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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: AUGUST 26, 1996
(DATE OF EARLIEST EVENT REPORTED)
CONSOLIDATED FREIGHTWAYS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 1-5046 94-1444798
(State or other jurisdiction of (Commission File No.) (I.R.S. Employer
incorporation or organization) Identification No.)
3240 HILLVIEW AVENUE
PALO ALTO, CALIFORNIA 94304
(Address of principal executive offices)
(415) 494-2900
Registrant's telephone number, including area code
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ITEM 5 - OTHER EVENTS
On August 26, 1996, the Registrant's Board of Directors approved the
spin-off of several businesses that will result in two separate, publicly
traded companies, each offering a variety of premium freight transportation
services.
The Registrant will spin off its long-haul, less-than-truckload ("LTL")
subsidiary, Consolidated Freightways Corporation of Delaware and its
subsidiaries ("CFCD"). The businesses being spun off to shareholders include
CF MotorFreight, the domestic LTL motor carrier operations, and its Canadian
operations, including Canadian Freightways Ltd., Epic Express, Milne &
Craighead and Canadian Sufferance Warehouses and other related businesses as
well as Leland James Service Corporation ("LJSC") which combined will
comprise a new public company, which will be called Consolidated Freightways
Corporation ("CFC").
The Registrant will seek stockholder approval to change its name to CNF
Transportation, Inc. ("CNF") and will consist of Emery Worldwide, the
international air and ocean freight carrier; Con-Way Transportation Services,
including its three regional less-than-truckload carriers and Con-Way
Truckload Services; Menlo Logistics, a third-party logistics management firm;
Road Systems, Inc., a trailer manufacturer; and VantageParts, a retail
distributor of truck parts and supplies.
The spin-off transaction, which is expected to be completed in the
fourth quarter of 1996, is anticipated to be generally tax free for current
stockholders and is subject to a number of conditions, including the receipt
of a private letter ruling or an opinion of counsel that the spin-off will
qualify generally as a tax-free distribution. The Registrant will continue to
be listed on the New York Stock Exchange ("NYSE"). CFC plans to file an
application to be listed on the NYSE. Each company will have its own
separate Board of Directors.
Donald E. Moffitt, chairman, president and chief executive officer of
the Registrant will continue in those positions as head of CNF. W. Roger
Curry, currently president and chief executive officer of CF MotorFreight,
will maintain those positions at CFC.
Joining Mr. Curry at the new company is William D. Walsh, currently a
member of the Registrant's Board of Directors, who will leave the
Registrant's Board of Directors and will become chairman of the board of CFC.
G. Robert Evans will leave the Registrant's Board of Directors and will
become a board member of CFC.
ITEM 7 - FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<CAPTION>
PAGE OF THIS REPORT
<S> <C>
(A) Pro Forma Condensed Consolidated Financial Information
Pro Forma Condensed Consolidated Balance Sheet as of June 30, 1996 . . . . 3
Pro Forma Condensed Consolidated Statement of Income for the Six Months
Ended June 30, 1996. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Pro Forma Condensed Consolidated Statement of Income for the Year Ended
December 31, 1995. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
CONSOLIDATED FREIGHTWAYS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The historical financial statements of Consolidated Freightways, Inc.
include the results of operations and financial position of the businesses
constituting Consolidated Freightways Corporation. The pro forma condensed
consolidated balance sheet (unaudited) as of June 30, 1996 has been prepared
assuming the spin-off of Consolidated Freightways Corporation and
distribution of related shares occurred as of that date. The pro forma
condensed consolidated statement of income (unaudited) for the six months
ended June 30, 1996 has been prepared assuming the spin-off and distribution
occurred as of January 1, 1996. The pro forma condensed consolidated
statement of income (unaudited) for the year ended December 31, 1995 has been
prepared assuming the spin-off and distribution occurred as of January 1,
1995. The pro forma adjustments are based upon available information and
upon certain assumptions that the Registrant and CFC believe are reasonable
which are described in the Notes to the Unaudited Pro Forma Condensed
Consolidated Financial Statements. These pro forma financial statements are
not necessarily indicative of the consolidated results of operations or
financial position that would have existed had the distribution occurred on
the dates indicated, or which may be attained in the future.
2
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CONSOLIDATED FREIGHTWAYS, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
CONSOLIDATED
CONSOLIDATED ELIMINATE PRO FORMA FREIGHTWAYS, INC.
