-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, lxGvrHMhGu7nkFoaD4hIhazJEmuYX+GC4TdDUzIGyXTBn1ZQIL/eQaebYze+xHI2 A78YZQNZjURmDTVzjssk+g== 0000023675-94-000010.txt : 19941116 0000023675-94-000010.hdr.sgml : 19941116 ACCESSION NUMBER: 0000023675-94-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONSOLIDATED FREIGHTWAYS INC CENTRAL INDEX KEY: 0000023675 STANDARD INDUSTRIAL CLASSIFICATION: 4213 IRS NUMBER: 941444798 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05046 FILM NUMBER: 94558932 BUSINESS ADDRESS: STREET 1: 3240 HILLVIEW AVE CITY: PALO A LTO STATE: CA ZIP: 94304 BUSINESS PHONE: 4154942900 10-Q 1 PAGE 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1994 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from N/A to N/A COMMISSION FILE NUMBER 132-3 CONSOLIDATED FREIGHTWAYS, INC. Incorporated in the State of Delaware I.R.S. Employer Identification No. 94-1444798 3240 Hillview Avenue, Palo Alto, California 94304 Telephone Number (415) 494-2900 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes xx No Number of shares of Common Stock, $.625 par value, outstanding as of September 30, 1994 : 36,285,771 PAGE 2 CONSOLIDATED FREIGHTWAYS, INC. FORM 10-Q Quarter Ended September 30, 1994 _________________________________________________________________ _________________________________________________________________ INDEX PART I. FINANCIAL INFORMATION Page Item 1. Financial Statements Consolidated Balance Sheets - September 30, 1994 and December 31, 1993 3 Statements of Consolidated Income - Three Months and Nine Months Ended September 30, 1994 and 1993 5 Statements of Consolidated Cash Flows - Nine Months Ended September 30, 1994 and 1993 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION Item 1. Legal Proceedings 11 Item 6. Exhibits and Reports on Form 8-K 11 SIGNATURES 12 PAGE 3 PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements CONSOLIDATED FREIGHTWAYS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 30, December 31, 1994 1993 (Dollars in thousands) ASSETS CURRENT ASSETS Cash and temporary cash investments $ 140,574 $ 139,044 Trade accounts receivable, net of allowances 599,324 508,669 Other accounts and notes receivable 72,056 24,261 Operating supplies, at lower of average cost or market 38,458 34,940 Prepaid expenses 83,180 69,009 Deferred income taxes 109,354 108,458 Total Current Assets 1,042,946 884,381 PROPERTY, PLANT AND EQUIPMENT, at cost Land 158,787 152,402 Buildings and improvements 509,115 488,292 Revenue equipment 989,982 935,482 Other equipment and leasehold improvements 368,894 347,601 2,026,778 1,923,777 Accumulated depreciation and amortization (1,085,830) (1,013,333) 940,948 910,444 OTHER ASSETS Cost in excess of net assets of businesses acquired, net of accumulated amortization 345,506 354,076 Operating rights, net of accumulated amortization -- 9,129 Long-term receivables 6,600 6,600 Marketable securities at lower of cost or market 14,019 13,727 Restricted funds 14,287 13,954 Deferred income taxes 32,455 16,659 Deferred charges and other assets 117,298 102,889 530,165 517,034 TOTAL ASSETS $2,514,059 $2,311,859 The accompanying notes are an integral part of these statements. PAGE 4 CONSOLIDATED FREIGHTWAYS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 30, December 31, 1994 1993 (Dollars in thousands) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued liabilities $ 801,759 $ 634,107 Accrued claims costs 142,876 138,242 Current maturities of long-term debt and capital leases 41,050 39,246 Federal and other income taxes 48,780 33,449 Total Current Liabilities 1,034,465 845,044 LONG-TERM LIABILITIES Long-term debt and guarantees 294,639 297,215 Long-term obligations under capital leases 111,171 111,194 Accrued claims costs 164,892 173,999 Other