UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A to N/A
Commission File Number 1-12149
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 April 30, 2000: 21,464,671
CONSOLIDATED FREIGHTWAYS CORPORATION
FORM 10-Q
Quarter Ended March 31, 2000
____________________________________________________________________________
____________________________________________________________________________
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 2000 and December 31, 1999 3
Statements of Consolidated Operations -
Three Months Ended March 31, 2000 and 1999 5
Statements of Consolidated Cash Flows -
Three Months Ended March 31, 2000 and 1999 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2000 1999
(Dollars in thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 87,682 $ 49,050
Trade accounts receivable, net of allowances 326,738 343,198
Other receivables 5,513 6,524
Operating supplies, at lower of average
cost or market 8,784 9,268
Prepaid expenses 51,338 41,405
Deferred income taxes 20,287 21,567
Total Current Assets 500,342 471,012
PROPERTY, PLANT AND EQUIPMENT, at cost
Land 82,766 82,701
Buildings and improvements 354,481 354,012
Revenue equipment 536,645 545,129
Other equipment and leasehold improvements 141,784 139,408
1,115,676 1,121,250
Accumulated depreciation and amortization (755,246) (752,298)
360,430 368,952
OTHER ASSETS
Deposits and other assets 57,102 57,712
Deferred income taxes 21,337 18,596
78,439 76,308
TOTAL ASSETS $ 939,211 $ 916,272
The accompanying notes are an integral part of these statements.
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2000 1999
(Dollars in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 86,368 $ 98,701
Accrued liabilities 220,489 202,287
Accrued claims costs 80,353 78,584
Federal and other income taxes 13,402 16,883
Short-term borrowings 20,000 -
Total Current Liabilities 420,612 396,455
LONG-TERM LIABILITIES
Long-term debt 15,100 15,100
Accrued claims costs 96,948 97,839
Employee benefits 122,863 121,783
Other liabilities and deferred credits 27,377 26,533
Total Liabilities 682,900 657,710
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 23,133,848 shares 231 231
Additional paid-in capital 77,224 77,406
Accumulated other comprehensive loss (10,094) (10,087)
Retained earnings 204,653 207,632
Treasury stock, at cost (1,760,855 and 1,863,691
shares, respectively) (15,703) (16,620)
Total Shareholders' Equity 256,311 258,562
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 939,211 $ 916,272
The accompanying notes are an integral part of these statements.
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(Dollars in thousands except per share amounts)
Three Months Ended
March 31,
2000 1999
REVENUES $ 593,629 $ 558,208
COSTS AND EXPENSES
Salaries, wages and benefits 379,660 358,400
Operating expenses 115,815 91,580
Purchased transportation 49,125 51,772
Operating taxes and licenses 18,468 17,042
Claims and insurance 18,059 13,898
Depreciation 13,741 12,324
594,868 545,016
OPERATING INCOME (LOSS) (1,239) 13,192
OTHER INCOME (EXPENSE)
Investment income 353 818
Interest expense (1,087) (1,032)
Miscellaneous, net (4,106) (359)
(4,840) (573)
Income (loss) before income taxes (benefits) (6,079) 12,619
Income taxes (benefits) (3,100) 5,868
NET INCOME (LOSS) $(2,979) $6,751
Basic average shares outstanding 21,350,812 22,607,703
Diluted average shares outstanding 21,350,812 22,607,703
Basic Earnings (Loss) per Share: $(0.14) $ 0.30
Diluted Earnings (Loss) per Share: $(0.14) $ 0.30
The accompanying notes are an integral part of these statements.
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
Three Months Ended
March 31,
2000 1999
(Dollars in thousands)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $ 49,050 $ 123,081
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) (2,979) 6,751
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 15,255 13,350
Decrease in deferred income taxes (1,461) (1,189)
Gains from property disposals, net (297) (38)
Issuance of common stock under stock
compensation plans 735 230
Changes in assets and liabilities:
Receivables 17,471 (10,435)
Prepaid expenses (9,933) (4,204)
Accounts payable (12,333) 5,600
Accrued liabilities 18,202 14,633
Accrued claims costs 878 (278)
Income taxes (3,481) 4,077
Employee benefits 1,080 2,149
Other 2,829 (9,067)
Net Cash Provided by Operating Activities 25,966 21,579
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (5,436) (16,624)
Software expenditures (2,879) (8,771)
Proceeds from sales of property 981 894
Net Cash Used by Investing Activities (7,334) (24,501)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings 20,000 --
Net Cash Provided by Financing Activities 20,000 --
Increase (decrease) in Cash and Cash Equivalents 38,632 (2,922)
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 87,682 $ 120,159
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
accounting principles generally accepted in the United States have
been condensed or omitted from these statements pursuant to such
rules and regulations and, accordingly, should be read in conjunction
with the consolidated financial statements included in the Company's
1999 Annual Report to Shareholders.
There were no significant changes in the Company's commitments
and contingencies as previously described in the 1999 Annual Report
to Shareholders and related annual report to the Securities and
Exchange Commission on Form 10-K, except as discussed in Footnote 6
below, regarding settlement of tax liabilities.
