         |   |      |   |         |  
|Income taxes paid                                                                             |  | $                              | 2,616   |   |      | $ | 1,049   |  
|                                                                                              |  |                                |         |   |      |   |         |  



See notes to
consolidated condensed financial statements



5



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TOTAL LOGISTICS, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)



NOTE 1  BASIS OF PRESENTATION



The accompanying unaudited consolidated financial statements have been prepared by Total Logistics, Inc. (TLI or the Company) in accordance with
accounting principles generally accepted in the United States of America (US GAAP) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements, prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted pursuant to such rules and regulations. These condensed statements should be read
in conjunction with the financial statements and the notes thereto included in the Companys 2003 Annual Report on Form 10-K.



In the opinion of management, the aforementioned statements reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of
the results for the interim periods. Results for the nine months ended September 30, 2004, are not necessarily indicative of results that may be expected for the year ending December 31, 2004.



NOTE 2  SIGNIFICANT ACCOUNTING POLICIES



Inventories: Inventories are carried at the lower of FIFO
(first-in, first-out) cost or market value. In the Logistics Services segment, inventories consist primarily of repair parts. In the Product Sales segment, inventories include materials, food products and labor and manufacturing overhead. As of
September 30, 2004 and December 31, 2003, inventories are comprised of the following:



|                                  |  |                    |        |                  |   |      
|--------------------------------- |  | ------------------ | ------ | ---------------- | - | -----
|                                  |  | September 30, 2004 |        | December 31,2003
|Repair parts                      |  | $                  | 274    |                  | $ | 137  
|Commodities and other             |  |                    | 2,251  |                  |   | 1,755
|Raw materials and work in process |  |                    | 6,511  |                  |   | 6,260
|Finished goods                    |  |                    | 2,683  |                  |   | 1,203
|                                  |  |                    |        |                  |   |      
|                                  |  | $                  | 11,719 |                  | $ | 9,355
|                                  |  |                    |        |                  |   |      



Goodwill: Effective January 1,
2002, the Company adopted SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 142 requires goodwill to be tested for impairment annually, or more frequently under certain circumstances, and written down when impaired, rather
than being amortized as previous standards required. There were no changes to the carrying amount of goodwill for the nine months ended September 30, 2004. Balances by segment are as follows:



|                                                       |  |                  |       |              |   |        |  |   |       
|------------------------------------------------------ |  | ---------------- | ----- | ------------ | - | ------ |  | - | ------
|                                                       |  | LogisticServices |       | ProductSales |   | Total 
|Balance as of December 31, 2003 and September 30, 2004 |  | $                | 4,882 |              | $ | 11,320 |  | $ | 16,202
|                                                       |  |                  |       |              |   |        |  |   |       



6



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NOTE 3  EARNINGS PER SHARE



The following is a reconciliation of basic and diluted earnings per share for the three
months and nine months ended September 30, 2004 and 2003.



|                                                             |  |                                 |           |                                |   |           |  |      |           |  |   |          
|------------------------------------------------------------ |  | ------------------------------- | --------- | ------------------------------ | - | --------- |  | ---- | --------- |  | - | ---------
|                                                             |  | Three Months EndedSeptember 30, |           | Nine Months EndedSeptember 30,
|                                                             |  | 2004                            |           | 2003                           |   | 2004      |  | 2003
|Basic Net Earnings per Share:                                |  |                                 |           |                                |   |           |  |      |           |  |   |          
|Net earnings available to common shareholders                |  | $                               | 2,136     |                                | $ | 1,568     |  | $    | 5,086     |  | $ | 2,648    
|Weighted average shares of common stock outstanding          |  |                                 | 5,379,864 |                                |   | 5,275,864 |  |      | 5,348,266 |  |   | 5,273,875
|                                                             |  |                                 |           |                                |   |           |  |      |           |  |   |          
|Basic net earnings per share                                 |  | $                               | .40       |                                | $ | .30       |  | $    | .95       |  | $ | .50      
|                                                             |  |                                 |           |                                |   |           |  |      |           |  |   |          
|Diluted Net Earnings per Share:                              |  |                                 |           |                                |   |           |  |      |           |  |   |          
|Weighted average shares of common stock outstanding          |  |                                 | 5,379,864 |                                |   | 5,275,864 |  |      | 5,348,266 |  |   | 5,273,875
|Incremental common shares applicable to common stock options |  |                                 | 218,316   |                                |   | 232,479   |  |      | 235,984   |  |   | 247,223  
|Restricted stock                                             |  |                                 | 8,362     |                                |   | 1,054     |  |      | 6,759     |  |   | 1,923    
|                                                             |  |                                 |           |                                |   |           |  |      |           |  |   |          
|Average common shares assuming full dilution                 |  |                                 | 5,606,542 |                                |   | 5,509,397 |  |      | 5,591,009 |  |   | 5,523,021
|                                                             |  |                                 |           |                                |   |           |  |      |           |  |   |          
|Diluted net earnings per share                               |  | $                               | .38       |                                | $ | .28       |  | $    | .91       |  | $ | .48      
|                                                             |  |                                 |           |                                |   |           |  |      |           |  |   |          



NOTE 4  SEGMENT INFORMATION



TLI is divided into two
discrete segments  Logistic Services and Product Sales. Logistic Services include providing warehousing, transportation operations and management services, supply chain management, dedicated third-party facility and operations management,
fulfillment services, packaging and food processing. The Product Sales operating segment includes the manufacture and sale of glass-door refrigerated and frozen display cases, refrigeration control systems and distribution of certain food products.
Products within this segment are sold primarily to grocery, general merchandise, convenience and drug store chains and industrial applications throughout the United States and to municipal school districts in the Midwest. These operating segments
are determined based upon the primary services and product lines provided to customers. Financial information by business segment is as follows:



|                          |  |                                 |        |   |                                |   |        |      |  |   |         |   |  |   |         |  
|------------------------- |  | ------------------------------- | ------ | - | ------------------------------ | - | ------ | ---- |  | - | ------- | - |  | - | ------- | -
|                          |  | Three Months EndedSeptember 30, |        |   | Nine Months EndedSeptember 30, |  
|                          |  | 2004                            |        |   | 2003                           |   |        | 2004 |  |   | 2003    |  
|Revenues:                 |  |                                 |        |   |                                |   |        |      |  |   |         |   |  |   |         |  
|Logistic services         |  | $                               | 71,256 |   |                                | $ | 53,394 |      |  | $ | 192,876 |   |  | $ | 152,226 |  
|Product sales             |  |                                 | 21,471 |   |                                |   | 17,701 |      |  |   | 60,456  |   |  |   | 50,354  |  
|                          |  |                                 |        |   |                                |   |        |      |  |   |         |   |  |   |         |  
|                          |  | $                               | 92,727 |   |                                | $ | 71,095 |      |  | $ | 253,332 |   |  | $ | 202,580 |  
|                          |  |                                 |        |   |                                |   |        |      |  |   |         |   |  |   |         |  
|Earnings from Operations: |  |                                 |        |   |                                |   |        |      |  |   |         |   |  |   |         |  
|Logistic services         |  | $                               | 2,947  |   |                                | $ | 2,772  |      |  | $ | 7,319   |   |  | $ | 6,499   |  
|Product sales             |  |                                 | 1,533  |   |                                |   | 947    |      |  |   | 3,960   |   |  |   | 1,277   |  
|Corporate                 |  |                                 | (249   | ) |                                |   | (276   | )    |  |   | (758    | ) |  |   | (897    | )
|                          |  |                                 |        |   |                                |   |        |      |  |   |         |   |  |   |         |  
|                          |  | $                               | 4,231  |   |                                | $ | 3,443  |      |  | $ | 10,521  |   |  | $ | 6,879   |  
|                          |  |                                 |        |   |                                |   |        |      |  |   |         |   |  |   |         |  



7



---

NOTE 5  DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES



The Company has derivative financial instruments, however, it does not use them for
trading purposes. As of September 30, 2004 and December 31, 2003, interest rate swaps are the only derivative financial instruments held by the Company. The interest rate swaps, designated as cash flow hedging relationships, were entered into in
2001 and 2002 as an effort to mitigate the risk of rising interest rates in future periods by converting certain floating rate debt instruments into fixed rate debt. The effective portion of the gains and losses on these instruments are deferred in
other comprehensive income and recognized in interest expense over the period in which the Company accrues interest expense on the related debt instruments. The ineffective portion of hedging derivatives has been insignificant. The fair value of
interest rate swaps resulted in a loss of $407 (net of tax of $271) and a loss of $640 (net of tax of $490) at September 30, 2004 and December 31, 2003, respectively, and was based on dealer quotes.



