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 September 30, 1999
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 1-12149
CONSOLIDATED FREIGHTWAYS CORPORATION
Incorporated in the State of Delaware
I.R.S. Employer Identification No. 77-0425334
175 Linfield Drive, Menlo Park, CA 94025
Telephone Number (650) 326-1700
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Number of shares of Common Stock, $.01 par value,
outstanding as of October 31, 1999: 21,728,929
CONSOLIDATED FREIGHTWAYS CORPORATION
FORM 10-Q
Quarter Ended September 30, 1999
___________________________________________________________________________
___________________________________________________________________________
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets -
September 30, 1999 and December 31, 1998 3
Statements of Consolidated Income -
Three and Nine Months Ended
September 30, 1999 and 1998 5
Statements of Consolidated Cash Flows -
Nine Months Ended September 30, 1999 and 1998 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1999 1998
(Dollars in thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 95,680 $ 123,081
Trade accounts receivable, net of allowances 343,379 292,463
Other receivables 5,522 9,195
Operating supplies, at lower of average
cost or market 8,541 7,561
Prepaid expenses 39,145 40,335
Deferred income taxes 6,806 6,806
Total Current Assets 499,073 479,441
PROPERTY, PLANT AND EQUIPMENT, at cost
Land 83,287 78,218
Buildings and improvements 349,271 343,492
Revenue equipment 545,194 562,624
Other equipment and leasehold improvements 134,299 123,404
1,112,051 1,107,738
Accumulated depreciation and amortization (750,330) (746,966)
361,721 360,772
OTHER ASSETS
Deposits and other assets 55,609 32,199
Deferred income taxes 24,541 17,978
80,150 50,177
TOTAL ASSETS $ 940,944 $ 890,390
The accompanying notes are an integral part of these statements.
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1999 1998
(Dollars in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 88,341 $ 84,861
Accrued liabilities 216,191 187,528
Accrued claims costs 73,111 72,942
Federal and other income taxes 20,002 14,173
Total Current Liabilities 397,645 359,504
LONG-TERM LIABILITIES
Long-term debt 15,100 15,100
Accrued claims costs 96,927 103,574
Employee benefits 122,540 117,236
Other liabilities and deferred credits 30,553 28,258
Total Liabilities 662,765 623,672
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value; authorized
5,000,000 shares; issued none -- --
Common stock, $.01 par value; authorized
50,000,000 shares; issued 23,100,515
and 23,066,905 shares, respectively 231 231
Additional paid-in capital 77,416 77,303
Accumulated other comprehensive loss (9,912) (11,565)
Retained earnings 218,907 204,919
Treasury stock, at cost (907,586 and 477,686
shares, respectively) (8,463) (4,170)
Total Shareholders' Equity 278,179 266,718
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 940,944 $ 890,390
The accompanying notes are an integral part of these statements.
CONSOLIDATED FREIGHTWAYS CORPORATION
STATEMENTS OF CONSOLIDATED INCOME
(Dollars in thousands except per share amounts)
For the Three Months For the Nine Months
Ended Ended
September 30, September 30,
1999 1998 1999 1998
REVENUES $ 625,547 $ 571,231 $1,773,536 $1,668,720
COSTS AND EXPENSES
Salaries, wages and benefits 396,109 369,116 1,134,290 1,079,802
Operating expenses 107,224 88,185 299,224 264,730
Purchased transportation 65,358 54,840 176,475 149,261
Operating taxes and licenses 18,103 16,450 52,479 50,768
Claims and insurance 15,289 13,175 43,797 39,316
Depreciation 13,741 12,068 39,394 37,140
615,824 553,834 1,745,659 1,621,017
OPERATING INCOME 9,723 17,397 27,877 47,703
OTHER INCOME (EXPENSE)
Investment income 619 1,428 2,273 3,843
Interest expense (922) (980) (2,840) (2,947)
Miscellaneous, net (56) (279) (641) (1,157)
(359) 169 (1,208) (261)
Income before income taxes 9,364 17,566 26,669 47,442
Income taxes 4,634 8,335 12,681 23,721
NET INCOME $ 4,730 $ 9,231 $ 13,988 $ 23,721
Basic average shares
outstanding 22,564,538 22,710,557 22,599,509 22,928,421
Diluted average shares
outstanding 22,564,538 22,710,557 22,874,547 23,716,953
Basic Earnings per Share: $ 0.21 $ 0.41 $ 0.62 $ 1.03
Diluted Earnings per Share: $ 0.21 $ 0.41 $ 0.61 $ 1.00
The accompanying notes are an integral part of these statements.