FREIGHTWAYS, INC. CFCD & LJSC (a) ADJUSTMENTS PRO FORMA
----------------- --------------- ----------- -----------------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 123,064 $ (37,757) $ 102 (b) $ 85,409
Receivables, net of allowances 825,155 (293,599) 332 (b) 531,888
Operating supplies, at lower of average cost or market 39,524 (17,569) 5,502 (b) 27,457
Prepaid expenses 82,628 (38,748) 1,335 (b) 45,215
Deferred income taxes 134,044 (59,873) 288 (b) 74,459
----------------- --------------- ----------- -----------------
TOTAL CURRENT ASSETS 1,204,415 (447,546) 7,559 764,428
----------------- --------------- ----------- -----------------
Property, plant and equipment, net 1,132,136 (493,764) 24,520 (b) 701,802
38,910 (c)
----------------- --------------- ----------- -----------------
OTHER ASSETS
Restricted funds 11,306 11,306
Deposits and other assets 98,808 (8,993) 4,023 (b) 93,838
Unamortized aircraft maintenance, net 125,918 125,918
Costs in excess of net assets of businesses acquired,
net of accumulated amortization 303,585 303,585
----------------- --------------- ----------- -----------------
539,617 (8,993) 4,023 534,647
----------------- --------------- ----------- -----------------
TOTAL ASSETS $ 2,876,168 $ (950,303) $ 75,012 $ 2,000,877
----------------- --------------- ----------- -----------------
----------------- --------------- ----------- -----------------
</TABLE>
The accompanying notes are an integral part of this statement.
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CONSOLIDATED FREIGHTWAYS, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
CONSOLIDATED
CONSOLIDATED ELIMINATE PRO FORMA FREIGHTWAYS, INC.
FREIGHTWAYS, INC. CFCD & LJSC (a) ADJUSTMENTS PRO FORMA
----------------- --------------- ----------- -----------------
<S> <C> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES
Accounts payable and accrued
liabilities $ 781,355 $ (301,283) $ 19,826 (b) $ 499,898
Accrued claims costs 163,350 (88,146) 82 (b) 75,286
Current maturities of long-term
debt and capital leases 3,216 3,216
Short-term borrowings 122,000 122,000
Federal and other income taxes
payable 6,586 6,586
------------ ----------- ---------- ----------
TOTAL CURRENT LIABILITIES 1,076,507 (389,429) 19,908 706,986
Long-term debt, guarantees and
capital leases 492,350 (15,100) 477,250
Accrued claims costs 162,117 (101,417) 60,700
Employee benefits and other
liabilities 343,111 (137,492) 192 (b) 205,811
Deferred income taxes 78,090 (27,400) (3,355)(d) 48,825
1,490 (c)
------------ ----------- ---------- ----------
TOTAL LIABILITIES 2,152,175 (670,838) 18,235 1,499,572
------------ ----------- ---------- ----------
TOTAL SHAREHOLDERS' EQUITY 723,993 (279,465) 16,002 (b) 501,305
37,420 (c)
3,355 (d)
------------ ----------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 2,876,168 $ (950,303) $ 75,012 $2,000,877
------------ ----------- ---------- ----------
------------ ----------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of this statement.
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CONSOLIDATED FREIGHTWAYS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
CONSOLIDATED
CONSOLIDATED ELIMINATE PRO FORMA FREIGHTWAYS, INC.
FREIGHTWAYS, INC. CFCD & LJSC (e) ADJUSTMENTS PRO FORMA
----------------- --------------- ----------- -----------------
<S> <C> <C> <C> <C>
REVENUES $ 2,723,005 $ (1,032,541) $ 51,745 (g) $ 1,742,209
COSTS AND EXPENSES 2,673,358 (1,070,765)(f) 51,745 (g) 1,654,094 (m)
(244)(h)
------------ ------------- --------- ------------
OPERATING INCOME 49,647 38,224 244 88,115
------------ ------------- --------- ------------
OTHER INCOME (EXPENSE)
Investment income 223 (171) 52
Interest expense (19,990) 435 (19,555)
Miscellaneous, net (886) 2,352 (2,828)(i) (1,362)
------------ ------------- --------- ------------
(20,653) 2,616 (2,828) (20,865)
------------ ------------- --------- ------------
INCOME (LOSS) BEFORE INCOME TAXES
(BENEFITS) 28,994 40,840 (2,584) 67,250
INCOME TAXES (BENEFITS) 15,058 12,772 (1,008)(j) 26,822
------------ ------------- --------- ------------
NET INCOME (LOSS) 13,936 28,068 (1,576) 40,428
Preferred Stock Dividends 4,317 4,317
------------ ------------- --------- ------------
NET INCOME (LOSS) AVAILABLE
TO COMMON SHAREHOLDERS $ 9,619 $ 28,068 $ (1,576) $ 36,111
------------ ------------- --------- ------------
------------ ------------- --------- ------------
AVERAGE COMMON SHARES OUTSTANDING:
Primary (k) 44,899 45,358
Fully Diluted (l) 49,372 49,372
EARNINGS PER SHARE:
Primary (k) $ 0.21 $ 0.80
------------ ------------
------------ ------------
Fully Diluted (l) $ 0.21 $ 0.75
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of this statement.
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CONSOLIDATED FREIGHTWAYS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
CONSOLIDATED
CONSOLIDATED ELIMINATE PRO FORMA FREIGHTWAYS, INC.
