-----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, JwppLk7qNtaDHP3XR6HLRdg8WKNehoor8M12ndmXbH19/jfiBQ4Sowl8e/NRwPZ6 MYPIMnaIiof82BpViJnGhw== 0000023675-97-000014.txt : 19970520 0000023675-97-000014.hdr.sgml : 19970520 ACCESSION NUMBER: 0000023675-97-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NYSE 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: 1934 Act SEC FILE NUMBER: 001-05046 FILM NUMBER: 97607242 BUSINESS ADDRESS: STREET 1: 3240 HILLVIEW AVE CITY: PALO A LTO STATE: CA ZIP: 94304 BUSINESS PHONE: 4154942900 FORMER COMPANY: FORMER CONFORMED NAME: CONSOLIDATED FREIGHTWAYS INC DATE OF NAME CHANGE: 19920703 10-Q 1 10-Q PAGE 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 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 (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 April 30, 1997: 45,862,236 PAGE 2 CNF TRANSPORTATION INC. FORM 10-Q Quarter Ended March 31, 1997 ___________________________________________________________________________ ___________________________________________________________________________ INDEX PART I. FINANCIAL INFORMATION Page Item 1. Financial Statements Consolidated Balance Sheets - March 31, 1997 and December 31, 1996 3 Statements of Consolidated Operations - Three Months Ended March 31, 1997 and 1996 5 Statements of Consolidated Cash Flows - Three Months Ended March 31, 1997 and 1996 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 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 6. Exhibits and Reports on Form 8-K 13 SIGNATURES 14 PAGE 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CNF TRANSPORTATION INC. CONSOLIDATED BALANCE SHEETS March 31, December 31, 1997 1996 (Dollars in thousands) ASSETS CURRENT ASSETS Cash and cash equivalents $ 78,277 $ 82,094 Trade accounts receivable, net of allowances 550,802 542,381 Other accounts receivable 35,014 49,278 Operating supplies, at lower of average cost or market 32,400 32,916 Prepaid expenses 50,217 31,249 Deferred income taxes 77,956 77,977 Total Current Assets 824,666 815,895 PROPERTY, PLANT AND EQUIPMENT, at cost Land 104,619 104,314 Buildings and improvements 273,541 265,655 Revenue equipment 596,206 586,720 Other equipment and leasehold improvements 320,740 302,679 1,295,106 1,259,368 Accumulated depreciation and amortization (532,630) (506,719) 762,476 752,649 OTHER ASSETS Restricted funds 13,134 12,685 Deposits and other assets 97,338 95,144 Unamortized aircraft maintenance, net 122,195 119,927 Costs in excess of net assets of businesses acquired, net of accumulated amortization 283,328 285,566 515,995 513,322 TOTAL ASSETS $2,103,137 $2,081,866 The accompanying notes are an integral part of these statements. PAGE 4 CNF TRANSPORTATION INC. CONSOLIDATED BALANCE SHEETS March 31, December 31, 1997 1996 (Dollars in thousands) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 200,800 $ 210,902 Accrued liabilities 368,358 349,497 Accrued claims costs 82,613 87,340 Current maturities of long-term debt and capital leases 4,947 3,185 Short-term borrowings 145,000 155,000 Federal and other income taxes 9,524 9,162 Total Current Liabilities 811,242 815,086 LONG-TERM LIABILITIES Long-term debt and guarantees 362,771 366,305 Long-term obligations under capital leases 110,871 110,896 Accrued claims costs 58,353 57,912 Employee benefits 120,594 115,470 Other liabilities and deferred credits 68,765 75,479 Deferred income taxes 37,651 32,439 Total Liabilities 1,570,247 1,573,587 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 872,394 and 875,191 shares, respectively 9 9 Additional paid-in capital, preferred stock 132,682 133,108 Deferred TASP compensation (107,093) (108,655) Total Preferred Shareholders' Equity 25,598 24,462 Common stock, $.625 par value; authorized 100,000,000 shares; issued 52,657,597 and 51,595,827 shares, respectively 32,911 32,247 Additional paid-in capital, common stock 258,145 242,879 Cumulative translation adjustment (534) 3,279 Retained earnings 389,650 378,744 Cost of repurchased common stock (7,011,589 and 7,029,917 shares, respectively) (172,880) (173,332) Total Common Shareholders' Equity 507,292 483,817 Total Shareholders' Equity 532,890 508,279 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,103,137 $2,081,866 The accompanying notes are an integral part of these statements. PAGE 5 CNF TRANSPORTATION INC. STATEMENTS OF CONSOLIDATED OPERATIONS (Dollars in thousands except per share amounts) Three Months Ended March 31, 1997 1996 REVENUES Con-Way Transportation Services $334,458 $301,841 Emery Worldwide 508,552 446,599 Other 99,618 99,433 942,628 847,873 COSTS AND EXPENSES Con-Way Transportation Services Operating Expenses 247,913 230,052 Selling and Administrative Expenses 43,271 40,051 Depreciation 14,797 11,354 305,981 281,457 Emery Worldwide Operating Expenses 406,846 365,703 Selling and Administrative Expenses 74,252 61,848 Depreciation 8,947 7,548 490,045 435,099 Other Operating Expenses 88,102 89,833 