CONTINUED

• Maintenance and repairs are charged to operations currently; replacements and improvements are capitalized. The gain or loss on dispositions is reflected in operating expenses and supplies. Net gains (losses) from operating property dispositions totaled ($0.3) million in 1999, $5.0 million in 1998 and $1.1 million in 1997.

• Goodwill at December 31, 1999 and 1998, net of accumulated amortization of $6.7 million and $4.5 million is being amortized over 20-40 years.

• The company’s investment in technology equipment and software consists primarily of advanced customer service and freight management communications equipment and related software.

• Effective January 1, 1998, the company prospectively adopted Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use (the SOP). The statement requires capitalization of certain costs associated with developing or obtaining internal-use software, once the capitalization criteria of the SOP has been met.

Capitalizable costs include external direct costs of materials and services utilized in developing or obtaining the software and, payroll and payroll-related costs for employees directly associated with the project. Prior to adoption of the standard, the company had capitalized only the external direct costs associated with internal-use software. For the years ended December 31, 1999 and 1998, the company capitalized $6.7 million and $5.1 million, respectively, primarily payroll-related costs incurred since January 1, 1998, on eligible projects.

• Claims and insurance accruals, both current and long-term, reflect the estimated cost of claims for workers’ compensation, cargo loss and damage, and bodily injury and property damage not covered by insurance. These costs are included in claims and insurance expense except for workers’ compensation which is included in employees’ benefits expense.

Reserves for workers’ compensation are primarily based upon actuarial analyses prepared by independent actuaries and are discounted to present value using a risk-free rate. The risk-free rate is the U.S.Treasury rate for maturities that match the expected pay-out of workers’ compensation liabilities. The process of determining reserve requirements utilizes historical trends and involves an evaluation of claim frequency, severity and other factors. The effect of future inflation for costs is implicitly considered in the actuarial analyses. Adjustments to previously established reserves are included in operating results.

At December 31, 1999 and 1998, estimated future payments for workers’ compensation claims aggregated $112.9 million and $116.5 million. The present value of these estimated future payments was $96.1 million at December 31, 1999, and $99.7 million at December 31, 1998.

• Revenue is recognized on a percentage completion basis while expenses are recognized as incurred.

• The exercise of stock options under the company’s various stock option plans gives rise to compensation included in the taxable income of the stock recipient and deducted by the company for federal and state income tax purposes. The compensation results from increases in the fair value of the company’s common stock after the date of grant. The compensation is not recognized in expense in the accompanying financial statements. The related tax benefits increase capital surplus.

• Comprehensive income for the three years ended December 31, 1999 includes foreign currency translation adjustments which are net of tax expense (benefit) of $0.2 million in 1999, ($0.3) million in 1998 and ($0.2) million in 1997.

• Certain reclassifications have been made to the prior year consolidated financial statements to conform with current presentation.