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
Nine Months Ended
September 30,
1999 1998
(Dollars in thousands)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $ 123,081 $ 107,721
CASH FLOWS FROM OPERATING ACTIVITIES
Net income 13,988 23,721
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 43,279 38,470
Decrease in deferred income taxes (6,563) (1,735)
(Gains) losses from property disposals, net (898) 6
Issuance of common stock under restricted stock plan 228 -
Changes in assets and liabilities:
Receivables (47,243) (15,127)
Prepaid expenses 1,190 (4,396)
Accounts payable 3,480 (8,622)
Accrued liabilities 28,663 13,393
Accrued claims costs (6,478) (10,904)
Income taxes 5,829 12,289
Employee benefits 5,304 1,681
Other (25,738) (5,175)
Net Cash Provided by Operating Activities 15,041 43,601
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (42,599) (16,433)
Proceeds from sales of property 4,569 1,397
Net Cash Used by Investing Activities (38,030) (15,036)
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of treasury stock (4,412) (12,555)
Net Cash Used by Financing Activities (4,412) (12,555)
Increase (decrease) in Cash and Cash Equivalents (27,401) 16,010
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 95,680 $ 123,731
The accompanying notes are an integral part of these statements.
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying consolidated financial statements of
Consolidated Freightways Corporation 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 1998 Annual Report to
Shareholders.
There were no significant changes in the Company's commitments
and contingencies as previously described in the 1998 Annual Report
to Shareholders and related annual report to the Securities and
Exchange Commission on Form 10-K.
2. Segment and Geographic Information
The Company operates in a single industry segment, primarily
providing less-than-truckload transportation and supply chain
management services throughout the United States, Canada and Mexico,
and international freight services between the United States and more
than 80 countries. The following information sets forth revenues and
long-lived assets by geographic location. Revenues are attributed to
geographic location based upon the location of the customer. No one
customer provides 10% or more of total revenues.
Geographic Information
(Dollars in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
Revenues
United States $591,922 $541,149 $1,678,851 $1,577,394
Canada 33,625 30,082 94,685 91,326
Total $625,547 $571,231 $1,773,536 $1,668,720
Geographic Information (continued)
As of
September 30,
1999 1998
Long-Lived Assets
United States $330,101 $335,570
Canada 31,620 24,166
Total $361,721 $359,736
3. Stock Compensation
As of September 30, 1999 there were approximately 1,087,000
granted but unissued restricted common shares remaining from the
initial grant made under the Company's Stock Option and Incentive
Plan. Those shares vest as early as December 16, 1999, but are
contingent upon the Company's stock price achieving a 60% increase
over the price at the time of grant to $11.96. If performance
conditions are met, those shares will be issued to employees in
December 1999 and compensation expense will be recognized based on
the market price of the stock at that time. At September 30, 1999,
the stock price was below the pre-determined level required for
vesting.
The Company granted an additional 141,000 restricted common
shares to senior management in May 1999. These shares, which have a
maximum term of three years, vest as early as May 2000, but are
contingent on the Company's stock price achieving $20.00 per share.
Also in May 1999, the Company granted 916,400 stock options to
members of the Board of Directors and management at prices ranging
from $13.00 to $14.0625 per share, equal to the closing stock prices
on the dates of the grants. The options vest ratably over 48 months,
beginning in January 2000 and expire in May 2004.
