-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, deSGiV9fxjhpXCLyNPMa3XHmJz+KoZZPJH3Az4k6NnfLkV3WXjAmPJYtTcItCJz+ Hxan8xgMRQAbmtbbe/olHA== 0000023675-95-000005.txt : 19950512 0000023675-95-000005.hdr.sgml : 19950512 ACCESSION NUMBER: 0000023675-95-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950511 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONSOLIDATED FREIGHTWAYS INC CENTRAL INDEX KEY: 0000023675 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 941444798 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05046 FILM NUMBER: 95536649 BUSINESS ADDRESS: STREET 1: 3240 HILLVIEW AVE CITY: PALO A LTO STATE: CA ZIP: 94304 BUSINESS PHONE: 4154942900 10-Q 1 PAGE 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1995 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from N/A to N/A COMMISSION FILE NUMBER 132-3 CONSOLIDATED FREIGHTWAYS, INC. Incorporated in the State of Delaware I.R.S. Employer Identification No. 94-1444798 3240 Hillview Avenue, Palo Alto, California 94304 Telephone Number (415) 494-2900 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 and (2) has been subject to such filing requirements for the past 90 days. Yes xx No Number of shares of Common Stock, $.625 par value, outstanding as of March 31, 1995 : 43,302,283 PAGE 2 CONSOLIDATED FREIGHTWAYS, INC. FORM 10-Q Quarter Ended March 31, 1995 _________________________________________________________________ _________________________________________________________________ INDEX PART I. FINANCIAL INFORMATION Page Item 1. Financial Statements Consolidated Balance Sheets - March 31, 1995 and December 31, 1994 3 Statements of Consolidated Income - Three Months Ended March 31, 1995 and 1994 5 Statements of Consolidated Cash Flows - Three Months Ended March 31, 1995 and 1994 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION Item 1. Legal Proceedings 10 Item 4. Submission of Matters to a Vote of Security Holders 11 Item 6. Exhibits and Reports on Form 8-K 12 SIGNATURES 13 PAGE 3 PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements CONSOLIDATED FREIGHTWAYS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, December 31, 1995 1994 (Dollars in thousands) ASSETS CURRENT ASSETS Cash and cash equivalents $ 93,516 $ 95,711 Trade accounts receivable, net of allowances 675,044 659,191 Other accounts receivable 23,608 37,021 Operating supplies, at lower of average cost or market 44,033 41,719 Prepaid expenses 98,668 71,277 Deferred income taxes 131,071 126,546 Total Current Assets 1,065,940 1,031,465 PROPERTY, PLANT AND EQUIPMENT, at cost Land 164,289 163,965 Buildings and improvements 519,060 510,568 Revenue equipment 995,988 979,002 Other equipment and leasehold improvements 386,686 368,809 2,066,023 2,022,344 Accumulated depreciation and amortization (1,093,549) (1,077,752) 972,474 944,592 OTHER ASSETS Restricted funds 14,356 12,861 Deposits and other assets 108,114 80,626 Unamortized aircraft maintenance, net 78,396 81,010 Costs in excess of net assets of businesses acquired, net of accumulated amortization 319,585 322,169 520,451 496,666 TOTAL ASSETS $2,558,865 $2,472,723 The accompanying notes are an integral part of these statements. PAGE 4 CONSOLIDATED FREIGHTWAYS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, December 31, 1995 1994 (Dollars in thousands) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued liabilities $ 802,423 $ 796,381 Accrued claims costs 136,236 138,800 Current maturities of long-term debt and capital leases 2,174 3,712 Short-term borrowings 55,000 -- Federal and other income taxes 6,506 6,275 Total Current Liabilities 1,002,339 945,168 LONG-TERM LIABILITIES Long-term debt and guarantees 286,679 286,833 Long-term obligations under capital leases 111,010 111,024 Accrued claims costs 163,859 163,849 Deferred income taxes 43,570 38,034 Other liabilities and deferred credits 252,106 254,186 Total Liabilities 1,859,563 1,799,094 SHAREHOLDERS' EQUITY Preferred stock, no par value; authorized 5,000,000 shares: Series A, designated 600,000 shares; none issued -- -- Series B, 8.5% cumulative, convertible, $.01 stated value; designated 1,100,000 shares; issued 961,032 and 962,748 shares, respectively 10 10 Series C, 8.738% cumulative, convertible, $.01 stated value; designated and issued none and 690,000 shares, respectively -- 7 Additional paid-in capital, preferred stock 146,163 264,284 Deferred TASP compensation (119,167) (120,646) Total Preferred Shareholders' Equity 27,006 143,655 Common stock, $.625 par value; authorized 100,000,000 shares; issued 50,892,217 and 43,955,510 shares, respectively 31,808 27,472 Additional paid-in capital, common stock 230,229 116,209 Cumulative translation adjustment 2,672 (1,170) Retained earnings 594,726 574,885 Cost of repurchased common stock (7,589,934 and 7,601,382 shares, respectively) (187,139) (187,422) Total Common Shareholders' Equity 672,296 529,974 Total Shareholders' Equity 699,302 673,629 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,558,865 $2,472,723 The accompanying notes are an integral part of these statements. PAGE 5 CONSOLIDATED