PAGE 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A to N/A
COMMISSION FILE NUMBER 1-5046
CNF TRANSPORTATION INC.
Incorporated in the State of Delaware
I.R.S. Employer Identification No. 94-1444798
3240 Hillview Avenue, Palo Alto, California 94304
Telephone Number (415) 494-2900
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months and (2) has been subject to such
filing requirements for the past 90 days. Yes xx No
Number of shares of Common Stock, $.625 par value,
outstanding as of April 30, 1997: 45,862,236
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CNF TRANSPORTATION INC.
FORM 10-Q
Quarter Ended March 31, 1997
___________________________________________________________________________
___________________________________________________________________________
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 1997 and December 31, 1996 3
Statements of Consolidated Operations -
Three Months Ended March 31, 1997 and 1996 5
Statements of Consolidated Cash Flows -
Three Months Ended March 31, 1997 and 1996 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of
Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
PAGE 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CNF TRANSPORTATION INC.
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1997 1996
(Dollars in thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 78,277 $ 82,094
Trade accounts receivable, net of
allowances 550,802 542,381
Other accounts receivable 35,014 49,278
Operating supplies, at lower of average
cost or market 32,400 32,916
Prepaid expenses 50,217 31,249
Deferred income taxes 77,956 77,977
Total Current Assets 824,666 815,895
PROPERTY, PLANT AND EQUIPMENT, at cost
Land 104,619 104,314
Buildings and improvements 273,541 265,655
Revenue equipment 596,206 586,720
Other equipment and leasehold improvements 320,740 302,679
1,295,106 1,259,368
Accumulated depreciation and amortization (532,630) (506,719)
762,476 752,649
OTHER ASSETS
Restricted funds 13,134 12,685
Deposits and other assets 97,338 95,144
Unamortized aircraft maintenance, net 122,195 119,927
Costs in excess of net assets of businesses
acquired, net of accumulated amortization 283,328 285,566
515,995 513,322
TOTAL ASSETS $2,103,137 $2,081,866
The accompanying notes are an integral part of these statements.
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CNF TRANSPORTATION INC.
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1997 1996
(Dollars in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 200,800 $ 210,902
Accrued liabilities 368,358 349,497
Accrued claims costs 82,613 87,340
Current maturities of long-term debt and
capital leases 4,947 3,185
Short-term borrowings 145,000 155,000
Federal and other income taxes 9,524 9,162
Total Current Liabilities 811,242 815,086
LONG-TERM LIABILITIES
Long-term debt and guarantees 362,771 366,305
Long-term obligations under capital leases 110,871 110,896
Accrued claims costs 58,353 57,912
Employee benefits 120,594 115,470
Other liabilities and deferred credits 68,765 75,479
Deferred income taxes 37,651 32,439
Total Liabilities 1,570,247 1,573,587
SHAREHOLDERS' EQUITY
Preferred stock, no par value; authorized
5,000,000 shares:
Series B, 8.5% cumulative, convertible,
$.01 stated value; designated
1,100,000 shares; issued 872,394 and
875,191 shares, respectively 9 9
Additional paid-in capital, preferred stock 132,682 133,108
Deferred TASP compensation (107,093) (108,655)
Total Preferred Shareholders' Equity 25,598 24,462
Common stock, $.625 par value; authorized
100,000,000 shares; issued 52,657,597
and 51,595,827 shares, respectively 32,911 32,247
Additional paid-in capital, common stock 258,145 242,879
Cumulative translation adjustment (534) 3,279
Retained earnings 389,650 378,744
Cost of repurchased common stock
(7,011,589 and 7,029,917 shares,
respectively) (172,880) (173,332)
Total Common Shareholders' Equity 507,292 483,817
Total Shareholders' Equity 532,890 508,279
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,103,137 $2,081,866
The accompanying notes are an integral part of these statements.
PAGE 5
CNF TRANSPORTATION INC.