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 and Canada, as well
as in Mexico through a joint venture, and international freight
services between the United States and more than 80 countries. The
following information sets forth revenues and property, plant and
equipment 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
March 31,
2000 1999
Revenues
United States $557,903 $529,421
Canada 35,726 28,787
Total $593,629 $558,208
Geographic Information (continued)
As of
March 31,
2000 1999
Property, Plant and Equipment
United States $323,826 $334,916
Canada 36,604 30,288
Total $360,430 $365,204
3. Stock Compensation
As of March 31, 2000, there were 1,240,000 granted but unissued
restricted common shares remaining from grants made under the
Company's various stock incentive plans. The shares vest over time
and are contingent upon the Company's average stock price achieving
pre-determined increases over the grant prices for 10 consecutive
trading days. Compensation expense is recognized based upon the
stock price when the minimum stock price is achieved. As of March
31, 2000, the stock price was below the pre-determined levels
required for vesting.
4. Comprehensive Income
Comprehensive income (loss) for the three months ended March 31,
2000 and 1999 is as follows:
(Dollars in thousands)
Three
Months Ended
March 31,
2000 1999
Net Income (Loss) $(2,979) $6,751
Other Comprehensive Income (Loss):
Foreign currency translation
adjustments (7) 482
Comprehensive Income (Loss) $(2,986) $7,233
5. Debt
The Company has a 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. As of March 31, 2000, the Company had $20
million of short-term borrowings and $66 million of letters of credit
outstanding. The continued availability of funds under this credit
facility will require that the Company comply with certain financial
covenants, the most restrictive of which requires the Company to
maintain a minimum tangible net worth. The Company is in compliance
as of March 31, 2000 and expects to be in compliance with these
covenants for the remainder of the year.
6. 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., continues
to dispute certain tax issues with the Internal Revenue Service
relating to the taxable years prior to the spin-off of the Company.
The issues arise from tax positions first taken by the former parent
in the mid-1980's.
Under a tax sharing agreement entered into between CNF
Transportation Inc. and the Company at the time of the spin-off, the
Company is obligated to reimburse the former parent for its share of
any additional taxes and interest that relate to the Company's
business prior to the spin-off. Although the former parent's
resolution with the Internal Revenue Service is still pending, the
Company has reached an agreement in principle on a tax settlement
amount that appropriately reflects its liability under the tax
sharing agreement as of March 31, 2000. As a result, the Company
recorded a $4.0 million charge for the settlement in the quarter
ended March 31, 2000.
In May, the Company contemplates that a formal tax settlement
agreement will be executed between the parties. The agreement will
call for a full settlement of the tax sharing liability, except for
certain enumerated open tax items that are anticipated to be resolved
within the next 24 to 30 months. The settlement entails a current
cash payment of $16.7 million, transfer of approximately $1 million
of real property, and the grant of promissory notes in an aggregate
amount of $40.2 million payable over a four year period. As of March
31, 2000, the Company believes that it has accrued the necessary
reserves to adequately provide for its entire liability to CNF
Transportation Inc. under the tax sharing agreement.
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 three months ended March 31, 2000 increased
6.3% over the same period last year to $593.6 million despite lower
tonnage. Tonnage decreased 1.6% from the prior year reflecting a
higher proportion of lighter weight freight in the system, yield
management programs as well as continued competition. Shipments
increased 3.3%; however, the average weight per shipment decreased
4.8%. The tonnage decrease was offset by a 7.6% increase in revenue
per hundredweight due to rate increases, a fuel surcharge and the
change in freight profile.
Salaries, wages and benefits increased 5.9% due primarily to
a contractual wage and benefit increase and $4.3 million of severance
pay due to an administrative reorganization. The Company was also
impacted by lower P&D and crossdock efficiencies due to a higher
proportion of lighter weight freight in the system.