Selling and Administrative Expenses 6,868 5,739 Depreciation 1,265 531 96,235 96,103 892,261 812,659 OPERATING INCOME Con-Way Transportation Services 28,477 20,384 Emery Worldwide 18,507 11,500 Other 3,383 3,330 50,367 35,214 OTHER INCOME (EXPENSE) Interest expense (10,805) (9,664) Miscellaneous, net 610 133 (10,195) (9,531) Income from continuing operations before income taxes 40,172 25,683 Income Taxes 18,228 12,020 Net Income from Continuing Operations 21,944 13,663 Loss from discontinued operations net of income tax benefits - (13,383) Net Income 21,944 280 Preferred dividends 1,939 2,134 NET INCOME (LOSS) APPLICABLE TO COMMON SHAREHOLDERS $20,005 ($1,854) Primary average shares outstanding 46,465,385 44,925,741 PRIMARY EARNINGS (LOSS) PER SHARE Continuing operations $0.43 $0.26 Discontinued operations - (0.29) $0.43 ($0.03) FULLY DILUTED EARNINGS (LOSS) PER SHARE Continuing operations $0.40 $0.24 Discontinued operations - (0.27) $0.40 ($0.03) The accompanying notes are an integral part of these statements. PAGE 6 CNF TRANSPORTATION INC. STATEMENTS OF CONSOLIDATED CASH FLOWS Three Months Ended March 31, 1997 1996 (Dollars in Thousands) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $ 82,094 $ 59,787 CASH FLOWS FROM OPERATING ACTIVITIES Net income 21,944 280 Adjustments to reconcile income to net cash provided by operating activities: Loss from discontinued operations - 13,383 Depreciation and amortization 28,008 21,327 Increase (Decrease) in deferred income taxes 5,233 (3,294) Losses (Gains) from property disposals, net (638) 179 Changes in assets and liabilities: Receivables 5,843 59,762 Prepaid expenses (18,968) (19,404) Accounts payable (10,102) 12,798 Accrued claims costs (4,286) 1,021 Federal and other Income taxes 362 (2,257) Incentive compensation (9,963) (9,766) Accrued liabilities and other 16,241 (9,689) Net Cash Provided by Operating Activities 33,674 64,340 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (35,156) (49,541) Proceeds from sales of property 869 1,043 Net Cash Used by Investing Activities (34,287) (48,498) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of long-term debt 1,997 - Repayment of long-term debt and capital lease obligations (3,794) (2,266) Net borrowings (payments) under revolving lines of credit (10,000) 40,000 Proceeds from issuance of common stock 15,956 824 Payments of common dividends (4,534) (4,396) Payments of preferred dividends (2,829) (3,084) Net Cash Provided (Used) by Financing Activities (3,204) 31,078 Net Cash Provided (Used) by Continuing Operations (3,817) 46,920 Net Cash Used by Discontinued Operations - (31,594) Increase (Decrease) in Cash and Cash Equivalents (3,817) 15,326 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 78,277 $ 75,113 The accompanying notes are an integral part of these statements. PAGE 7 CNF TRANSPORTATION INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The accompanying consolidated financial statements of CNF Transportation 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 1996 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 1996 Annual Report to Shareholders and related annual report to the Securities and Exchange Commission on Form 10-K. Operating results for 1996 have been restated to exclude the results of Consolidated Freightways Corporation (CFC), the Company's former long-haul, less-than-truckload carrier which was spun-off to shareholders on December 2, 1996, and is reported as discontinued operations in the prior year. 2. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 "Earnings Per Share" (SFAS 128). The statement replaces Primary Earnings Per Share (EPS) with Basic EPS. Basic EPS is computed by dividing reported earnings available to common shareholders by the weighted average shares outstanding; no dilution for any potentially dilutive securities is included. In addition, Diluted EPS under the new statement is calculated differently than the Fully Diluted EPS calculation under existing authoritative guidance. When applying the treasury stock method for Diluted EPS to compute dilution for options, the new statement requires use of the average share price for the period, rather than the greater of the average share price or end-of-period share price required by APB Opinion 15. Retroactive adoption of SFAS 128 will be required in financial statements for periods ending after December 15, 1997; however, early application is prohibited. Had this statement been adopted January 1, 1997, Basic EPS and Diluted EPS from continuing operations for the quarter ended March 31, 1997 would have been $.44 and $.40, respectively. The restated Basic and Diluted EPS from continuing operations for the quarter ended March 31, 1996 would have been $.26 and $.24, respectively. 