4. Earnings per Share
The following chart reconciles basic to diluted earnings per
share for the three and nine months ended September 30, 1999 and
1998. See Footnote 3 for a discussion of dilutive securities.
(Dollars in thousands except per share amounts)
Weighted
Three Average Earnings
Months Ended Net Income Shares Per Share
September 30, 1999
Basic $ 4,730 22,564,538 $0.21
Dilutive effect of
restricted stock
and stock options -- -- --
Diluted $ 4,730 22,564,538 $0.21
September 30, 1998
Basic $ 9,231 22,710,557 $0.41
Dilutive effect of
restricted stock
and stock options -- -- --
Diluted $ 9,231 22,710,557 $0.41
Weighted
Nine Average Earnings
Months Ended Net Income Shares Per Share
September 30, 1999
Basic $13,988 22,599,509 $0.62
Dilutive effect of
restricted stock
and stock options -- 275,038 (0.01)
Diluted $13,988 22,874,547 $0.61
September 30, 1998
Basic $23,721 22,928,421 $1.03
Dilutive effect of
restricted stock
and stock options -- 788,532 (0.03)
Diluted $23,721 23,716,953 $1.00
5. Comprehensive Income
Comprehensive income for the three and nine months ended
September 30, 1999 and 1998 is as follows:
(Dollars in thousands)
Three Nine
Months Ended Months Ended
September 30, September 30,
1999 1998 1999 1998
Net Income $4,730 $9,231 $13,988 $23,721
Other Comprehensive Income (Loss):
Foreign currency translation
adjustments (223) (1,711) 1,653 (4,001)
Comprehensive Income $4,507 $7,520 $15,641 $19,720
6. Credit Facility
On October 12, 1999, the Company entered into a new, multi-year
$175 million unsecured credit facility with several banks to provide
for working capital and letter of credit needs. Borrowings under the
agreement bear interest at LIBOR plus a margin. This agreement
replaces the Company's $150 million secured credit facility that was
due to expire in January 2000. As of September 30, 1999, the Company
had no short-term borrowings and $74.6 million of letters of credit
outstanding under the old facility, which were transferred to the new
credit facility.
7. Contingencies
The Company and its subsidiaries are involved 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 adverse effect on the Company's financial position or
results of operations.
The Company's former parent, CNF Transportation Inc., is engaged
in disputes with the Internal Revenue Service over the amount and
timing of certain tax deductions reported by the former parent in tax
years prior to the spin-off of the Company. These disputes arise from
tax positions first taken by the former parent in the mid-1980's. The
former parent, which is contesting the IRS's positions, has made
certain advance payments to the IRS which would be applied against
any ultimate liability.
Under a tax sharing agreement entered into by the former parent
and the Company at the time of the spin-off, the Company may be
obligated to reimburse the former parent for a portion of any
additional taxes and interest which relate to the Company's business
prior to the spin-off. The amount and timing of such payments, if
any, is dependent on the ultimate resolution of the former parent's
disputes with the IRS and the determination of the nature and extent
of the Company's obligations under the tax sharing arrangement. The
Company has established certain reserves both at the time of and
subsequent to the spin-off with respect to the foregoing. There can
be no assurance that the amount or timing of any liability of the
Company to the former parent will not have a material adverse effect
on the Company's results of operations or financial position.
The Company has received notices from the Environmental
Protection Agency (EPA) and others that it has been identified as a
potentially responsible party (PRP) under the Comprehensive
Environmental Response Compensation and Liability Act (CERCLA) or
other Federal and state environmental statutes at various Superfund
sites. Under CERCLA, PRP's are jointly and severally liable for all
site remediation and expenses. Based upon cost studies performed by
independent third parties, the Company believes its obligations with
respect to such sites would not have a material adverse effect on its
financial position or results of operations.
