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 June 30, 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 1-5046
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 (650) 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 July 31, 2000: 48,559,626
PAGE 2
CNF TRANSPORTATION INC.
FORM 10-Q
Quarter Ended June 30, 2000
____________________________________________________________________________
____________________________________________________________________________
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets -
June 30, 2000 and December 31, 1999 3
Statements of Consolidated Income -
Three and Six Months Ended June 30, 2000 and 1999 5
Statements of Consolidated Cash Flows -
Six Months Ended June 30, 2000 and 1999 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 6. Exhibits and Reports on Form 8-K 23
SIGNATURES 23
PAGE 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CNF TRANSPORTATION INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
June 30, December 31,
2000 1999
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 136,442 $ 146,263
Trade accounts receivable, net of
allowances (Note 1) 1,043,180 914,307
Other accounts receivable 39,309 25,419
Operating supplies, at lower of average
cost or market 41,156 46,019
Prepaid expenses 54,528 41,971
Deferred income taxes 28,569 26,254
Total Current Assets 1,343,184 1,200,233
PROPERTY, PLANT AND EQUIPMENT, NET
Land 120,734 119,403
Buildings and leasehold improvements 630,032 573,688
Revenue equipment 861,940 854,519
Other equipment 479,094 447,962
2,091,800 1,995,572
Accumulated depreciation and amortization (939,919) (864,538)
1,151,881 1,131,034
OTHER ASSETS
Deferred charges and other assets 172,154 200,739
Capitalized software, net 91,112 88,157
Unamortized aircraft maintenance (Note 1) 251,237 226,629
Goodwill, net 260,364 265,896
774,867 781,421
TOTAL ASSETS $3,269,932 $3,112,688
The accompanying notes are an integral part of these statements.
PAGE 4
CNF TRANSPORTATION INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
June 30, December 31,
2000 1999
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 322,642 $ 305,954
Accrued liabilities 460,448 524,121
Accrued claims costs 119,791 99,940
Current maturities of long-term debt and
capital leases 7,553 6,452
Short-term borrowings - 40,000
Income taxes payable 103,019 53,455
Total Current Liabilities 1,013,453 1,029,922
LONG-TERM LIABILITIES
Long-term debt and guarantees (Note 2) 424,076 322,800
Long-term obligations under capital leases 110,591 110,646
Accrued claims costs 55,501 81,978
Employee benefits 234,383 217,519
Other liabilities and deferred credits 45,360 45,450
Aircraft lease return provision (Note 1) 81,819 82,910
Deferred income taxes 142,989 128,515
Total Liabilities 2,108,172 2,019,740
COMMITMENTS AND CONTINGENCIES (Note 7)
COMPANY-OBLIGATED MANDATORILY REDEEMABLE
PREFERRED SECURITIES OF SUBSIDIARY TRUST
HOLDING SOLELY CONVERTIBLE DEBENTURES OF
THE COMPANY (Note 6) 125,000 125,000
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 831,520 and 840,407 shares,
respectively 8 8
Additional paid-in capital, preferred stock 126,466 127,817
Deferred compensation, Thrift and Stock Plan (83,982) (87,600)
Total Preferred Shareholders' Equity 42,492 40,225
Common stock, $.625 par value; authorized
100,000,000 shares; issued 55,373,548
and 55,306,947 shares, respectively 34,608 34,567
Additional paid-in capital, common stock 330,288 328,721
Retained earnings 819,446 747,936
Deferred compensation, restricted stock (1,805) (2,010)
Cost of repurchased common stock
(6,810,369 and 6,856,567 shares,
respectively) (167,918) (169,057)
1,014,619 940,157
Accumulated foreign currency translation
adjustment (15,956) (8,039)
Minimum pension liability adjustment (4,395) (4,395)
Accumulated Other Comprehensive Loss (20,351) (12,434)
Total Common Shareholders' Equity 994,268 927,723
Total Shareholders' Equity 1,036,760 967,948
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,269,932 $3,112,688
The accompanying notes are an integral part of these statements.
PAGE 5
<TABLE>
CNF TRANSPORTATION INC.
STATEMENTS OF CONSOLIDATED INCOME
(Dollars in thousands except per share amounts)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
REVENUES $ 1,529,203 $ 1,361,637 $ 2,991,956 $ 2,616,960
Costs and Expenses
Operating expenses 1,263,506 1,105,296 2,475,071 2,134,446
General and administrative 133,639 129,718 266,216 250,800
Depreciation 44,541 41,401 89,735 80,363
Net gain on sale of assets of
parts distribution operation (10,112) (10,112)
Net gain on legal settlement - (16,466)
1,441,686 1,266,303 2,831,022 2,439,031
OPERATING INCOME 87,517 95,334 160,934 177,929
Other Income (Expense)
Interest expense (7,881) (7,352) (14,281) (14,478)
Dividend requirement on
preferred securities of
subsidiary trust (Note 6) (1,563) (1,563) (3,126) (3,126)
Miscellaneous, net 1,902 (76) 4,852 879
(7,542) (8,991) (12,555) (16,725)
Income before Income Taxes 79,975 86,343 148,379 161,204
Income Taxes 33,989 37,559 63,061 70,124
Net Income 45,986 48,784 85,318 91,080
Preferred Stock Dividends 2,072 2,061 4,106 4,088
NET INCOME AVAILABLE TO
COMMON SHAREHOLDERS $ 43,914 $ 46,723 $ 81,212 $ 86,992
Weighted-Average Common Shares
Outstanding (Note 5)
Basic 48,463,040 48,158,898 48,440,350 48,042,740
Diluted 56,361,884 55,951,658 56,377,108 55,897,549
Earnings per Common Share (Note 5)
Basic $ 0.91 $ 0.97 $ 1.68 $ 1.81
Diluted $ 0.80 $ 0.86 $ 1.49 $ 1.60
The accompanying notes are an integral part of these statements.