STATEMENTS OF CONSOLIDATED OPERATIONS
(Dollars in thousands except per share amounts)
Three Months Ended
March 31,
1997 1996
REVENUES
Con-Way Transportation Services $334,458 $301,841
Emery Worldwide 508,552 446,599
Other 99,618 99,433
942,628 847,873
COSTS AND EXPENSES
Con-Way Transportation Services
Operating Expenses 247,913 230,052
Selling and Administrative Expenses 43,271 40,051
Depreciation 14,797 11,354
305,981 281,457
Emery Worldwide
Operating Expenses 406,846 365,703
Selling and Administrative Expenses 74,252 61,848
Depreciation 8,947 7,548
490,045 435,099
Other
Operating Expenses 88,102 89,833
Selling and Administrative Expenses 6,868 5,739
Depreciation 1,265 531
96,235 96,103
892,261 812,659
OPERATING INCOME
Con-Way Transportation Services 28,477 20,384
Emery Worldwide 18,507 11,500
Other 3,383 3,330
50,367 35,214
OTHER INCOME (EXPENSE)
Interest expense (10,805) (9,664)
Miscellaneous, net 610 133
(10,195) (9,531)
Income from continuing operations
before income taxes 40,172 25,683
Income Taxes 18,228 12,020
Net Income from Continuing Operations 21,944 13,663
Loss from discontinued operations net
of income tax benefits - (13,383)
Net Income 21,944 280
Preferred dividends 1,939 2,134
NET INCOME (LOSS) APPLICABLE
TO COMMON SHAREHOLDERS $20,005 ($1,854)
Primary average shares outstanding 46,465,385 44,925,741
PRIMARY EARNINGS (LOSS) PER SHARE
Continuing operations $0.43 $0.26
Discontinued operations - (0.29)
$0.43 ($0.03)
FULLY DILUTED EARNINGS (LOSS) PER SHARE
Continuing operations $0.40 $0.24
Discontinued operations - (0.27)
$0.40 ($0.03)
The accompanying notes are an integral part of these statements.
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CNF TRANSPORTATION INC.
STATEMENTS OF CONSOLIDATED CASH FLOWS
Three Months Ended
March 31,
1997 1996
(Dollars in Thousands)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $ 82,094 $ 59,787
CASH FLOWS FROM OPERATING ACTIVITIES
Net income 21,944 280
Adjustments to reconcile income
to net cash provided by operating
activities:
Loss from discontinued operations - 13,383
Depreciation and amortization 28,008 21,327
Increase (Decrease) in deferred
income taxes 5,233 (3,294)
Losses (Gains) from property
disposals, net (638) 179
Changes in assets and liabilities:
Receivables 5,843 59,762
Prepaid expenses (18,968) (19,404)
Accounts payable (10,102) 12,798
Accrued claims costs (4,286) 1,021
Federal and other Income taxes 362 (2,257)
Incentive compensation (9,963) (9,766)
Accrued liabilities and other 16,241 (9,689)
Net Cash Provided by Operating
Activities 33,674 64,340
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (35,156) (49,541)
Proceeds from sales of property 869 1,043
Net Cash Used by Investing Activities (34,287) (48,498)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 1,997 -
Repayment of long-term debt and capital
lease obligations (3,794) (2,266)
Net borrowings (payments) under revolving
lines of credit (10,000) 40,000
Proceeds from issuance of common stock 15,956 824
Payments of common dividends (4,534) (4,396)
Payments of preferred dividends (2,829) (3,084)
Net Cash Provided (Used) by Financing
Activities (3,204) 31,078
Net Cash Provided (Used) by
Continuing Operations (3,817) 46,920
Net Cash Used by Discontinued
Operations - (31,594)
Increase (Decrease) in Cash and
Cash Equivalents (3,817) 15,326
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 78,277 $ 75,113
The accompanying notes are an integral part of these statements.
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CNF TRANSPORTATION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying consolidated financial statements of CNF Transportation
Inc. and subsidiaries (the Company) have been prepared by the Company,
without audit by independent public accountants, pursuant to the rules and
regulations of the Securities and Exchange Commission. In the opinion of
management, the consolidated financial statements include all normal
recurring adjustments necessary to present fairly the information required
to be set forth therein. Certain information and note disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted from these
statements pursuant to such rules and regulations and, accordingly, should
be read in conjunction with the consolidated financial statements included
in the Company's 1996 Annual Report to Shareholders.
There have been no significant changes in the accounting policies of
the Company. There were no significant changes in the Company's
commitments and contingencies as previously described in the 1996 Annual
Report to Shareholders and related annual report to the Securities and
Exchange Commission on Form 10-K.