CONSOLIDATED FREIGHTWAYS CORPORATION AND SUBSIDIARIES
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Revenues for the quarter ended September 30, 1999 increased 9.5%
over the prior year on total and less-than-truckload (LTL) tonnage
increases of 3.1% and 2.8%, respectively. Total and LTL shipments
increased 5.0% and 5.1%, respectively. During the quarter, the
Company benefited from a 35% increase in its PrimeTime business,
continued expansion of its two-day service offering and growth at its
start-up truckload services company. Also contributing to the growth
was incremental business received from existing customers following
the mid-year shut-down of two major LTL carriers. Revenue per
hundredweight increased 4.0% for the quarter due to rate increases
and the effects of a fuel surcharge implemented on July 8th, in
response to higher fuel costs. Revenues for the nine-month period
increased 6.3% on total and LTL tonnage increases of 0.7% and 1.2%,
respectively, and revenue per hundredweight increased 3.9%.
Salaries, wages and benefits increased 7.3% and 5.0% in the
quarter and nine-month period, respectively, due to increased
business levels and a Teamster wage and benefit increase on April
1st. As noted above, the Company received incremental business from
the shutdown of two major LTL carriers. Unfortunately, a high
proportion of this incremental business consisted of light and bulky
shipments inadequately priced to recoup incremental handling costs.
These increased expenses were partially offset by reduced incentive
compensation.
Operating expenses increased 21.6% and 13.0% in the quarter and
nine-month period, respectively, due primarily to increased business
levels and the change in freight mix, as noted above. Additionally,
the average fuel cost per gallon increased 38% in the quarter. As
discussed above, the Company implemented a fuel surcharge effective
July 8th in response to higher fuel costs, as permitted under the
Company's rules tariff. The Company was also impacted by higher than
anticipated costs associated with transitioning information systems
to a third party, start-up costs associated with the continued
expansion of the Company's 2-day service, increased purchased labor
related to the Company's Mexico operations and software amortization
related to the replacement of certain operational and financial
systems. Lease expense for new revenue equipment increased 35% in the
quarter as the Company continued to make significant fleet
replacements.
Purchased transportation increased 19.2% and 18.2% in the
quarter and nine-month period, respectively, due to the use of owner-
operators for new truckload operations, costs associated with the
Company's growing PrimeTime service and increased rail costs. Rail
miles as a percentage of total inter-city miles were 28.2% in the
quarter and 27.2% in the nine-month period. The Company benefited
from a slight decrease in rail costs per mile in the quarter; however,
rail costs per mile increased approximately 2% in the nine-month period.
Operating taxes and licenses increased 10.0% and 3.4% for the
quarter and nine-month period, respectively, due to increased
business levels and increased property taxes on terminal properties.
Claims and insurance expense increased 16.0% and 11.4% in the
quarter and nine-month period, respectively, due to increased
business levels and higher claims experience year-over-year.
Depreciation increased 13.9% and 6.1% in the quarter and nine-
month period, respectively, due to increased capital expenditures in
1999 for the replacement of older revenue equipment.
The above factors resulted in a $7.7 million decrease in
operating income to $9.7 million for the quarter. The operating
ratio deteriorated to 98.4% from 97.0%. Operating income decreased
$19.8 million in the nine-month period to $27.9 million, with the
operating ratio deteriorating to 98.4% from 97.1%.
Other expense, net, increased $528,000 and $947,000 in the
quarter and nine-month period, respectively, due to decreased
investment income on the Company's short-term investments. Short-
term investments decreased as funds were used for capital expenditure
purposes.
The Company's effective income tax rates differ from the
statutory Federal rate due primarily to foreign and state taxes and
non-deductible items.
Management is continuing to expand its expedited service
offerings and invest in its new 2-day service offering. This
includes consolidating terminals and expanding others to expedite
freight through the system, reducing handling and related costs.
Additionally, management will work to reprice or remove the less
profitable freight from the system that had an adverse impact on
previous results. As a result of information systems enhancement and
higher usage, management expects an additional $2 million of expense
per quarter. Cost benefits should partially offset the additional
increased information systems costs.