</TABLE>
PAGE 6
CNF TRANSPORTATION INC.
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in thousands)
Six Months Ended
June 30,
2000 1999
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $ 146,263 $ 73,897
OPERATING ACTIVITIES
Net income 85,318 91,080
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 104,191 91,832
Increase in deferred income taxes 12,159 13,904
Amortization of deferred compensation 3,961 5,923
Provision for uncollectable accounts 7,964 5,665
Gain on sale of equity securities, net (2,619) -
Gains from sales of property, net (644) (317)
Net gain on sale of assets of parts
distribution operation - (10,112)
Changes in assets and liabilities:
Receivables (150,727) 11,995
Prepaid expenses (12,557) (15,851)
Accounts payable 16,725 (11,674)
Accrued liabilities (63,673) 14,226
Accrued claims costs (6,626) 17,701
Income taxes 49,564 26,884
Employee benefits 16,864 15,879
Deferred charges and credits 7,502 (23,706)
Other (6,493) (15,098)
Net Cash Provided by Operating Activities 60,909 218,331
INVESTING ACTIVITIES
Capital expenditures (115,089) (143,274)
Software expenditures (11,021) (21,633)
Proceeds from sale of equity securities 2,619 -
Proceeds from sales of property 6,229 3,922
Proceeds from sale of assets of parts
distribution operation - 27,961
Net Cash Used in Investing Activities (117,262) (133,024)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 198,752 -
Payments for issuance costs of long-term debt (1,300) -
Repayment of long-term debt, guarantees and
capital lease obligations (96,455) (5,247)
Repayment of short-term borrowings, net (40,000) (37,000)
Proceeds from exercise of stock options 707 6,707
Payments of common dividends (9,702) (9,637)
Payments of preferred dividends (5,470) (5,556)
Net Cash Provided by (Used in) Financing
Activities 46,532 (50,733)
Increase (Decrease) in Cash and Cash
Equivalents (9,821) 34,574
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 136,442 $ 108,471
The accompanying notes are an integral part of these statements.
PAGE 7
CNF TRANSPORTATION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Principal Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements of CNF
Transportation Inc. and its wholly owned 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 1999 Annual
Report to Shareholders.
Recognition of Revenues
Revenue from long-term contracts is recognized in accordance with
contractual terms as services are provided. Under certain long-term
contracts, there are provisions for price re-determination that give rise
to unbilled revenue. Unbilled revenue representing contract change orders
or claims is included in revenue only when it is probable that the change
order or claim will result in additional contract revenue and if the amount
can be reliably estimated. The Company recognizes unbilled revenue related
to claims sufficient only to recover costs. When adjustments in contract
revenue are determined, any changes from prior estimates are reflected in
earnings in the current period. The amount of unbilled revenue related to
the Company's Priority Mail contract recognized in Trade Accounts
Receivable in the Consolidated Balance Sheets at June 30, 2000 and December
31, 1999 was $173.4 million and $123.7 million, respectively.
Reclassification
In March 2000, the Securities and Exchange Commission (SEC)
communicated its interpretation of certain accounting issues related to
major maintenance expenditures. As a result of the SEC's comments, the
Company reclassified Emery's aircraft lease return provision. Accordingly,
the aircraft lease return provision is reported separately as a liability
rather than being shown as a reduction of Unamortized Aircraft Maintenance.
Prior periods have been reclassified.
Certain other amounts in prior year financial statements have been
reclassified to conform to current year presentation.
PAGE 8
2. Long-Term Debt
In August 1999, the aggregate principal amount of $117.7 million of
the Company's unsecured 9 1/8% Notes was paid in full at maturity. The
redemption of these notes was made in part with $90.0 million of borrowings
under lines of credit.
In March 2000, the Company issued $200 million in notes with a coupon
rate of 8 7/8% and a maturity date of May 1, 2010. Interest on the notes
is payable semi-annually on May 1 and November 1 of each year, commencing
May 1, 2000, and principal is payable at maturity. The notes contain a
covenant that limits the incurrence of liens. A portion of the proceeds
was used to repay a total of $152 million of short-term and long-term
borrowings outstanding under lines of credit.
