11-K 1 ewwsp02.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 11-K FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 _X_ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2002 OR ___ TRANSITION REPORT PURSUANT TO SECTION 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 INC. EWW SAVINGS PLAN CNF 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 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons administering the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. CNF Inc. EWW Savings Plan June 27, 2003 /s/ Mark C. Thickpenny ------------------------------- Mark C. Thickpenny Chairman, CNF Inc. Benefits Administrative Committee CNF INC. EWW SAVINGS PLAN FINANCIAL STATEMENTS AND SCHEDULE AS OF DECEMBER 31, 2002 AND 2001 AND FOR THE YEAR ENDED DECEMBER 31, 2002 TOGETHER WITH AUDITORS' REPORT Independent Auditors' Report To the Compensation Committee of the CNF Inc. Board of Directors: We have audited the accompanying statements of net assets available for benefits of the CNF Inc. EWW Savings Plan as of December 31, 2002 and 2001, and the related statement of changes in net assets available for benefits for the year ended December 31, 2002. These financial statements are the responsibility of the plan administrator. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2002 and 2001, and the changes in its net assets available for benefits for the year ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets (held at end of year) is presented for purposes of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects, in relation to the basic financial statements taken as a whole. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The fund information in the statements of net assets available for benefits and statement of changes in net assets available for benefits is presented for purposes of additional analysis rather than to present the net assets available for benefits and changes in net assets available for benefits of each fund. The fund information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects, in relation to the basic financial statements taken as a whole. /s/ KPMG LLP Portland, Oregon, June 20, 2003 CNF INC. EWW SAVINGS PLAN DECEMBER 31, 2002 AND 2001 INDEX TO FINANCIAL STATEMENTS AND SCHEDULE Page FINANCIAL STATEMENTS: Statement of Net Assets Available for Benefits as of December 31, 2002 1 Statement of Net Assets Available for Benefits as of December 31, 2001 2 Statement of Changes in Net Assets Available for Benefits for the Year Ended December 31, 2002 3 NOTES TO FINANCIAL STATEMENTS 4 SUPPLEMENTAL SCHEDULE: Schedule I: Schedule H, Line 4i - Schedule of Assets (Held at End of Year) as of December 31, 2002 7 PAGE 1 CNF INC. EWW SAVINGS PLAN STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS AS OF DECEMBER 31, 2002
Participant Non-Participant Directed Directed Total ------------- ---------------------------- ------------- Restricted CNF CNF Common Preferred Stock Fund Stock Fund ------------- ------------- ASSETS: Investments, at fair value- Shares in registered investment companies $ 9,479,974 $ - $ - $ 9,479,974 Common trust funds 4,488,288 - - 4,488,288 Participant loans 520,735 - - 520,735 CNF equity 589,779 678,423 1,348,819 2,617,021 ------------- ------------- ------------- ------------- Total investments $ 15,078,776 $ 678,423 1,348,819 17,106,018 Participant contributions receivable 10,332 - - 10,332 Cash 197 83 - 280 ------------- ------------- ------------- ------------- NET ASSETS AVAILABLE FOR BENEFITS $ 15,089,305 $ 678,506 $ 1,348,819 $ 17,116,630 ============= ============= ============= ============= See accompanying notes to financial statements.
PAGE 2 CNF INC. EWW SAVINGS PLAN STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS AS OF DECEMBER 31, 2001
Participant Non-Participant Directed Directed Total ------------- ---------------------------- ------------- Restricted CNF CNF Common Preferred Stock Fund Stock Fund ------------- ------------- ASSETS: Investments, at fair value- Shares in registered investment companies $ 17,854,028 $ - $ - $ 17,854,028 Common trust funds 6,943,956 - - 6,943,956 Participant loans 1,463,142 - - 1,463,142 CNF equity 1,178,447 1,217,867 2,062,085 4,458,399 ------------- ------------- ------------- ------------- Total investments 27,439,573 1,217,867 2,062,085 30,719,525 Participant contributions receivable 19,958 - - 19,958 Cash - - 16,843 16,843 ------------- ------------- ------------- ------------- NET ASSETS AVAILABLE FOR BENEFITS $ 27,459,531 $ 1,217,867 $ 2,078,928 $ 30,756,326 ============= ============= ============= ============= See accompanying notes to financial statements.