NOTE 6  STOCK-BASED EMPLOYEE COMPENSATION PLAN



At September 30, 2004, the Company had one stock-based employee
compensation plan, which is described more fully in Note E to the Notes to Consolidated Financial Statements of the Companys Annual Report on Form 10-K for the year ended December 31, 2003. The Company accounts for this stock-based plan under
the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based employee compensation cost was reflected for stock options granted in previously
reported results for any period, as all options granted under this plan had an exercise price equal to the market value of the underlying Common Stock on the measurement date. The following table illustrates the effect on net income and earnings per
share if the Company had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure,
to stock-based employee compensation.



|                                                                                       |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|-------------------------------------------------------------------------------------- |  | ------------------------------- | ----- | - | ------------------------------ | - | ----- | ---- |  | - | ----- | - |  | - | ----- | -
|                                                                                       |  | Three Months EndedSeptember 30, |       |   | Nine Months EndedSeptember 30, |  
|                                                                                       |  | 2004                            |       |   | 2003                           |   |       | 2004 |  |   | 2003  |  
|Net income, as reported                                                                |  | $                               | 2,136 |   |                                | $ | 1,568 |      |  | $ | 5,086 |   |  | $ | 2,648 |  
|Deferred compensation expense                                                          |  |                                 | 14    |   |                                |   | 6     |      |  |   | 30    |   |  |   | 10    |  
|Employee compensation expense determined under fair value based method for all awards, |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|net of related tax effects                                                             |  |                                 | (26   | ) |                                |   | (34   | )    |  |   | (65   | ) |  |   | (94   | )
|                                                                                       |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|Pro forma net income                                                                   |  | $                               | 2,124 |   |                                | $ | 1,540 |      |  | $ | 5,051 |   |  | $ | 2,564 |  
|                                                                                       |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|Basic net earnings per share:                                                          |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|As reported                                                                            |  | $                               | 0.40  |   |                                | $ | 0.30  |      |  | $ | 0.95  |   |  | $ | 0.50  |  
|                                                                                       |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|Pro forma                                                                              |  | $                               | 0.39  |   |                                | $ | 0.29  |      |  | $ | 0.94  |   |  | $ | 0.49  |  
|                                                                                       |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|Diluted net earnings per share:                                                        |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|As reported                                                                            |  | $                               | 0.38  |   |                                | $ | 0.28  |      |  | $ | 0.91  |   |  | $ | 0.48  |  
|                                                                                       |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|Pro forma                                                                              |  | $                               | 0.38  |   |                                | $ | 0.28  |      |  | $ | 0.90  |   |  | $ | 0.46  |  
|                                                                                       |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   |       |  



8



---

NOTE 7  GUARANTEE ARRANGEMENT



Integrated Transportation Logistics, L.L.C. (ITLX), a company 45% owned by a
subsidiary of the Company, Total Logistic Control (TLC), entered into a promissory note (the Note) with a lender which allowed ITLX to borrow up to $500 at the lenders prime rate until the Note matured on June 30, 2004.
Upon maturity, at the same amount and borrowing terms, the Note was extended to mature on August 16, 2004. Upon the August 16, 2004 maturity, the Note was revised to allow ITLX to borrow up to $100 at the lenders prime rate plus one half of
one percent until its maturity on July 31, 2005 (the Revised Note). Under a Limited Guaranty arrangement between the lender and TLC, TLC has unconditionally guaranteed 45% of the indebtedness for outstanding amounts at maturity
(including extensions) under the Note and Revised Note. As of September 30, 2004, there were no outstanding borrowings under the Note or Revised Note.



NOTE 8  Condensed Consolidating Financial Information



Under the subsidiary debt arrangements, other than for tax liabilities and management fees, substantially all of the subsidiary assets are
restricted from transfer to the parent company, TLI. Below are the condensed balance sheets as of September 30, 2004 and December 31, 2003, the condensed income statements for the quarter and nine-month periods ended September 30, 2004 and 2003 and
condensed statements of cash flows for the nine months ended September 30, 2004 and 2003 of TLI and its subsidiaries.



Condensed Consolidating Balance Sheets:



|                                        |  |                          |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|--------------------------------------- |  | ------------------------ | ------ | - | ------------ | - | ------- | ------------ |  | - | ------------ | - |  | - | ------- | -
|                                        |  | As of September 30, 2004 |       
|                                        |  | TLI                      |        |   | Subsidiaries |   |         | Eliminations |  |   | Consolidated |  
|ASSETS:                                 |  |                          |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Current Assets:                         |  |                          |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Cash and cash equivalents               |  | $                        | 614    |   |              | $ | 1,288   |              |  | $ |             |   |  | $ | 1,902   |  
|Accounts receivable, net                |  |                          |       |   |              |   | 46,740  |              |  |   |             |   |  |   | 46,740  |  
|Unbilled receivables                    |  |                          |       |   |              |   | 5,871   |              |  |   |             |   |  |   | 5,871   |  
|Inventories                             |  |                          |       |   |              |   | 11,719  |              |  |   |             |   |  |   | 11,719  |  
|Prepaids and other                      |  |                          | 24     |   |              |   | 3,769   |              |  |   |             |   |  |   | 3,793   |  
|                                        |  |                          |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Total Current Assets                    |  |                          | 638    |   |              |   | 69,387  |              |  |   |             |   |  |   | 70,025  |  
|                                        |  |                          |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Long-Term Assets:                       |  |                          |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Fixed assets, net                       |  |                          | 20     |   |              |   | 62,014  |              |  |   |             |   |  |   | 62,034  |  
|Goodwill                                |  |                          |       |   |              |   | 16,202  |              |  |   |             |   |  |   | 16,202  |  
|Investment in subsidiaries              |  |                          | 19,386 |   |              |   |        |              |  |   | (19,386      | ) |  |   |        |  
|Other assets                            |  |                          |       |   |              |   | 3,688   |              |  |   |             |   |  |   | 3,688   |  
|                                        |  |                          |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Total Long-Term Assets                  |  |                          | 19,406 |   |              |   | 81,904  |              |  |   | (19,386      | ) |  |   | 81,924  |  
|                                        |  |                          |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Total Assets                            |  | $                        | 20,044 |   |              | $ | 151,291 |              |  | $ | (19,386      | ) |  | $ | 151,949 |  
|                                        |  |                          |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|LIABILITIES AND SHAREHOLDERS EQUITY:   |  |                          |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Current Liabilities:                    |  |                          |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Current maturities of long-term debt    |  | $                        |       |   |              | $ | 2,296   |              |  | $ |             |   |  | $ | 2,296   |  
|Line of credit                          |  |                          |       |   |              |   | 5,034   |              |  |   |             |   |  |   | 5,034   |  
|Accounts payable                        |  |                          |       |   |              |   | 19,513  |              |  |   |             |   |  |   | 19,513  |  
|Accrued liabilities                     |  |                          | (3,791 | ) |              |   | 31,830  |              |  |   |             |   |  |   | 28,039  |  
|                                        |  |                          |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Total Current Liabilities               |  |                          | (3,791 | ) |              |   | 58,673  |              |  |   |             |   |  |   | 54,882  |  
|                                        |  |                          |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Long-Term Liabilities:                  |  |                          |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Long-term debt, less current maturities |  |                          |       |   |              |   | 50,334  |              |  |   |             |   |  |   | 50,334  |  
|Other liabilities                       |  |                          |       |   |              |   | 3,441   |              |  |   |             |   |  |   | 3,441   |  
|                                        |  |                          |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Total Long-Term Liabilities             |  |                          |       |   |              |   | 53,775  |              |  |   |             |   |  |   | 53,775  |  
|                                        |  |                          |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Net inter-company payable/(receivable)  |  |                          | 623    |   |              |   | (623    | )            |  |   |             |   |  |   |        |  
|                                        |  |                          |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Total Liabilities                       |  |                          | (3,168 | ) |              |   | 111,825 |              |  |   |             |   |  |   | 108,657 |  
|                                        |  |                          |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Shareholders equity:                   |  |                          |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Preferred stock                         |  |                          |       |   |              |   |        |              |  |   |             |   |  |   |        |  
|Common stock                            |  |                          | 54     |   |              |   | 3,779   |              |  |   | (3,779       | ) |  |   | 54      |  
|Additional paid-in capital              |  |                          | 23,102 |   |              |   | 14,351  |              |  |   | (14,351      | ) |  |   | 23,102  |  
|Deferred compensation                   |  |                          | (223   | ) |              |   |        |              |  |   |             |   |  |   | (223    | )
|Accumulated other comprehensive loss    |  |                          |       |   |              |   | (407    | )            |  |   |             |   |  |   | (407    | )
|Retained earnings                       |  |                          | 279    |   |              |   | 21,743  |              |  |   | (1,256       | ) |  |   | 20,766  |  
|                                        |  |                          |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Total Shareholders Equity              |  |                          | 23,212 |   |              |   | 39,466  |              |  |   | (19,386      | ) |  |   | 43,292  |  
|                                        |  |                          |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|                                        |  | $                        | 20,044 |   |              | $ | 151,291 |              |  | $ | (19,386      | ) |  | $ | 151,949 |  
|                                        |  |                          |        |   |              |   |         |              |  |   |              |   |  |   |         |  