3. Comprehensive Income
Comprehensive Income, which is a measure of all changes in equity
except those resulting from investments by owners and distributions to
owners, was as follows:
Three Months Ended Six Months Ended
(Dollars in thousands) June 30, June 30,
2000 1999 2000 1999
---------- ---------- ---------- ----------
Net income $ 45,986 $ 48,784 $ 85,318 $ 91,080
Foreign currency
translation adjustment (3,297) 854 (7,917) 694
---------- ---------- ---------- ----------
$ 42,689 $ 49,638 $ 77,401 $ 91,774
========== ========== ========== ==========
PAGE 9
4. Business Segments
Selected financial information about the Company's operating segments
was as follows:
Three Months Ended Six Months Ended
(Dollars in thousands) June 30, June 30,
2000 1999 2000 1999
---------- ---------- ---------- ----------
Revenues
Con-Way
Transportation $ 533,027 $ 469,100 $1,048,540 $ 907,611
Emery Worldwide 638,221 588,808 1,245,708 1,121,635
Menlo Logistics 241,819 184,850 455,371 347,837
Other 144,374 139,463 298,067 283,591
---------- ---------- ---------- ----------
1,557,441 1,382,221 3,047,686 2,660,674
Intercompany Eliminations
Con-Way
Transportation (4,433) (5,553) (9,430) (10,685)
Emery Worldwide (7,516) (2,954) (13,765) (6,360)
Menlo Logistics (3,268) (3,247) (6,917) (5,675)
Other (13,021) (8,830) (25,618) (20,994)
---------- ---------- ---------- ----------
(28,238) (20,584) (55,730) (43,714)
External Revenues
Con-Way
Transportation 528,594 463,547 1,039,110 896,926
Emery Worldwide 630,705 585,854 1,231,943 1,115,275
Menlo Logistics 238,551 181,603 448,454 342,162
Other 131,353 130,633 272,449 262,597
---------- ---------- ---------- ----------
$1,529,203 $1,361,637 $2,991,956 $2,616,960
========== ========== ========== ==========
Operating Income
Con-Way
Transportation $ 65,675 $ 60,830 $ 123,791 $ 114,777
Emery Worldwide 13,024 17,425 20,376 20,976
Menlo Logistics 8,473 5,273 16,111 9,829
Other (1) 345 11,806 656 32,347
---------- ---------- ---------- ----------
$ 87,517 $ 95,334 $ 160,934 $ 177,929
========== ========== ========== ==========
(1) The Other segment consists primarily of the operations under a
Priority Mail contract with the U.S. Postal Service, and includes the
operating results of Road Systems and, prior to the sale of its assets in
May 1999, VantageParts.
For the three and six months ended June 30, 1999, the Other segment
included a $10.1 million net gain recognized in May 1999 from the sale
of the assets of VantageParts, the Company's wholesale parts
distribution operation. For the six months ended June 30, 1999, the
Other segment included the net gain on the VantageParts asset sale and
a $16.5 million net gain on a lawsuit settled in January 1999.
PAGE 10
5. Earnings Per Share
Basic earnings per share was computed by dividing net income available
to common shareholders by the weighted-average common shares outstanding.
Diluted earnings per share was calculated as follows:
Three Months Ended Six Months Ended
(Dollars in thousands except June 30, June 30,
per share data) 2000 1999 2000 1999
---------- ---------- --------- ----------
Earnings:
Net Income Available
to Common Shareholders $ 43,914 $ 46,723 $ 81,212 $ 86,992
Add-backs:
Dividends on Series B
preferred stock, net
of replacement funding 377 339 706 671
Dividends on preferred
securities of subsidiary
trust, net of tax 954 954 1,908 1,908
---------- ---------- ---------- ----------
$ 45,245 $ 48,016 $ 83,826 $ 89,571
---------- ---------- ---------- ----------
Shares:
Basic shares (weighted-
average common shares
outstanding) 48,463,040 48,158,898 48,440,350 48,042,740
Stock option and restricted
stock dilution 320,860 684,627 358,774 746,676
Series B preferred stock 4,452,984 3,983,133 4,452,984 3,983,133
Preferred securities of
subsidiary trust 3,125,000 3,125,000 3,125,000 3,125,000
---------- ---------- ---------- ----------
56,361,884 55,951,658 56,377,108 55,897,549
---------- ---------- ---------- ----------
Diluted Earnings
Per Share $ 0.80 $ 0.86 $ 1.49 $ 1.60
========== ========== ========== ==========
6. Preferred Securities of Subsidiary Trust
On June 11, 1997, CNF Trust I (the Trust), a Delaware business trust
wholly owned by the Company, issued 2,500,000 of its $2.50 Term Convertible
Securities, Series A (TECONS) to the public for gross proceeds of $125
million. The combined proceeds from the issuance of the TECONS and the
issuance to the Company of the common securities of the Trust were invested
by the Trust in $128.9 million aggregate principal amount of 5% convertible
subordinated debentures due June 1, 2012 (the Debentures) issued by the
Company. The Debentures are the sole assets of the Trust.