3. The Internal Revenue Service (IRS) has proposed adjustments that would require that Emery Air Freight Corporation (EAFC), a subsidiary of the Company, 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 administrative conference division (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, PAGE 8 accordingly, the Company intends vigorously to continue to 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 have to pay a substantial amount of additional aviation excise taxes for the 1990 through 1995 tax period. In addition, it is possible that the IRS may seek to increase the amount of the airline excise tax payable by EAFC for periods subsequent to September 30, 1995. The Company anticipates that the IRS will seek a substantial proposed 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. The Company believes that its practice of expensing these types of maintenance costs is consistent with industry practice. However, if this adjustment were proposed by the IRS, and the issue was determined adversely to the Company, it could require the Company to pay substantial additional tax. The Company is unable to predict the ultimate outcome of this matter and intends vigorously to contest any such proposed adjustment. 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 incidental lawsuits will not have a material adverse effect on the Company's consolidated financial position or results of operations. PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Operating results for 1996 have been restated to exclude the results of Consolidated Freightways Corporation (CFC), the Company's former long- haul, less-than-truckload carrier which was spun-off to shareholders on December 2, 1996, and is reported as discontinued operations in the prior year. GENERAL Total revenues of CNF Transportation Inc. for the first quarter of 1997 increased 11.2% over the first quarter of 1996. The increase was the result of higher revenues at all three of the Company's operating segments. Contributing to the higher revenue levels were improved global economic conditions, a more stable pricing environment, and successful marketing strategies. The Company's total operating income for the first quarter increased 43.0% over the first quarter of 1996. This improvement was driven by significantly higher operating income at Emery Worldwide and Con-Way Transportation Services (CTS), as well as at Menlo Logistics, whose operating income provides the majority of the operating income of the Other segment. The improvement in 1997 first quarter operating income was also attributable to the effects of severe winter storms during the first quarter of 1996, which adversely affected results of CTS and Emery during the 1996 period. Other expenses for the first quarter 1997 increased 7.0% over the first quarter last year due primarily to higher interest expense. PAGE 9 Increased borrowings under the Company's unsecured credit facility drove up the 1997 first quarter's interest expense by 11.8% compared with the first quarter of 1996. The effective income tax rate of 45.4% for the first quarter of 1997 was lower than the rate of 46.8% for the first quarter of 1996, primarily because non-deductible expenses for the two periods were approximately equal while pretax earnings were higher in the first quarter of 1997 than in the first quarter of 1996. Net income applicable to common stock for the first quarter of 1997 was $21.9 million above the first quarter of 1996 due primarily to the higher operating income described above and the loss from discontinued operations of $13.4 million reported in the first quarter of 1996. Significant variations in segment revenues and operating income are as follows: CON-WAY TRANSPORTATION SERVICES Con-Way Transportation Services' (CTS) revenues for the first quarter of 1997 were 10.8% above the same quarter of 1996. Total tonnage for the first quarter of 1997 increased 3.4% over the first quarter of 1996, with less-than-truckload tonnage, which typically has higher rates than truckload tonnage, up 6.2% over the first quarter of 1996. The increased revenues reflect both the tonnage gains as well as improved pricing conditions in the industry compared with the first quarter of 1996. Operating income for CTS in the first quarter of 1997 increased 39.7% over the first quarter of last year. The higher operating income was attributable in part to increased revenues, improved load factors and freight system utilization in newer geographic regions served by CTS, recovery of a portion of the higher fuel costs through surcharges to customers, improved operating efficiencies, and improved pricing conditions in the industry. The improvement in first quarter 1997 operating income was also attributable to the fact that first quarter 1996 results were adversely affected by severe winter weather and by slightly higher fuel costs. CTS management's strategies will continue to emphasize operating margin improvements. The strategies include efforts to increase the utilization of the freight system in the Pacific Northwest and northeastern United States, continued emphasis