As discussed in Footnote 3, the Company has a restricted stock
program. If performance conditions are met in December 1999,
approximately 1,087,000 shares of common stock will be issued to
employees, and compensation expense recognized based on the market
price of the stock at that time. At September 30, 1999, the stock
price was below the pre-determined level required for vesting.
As discussed above, the Company experienced a 38% increase in
fuel costs in the third quarter over the prior year. The Company's
rules tariff implements a fuel surcharge when the average cost per
gallon of on-highway diesel fuel exceeds $1.10, as determined from
the Energy Information Administration of the Department of Energy's
publication of weekly retail on-highway diesel prices. This
provision of the rules tariff became effective July 8th. However,
there can be no assurance that the Company will be able to maintain
this surcharge or successfully implement such surcharges in response
to increased fuel costs in the future.
As discussed in more detail in Footnote 7, the Company is party
to a tax sharing agreement with its former parent. Given the
uncertainties surrounding the amount and timing of any obligations of
the Company under the tax sharing agreement, there can be no
assurance that the amount or timing of any liability of the Company
to the former parent will not have a material adverse effect on the
Company's results of operations or financial position.
YEAR 2000
Management has a formal plan in place through which it has
identified its operational and financial systems and applications
requiring either modification or replacement for Year 2000
compliance. Of these systems, the Company's on-line equipment and
freight tracking system is deemed most critical. Based upon an
assessment at September 30, 1999, testing and modification of mission
critical IT mainframe applications, which includes the on-line
equipment and freight tracking system, and non-mission critical
mainframe applications are 100% complete. Non-mainframe related Year
2000 activities are approximately 90% complete. Expenses related to
Year 2000 modifications totaled $3.4 million for the nine months
ended September 30, 1999 and include payroll and payroll related
costs as well as the costs of external consultants. In certain
cases, management has opted to replace rather than modify certain of
its systems and applications. Costs associated with the replacement
of systems and applications are capitalized. As of September 30,
1999, $36.4 million has been capitalized and includes hardware,
software and payroll costs as well as costs of external consultants.
Management expects to spend an additional $9 million to replace
and/or convert its internal systems for Year 2000 compliance. Of
this amount, it is expected that approximately $1 million will be
expensed and approximately $8 million will be capitalized. These
estimates may be revised based upon the results of continued
implementation. Management expects that all Year 2000 system
modifications and replacements will be funded with cash from
operations.
Management has identified and prioritized its critical customers
and key vendors of products and services and is soliciting written
responses to Year 2000 readiness questionnaires. Management has
completed substantially all of the vendor verification portion of the
effort. Management is formulating contingency plans as necessary
based upon the results of those questionnaires.
As noted above, testing and modification of mission critical and
non-mission critical IT mainframe applications are 100% complete.
Non-mainframe related Year 2000 activities are approximately 90%
complete. The Company is currently enterprise testing for further
Year 2000 assurance as well as distributing replacement equipment where
necessary. To the extent that the Company or its critical customers
and key suppliers fail to achieve Year 2000 compliance, there could
be a material adverse effect on the Company's business, results of
operations and financial position.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1999, the Company had $95.7 million in cash
and cash equivalents. Net cash flow from operations for the nine
months ended September 30, 1999 was $15.0 million compared with $43.6
million in the prior year. The decrease was due in large part to
lower net income and increased expenditures to replace operational
and financial systems for Year 2000 compliance. Depreciation and
amortization includes approximately $3 million of amortization
related to replacement of those systems. The increase in accounts
receivable is primarily attributable to increased business levels.
Management expects cash flow from operations for 1999 will be
sufficient for working capital requirements. Capital expenditures
for the nine months ended September 30, 1999 were $42.6 million
compared with $16.4 million in the same period last year. Management
expects capital expenditures to be approximately $42 million for the
remainder of the year, primarily for the purchase of equipment and
upgrades to terminal properties. It is anticipated that those
expenditures will be funded with existing cash balances and cash from
operations, supplemented by financing arrangements. During the
quarter ended September 30, 1999, the Company repurchased 443,500
shares of its common stock for $4.4 million. Management is
authorized to repurchase an additional $8.0 million of common stock.