Operating expenses increased 26.5% over the prior year period
due primarily to increased fuel costs. The average fuel cost per
gallon, excluding tax, increased to $0.88 from $0.41. The Company
has a fuel surcharge in place to offset the impact of the increased
fuel costs. Higher information systems costs and revenue equipment
lease expense, as well as a lower proportion of freight transported
via rail also impacted the quarter. The quarter was also impacted by
infrastructure costs as management continues to adjust the mix of
customer freight and resize the freight flow system to expected
business levels.
Purchased transportation decreased 5.1% due to a decrease in the
use of rail transportation. Rail miles as a percentage of inter-city
miles decreased to 22.8% from 26.5% due to concerns about service
levels subsequent to a recent rail line merger.
Operating taxes and licenses increased 8.4% due to lower rail
usage and increased licensing costs due to a larger fleet size.
Claims and insurance increased 29.9% due to higher than
anticipated cargo claims and higher-cost vehicular accidents.
Depreciation increased 11.5% due to increased capital
expenditures in 1999.
The above resulted in an operating loss of $1.2 million for the
quarter compared with $13.2 million of operating income in the same
period last year. The operating ratio deteriorated to 100.2 from
97.6.
Other expense, net increased $4.3 million reflecting a $4.0
million charge for settlement of a tax liability with CNF
Transportation Inc., its former parent. Additionally, investment
income on the Company's 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 working to improve the freight mix by shedding
less profitable freight as well as seeking appropriate compensation
for the freight handled. These actions are expected to adversely
impact business levels in the short term. An April 1st wage and
benefit increase averaging 3.4% will add approximately $21 million of
expense in the remainder of 2000. Management will continue to resize
the freight flow infrastructure as business levels stabilize. This
includes consolidating some terminals and expanding others to
expedite freight through the system, reducing handling and related
costs. Additionally, management will continue to invest in its 2nd
day service offering in an effort to become more competitive in the
shorter length-of-haul lanes.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, the Company had $87.7 million in cash and
cash equivalents. Net cash flow provided by operations for the three
months ended March 31, 2000 was $26.0 million compared with $21.6
million in the same period last year. The increase was due primarily
to improved collections of accounts receivable. Management expects
cash flow from operations for 2000 will be sufficient for working
capital requirements.
Net cash flows used by investing activities was $7.3 million
compared with $24.5 million in the same period last year. The prior
year period reflects a higher level of revenue equipment purchases as
the Company continued upgrading its fleet, as well as costs to
replace certain operational and financial software systems for Year
2000 compliance. Management expects capital and software
expenditures to be approximately $72 million for the remainder of the
year, primarily for upgrades to terminal properties, technology
enhancements and the purchase of revenue equipment. It is anticipated
that those expenditures will be funded with existing cash balances
and cash from operations, supplemented by financing arrangements.
Net cash provided by financing activities of $20 million
reflects borrowings under the Company's credit facility in
anticipation of settlement of its tax liability with CNF
Transportation Inc., as discussed in Footnote 6.
The Company has a 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. As of March 31, 2000, the Company had $20
million of short-term borrowings and $66 million of letters of credit
outstanding. The continued availability of funds under this credit
facility will require that the Company comply with certain financial
covenants, the most restrictive of which requires the Company to
maintain a minimum tangible net worth. The Company is in compliance
as of March 31, 2000 and expects to be in compliance with these
covenants for the remainder of the year.
As discussed in Footnote 6, the Company is party to a tax
sharing agreement with its former parent. In May, the Company
contemplates that a formal tax settlement agreement will be executed
between the parties. The agreement will call for a full settlement
of the tax sharing liability, except for certain enumerated open tax
items that are anticipated to be resolved within the next 24 to 30
months. The settlement entails a current cash payment of $16.7
million, transfer of approximately $1 million of real property, and
the grant of promissory notes in an aggregate amount of $40.2 million
payable over a four year period. As of March 31, 2000, the Company
believes that it has accrued the necessary reserves to adequately
provide for its entire liability to CNF Transportation Inc. under the
tax sharing agreement.
OTHER
On May 8, 2000, the Board of Directors elected Patrick H. Blake
president and chief executive officer of the Company and chief
executive officer of CF, the Company's long-haul subsidiary. He
replaces Vice Chairman of the Board G. Robert Evans, who served as
interim CEO after the retirement of W. Roger Curry in January. Mr.
Blake previously served as executive vice president of operations and
chief operating officer of the Company and president and chief
operating officer of CF. The Board elected Thomas A. Paulsen to
replace Mr. Blake as president and chief operating officer of CF. He
previously served as senior vice president of operations.