PAGE 3 CNF INC. EWW SAVINGS PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEAR ENDED DECEMBER 31, 2002
Participant Non-Participant Directed Directed Total -------------- ------------------------------ -------------- Restricted CNF CNF Common Preferred Stock Fund Stock Fund -------------- -------------- ADDITIONS/(DEDUCTIONS): Participant contributions $ 606,964 $ - $ - $ 606,964 Dividend income (Note 1) - - 103,182 103,182 Interest income 80,405 9,617 - 90,022 Transfers in from other plans 377,228 19,997 37,021 434,246 Net depreciation in fair value of investments (Note 3) (3,910,829) (28,666) (243,651) (4,183,146) Distributions to participants (Note 1) (9,560,192) (1,130,772) - (10,690,964) -------------- -------------- -------------- -------------- Total deductions (12,406,424) (1,129,824) (103,448) (13,639,696) INTERFUND TRANSFERS, net 36,198 590,463 (626,661) - -------------- -------------- -------------- -------------- Net decrease (12,370,226) (539,361) (730,109) (13,639,696) NET ASSETS AVAILABLE FOR BENEFITS, December 31, 2001 27,459,531 1,217,867 2,078,928 30,756,326 -------------- -------------- -------------- -------------- NET ASSETS AVAILABLE FOR BENEFITS, December 31, 2002 $ 15,089,305 $ 678,506 $ 1,348,819 $ 17,116,630 ============== ============== ============== ============== See accompanying notes to financial statements.
PAGE 4 CNF INC. EWW SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS AND SCHEDULE 1. Description of Plan The following description of the CNF Inc. EWW Savings Plan ("the Plan") is provided for general information purposes only. Participants should refer to the Employee Benefits Handbook or the Plan document for more complete information. General: The Plan is a defined contribution plan and is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Overall responsibility for administering the Plan rests with the CNF Inc. ("CNF") Administrative Committee ("the Committee"), which is appointed by the Chief Executive Officer of CNF. The Committee reports directly to the Compensation Committee of CNF's Board of Directors. The Plan's trustee, T. Rowe Price Trust Company ("the Trustee"), is responsible for the management and control of the Plan's assets. In connection with CNF's announcement of the cessation of Emery Worldwide Airlines' ("EWA") air carrier operations on December 5, 2001, EWA terminated the employment of all of its pilots and crewmembers, bringing the total number of terminated employees in 2001 to 800. Distributions to participants in 2002 of $10,690,964, as reported in the Statement of Changes in Net Assets Available for Benefits, reflects these employee terminations. Amendments: During 2000, CNF amended the CNF Thrift and Stock Plan ("TASP") and the Plan. Effective September 19, 2000, the pilots of EWA ceased participation in the TASP and their elective deferrals began being contributed to the Plan. The EWW pilots' vested balance in the TASP was transferred to the Plan effective December 20, 2000. In December 2002, the Plan was amended to reflect certain provisions of the Economic Growth and Tax Relief and Reconciliation Act of 2001 ("EGTRRA"), and to reflect compliance with final regulations under Internal Revenue Code ("Code") section 401(a)(9) by adoption of the Internal Revenue Service ("IRS") model amendment pursuant to Rev. Proc. 2002-29. The changes made in this amendment were effective generally January 1, 2002, except for the changes made with respect to Code section 401(a)(9) which are effective January 1, 2003. Eligibility: The Plan covers all eligible employees of CNF who are covered by a collective bargaining unit that specifically provides for participation in the Plan. Employees become eligible to participate in the Plan upon hire if they are regular full-time employees. Supplemental or part-time employees become eligible upon completion of 750 hours and one year of service. Contributions: Participants may contribute up to 50% of their compensation into the Plan, as defined by the Plan and subject to certain limitations. Each participating employee may direct contributions in any one or more of the investment funds established under the Plan. CNF makes no matching contributions for participants of the Plan. Participants who formerly participated in the TASP, as discussed under "-Amendments" above, are awarded