9



---

|                                        |  |                         |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|--------------------------------------- |  | ----------------------- | ------ | - | ------------ | - | ------- | ------------ |  | - | ------------ | - |  | - | ------- | -
|                                        |  | As of December 31, 2003 |       
|                                        |  | TLI                     |        |   | Subsidiaries |   |         | Eliminations |  |   | Consolidated |  
|ASSETS:                                 |  |                         |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Current Assets:                         |  |                         |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Cash and cash equivalents               |  | $                       | 845    |   |              | $ | 1,380   |              |  | $ |             |   |  | $ | 2,225   |  
|Accounts receivable, net                |  |                         | 8      |   |              |   | 28,651  |              |  |   |             |   |  |   | 28,659  |  
|Inventories                             |  |                         |       |   |              |   | 9,355   |              |  |   |             |   |  |   | 9,355   |  
|Prepaids and other                      |  |                         | 1,402  |   |              |   | 1,801   |              |  |   |             |   |  |   | 3,203   |  
|                                        |  |                         |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Total Current Assets                    |  |                         | 2,255  |   |              |   | 41,187  |              |  |   |             |   |  |   | 43,442  |  
|                                        |  |                         |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Long-Term Assets:                       |  |                         |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Fixed assets, net                       |  |                         | 27     |   |              |   | 62,031  |              |  |   |             |   |  |   | 62,058  |  
|Goodwill                                |  |                         |       |   |              |   | 16,202  |              |  |   |             |   |  |   | 16,202  |  
|Investment in subsidiaries              |  |                         | 21,130 |   |              |   |        |              |  |   | (21,130      | ) |  |   |        |  
|Other assets                            |  |                         |       |   |              |   | 2,631   |              |  |   |             |   |  |   | 2,631   |  
|                                        |  |                         |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Total Long-Term assets                  |  |                         | 21,157 |   |              |   | 80,864  |              |  |   | (21,130      | ) |  |   | 80,891  |  
|                                        |  |                         |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|                                        |  | $                       | 23,412 |   |              | $ | 122,051 |              |  | $ | (21,130      | ) |  | $ | 124,333 |  
|                                        |  |                         |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|LIABILITIES AND SHAREHOLDERS EQUITY:   |  |                         |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Current Liabilities:                    |  |                         |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Current maturities of long-term debt    |  | $                       |       |   |              | $ | 2,792   |              |  | $ |             |   |  | $ | 2,792   |  
|Line of credit                          |  |                         |       |   |              |   | 2,661   |              |  |   |             |   |  |   | 2,661   |  
|Accounts payable                        |  |                         | 6      |   |              |   | 15,430  |              |  |   |             |   |  |   | 15,436  |  
|Accrued liabilities                     |  |                         | (1,111 | ) |              |   | 20,769  |              |  |   |             |   |  |   | 19,658  |  
|                                        |  |                         |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Total Current Liabilities               |  |                         | (1,105 | ) |              |   | 41,652  |              |  |   |             |   |  |   | 40,547  |  
|                                        |  |                         |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Long-Term Liabilities:                  |  |                         |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Long-term debt, less current maturities |  |                         |       |   |              |   | 42,932  |              |  |   |             |   |  |   | 42,932  |  
|Other liabilities                       |  |                         |       |   |              |   | 3,376   |              |  |   |             |   |  |   | 3,376   |  
|                                        |  |                         |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Total Long-Term liabilities             |  |                         |       |   |              |   | 46,308  |              |  |   |             |   |  |   | 46,308  |  
|                                        |  |                         |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Net inter-company payable/(receivable)  |  |                         | 3,419  |   |              |   | (3,419  | )            |  |   |             |   |  |   |        |  
|                                        |  |                         |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Total Liabilities                       |  |                         | 2,314  |   |              |   | 84,541  |              |  |   |             |   |  |   | 86,855  |  
|                                        |  |                         |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Shareholders equity:                   |  |                         |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Preferred stock                         |  |                         |       |   |              |   |        |              |  |   |             |   |  |   |        |  
|Common stock                            |  |                         | 53     |   |              |   | 3,779   |              |  |   | (3,779       | ) |  |   | 53      |  
|Additional paid-in capital              |  |                         | 22,484 |   |              |   | 14,351  |              |  |   | (14,352      | ) |  |   | 22,483  |  
|Deferred compensation                   |  |                         | (98    | ) |              |   |        |              |  |   |             |   |  |   | (98     | )
|Accumulated other comprehensive loss    |  |                         |       |   |              |   | (640    | )            |  |   |             |   |  |   | (640    | )
|Retained earnings                       |  |                         | (1,341 | ) |              |   | 20,020  |              |  |   | (2,999       | ) |  |   | 15,680  |  
|                                        |  |                         |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|Total Shareholders Equity              |  |                         | 21,098 |   |              |   | 37,510  |              |  |   | (21,130      | ) |  |   | 37,478  |  
|                                        |  |                         |        |   |              |   |         |              |  |   |              |   |  |   |         |  
|                                        |  | $                       | 23,412 |   |              | $ | 122,051 |              |  | $ | (21,130      | ) |  | $ | 124,333 |  
|                                        |  |                         |        |   |              |   |         |              |  |   |              |   |  |   |         |  



10



---

Condensed Consolidating Income Statements:



|                                             |  |                                       |      |   |              |   |        |              |  |   |              |   |  |   |        |  
|-------------------------------------------- |  | ------------------------------------- | ---- | - | ------------ | - | ------ | ------------ |  | - | ------------ | - |  | - | ------ | -
|                                             |  | Three Months Ended September 30, 2004 |     
|                                             |  | TLI                                   |      |   | Subsidiaries |   |        | Eliminations |  |   | Consolidated |  
|Revenues:                                    |  |                                       |      |   |              |   |        |              |  |   |              |   |  |   |        |  
|Logistic services                            |  | $                                     |     |   |              | $ | 71,256 |              |  | $ |             |   |  | $ | 71,256 |  
|Product sales                                |  |                                       |     |   |              |   | 21,471 |              |  |   |             |   |  |   | 21,471 |  
|Management fees                              |  |                                       | 105  |   |              |   |       |              |  |   | (105         | ) |  |   |       |  
|                                             |  |                                       |      |   |              |   |        |              |  |   |              |   |  |   |        |  
|                                             |  |                                       | 105  |   |              |   | 92,727 |              |  |   | (105         | ) |  |   | 92,727 |  
|                                             |  |                                       |      |   |              |   |        |              |  |   |              |   |  |   |        |  
|Costs and Expenses:                          |  |                                       |      |   |              |   |        |              |  |   |              |   |  |   |        |  
|Logistic expenses                            |  |                                       |     |   |              |   | 64,555 |              |  |   |             |   |  |   | 64,555 |  
|Cost of product sales                        |  |                                       |     |   |              |   | 16,915 |              |  |   |             |   |  |   | 16,915 |  
|Depreciation and amortization                |  |                                       | 3    |   |              |   | 1,788  |              |  |   |             |   |  |   | 1,791  |  
|Selling, general and administrative expenses |  |                                       | 246  |   |              |   | 4,989  |              |  |   |             |   |  |   | 5,235  |  
|                                             |  |                                       |      |   |              |   |        |              |  |   |              |   |  |   |        |  
|                                             |  |                                       | 249  |   |              |   | 88,249 |              |  |   |             |   |  |   | 88,496 |  
|                                             |  |                                       |      |   |              |   |        |              |  |   |              |   |  |   |        |  
|Earnings from Operations                     |  |                                       | (144 | ) |              |   | 4,480  |              |  |   | (105         | ) |  |   | 4,231  |  
|                                             |  |                                       |      |  
|Other Income (Expense):                      |  |                                       |      |   |              |   |        |              |  |   |              |   |  |   |        |  
|Interest income (expense)                    |  |                                       | 85   |   |              |   | (756   | )            |  |   |             |   |  |   | (671   | )
|Other income (expense), net                  |  |                                       |     |   |              |   | (105   | )            |  |   | 105          |   |  |   |       |  
|                                             |  |                                       |      |   |              |   |        |              |  |   |              |   |  |   |        |  
|Earnings before income taxes                 |  |                                       | (59  | ) |              |   | 3,619  |              |  |   |             |   |  |   | 3,560  |  
|Income tax provision                         |  |                                       | (23  | ) |              |   | 1,447  |              |  |   |             |   |  |   | 1,424  |  
|                                             |  |                                       |      |   |              |   |        |              |  |   |              |   |  |   |        |  
|Net earnings                                 |  | $                                     | (36  | ) |              | $ | 2,172  |              |  | $ |             |   |  | $ | 2,136  |  
|                                             |  |                                       |      |   |              |   |        |              |  |   |              |   |  |   |        |  
|                                             | 
|                                             |  | Three Months Ended September 30, 2003 |     
|                                             |  | TLI                                   |      |   | Subsidiaries |   |        | Eliminations |  |   | Consolidated |  
|Revenues:                                    |  |                                       |      |   |              |   |        |              |  |   |              |   |  |   |        |  
|Logistic services                            |  | $                                     |     |   |              | $ | 53,394 |              |  | $ |             |   |  | $ | 53,394 |  
|Product sales                                |  |                                       |     |   |              |   | 17,701 |              |  |   |             |   |  |   | 17,701 |  
|Management fees                              |  |                                       | 105  |   |              |   |       |              |  |   | (105         | ) |  |   |       |  
|                                             |  |                                       |      |   |              |   |        |              |  |   |              |   |  |   |        |  
|                                             |  |                                       | 105  |   |              |   | 71,095 |              |  |   | (105         | ) |  |   | 71,095 |  
|                                             |  |                                       |      |   |              |   |        |              |  |   |              |   |  |   |        |  
|Costs and Expenses:                          |  |                                       |      |   |              |   |        |              |  |   |              |   |  |   |        |  
|Logistic expenses                            |  |                                       |     |   |              |   | 46,649 |              |  |   |             |   |  |   | 46,649 |  
|Cost of product sales                        |  |                                       |     |   |              |   | 14,120 |              |  |   |             |   |  |   | 14,120 |  
|Depreciation and amortization                |  |                                       | 5    |   |              |   | 1,947  |              |  |   |             |   |  |   | 1,952  |  
|Selling, general and administrative expenses |  |                                       | 271  |   |              |   | 4,660  |              |  |   |             |   |  |   | 4,931  |  
|                                             |  |                                       |      |   |              |   |        |              |  |   |              |   |  |   |        |  
|                                             |  |                                       | 276  |   |              |   | 67,376 |              |  |   |             |   |  |   | 67,652 |  
|                                             |  |                                       |      |   |              |   |        |              |  |   |              |   |  |   |        |  
|Earnings from Operations                     |  |                                       | (171 | ) |              |   | 3,719  |              |  |   | (105         | ) |  |   | 3,443  |  
|                                             |  |                                       |      |  
|Other Income (Expense):                      |  |                                       |      |   |              |   |        |              |  |   |              |   |  |   |        |  
|Interest income (expense)                    |  |                                       | 62   |   |              |   | (769   | )            |  |   |             |   |  |   | (707   | )
|Other income (expense), net                  |  |                                       |     |   |              |   | (105   | )            |  |   | 105          |   |  |   |       |  
|                                             |  |                                       |      |   |              |   |        |              |  |   |              |   |  |   |        |  
|Earnings before income taxes                 |  |                                       | (109 | ) |              |   | 2,845  |              |  |   |             |   |  |   | 2,736  |  
|Income tax provision                         |  |                                       | (47  | ) |              |   | 1,215  |              |  |   |             |   |  |   | 1,168  |  
|                                             |  |                                       |      |   |              |   |        |              |  |   |              |   |  |   |        |  
|Net earnings                                 |  | $                                     | (62  | ) |              | $ | 1,630  |              |  | $ |             |   |  | $ | 1,568  |  
|                                             |  |                                       |      |   |              |   |        |              |  |   |              |   |  |   |        |  



11



---

Condensed Consolidating Income Statements:



|                                             |  |                                      |      |   |              |   |         |              |  |   |              |   |  |   |         |  
|-------------------------------------------- |  | ------------------------------------ | ---- | - | ------------ | - | ------- | ------------ |  | - | ------------ | - |  | - | ------- | -
|                                             |  | Nine Months Ended September 30, 2004 |     
|                                             |  | TLI                                  |      |   | Subsidiaries |   |         | Eliminations |  |   | Consolidated |  
|Revenues:                                    |  |                                      |      |   |              |   |         |              |  |   |              |   |  |   |         |  
|Logistic services                            |  | $                                    |     |   |              | $ | 192,876 |              |  | $ |             |   |  | $ | 192,876 |  
|Product sales                                |  |                                      |     |   |              |   | 60,456  |              |  |   |             |   |  |   | 60,456  |  
|Management fees                              |  |                                      | 315  |   |              |   |        |              |  |   | (315         | ) |  |   |        |  
|                                             |  |                                      |      |   |              |   |         |              |  |   |              |   |  |   |         |  
|                                             |  |                                      | 315  |   |              |   | 253,332 |              |  |   | (315         | ) |  |   | 253,332 |  
|                                             |  |                                      |      |   |              |   |         |              |  |   |              |   |  |   |         |  
|Costs and Expenses:                          |  |                                      |      |   |              |   |         |              |  |   |              |   |  |   |         |  
|Logistic expenses                            |  |                                      |     |   |              |   | 174,595 |              |  |   |             |   |  |   | 174,595 |  
|Cost of product sales                        |  |                                      |     |   |              |   | 47,884  |              |  |   |             |   |  |   | 47,884  |  
|Depreciation and amortization                |  |                                      | 9    |   |              |   | 5,107   |              |  |   |             |   |  |   | 5,116   |  
|Selling, general and administrative expenses |  |                                      | 749  |   |              |   | 14,467  |              |  |   |             |   |  |   | 15,216  |  
|                                             |  |                                      |      |   |              |   |         |              |  |   |              |   |  |   |         |  
|                                             |  |                                      | 758  |   |              |   | 242,053 |              |  |   |             |   |  |   | 242,811 |  
|                                             |  |                                      |      |   |              |   |         |              |  |   |              |   |  |   |         |  
|Earnings from Operations                     |  |                                      | (443 | ) |              |   | 11,279  |              |  |   | (315         | ) |  |   | 10,521  |  
|                                             |  |                                      |      |  
|Other Income (Expense):                      |  |                                      |      |   |              |   |         |              |  |   |              |   |  |   |         |  
|Interest income (expense)                    |  |                                      | 237  |   |              |   | (2,226  | )            |  |   |             |   |  |   | (1,989  | )
|Other income (expense), net                  |  |                                      |     |   |              |   | (370    | )            |  |   | 315          |   |  |   | (55     | )
|                                             |  |                                      |      |   |              |   |         |              |  |   |              |   |  |   |         |  
|Earnings before income taxes                 |  |                                      | (206 | ) |              |   | 8,683   |              |  |   |             |   |  |   | 8,477   |  
|Income tax provision                         |  |                                      | (82  | ) |              |   | 3,473   |              |  |   |             |   |  |   | 3,391   |  
|                                             |  |                                      |      |   |              |   |         |              |  |   |              |   |  |   |         |  
|Net earnings                                 |  | $                                    | (124 | ) |              | $ | 5,210   |              |  | $ |             |   |  | $ | 5,086   |  
|                                             |  |                                      |      |   |              |   |         |              |  |   |              |   |  |   |         |  
|                                             | 
|                                             |  | Nine Months Ended September 30, 2003 |     
|                                             |  | TLI                                  |      |   | Subsidiaries |   |         | Eliminations |  |   | Consolidated |  
|Revenues:                                    |  |                                      |      |   |              |   |         |              |  |   |              |   |  |   |         |  
|Logistic services                            |  | $                                    |     |   |              | $ | 152,226 |              |  | $ |             |   |  | $ | 152,226 |  
|Product sales                                |  |                                      |     |   |              |   | 50,354  |              |  |   |             |   |  |   | 50,354  |  
|Management fees                              |  |                                      | 315  |   |              |   |        |              |  |   | (315         | ) |  |   |        |  
|                                             |  |                                      |      |   |              |   |         |              |  |   |              |   |  |   |         |  
|                                             |  |                                      | 315  |   |              |   | 202,580 |              |  |   | (315         | ) |  |   | 202,580 |  
|                                             |  |                                      |      |   |              |   |         |              |  |   |              |   |  |   |         |  
|Costs and Expenses:                          |  |                                      |      |   |              |   |         |              |  |   |              |   |  |   |         |  
|Logistic expenses                            |  |                                      |     |   |              |   | 134,868 |              |  |   |             |   |  |   | 134,868 |  
|Cost of product sales                        |  |                                      |     |   |              |   | 41,307  |              |  |   |             |   |  |   | 41,307  |  
|Depreciation and amortization                |  |                                      | 15   |   |              |   | 5,765   |              |  |   |             |   |  |   | 5,780   |  
|Selling, general and administrative expenses |  |                                      | 884  |   |              |   | 12,862  |              |  |   |             |   |  |   | 13,746  |  
|                                             |  |                                      |      |   |              |   |         |              |  |   |              |   |  |   |         |  
|                                             |  |                                      | 899  |   |              |   | 194,802 |              |  |   |             |   |  |   | 195,701 |  
|                                             |  |                                      |      |   |              |   |         |              |  |   |              |   |  |   |         |  
|Earnings from Operations                     |  |                                      | (584 | ) |              |   | 7,778   |              |  |   | (315         | ) |  |   | 6,879   |  
|                                             |  |                                      |      |  
|Other Income (Expense):                      |  |                                      |      |   |              |   |         |              |  |   |              |   |  |   |         |  
|Interest income (expense)                    |  |                                      | 156  |   |              |   | (2,378  | )            |  |   |             |   |  |   | (2,222  | )
|Other income (expense), net                  |  |                                      |     |   |              |   | (315    | )            |  |   | 315          |   |  |   |        |  
|                                             |  |                                      |      |   |              |   |         |              |  |   |              |   |  |   |         |  
|Earnings before income taxes                 |  |                                      | (428 | ) |              |   | 5,085   |              |  |   |             |   |  |   | 4,657   |  
|Income tax provision                         |  |                                      | (185 | ) |              |   | 2,194   |              |  |   |             |   |  |   | 2,009   |  
|                                             |  |                                      |      |   |              |   |         |              |  |   |              |   |  |   |         |  
|Net earnings                                 |  | $                                    | (243 | ) |              | $ | 2,891   |              |  | $ |             |   |  | $ | 2,648   |  
|                                             |  |                                      |      |   |              |   |         |              |  |   |              |   |  |   |         |  