Holders of the TECONS are entitled to receive cumulative cash
distributions at an annual rate of $2.50 per TECONS (equivalent to a rate
of 5% per annum of the stated liquidation amount of $50 per TECONS). The
Company has guaranteed, on a subordinated basis, distributions and other
payments due on the TECONS, to the extent the Trust has funds available
therefor and subject to certain other limitations (the Guarantee). The
Guarantee, when taken together with the obligations of the Company under
the Debentures, the Indenture pursuant to which the Debentures were issued,
and the Amended and Restated Declaration of Trust of the Trust including
its obligations to pay costs, fees, expenses, debts and other obligations
of the Trust (other than with respect to the TECONS and the common
securities of the Trust), provide a full and unconditional guarantee of
amounts due on the TECONS.
PAGE 11
The Debentures are redeemable for cash, at the option of the Company,
in whole or in part, on or after June 1, 2000, at a price equal to 103.125%
of the principal amount, declining annually to par if redeemed on or after
June 1, 2005, plus accrued and unpaid interest. In certain circumstances
relating to federal income tax matters, the Debentures may be redeemed by
the Company at 100% of the principal plus accrued and unpaid interest. Upon
any redemption of the Debentures, a like aggregate liquidation amount of
TECONS will be redeemed. The TECONS do not have a stated maturity date,
although they are subject to mandatory redemption upon maturity of the
Debentures on June 1, 2012, or upon earlier redemption.
Each TECONS is convertible at any time prior to the close of business
on June 1, 2012, at the option of the holder into shares of the Company's
common stock at a conversion rate of 1.25 shares of the Company's common
stock for each TECONS, subject to adjustment in certain circumstances.
7. Contingencies
In connection with the December 2, 1996 spin-off of Consolidated
Freightways Corporation (CFC), the Company's former long-haul LTL segment,
the Company agreed to indemnify certain states, insurance companies and
sureties against the failure of CFC to pay certain worker's compensation,
tax and public liability claims that were pending as of September 30, 1996.
In some cases, these indemnities are supported by letters of credit under
which the Company is liable to the issuing bank and by bonds issued by
surety companies. In order to secure CFC's obligation to reimburse and
indemnify the Company against liability with respect to these claims, as of
June 30, 2000, CFC had provided the Company with approximately $6.0 million
of letters of credit and $7.5 million of real property collateral. However,
the letters of credit and collateral provided by CFC are less than the
Company's maximum contingent liability under these indemnities.
The Company is currently under examination by the Internal Revenue
Service (IRS) for tax years 1987 through 1996 on various issues. In
connection with that examination, the IRS proposed adjustments for tax
years 1987 through 1990. The Company filed a protest concerning the
proposed adjustments for tax years 1987 through 1990 and was engaged in
discussions with the Appeals Office of the IRS. After those discussions
failed to produce a settlement, in March 2000 the IRS issued a Notice of
Deficiency (the Notice) for the years 1987 through 1990 with respect to
various issues, including aircraft maintenance and matters related to CFC
for years prior to the spin-off, which are described below. Based upon the
Notice, the total amount of the deficiency for items in years 1987 through
1990, including taxes and interest, is $211 million.
Under the Notice, the IRS has assessed a substantial adjustment for
tax years 1989 and 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 aircraft maintenance costs is consistent with
industry practice. As described below, the IRS has proposed an additional
adjustment, based on the same IRS position with respect to aircraft
maintenance, for subsequent tax years not included under the Notice.
PAGE 12
Under the Notice, the IRS is also seeking additional taxes, plus
interest, for certain matters relating to CFC for those periods. As part
of the spin-off, the Company and CFC entered into a tax sharing agreement
that provided a mechanism for the allocation of any additional tax
liability and related interest that arise due to adjustments by the IRS for
years prior to the spin-off. In May 2000, the Company and CFC settled
certain federal tax matters relating to CFC on issues for tax years 1984
through 1990. Under the settlement agreement, the Company received from
CFC cash of $16.7 million, a $20.0 million note due in 2004, and a
commitment to transfer to the Company land and buildings valued at $21.2
million.
As discussed above, the IRS is seeking to recover $211 million under
the Notice. In addition to the issues covered under the Notice for tax
years 1987 through 1990, the IRS in May 2000 proposed additional
adjustments for tax years 1991 through 1996 with respect to various issues,
including aviation excise taxes and aircraft maintenance costs.
The Company settled the tax issue relating to the manner in which
Emery Worldwide calculated and paid aviation excise taxes. In June 2000,
the Company paid $29.6 million to the IRS in settlement of proposed excise
tax adjustments for tax years 1990 through 1999, which approximated the
amount previously accrued by the Company for the excise tax issue.
In the third quarter of 2000, the Company paid $93.4 million to the
IRS to stop the accrual of interest on amounts due under the Notice for tax
years 1987 through 1990 and under proposed adjustments for tax years 1991
through 1996 for all issues except aircraft maintenance costs.
The Company intends to vigorously contest the Notice and the proposed
adjustments as they pertain to the aircraft maintenance issue, and is
evaluating courses of action for the other items covered under the Notice
and proposed adjustments. However, there can be no assurance that the
Company will not be liable for all of the amounts due under the Notice and
proposed adjustments. As a result, the Company is unable to predict the
ultimate outcome of this matter and there can be no assurance that this
matter will not have a material adverse effect on the Company's financial
condition or results of operations.