Operating results for 1996 have been restated to exclude the results of
Consolidated Freightways Corporation (CFC), the Company's former long-haul,
less-than-truckload carrier which was spun-off to shareholders on December
2, 1996, and is reported as discontinued operations in the prior year.
2. In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 "Earnings Per Share"
(SFAS 128). The statement replaces Primary Earnings Per Share (EPS) with
Basic EPS. Basic EPS is computed by dividing reported earnings available
to common shareholders by the weighted average shares outstanding; no
dilution for any potentially dilutive securities is included. In addition,
Diluted EPS under the new statement is calculated differently than the
Fully Diluted EPS calculation under existing authoritative guidance. When
applying the treasury stock method for Diluted EPS to compute dilution for
options, the new statement requires use of the average share price for the
period, rather than the greater of the average share price or end-of-period
share price required by APB Opinion 15. Retroactive adoption of SFAS 128
will be required in financial statements for periods ending after December
15, 1997; however, early application is prohibited. Had this statement
been adopted January 1, 1997, Basic EPS and Diluted EPS from continuing
operations for the quarter ended March 31, 1997 would have been $.44 and
$.40, respectively. The restated Basic and Diluted EPS from continuing
operations for the quarter ended March 31, 1996 would have been $.26 and
$.24, respectively.
3. The Internal Revenue Service (IRS) has proposed adjustments that would
require that Emery Air Freight Corporation (EAFC), a subsidiary of the
Company, pay substantial additional aviation excise taxes for the period
from January 1, 1990 through September 30, 1995. The Company has filed
protests contesting these proposed adjustments and is engaged in
discussions with the administrative conference division (Appeals Office)
of the IRS.
The Company believes that there is legal authority to support the
manner in which it has calculated and paid the aviation excise taxes and,
PAGE 8
accordingly, the Company intends vigorously to continue to challenge the
proposed adjustments. Nevertheless, the Company is unable to predict the
ultimate outcome of this matter. As a result, there can be no assurance
that the Company will not have to pay a substantial amount of additional
aviation excise taxes for the 1990 through 1995 tax period. In addition,
it is possible that the IRS may seek to increase the amount of the airline
excise tax payable by EAFC for periods subsequent to September 30, 1995.
The Company anticipates that the IRS will seek a substantial proposed
adjustment for tax years 1987 through 1990 based on the IRS' position that
certain aircraft maintenance costs should have been capitalized rather than
expensed for federal income tax purposes. The Company believes that its
practice of expensing these types of maintenance costs is consistent with
industry practice. However, if this adjustment were proposed by the IRS,
and the issue was determined adversely to the Company, it could require
the Company to pay substantial additional tax. The Company is unable to
predict the ultimate outcome of this matter and intends vigorously to
contest any such proposed adjustment.
The Company and its subsidiaries are defendants in various lawsuits
incidental to their businesses. It is the opinion of management that the
ultimate outcome of these incidental lawsuits will not have a material
adverse effect on the Company's consolidated financial position or results
of operations.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operating results for 1996 have been restated to exclude the results
of Consolidated Freightways Corporation (CFC), the Company's former long-
haul, less-than-truckload carrier which was spun-off to shareholders on
December 2, 1996, and is reported as discontinued operations in the prior
year.
GENERAL
Total revenues of CNF Transportation Inc. for the first quarter of
1997 increased 11.2% over the first quarter of 1996. The increase was the
result of higher revenues at all three of the Company's operating segments.
Contributing to the higher revenue levels were improved global economic
conditions, a more stable pricing environment, and successful marketing
strategies.
The Company's total operating income for the first quarter increased
43.0% over the first quarter of 1996. This improvement was driven by
significantly higher operating income at Emery Worldwide and Con-Way
Transportation Services (CTS), as well as at Menlo Logistics, whose
operating income provides the majority of the operating income of the Other
segment. The improvement in 1997 first quarter operating income was also
attributable to the effects of severe winter storms during the first
quarter of 1996, which adversely affected results of CTS and Emery during
the 1996 period.
Other expenses for the first quarter 1997 increased 7.0% over the
first quarter last year due primarily to higher interest expense.