12



---

Condensed Consolidating Statements Of Cash Flows:



|                                                     |  |                                      |        |   |              |   |        |              |  |              |   |  |   |        |  
|---------------------------------------------------- |  | ------------------------------------ | ------ | - | ------------ | - | ------ | ------------ |  | ------------ | - |  | - | ------ | -
|                                                     |  | Nine Months Ended September 30, 2004 |       
|                                                     |  | TLI                                  |        |   | Subsidiaries |   |        | Eliminations |  | Consolidated |  
|NET CASH USED IN OPERATING ACTIVITIES:               |  | $                                    | (2,440 | ) |              | $ | (2,568 | )            |  | $            |  |  | $ | (5,008 | )
|                                                     |  |                                      |        |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                |  |                                      |        |   |              |   |        |              |  |              |   |  |   |        |  
|Purchase of fixed assets                             |  |                                      |       |   |              |   | (5,088 | )            |  |              |  |  |   | (5,088 | )
|Proceeds from sale of fixed assets                   |  |                                      |       |   |              |   | 29     |              |  |              |  |  |   | 29     |  
|                                                     |  |                                      |        |   |              |   |        |              |  |              |   |  |   |        |  
|Net cash used in investing activities                |  |                                      |       |   |              |   | (5,059 | )            |  |              |  |  |   | (5,059 | )
|                                                     |  |                                      |        |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                |  |                                      |        |   |              |   |        |              |  |              |   |  |   |        |  
|Borrowings on credit lines, net                      |  |                                      |       |   |              |   | 2,373  |              |  |              |  |  |   | 2,373  |  
|Net proceeds from long-term debt                     |  |                                      |       |   |              |   | 6,906  |              |  |              |  |  |   | 6,906  |  
|Proceeds from the exercise of stock options          |  |                                      | 465    |   |              |   |       |              |  |              |  |  |   | 465    |  
|Inter-company dividends                              |  |                                      | 1,744  |   |              |   | (1,744 | )            |  |              |  |  |   |       |  
|                                                     |  |                                      |        |   |              |   |        |              |  |              |   |  |   |        |  
|Net cash provided by financing activities            |  |                                      | 2,209  |   |              |   | 7,535  |              |  |              |  |  |   | 9,744  |  
|                                                     |  |                                      |        |   |              |   |        |              |  |              |   |  |   |        |  
|NET DECREASE INCREASE IN CASH AND CASH EQUIVILENTS   |  |                                      | (231   | ) |              |   | (92    | )            |  |              |  |  |   | (323   | )
|                                                     |  |                                      |        |   |              |   |        |              |  |              |   |  |   |        |  
|BEGINNING CASH AND CASH EQUIVALENTS                  |  |                                      | 845    |   |              |   | 1,380  |              |  |              |  |  |   | 2,225  |  
|                                                     |  |                                      |        |   |              |   |        |              |  |              |   |  |   |        |  
|ENDING CASH AND CASH EQUIVALENTS                     |  | $                                    | 614    |   |              | $ | 1,288  |              |  | $            |  |  | $ | 1,902  |  
|                                                     |  |                                      |        |   |              |   |        |              |  |              |   |  |   |        |  
|Supplemental Disclosures of cash flow information    |  |                                      |        |   |              |   |        |              |  |              |   |  |   |        |  
|Interest paid                                        |  | $                                    |       |   |              | $ | 2,043  |              |  | $            |  |  | $ | 2,043  |  
|                                                     |  |                                      |        |   |              |   |        |              |  |              |   |  |   |        |  
|Income taxes paid                                    |  | $                                    | 2,312  |   |              | $ | 304    |              |  | $            |  |  | $ | 2,616  |  
|                                                     |  |                                      |        |   |              |   |        |              |  |              |   |  |   |        |  
|Non-Cash transactions: payment-in-kind interest      |  | $                                    | (74    | ) |              | $ | 148    |              |  | $            |  |  | $ | 74     |  
|                                                     |  |                                      |        |   |              |   |        |              |  |              |   |  |   |        |  
|                                                     | 
|                                                     |  | Nine Months Ended September 30, 2003 |       
|                                                     |  | TLI                                  |        |   | Subsidiaries |   |        | Eliminations |  | Consolidated |  
|NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES: |  | $                                    | (794   | ) |              | $ | 7,746  |              |  | $            |  |  | $ | 6,952  |  
|                                                     |  |                                      |        |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                |  |                                      |        |   |              |   |        |              |  |              |   |  |   |        |  
|Purchase of fixed assets                             |  |                                      |       |   |              |   | (2,853 | )            |  |              |  |  |   | (2,853 | )
|Proceeds from sale of fixed assets                   |  |                                      |       |   |              |   | 510    |              |  |              |  |  |   | 510    |  
|Other investments                                    |  |                                      |        |   |              |   | (145   | )            |  |              |   |  |   | (145   | )
|                                                     |  |                                      |        |   |              |   |        |              |  |              |   |  |   |        |  
|Net cash used in investing activities                |  |                                      |       |   |              |   | (2,488 | )            |  |              |  |  |   | (2,488 | )
|                                                     |  |                                      |        |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                |  |                                      |        |   |              |   |        |              |  |              |   |  |   |        |  
|Borrowings on credit lines, net                      |  |                                      |       |   |              |   | 1,479  |              |  |              |  |  |   | 1,479  |  
|Net repayments of long-term debt                     |  |                                      |       |   |              |   | (6,766 | )            |  |              |  |  |   | (6,766 | )
|Proceeds from the exercise of stock options          |  |                                      | 16     |   |              |   |       |              |  |              |  |  |   | 16     |  
|Inter-company dividends                              |  |                                      | 397    |   |              |   | (397   | )            |  |              |  |  |   |       |  
|Inter-company loans                                  |  |                                      | (1,500 | ) |              |   | 1,500  |              |  |              |   |  |   |       |  
|                                                     |  |                                      |        |   |              |   |        |              |  |              |   |  |   |        |  
|Net cash used in financing activities                |  |                                      | (1,087 | ) |              |   | (4,184 | )            |  |              |  |  |   | (5,271 | )
|                                                     |  |                                      |        |   |              |   |        |              |  |              |   |  |   |        |  
|NET (DECREASE) INCREASE IN CASH AND                  |  |                                      |        |   |              |   |        |              |  |              |   |  |   |        |  
|CASH EQUIVALENTS                                     |  |                                      | (1,881 | ) |              |   | 1,074  |              |  |              |  |  |   | (807   | )
|                                                     |  |                                      |        |   |              |   |        |              |  |              |   |  |   |        |  
|BEGINNING CASH AND CASH EQUIVALENTS                  |  |                                      | 2,995  |   |              |   | 1,488  |              |  |              |  |  |   | 4,483  |  
|                                                     |  |                                      |        |   |              |   |        |              |  |              |   |  |   |        |  
|ENDING CASH AND CASH EQUIVALENTS                     |  | $                                    | 1,114  |   |              | $ | 2,562  |              |  | $            |  |  | $ | 3,676  |  
|                                                     |  |                                      |        |   |              |   |        |              |  |              |   |  |   |        |  
|Supplemental Disclosures of cash flow information    |  |                                      |        |   |              |   |        |              |  |              |  |  |   |        |  
|Interest paid                                        |  | $                                    |       |   |              | $ | 2,344  |              |  | $            |  |  | $ | 2,344  |  
|                                                     |  |                                      |        |   |              |   |        |              |  |              |   |  |   |        |  
|Income taxes paid                                    |  | $                                    | 364    |   |              | $ | 685    |              |  | $            |  |  | $ | 1,049  |  
|                                                     |  |                                      |        |   |              |   |        |              |  |              |   |  |   |        |  
|Non-Cash transactions: payment-in-kind interest      |  | $                                    | (70    | ) |              | $ | 140    |              |  | $            |  |  | $ | 70     |  
|                                                     |  |                                      |        |   |              |   |        |              |  |              |   |  |   |        |  



13



---

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS



General



Our strategy to build equity value is primarily focused on the development of two business
segments, Logistic Services and Product Sales. Our objective is to build long-term sustainable business value by expanding our businesses, growing earnings and strengthening our capital structure.