In addition to the matters discussed above, 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 actions will not have a material impact on the Company's financial
condition or results of operations.
PAGE 13
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
---------------------
Consolidated Results
Net income available to common shareholders for the second quarter of
2000 was $43.9 million ($0.91 per basic share and $0.80 per diluted share)
compared to $46.7 million ($0.97 per basic share and $0.86 per diluted
share) in the same quarter of last year. The second quarter of last year
benefited from a $10.1 million non-recurring net gain ($0.12 per basic
share and $0.10 per diluted share) on the sale of assets of VantageParts,
the Company's former wholesale parts distribution operation. Excluding
that sale, net income available to common shareholders in the second
quarter of 2000 increased 7.1% over the same quarter last year.
Net income available to common shareholders for the first half of 2000
was $81.2 million ($1.68 per basic share and $1.49 per diluted share)
compared to $87.0 million ($1.81 per basic share and $1.60 per diluted
share) in the same period last year. The first half of 2000 included a
$2.6 million non-recurring net gain ($0.03 per basic and diluted share) on
the sale of securities. The first half of last year included both the net
gain on the VantageParts asset sale and a $16.5 million non-recurring net
gain ($0.19 per basic share and $0.17 per diluted share) on the settlement
of a lawsuit. The non-recurring gains in the first half of 1999 were
recognized in operating income. Excluding these non-recurring gains in the
first half of 2000 and 1999, net income available to common shareholders
for the first half of 2000 increased 10.7% over the first half of 1999.
Revenue for the second quarter and first half of 2000 increased 12.3%
and 14.3%, respectively, over the second quarter and first half of last
year due to higher revenue from all reporting segments.
Operating income of $87.5 million for the second quarter and $160.9
million for the first six months of 2000 decreased 8.2% and 9.6%,
respectively, from the comparable periods last year. Excluding non-
recurring gains, operating income for the second quarter and first six
months of 2000 increased 2.7% and 6.3%, respectively. Record operating
income earned by Con-Way and Menlo in the second quarter and first half of
2000 was partially offset by lower operating income from Emery and the
Other segment. The Other segment, which includes the Priority Mail
operations, also included the non-recurring gains recognized in the first
half of 1999.
Other net expenses in the second quarter of 2000 decreased 16.1% from
the same quarter last year due primarily to interest income earned on cash-
equivalent investments and on a state tax refund, partially offset by a
7.2% increase in interest expense. Long-term debt transactions discussed
in Note 2 of the Notes to Consolidated Financial Statements resulted in
higher interest expense on long-term borrowings in the second quarter of
2000 compared to last year's second quarter. Other net expenses in the
first half of 2000 fell 24.9% due primarily to a $2.6 million net gain from
the sale of securities in March 2000 and higher income on cash-equivalent
investments.
The effective tax rate during 2000 was 42.5% compared to 43.5% in
1999. The reduction was due primarily to resolution of certain tax issues
and tax planning strategies in 2000.
PAGE 14
Con-Way Transportation Services
Con-Way's revenue in the second quarter and first six months of 2000,
increased 14.0% and 15.9%, respectively, over the same periods last year
due primarily to higher tonnage (weight) and revenue per hundredweight
(yield), and to a lesser extent, fuel surcharges.
In the second quarter of 2000, total and less-than-truckload (LTL)
weight for Con-Way's regional carriers increased 7.5% and 7.0%,
respectively, over the second quarter of 1999. Total and LTL weight for
the regional carriers in the first six months of 2000 increased 8.4% and
8.1%, respectively, over the same period last year. The increased weight
reflects continued growth in core regional service and inter-regional joint
services.
In the second quarter of 2000, revenue per hundredweight for the
regional carriers increased 5.6% over the second quarter of last year and
the regional carriers' revenue per hundredweight for the first half of 2000
was 6.4% higher than the first half of 1999. The increases in yield were
due primarily to higher rates obtained for Con-Way's core premium services
and a larger percentage of inter-regional joint services, which command
higher rates on longer lengths of haul.
Con-Way's operating income in the second quarter and first half of
2000 grew 8.0% and 7.9%, respectively, over the same periods last year.
The increases were due primarily to higher revenue, increased load factor,
and continued emphasis on operating efficiencies. Higher diesel fuel costs
in the first half of 2000 were substantially mitigated by a fuel surcharge
implemented by Con-Way in August 1999. Both the first half of 2000 and the
first half of 1999 were negatively affected by operating losses from Con-
Way's new multi-client warehousing and logistics business, which was formed
in the fourth quarter of 1998.
Emery Worldwide
Emery's revenue for the second quarter and first six months of 2000
increased 7.7% and 10.5%, respectively, over the same periods last year due
primarily to higher international airfreight revenue and, to a lesser
extent, fuel surcharges.
International airfreight revenue for the second quarter and first half
of 2000, excluding fuel surcharges, increased 14.0% and 19.1% over the
second quarter and first half of 1999 due primarily to increases in pounds
transported (weight) and revenue per pound (yield). Weight and yield for
the second quarter of 2000 increased 10.0% and 3.7%, respectively, over the
second quarter last year. In the first half of 2000, weight and yield rose
15.1% and 3.5%, respectively, over the first half of 1999. Weight and
yield in the second quarter and first half of 2000 were favorably affected
by improved economic conditions in the international markets served by
Emery.