FREIGHTWAYS, INC. CFCD & LJSC (e) ADJUSTMENTS PRO FORMA
----------------- ---------------- ----------- -----------------
<S> <C> <C> <C> <C>
REVENUES $5,281,084 $(2,106,529) $ 115,522 (g) $3,290,077
COSTS AND EXPENSES 5,137,183 (2,149,315)(f) 115,522 (g) 3,102,902 (m)
(488)(h)
---------- ----------- ---------- ----------
OPERATING INCOME 143,901 42,786 488 187,175
---------- ----------- ---------- ----------
OTHER INCOME (EXPENSE)
Investment income 841 (756) 85
Interest expense (34,325) 918 (33,407)
Miscellaneous, net 456 850 (1,729)(i) (423)
---------- ----------- --------- ----------
(33,028) 1,012 (1,729) (33,745)
---------- ----------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES
(BENEFITS) 110,873 43,798 (1,241) 153,430
INCOME TAXES (BENEFITS) 53,508 13,889 (484)(j) 66,913
---------- ----------- ---------- ----------
NET INCOME (LOSS) 57,365 29,909 (757) 86,517
---------- ----------- ---------- ----------
Preferred Stock Dividends 10,799 10,799
---------- ----------
NET INCOME (LOSS) AVAILABLE
TO COMMON SHAREHOLDERS $ 46,566 $ 29,909 $ (757) $ 75,718
---------- ----------- ---------- ----------
---------- ----------- ---------- ----------
AVERAGE COMMON SHARES OUTSTANDING:
Primary (k) 44,362 44,812
Fully Diluted (l) 48,724 48,724
EARNINGS PER SHARE:
Primary (k) $ 1.10 $ 1.74
----------- ----------
----------- ----------
Fully Diluted (l) $ 1.04 $ 1.64
----------- ----------
----------- ----------
</TABLE>
The accompanying notes are an integral part of this statement.
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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
(a) Represents the elimination of the historical assets and liabilities of CFCD
and LJSC.
(b) Represents the transfers of certain assets and liabilities from LJSC in
connection with the transfer of certain administrative service departments from
LJSC to a subsidiary of the Registrant.
(c) Represents the transfer of certain real properties from CFCD to a
subsidiary of the Registrant, some of which may be leased back under
short-term operating leases.
(d) In connection with the spin-off, certain real property transfers from
CFCD to a subsidiary of the Registrant will occur and will be recognized as
taxable sales for income tax purposes and such taxes will be paid by CFC.
However, the taxable sales recognition results in additional tax basis for
the property transferred that is deductible in future periods by the
Registrant and is recorded as a deferred tax asset.
(e) Represents the elimination of the historical operating results of CFCD and
LJSC.
(f) The historical financial statements include an allocation of corporate
overhead costs incurred by the Registrant using both incremental and
proportional methods on a revenue and capital basis. Although management
believes the allocation methods used provide CFCD with a reasonable share of
such expenses, there can be no assurance that these costs will not increase
after the spin-off.
(g) To reflect intercompany sales and expenses between certain subsidiaries
of the Registrant and CFCD previously eliminated in the historical
consolidated financial statements of the Registrant. Such sales are expected
to continue after the spin-off.
(h) To adjust for the effects on depreciation expense and sub-lease rental
income from third parties, resulting from the pro forma transfers of certain
real properties from CFCD to a subsidiary of the Registrant.
(i) To eliminate intercompany interest income, net, earned on balances
receivable from CFCD.
(j) To reflect the income tax effects of the pro forma adjustments using an
estimated marginal tax rate of 39%.
(k) Includes the dilutive effect of stock options and, in pro forma, the
conversion into common stock of Series B Thrift and Stock Plan (TASP)
convertible preferred shares for CFCD participants in the Registrant's TASP.
Also included in the year ended December 31, 1995 is an addback to earnings
of $2.2 million, which represents the Series C preferred stock dividend as
such shares converted to common stock.
(l) Includes the dilutive effect of stock options and Series B TASP
preferred shares. The six months ended June 30, 1996 computation includes an
addback to earnings of $1.0 million and the year ended December 31, 1995
includes an addback to earnings of $1.8 million representing the Series B
convertible preferred stock dividend net of required replacement funding.
Also included in the year ended December 31, 1995 is an addback to earnings
of $2.2 million, which represents the Series C preferred stock dividend as
such shares converted to common stock.
(m) The Registrant's pro forma costs and expenses include depreciation and
amortization of approximately $46 million and $84 million for the six months
ended June 30, 1996 and the year ended December 31, 1995, respectively. Also
includes rental expense of approximately $85 million and $169 million for the
same respective periods.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CONSOLIDATED FREIGHTWAYS, INC.
Dated: September 6, 1996 By: /s/ Gregory L. Quesnel
-----------------------------------
Name: Gregory L. Quesnel
Title: Executive Vice President and
Chief Financial Officer
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