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; and environmental and tax matters. 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
(10.1) Settlement Agreement and Mutual Release of Claims
between Consolidated Freightways Corporation and
W. Roger Curry dated April 14, 2000.
(10.2) Consolidated Freightways Corporation Senior Executive
Incentive Plan for 2000.
(27) Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed in the quarter ended
March 31, 2000.
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)
May 12, 2000 /s/Sunil Bhardwaj
Sunil Bhardwaj
Senior Vice President and
Chief Financial Officer
May 12, 2000 /s/Robert E. Wrightson
Robert E. Wrightson
Senior Vice President and
Controller
Exhibit 10.1
SETTLEMENT AGREEMENT AND MUTUAL RELEASE OF CLAIMS
This Settlement Agreement and Mutual Release of Claims
(hereinafter "Release") is made between W. Roger Curry
("Curry") and Consolidated Freightways ("CFC")
(individually, a "Party," and collectively the "Parties")
for the complete and final settlement of the Employment
Agreement, dated as of December 8, 1998 between Curry and
CFC (hereinafter the "Employment Agreement") and the mutual
release of claims, if any. The Parties hereto voluntarily
and knowingly enter into the following Release and have
agreed and do agree as follows:
1 Except as specifically otherwise provided herein, Curry
shall and hereby does, acknowledge full and complete
satisfaction of the Employment Agreement and does hereby
release, absolve and discharge, except as expressly set
forth herein, CFC, its subsidiaries and affiliated
companies, their predecessors, successors and assigns,
past and present, and each of them as well as their
directors, officers, stockholders, agents, servants,
employees, representatives and attorneys, and each of
them (all hereinafter referred to collectively and
individually as "CFC and Affiliates") from any and all
claims, demands, liens, agreements, contracts, covenants,
actions, suits, causes of action, employment
discrimination accusations, wages, obligations, debts,
expenses, damages, judgements, orders, and liabilities of
whatever kind or nature in law, equity or otherwise,
whether known or unknown, suspected or unsuspected, which
Curry now owns or holds or at any time heretofore owned
or held against said entities or persons or any of them,
including specifically but not exclusively and without
limiting the generality of the foregoing (1) any and all
claims arising out of or in any way connected with
Curry`s employment by CFC and Affiliates; (2) any and all
claims arising out of or in any way connected with
Curry's separation from employment with CFC and
Affiliates; (3) any and all claims for wages or
commissions due as a result of said employment
relationship, including any payments under any long or
short term incentive plan; (4) any and all claims for
statutory penalties, interest, or attorneys' fees; (5)
any and all claims for wrongful discharge, whether
contractual or tortious, including any claim for
constructive discharge or forced involuntary retirement;
(6) any and all claims for intentional, negligent, or
wrongful termination; (7) any and all claims for breach
of contract, whether express or implied; (8) any and all
claims for further pension or other retirement benefits
other than those benefits provided herein; (9) any and
all tort claims, including claims for intentional or
negligent infliction of emotional distress or defamation;
(10) any and all claims for breach of the covenant of
good faith and fair dealing, whether contractual or
tortious; (11) any and all claims for labor protection
benefits under state, federal or local law; (12) any and
all claims that could be raised under any state, federal
or municipal laws pertaining to age, sex, race, religion,
veteran status, job protection, national origin,
disability or other employment discrimination of whatever
type; (13) any and all claims arising out of or in any
way connected with Curry's Employment Agreement; (14) any
and all claims for severance benefits and/or payments of
whatever type; (15) any and all claims under any
executive or general employee benefit plans or
arrangements other than those benefits provided herein;
(16) any and all claims arising out of or in any way
connected with any loss, damage or injury whatever, known
or unknown, suspected or unsuspected, resulting from any
act or omission by CFC and Affiliates committed or
omitted prior to the date hereof. Curry hereby releases
all of his employment rights and privileges with the
company and its affiliates. The Company hereby forever
and generally and completely releases and discharges
Curry and his agents, successors, heirs, assigns, and
affiliates, from any and all claims and demands of every
kind and nature, in law, equity or otherwise, based on
any actions, or failures to act, of Curry, and for
damages actual and consequential, past present and future
arising therefrom. The Company represents and warrants
that it has obtained any necessary approvals or
authorizations from its Board of Directors required to
consummate this Agreement and effectuate the resolution
of all claims which are the subject of this Agreement,
and also represents and warrants that it has reasonably
investigated and determined that it has no claims against
Curry at this time.