FREIGHTWAYS, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED INCOME (Dollars in thousands except per share amounts) Three Months Ended March 31 REVENUES 1995 1994 CF MotorFreight $ 608,425 $ 532,383 Con-Way Transportation Services 274,890 230,408 Emery Worldwide 412,772 340,430 1,296,087 1,103,221 COSTS AND EXPENSES CF MotorFreight Operating Expenses 524,784 447,155 Selling and Administrative Expenses 56,827 61,567 Depreciation 16,691 19,748 598,302 528,470 Con-Way Transportation Services Operating Expenses 203,540 173,773 Selling and Administrative Expenses 33,219 27,656 Depreciation 9,283 8,055 246,042 209,484 Emery Worldwide Operating Expenses 339,175 275,242 Selling and Administrative Expenses 53,938 48,190 Depreciation 6,597 6,351 399,710 329,783 1,244,054 1,067,737 OPERATING INCOME CF MotorFreight 10,123 3,913 Con-Way Transportation Services 28,848 20,924 Emery Worldwide 13,062 10,647 52,033 35,484 OTHER INCOME (EXPENSE) Investment income 125 515 Interest expense (7,201) (6,876) Miscellaneous, net (206) (365) (7,282) (6,726) Income Before Income Taxes 44,751 28,758 Income Taxes 20,585 13,502 Net Income 24,166 15,256 Preferred Stock Dividends 4,324 4,734 NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 19,842 $ 10,522 Primary average shares outstanding (1) 44,217,465 37,159,645 PRIMARY EARNINGS PER SHARE $ 0.50 $ 0.28 FULLY DILUTED EARNINGS PER SHARE $ 0.46 $ 0.25 (1) Includes the dilutive effect of stock options, and the conversion of Series C Preferred stock to Common stock in the three months ended March 31, 1995. The accompanying notes are an intergral part of these statements. PAGE 6 CONSOLIDATED FREIGHTWAYS, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS Three Months Ended March 31, 1995 1994 (Dollars in thousands) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $ 95,711 $ 139,044 CASH FLOWS FROM OPERATING ACTIVITIES Net income 24,166 15,256 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 35,310 36,749 Increase (decrease) in deferred income taxes 2,098 (5,345) (Gains) losses from property disposals, net (171) 4 Changes in assets and liabilities: Receivables (17,490) (10,787) Accrued claims costs (2,278) (5,354) Accounts payable 9,753 (9,997) Income taxes 14,884 3,569 Accrued incentive compensation (30,971) (650) Accrued liabilities and other (26,630) (4,113) Net Cash Provided by Operating Activities 8,671 19,332 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (56,541) (38,177) Purchases of marketable securities -- (977) Proceeds from sale of property 825 758 Net Cash Used by Investing Activities (55,716) (38,396) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term borrowings 55,000 -- Repayment of long-term debt and capital lease obligations (1,707) (273) Proceeds from issuance of common stock 511 6,297 Payments of common dividends (3,636) -- Payments of preferred dividends (5,318) (5,782) Net Cash Provided by Financing Activities 44,850 242 Decrease in Cash and Cash Equivalents (2,195) (18,822) CASH AND CASH EQUIVALENTS, END OF PERIOD $ 93,516 $ 120,222 The accompanying notes are an integral part of these statements. PAGE 7 CONSOLIDATED FREIGHTWAYS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The accompanying consolidated financial statements of Consolidated Freightways, Inc. and subsidiaries (the Company) have been prepared by the Company, without audit by independent public accountants, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the consolidated financial statements include all normal recurring adjustments necessary to present fairly the information required to be set forth therein. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, should be read in conjunction with the consolidated financial statements included in the Company's 1994 Annual Report to Shareholders. There have been no significant changes in the accounting policies of the Company. There were no significant changes in the Company's commitments and contingencies as previously described in the 1994 Annual Report to Shareholders and related annual report to the Securities and Exchange Commission on Form 10-K. 2. Short-term borrowings consist of $55.0 million from the Company's $300 million revolving, unsecured credit facility. The borrowings bear interest at LIBOR plus a margin (totaling 6.65% at March 31, 1995). At March 31, 1995, the Company also had $110.1 million of letters of credit outstanding under this agreement, leaving $134.9 million of unused capacity. This agreement expires in January 1999. 3. On March 15, 1995, the Company's 6,900,000 depository shares, each representing one-tenth of a share of Series C Conversion Preferred stock, were converted to 6,900,000 shares of the Company's Common stock. 