Growth from the second quarter of 2004 and comparable prior year quarterly and year to date
periods in revenues and earnings from operations remained strong. The following table outlines growth from the prior year comparable quarter, sequential growth from the second quarter of 2004 and the prior year to date periods:



|                          |  |                  |   |  |                   |   |  |                    |  
|------------------------- |  | ---------------- | - |  | ----------------- | - |  | ------------------ | -
|                          |  | Quarterly Growth |   |  | Sequential Growth |   |  | Year to DateGrowth |  
|Revenues:                 |  |                  |   |  |                   |   |  |                    |  
|Logistic Services         |  | 33.5             | % |  | 5.7               | % |  | 26.7               | %
|Product Sales             |  | 21.3             | % |  | 10.1              | % |  | 20.1               | %
|Total                     |  | 30.4             | % |  | 6.7               | % |  | 25.1               | %
|Earnings from Operations: |  |                  |   |  |                   |   |  |                    |  
|Logistic Services         |  | 6.3              | % |  | 7.9               | % |  | 12.6               | %
|Product Sales             |  | 61.9             | % |  | 18.2              | % |  | 210.1              | %
|Total                     |  | 22.9             | % |  | 11.6              | % |  | 52.9               | %



In the Logistic Services segment, we
continued to execute our business plan of operating at high levels of asset utilization and adding new long-term logistic service contracts. A number of factors contribute to our ability to perform successfully. Success in Logistic Services depends
largely on our ability to design and execute complex logistics solutions, the number of facilities in which we operate, our level of capacity utilization, the number of projects we add, the efficiency of our transportation operations and our ability
to leverage our existing knowledge of the logistics business. Dedicated facility projects have become our biggest growth driver from both a revenue and an earnings standpoint. Dedicated facility projects are generally based upon cost plus management
fee arrangements. Our success in these activities has significantly increased our profile in the industry and today we are considered to be a leading provider of integrated logistic services across the supply chain. In the third quarter of 2004, we
entered into several new projects. In July, 2004 we commenced operations of a dedicated dry distribution center with Campbells Soup Company and dedicated dry and refrigerated distribution centers with Kraft Foods. In August, 2004 we began a
dedicated deli and bakery procurement and distribution business with a major Midwest retailer (the Deli Distribution Business) and in September we started up a new refrigerated distribution center with a Fortune 100 food company and
entered into a new ten year rail service agreement to provide railcar switching and placement services with the City of Rochelle, Illinois. In addition, we will start up a new refrigerated distribution center in November with Simmons Foods.



In Product Sales, our improved performance is being driven by improved orders
based on past and new customer relationships, new product introductions, timely deliveries and our ability to control costs while providing quality products and a high level of service at a competitive price. Over the past quarter, we continued to
experience stronger ordering patterns and an increase in our backlog, however, the product sales market remains highly competitive due to consolidation in the grocery and drug store businesses and excess capacity in product manufacturing continues
to be a significant factor in our industry. In addition, we are experiencing rising commodity prices in metals and plastics used in our manufacturing process of refrigeration casements and systems which, to the extent such costs are not passed on to
our customers, could negatively impact our margins.



Since 1999, our year over
year financial condition has strengthened each year, driven by the long-term strong cash generating capability of our operating segments. In August, we began the Deli Distribution Business



14



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which differed from other dedicated projects in that it requires us to provide additional working capital for which we
are compensated. Under this contract we began procuring frozen, refrigerated and dry deli and bakery products based upon daily orders directly from retailer store locations. We now warehouse these products and build store ready custom pallets for
delivery to the stores. Due to the high volume of product, the timing of payments due from us to suppliers and our ultimate receipt of amounts due to us from our customer, we have, as expected, experienced in the current quarter an increase of
approximately $8.7 million in our working capital. The increase in working capital has not and is not expected to have an impact on TLCs borrowing rates.



Despite the working capital impact of the Deli Distribution Business, at September 30, 2004, our ratio of debt to equity was 1.3x, an improvement over September 30,
2003s ratio of 1.6x and considerably less than our high of 2.9x at March 31, 1999. In addition, our debt to total capitalization (defined as total debt divided by total debt plus shareholders equity) at September 30, 2004 was 57.1
percent, improved from 60.7 percent at September 30, 2003 and the high point of 74.5 percent at the end of March 1999. In the first three quarters of 2004, we used $5.0 million in operating cash flow, decreased cash by $0.3 million, increased our
debt by $9.3 million, and made $5.1 million of capital expenditures to support business growth initiatives as compared with the comparable prior year period when we generated $7.0 million in operating cash flow, decreased our debt by $5.3 million
and made $2.9 million of capital expenditures. See Liquidity and Capital Resources



Quarter ended September 30, 2004 compared to the quarter ended September 30, 2003



|                  |  |      |        |      |   |               |  |             |        |  |      |  
|----------------- |  | ---- | ------ | ---- | - | ------------- |  | ----------- | ------ |  | ---- | -
|Revenues ($000)   |  | 2004 |        | 2003 |   | Dollar Change |  | Pct. Change |       
|Logistic Services |  | $    | 71,256 |      | $ | 53,394        |  | $           | 17,862 |  | 33.5 | %
|Product Sales     |  |      | 21,471 |      |   | 17,701        |  |             | 3,770  |  | 21.3 | %
|                  |  |      |        |      |   |               |  |             |        |  |      |  
|Total Revenue     |  | $    | 92,727 |      | $ | 71,095        |  | $           | 21,632 |  | 30.4 | %
|                  |  |      |        |      |   |               |  |             |        |  |      |  



Consolidated revenues increased 30.4
percent to $92.7 million in the third quarter of 2004 compared with the third quarter of 2003. Consolidated revenue in the third quarter of 2004 included Logistic Services revenues of $71.3 million, reflecting year-to-year growth of 33.5 percent,
and Product Sales revenues of $21.5 million, which increased 21.3 percent from the prior year.



The increase in revenues from Logistic Services of approximately $17.9 million in the third quarter of 2004 was attributable to new and full year effects of dedicated facility projects (approximately $13.7 million)
and volume growth in transportation operations (approximately $3.9 million) and logistic management services (approximately $0.4 million).



Increased Product Sales revenues in the third quarter of 2004 of approximately $3.8 million were primarily attributable to increased sales of refrigerated casements and
refrigeration control systems (approximately $3.2 million) and increased sales and management fees associated with the distribution of food products (approximately $0.6 million).



|                                |  |      |       |   |      |   |       |              |  |             |     |  |                      |   |  |                      |   |  |     |  
|------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ------------ |  | ----------- | --- |  | -------------------- | - |  | -------------------- | - |  | --- | -
|Earnings From Operations
($000) |  | 2004 |       |   | 2003 |   |       | DollarChange |  | Pct. Change |     |  | Pct. ofRevenues 2004 |   |  | Pct. ofRevenues 2003 |  
|Logistic Services               |  | $    | 2,947 |   |      | $ | 2,772 |              |  | $           | 175 |  | 6.3                  | % |  | 4.1                  | % |  | 5.2 | %
|Product Sales                   |  |      | 1,533 |   |      |   | 947   |              |  |             | 586 |  | 61.9                 | % |  | 7.1                  | % |  | 5.3 | %
|Corporate                       |  |      | (249  | ) |      |   | (276  | )            |  |             | 27  |  | 9.8                  | % |  |                     |   |  |    |  
|                                |  |      |       |   |      |   |       |              |  |             |     |  |                      |   |  |                      |   |  |     |  
|Total Earnings From Operations  |  | $    | 4,231 |   |      | $ | 3,443 |              |  | $           | 788 |  | 22.9                 | % |  | 4.6                  | % |  | 4.8 | %
|                                |  |      |       |   |      |   |       |              |  |             |     |  |                      |   |  |                      |   |  |     |  



Earnings from operations attributable
to Logistic Services in the third quarter of 2004 were $3.0 million or 4.1 percent of revenues, an increase of $0.2 million from $2.8 million and 5.2 percent of revenues in the corresponding 2003 period. Increased earnings from operations
attributable to Logistic Services were primarily from increased gross profit in dedicated facility projects (approximately $0.5 million) and a



15



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reduction in overhead (approximately $0.1 million), partially offset by decreased gross profit in refrigerated and dry
warehousing (approximately $0.2 million) and transportation (approximately $0.2 million). Gross profit increases in dedicated facility projects resulted from four new projects commenced in the third quarter of 2004 (a dedicated dry distribution
center with Campbells Soup Company, dedicated dry and refrigerated distribution centers with Kraft Foods and a new refrigerated distribution center with a Fortune 100 food company), dedicated facility projects from two new projects commenced
in February and April, 2004, respectively (a refrigerated distribution project with a Fortune 100 food company in York, Pennsylvania and the contract packaging business with Kellogg Company in Athens, Georgia) and the reduction in overhead expenses
primarily due to improved health care experience. Gross profit decreased in warehousing primarily due to start up costs associated with the Deli Distribution Business and lower than average crop yields in locations which we operate and in
transportation due to negative impacts from the underutilization of equipment and driver and fuel cost increases.