However, the above releases herein expressly do not apply
to or limit either (1) Curry's legally-vested rights (if
any) under any benefit plan of the company; (2) Curry's
rights to indemnification by the Company as provided for
herein and by law; (3) either Party's potential claims
with regard to the other Party's future activities; or
(4) either Party's rights to enforce the terms of this
Agreement.
2.Except as modified by paragraph 1 above, this Release is
expressly intended to waive any and all claims either
Party may presently possess or previously possessed,
however enumerated and regardless of the nature, source
or basis for any such claim. The Parties hereby intend
this Release to have a broad effect and to settle all
disputes, without limitation of any kind or nature, which
either Party may have against each other.
The Parties knowingly waive the requirement of California
Civil Code Section 1542, which reads as follows:
"A general release does not extend to claims which
the creditor does not know or suspect to exist in its
favor at the time of executing the Release, which, if
known by him, must have materially affected his
settlement with the debtor."
Notwithstanding the provisions of Section 1542 and of any
other laws of similar scope and effect, and for the
purpose of implementing a full and complete release of
claims, CFC and Curry expressly acknowledge that this
Release is intended to include in its effect, without
limitation, all claims which they do not know or suspect
to exist in their favor at the time of execution of this
Release.
3 Curry acknowledges and agrees that the only
representations or inducements that have been made to him to
secure his signature on this document and the only
consideration he will receive for signing this Release are
as appears in this document, and Curry further agrees that
this document constitutes the entire agreement between him
and CFC and Affiliates on the subject of his separation from
employment.
4 Curry expressly waives any rights or claims under the
Federal Age Discrimination in Employment Act and Older
Workers' Benefit Protection Act in connection with his
separation from employment at CFC and Affiliates. Curry,
with the advice of competent counsel, and after having been
advised to consult with an attorney, affirms that he has had
at least twenty-one (21) days in which to consider executing
the release of age discrimination claims under the
aforementioned statutes. Curry is further aware of his
right to revoke the waiver of age discrimination claims
within seven (7) days after signing this Release. In the
event Curry revokes the waiver of claims contained herein,
within seven (7) days after signing this Release he shall
immediately return to CFC all sums and benefits he has
received pursuant to this Release.
5 In consideration of the representations of Curry herein,
CFC agrees to provide the following severance pay and
arrangements:
a) Within ten (10) days from the date of this release,
$2,218,783
b) Quarterly payments, less applicable taxes, beginning
March 31, 2000 on a January 1, 2000 balance of $2,654,498
relating to deferred compensation earned on or prior to
December 31, 1996. The amount and duration of the payments,
together with accrued interest, shall be made in accordance
with the CNF Transportation Inc. Stock Appreciation Rights
Plan and Long-term Incentive Plan, which are a part of this
Release.
c) Promptly issue Curry 200,000 shares of CF stock upon
payment of withholding tax of $484,500. The withholding tax
shall be deducted from the $2,218,783 payable under section
5(a) above. CF will provide Curry a W-2 by January 31, 2001
showing compensation of $1,425,000.
d) Promptly issue Curry 100,000 shares of CF stock upon
attainment of the required CF stock price of $11.96 or in
the event of a Change of Control (unless otherwise
determined by the Compensation Committee of the Board of
Directors prior to the occurrence thereof), all in
accordance with the terms of the Stock Award and Deferral
Agreement, between Curry and CFC dated as of December 2,
1996, and the 1996 Stock Option and Incentive Plan. As
provided therein, the right to receive such shares will be
forfeited on January 24, 2001, unless the restrictions have
lapsed prior to that date.
e) Promptly issue Curry 30,000 shares of CFC stock upon
attainment of the required CF stock price of $20 or in the
event of a Change in Control (unless the surviving or
acquiring corporation refuses to assume such stock award and
the applicable agreement), all in accordance with the terms
of the Stock Award and Deferral Agreement, between Curry and
CFC, dated as of May 12, 1999, and the 1996 Stock Option and
Incentive Plan. As provided therein, the right to receive
such shares will be forfeited on January 24, 2001, unless
the restrictions have lapsed prior to that date.
f) Issue upon the exercise of stock options up to 100,000
shares of CFC stock for $14.0625 per share provided such
options are exercised on or prior to January 24, 2003, all
in accordance with the terms of the Stock Option Grant
Notice, dated June 16, 1999, the corresponding Stock Option
Agreement, the 1999 Equity Incentive Plan and the Notice of
Exercise.
g) Pay on behalf of Curry on the last day of each month
beginning March 31, 2000 an amount equivalent to the retiree
medical premium, less applicable taxes, through December 31,
2002.