4. The Company and its subsidiaries are defendants in various lawsuits incidental to their businesses. It is the opinion of management that the ultimate outcome of these actions will not have a material impact on the Company's financial position or results of operations. PAGE 8 CONSOLIDATED FREIGHTWAYS, INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Total Company revenues in the first quarter increased 17.5% to a record $1.30 billion driven by strong revenue growth at each of the Company's principal operations. CF MotorFreight (CFMF) continued its strong recovery, with revenues exceeding pre-strike levels. The growth was accomplished despite a noticeable slowdown in the rate of economic growth. Operating income increased 46.6% to a first quarter record of $52.0 million and was the second highest operating income level in the Company's history. The increase in income reflects the first quarter in five years that all of CF's principal businesses reported simultaneous earnings increases. Significant variations in segment revenue and operating income are as follows: CF MOTORFREIGHT CF MotorFreight's first quarter revenues increased 14.3% from the same quarter of last year on a tonnage increase of 9.6% with less-than-truckload (LTL) tonnage up 11.5%. The revenue improvements reflect CFMF's continuing recovery, benefits of the January 1st rate increase, continued growth from its non-carrier logistics operation and the success of new marketing initiatives. Operating income for the first quarter increased 158.7% from the same quarter last year. This improvement reflects benefits from revenue growth, cost controls and efficiencies gained from changes in operations to increase the utilization of rail. Also contributing to improved results was income from non-carrier operations. With growth in the economy beginning to slow, CFMF is experiencing increased discounting and intensified competition. A 3.3% wage and benefit increase for contractual labor went into effect on April 1, 1995. To offset the impact of these trends, CFMF will initiate additional changes to operations. These include increasing point-to-point loading, thereby reducing freight handling and transit times. PAGE 9 CON-WAY TRANSPORTATION SERVICES First quarter revenues from Con-Way Transportation Services (CTS) increased 19.3% on a tonnage increase of 7.5% with LTL tonnage increasing 7.9%. Contributing to the increased revenue levels was customers' acceptance of CTS's operations serving new geographic markets and expanded service in market lanes between regions. CTS's operating income for the first quarter was up 37.9% over the first quarter of 1994. The operating margin increased to 10.5% from 9.1% a year ago. The significant income improvement reflects increased profitability from revenue growth and efficiencies of joint service operations despite startup and expansion costs incurred in the Pacific Northwest and New York/New Jersey metropolitan area. With weaker economic growth expected for the second quarter, management is expecting increased pricing pressures especially in light of the deregulation of intrastate traffic. CTS expects to counter slower economic growth by differentiating the level and type of services it provides customers, including its ability to provide expanded geographic coverage. EMERY WORLDWIDE Emery Worldwide's (Emery) revenues increased 21.3% primarily from continued strong growth in its international business. Domestic revenues increased 8.4% on 10.6% weight growth, while international revenues were up 54.7% on a 57.8% weight increase. The lower domestic increase reflects softening U.S. economic growth, particularly in the automotive sector which constitutes a significant customer base for Emery. The strong international growth reflects the continuation of Emery's marketing strategy to increase its global market share. Emery's first quarter operating income increased 22.7% from the same quarter last year reflecting the combined benefits of volume improvements and cost control. Emery was able to mitigate some of the slowing of domestic growth by reducing terminal and airhaul expenses in part from the elimination seven aircraft from its fleet. Seasonal adjustments to the size of its fleet and measures to hold down other operating costs will be emphasized in response to the softening domestic business growth. In addition to the above measures, enhanced and new marketing programs have been added to further satisfy customer needs in global markets. In the international market, management is expanding its service capabilities to provide coverage to emerging areas, especially in Asia. PAGE 10 LIQUIDITY AND CAPITAL RESOURCES At March 31, 1995 the Company had $93.5 million in cash and cash equivalents. Net cash flow from operations of $8.7 million was primarily the result of income from operations, depreciation and amortization, after payments for incentive compensation. During the first three months of the year, capital expenditures were $56.5 million, an increase of $18.4 million over 1994, due primarily to purchases of several terminals and revenue equipment by CFMF and CTS. The Company intends to finance the remaining capital requirements for the year with cash from operations supplemented by financing arrangements. To supplement cash flows during the quarter, the Company borrowed $55.0 million under its $300 million unsecured credit facility. At March 31, 1995, $110.1 million of letters of credit were issued