on market penetration in light of the withdrawal of a major competitor from several key regional markets, and efforts to re-price or replace low margin business. EMERY WORLDWIDE Emery's revenues for the first quarter of 1997 were up 13.9% compared to 1996 due to strong tonnage growth from both domestic and international business. Domestic tonnage in the first quarter of 1997 was 9.2% higher than the first quarter last year and international tonnage was up 11.0% for the same period. Improved domestic and international economic conditions and increased emphasis on improving freight rates contributed to the revenue increases. PAGE 10 Emery's operating income for the first quarter of 1997 was 60.9% above the first quarter of 1996. The improvement in operating income was attributable in part to increased revenues, a fuel index fee intended to recover a portion of higher fuel costs from customers, and improved pricing. In addition, operating income for the first quarter of 1996 was adversely affected by the effects of severe winter storms and slightly higher fuel costs. Partially offsetting the improvement in the first quarter of 1997 was the renewal of the U.S. air cargo excise tax in mid- March 1997, as the excise tax was not in effect during the first quarter of 1996. Emery has converted eight international agent operations in the past two years to wholly-owned operations in an effort to improve customer service and increase international revenues. Management intends to continue with additional conversions of international agent locations in an effort to improve and expand the level of customer service. In 1997, management revised employee incentive plans to focus on improving operating margins, rather than on revenue growth. On April 24, 1997, Emery Worldwide Airlines (EWA) was awarded a new contract with the U.S. Postal Service (USPS) to provide Priority Mail sortation and transportation. The Company estimates that it could receive revenues of approximately $1.7 billion over the initial term of the contract, subject to reduction if the Company does not attain certain performance benchmarks. However, the foregoing estimate is subject to a number of uncertainties and assumptions (including assumptions regarding Priority Mail volumes to be handled under the contract), and there can be no assurance that the revenues realized by the Company will not be less than this amount. The initial term of the contract ends in February 2002, although the contract may be renewed by the USPS for two successive three- year terms. The contract establishes fixed prices per piece for four years, subject to adjustments based on volume and percentage of on-time performance and for increases in fuel and wage costs. As a result, the effect of the contract on the Company's results of operations will depend largely on its ability to control costs of performance under the contract. The contract calls for the Company to obtain, equip and fully staff ten Priority Mail processing centers in major metropolitan areas along the eastern seaboard. The contract calls for five of the processing centers to be fully operational by late October 1997, and for the remaining five to be fully operational by late February 1998. The contract also provides for the Company to pay liquidated damages if the centers are not operational on time, and provides for the Company to receive incentive bonuses if completed early. For 1997, the Company has budgeted approximately $102 million for capital expenditures associated with the new contract plus approximately $17 million for other costs. Operations under the contract are scheduled to commence in July 1997. The contract may be terminated by the USPS for failure by the Company to perform its obligations thereunder and, as is common in government contracts, may be terminated by the USPS "for convenience" (i.e., without cause), although the USPS may be required, following termination for convenience, to reimburse the Company for capital expenditures associated with the contract. OTHER OPERATIONS The Other segment, which consists of Menlo Logistics, Road Systems and VantageParts, reported a marginal increase in revenues for the first quarter of 1997 over the first quarter of 1996. Menlo Logistics' revenues, which made up most of the segment's revenues for the 1997 quarter, were up PAGE 11 9.6% over the first quarter of 1996, but were offset by significantly lower revenues from Road Systems due to a reduced number of trailer sales. Operating income for the segment increased only 1.6% over the first quarter of 1996, again largely due to the lower trailer sales. Menlo's operating income increased 53.4% over the first quarter of 1996 as its revenue mix shifted to higher margin dedicated logistics management services from the lower margin, but higher revenue generating, transportation management services. LIQUIDITY AND CAPITAL RESOURCES At March 31, 1997, the Company had $78.3 