h) On the last day of each month, beginning April 30,
2000, pay Curry $1,400 per month, in lieu of a car allowance
and 401(k) matches, through December 31, 2002, less
applicable withholding taxes. As soon as practicable, pay
Curry $2,800 for February and March, 2000.
i) Pay CFC's share of the split dollar life insurance
premiums, provided Curry pays his share of the premiums, in
accordance with the split-dollar life program available to
senior executives of CFC. Curry authorizes CFC to deduct
such premiums monthly from the retirement payments.
j) Provide the vested retirement benefits under the CFC
Pension Plan in accordance with its terms and the
supplemental retirement benefits under the CFC Supplemental
Retirement Plan, with age and service credit through
December 31, 2002. Retiree medical premiums shall be
deducted from pension payments.
k) Provide Curry all retiree benefits generally available
to employees.
l) Reimburse Curry for annual tax preparation services
through December 31, 2002, of up to $2,500, and for an
executive physical according to the terms of the program for
other executives.
6. Curry agrees to bear all tax consequences and pay all
withholding taxes for which he is liable for sums referred
to herein in connection with this settlement, and agrees to
hold harmless and indemnify CFC and Affiliates against all
liabilities, penalties, interest and expenses (including
reasonable attorneys' fees and expenses) in the event that
any proceeding is instituted by any governmental agency in
connection with the tax consequences of said sums.
7. Curry agrees to cooperate with CFC and Affiliates at
CFC's expense but without additional compensation in
connection with any claims, disputes or lawsuits on an as-
needed basis. CFC shall pay Curry an hourly consulting fee
of $250.00 for Curry's assistance, provided however, Curry
shall not be paid to prepare for or give testimony in a
deposition or at trial.
8. Curry agrees that he will not seek or accept employment
with CFC or its affiliated companies in the future.
9. CFC and Curry agree that, in any publication or
communication, they shall represent that Curry has retired
from employment with CFC. In addition, each Party agrees
not to illegally disparage the other Party.
10. The terms of settlement and this Release of claims are
a private matter and are to be held in strict confidence by
CFC and Curry and their attorneys and shall not be disclosed
to other persons other than their attorneys, spouses,
financial planners, tax return preparers, government taxing
authorities, or as required to comply with legal process or
other legal requirements. The Parties understand that this
is a material term of the Release and that any disclosure by
the Parties of the terms and conditions of the Release shall
be treated as a breach and will entitle the Parties, at
their option, to seek all damages occasioned by the breach.
11. The Parties recognize that, in connection with Curry's
employment, he had access to certain written and oral
information, data, marketing techniques and information,
administrative and operational procedures, materials,
marketing plans, strategic planning, pricing guidelines,
contract terms, and other trade secrets or confidential or
proprietary information of CFC and its affiliated companies,
which information is not otherwise generally available to
the public (the "Confidential Information"). The Parties
further recognize that Curry may have, on behalf of CFC and
its affiliated companies, produced, refined, or contributed
to the production or refinement of such Confidential
Information. The Parties further recognize that CFC and its
affiliated companies had and have a right to protect the
confidentiality and ownership of that Confidential
Information, that the nature of their businesses is highly
specialized and unique, and that Curry's position with CFC
and its affiliated companies was one of confidence and
trust.
Curry agrees never to use, for himself or others, or
disclose to any individual, directly or indirectly, any
Confidential Information, as described in the preceding
paragraph, without the prior written consent of CFC.
Curry understands that an unauthorized disclosure or use
of Confidential Information, as set forth herein, will
entitle CFC, at is option, to seek all damages occasioned
by the breach.
Curry covenants and agrees that he will, upon execution
of this Release, deliver to CFC any and all Confidential
Information as defined above, including but not limited
to any and all records, forms, contracts, studies,
reports, appraisals, strategic planning documents, price
lists, shipper or customer lists or information, special
pricing arrangements, financial data, lists of names or
other shipper data, and any other articles or papers,
computer tapes, and materials that have come into his
possession by reason of his employment with CFC, together
with all copies thereof, whether or not any of said items
were prepared by him, and he shall not retain memoranda
or copies of said items.
Curry acknowledges and agrees that he will not use for
himself or others or disclose to any individual directly
or indirectly any Confidential Information as defined
above. Further he will not use for himself or others or
disclose to any individual directly or indirectly any
Confidential Information as defined above. Further he
will not use for himself or others or disclose to any
individual directly or indirectly any information
concerning customer shipping volumes, rates, price lists,
special pricing arrangements, financial data, strategic
planning information, or other shipper data, that he
learned or acquired while at CFC that is not otherwise
readily available from the shipper/customer or other
public source.
