-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CX8uFrPUTx2GJ8zXIYuvasVgunZiDtD9ftNbsr6C+SnATAP0mXiGZMTl+CmVdzmi 8u6Btu4/CH/MqnbuB3J3KA== 0000023675-00-000004.txt : 20000511 0000023675-00-000004.hdr.sgml : 20000511 ACCESSION NUMBER: 0000023675-00-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CNF TRANSPORTATION 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: SEC FILE NUMBER: 001-05046 FILM NUMBER: 625139 BUSINESS ADDRESS: STREET 1: 3240 HILLVIEW AVE CITY: PALO ALTO STATE: CA ZIP: 94304 BUSINESS PHONE: 6504942900 MAIL ADDRESS: STREET 1: 1717 NW 21ST AVE CITY: PORTLAND STATE: OR ZIP: 97209 FORMER COMPANY: FORMER CONFORMED NAME: CONSOLIDATED FREIGHTWAYS INC DATE OF NAME CHANGE: 19920703 10-Q 1 10-Q PAGE 1 UNITED STATES 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, 2000 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 1-5046 CNF TRANSPORTATION INC. Incorporated in the State of Delaware I.R.S. Employer Identification No. 94-1444798 3240 Hillview Avenue, Palo Alto, California 94304 Telephone Number (650) 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 April 30, 2000: 48,526,036 PAGE 2 CNF TRANSPORTATION INC. FORM 10-Q Quarter Ended March 31, 2000 ___________________________________________________________________________ ___________________________________________________________________________ INDEX PART I. FINANCIAL INFORMATION Page Item 1. Financial Statements Consolidated Balance Sheets - March 31, 2000 and December 31, 1999 3 Statements of Consolidated Income - Three Months Ended March 31, 2000 and 1999 5 Statements of Consolidated Cash Flows - Three Months Ended March 31, 2000 and 1999 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 PART II. OTHER INFORMATION Item 1. Legal Proceedings 19 Item 6. Exhibits and Reports on Form 8-K 20 SIGNATURES 20 PAGE 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CNF TRANSPORTATION INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands) March 31, December 31, 2000 1999 ASSETS CURRENT ASSETS Cash and cash equivalents $ 111,415 $ 146,263 Trade accounts receivable, net of allowances (Note 1) 1,012,703 914,307 Other accounts receivable 27,974 25,419 Operating supplies, at lower of average cost or market 42,670 46,019 Prepaid expenses 60,980 41,971 Deferred income taxes 27,322 26,254 Total Current Assets 1,283,064 1,200,233 PROPERTY, PLANT AND EQUIPMENT, NET Land 122,563 119,403 Buildings and leasehold improvements 601,336 573,688 Revenue equipment 859,327 854,519 Other equipment 460,786 447,962 2,044,012 1,995,572 Accumulated depreciation and amortization (899,716) (864,538) 1,144,296 1,131,034 OTHER ASSETS Deferred charges and other assets (Note 7) 189,107 200,739 Capitalized software, net 89,483 88,157 Unamortized aircraft maintenance, net (Note 1) 238,507 226,629 Goodwill, net 263,116 265,896 780,213 781,421 TOTAL ASSETS $3,207,573 $3,112,688 The accompanying notes are an integral part of these statements. PAGE 4 CNF TRANSPORTATION INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands) March 31, December 31, 2000 1999 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 321,467 $ 305,954 Accrued liabilities 491,750 543,353 Accrued claims costs 120,999 99,940 Current maturities of long-term debt and capital leases 7,552 6,452 Short-term borrowings - 40,000 Income taxes payable 74,367 53,455 Total Current Liabilities 1,016,135 1,049,154 LONG-TERM LIABILITIES Long-term debt and guarantees (Note 2) 424,060 322,800 Long-term obligations under capital leases 110,619 110,646 Accrued claims costs 57,462 81,978 Employee benefits 226,804 217,519 Other liabilities and deferred credits 44,892 45,450 Aircraft lease return provision (Note 1) 60,154 63,678 Deferred income taxes 144,078 128,515 Total Liabilities 2,084,204 2,019,740 COMMITMENTS AND CONTINGENCIES (Note 7) COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF SUBSIDIARY TRUST HOLDING SOLELY CONVERTIBLE DEBENTURES OF THE COMPANY (Note 6) 125,000 125,000 SHAREHOLDERS' EQUITY Preferred stock, no par value; authorized 5,000,000 shares: Series B, 8.5% cumulative, convertible, $.01 stated value; designated 1,100,000 shares; issued 834,312 and 840,407 shares, respectively 8 8 Additional paid-in capital, preferred stock 126,890 127,817 Deferred compensation, Thrift and Stock Plan (85,791) (87,600) Total Preferred Shareholders' Equity 41,107 40,225 Common stock, $.625 par value; authorized 100,000,000 shares; issued 55,336,005 and 55,306,947 shares, respectively 34,585 34,567 Additional paid-in capital, common stock 329,633 328,721 Retained earnings 780,385 747,936 Deferred compensation, restricted stock (1,965) (2,010) Cost of repurchased common stock (6,826,731 and 6,856,567 shares, respectively) (168,322) (169,057) 974,316 940,157 Accumulated foreign currency translation adjustment (12,659) (8,039) Minimum pension liability adjustment (4,395) (4,395) Accumulated Other Comprehensive Loss (17,054) (12,434) Total Common Shareholders' Equity 957,262 927,723 Total Shareholders' Equity 998,369 967,948 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,207,573 $3,112,688 The accompanying notes are an integral part of these statements. PAGE 5 CNF TRANSPORTATION INC. STATEMENTS OF CONSOLIDATED INCOME (Dollars in thousands except per share amounts) Three Months Ended March 31, 2000 1999 REVENUES $1,462,753 $1,255,323 Costs and Expenses Operating expenses 1,211,565 1,029,150 General and administrative expenses 132,577 121,082 Depreciation 45,194 38,962 Net gain on legal settlement - (16,466) 1,389,336 1,172,728 OPERATING INCOME 73,417 82,595 Other Income (Expense) Interest expense (6,400) (7,126) Dividend requirement on preferred securities of subsidiary trust (Note 6) (1,563) (1,563) Miscellaneous, net 2,950 955 (5,013) (7,734) Income before income taxes 68,404 74,861 Income taxes 29,072 32,565 Net Income 39,332 42,296 Preferred stock dividends 2,034 2,027 NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 37,298 $ 40,269 Average Common Shares Outstanding (Note 5) Basic 48,417,660 47,925,476 Diluted 56,073,670 55,814,095 Earnings Per Share (Note 5) Basic $ 0.77 $ 0.84 Diluted $ 0.69 $ 0.74 The accompanying notes are an integral part of these statements. PAGE 6 CNF TRANSPORTATION INC. STATEMENTS OF CONSOLIDATED CASH FLOWS (Dollars in thousands) Three Months Ended March 31, 2000 1999 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $ 146,263 $ 73,897 OPERATING ACTIVITIES Net income 39,332 42,296 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 52,074 44,528 Increase in deferred income taxes 14,495 390 Amortization of deferred compensation 1,992 2,707 Provision for uncollectable accounts 4,483 2,711 Gain on sale of equity securities, net (2,619) - Gains from property disposals, net (1,106) (417) Changes in assets and liabilities: Receivables (105,434) 54,038 Prepaid expenses (19,009) (21,907) Accounts payable 18,266 (18,322) Accrued liabilities (35,089) (7,498) Accrued incentive compensation (16,514) (17,557) Accrued claims costs (3,457) 6,088 Income taxes 20,912 22,842 Employee benefits 9,285 7,992 Deferred charges and credits 4,004 (6,379) Other (8,291) (15,139) Net Cash Provided by (Used in) Operating Activities (26,676) 96,373 INVESTING ACTIVITIES Capital expenditures (59,654) (55,799) Software expenditures (5,310) (11,381) Proceeds from sale of equity securities 2,619 - Proceeds from sales of property 3,164 2,540 Net Cash Used in Investing Activities (59,181) (64,640) FINANCING ACTIVITIES Proceeds from issuance of long-term debt 198,752 - Payments for issuance costs of long-term debt (1,300) - Repayment of long-term debt, guarantees and capital lease obligations (96,419) (5,223) Repayment of short-term borrowings (40,000) (14,000) Proceeds from exercise of stock options 295 3,488 Payments of common dividends (4,849) (4,808) Payments of preferred dividends (5,470) (5,556) Net Cash Provided by (Used in) Financing Activities 51,009 (26,099) Increase (Decrease) in Cash and Cash Equivalents (34,848) 5,634 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 111,415 $ 79,531 The accompanying notes are an integral part of these statements. PAGE 7 CNF TRANSPORTATION INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Principal Accounting Policies Basis of Presentation The accompanying consolidated financial statements of CNF Transportation Inc. and its wholly owned 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 1999 Annual Report to Shareholders. Recognition of Revenues Revenue from long-term contracts is recognized in accordance with contractual terms as services are provided. Under certain long-term contracts, there are provisions for price re-determination that give rise to unbilled revenue. Unbilled revenue representing contract change orders or claims is included in revenue only when it is probable that the change order or claim will result in additional contract revenue and if the amount can be reliably estimated. The Company recognizes unbilled revenue related to claims sufficient only to recover costs. When adjustments in contract revenue are determined, any changes from prior estimates are reflected in earnings in the current period. The amount of unbilled revenue related to the Company's Priority Mail contract recognized in Trade Accounts Receivable in the Consolidated Balance Sheets at March 31, 2000 and December 31, 1999 was $144.1 million and $123.7 million, respectively. Reclassification In March 2000, the Securities and Exchange Commission (SEC) communicated its interpretation of certain accounting issues related to major maintenance expenditures. As a result of the SEC's comments, the Company has reclassified Emery's aircraft lease return provision. Accordingly, the aircraft lease return provision is reported separately as a liability rather than being included in Unamortized Aircraft Maintenance, Net. Prior periods have been reclassified. Certain other amounts in prior year financial statements have been reclassified to conform to current year presentation. 