million in cash and cash equivalents. Net cash flow from operations during the first quarter of 1997 was $33.7 million, the primary components of which were net income and depreciation and amortization. Cash flow from operations in the first quarter of 1996 was $64.3 million and was attributable primarily to a significant reduction of accounts receivable and to income from continuing operations and depreciation. Capital expenditures for the first quarter of 1997 were $35.2 million, which was $14.4 million lower than the same quarter in 1996. The Company expects to fund capital expenditure requirements for the year for its existing businesses with cash from operations and, if necessary, borrowings under credit facilities. The Company expects to pursue external financing for start-up expenses and operating equipment needed to service the U.S. Postal Service contract described above. Net debt repayments for the first quarter of 1997 totaled $11.8 million compared to a $37.7 million net increase in debt in the first quarter of 1996. Proceeds from the exercise of stock options, which the Company believes increased due to the spin-off of CFC, provided $16.0 million of cash compared with less than $1 million in the first quarter of 1996. At March 31, 1997, the Company had outstanding short-term borrowings of $100.0 million and outstanding letters of credit of $124.1 million under its $350 million unsecured credit facility. Under several other unsecured credit facilities, at March 31, 1997, the Company had outstanding short- term borrowings of $45.0 million and outstanding letters of credit of $69.8 million. At March 31, 1997, the Company had $125.9 million available for additional short-term borrowings and letters of credit under the $350 million credit facility while $5.5 million was available under other uncommitted credit facilities. Additionally, payments of preferred and common dividends were approximately $7.4 million in both the first quarter of 1997 and 1996. Other Items 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 qualified independent parties to protect the environment and comply with regulations. Where clean-up is necessary, the Company takes appropriate action. Certain statements included or incorporated by reference 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 PAGE 12 number of risks and uncertainties. Any such forward-looking statements contained or incorporated by reference 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" or "anticipates" or the negative thereof or other variations thereof or comparable terminology, or by discussions of strategy. 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, 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; uncertainties regarding the Company's new contract with the USPS; labor matters, including changes in labor costs, renegotiation of labor contracts and the risk of work stoppages or strikes; changes in governmental regulation; environmental and tax matters, including the aviation excise tax and aircraft maintenance cost matters discussed above; and matters relating to the recently completed spin-off of Consolidated Freightways Corporation (CFC). In that regard, the Company is 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 and environmental matters. Although CFC is, in general, either the primary obligor or jointly and severally liable with the Company with respect to these matters, a failure to pay or other default by CFC with respect to the obligations as to which the Company is 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 the Company. As a result of the foregoing, no assurance can be given as to future results of operations or financial condition. 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 cost will not have a material adverse effect on the Company's financial position or results of operations. The Company expects the costs of complying with existing and future federal, state and local environmental regulations to continue to increase. On the other hand, it does not anticipate that such cost increases will have a materially adverse effect on the Company. Certain legal matters are discussed in Note 3 in the Notes to Consolidated Financial Statements in Part I of this form. ITEM 4. Submission of Matters to a Vote of Security Holders At the Annual Shareholders Meeting held April 28, 1997, the following proposals were presented with the indicated voting results: PAGE 13 For the purpose of electing members of the Board of Directors, the votes representing shares of Common and Preferred stock were cast as follows: Nominee For Withheld Robert Alpert 43,514,965 750,685 Margaret G. Gill 43,503,897 761,753 Robert Jaunich II 43,520,592 745,058 Robert P. Wayman 43,522,817 742,833 The following directors did not stand for election and continued in office as directors after the Annual Shareholders Meeting: Earl F. Cheit, Richard A. Clarke, W. Keith Kennedy Jr., Richard