12. By entering into this Release, it is expressly agreed
between the Parties that neither Party admits any liability
or wrongdoing in connection with any aspect of Curry's
employment by CFC and its affiliated companies or his
retirement from that employment. Neither the agreement to
enter into this Release nor anything in this Release shall
be admissible in any proceeding as evidence of any admission
by CFC or Curry of any breach of any contractual obligation,
wrongdoing, or other wrongful action in any form whatsoever.
The Parties hereto enter into this Release in order to
resolve actual and potential claims, and no admission of
liability can be implied from that action.
13. CFC agrees that it will defend and indemnify Curry for
actions taken by him while employed at CFC and its
affiliated companies which were within the course and scope
of his employment to the fullest extent permitted by law,
CFC's articles of incorporation and by-laws.
14. The terms of this Release are contractual and not a
mere recital. Should any provision, or part of any
provision or application thereof be held invalid, the
invalidity shall not affect any other provisions or
applications of the Release which can be given effect
without the invalid provision or applications, and to this
end provisions of this Release are declared to be severable.
15. The Release shall bind and benefit all Parties hereto,
their spouses, legal successors, heirs, assigns, partners,
guarantors, agents, executors, representatives and advisors,
and all other claiming by and through them. In the case of
any corporation, the Release shall bind and benefit its
subsidiaries, affiliates, parents, assigns, employees,
successors-in-interest, agents, directors, officers, and
shareholders.
16. All Parties and their counsel have reviewed this
Release, and the normal rule of construction providing that
any ambiguities are to be resolved against the drafting
Party shall not be employed in the interpretation of this
Release.
17. No breach of any provisions hereto can be waived unless
done so expressly and in writing. Express waiver of any one
breach shall not be deemed a waiver of any other breach of
the same or any other provisions hereof. The Release may be
amended or modified only by a written agreement executed by
all Parties to this Release.
18. The Parties represent and declare that, in executing
this Release, they relied solely upon their own judgment,
belief and knowledge, and the advice and recommendations of
their own independently selected counsel, concerning the
nature, extent and duration of their rights and claims, and
that they have not been influenced to any extent whatsoever
in executing the same by any representations or statements
not expressly contained or referred to in this Release.
19. The interpretation of this Release and the provisions
thereof shall be governed by the laws of the State of
California.
20. All Parties acknowledge they have carefully read and
understood the contents of the Release. The Parties hereto
further expressly agree that the considerations recited in
this Release are the sole and only considerations for this
agreement, and that no representations, promises, or
inducements have been made by any Party or its officers,
employees, agents, or attorneys thereof other than as appear
in this Release. This Release supercedes any other oral or
written agreements or understandings between the Parties
regarding any matter within the scope of the Release. The
Parties hereto acknowledge voluntarily entering into this
agreement with full knowledge of the rights that they may be
waiving.
21. Curry shall not be required to mitigate the amount of
payments hereunder by seeking other employment or otherwise,
and any amount earned by Curry as a result of employment by
others shall not reduce payments hereunder.
22. The Company will reimburse Curry or Curry's successor-
in-interest for all reasonable attorney fees and costs
associated with bringing any action under the Release to
enforce his rights hereunder, regardless of the outcome of
such proceeding, provided the court does not find the claim
was brought in bad faith. Curry will reimburse CFC for all
reasonable attorney fees and cost associated with bringing
any action under this Release to enforce its rights if CFC
is the "prevailing party" as defined under California law.
Date: April 14, 2000
W. Roger Curry Consolidated Freightways Corporation
/s/ W. R. Curry By:_/s/ Stephen D. Richards
Name: Stephen D. Richards
Title: Senior Vice President and
General Counsel
EXHIBIT 10.2
CONSOLIDATED FREIGHTWAYS CORPORATION
SENIOR EXECUTIVE INCENTIVE PLAN
FOR 2000
THE PLAN
In order to motivate certain employees of Consolidated
Freightways Corporation (CFC) more effectively and efficiently,
CFC establishes an Incentive Plan (Plan) under which payments
will be made to designated eligible senior executive personnel
out of calendar year 2000 Incentive Profits.
DESIGNATION OF PARTICIPANTS
Participants in this Plan shall be designated full-time executive
personnel of CFC. A master list of all Plan participants will be
maintained in the office of the President of CFC.
ELIGIBILITY FOR PAYMENT
Participants will commence participation at the beginning of the
first full calendar quarter following becoming eligible.