2. Long-Term Debt In March 2000, the Company issued $200 million in notes with a coupon rate of 8 7/8% and a maturity date of May 1, 2010. Interest on the notes are payable semi-annually on May 1 and November 1 of each year, commencing May 1, 2000 and principal is payable at maturity. The notes contain covenants that limit the incurrence of liens. A portion of the proceeds was used to repay a total of $152 million of short-term and long-term borrowings outstanding under lines of credit. PAGE 8 3. Comprehensive Income SFAS 130, "Reporting Comprehensive Income", requires companies to report a measure of all changes in equity except those resulting from investments by owners and distributions to owners. Comprehensive income was as follows: Three Months Ended (Dollars in thousands) March 31, 2000 1999 ---------- ---------- Net income $ 39,332 $ 42,296 Foreign currency translation adjustment (4,620) (160) ---------- ---------- $ 34,712 $ 42,136 ========== ========== 4. Business Segments SFAS 131, "Disclosures about Segments of an Enterprise and Related Information", established standards for reporting information about operating segments in annual financial statements and requires selected information in interim financial statements. Selected financial information is reported below for the three-month periods ended March 31, 2000 and 1999: (Dollars in thousands) Con-Way Emery Menlo Other(2) Total ----------- ---------- ----------- ----------- ----------- 2000 Revenues $515,513 $607,487 $213,552 $153,693 $1,490,245 Inter-company eliminations (4,997) (6,249) (3,649) (12,597) (27,492) --------- --------- --------- --------- ----------- Net revenues $510,516 $601,238 $209,903 $141,096 $1,462,753 ========= ========= ========= ========= =========== Operating Income $ 58,116 $ 7,352 $ 7,638 $ 311 $73,417 ========= ========= ========= ========= =========== 1999 Revenues $438,511 $532,827 $162,987 $144,128 $1,278,453 Inter-company eliminations (5,132) (3,406) (2,428) (12,164) (23,130) --------- --------- --------- --------- ----------- Net revenues $433,379 $529,421 $160,559 $131,964 $1,255,323 ========= ========= ========= ========= =========== Operating Income (1) $ 53,947 $ 3,551 $ 4,556 $ 20,541 $ 82,595 ========= ========= ========= ========= =========== (1) For the three months ended March 31, 1999, the Other segment included a $16.5 million net gain on a lawsuit settled in January 1999. (2) The Other segment consists primarily of the operations under a Priority Mail contract with the U.S. Postal Service, and includes the operating results of Road Systems and, prior to the sale of its assets in May 1999, VantageParts. PAGE 9 5. Earnings Per Share Basic earnings per share was computed by dividing net income available to common shareholders by the weighted-average common shares outstanding. Diluted earnings per share was calculated as follows: Three Months Ended (Dollars in thousands except March 31, per share data) 2000 1999 ------------ ------------ Earnings: Net income available to common shareholders $ 37,298 $ 40,269 Add-backs: Dividends on preferred stock, net of replacement funding 329 332 Dividends on preferred securities of subsidiary trust, net of tax 954 954 ----------- ----------- $ 38,581 $ 41,555 ----------- ----------- Shares: Weighted-average shares outstanding 48,417,660 47,925,476 Stock option and restricted stock dilution 396,309 765,435 Series B preferred stock 4,134,701 3,998,184 Preferred securities of subsidiary trust 3,125,000 3,125,000 ----------- ----------- 56,073,670 55,814,095 ----------- ----------- Diluted earnings per share $ 0.69 $ 0.74 =========== =========== 6. Preferred Securities of Subsidiary Trust On June 11, 1997, CNF Trust I (the Trust), a Delaware business trust wholly owned by the Company, issued 2,500,000 of its $2.50 Term Convertible Securities, Series A (TECONS) to the public for gross proceeds of $125 million. The combined proceeds from the issuance of the TECONS and the issuance to the Company of the common securities of the Trust were invested by the Trust in $128.9 million aggregate principal amount of 5% convertible subordinated debentures due June 1, 2012 (the Debentures) issued by the Company. The Debentures are the sole assets of the Trust. Holders of the TECONS are entitled to receive cumulative cash distributions at an annual rate of $2.50 per TECONS (equivalent to a rate of 5% per annum of the stated liquidation amount of $50 per TECONS). The Company has guaranteed, on a subordinated basis, distributions and other payments due on the TECONS, to the extent the Trust has funds available therefor and subject to certain other limitations (the Guarantee). The Guarantee, when taken together with the obligations of the Company under the Debentures, the Indenture pursuant to which the Debentures were issued, and the Amended and Restated Declaration of Trust of the Trust including its obligations to pay costs, fees, expenses, debts and other obligations PAGE 10 of the Trust (other than with respect to the TECONS and the common securities of the Trust), provide a full and unconditional guarantee of amounts due on the TECONS. The Debentures are redeemable for cash, at the option of the Company, in whole or in part, on or after June 1, 2000, at a price equal to 103.125% of the principal amount, declining annually to par if redeemed on or after June 1, 2005, plus accrued and unpaid interest. In certain circumstances relating to federal income tax matters, the Debentures may be redeemed by the Company at 100% of the principal plus accrued and unpaid interest. Upon any redemption of the Debentures, a like aggregate liquidation amount of TECONS will be redeemed. The TECONS do not have a stated maturity date, although they are subject to mandatory redemption upon maturity of the Debentures on June 1, 2012, or upon earlier redemption. Each TECONS is convertible at any time prior to the close of business on June 1, 2012, at the option of the holder into shares of the Company's common stock at a conversion rate of 1.25 shares of the Company's common stock for each TECONS, subject to adjustment in certain circumstances. 7. Contingencies In connection with the December 2, 1996 spin-off of Consolidated Freightways Corporation (CFC), the Company's former long-haul LTL segment, the Company agreed to indemnify certain states, insurance companies and sureties against the failure of CFC to pay certain worker's compensation, tax and public liability claims that were pending as of September 30, 1996. In some cases, these indemnities are supported by letters of credit under which the Company is liable to the issuing bank and by bonds issued by surety companies. In order to secure CFC's obligation to reimburse and indemnify the Company against liability with respect to these claims, as of March 31, 2000, CFC had provided the Company with approximately $11.0 million of letters of credit and $7.5 million of real property collateral. However, the letters of credit and collateral provided by CFC are less than the Company's maximum contingent liability under these indemnities. The Company is currently under examination by the Internal Revenue Service (IRS) for tax years 1987 through 1996 on various issues. In connection with that examination, the IRS is seeking additional taxes, plus interest, for certain matters relating to CFC for those periods. As part of the spin-off, the Company and CFC entered into a tax sharing agreement that provides a mechanism for the allocation of any additional tax liability and related interest that arise due to adjustments by the IRS for years prior to the spin-off. The Company believes it is entitled to and will pursue reimbursement from CFC under the tax sharing agreement for any payments that the Company makes to the IRS with respect to these additional taxes. Any failure to receive reimbursement for a significant portion of those payments, whether due to CFC successfully contesting their obligation to reimburse the Company or for any other reason, could have a material adverse effect on the Company's financial condition or results of operations. At March 31, 2000, the Company had recognized approximately $53 million in Deferred Charges and Other Assets in the Consolidated Balance Sheet for amounts receivable from CFC and a corresponding payable for amounts due the IRS. The IRS proposed a substantial adjustment for tax years 1987 through 1990 based on the IRS' position that certain aircraft maintenance costs should have been capitalized rather than expensed for federal income tax purposes. In addition, the Company believes it is likely that the IRS will propose an additional adjustment, based on the same IRS position with respect to aircraft maintenance costs, for subsequent tax years. The Company believes that its practice of expensing these types of aircraft maintenance costs is consistent with industry practice. PAGE 11 The Company filed a protest concerning the proposed adjustment for tax years 1987 through 1990 and was engaged in discussions with the Appeals Office of the IRS. After those discussions failed to produce a settlement, in March 2000 the IRS issued a Notice of Deficiency (the Notice) for the years 1987 through 1990 with respect to the aircraft maintenance issue described above, and with respect to various other matters, including some related to CFC for years prior to the spin-off. Based upon the Notice, the total amount of the deficiency for items in years 1987 through 1990, including taxes and interest, is $191 million. The Company intends to vigorously contest the Notice as it pertains to the aircraft maintenance issue, and is evaluating courses of action for the other items covered under the Notice. However, there can be no assurance that the Company will not be liable for all of the amounts due under the Notice. As a result, the Company is unable to predict the ultimate outcome of this matter and there can be no assurance that this matter will not have a material adverse effect on the Company's financial condition or results of operations. The IRS has also proposed adjustments that would require Emery Worldwide to pay substantial additional aviation excise taxes for the period from January 1, 1990 through September 30, 1995. The Company has filed protests contesting these proposed adjustments and is engaged in discussions with the Appeals Office of the IRS. The Company believes that there is legal authority to support the manner in which it has calculated and paid the aviation excise taxes and, accordingly, the Company intends to continue to vigorously challenge the proposed adjustments. Nevertheless, the Company is unable to predict the ultimate outcome of this matter. As a result, there can be no assurance that the Company will not be liable for a substantial amount of additional aviation excise taxes for the 1990 through 1995 tax period, plus interest. In addition, it is possible that the IRS may seek to increase the amount of the aviation excise tax payable by Emery Worldwide for periods subsequent to September 30, 1995. As a result, there can be no assurance that this matter will not have a material adverse effect on the Company's financial condition or results of operations. In addition to the matters discussed above, 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 condition or results of operations. PAGE 12 PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - --------------------- Consolidated Results Net income available to common shareholders for the first quarter of 2000 was $37.3 million ($0.77 per basic share and $0.69 per diluted share) compared to $40.3 million ($0.84 per basic share and $0.74 per diluted share) in the same quarter of last year. The first quarter of 2000 included a $2.6 million net gain ($0.03 per basic and diluted share) from the sale of securities. The first quarter of last year benefited from a $16.5 million net gain ($0.19 per basic share and $0.16 per diluted share) on the settlement of a lawsuit, which was recognized in operating income. Excluding the non-recurring net gains, net income available to common shareholders increased 15.6% due to higher operating income, lower interest expense, and a lower effective tax rate. Revenue for the first quarter of 2000 increased 16.5% over the same quarter of 1999 due primarily to revenue growth at Con-Way, Emery, and Menlo. Revenue for the Other segment, which primarily includes