under the Company's $300 million unsecured credit facility. In addition, $70.4 million of letters of credit were issued and secured with Emery receivables under the Company's $100 million Emery receivables sale facility. Also at March 31, 1995, $40.4 million of letters of credit were issued under several unsecured letter of credit facilities. OTHER The Company's operations necessitate the storage of fuel in underground tanks as well as the disposal of substances regulated by various federal and state laws. The Company adheres to a stringent site-by-site tank testing and maintenance program performed by a qualified independent party to protect the environment and comply with regulations. Where the need for clean-up is necessary, the Company takes appropriate action. PART II. OTHER INFORMATION ITEM 1. Legal Proceedings As previously reported, the Company has been designated a Potentially Responsible Party (PRP) by the EPA with respect to the disposal of hazardous substances at various sites. The Company expects its share of the total cleanup costs of all sites to be immaterial. Certain legal matters are discussed in Note 4 in the Notes to Consolidated Financial Statements in Part I of this form. PAGE 11 Item 4. Submission of Matters to a Vote of Security Holders There were presented at the Annual Shareholders Meeting held April 24, 1995 the following proposals with respective voting results: For the purpose of electing certain members of the Board of Directors, the votes representing shares of Common and Preferred stock were cast with the following results: Nominee For Withheld Earl F. Cheit 35,642,260 415,436 G. Robert Evans 35,648,311 409,385 Gerhard E. Liener 35,639,936 417,760 Richard B. Madden 35,644,115 413,581 The following directors did not stand for election and continued in office as a director after the Annual Shareholders Meeting: Robert Alpert, Margaret G. Gill, Robert Jaunich II, Donald E. Moffitt, Ronald E. Poelman, Robert D. Rodgers, William D. Walsh and Robert P. Wayman. The appointment of Arthur Andersen LLP as independent public accountants for the year 1995 was approved by the following vote: For 35,711,958; Against 156,874; Abstaining 188,864. The proposal to adopt the Consolidated Freightways, Inc. Amended and Restated Equity Incentive Plan for Non-Employee Directors was approved by the following vote: For 30,151,372; Against 5,521,535; Abstaining 384,789. The stockholder proposal to declassify the Board of Directors for the purpose of Director elections was defeated by the following votes: For 10,660,220; Against 17,110,038; Abstaining 5,359,556; Broker non-votes 2,927,882. The stockholder proposal to eliminate the 80% vote requirement in the by-laws to change the structure of the Board of Directors was defeated by the following vote: For 9,813,034; Against 22,322,701; Abstaining 994,079; Broker non-votes 2,927,882. PAGE 12 ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits (10) Material Contracts (10.1) Consolidated Freightways, Inc. Amended and Restated Equity Incentive Plan for Non-Employee Directors. (Previously filed with the Securities and Exchange Commission as an attachment to the Company's 1995 Proxy Statement dated March 17, 1995.) (11) Computation of Per Share Earnings (27) Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended March 31, 1995. PAGE 13 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company (Registrant) has duly caused this Form 10-Q Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized. CONSOLIDATED FREIGHTWAYS,INC. (Registrant) May 11, 1995 /s/Gregory L. Quesnel Gregory L. Quesnel Executive Vice President and Chief Financial Officer May 11, 1995 /s/Gary D. Taliaferro Gary D. Taliaferro Vice President and Controller EX-11 2 Exhibit 11 COMPUTATION OF PER SHARE EARNINGS The following is the computation of fully-diluted earnings per share: Three Months Ended March 31 1995 1994 (Dollars in thousands except per share data) Net income available to common shareholders $ 19,842 $ 10,522 Non-discretionary adjustments under the if-converted method: Addback: Series C, preferred dividends 2,207 -- Addback: Series B, preferred dividends, 2,117 2,078 net of tax benefits Less: Replacement of funding adjustment, net of tax benefits (1) (1,664) (2,078) $ 22,502 $ 10,522 WEIGHTED AVERAGE SHARES OUTSTANDING: Common shares (2) 43,274,729 35,962,606 Equivalents - stock options 1,244,429 1,197,039 Series B, Preferred stock if-converted method 4,142,418 4,124,274 48,661,576 41,283,919 FULLY DILUTED EARNINGS PER SHARE $ 0.46 $ 0.25 (1) Additional payment to the TASP to replace the funding lost under the if-converted method. (2) Reflects the converion of Series C Preferred stock to Common stock in the three months ended March 31, 1995. EX-27 3 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE. <5> <1,000> <3-MOS> 93,516 0 701,747 (26,703) 44,033 1,065,940 2,066,023 (1,093,549) 2,558,865 1,002,339 397,689 262,037 0 146,173 291,092 2,558,865 0 1,296,087 0 1,244,054 7,282 2,301 7,201 44,751 20,585 24,166 0 0 0 19,842 0.50 0.46
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