Calendar quarters begin January 1, April 1, July 1, and October 1
or the first working day thereafter. An employee who commences
participation in the 2000 Plan during the 2000 Plan year, and who
participates less than four full quarters, will receive a pro
rata payment based on the number of full calendar quarters of
Plan participation.
Subject to the following exceptions, no person shall receive any
payment under this Plan unless on the date that the payment is
actually made that person is then currently (i) employed by CFC
or any of its subsidiaries and (ii) a Plan participant.
EXCEPTION 1. A Plan participant who is employed by CFC
through December 31, 2000 but leaves that employment or
otherwise becomes ineligible after December 31, 2000 but
before the final payment is made relating to 2000, unless
terminated for cause, shall be entitled to receive payments
under this Plan resulting from 2000 Incentive Profits.
EXCEPTION 2. An appropriate pro rata payment will be made
(1) to a Plan participant who retires prior to December 31,
2000 pursuant to the Consolidated Freightways Corporation
Retirement Plan or to the provisions of the Social Security
Act and who, at the time of retirement, was an eligible
participant in this Plan, (2) to the heirs, legatees,
administrators or executors of a Plan participant
who dies prior to December 31, 2000 and who, at the time of
death, was an eligible participant in this Plan, (3) to an
eligible Plan participant who is placed on an approved
Medical, Sabbatical, or Military Leave of Absence prior to
December 31, 2000, or (4) to an eligible Plan participant
who is transferred to another subsidiary of Consolidated
Freightways Corporation and who remains an employee through
December 31, 2000.
METHOD OF PAYMENT
Each Plan participant will be assigned an incentive participation
factor as a percent of Annual Salary. Incentive will be earned
based on CFC pretax pre-incentive profit.
Incentive will be earned on a pro rata
basis for accomplishment between the Minimum level and the Factor
Profit Goal.
PERSONAL DATA SHEET
A "Personal Data Sheet" for calculation of incentive will be
prepared for each Plan participant which designates (1) the unit
to which the participant is assigned, (2) his assigned
participation, (3) the minimum level of profit achievement
required, (4) the Factor level of achievement for profit, and (5)
the incentive earnings at the Factor profit goal.
DATE OF PAYMENT
The President of CFC may authorize a partial payment of the
estimated annual earned incentive, in December, 2000. The final
payment to eligible participants, less any previous partial
payment, will be made on or before March 15, 2000.
INCENTIVE PROFIT
Incentive Profit is defined as the pre-tax earnings of
Consolidated Freightways Corporation before deducting any amounts
expensed under this or any subsidiary incentive plan, before
deducting any amounts expensed under the restricted stock plan
and before deducting income taxes, but after deducting expenses
incurred from any bonus plan(s).
ANNUAL COMPENSATION
Annual Compensation for incentive purposes for each Plan
participant is his annualized salary before any incentive or
other special compensation as of the first pay period following
the date the participant becomes eligible to participate in this
Plan.
MAXIMUM PAYMENT
Payments under this Plan are not limited by each participant's
participation factor.
LAWS GOVERNING PAYMENTS
No payment shall be made under this Plan in an amount which is
prohibited by law.
AMENDMENT, SUSPENSION, AND ADMINISTRATION OF PLAN
The Board of Directors of CFC may at any time amend, suspend, or
terminate the operation of this Plan, by thirty-day written
notice to the Plan participants, and will have full discretion as
to the administration and interpretation of this Plan. No
participant in this Plan shall at any time have any right to
receive any payment under this Plan until such time, if any, as
any payment is actually made.
DURATION OF PLAN
This Plan is for the calendar year 2000 only.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 87,682
<SECURITIES> 0
<RECEIVABLES> 345,245
<ALLOWANCES> (12,994)
<INVENTORY> 8,784
<CURRENT-ASSETS> 500,342
<PP&E> 1,115,676
<DEPRECIATION> (755,246)
<TOTAL-ASSETS> 939,211
<CURRENT-LIABILITIES> 420,612
<BONDS> 15,100
0
0
<COMMON> 77,455
<OTHER-SE> 178,856
<TOTAL-LIABILITY-AND-EQUITY> 939,211
<SALES> 0
<TOTAL-REVENUES> 593,629
<CGS> 0
<TOTAL-COSTS> 594,868
<OTHER-EXPENSES> 4,840
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,087
<INCOME-PRETAX> (6,079)
<INCOME-TAX> (3,100)
<INCOME-CONTINUING> (2,979)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,979)
<EPS-BASIC> (0.14)
<EPS-DILUTED> (0.14)
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