Earnings from operations attributable to Product Sales in the third quarter of 2004 were $1.5 million and 7.1 percent of revenues, an increase of approximately $0.6
million from last years corresponding quarter of $0.9 million and 5.3 percent of revenues. Increased earnings from operations in the Product Sales segment were primarily from increased gross profit in refrigerated casement and refrigerated
control system sales (approximately $1.0 million) partially offset by increased selling, general and administrative expenses (approximately $0.4 million). Increased earnings from operations from casement and refrigeration systems were primarily due
to improved margins from manufacturing efficiencies. Selling, general and administrative expenses increased as a result of increased volume in the Product Sales segment.



Interest Expense



Consolidated net interest expense in the third quarter of 2004 and 2003 were both approximately $0.7 million. Average debt levels and interest rates charged on
outstanding loans during the two periods were essentially unchanged.



Income Taxes



The effective tax rate was 40 percent and
42.7 percent in third quarters of 2004 and 2003, respectively. We anticipate a 40 percent tax rate for the remainder of 2004.



Net Earnings



For the reasons discussed above, in the third quarter of 2004 consolidated net earnings totaled approximately $2.1 million or $0.38 per diluted share, representing an increase of 36.2 percent compared to net earnings
in the corresponding 2003 period of $1.6 million or $.28 per diluted share.



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Nine months ended September 30, 2004 compared to the nine months ended September 30, 2003



|                  |  |      |         |      |   |               |  |             |        |  |      |  
|----------------- |  | ---- | ------- | ---- | - | ------------- |  | ----------- | ------ |  | ---- | -
|Revenues ($000)   |  | 2004 |         | 2003 |   | Dollar Change |  | Pct. Change |       
|Logistic Services |  | $    | 192,876 |      | $ | 152,226       |  | $           | 40,650 |  | 26.7 | %
|Product Sales     |  |      | 60,456  |      |   | 50,354        |  |             | 10,102 |  | 20.1 | %
|                  |  |      |         |      |   |               |  |             |        |  |      |  
|Total Revenue     |  | $    | 253,332 |      | $ | 202,580       |  | $           | 50,752 |  | 25.1 | %
|                  |  |      |         |      |   |               |  |             |        |  |      |  



Consolidated revenues increased 25.1
percent to $253.3 million in the first three quarters of 2004 compared with the first three quarters of 2003. Consolidated revenue in the first three quarters of 2004 included Logistic Services revenues of $192.9 million, reflecting year-to-year
growth of 26.7 percent and Product Sales revenue of $60.5 million, which increased 20.1 percent from the prior year.



The increase in revenues from Logistic Services of approximately $40.7 million in the first three quarters of 2004 was attributable to new and full year effects of
dedicated facility projects (approximately $31.3 million), volume growth in transportation operations (approximately $8.2 million), refrigerated and dry warehousing (approximately $0.6 million) and logistic management services (approximately $0.6
million).



Increased Product Sales revenues in the first three quarters of 2004
of approximately $10.1 million were primarily attributable to increased sales of refrigerated casements and refrigeration system sales (approximately $10.2 million), partially offset by decreased sales and management fees associated with the
distribution of food products (approximately $0.1 million).



|                                |  |      |        |   |      |   |       |               |  |             |       |  |                      |   |  |                      |   |  |     |  
|------------------------------- |  | ---- | ------ | - | ---- | - | ----- | ------------- |  | ----------- | ----- |  | -------------------- | - |  | -------------------- | - |  | --- | -
|Earnings From Operations
($000) |  | 2004 |        |   | 2003 |   |       | Dollar Change |  | Pct. Change |       |  | Pct. ofRevenues 2004 |   |  | Pct. ofRevenues 2003 |  
|Logistic Services               |  | $    | 7,319  |   |      | $ | 6,499 |               |  | $           | 820   |  | 12.6                 | % |  | 3.8                  | % |  | 4.3 | %
|Product Sales                   |  |      | 3,960  |   |      |   | 1,277 |               |  |             | 2,683 |  | 210.1                | % |  | 6.6                  | % |  | 2.5 | %
|Corporate                       |  |      | (758   | ) |      |   | (897  | )             |  |             | 139   |  | 15.5                 | % |  |                     |   |  |    |  
|                                |  |      |        |   |      |   |       |               |  |             |       |  |                      |   |  |                      |   |  |     |  
|Total Earnings From Operations  |  | $    | 10,521 |   |      | $ | 6,879 |               |  | $           | 3,642 |  | 52.9                 | % |  | 4.2                  | % |  | 3.4 | %
|                                |  |      |        |   |      |   |       |               |  |             |       |  |                      |   |  |                      |   |  |     |  



Earnings from operations attributable
to Logistic Services in the first three quarters of 2004 were $7.3 million or 3.8 percent of revenues, an increase of approximately $0.8 million from $6.5 million and 4.3 percent of revenues in the corresponding 2003 period. Increased earnings from
operations attributable to Logistic Services were primarily from increased gross profit in dedicated facility projects (approximately $2.2 million) and warehousing (approximately $0.2 million), partially offset by decreased gross profit in
transportation (approximately $1.0 million) and logistic services (approximately $0.1 million) and increased overhead costs (approximately $0.5 million). Gross profit increases in dedicated facility projects resulted from six new projects commenced
in 2004; a refrigerated distribution project with a Fortune 100 food company in York, Pennsylvania (February 2004), the contract packaging business with Kellogg Company in Athens, Georgia (April 2004), a dedicated dry distribution center with
Campbells Soup Company in Seattle, Washington (July 2004), dedicated dry and refrigerated distribution centers with Kraft Foods in Ontario, California (July 2004) and a new refrigerated distribution center with a Fortune 100 food company in
Rochelle, Illinois (September 2004) and three projects that existed partially in the prior years comparable period; refrigerated distribution projects with Sara Lee in Phoenix, Arizona (March 2003) and with a Fortune 100 food company in
Indianapolis, Indiana (May 2003) and a dry distribution project with a Fortune 100 food company in Ontario, California (June 2003) and increased gross profits resulting from the receipt of compensatory payments related to a restructured contract,
partially offset by decreased service fees from that same contract. Warehousing gross profit increased due to increased facility usage, partially offset by start up costs associated with the Deli Distribution Business and a lower than average crop
yields in locations in which we operate. Gross profit in transportation was negatively impacted by underutilization of equipment and driver and fuel cost increases. Overhead expenses in the Logistic Services segment increased primarily due to
additional employee compensation expense predicated by increased levels of business activity, partially offset by decreased depreciation associated with fully depreciated assets.



17



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Earnings from operations attributable to Product Sales in the first three quarters of 2004 were $4.0 million and 6.6
percent of revenues, an increase of approximately $2.7 million from last years corresponding period of $1.3 million and 2.5 percent of revenues. Increased earnings from operations in the Product Sales segment were primarily from increased
gross profit in refrigerated casement and refrigeration control system sales (approximately $3.7 million), partially offset by increased selling, general and administrative expenses (approximately $1.0 million). Increased earnings from operations
from casement and refrigeration control systems were primarily due to increased volume and efficiencies associated with product service. Selling, general and administrative expenses increased as a result of increased volume in the Product Sales
segment.



Interest Expense



Consolidated net interest expense in the first three quarters of 2004 was approximately $2.0
million compared to approximately $2.2 million reported for the corresponding 2003 period. The decrease in interest expense in the first three quarters of 2004 was primarily attributable to improvements in the borrowing rate or the spread over LIBOR
(the LIBOR Margin) we paid on outstanding loans in the Logistic Services segment. The LIBOR Margin declined in February 2004 from 175 basis points to 150 basis points and is based on incentive pricing levels related to leverage which
improved primarily from reductions in debt in 2003 and increased levels of profitability.



Income Taxes



The effective tax
rate was 40 percent and 43.1 percent in first three quarters of 2004 and 2003, respectively. We anticipate a 40 percent tax rate for the remainder of 2004.