PAGE 9
Increased borrowings under the Company's unsecured credit facility drove up
the 1997 first quarter's interest expense by 11.8% compared with the first
quarter of 1996.
The effective income tax rate of 45.4% for the first quarter of 1997
was lower than the rate of 46.8% for the first quarter of 1996, primarily
because non-deductible expenses for the two periods were approximately
equal while pretax earnings were higher in the first quarter of 1997 than
in the first quarter of 1996.
Net income applicable to common stock for the first quarter of 1997
was $21.9 million above the first quarter of 1996 due primarily to the
higher operating income described above and the loss from discontinued
operations of $13.4 million reported in the first quarter of 1996.
Significant variations in segment revenues and operating income are as
follows:
CON-WAY TRANSPORTATION SERVICES
Con-Way Transportation Services' (CTS) revenues for the first quarter
of 1997 were 10.8% above the same quarter of 1996. Total tonnage for the
first quarter of 1997 increased 3.4% over the first quarter of 1996, with
less-than-truckload tonnage, which typically has higher rates than
truckload tonnage, up 6.2% over the first quarter of 1996. The increased
revenues reflect both the tonnage gains as well as improved pricing
conditions in the industry compared with the first quarter of 1996.
Operating income for CTS in the first quarter of 1997 increased 39.7%
over the first quarter of last year. The higher operating income was
attributable in part to increased revenues, improved load factors and
freight system utilization in newer geographic regions served by CTS,
recovery of a portion of the higher fuel costs through surcharges to
customers, improved operating efficiencies, and improved pricing conditions
in the industry. The improvement in first quarter 1997 operating income
was also attributable to the fact that first quarter 1996 results were
adversely affected by severe winter weather and by slightly higher fuel
costs.
CTS management's strategies will continue to emphasize operating
margin improvements. The strategies include efforts to increase the
utilization of the freight system in the Pacific Northwest and northeastern
United States, continued emphasis on market penetration in light of the
withdrawal of a major competitor from several key regional markets, and
efforts to re-price or replace low margin business.
EMERY WORLDWIDE
Emery's revenues for the first quarter of 1997 were up 13.9% compared
to 1996 due to strong tonnage growth from both domestic and international
business. Domestic tonnage in the first quarter of 1997 was 9.2% higher
than the first quarter last year and international tonnage was up 11.0% for
the same period. Improved domestic and international economic conditions
and increased emphasis on improving freight rates contributed to the
revenue increases.
PAGE 10
Emery's operating income for the first quarter of 1997 was 60.9% above
the first quarter of 1996. The improvement in operating income was
attributable in part to increased revenues, a fuel index fee intended to
recover a portion of higher fuel costs from customers, and improved
pricing. In addition, operating income for the first quarter of 1996 was
adversely affected by the effects of severe winter storms and slightly
higher fuel costs. Partially offsetting the improvement in the first
quarter of 1997 was the renewal of the U.S. air cargo excise tax in mid-
March 1997, as the excise tax was not in effect during the first quarter of
1996.
Emery has converted eight international agent operations in the past
two years to wholly-owned operations in an effort to improve customer
service and increase international revenues. Management intends to
continue with additional conversions of international agent locations in an
effort to improve and expand the level of customer service. In 1997,
management revised employee incentive plans to focus on improving operating
margins, rather than on revenue growth.
On April 24, 1997, Emery Worldwide Airlines (EWA) was awarded a new
contract with the U.S. Postal Service (USPS) to provide Priority Mail
sortation and transportation. The Company estimates that it could receive
revenues of approximately $1.7 billion over the initial term of the
contract, subject to reduction if the Company does not attain certain
performance benchmarks. However, the foregoing estimate is subject to a
number of uncertainties and assumptions (including assumptions regarding
Priority Mail volumes to be handled under the contract), and there can be
no assurance that the revenues realized by the Company will not be less
than this amount. The initial term of the contract ends in February 2002,
although the contract may be renewed by the USPS for two successive three-
year terms. The contract establishes fixed prices per piece for four
years, subject to adjustments based on volume and percentage of on-time
performance and for increases in fuel and wage costs. As a result, the
effect of the contract on the Company's results of operations will depend
largely on its ability to control costs of performance under the contract.