B. Madden, Donald E. Moffitt, Robert D. Rogers, and William J. Schroeder. Subsequent to the Annual Shareholders Meeting, the Board of Directors appointed Michael J. Murray to fill a vacant position with the Board. The appointment was effective May 3, 1997. A proposed amendment to the Company's Certificate of Incorporation was approved. The amendment, which changes the name of the Company from "Consolidated Freightways, Inc." to "CNF Transportation Inc.", was approved by the following vote: For 43,640,046; Against 445,314; Abstain 180,290. The 1997 Equity and Incentive Plan was approved by the following vote: For 34,939,104; Against 7,903,276; Abstain 1,423,270. The appointment of Arthur Andersen LLP as independent public accountants for the year 1997 was approved by the following vote: For 43,640,106; Against 331,721; Abstain 293,823. ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits (3)(a) CNF Transportation Inc. By-Laws as Amended May 3, 1997 (incorporated by reference from Exhibit 4(b) to the Company's registration statement on Form S-3 dated May 6, 1997, no. 333- 26595). (3)(b) Amendment to CNF Transportation Inc. Certificate of Incorporation (incorporated by reference from Exhibit 4(a) to the Company's registration statement on Form S-3 dated May 6, 1997, no. 333-26595). (11) Computation of Per Share Earnings (12) Computation of Ratios of Earnings to Fixed Charges (27) Financial Data Schedule PAGE 14 (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended March 31, 1997. 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 14, 1997 /s/Gregory L. Quesnel Gregory L. Quesnel Executive Vice President and Chief Financial Officer May 14, 1997 /s/Gary D. Taliaferro Gary D. Taliaferro Vice President and Controller EX-11 2 Exhibit 11 CNF TRANSPORTATION INC. COMPUTATION OF PER SHARE EARNINGS The following is the computation of fully diluted earnings per share: Three Months Ended March 31 1997 1996 (Dollars in thousands except per share data) Net income (loss) applicable to common shareholders $ 20,005 $ (1,854) Non-discretionary adjustments under the if-converted method: Addback: Series B, preferred dividends, net of tax benefits 1,939 2,134 Less: Replacement of funding adjustment, net of tax benefits (1) (1,637) (1,668) Adjusted net income (loss) applicable to common shareholders $ 20,307 $ (1,388) WEIGHTED AVERAGE SHARES OUTSTANDING: Common shares 45,222,202 43,952,397 Equivalents - stock options 1,452,566 990,587 Series B, Preferred stock if-converted method 4,258,592 4,194,726 50,933,360 49,137,710 FULLY DILUTED EARNINGS PER SHARE $ 0.40 $ (0.03) (1) Additional payment to the Company's Thrift and Stock Plan to replace the funding lost under the if-converted method. EX-12 3 Exhibit 12 ---------- CNF TRANSPORTATION INC. COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
Three Months Ended March 31, Year Ended December 31, ------------------ ------------------------------------------------- 1997 1996 1996 1995 1994 1993 1992 (Dollars in thousands) Fixed Charges: Interest Expense $10,805 $ 9,664 $ 39,766 $ 33,407 $ 27,065 $ 29,890 $ 33,023 Capitalized Interest 702 471 2,092 731 793 531 4 Preferred Dividends 3,087 3,160 12,645 12,419 12,475 12,551 12,618 Total Interest 14,594 13,295 54,503 46,557 40,333 42,972 45,645 Interest Component of Rental Expense 13,218 10,915 48,704 43,202 41,416 34,464 32,219 Fixed Charges 27,812 24,210 103,207 89,759 81,749 77,436 77,864 Less: Capitalized Interest 702 471 2,092 731 793 531 4 Preferred Dividends 3,087 3,160 12,645 12,419 12,475 12,551 12,618 Net Fixed Charges $24,023 $20,579 $ 88,470 $ 76,609 68,481 $ 64,354 $ 65,242 Earnings: Income (Loss) from Continuing Operations before Income Taxes $40,172 $25,683 $147,132 $152,942 $165,129 $ 66,202 $(26,783) Add: Net Fixed Charges 24,023 20,579 88,470 76,609 68,481 64,354 65,242 Total Earnings Before Fixed Charges $64,195 $46,262 $235,602 $229,551 $233,610 $130,556 $ 38,459 Ratio of Earnings to Fixed Charges: Total Earnings $64,195 $46,262 $235,602 $229,551 $233,610 $130,556 $ 38,459 Fixed Charges (1) 27,812 24,210 103,207 89,759 81,749 77,436 77,864 Ratio 2.3x 1.9x 2.3x 2.6x 2.9x 1.7x 0.5x(2) (1) Fixed charges represent interest on capital leases and short-term and long-term debt, capitalized interest, dividends on shares of the Series B Cumulative Convertible Preferred Stock used to pay debt service on notes issued by the Company's Thrift and Stock Plan (the "TASP"), and the applicable portion of the consolidated rent expense which approximates the interest portion of lease payments. (2) Earnings were inadequate to cover fixed charges for the period. The deficiency was $39.4 million for the year ended December 31, 1992.
EX-27 4
5 1000 3-MOS DEC-31-1997 MAR-31-1997 78277 0 570626 (19824) 32400 824666 1295106 (532630) 2103137 811242 473642 0 132691 291056 109143 2103137 0 942628 0 892261 10195 0 10805 40172 18228 21944 0 0 0 20005 .43 .40
-----END PRIVACY-ENHANCED MESSAGE-----