Net Earnings



For the reasons discussed above, in the first three quarters of 2004 consolidated net earnings totaled approximately $5.1 million or $.91 per diluted share, representing an increase of 92.1percent compared to net
earnings in the corresponding 2003 period of $2.6 million or $.48 per diluted share.



Financial Condition, Liquidity and Capital Resources



Cash and cash equivalents at September 30, 2004 totaled approximately $1.9 million compared to approximately $2.2 million at December 31, 2003. The Companys working capital at September 30, 2004 was approximately $15.1 million
compared to approximately $2.9 million at December 31, 2003. Working capital increased during the first three quarters of 2004 primarily due to increased accounts receivables (approximately $18.1 million), unbilled receivables (approximately $5.9
million), inventories (approximately $2.4 million) and prepaid and other assets (approximately $0.6 million) partially offset by increased accrued liabilities (approximately $8.4 million), accounts payable (approximately $4.1 million), short term
debt (approximately $1.9 million) and cash (approximately $0.3 million). Accounts receivable increased primarily from the addition of the Deli Distribution Business (approximately $5.8 million), activity of new accounts including the new contract
packaging operations (approximately $3.5 million) and increased levels of revenues in both segments (approximately $8.8 million). The balance in unbilled receivables is entirely due to the Deli Distribution Business and represents the value of
product stored in our warehouse for which our customer is contractually obligated to pay in conjunction with the distribution program. Accrued liabilities increased primarily from the timing and size of accrued payroll (approximately $3.2 million),
increased levels of business activity (approximately $3.3 million) and accruals related to the new contract packaging operations (approximately $1.9 million). The accounts payable increase was primarily due to amounts due to suppliers in the Deli
Distribution Business (approximately $3.0 million). Other working capital fluctuations were due to increased levels of business activity associated with our businesses.



18



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Operating activities in the first three quarters of 2004 used cash of approximately $5.0 million compared to providing
approximately $7.0 million in 2003. In 2004, cash used by operating activities was derived primarily from an increase in working capital accounts discussed above (excluding cash and short term debt) of approximately $14.5 million and a net increase
in other assets and liabilities of approximately $0.8 million, partially offset by net earnings of approximately $5.1 million and depreciation and amortization expense of approximately $5.1 million.



Net cash used in investing activities in the first three quarters of 2004 totaled
approximately $5.1 million, compared to approximately $2.5 million in the corresponding 2003 period. Investing activities in the first three quarters of 2004 consist of capital expenditures to support business growth initiatives. Capital
expenditures in the first three quarters of 2004 were approximately $2.2 million higher than the prior years corresponding period. This increased level of capital expenditures was primarily in the Logistic Services segment for equipment purchased in
connection with our entrance into the contract packaging business and new project information technology systems. In addition, in 2003, the Company sold a parcel of land for approximately $0.5 million and invested approximately $0.1 million in a
minority business enterprise engaged in the logistics industry.



Cash flows
provided by financing activities totaled approximately $9.7 million in the first three quarters of 2004 compared to $5.3 million used in financing activities in the corresponding 2003 period. Borrowings in the first three quarters of 2004 were
higher than the corresponding 2003 period due to higher levels of capital expenditures and increased working capital requirements (as explained above). The major components of cash flows provided by financing activities in the first three quarters
of 2004 were borrowings under the Companys credit facilities (net of mandatory repayments) of approximately $9.2 million, and cash proceeds from the exercise of employee stock options of approximately $0.5 million.



Our current sources of capital include: cash generated from operations, existing cash
resources, which at September 30, 2004 totaled $1.9 million and unused availability under our existing credit facilities totaling approximately $21.3 million. Other than additional net borrowings of approximately $9.2 million there have been no
material changes to our credit facilities described in our Annual Report on Form 10-K. We believe these resources are sufficient to fund projected cash requirements related to current operations and we expect capital expenditures in 2004 to
approximate $6.0 million.



We continue to evaluate new projects and
acquisitions in line with our strategic development plan. Future acquisitions may be funded through cash balances; cash flows from operations; existing credit facilities; potential new credit facilities; and/or the issuance of equity securities
through an underwritten offering, rights offering to shareholders or otherwise. We consider our existing credit facilities and internally generated cash flow to be adequate to fund our operations in the foreseeable future.



Critical Accounting Policies



The Companys application of critical accounting policies disclosures in its Annual
Report on Form 10-K for the year ended December 31, 2003 have not materially changed since that report was filed.



New Accounting Standards



Except as stated below, the Companys disclosure on new accounting standards in its Annual Report on Form 10-K has not materially changed since that report was
filed.



On October 22, 2004, the American Jobs Creation Act of 2004 (the
Act) was signed into law. Under the Act, with certain limitations, domestic manufacturers will be allowed to deduct nine percent of the lesser of: (1) production activities income or (2) taxable income after a five year phase in period
(three percent for years 2005-2006, six percent for years 2007-2009, and nine percent for subsequent years). The Company has not evaluated the impact of the Act (if any) on its tax liabilities, tax expense or deferred taxes.



19



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Contractual Obligations, Commercial Commitments and Off-Balance Sheet Arrangements



Except as described in the footnotes to the financial statements, the Companys
contractual obligations, commercial commitments and off-balance sheet arrangements disclosures in its Annual Report on Form 10-K for the year ended December 31, 2003 have not materially changed since that report was filed.



Forward Looking Information



Certain matters discussed in this Report are forward-looking statements intended
to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such because the context of the statement includes phrases such as we
believe, expect or other words of similar import. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements, including, among other, discussions of growth in the market and
demand for services in third-party logistics, the outlook for growth in the market for new construction or refurbishment of grocery, drug and convenience stores, and thus demand for Product Sales. Such forward-looking statements are subject to
certain risks and uncertainties, which could cause actual results or outcomes to differ materially from those currently anticipated. Although we believe our expectations are based on reasonable assumptions, we can give no assurance that our goals
will be achieved. Important factors that could affect actual results or outcomes have not materially changed since our disclosure in our 2003 Annual Report on Form 10-K.



Shareholders, potential investors and other readers are urged to consider the cautionary factors contained in the Companys 2003 Annual
Report on Form 10-K in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements.



ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK



As discussed in the Companys 2003 Annual Report on Form 10-K, we are exposed to market risk from changes in interest rates. To reduce
our risk from interest rate fluctuations, we occasionally enter into various hedging transactions. On October 2 and November 2, 2004 two of the Companys interest rate swaps (the Swaps) with notional amounts of $5.0 million each and
swap agreement rates of 3.92% and 3.6725%, respectively, expired. Due to the current low interest rate environment, we do not anticipate replacing the Swaps. Although by not replacing the Swaps, the Company has increased its exposure to increases in
interest rates, the Swaps were at higher rates than our current borrowing and therefore their expiration is expected to result in a slight reduction in interest expense in the fourth quarter. The remaining $17.4 million of Swaps remain in place.



ITEM 4. CONTROLS AND PROCEDURES



In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the
Exchange Act), the Companys management evaluated, with the participation of the Companys President and Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of the Companys
disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the quarter ended September 30, 2004. Based upon their evaluation of these disclosure controls and procedures, the President and Chief
Executive Officer and the Chief Financial Officer concluded that the disclosure controls and procedures were effective as of the end of the quarter ended September 30, 2004 to ensure that material information relating to the Company, including its
consolidated subsidiaries, was made known to them by others within those entities, particularly during the period in which this Quarterly Report on Form 10-Q was being prepared.



There was no change in the Companys internal control over financial reporting that occurred during the quarter ended September 30,
2004 that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.



20



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PART II - OTHER INFORMATION



Item 1. Not applicable.



Item 2. Not applicable.



Item 3.
Not applicable.



Item 4. Not applicable



Item 5. Not applicable.



Item 6. Exhibits and Reports on Form 8-K



(a) Exhibits



Exhibit 31.1 Certification by the Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.



Exhibit 31.2 Certification by the Chief Financial Officer, pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.



Exhibit 32.1
Certification of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. Section 1350



(b). Reports on Form 8-K



A Report on Form 8-K was filed July 28, 2004 to report under Item 12 the disclosure of Results of Operations for the six months ended June 30, 2004



21



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SIGNATURES:



Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.



|      |  |                   |  |                                      
|----- |  | ----------------- |  | -------------------------------------
|      |  |                   |  | Total Logistics, Inc.                
|      |  |                   |  | (Registrant)                         
|Date: |  | November 10, 2004 |  | /s/ William T. Donovan               
|      |  |                   |  | William T. Donovan                   
|      |  |                   |  | President and Chief Executive Officer
|      |  |                  
|Date: |  | November 10, 2004 |  | /s/ John Buono                       
|      |  |                   |  | John Buono                           
|      |  |                   |  | Chief Financial Officer              



22