North American airfreight revenue for the second quarter and first
half of 2000, excluding fuel surcharges, fell 3.3% and 1.4%, respectively,
from the comparable periods last year. Including fuel surcharges, North
American airfreight revenue for the second quarter was essentially flat
when compared to the second quarter of last year and North American
airfreight revenue in the first half of 2000 increased 2.0% over the first
half of 1999. In the second quarter of 2000, a 5.4% decline in North
American airfreight weight was partially offset by a 2.3% increase in yield
(excluding fuel surcharges). In the first six months of 2000, a 4.9%
reduction in North American airfreight weight was partially offset by a
3.7% increase in revenue per pound (excluding fuel surcharges). Improved
revenue per pound in the second quarter and first half of 2000 was due in
part to an increase in the percentage of higher yielding guaranteed
delivery service and Emery's ongoing yield management program, which is
designed to eliminate or reprice certain low margin business.
PAGE 15
Emery's second-quarter 2000 operating income declined 25.3% from last
year's second quarter and 2000 first-half operating income was down 2.9%
from last year's first half. Operating income for the second quarter and
first half of 2000 declined from the comparable periods last year due
primarily to higher aircraft maintenance costs on aircraft during the
implementation of the service initiatives discussed below. Higher jet fuel
costs in the second quarter and first half of 2000 were substantially
mitigated by a fuel surcharge implemented by Emery in September 1999.
We will continue to focus on positioning Emery as a premium service
provider. In North America, we intend to continue to develop an
infrastructure capable of servicing a higher volume of premium and
guaranteed delivery services and to reduce costs. Key initiatives include
replacing older aircraft with newer and more efficient aircraft having
lower maintenance costs, and the reconfiguration of Emery's sortation hub
in Dayton, Ohio. Internationally, we will focus on expanding Emery's
variable-cost-based operations and will continue our efforts to increase
Emery's international revenue as a percentage of its total revenue.
In July 2000, the Air Line Pilots Association (ALPA), the union
representing Emery's pilots, issued a press release stating that Emery's
pilots voted to authorize ALPA's management to determine whether or not the
union will strike. According to federal law, before the issue could
escalate into a strike, the National Mediation Board (NMB) would first have
to declare an impasse and recommend that the parties submit their
differences to an arbitrator for binding resolution. If either party should
reject the offer for an arbitrated settlement, the NMB would then launch a
30-day period of continued negotiations, after which economic actions such
as a strike or lockout could occur. As a result, the Company is unable to
predict the ultimate outcome of this matter and there can be no assurance
that this matter will not have a material adverse effect on the Company's
financial condition or results of operations.
Menlo Logistics
Menlo's revenue in the second quarter and first six months of 2000
exceeded the comparable periods last year by 31.4% and 31.1%, respectively.
Higher revenue was due in part to existing contracts and consulting fees
earned on contracts entered into in the first quarter and first half of
2000. A portion of Menlo's revenue is attributable to logistics contracts
for which Menlo manages the transportation of freight but subcontracts the
actual transportation and delivery of products to third parties. We refer
to this as purchased transportation. Menlo's revenue in the second
quarter, net of purchased transportation, increased 37.1% from the same
quarter last year to $65.1 million. For the second half of 2000, Menlo's
revenue, net of purchased transportation, increased 34.1% from the first
half of last year to $130.1 million.
Operating income for Menlo in the second quarter and first half of
2000 increased 60.7% and 63.9%, respectively, over the second quarter and
first half of 1999. Higher operating income was primarily attributable to
increased revenue and an increase in the percentage of revenue from higher-
margin consulting fees.
PAGE 16
Other Segment
The Other segment consists primarily of the operations under a
Priority Mail contract with the U.S. Postal Service, and includes the
operating results of Road Systems and, prior to our sale of its assets in
May 1999, VantageParts. Also included in the Other segment for 1999 were
net gains on the VantageParts asset sale and settlement of a lawsuit in
January 1999.
The Other segment's revenue for the second quarter and first half of
2000 increased 0.6% and 3.8%, respectively, over the same periods last year
due primarily to higher revenue from the Priority Mail operation. Second-
quarter revenue from the Priority Mail operation increased to $126.8
million, a 7.3% increase from the second quarter of 1999. Priority Mail
revenue of $262.0 million in the first half of 2000 was 10.9% higher than
the first half of 1999. Higher Priority Mail revenue was partially offset
by loss of revenue from VantageParts following the sale of its assets in
May 1999.
The Other segment's second-quarter operating income of $345,000
declined from $11.8 million in the second quarter of 1999. The second
quarter of last year included the $10.1 million net gain on the
VantageParts asset sale and $1.3 million of operating income from the
Priority Mail operations. The Other segment's first-half operating income
of $656,000 decreased from $32.3 million in the first half of 1999. Last
year's first-half operating income included a $16.5 million net gain on the
settlement of a lawsuit in January 1999, the $10.1 million net gain on the
VantageParts asset sale, and $4.8 million of operating income from the
Priority Mail operations. As discussed below, Priority Mail operating
income was recognized in the first six months of 1999 and break-even
results on Priority Mail operations have been recognized thereafter.