liabilities and deferred credits 251,855 261,032 Total Liabilities 1,857,022 1,688,484 SHAREHOLDERS' EQUITY Preferred stock, no par value; authorized 5,000,000 shares: Series A, designated 600,000 shares; none issued -- -- Series B, 8.5% cumulative, convertible, $.01 stated value; designated 1,100,000 shares; issued 963,919 and 968,655 shares, respectively 10 10 Series C, 8.738% cumulative, convertible, $.01 stated value; designated and issued 690,000 shares 7 7 Additional paid-in capital, preferred stock 264,462 265,182 Deferred TASP compensation (123,550) (129,276) Total Preferred Shareholders' Equity 140,929 135,923 Common stock, $.625 par value; authorized 100,000,000 shares; issued 43,895,612 and 43,340,801 shares, respectively 27,435 27,090 Additional paid-in capital, common stock 112,765 104,666 Cumulative translation adjustment (229) 1,229 Retained earnings 563,767 542,811 Cost of repurchased common stock (7,609,841 and 7,638,809 shares, respectively) (187,630) (188,344) Total Common Shareholders' Equity 516,108 487,452 Total Shareholders' Equity 657,037 623,375 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,514,059 $2,311,859 The accompanying notes are an integral part of these statements. PAGE 5
CONSOLIDATED FREIGHTWAYS, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED INCOME (Dollars in thousands except per share amounts) Three Months Ended Nine Months Ended September 30 September 30 1994 1993 1994 1993 REVENUES CF MotorFreight $ 584,398 $ 536,047 $ 1,512,894 $ 1,580,128 Con-Way Transportation Services 259,444 213,989 763,765 600,889 Emery Worldwide 392,641 316,967 1,122,820 899,191 1,236,483 1,067,003 3,399,479 3,080,208 COSTS AND EXPENSES CF MotorFreight Operating Expenses 500,745 445,136 1,312,732 1,316,421 Selling and Administrative Expenses 65,406 56,021 181,582 171,025 Depreciation 17,988 22,190 56,552 63,472 584,139 523,347 1,550,866 1,550,918 Con-Way Transportation Services Operating Expenses 191,948 162,914 562,140 449,681 Selling and Administrative Expenses 30,633 27,354 90,546 76,954 Depreciation 9,288 5,922 25,831 22,076 231,869 196,190 678,517 548,711 Emery Worldwide Operating Expenses 313,975 253,988 894,935 733,818 Selling and Administrative Expenses 51,748 49,437 154,290 145,309 Depreciation 6,387 5,593 19,050 16,339 372,110 309,018 1,068,275 895,466 1,188,118 1,028,555 3,297,658 2,995,095 OPERATING INCOME (LOSS) CF MotorFreight 259 12,700 (37,972) 29,210 Con-Way Transportation Services 27,575 17,799 85,248 52,178 Emery Worldwide 20,531 7,949 54,545 3,725 48,365 38,448 101,821 85,113 OTHER INCOME (EXPENSE) Investment income 661 1,155 1,882 4,149 Interest expense (7,206) (7,845) (20,865) (23,473) Miscellaneous, net 93 (80) (1,362) (1,693) (6,452) (6,770) (20,345) (21,017) Income Before Income Taxes and Extraordinary Charge 41,913 31,678 81,476 64,096 Income Taxes 21,632 14,599 40,732 30,357 Net Income Before Extraordinary Charge 20,281 17,079 40,744 33,739 Extraordinary charge from write off of intrastate operating rights, net of tax benefits of $4,056 5,522 -- 5,522 -- NET INCOME 14,759 17,079 35,222 33,739 Preferred Stock Dividends 4,768 4,697 14,265 14,193 NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 9,991 $ 12,382 $ 20,957 $ 19,546 Primary average shares outstanding (1) 37,218,928 35,432,410 37,261,289 35,398,707 PRIMARY EARNINGS PER SHARE Net Income Before Extraordinary Charge $ 0.42 $ 0.35 $ 0.71 $ 0.55 Extraordinary charge (0.15) -- (0.15) -- Net income $ 0.27 $ 0.35 $ 0.56 $ 0.55 FULLY DILUTED EARNINGS PER SHARE Net Income Before Extraordinary Charge $ 0.37 $ 0.31 $ 0.63 $ 0.48 Extraordinary charge (0.13) -- (0.13) -- Net income $ 0.24 $ 0.31 $ 0.50 $ 0.48 (1) Includes the dilutive effects of stock options. The accompanying notes are an intergral part of these statements.