On October 12, 1999, the Company entered into a new, multi-year
$175 million unsecured credit facility with several banks to provide
for working capital and letter of credit needs. Borrowings under the
agreement bear interest at LIBOR plus a margin. This agreement
replaces the Company's $150 million secured credit facility that was
due to expire in January 2000. As of September 30, 1999, the Company
had no short-term borrowings and $74.6 million of letters of credit
outstanding under the old facility, which were transferred to the new
credit facility.
Also in October, the Company refinanced an existing lease
agreement covering 2,700 of the Company's trucks and tractors,
lowering the lease expense and extending the lease term.
During the quarter, the Company completed a six-year operating
lease agreement for 670 new trucks and tractors. Incremental lease
payments for these new trucks and tractors are expected to be $1.5
million for the remainder of 1999 and $5.9 million annually through
2005. These new units are replacements for older equipment currently
in service. The Company expects to complete another six-year lease
agreement for 100 new trucks and tractors in December 1999.
Incremental lease payments are expected to be $855,000 annually
through 2005.
As discussed in Footnote 7, the Company is party to a tax
sharing agreement with its former parent. Given the uncertainties
surrounding the amount and timing of any obligations of the Company
under the tax sharing agreement, there can be no assurance that the
amount or timing of any liability of the Company to the former parent
will not have a material adverse effect on the Company's results of
operations or financial position.
OTHER
The Company has received notices from the Environmental
Protection Agency and others that it has been identified as a
potentially responsible party (PRP) under the Comprehensive
Environmental Response Compensation and Liability Act (CERCLA) or
other Federal and state environmental statutes at various Superfund
sites. Under CERCLA, PRP's are jointly and severally liable for all
site remediation and expenses. Based upon cost studies performed by
independent third parties, the Company believes its obligations with
respect to such sites would not have a material adverse effect on its
financial condition or results of operations.
Certain statements included or incorporated by reference herein
constitute "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended, and 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 included 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," "approximately," "intends," "plans," "pro forma,"
"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 matters discussed elsewhere herein and in documents incorporated
by reference herein, could cause actual results and other matters to
differ materially from those in such forward-looking statements:
changes in general business and economic conditions; increases in
domestic and international competition and pricing pressure;
increases in fuel prices; uncertainty regarding the Company's ability
to improve results of operations; labor matters, including shortages
of drivers and increases in labor costs; changes in governmental
regulation; environmental and tax matters; increases in costs
associated with the conversion of financial and operational systems
and applications for Year 2000 compliance and failure to convert all
systems by the year 2000. As a result of the foregoing, no assurance
can be given as to future results of operations or financial
condition.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is subject to market risks related to changes in
interest rates and foreign currency exchange rates, primarily the
Canadian dollar and Mexican peso. Management believes that the
impact on the Company's financial position, results of operations and
cash flows from fluctuations in interest rates and foreign currency
exchange rates would not be material. Consequently, management does
not currently use derivative instruments to manage these risks;
however, it may do so in the future.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
As previously disclosed, the Company has received notices from
the Environmental Protection Agency and others that it has been
identified as a potentially responsible party (PRP) under the
Comprehensive Environmental Response Compensation and Liability Act
(CERCLA) or other Federal and state environmental statutes at various
Superfund sites. Based upon cost studies performed by independent
third parties, the Company believes its obligations with respect to
such sites would not have a material adverse effect on its financial
condition or results of operations.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed in the quarter ended
September 30, 1999.
SIGNATURES
Pursuant to the requirements 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 Corporation
(Registrant)
November 12, 1999 /s/Sunil Bhardwaj
Sunil Bhardwaj
Senior Vice President and
Chief Financial Officer
November 12, 1999 /s/Robert E. Wrightson
Robert E. Wrightson
Senior Vice President and
Controller
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