operations under a Priority Mail contract with the U.S. Postal Service, increased 6.9% from the same period last year. Operating income for the 2000 first quarter was $73.4 million compared to $82.6 million in the 1999 first quarter. Excluding the $16.5 million net gain on the settlement of a lawsuit in last year's first quarter, operating income in the first quarter of 2000 would have increased 11.0% over the first quarter of 1999. Higher operating income at Con-Way, Emery and Menlo for the 2000 first quarter was partially offset by lower operating income from the Priority Mail operations. Other net expenses in the first quarter of 2000 decreased 35.2% from the first quarter of last year due primarily to a $2.6 million net gain from the sale of securities in March 2000 and lower interest expense. Interest expense declined 10.2% due primarily to the refinancing of long- term debt and higher capitalized interest. The first quarter of last year included interest expense on $117.7 million of 9 1/8% Notes, which were repaid in August 1999 in part with $90.0 million of lower-interest rate borrowings under unsecured lines of credit. In March 2000, we issued $200.0 million of new 8 7/8% Notes, of which $152.0 million of proceeds were used to repay short-term and long-term borrowings outstanding under lines of credit. The effective tax rate for the first quarter of 2000 was 42.5% compared to 43.5% in the same period last year. The reduction was due primarily to tax planning strategies and higher estimated income in 2000. Con-Way Transportation Services Con-Way's revenue in the first three months of 2000 increased 17.8% over the same period last year due primarily to higher tonnage (weight) and revenue per hundredweight (yield), and to a lesser extent, fuel surcharges. In the first quarter of 2000, total and less-than-truckload (LTL) weight for Con-Way's regional carriers increased 9.3% and 9.2%, respectively, over the first quarter of 1999. The higher weight reflects continued growth in core regional service and inter-regional joint services. Net revenue per hundredweight in the first quarter of 2000 increased 7.3% over the same period last year due primarily to higher rates PAGE 13 obtained for Con-Way's core premium services and a larger percentage of inter-regional joint services, which command higher rates on longer lengths of haul. Con-Way's operating income in the first quarter of 2000 grew 7.7% over the first quarter of 1999. The increase was due primarily to higher revenue, increased load factor, and continued emphasis on operating efficiencies, partially offset by higher pension expense. Higher diesel fuel costs in the first quarter of 2000 were substantially mitigated by a fuel surcharge implemented by Con-Way in August 1999. The first quarters of 2000 and 1999 were negatively affected by operating losses from Con- Way's new multi-client warehousing and logistics business, which was formed in the fourth quarter of 1998. Emery Worldwide In the first quarter of 2000, Emery's revenue increased 13.6% over the same period last year due primarily to higher international airfreight revenue and, to a lesser extent, increased revenue from an Express Mail contract with the U.S. Postal Service and fuel surcharges. International airfreight revenue grew 25.1% over the 1999 first quarter due primarily to a 20.9% increase in pounds transported (weight or freight volume) and 3.5% higher revenue per pound (yield). Freight volume and yield in the 2000 first quarter were favorably affected by improved economic conditions in the international markets served by Emery. North American airfreight revenue for the first quarter of 2000 was essentially flat, increasing 0.6% over the same quarter last year due primarily to a 5.1% increase in revenue per pound (yield) partially offset by a 4.3% decline in weight. Improved revenue per pound in the 2000 first quarter was due in part to an increase in the percentage of higher yielding guaranteed delivery service and Emery's ongoing yield management program, which is designed to eliminate or reprice certain low margin business. Emery's operating income in the first quarter of 2000 more than doubled from the same period last year, increasing to $7.4 million from $3.6 million due primarily to higher airfreight revenue. Operating income in the first quarter of 2000 was adversely affected by aircraft maintenance costs on aircraft during the implementation of the service initiatives discussed below. Higher jet fuel costs in the first quarter of 2000 were substantially mitigated by a fuel surcharge implemented by Emery in September 1999. We will continue to focus on positioning Emery as a premium service provider. In North America, we intend to continue to develop an infrastructure capable of servicing a higher volume of premium and guaranteed delivery services and to reduce costs. Key initiatives include replacing older aircraft with newer and more efficient aircraft having lower maintenance costs, and the recent reconfiguration of Emery's hub sortation center in Dayton, Ohio. Internationally, we will focus on expanding Emery's variable-cost-based operations and will continue our efforts to increase Emery's international revenue as a percentage of its total revenue. Menlo Logistics Menlo's revenue in the first quarter of 2000 exceeded the same period last year by 30.7% due primarily to higher revenue from contracts that were initially entered into prior to the first quarter of last year and consulting fees earned on contracts entered into in the first quarter of PAGE 14 2000. A portion of Menlo's revenue is attributable to logistics contracts for which Menlo manages the transportation of freight but subcontracts the actual transportation and delivery of products to third parties. We refer to this as purchased transportation. Menlo's revenue, net of purchased transportation, increased 31.9% to $65.0 million in the first quarter of 2000 from $49.6 million in the first quarter of last year. Operating income for Menlo in the first three months of 2000 increased 67.6% over the same period last year. Higher operating income was primarily attributable to increased revenue. Other Segment The Other segment consists primarily of the operations under a Priority Mail contract with the U.S. Postal Service, and includes the operating results of Road Systems and, prior to our sale of its assets in May 1999, VantageParts. Also included in the Other segment for 1999 was a net gain on the settlement of a lawsuit in January 1999. The Other segment's revenue of $141.1 million in the first quarter of 2000 increased 6.9% over the same quarter of 1999 due primarily to first- quarter 2000 revenue of $135.2 million from the Priority Mail operation, a 14.4% increase over the first quarter of 1999. Higher Priority Mail revenue was partially offset by loss of revenue from VantageParts following the sale of its assets in May 1999. In the first quarter of 2000, operating income of $311,000 for the Other segment decreased from $20.5 million in the first quarter last year. The 1999 first quarter included a $16.5 million net gain from a lawsuit settled in January 1999 and operating income of $3.5 million from the Priority Mail operations. As discussed below, Priority Mail operating income was recognized in the first six months of 1999 and break-even results on Priority Mail operations have been recognized thereafter. In accordance with the Priority Mail contract, in February 1999, Emery Worldwide Airlines (EWA), our subsidiary that operates the contract, submitted a proposal to the U.S. Postal Service (USPS) for 1999 pricing. We believe that our proposal was reasonably determined and justifiable based upon EWA's experience of operating under the Priority Mail contract. EWA did not receive a satisfactory response from the USPS. Consequently, EWA in the third quarter of 1999 filed a claim with the USPS for proposed higher prices. Through the second quarter of 1999, Priority Mail contract revenue was billed at a provisional rate set by the USPS, pending a final price determination. The USPS responded to the EWA claim with unilateral price reductions for both prior and future periods. The current rate is below EWA's cost to service this contract. Unless the rate is increased or until negotiation or litigation results in favorable pricing or contract changes, EWA will be compensated below its cost of operating the contract. Also, in August 1999, the USPS denied EWA's previously filed claim for reimbursement of additional costs incurred during the 1998 holiday season. In March 2000, EWA filed a claim with the USPS related to the Priority Mail contract to recover actual and expected reductions to EWA's contract pricing. This claim was filed in response to the reduction by the USPS in contract pricing for both prior and future periods as discussed above. The claim is in addition to EWA's previous claim for 1999 pricing as discussed above and substantially covers the remaining initial term of the contract. PAGE 15 In April 2000, EWA filed a complaint in the United States Court of Federal Claims in Washington, D.C. that requests a declaration of contract rights under the Priority Mail contract and a ruling that the USPS is in breach of contractual payment obligations. Consistent with our accounting policies described in Note 1 of the Notes to Consolidated Financial Statements, unbilled revenue from the Priority Mail contract is recognized in our financial statements. In accordance with generally accepted accounting principles, EWA recognizes unbilled revenue related to claims sufficient only to recover costs of operating under the contract. Accordingly, no operating profit has been recognized in connection with the Priority Mail contract since the first half of 1999. As a result of the claims discussed above and the USPS's decision to assert price reductions, EWA recognized $20.3 million of unbilled revenue in the first quarter of 2000 and has recognized $144.1 million in unbilled revenue since the beginning of the Priority Mail contract, which amounts are in dispute. Until the dispute is resolved, we expect that any shortfall between EWA's billed revenue from the Priority Mail contract and its costs of operating under the contract will be recognized as unbilled revenue and as a result, we will generally continue to record break-even operating results under the Priority Mail contract in our financial statements. If we determine that the unbilled revenue is not collectable, the uncollectable amount will be charged as expense to operations in the period when and if that determination is made. We have had discussions with the USPS on a range of possibilities for restructuring the activities under the Priority Mail contract. Although we cannot predict whether these discussions will in fact result in additional payments to us or a modification to the contract, the wide range of alternatives discussed has included both increasing and decreasing the scope of our activities under the contract and both partial and total termination of the contract. In addition, both we and the USPS have notified each other of alleged breaches under the contract. If our activities under the contract are curtailed or terminated, the costs could be material. Likewise, it is possible that the USPS could assert claims against us for breach of the contract or other matters, which could be significant. We believe our position with respect to the Priority Mail contract is reasonable and well founded; however, there can be no assurance as to the outcome. Accordingly, we can give no assurance that matters relating to the Priority Mail contract with the USPS will not have a material adverse effect on our financial condition or results of operations. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- In the first quarter of 2000, cash and cash equivalents decreased $34.8 million to $111.4 million. Net capital expenditures of $56.5 million and $26.7 million of net cash used in operating activities were funded with $51.0 million generated from financing activities and a reduction in cash. Cash provided by net income before depreciation, amortization and deferred taxes in the first quarter of 2000 was more than offset by increases in receivables and prepaid expenses and a decrease in accrued liabilities, contributing to a net use of $26.7 million of cash in operating activities. Investing activities in the first quarter of 2000 used $5.5 million of cash less than in the first quarter of 1999. Capital expenditures of $59.7 million in the first three months of 2000 increased $3.9 million over the same period last year. For the first three months of 2000, Con-Way spent PAGE 16 $26.9 million of cash primarily on revenue equipment and infrastructure and Emery spent $18.3 million of cash primarily on infrastructure. Software expenditures in the 2000 first quarter decreased $6.1 million from the same period last year. Financing activities in the first three months of 2000 provided $51.0 million compared to a $26.1 million use for the same period last year. As discussed above under "Results of Operations", a portion of the net proceeds of $197.5 million from the issuance in March 2000 of $200 million of 8 7/8% Notes due 2010 were used to repay a total of $152.0 million of short-term and long-term borrowings outstanding under lines of credit. As discussed above under "Results of Operations" for the "Other Segment", the provisional rate currently being paid to EWA by the U.S. Postal Service under the Priority Mail contract is below EWA's cost to service the contract. Until the dispute over pricing is resolved, our liquidity will be negatively affected by the shortfall between EWA's compensation from the contract and it's cost of operating under the contract. We maintain a $350 million unsecured credit facility and a supplemental $100 million unsecured credit facility. At March 31, 2000, we had no borrowings outstanding under the unsecured credit facilities. The $350 million facility is also available for issuance of letters of credit. Under that facility, outstanding letters of credit totaled $52.5 million at March 31, 2000. Available capacity under the $350 million facility and the supplemental line of credit was $397.5 million at March 31, 2000. At March 31, 2000 we also had $65.0 million of uncommitted lines with $53.7 million in letters of credit outstanding, leaving $11.3 million of additional short-term borrowing availability. Under other unsecured facilities, $12.9 million in letters of credit were outstanding at March 31, 2000. Our ratio of total debt to capital increased to 32.6% at March 31, 2000, from 30.5% at December 31, 1999, primarily due to the March 2000 issuance of the $200 million of 8 7/8% Notes due 2010. CYCLICALITY AND SEASONALITY - --------------------------- Our businesses operate in industries that are affected directly by general economic conditions and seasonal fluctuations, both of which affect demand for transportation services. In the trucking and airfreight industries, for a typical year, the months of September and October usually have the highest business levels while the months of January and February usually have the lowest business levels. Operations under the Priority Mail contract peak in December primarily due to higher shipping demand related to the holiday season. MARKET RISK - ----------- We are exposed to a variety of market risks, including the effects of interest rates, commodity prices and foreign currency exchange rates. Our policy is to enter into derivative financial instruments only in circumstances that warrant the hedge of an underlying asset or liability against exposure to some form of commodity, interest rate or currency- related risk. Additionally, the designated hedges should have high correlation to the underlying exposure such that fluctuations in the value of the derivatives offset reciprocal changes in the underlying exposure. PAGE 17 Our policy prohibits entering into derivative instruments for trading purposes. We may be exposed to the effect of interest rate fluctuations in the fair value of our long-term debt and capital lease obligations, as summarized in Notes 3 and 4 of our 1999 Annual Report to Shareholders. Changes in our long-term debt in the first quarter of 2000 are discussed herein in Note 2 of the Notes to Consolidated Financial Statements. The change in the fair value of our long-term obligations given a hypothetical 10% change in interest rates would be approximately $21 million at March 31, 2000. We use interest rate swaps to mitigate the impact of interest rate volatility on cash flows and the fair value of our long-term debt. At March 31, 2000, interest rate swaps consisted only of cash flow hedges. The underlying exposure of these swaps was from equipment lease obligations with variable interest rate components. As of March 31, 2000, we estimate that the net payments under the swaps given a hypothetical adverse change of 10% in market interest rates would not have a material effect on our financial condition or results of operations. In April 2000, we entered into interest rate swaps designated as fair value hedges. The underlying exposure of these swaps is the fluctuation in fair value of the $200 million of 8 7/8% Notes due 2010 issued in March 2000. As of April 30, 2000, the change in the fair value of these interest rate swaps given a hypothetical 10% change in interest rates would be approximately $12 million. Since December 31, 1999, there have been no significant changes in our foreign currency risk and commodity price risk. ACCOUNTING STANDARDS - -------------------- In June 1999, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133" (SFAS 137). SFAS 137 delays by one year the effective date of FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). SFAS 133 establishes accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet as either an asset or liability measured at its fair value and that changes in fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Qualifying hedges allow a derivative's gains and losses to offset related results on the hedged item in the income statement. SFAS 133 will now be effective January 1, 2001. We plan to adopt the statement in the first quarter of 2001 and are evaluating the impact of adoption on our financial condition and results of operations. YEAR 2000 --------- Since 1996, our Information Technology professionals have coordinated our continuing Year 2000 (Y2K) compliance effort. We believe our efforts to address Y2K issues have been successful and do not expect any material adverse effect on our financial condition or results of operations. We will continue to monitor for Y2K-related problems. Should problems arise, we will implement the Y2K business resumption contingency plans we previously established. PAGE 18 Since 1996, we expensed $38.1 million on Y2K compliance through December 31, 1999. All Y2K costs have been funded from operations. A portion of our capitalized software costs was for new financial and administrative systems that are Y2K compliant. These systems replaced non- compliant systems. FORWARD-LOOKING STATEMENTS - -------------------------- Certain statements included herein constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to a number of risks and uncertainties. Any such forward-looking statements contained herein should not be relied upon as predictions of future events. Certain such forward- looking statements can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," "seeks," "approximately," "intends," "plans," "estimates" or "anticipates" or the negative thereof or other variations thereof or comparable terminology, or by discussions of strategy, plans or intentions. Such forward-looking statements are necessarily dependent on assumptions, data or methods that may be incorrect or imprecise and they may be incapable of being realized. In that regard, the following factors, among others and in addition to the matters discussed below and elsewhere in this document, could cause actual results and other matters to differ materially from those in such forward-looking statements: changes in general business and economic conditions; increasing domestic and international competition and pricing pressure; changes in fuel prices; uncertainty regarding EWA's Priority Mail contract with the United States Postal Service, including uncertainties regarding EWA's claims under the contract described herein; labor matters, including changes in labor costs, renegotiations of labor contracts and the risk of work stoppages or strikes; changes in governmental regulation; environmental and tax matters, including the aviation excise tax, aircraft maintenance, and other tax matters discussed herein; Y2K matters; and matters relating to the spin-off of CFC. In that regard, we are or may be subject to substantial liabilities with respect to certain matters relating to CFC's business and operations, including, without limitation, guarantees of certain indebtedness of CFC and liabilities for employment-related, tax and environmental matters, including the tax matters described herein. Although CFC is, in general, either the primary or secondary obligor or jointly and severally liable with us with respect to these matters, a failure to pay or other default by CFC with respect to the obligations as to which we are or may be, or may be perceived to be, liable, whether because of CFC's bankruptcy or insolvency or otherwise, could lead to substantial claims against us. As a result of the foregoing, no assurance can be given as to future results of operations or financial condition. PAGE 19 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 clean-up costs will not have a material adverse effect on the Company's financial condition or results of operations. The Department of Transportation, through its Office of Inspector General, and the Federal Aviation Administration are conducting an investigation relating to the handling of so-called hazardous materials by Emery. The investigation is ongoing and Emery is cooperating fully. Because the investigation is at a preliminary stage, the Company is unable to predict the outcome of this investigation. On February 16, 2000, a DC-8 cargo aircraft operated by EWA crashed shortly after take-off from Mather Field, near Sacramento, California. The crew of three was killed. There were no reported injuries on the ground. The cause of the crash has not been determined. The National Transportation Safety Board has begun an investigation. The Company is currently unable to predict the outcome of this matter or the effect it may have on the Company. The Company may be subject to claims and proceedings relating to the crash, which could include private lawsuits seeking monetary damages and governmental proceedings. Although EWA maintains insurance that is intended to cover claims that may arise in connection with an airplane crash, the Company cannot assure that the insurance will in fact be adequate to cover all possible types of claims. In particular, any claims for punitive damages or any impact of possible government proceedings or other sanctions would not be covered by insurance. Certain legal matters are discussed in Note 7 in the Notes to Consolidated Financial Statements in Part I of this form. ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits 3 CNF Transportation Inc. By-laws, as amended May 1, 2000 27 Financial Data Schedule 99(a) Computation of Ratios of Earnings to Fixed Charges -- the ratios of earnings to fixed charges were 3.6 and 3.9 for the three months ended March 31, 2000 and 1999, respectively. (b) Computation of Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividends -- the ratios of earnings to combined fixed charges and preferred stock dividends were 3.4 and 3.8 for the three months ended March 31, 2000 and 1999, respectively. (b) Reports on Form 8-K On March 8, 2000, the Registrant filed a Report on Form 8-K in connection with the issuance of $200 million aggregate principal amount of its 8 7/8% Notes due 2010 (the "Notes") under the Company's shelf registration statement on Form S-3 (File No. 333-56667). In the Report on Form 8-K, the Company filed an Underwriting Agreement, Indenture and form of Note executed in connection with the previously announced public offering of the Notes. PAGE 20 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. CNF Transportation Inc. (Registrant) May 10, 2000 /s/Chutta Ratnathicam Chutta Ratnathicam Senior Vice President and Chief Financial Officer EX-3 2 Exhibit 3 CNF TRANSPORTATION INC. BYLAWS As Amended May 1, 2000 ARTICLE I OFFICES SECTION 1. Registered Office. The registered office of the Corporation in the State of Delaware shall be in the City of Wilmington, County of New Castle. SECTION 2. Other Offices. The Corporation shall also have and maintain a principal office or place of business at such place as may be fixed by the Board of Directors, and may also have other offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or as the business of the Corporation may require. ARTICLE II STOCKHOLDERS' MEETINGS SECTION 1. Place of Meetings. Meetings of the stockholders of the Corporation shall be held at such place, either within or without the State of Delaware, as may be designated from time to time by the Board of Directors or, if not so designated, then at the principal office of the Corporation. SECTION 2. Annual Meetings. The annual meetings of the stockholders of the Corporation for the purpose of election of directors and for such other business as may lawfully come before the meetings shall be held on a date and at a time designated from time to time by the Board of Directors. No business may be transacted at an annual meeting of stockholders, other than business that is either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (b) otherwise properly brought before the annual meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (c) otherwise properly brought before the annual meeting by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 2 and on the record date for the determination of stockholders entitled to vote at such annual meeting and (ii) who complies with the notice procedures set forth in this Section 2. In addition to any other applicable requirement, for business to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a stockholders notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation not less than ninety (90) days nor more than one hundred twenty (120) days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which notice of the date of the annual meeting was mailed or public disclosure of the date of the annual meeting was made, whichever first occurs. To be in proper written form, a stockholders notice to the Secretary must set forth as to each matter such stockholder proposes to bring before this annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of such stockholder, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder, (iv) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder in business and (v) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. Notwithstanding anything in the Bylaws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Section 2. The Chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 2, and if he should so determine, he shall so declare to the meeting and any such business shall not be transacted. SECTION 3. Special Meetings. Special meetings of the stockholders of the Corporation may be called, for any purpose or purposes, by the Chief Executive Officer or the Board of Directors at any time. Upon written request of any stockholder or stockholders holding in the aggregate a majority of the voting power of all stockholders, the Secretary shall call a meeting of stockholders to be held not less than thirty (30) and not more than ninety (90) days after the receipt of the request, on such date and at such time and place as may be designated by the Board of Directors. If the Secretary, within forty-five (45) days following receipt of the request, shall neglect or refuse to call the meeting in accordance with the provisions of the preceding sentence, the stockholder or stockholders making the request may do so. SECTION 4. Notice of Meetings. Except as otherwise provided by law or the Certificate of Incorporation, written notice of each meeting of stockholders shall be given not less than ten nor more than 50 days before the date of the meeting to each stockholder entitled to vote thereat, directed to his address as it appears upon the books of the Corporation; said notice to specify the place, date and hour and purpose or purposes of the meeting. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken unless the adjournment is for more than thirty days, or unless after the adjournment a new record date is fixed for the adjourned meeting, in which event a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Notice of the time, place and purpose of any meeting of stockholders may be waived in writing, either before or after such meeting, and will be waived by any stockholder by his attendance thereat in person or by proxy. Any stockholder so waiving notice of such meeting shall be bound by the proceedings of any such meeting in all respects as if due notice thereof had been given. SECTION 5. Quorum. At all meetings of stockholders, except where otherwise provided by statute or by the Certificate of Incorporation, or by the Bylaws, the presence, in person or by proxy duly authorized, of the holders of a majority of the outstanding shares of stock entitled to vote shall constitute a quorum for the transaction of business. Shares, the voting of which at said meeting has been enjoined, or which for any reason cannot be lawfully voted at such meeting shall not be counted to determine a quorum at said meeting. In the absence of a quorum any meeting of stockholders may be adjourned, from time to time, by vote of the holders of a majority of the shares represented thereat, but no other business shall be transacted at such meeting. At such adjourned meeting at which a quorum is present or represented any business may be transacted which might have been transacted at the original meeting. The stockholders present at a duly called or convened meeting, at which a quorum is present, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, all action taken by the holders of a majority of the voting power represented at any meeting at which a quorum is present shall be valid and binding upon the Corporation. SECTION 6. Voting Rights. Except as otherwise provided by law, only persons in whose names shares entitled to vote stand on the stock records of the Corporation on the record date for determining the stockholders entitled to vote at said meeting shall be entitled to vote at such meeting. Shares standing in the names of two or more persons shall be voted or represented in accordance with the determination of the majority of such persons, or, if only one of such persons is present in person or represented by proxy, such person shall have the right to vote such shares and such shares shall be deemed to be represented for the purpose of determining a quorum. Every person entitled to vote or execute consents shall have the right to do so either in person or by an agent or agents authorized by a written proxy executed by such person or his duly authorized agent, which proxy shall be filed with the Secretary of the Corporation at or before the meeting at which it is to be used. Said proxy so appointed need not be a stockholder. No proxy shall be voted on after three years from its date unless the proxy provides for a longer period. SECTION 7. List of Stockholders. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order, showing the address of and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held and which place shall be specified in the notice of the meeting, or, if not specified, at the place where said meeting is to be held, and the list shall be produced and kept at the time and place of meeting during the whole time thereof, and may be inspected by any stockholder who is present. SECTION 8. Action Without Meeting. Whenever the vote of stockholders at a meeting thereof is required or permitted to be taken in connection with any corporate action by any provisions of the statutes or of the Certificate of Incorporation, the meeting and vote of stockholders may be dispensed with: (1) if all of the stockholders who would have been entitled to vote upon the action if such meeting were held shall consent in writing to such corporate action being taken; or (2) if the Certificate of Incorporation authorizes the action to be taken with the written consent of the holders of less than all of the stock who would have been entitled to vote upon the action if a meeting were held, then on the written consent of the stockholders having not less than such percentage of the number of votes as may be authorized in the Certificate of Incorporation; provided that in no case shall the written consent be by the holders of stock having less than the minimum percentage of the vote required by statute for the proposed corporate action, and provided that prompt notice must be given to all stockholders of the taking of corporate action without a meeting and by less than unanimous written consent. SECTION 9. Rules of Conduct. The Board of Directors of the Company shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board of Directors, if any, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to stockholders of record of the Corporation and their duly authorized and constituted proxies, and such other persons as the chairman shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting on matters which are to be voted on by ballot. Unless, and to the extent, determined by the Board of Directors or the chairman of the meeting, meetings of shareholders shall not be required to be held in accordance with rules of parliamentary procedure. ARTICLE III DIRECTORS SECTION 1. Powers. The powers of the Corporation shall be exercised, its business conducted and its property controlled by the Board of Directors. SECTION 2. Number, Qualifications and Classification. (a) A majority of the directors holding office may by resolution increase or decrease the number of directors, provided, however, that the number thereof shall never be less than twelve nor greater than fifteen. A director need not be a stockholder. The directors shall be divided into three classes, designated Class I, Class II and Class III, as nearly equal in number as the then total number of directors permits. At the 1985 annual meeting of stockholders, Class I directors shall be elected for a one-year term, Class II directors for a two-year term and Class III directors for a three-year term. At each succeeding annual meeting of stockholders beginning in 1986, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year term. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional directors of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case will a decrease in the number of directors shorten the term of any incumbent director. A director shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office. Any vacancy on the Board of Directors, including any vacancy that results from an increase in the number of directors, may be filled by a majority of the Board of Directors then in office, although less than a quorum, or by a sole remaining director. Any director elected to fill a vacancy shall have the same remaining term as that of his predecessor. (b) Notwithstanding the foregoing, whenever the holders of any one or more classes or series of Preferred Stock issued by the Corporation shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of the Certificate of Incorporation applicable thereto, and such directors so elected shall not be divided into classes pursuant to these Bylaws unless expressly provided by such terms. (c) Any amendment, change or repeal of this Section 2 of Article III, or any other amendment to these Bylaws that will have the effect of permitting circumvention of or modifying this Section 2 of Article III, shall require the favorable vote, at a stockholders' meeting, of the holders of at least 80 of the then-outstanding shares of stock of the Corporation entitled to vote. SECTION 3. "Intentionally Omitted." SECTION 4. Vacancies. A vacancy in the Board of Directors shall be deemed to exist in the case of the death, resignation or removal of any director, or if the number of directors constituting the whole Board be increased, or if the stockholders, at any meeting of stockholders at which directors are to be elected, fail to elect the number of directors then constituting the whole Board. SECTION 5. Resignations. Any director may resign at any time by delivering his written resignation to the Secretary, such resignation to specify whether it will be effective at a particular time, upon receipt by the Secretary or at the pleasure of the Board of Directors. If no such specification is made, it shall be deemed effective at the pleasure of the Board of Directors. SECTION 6. Meetings. (a) The annual meeting of the Board of Directors shall be held at such time and place as the Board may determine. No notice of the annual meeting of the Board of Directors shall be necessary if such meeting is held immediately after the annual stockholders meeting and at the place where such stockholders meeting is held. If the annual meeting of the Board of Directors is held on a different date, or at a different time or place, notice of the date, time and place of such annual meeting of the Board of Directors shall be furnished to each director in accordance with the procedures of Article III, Section 6(c) of these Bylaws. The annual meeting of the Board of Directors shall be held for the purpose of electing officers and transacting such other business as may lawfully come before it. (b) Regular meetings of the Board of Directors shall be held at such place within or without the State of Delaware, and at such times as the Board may from time to time determine, and if so determined no notice thereof need be given. (c) Special meetings may be called at any time and place within or without the State of Delaware upon the call of the Chief Executive Officer or Secretary or any two directors. Notice of the date, time, place and purposes of each special meeting, and notice of the date, time and place of each annual and regular meeting for which notice is required to be given, shall be sent by mail at least seventy-two hours in advance of the time of the meeting, or by telegram at least forty-eight hours in advance of the time of the meeting, or by facsimile at least twenty-four hours in advance of the time of the meeting, to the address or facsimile number (as applicable) of each director. Notice of any special meeting may be waived in writing at any time before or after the meeting and will be waived by any director by attendance thereat. SECTION 7. Quorum and Voting. (a) A majority of the whole Board of Directors shall constitute a quorum for all purposes, provided, however, at any meeting whether a quorum be present or otherwise, a majority of the directors present may adjourn from time to time and place to place, within or without the State of Delaware, without notice other than by announcement at the meeting. (b) At each meeting of the Board at which a quorum is present all questions and business shall be determined by a vote of a majority of the directors present, unless a different vote be required by law or by the Certificate of Incorporation. SECTION 8. Action Without Meeting. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board or of such committee, as the case may be, consent thereto in writing, and such writing or writings are filed with the minutes of proceedings of the Board or committee. SECTION 9. Fees and Compensation. Directors shall not receive any stated salary for their services as directors, but, by resolution of the Board, compensation in a reasonable amount may be fixed by the Board, including, without limitation, compensation in the form of an annual retainer, a fee for each Board or Board Committee meeting attended, reimbursement for expenses of attendance at any such meeting, or any combination of any of the foregoing. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity as an officer, agent, employee, or otherwise, and receiving compensation therefor. SECTION 10. Maximum Age of Directors. Directors who have attained the age of 72 years shall be ineligible to stand for election or reelection as a director. Except as may otherwise be determined by the Board of Directors, a director who has attained the age of 72 years whose term as a director continues beyond the annual meeting of shareholders next following attainment of 72 years shall retire and resign as a director at the first directors meeting following such annual meeting of shareholders. Unless otherwise determined by the Board of Directors in accordance with the preceding sentence, for this purpose such resignation will be automatic and need not meet the requirements for resignation set forth in Section 5 of this Article III. SECTION 11. Nominations of Persons for Election to the Board of Directors. Only persons who are nominated in accordance with the following procedures set forth in these Bylaws shall be eligible for election as directors of the Corporation. Nominations of persons for election to the Board of Directors may be made at any annual meeting of stockholders (a) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (b) by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 11 and on the record date for the determination of stockholders entitled to vote and (II) who complies with the notice procedures set forth in this Section 11. In addition to any other applicable requirements, for a nomination to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a stockholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation not less than ninety (90) days nor more than one hundred and twenty (120) days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which notice of the date of the annual meeting was mailed or public disclosure of the date of the annual meeting was made, whichever first occurs. To be in proper written form, a stockholders notice to the Secretary must set forth (a) as to each person whom the stockholder proposes to nominate for election as a director (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by the person and (iv) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the |Exchange Act|), and the rules and regulations promulgated thereunder; and (b) as to the stockholder giving the notice (i) the name and record address of such stockholder, (ii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder, (iii) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (iv) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to nominate the persons named in its notice and (v) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to be named as a nominee and to serve as a director if elected. The Corporation may require any proposed nominee to furnish any other information that may reasonably be required by the Corporation to determine the qualifications of such proposed nominee to serve as a director of the Corporation. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth herein. These provisions shall not apply to nomination of any persons entitled to be separately elected by holders of Preferred Stock. The Chairman of the annual meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedures, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. ARTICLE IV OFFICERS AND COMMITTEES SECTION 1. Officers Designated. The executive officers of the Corporation shall be chosen by the Board of Directors and shall be the Chairman of the Board, the President, one or more Vice Presidents, the Secretary, one or more Assistant Secretaries, the Treasurer, one or more Assistant Treasurers, and such other executive officers as the Board of Directors from time to time may designate. The Board of Directors shall designate either the Chairman of the Board or the President as the Chief Executive Officer of the Corporation. The officer so designated shall have charge of the actual conduct and operation of the business of the Corporation, subject to the control and direction of the Board of Directors. The Chief Executive Officer shall, with the consent of the Board of Directors, assign such additional titles to Vice Presidents as he shall deem appropriate and designate the succession of officers to act in his stead in his absence or disability. He may appoint additional Vice Presidents who shall not, however, be executive officers. He shall assign all duties not otherwise specified by these Bylaws to all officers and employees of the Corporation. SECTION 2. Election, Qualification, Tenure of Office, and Duties of Executive Officers and Other Officers. (a) At the annual meeting of the Board of Directors following their election by the stockholders, the directors shall elect all executive officers of the Corporation. Any one person may hold any number of offices of the Corporation at any one time unless specifically prohibited therefrom by law. The Chairman of the Board shall be a director but no other officer need be a director. (b) Each executive officer shall hold office from the date of his election either until the date of his voluntary resignation, or death, or until the next annual meeting of the Board of Directors and until a successor shall have been duly elected and qualified, whichever shall first occur; provided that any such officer may be removed by the Board of Directors whenever in its judgment the best interest of the Corporation will be served thereby, and the Board may elect another in the place and stead of the person so removed. (c) Chairman of the Board: The Chairman of the Board shall preside at all meetings of the stockholders, of the Board of Directors, and of the Executive Committee. He shall have the responsibility of keeping the directors informed on all policy matters, and shall have such other powers and perform such other duties as may be prescribed by the Board. (d) President: The President shall, in the absence of the Chairman of the Board preside at all meetings of the stockholders, the Board of Directors and the Executive Committee. He shall exercise all of the powers and discharge all of the other duties of the Chairman of the Board in the absence of the Chairman of the Board. He shall perform such other duties as may be prescribed by the Chairman of the Board. (e) Vice Presidents: The Vice Presidents shall have such duties and have such other powers as shall be prescribed by the Chief Executive Officer. Such Vice President as may be designated by the Board of Directors or the Chairman of the Board shall preside at all meetings of the stockholders. (f) Secretary: The Secretary shall record all the proceedings of the meetings of the Corporation and of the directors in a book or books kept for that purpose. He shall attend to the giving and serving of all notices on behalf of the Corporation. He shall have the custody of the corporate seal and affix the same to such instruments as may be required. He shall have such other powers and perform such other duties as may be prescribed by the Chief Executive Officer. (g) Assistant Secretaries: Assistant Secretaries shall assist the Secretary in the performance of his duties and any one of the Assistant Secretaries may perform all of the duties of the Secretary if at any time he shall be unable to act. Assistant Secretaries shall have such other powers and perform such other duties as may be prescribed by the Chief Executive Officer. (h) Treasurer: The Treasurer shall have charge of the custody, control and disposition of all funds of the Corporation and shall account for same. He shall have such other powers and perform such other duties as may be prescribed by the Chief Executive Officer. (i) Assistant Treasurers: Assistant Treasurers shall assist the Treasurer in the performance of his duties and any one of the Assistant Treasurers may perform all of the duties of the Treasurer if at any time he shall be unable to act. Assistant Treasurers shall have such other powers and perform such other duties as may be prescribed by the Chief Executive Officer. SECTION 3. Committees. (a) Executive Committee. The Board of Directors shall, by resolution passed by a majority of the whole Board, appoint an Executive Committee of not less than three members, all of whom shall be directors. The Executive Committee, to the extent permitted by law, shall have and may exercise when the Board of Directors is not in session all powers of the Board in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers which may require it. It shall be the duty of the Secretary of the Corporation to record the minutes of all actions of the Executive Committee. (b) Other Committees. The Board of Directors may, by resolution passed by a majority of the whole Board, from time to time appoint such other committees as may be permitted by law. The Chief Executive Officer may appoint such other committees as he finds necessary to the conduct of the Corporation's business. Such other committees appointed by the Board of Directors or the Chief Executive Officer shall have such powers and perform such duties as may be prescribed by the body or person appointing such committee. (c) Term; Number of Committee Members. The members of all committees of the Board of Directors shall serve a term coexistent with that members remaining term as a member of the Board of Directors, or until such time as the Board of Directors shall replace that member on such committee or ask that member to accept another committee assignment in its stead. The Board, subject to the provisions of subsection (a) and (b) of this Section 3, may at any time increase or decrease the number of members of a committee or terminate the existence of a committee; provided, that no committee, while it exists, shall consist of less than three members. The membership of a committee member shall terminate on the date of his death or voluntary resignation, but the Board may at any time for any reason remove any individual committee member and the Board may fill any committee vacancy created by death, resignation, removal or increase in the number of members of the committee. The Board of Directors may designate one or more directors as alternate members of any committee, to replace any absent or disqualified member at any meeting of the committee. If the qualified members of a committee, in attendance at a committee meeting, believe that the absence or disqualification of one or more members of that committee seriously impairs the function of that committee, such remaining qualified members, whether or not constituting a quorum, may by unanimous action appoint another member of the Board of Directors to act as a committee member at that meeting. (d) Notice of Committee Meetings. Notice of the date, time and place of each committee meeting shall be sent to each committee member by mail at least seventy-two hours in advance of the time of the meeting, or by telegram at least forty-eight hours in advance of the time of the meeting, or by facsimile at least twenty-four hours in advance of the time of the meeting, to the address or facsimile number (as applicable) of each committee member. ARTICLE V CAPITAL STOCK SECTION 1. Form and Execution of Certificates. Certificates for the shares of stock of the Corporation shall be in such form as are consistent with the Certificate of Incorporation and applicable law. Every holder of stock in the Corporation shall be entitled to have a certificate signed by, or in the name of the Corporation by, the Chairman of the Board, President or any Vice President and by the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary, certifying the number of shares owned by him in the Corporation. Where such certificate is countersigned by a transfer agent other than the Corporation or its employee, or by a registrar other than the Corporation or its employee, any other signature on the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. SECTION 2. Lost Certificates. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed. SECTION 3. Transfers. Transfers of record of shares of the capital stock of the Corporation shall be made upon its books by the holders thereof, in person or by attorney duly authorized, and upon the surrender of a certificate or certificates for a like number of shares, properly endorsed or accompanied by a properly endorsed stock power. SECTION 4. Fixing Record Dates. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed: (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; and (2) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 5. Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE VI OTHER SECURITIES OF THE CORPORATION All bonds, debentures and other corporate securities of the Corporation, other than stock certificates, may be signed by the Chairman of the Board, the President or any Vice President, or such other person as may be authorized by the Board of Directors, and the corporate seal impressed thereon or a facsimile of such seal imprinted thereon and attested by the signature of the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer, or such other person as may be authorized by the Board of Directors; provided, however, that where any such bond, debenture or other corporate security shall be authenticated by a trustee under an indenture pursuant to which such bond, debenture or other corporate securities shall be issued, the signatures of the persons signing and attesting the corporate seal on such bond, debenture or other corporate security may be the imprinted facsimile of the signatures of such persons. Interest coupons appertaining to any such bond, debenture or other corporate security, authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the Corporation, or such other person as may be authorized by the Board of Directors, or bear imprinted thereon the facsimile signature of such person. In case any person who shall have signed or attested any bond, debenture or other corporate security, or whose facsimile signature shall appear thereon or on any such interest coupon, shall have ceased to be an officer before the bond, debenture or other corporate security so signed or attested shall have been delivered, such bond, debenture or other corporate security nevertheless may be adopted by the Corporation and issued and delivered as though the person who signed the same or whose facsimile signature shall have been used thereon had not ceased to be such officer of the Corporation. ARTICLE VII SECURITIES OWNED BY THE CORPORATION Power to Vote. Unless otherwise ordered by the Board of Directors, the Chief Executive Officer, or any officer designated in writing by the Chief Executive Officer, shall have full power and authority in the name and on behalf of the Corporation, to vote and to act either in person or by proxy at any meeting of the holders of stock or securities in any corporation upon and in respect of any securities therein which the Corporation may hold, and shall possess and may exercise in the name of the Corporation any and all rights and powers incident to the ownership of such stock or securities which, as the owner thereof, the Corporation shall possess and might exercise including the right to give written consents in respect to action taken or to be taken. The Board of Directors may from time to time confer like powers upon any other person or persons. ARTICLE VIII CORPORATE SEAL The corporate seal shall consist of a die bearing the inscription, CNF Transportation Inc. Corporate Seal Delaware. ARTICLE IX AMENDMENTS These Bylaws may be