In accordance with the Priority Mail contract, in February 1999, Emery
Worldwide Airlines (EWA), our subsidiary that operates the contract,
submitted a proposal to the U.S. Postal Service (USPS) for 1999 pricing. We
believe that our proposal was reasonably determined and justifiable based
upon EWA's experience of operating under the Priority Mail contract.
EWA did not receive a satisfactory response from the USPS.
Consequently, EWA in the third quarter of 1999 filed a claim with the USPS
for proposed higher prices.
Through the second quarter of 1999, Priority Mail contract revenue was
billed at a provisional rate set by the USPS, pending a final price
determination. The USPS responded to the EWA claim with unilateral price
reductions for both prior and future periods. The current rate is below
EWA's cost to service this contract. Unless the rate is increased or until
negotiation or litigation results in favorable pricing or contract changes,
EWA will be compensated below its cost of operating the contract.
Also, in August 1999, the USPS denied EWA's previously filed claim for
reimbursement of additional costs incurred during the 1998 holiday season.
In March 2000, EWA filed a claim with the USPS related to the Priority
Mail contract to recover actual and expected reductions to EWA's contract
pricing. This claim was filed in response to the reduction by the USPS in
contract pricing for both prior and future periods as discussed above. The
claim is in addition to EWA's previous claim for 1999 pricing as discussed
above and substantially covers the remaining initial term of the contract.
In April 2000, EWA filed a complaint in the United States Court of Federal
Claims in Washington, D.C. that requests a declaration of contract rights
under the Priority Mail contract and a ruling that the USPS is in breach of
contractual payment obligations.
PAGE 17
Consistent with our accounting policies described in Note 1 of the
Notes to Consolidated Financial Statements, unbilled revenue from the
Priority Mail contract is recognized in our financial statements. In
accordance with generally accepted accounting principles, EWA recognizes
unbilled revenue related to claims sufficient only to recover costs of
operating under the contract. Accordingly, no operating profit has been
recognized in connection with the Priority Mail contract since the first
half of 1999. As a result of the claims discussed above and the USPS's
decision to assert price reductions, EWA recognized $29.3 million and $49.6
million of unbilled revenue in the second quarter and first half of 2000,
respectively, and has recognized $173.4 million in unbilled revenue since
the beginning of the Priority Mail contract, which amounts are in dispute.
Until the dispute is resolved, we expect that any shortfall between EWA's
billed revenue from the Priority Mail contract and its costs of operating
under the contract will be recognized as unbilled revenue and as a result,
we will generally continue to record break-even operating results under the
Priority Mail contract in our financial statements. If we determine that
the unbilled revenue is not collectable, the uncollectable amount will be
charged as expense to operations in the period when and if that
determination is made.
We have had discussions with the USPS on a range of possibilities for
restructuring the activities under the Priority Mail contract. Although we
cannot predict whether these discussions will in fact result in additional
payments to us or a modification to the contract, the wide range of
alternatives discussed has included both increasing and decreasing the
scope of our activities under the contract and both partial and total
termination of the contract. In addition, both we and the USPS have
notified each other of alleged breaches under the contract. If our
activities under the contract are curtailed or terminated, the costs could
be material. Likewise, it is possible that the USPS could assert claims
against us for breach of the contract or other matters, which could be
significant.
We believe our position with respect to the Priority Mail contract is
reasonable and well founded; however, there can be no assurance as to the
outcome. Accordingly, we can give no assurance that matters relating to
the Priority Mail contract with the USPS will not have a material adverse
effect on our financial condition or results of operations.
PAGE 18
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
In the first half of 2000, cash and cash equivalents decreased $9.8
million to $136.4 million. Net capital expenditures of $117.3 million were
funded with $60.9 million of cash provided by operating activities, $46.5
million provided by financing activities and a reduction in cash.
Operating activities in the first half of 2000 generated net cash of
$60.9 million. Net income of $85.3 million, depreciation and amortization
of $104.2 million, and a $49.6 million increase in accrued income taxes
were partially offset by a $150.7 million increase in receivables and a
$63.7 million decline in accrued liabilities. The increase in receivables
was due in part to higher revenue and an increase in the amount of unbilled
revenue from the Priority Mail contract, as described above. Other
operating activities in the first half of 2000 generated net cash of $36.2
million. As discussed in Note 7 of the Notes to Consolidated Financial
Statements, the decline in accrued liabilities was due in part to a $29.6
million payment to the IRS in settlement of a proposed IRS adjustment
related to excise taxes.
Investing activities in the first half of 2000 used $117.3 million of
cash, $15.8 million less than the first half of 1999. Capital expenditures
of $115.1 million in the first six months of 2000 declined $28.2 million
from the same period last year. For the first half of 2000, Con-Way spent
$58.9 million of cash primarily on revenue equipment and infrastructure and
Emery spent $33.2 million of cash primarily on infrastructure. Capital
expenditures by Con-Way and Emery in the first half of 2000 declined $30.4
million and $10.2 million, respectively, from the same period last year.