The contract calls for the Company to obtain, equip and fully staff ten
Priority Mail processing centers in major metropolitan areas along the
eastern seaboard. The contract calls for five of the processing centers to
be fully operational by late October 1997, and for the remaining five to be
fully operational by late February 1998. The contract also provides for the
Company to pay liquidated damages if the centers are not operational on
time, and provides for the Company to receive incentive bonuses if
completed early. For 1997, the Company has budgeted approximately $102
million for capital expenditures associated with the new contract plus
approximately $17 million for other costs. Operations under
the contract are scheduled to commence in July 1997. The contract may be
terminated by the USPS for failure by the Company to perform its
obligations thereunder and, as is common in government contracts, may be
terminated by the USPS "for convenience" (i.e., without cause), although
the USPS may be required, following termination for convenience, to
reimburse the Company for capital expenditures associated with the
contract.
OTHER OPERATIONS
The Other segment, which consists of Menlo Logistics, Road Systems and
VantageParts, reported a marginal increase in revenues for the first
quarter of 1997 over the first quarter of 1996. Menlo Logistics' revenues,
which made up most of the segment's revenues for the 1997 quarter, were up
PAGE 11
9.6% over the first quarter of 1996, but were offset by significantly lower
revenues from Road Systems due to a reduced number of trailer sales.
Operating income for the segment increased only 1.6% over the first
quarter of 1996, again largely due to the lower trailer sales. Menlo's
operating income increased 53.4% over the first quarter of 1996 as its
revenue mix shifted to higher margin dedicated logistics management
services from the lower margin, but higher revenue generating,
transportation management services.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company had $78.3 million in cash and cash
equivalents. Net cash flow from operations during the first quarter of 1997
was $33.7 million, the primary components of which were net income and
depreciation and amortization. Cash flow from operations in the first
quarter of 1996 was $64.3 million and was attributable primarily to a
significant reduction of accounts receivable and to income from continuing
operations and depreciation.
Capital expenditures for the first quarter of 1997 were $35.2 million,
which was $14.4 million lower than the same quarter in 1996. The Company
expects to fund capital expenditure requirements for the year for its
existing businesses with cash from operations and, if necessary, borrowings
under credit facilities. The Company expects to pursue external financing
for start-up expenses and operating equipment needed to service the U.S.
Postal Service contract described above.
Net debt repayments for the first quarter of 1997 totaled $11.8
million compared to a $37.7 million net increase in debt in the first
quarter of 1996. Proceeds from the exercise of stock options, which the
Company believes increased due to the spin-off of CFC, provided $16.0
million of cash compared with less than $1 million in the first quarter of
1996. At March 31, 1997, the Company had outstanding short-term borrowings
of $100.0 million and outstanding letters of credit of $124.1 million under
its $350 million unsecured credit facility. Under several other unsecured
credit facilities, at March 31, 1997, the Company had outstanding short-
term borrowings of $45.0 million and outstanding letters of credit of $69.8
million. At March 31, 1997, the Company had $125.9 million available for
additional short-term borrowings and letters of credit under the $350
million credit facility while $5.5 million was available under other
uncommitted credit facilities. Additionally, payments of preferred and
common dividends were approximately $7.4 million in both the first quarter
of 1997 and 1996.
Other Items
The Company's operations necessitate the storage of fuel in
underground tanks as well as the disposal of substances regulated by
various federal and state laws. The Company adheres to a stringent site-by-
site tank testing and maintenance program performed by qualified
independent parties to protect the environment and comply with regulations.
Where clean-up is necessary, the Company takes appropriate action.