repealed, altered or amended or new Bylaws adopted by written consent of stockholders in the manner authorized by Section 8 of Article II or at any meeting of the stockholders, either annual or special, by the affirmative vote of a majority of the stock entitled to vote at such meeting. The Board of Directors shall also have the authority to repeal, alter or amend these Bylaws or adopt new Bylaws by unanimous written consent or by the affirmative vote of a majority of the whole Board at any annual, regular, or special meeting subject to the power of the stockholders to change or repeal such Bylaws. ARTICLE X MISCELLANEOUS SECTION 1. Definitions. As used in these Bylaws and wherever the context shall require, the word |person| shall include associations, partnerships and corporations as well as individuals; words in the masculine gender shall include the feminine and associations, partnerships and corporations; words in the singular shall include the plural and words in the plural may mean only the singular, and words |additional compensation| shall mean and include all bonus, profit sharing, retirement, deferred compensation, and all other additional compensation plans or arrangements affecting persons individually or as a group. SECTION 2. Notices. Whenever, under any provisions of these Bylaws, notice is required to be given to any stockholder, the same shall be given in writing, timely and duly deposited in the United States Mail, postage prepaid, and addressed to his last known post office address as shown by the stock record of the Corporation or its transfer agent. Any notice required to be given to any director may be given by the method hereinabove stated, by personal delivery, or by telegram, except that such notice, other than one which is delivered personally, shall be sent to such address as such director shall have filed in writing with the Secretary of the Corporation, or, in the absence of such filing, to the last known post office address of such director. If no address of a stockholder or director be known, such notice may be sent to the principal office of the Corporation. An affidavit of mailing, executed by a duly authorized and competent employee of the Corporation or its transfer agent appointed with respect to the class of stock affected, specifying the name and address or the names and addresses of the stockholder or stockholders, director or directors, to whom any such notice or notices was or were given, and the time and method of giving the same, shall be conclusive evidence of the statements therein contained. All notices given by mail, as above provided, shall be deemed to have been given as at the time of mailing and all notices given by telegram shall be deemed to have been given as at the sending time recorded by the telegraph company transmitting the same. It shall not be necessary that the same method of giving be employed in respect of all directors, but one permissible method may be employed in respect of any one or more, and any other permissible method or methods may be employed in respect of any other or others. The period or limitation of time within which any stockholder may exercise any option or right, or enjoy any privilege or benefit, or be required to act, or within which any directors may exercise any power or right, or enjoy any privilege, pursuant to any notice sent him in the manner above provided, shall not be affected or extended in any manner by the failure of such stockholder or such director to receive such notice. Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation, or of these Bylaws, a waiver thereof in writing signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Whenever notice is required to be given, under any provision of law or of the Certificate of Incorporation or Bylaws of the Corporation, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the Corporation is such as to require the filing of a certificate under any provision of the Delaware General Corporation Law, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful. SECTION 3. Indemnification of Officers, Directors, Employees and Agents.(a) Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is involved in any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (hereinafter a |Proceeding|), by reason of the fact that he, or a person of whom he is the legal representative, is or was a director, officer, employee, or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee, or agent of another corporation or of a partnership, joint venture, trust, or other enterprise, including service with respect to employee benefit plans, whether the basis of the Proceeding is alleged action in an official capacity as a director, officer, employee, or agent or in any other capacity while serving as a director, officer, employee, or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than were permitted prior to amendment) against all expenses, liability, and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties, and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith; provided, however, that except as to actions to enforce indemnification rights pursuant to paragraph (c) of this Section, the Corporation shall indemnify any such person seeking indemnification in connection with a Proceeding (or part thereof) initiated by such person only if the Proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Article shall be a contract right for the benefit of the Corporation's directors, officers, employees, and agents. (b) Authority to Advance Expenses. Expenses incurred (including attorneys' fees) by an officer or director (acting in his capacity as such) in defending a Proceeding shall be paid by the Corporation in advance of the final disposition of such Proceeding, provided, however, that if required by the Delaware General Corporation Law, as amended, such expenses shall be advanced only upon delivery to the Corporation of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article or otherwise. Such expenses incurred by other employees or agents of the Corporation (or by the directors or officers not acting in their capacity as such, including service with respect to employee benefit plans) may be advanced upon such terms and conditions as the Board of Directors deems appropriate. (c) Right of Claimant to Bring Suit. If a claim under paragraph (a) or (b) of this Section is not paid in full by the Corporation within sixty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense (including attorneys' fees) of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending a Proceeding in advance of its final disposition where the required undertaking has been tendered to the Corporation) that the claimant has not met the standards of conduct that make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed. The burden of proving such a defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper under the circumstances because he has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant had not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct. (d) Provisions Nonexclusive. The rights conferred on any person by this Section shall not be exclusive of any other rights that such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. (e) Authority to Insure. The Corporation may purchase and maintain insurance to protect itself and any person who is or was a director, officer, employee, or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against any liability, expense, or loss asserted against or incurred by such person, whether or not the Corporation would have the power to indemnify him against such liability, expense, or loss under applicable law or the provisions of this Article. (f) Survival of Rights. The rights provided by this Section shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person. (g) Effect of Amendment. Any amendment, repeal, or modification of this Section shall not (a) adversely affect any right or protection of any director, officer, employee, or agent existing at the time of such amendment, repeal, or modification, or (b) apply to the indemnification of any such person for liability, expense, or loss stemming from actions or omissions occurring prior to such amendment, repeal, or modification. CERTIFICATE The undersigned, Secretary of CNF TRANSPORTATION INC., does hereby certify that the foregoing is a true and correct copy of the Bylaws of CNF TRANSPORTATION INC., as amended to date hereof. In witness whereof the undersigned has hereunto set his hand and affixed the seal of said corporation this day of , .Secretary of CNF Transportation Inc. CNF TRANSPORTATION INC. INCORPORATED IN DELAWARE AUGUST 13, 1958 UNDER THE CORPORATE NAME OF CONSOLIDATED FREIGHTWAYS COMPANY BYLAWS As Amended May 1, 2000 EX-27 3
5 1000 3-MOS DEC-31-2000 MAR-31-2000 111,415 0 1,038,941 (26,238) 42,670 1,283,064 2,044,012 (899,716) 3,207,573 1,016,135 534,679 125,000 126,898 364,218 507,253 3,207,573 0 1,462,753 0 1,389,336 5,013 0 6,400 68,404 29,072 39,332 0 0 0 37,298 0.77 0.69
EX-99 4 Exhibit 99(a) CNF TRANSPORTATION INC. COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES (Dollars in thousands) Three Months Ended March 31, 2000 1999 ---------- ---------- Fixed Charges and Preferred Stock Dividends: Interest expense $ 6,400 $ 7,126 Capitalized interest 1,748 1,129 Dividend requirement on Series B Preferred Stock [1] 2,717 3,063 Interest component of rental expense [2] 13,806 12,684 -------- -------- $24,671 $24,002 Earnings: Income before taxes $68,404 $74,861 Fixed Charges and Preferred Stock Dividends 24,671 24,002 Capitalized interest (1,748) (1,129) Preferred dividend requirements [3] (2,717) (3,063) -------- -------- $88,610 $94,671 Ratio 3.6x 3.9x ======== ======== [1] Dividends on shares of the Series B cumulative convertible preferred stock are used to pay debt service on notes issued by the Company's Thrift and Stock Plan. [2] Estimate of the interest portion of lease payments. [3] Preferred stock dividend requirements included in fixed charges but not deducted in the determination of the Income before Taxes. EX-99 5 Exhibit 99(b) CNF TRANSPORTATION INC. COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (Dollars in thousands) Three Months Ended March 31, 2000 1999 Fixed Charges: --------- -------- Interest expense $ 6,400 $ 7,126 Capitalized interest 1,748 1,129 Dividend requirement on Series B Preferred Stock [1] 2,717 3,063 Dividend requirement on preferred securities of subsidiary trust 1,563 1,563 Interest component of rental expense [2] 13,806 12,684 -------- -------- $26,234 $25,565 Earnings: Income before taxes $68,404 $74,861 Fixed charges 26,234 25,565 Capitalized interest (1,748) (1,129) Preferred dividend requirements [3] (2,717) (3,063) -------- -------- $90,173 $96,234 Ratio 3.4x 3.8x ======== ======== [1] Dividends on shares of the Series B cumulative convertible preferred stock are used to pay debt service on notes issued by the Company's Thrift and Stock Plan. [2] Estimate of the interest portion of lease payments. [3] Preferred stock dividend requirements included in fixed charges but not deducted in the determination of the Income before Taxes. -----END PRIVACY-ENHANCED MESSAGE-----