PAGE 6 CONSOLIDATED FREIGHTWAYS, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS Nine Months Ended September 30, 1994 1993 (Dollars in thousands) CASH AND TEMPORARY CASH INVESTMENTS, BEGINNING OF PERIOD $ 139,044 $ 152,064 CASH FLOWS FROM OPERATING ACTIVITIES Income before extraordinary charge 40,744 33,739 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 109,313 109,150 Decrease in deferred income taxes (5,523) (14,166) (Gains) losses from property disposals, net 772 (613) Changes in operating assets and liabilities: Receivables (85,462) (166,580) Notes receivable from sale of trade accounts -- 166,399 Accrued claims costs (4,473) (4,352) Accounts payable 48,931 (9,568) Income taxes 14,299 (10,257) Accrued liabilities, deferred charges and other 26,186 30,881 Net Cash Provided by Operating Activities 144,787 134,633 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (138,768) (157,858) Sales of marketable securities -- 66,395 Purchases of marketable securities (292) (53,392) Proceeds from sale of property 5,493 9,493 Net Cash Used in Investing Activities (133,567) (135,362) CASH FLOWS FROM FINANCING ACTIVITIES Repayment of long-term debt and capital lease obligations (795) (45,404) Proceeds from issuance of long-term debt -- 32,000 Proceeds from issuance of common stock 8,438 987 Payments of preferred dividends (17,333) (17,389) Net Cash Used in Financing Activities (9,690) (29,806) Increase (Decrease) in Cash and Temporary Cash Investments 1,530 (30,535) CASH AND TEMPORARY CASH INVESTMENTS, END OF PERIOD $ 140,574 $ 121,529 The accompanying notes are an integral part of these statements. PAGE 7 CONSOLIDATED FREIGHTWAYS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The accompanying consolidated financial statements of Consolidated Freightways, Inc. and subsidiaries (the Company) have been prepared by the Company, without audit by independent public accountants, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the consolidated financial statements include all normal recurring adjustments necessary to present fairly the information required to be set forth therein. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, should be read in conjunction with the consolidated financial statements included in the Company's 1993 Annual Report to Shareholders. There have been no significant changes in the accounting policies of the Company. There were no significant changes in the Company's commitments and contingencies as previously described in the 1993 Annual Report to Shareholders and related annual report to the Securities and Exchange Commission on Form 10-K. 2. In November 1993, the Accounting Standards Division of the AICPA issued Statement of Position 93-6, "Employers' Accounting for Employee Stock Ownership Plans" (SOP 93-6). This statement changes the recognition of compensation for stock allocated to employee accounts to satisfy plan benefits, settlement of plan liabilities and changes the inclusion in earnings per share of shares held in trust by ESOPs. As provided for under this statement, the Company is not required to adopt this method of accounting as its existing ESOP (TASP) was established before December 31, 1992. Had this statement been adopted January 1, 1994, both the primary and fully diluted earnings per share for the quarter and nine months ended September 30, 1994 would have been $.26 and $.55, respectively. 3. The passage of the Federal Aviation Administration Authorization Act of 1994 made the Company's intrastate operating rights worthless. Consequently, the Company recorded an extraordinary charge of $9,578,000 equal to the carrying value of its operating rights. The extraordinary charge is reflected net of income tax benefits of $4,056,000 in the Statements of Consolidated Income. 4. The Company and its subsidiaries are defendants in various lawsuits incidental to their businesses. It is the opinion of management that the ultimate outcome of these actions will not have a material impact on the Company's financial position or results of operations. PAGE 8 CONSOLIDATED FREIGHTWAYS, INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Strong growth at all of the Company's principal operating entities in the third quarter resulted in an increase in total Company revenues of 15.9% over the same period last year. CF MotorFreight (CFMF) revenues were a significant improvement from the levels in the second quarter that were adversely impacted by a 24 day strike by the Teamster's Union. Year-to-date Company revenues were up 10.4% as continuing record levels at Con-Way Transportation Services (CTS) and Emery Worldwide (Emery) more than offset lower, strike affected CFMF revenues. Third quarter operating income increased 25.8% to $48.4 million while year-to-date operating income increased 19.6% to $101.8 million. Significant improvements in earnings at CTS and Emery offset lower operating income and strike related losses at CFMF. The Company recorded a non-cash $5.5 million extraordinary charge net of income tax benefits of $4.1 million in the third quarter. The charge reflects the pre-emption of intrastate operating rights as a result of the passage of