Preferred Stock as a substitute for cash dividends. For 2002, these participants received Preferred Stock with a historical cost of $103,182, as shown on the Statement of Changes in Net Assets Available for Benefits. The Plan allows for a supplemental employer contribution of up to 10 days of unused forfeited vacation and sick days for those participants whose collective bargaining agreements provide for such contributions. Participant Accounts: A separate account is maintained for each participant of the Plan. Each account is credited with the participant's and employer contributions, if any, and an allocation of the Plan's net earnings. The Plan's net earnings are allocated to the separate funds in each participant's account based upon the value of the individual's account fund balance in relation to the Plan's total fund balance. Vesting: Participants are fully vested at all times in all contributions made to the Plan plus net earnings thereon. PAGE 5 Participant Loans: The Plan has a loan provision allowing participants access to funds on a tax-free basis. Each participant may borrow from a minimum of $1,000 up to a maximum of $50,000 from the participant's fund account, reduced by the excess of the participant's highest outstanding loan balance during the one-year period on the day before the loan is made over the participant's current outstanding loan balance on the date of the loan. Loans may not exceed 50% of a participant's vested account balance. The loans are secured by the vested balance in the participant's account. Loans must be repaid within 4 1/2 years and bear interest at a rate determined by the loan committee (the prime rate plus 1% in 2002). Loans outstanding at December 31, 2002 bear interest at rates ranging from 5.75% to 10.50%. Principal and interest are paid ratably through payroll deductions. Distribution to Participants: Employees become eligible for distribution upon termination of employment, disability, retirement or death. Distributions are payable in the form of lump sum payments or in a series of substantially equal annual installments. Plan Termination: Although it has not expressed any intent to do so, CNF has the right under the Plan to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, CNF shall direct the Trustee with respect to the distribution of accounts to or for the exclusive benefit of participants or their beneficiaries. 2. Summary of Significant Accounting Policies Basis of Accounting: The accompanying financial statements have been prepared using the accrual method of accounting. Financial Instruments: The investments in the accompanying financial statements are stated at quoted market prices, which approximate fair value as of December 31, 2002 and 2001 except for (1) participant loans outstanding that are valued at cost, which approximates fair value and (2) Preferred Stock, which does not have a quoted market value, and is stated at fair value as determined by an annual independent appraisal. Investments: The Plan invests in various investments. Investment securities are generally exposed to various risks, such as interest rate, credit and overall market volatility risks. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the value of investment securities will occur in the near term and that such changes could materially affect amounts reported in the Statements of Net Assets Available for Benefits. Income Recognition: The difference in market value from one period to the next is included in net depreciation in fair value of investments in the accompanying Statement of Changes in Net Assets Available for Benefits. The net depreciation in fair value of investments also includes realized gains and losses. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Purchases and sales of securities are recorded on the trade-date basis. The Plan is charged a wrap fee for each investment transaction recorded in the Trust. Accordingly, these costs result in an overall reduction in the investment returns recorded by each underlying asset. Operating Expenses: During 2002, all administrative expenses of the Plan were paid by CNF. Payment of Benefits: Benefits paid to participants are recorded upon distribution. Estimates: Management makes estimates and assumptions when preparing the financial statements in conformity with accounting principles generally accepted in the United States of America. These estimates and assumptions affect the amounts reported in the accompanying financial statements and notes thereto. Actual results could differ from those estimates. PAGE 6 3. Investments The investment options available to participants were revised during 2002. A fund with shares in registered investment companies was added as a participant-directed investment option while a common trust fund was removed from the plan. The following presents investments that represent 5 percent or more of the Plan's net assets as of December 31, 2002 and 2001. December 31, 2002 2001 ------------ ------------ Participant Directed Investments: Shares in Registered Investment Companies: T. Rowe Price Growth Stock Fund, 175,802 and 242,540 shares, respectively $ 3,266,398 $ 5,864,629 T. Rowe Price Science and Technology Fund, 210,428 and 289,852 shares, respectively 2,615,616 6,063,702 T. Rowe Price Equity Income Fund, 99,769 and 137,544 shares, respectively 1,974,431 3,252,920 Common Trust Funds: T. Rowe Price US Treasury Money Market Trust, 3,051,871 and 4,311,262 shares, respectively 3,051,871 4,311,262 Non-Participant Directed Investments: CNF Preferred Stock, 6,332 and 9,331 shares, respectively 1,348,819 2,062,085 During 2002, the Plan's investments (including gains and losses on investments bought and sold, as well as held during the year) depreciated in value as follows: Shares in registered investment companies $ (3,623,969) Common trust funds (276,558) CNF Common stock (38,968) CNF Preferred stock (243,651) ------------- $ (4,183,146) ============= 4. Income Tax Status The Internal Revenue Service has determined and informed CNF by a letter dated October 3, 2001, that the Plan and related trust are designed in accordance with applicable sections of the Code. The Plan has been amended since receiving the determination letter. However, the plan administrator believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the Code. Therefore, the plan administrator believes that the Plan was qualified and the related trust was tax exempt as of the financial statement date. 5. Related Party Transactions Certain Plan investments are shares in funds managed by T. Rowe Price Trust Company, the trustee as defined by the Plan. Therefore, these investments and investment transactions qualify as party-in- interest. PAGE 7 SCHEDULE I CNF INC. EWW SAVINGS PLAN EIN 94-1444798 PLAN NO. 112 SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR) AS OF DECEMBER 31, 2002 Identity of Issue Borrower, Description of Investment Lessor Including Maturity Date, Rate of or Similar Interest, Collateral, Par or Current Party Maturity Value Cost Value -------------- -------------------------------------- ----------- ----------- Shares in Registered Investment Companies: *T. Rowe Price Growth Stock Fund (175,801.816 shares) $ 4,515,289 $ 3,266,398 *T. Rowe Price Equity Income Fund (99,769.104 shares) 2,390,658 1,974,431 *T. Rowe Price Science and Technology Fund (210,427.679 shares) 5,913,040 2,615,616 *T. Rowe Price International Stock Fund (80,338.461 shares) 1,050,782 713,406 *T. Rowe Price Small-Cap Stock Fund (11,414.975 shares) 275,320 245,422 *T. Rowe Price PIMCO Total Return Fund (61,871.598 shares) 660,071 660,170 *T. Rowe Price Undiscovered Managers Small Cap Growth Fund (740.381 shares) 4,439 4,531 Common Trust Funds: *T. Rowe Price Equity Index Trust (22,902.396 shares) 742,800 550,116 *T. Rowe Price Bond Index Trust (10,742.573 shares) 200,020 217,430 *T. Rowe Price U.S. Treasury Money Market Fund (3,051,871.070 shares) 3,051,871 3,051,871 *T. Rowe Price Retirement Strategy Trust - Balanced (35,129.758 shares) 752,784 668,871 *Plan Participant Loans with interest participants from 5.75% to 10.50% and maturity dates from 2003 to 2007 - 520,735 Common Stock: *CNF Inc. Unrestricted CNF Common Stock 513,833 589,779 (17,743.051 shares) *CNF Inc. Restricted CNF Common Stock Fund (20,409.845 shares) 552,788 678,423 Preferred Stock: *CNF Inc. CNF Preferred Stock - Allocated (6,332.484 shares) 962,920 1,348,819 ----------- Total Investments $17,106,018 =========== *Represents a party-in-interest transaction as of December 31, 2002. NOTE: Cost is calculated using the historical rolling-average-cost method. See accompanying independent auditors' report.