Certain statements included or incorporated by reference herein
constitute "forward-looking statements" within the meaning of Section 21E
of the Securities Exchange Act of 1934, as amended, and are subject to a
PAGE 12
number of risks and uncertainties. Any such forward-looking statements
contained or incorporated by reference herein should not be relied upon as
predictions of future events. Certain such forward-looking statements can
be identified by the use of forward-looking terminology such as "believes,"
"expects," "may," "will," "should," "seeks" or "anticipates" or the
negative thereof or other variations thereof or comparable terminology, or
by discussions of strategy. Such forward-looking statements are
necessarily dependent on assumptions, data or methods that may be incorrect
or imprecise and they may be incapable of being realized. In that regard,
the following factors, among others, could cause actual results and other
matters to differ materially from those in such forward-looking statements:
changes in general business and economic conditions; increasing domestic
and international competition and pricing pressure; changes in fuel prices;
uncertainties regarding the Company's new contract with the USPS; labor
matters, including changes in labor costs, renegotiation of labor contracts
and the risk of work stoppages or strikes; changes in governmental
regulation; environmental and tax matters, including the aviation excise
tax and aircraft maintenance cost matters discussed above; and matters
relating to the recently completed spin-off of Consolidated Freightways
Corporation (CFC). In that regard, the Company is or may be subject to
substantial liabilities with respect to certain matters relating to CFC's
business and operations, including, without limitation, guarantees of
certain indebtedness of CFC and liabilities for employment-related and
environmental matters. Although CFC is, in general, either the primary
obligor or jointly and severally liable with the Company with respect to
these matters, a failure to pay or other default by CFC with respect to the
obligations as to which the Company is or may be, or may be perceived to
be, liable, whether because of CFC's bankruptcy or insolvency or otherwise,
could lead to substantial claims against the Company. As a result of the
foregoing, no assurance can be given as to future results of operations or
financial condition.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
As previously reported, the Company has been designated a Potentially
Responsible Party (PRP) by the EPA with respect to the disposal of
hazardous substances at various sites. The Company expects its share of
the clean-up cost will not have a material adverse effect on the Company's
financial position or results of operations. The Company expects the costs
of complying with existing and future federal, state and local
environmental regulations to continue to increase. On the other hand, it
does not anticipate that such cost increases will have a materially adverse
effect on the Company. Certain legal matters are discussed in Note 3 in
the Notes to Consolidated Financial Statements in Part I of this form.
ITEM 4. Submission of Matters to a Vote of Security Holders
At the Annual Shareholders Meeting held April 28, 1997, the following
proposals were presented with the indicated voting results:
PAGE 13
For the purpose of electing members of the Board of Directors, the
votes representing shares of Common and Preferred stock were cast as
follows:
Nominee For Withheld
Robert Alpert 43,514,965 750,685
Margaret G. Gill 43,503,897 761,753
Robert Jaunich II 43,520,592 745,058
Robert P. Wayman 43,522,817 742,833
The following directors did not stand for election and continued in
office as directors after the Annual Shareholders Meeting: Earl F. Cheit,
Richard A. Clarke, W. Keith Kennedy Jr., Richard B. Madden, Donald E.
Moffitt, Robert D. Rogers, and William J. Schroeder.
Subsequent to the Annual Shareholders Meeting, the Board of Directors
appointed Michael J. Murray to fill a vacant position with the Board. The
appointment was effective May 3, 1997.
A proposed amendment to the Company's Certificate of Incorporation was
approved. The amendment, which changes the name of the Company from
"Consolidated Freightways, Inc." to "CNF Transportation Inc.", was approved
by the following vote: For 43,640,046; Against 445,314; Abstain 180,290.
The 1997 Equity and Incentive Plan was approved by the following vote:
For 34,939,104; Against 7,903,276; Abstain 1,423,270.
The appointment of Arthur Andersen LLP as independent public
accountants for the year 1997 was approved by the following vote: For
43,640,106; Against 331,721; Abstain 293,823.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(3)(a) CNF Transportation Inc. By-Laws
as Amended May 3, 1997 (incorporated by reference
from Exhibit 4(b) to the Company's registration
statement on Form S-3 dated May 6, 1997, no. 333-
26595).
(3)(b) Amendment to CNF Transportation
Inc. Certificate of Incorporation (incorporated by
reference from Exhibit 4(a) to the Company's
registration statement on Form S-3 dated May 6,
1997, no. 333-26595).
(11) Computation of Per Share Earnings
(12) Computation of Ratios of Earnings to Fixed Charges
(27) Financial Data Schedule
PAGE 14
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter
ended March 31, 1997.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company (Registrant) has duly caused this Form
10-Q Quarterly Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CNF Transportation Inc.
(Registrant)
May 14, 1997 /s/Gregory L. Quesnel
Gregory L. Quesnel
Executive Vice President and
Chief Financial Officer
May 14, 1997 /s/Gary D. Taliaferro
Gary D. Taliaferro
Vice President and Controller
Exhibit 11
CNF TRANSPORTATION INC.