the Federal Aviation Administration Authorization Act of 1994 in August of this year. CF MOTORFREIGHT CF MotorFreight (CFMF) revenues for the third quarter 1994 increased 9.0% on a tonnage increase of 2.0%, with higher rated less-then-truckload (LTL) tonnage also up 2.0%. CFMF's third quarter revenue improvement over last year reflects growth from its non-carrier logistics operation. Third quarter revenues from the LTL carrier operations improved marginally from the third quarter in 1993 reflecting CFMF's recapture of business levels lost during the second quarter strike. Year-to-date revenues were down 4.3% as a result of the Teamster strike in April of this year with year-to-date tonnage down 9.1% and LTL tonnage down 9.4%. CFMF's third quarter operating income was down $12.4 million from the 1993 quarter reflecting increased labor costs incurred during the recapture of business levels and costs incurred in connection with the reconfiguration of operations. The nine-months loss of $38.0 million reflects a deterioration of $67.2 million from the comparable period in 1993 due to losses incurred during the strike and subsequent recovery and increased operating expenses. However, CFMF's marginal operating income of $259,000 for the quarter highlights CFMF's return to profitability from the previous quarter's strike related loss of $42.1 million. PAGE 9 A new management team is focusing efforts on improving customer service, emphasizing flexible value-added service and continuing to reduce costs. In addition, management is implementing plans to benefit from the operating flexibilities gained in the new four-year National Master Freight Agreement with the Teamsters. The efficiencies realized from the operating flexibilities in conjunction with the new management's efforts are expected to yield improved operating results. CON-WAY TRANSPORTATION SERVICES Con-Way Transportation Services (CTS) third quarter revenues increased 21.2% to $259.4 million compared with the same period last year. Year-to-date revenues were at record levels, increasing 27.1% compared with the nine-months ended 1993. The corresponding tonnage increases were 16.4% for the quarter and 22.9% year-to-date with LTL tonnage up 20.1% and 27.0% for the respective periods. The gains in both periods reflect expansion into new regions combined with growth in the existing markets served, and benefits from the strike in the year-to-date period. Operating income for the quarter increased 54.9% to $27.6 million and year-to-date income increased 63.4% to $85.2 million over the respective periods last year. The improved operating income reflects the revenue growth within CTS' existing markets and improved profits from the newly established regions. CTS anticipates some erosion of rates following the federal pre- emption of state operating authorities under the Federal Aviation Administration Authorization Act of 1994. However, the pre- emption also allows CTS to continue to expand into regions not currently served and to further expand on their joint service agreements and complete a U.S. network. This will allow CTS to provide additional services and aggressively pursue large national accounts. EMERY WORLDWIDE Emery Worldwide (Emery) revenues in the third quarter increased 23.9% over the same period last year on tonnage growth of 29.6%. Year-to-date revenues have increased 24.9% to $1.1 billion. Both the quarter and year-to-date revenues represent record levels. The strong quarterly growth benefitted from international tonnage that increased 43.5% compared to 24.3% domestically. Year-to- date domestic and international growth was 35.3% and 39.2%, respectively. Contributing to the increase in revenues is management's continued concentration on securing significant international and domestic accounts. Also contributing to domestic growth is the decline in commercial wide-body lift. Emery continues to see the benefits of the combination of strong growth in revenues and managed cost containment as operating PAGE 10 income in the third quarter increased 158.3% over the prior year's quarter to $20.5 million. Year-to-date operating income increased $50.8 million over the prior year to a record $54.5 million. Emery management will continue with the same programs that have proven successful at increasing revenues and controlling costs. As part of these programs, Emery recently completed the reconfiguration of its main hub facility in Dayton, Ohio which will allow the company to increase its effective capacity by over 20% per day, while at the same time improving service reliability, delivery performance and minimizing costs. To meet increasing volumes, the company has put into service seven of nine DC-8 jet freighters ordered earlier in the year with the remainder to be put into service in the fourth quarter. Although these additions replace previously existing short-term leased planes, they allow Emery to more efficiently service increasing business levels. LIQUIDITY AND CAPITAL RESOURCES At September 30, 1994, the Company had $140.6 million in cash and cash equivalents and $14.0 million in long term investments. Cash flow from operations of $144.8 million was primarily the result of income from operations and significant depreciation and amortization. During the first nine months of the year, capital expenditures were $138.8 million compared to $157.9 million in 1993. The Company supplemented its 1994 capital expenditure needs for equipment with the addition of various lease arrangements. The 1993 capital expenditures include the purchase of approximately $61.5 million of aircraft and related equipment in connection with the USPS contract. The Company intends to finance the remaining capital requirements for the year with cash from operations supplemented by lease arrangements. In the fourth quarter of this year, $38.2 million of the Company's Medium Term Notes come due. The Company intends to retire these maturities with existing cash and cash flows from operations. The Company has a $250 million unsecured credit facility, which in May 1994, was supplemented by a $50 million agreement. A related $110 million facility provides for additional letter of credit flexibility subject to the overall limitation of $250 million. At the Company's election, $55 million of this letter of credit facility can be utilized as incremental capacity without the overall $250 million limitation. The aggregate capacity under these facilities is $355 million. At September 30, 1994, $77.6 million of letters of credit were issued under these agreements. In May 1994, the Company secured an additional $25 million PAGE 11 under the Emery receivables sale facility. This brings the total availability under this facility for cash and non-transferable promissory notes and related letters of credit to $100 million. At September 30, 1994, $72 million of letters of credit were issued and secured with Emery receivables. In addition, the Company has several unsecured letter of credit facilities with various banks that total $45 million. At September 30, 1994, $41.3 million of letters of credit were issued under these agreements. OTHER The Company's operations necessitate the storage of fuel in underground tanks as well as the disposal of substances regulated by various federal and state laws. The Company adheres to a stringent site-by-site tank testing and maintenance program performed by a qualified independent party to protect the environment and comply with regulations. Where the need for clean-up is necessary, the Company takes appropriate action. PART II. OTHER INFORMATION ITEM 1. Legal Proceedings As previously reported, the Company has been designated a Potentially Responsible Party (PRP) by the EPA with respect to the disposal of hazardous substances at various sites. The Company expects its share of the total cleanup costs of all sites to be immaterial. Certain legal matters are discussed in Note 4 in the Notes to Consolidated Financial Statements in Part I of this form. ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits (11) Computation of Per Share Earnings (27) Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended September 30, 1994. PAGE 12 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company (Registrant) has duly caused this Form 10-Q Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized. CONSOLIDATED FREIGHTWAYS, INC. (Registrant) November 10, 1994 /s/Gregory L. Quesnel Gregory L. Quesnel Executive Vice President - Chief Financial Officer November 10, 1994 /s/Gary D. Taliaferro Gary D. Taliaferro Vice President and Controller EX-11 2 EXHIBIT 11 EXHIBIT 11 COMPUTATION OF PER SHARE EARNINGS
The following is the computation of fully-diluted earnings per share: Three Months Ended Nine Months Ended September 30 September 30 1994 1993 1994 1993 (Dollars in thousands except per share data) Earnings: Net income before extraordinary charge $ 20,281 $ 17,079 $ 40,744 $ 33,739 Preferred dividends 4,768 4,697 14,265 14,193 15,513 12,382 26,479 19,546 Extraordinary charge 5,522 -- 5,522 -- Net income available to common shareholders 9,991 12,382 20,957 19,546 Non-discretionary adjustments under the if-converted method: Addback: Series B, preferred dividends, net of tax benefits 2,120 2,041 6,304 6,224 Less: Replacement of funding adjustment, net of tax benefits (1) (2,120) (2,041) (6,304) (6,224) Net income available to common shareholders $ 9,991 $ 12,382 $ 20,957 $ 19,546 WEIGHTED AVERAGE SHARES OUTSTANDING: Common shares 36,255,334 35,432,410 36,144,907 35,398,707 Equivalents - stock options 963,594 411,756 1,116,382 524,774 Preferred stock - if-converted method 4,315,273 4,586,821 4,315,273 4,586,821 41,534,201 40,430,987 41,576,562 40,510,302 FULLY-DILUTED EARNINGS PER SHARE Net income before extraordinary charge $ 0.37 $ 0.31 $ 0.63 $ 0.48 Extraordinary charge (0.13) -- (0.13) -- Net income available to common shareholders $ 0.24 $ 0.31 $ 0.50 $ 0.48 (1) Additional payment to the TASP to replace the funding lost under the if-converted method.
EX-27 3 EXHIBIT 27
5 1000 9-MOS DEC-31-1994 SEP-30-1994 140574 0 630208 (30884) 38458 1042946 2026778 (1085830) 2514059 1034465 405810 140200 0 264479 252358 2514059 0 3399479 0 3297658 20345 8442 20865 81476 40732 26479 0 5522 0 20957 .56 .50
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