COMPUTATION OF PER SHARE EARNINGS
The following is the computation of fully diluted earnings per share:
Three Months Ended
March 31
1997 1996
(Dollars in thousands except
per share data)
Net income (loss) applicable
to common shareholders $ 20,005 $ (1,854)
Non-discretionary adjustments under
the if-converted method:
Addback: Series B, preferred dividends,
net of tax benefits 1,939 2,134
Less: Replacement of funding
adjustment, net of tax benefits (1) (1,637) (1,668)
Adjusted net income (loss) applicable
to common shareholders $ 20,307 $ (1,388)
WEIGHTED AVERAGE SHARES OUTSTANDING:
Common shares 45,222,202 43,952,397
Equivalents - stock options 1,452,566 990,587
Series B, Preferred stock
if-converted method 4,258,592 4,194,726
50,933,360 49,137,710
FULLY DILUTED EARNINGS PER SHARE $ 0.40 $ (0.03)
(1) Additional payment to the Company's Thrift and Stock Plan to replace
the funding lost under the if-converted method.
<TABLE>
Exhibit 12
----------
CNF TRANSPORTATION INC.
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
------------------ -------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Charges:
Interest Expense $10,805 $ 9,664 $ 39,766 $ 33,407 $ 27,065 $ 29,890 $ 33,023
Capitalized Interest 702 471 2,092 731 793 531 4
Preferred Dividends 3,087 3,160 12,645 12,419 12,475 12,551 12,618
Total Interest 14,594 13,295 54,503 46,557 40,333 42,972 45,645
Interest Component of
Rental Expense 13,218 10,915 48,704 43,202 41,416 34,464 32,219
Fixed Charges 27,812 24,210 103,207 89,759 81,749 77,436 77,864
Less:
Capitalized Interest 702 471 2,092 731 793 531 4
Preferred Dividends 3,087 3,160 12,645 12,419 12,475 12,551 12,618
Net Fixed Charges $24,023 $20,579 $ 88,470 $ 76,609 68,481 $ 64,354 $ 65,242
Earnings:
Income (Loss) from Continuing
Operations before Income Taxes $40,172 $25,683 $147,132 $152,942 $165,129 $ 66,202 $(26,783)
Add: Net Fixed Charges 24,023 20,579 88,470 76,609 68,481 64,354 65,242
Total Earnings Before Fixed Charges $64,195 $46,262 $235,602 $229,551 $233,610 $130,556 $ 38,459
Ratio of Earnings to Fixed Charges:
Total Earnings $64,195 $46,262 $235,602 $229,551 $233,610 $130,556 $ 38,459
Fixed Charges (1) 27,812 24,210 103,207 89,759 81,749 77,436 77,864
Ratio 2.3x 1.9x 2.3x 2.6x 2.9x 1.7x 0.5x(2)
<FN>
(1) Fixed charges represent interest on capital leases and short-term and long-term debt, capitalized interest, dividends
on shares of the Series B Cumulative Convertible Preferred Stock used to pay debt service on notes issued by the
Company's Thrift and Stock Plan (the "TASP"), and the applicable portion of the consolidated rent expense which
approximates the interest portion of lease payments.
(2) Earnings were inadequate to cover fixed charges for the period. The deficiency was $39.4 million for the year ended
December 31, 1992.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 78277
<SECURITIES> 0
<RECEIVABLES> 570626
<ALLOWANCES> (19824)
<INVENTORY> 32400
<CURRENT-ASSETS> 824666
<PP&E> 1295106
<DEPRECIATION> (532630)
<TOTAL-ASSETS> 2103137
<CURRENT-LIABILITIES> 811242
<BONDS> 473642
0
132691
<COMMON> 291056
<OTHER-SE> 109143
<TOTAL-LIABILITY-AND-EQUITY> 2103137
<SALES> 0
<TOTAL-REVENUES> 942628
<CGS> 0
<TOTAL-COSTS> 892261
<OTHER-EXPENSES> 10195
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10805
<INCOME-PRETAX> 40172
<INCOME-TAX> 18228
<INCOME-CONTINUING> 21944
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20005
<EPS-PRIMARY> .43
<EPS-DILUTED> .40
</TABLE>