Lower capital expenditures at Con-Way and Emery were partially offset by
the in-process construction of a CNF corporate administrative facility.
Software expenditures in the first half of 2000 declined $10.6 million from
the first half of last year.
Financing activities in the first six months of 2000 provided $46.5
million compared to the use of $50.7 million in the same period last year.
As discussed in Note 2 of the Notes to Consolidated Financial Statements, a
portion of the net proceeds of $197.5 million from the issuance in March
2000 of $200 million of 8 7/8% Notes due 2010 were used to repay short-term
and long-term borrowings outstanding under lines of credit.
As discussed above under "Results of Operations" for the "Other
Segment", the provisional rate currently being paid to EWA by the U.S.
Postal Service under the Priority Mail contract is below EWA's cost to
service the contract. Until the dispute over pricing is resolved, our
liquidity will be negatively affected by the shortfall between EWA's
compensation from the contract and its cost of operating under the
contract.
As discussed in Note 7 of the Notes to Consolidated Financial
Statements, the Company is currently under examination by the Internal
Revenue Service (IRS) for tax years 1987 through 1996 on various issues.
In connection with that examination, we paid the IRS $93.4 million in
August 2000 for tax and interest related to issues raised under the
examination. We paid the IRS with cash and the proceeds from short-term
borrowings.
We maintain a $350 million unsecured credit facility and a
supplemental $100 million unsecured credit facility. At June 30, 2000, we
had no borrowings outstanding under the unsecured credit facilities.
PAGE 19
The $350 million facility is also available for issuance of letters of
credit. Under that facility, outstanding letters of credit totaled $52.6
million at June 30, 2000. Available capacity under the $350 million
facility and the supplemental line of credit was $397.4 million at June 30,
2000.
At June 30, 2000 we also had $75.0 million of uncommitted lines with
no outstanding borrowings. Under other unsecured facilities, $66.0 million
in letters of credit were outstanding at June 30, 2000.
Our ratio of total debt to capital increased to 31.8% from 30.5% at
December 31, 1999, primarily due to the March 2000 issuance of $200 million
of 8 7/8% Notes due 2010.
CYCLICALITY AND SEASONALITY
---------------------------
Our businesses operate in industries that are affected directly by
general economic conditions and seasonal fluctuations, both of which affect
demand for transportation services. In the trucking and airfreight
industries, for a typical year, the months of September and October usually
have the highest business levels while the months of January and February
usually have the lowest business levels. Operations under the Priority Mail
contract peak in December primarily due to higher shipping demand related
to the holiday season.
MARKET RISK
-----------
We are exposed to a variety of market risks, including the effects of
interest rates, commodity prices and foreign currency exchange rates. Our
policy is to enter into derivative financial instruments only in
circumstances that warrant the hedge of an underlying asset, liability or
future cash flow against exposure to some form of commodity, interest rate
or currency-related risk. Additionally, the designated hedges should have
high correlation to the underlying exposure such that fluctuations in the
value of the derivatives offset reciprocal changes in the underlying
exposure. Our policy prohibits entering into derivative instruments for
trading purposes.
We may be exposed to the effect of interest rate fluctuations in the
fair value of our long-term debt and capital lease obligations, as
summarized in Notes 3 and 4 of our 1999 Annual Report to Shareholders.
Changes in our long-term debt in the first half of 2000 are discussed
herein in Note 2 of the Notes to Consolidated Financial Statements. The
change in the fair value of our long-term obligations given a hypothetical
10% change in interest rates would be approximately $21 million at June 30,
2000.
We use interest rate swaps to mitigate the impact of interest rate
volatility on cash flows and the fair value of our long-term debt. At
March 31, 2000, interest rate swaps consisted only of cash flow hedges.
The underlying exposure of these swaps was from equipment lease obligations
with variable interest rate components. As of June 30, 2000, we estimate
that the net payments under these swaps given a hypothetical adverse change
of 10% in market interest rates would not have a material effect on our
financial condition or results of operations.
In April 2000, we entered into interest rate swaps designated as fair
value hedges. The underlying exposure of these swaps is the fluctuation in
fair value of the $200 million of 8 7/8% Notes due 2010 issued in March
2000. Under the measurement criteria of hedge effectiveness of SFAS 133,
the value of these fair value hedges vary inversely with the fluctuation in
fair value of the $200 million 8 7/8% Notes. As of June 30, 2000, the
change in the fair value of these interest rate swaps given a hypothetical
10% change in interest rates would be approximately $21 million.
PAGE 20
ACCOUNTING STANDARDS
--------------------
In June 1999, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 137, "Accounting for
Derivative Instruments and Hedging Activities-Deferral of the Effective
Date of FASB Statement No. 133" (SFAS 137). SFAS 137 delays by one year
the effective date of FASB Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133). SFAS 133 establishes
accounting and reporting standards requiring that every derivative
instrument be recorded in the balance sheet as either an asset or liability
measured at its fair value and that changes in fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Qualifying hedges allow a derivative's gains and losses to offset related
results on the hedged item in the income statement. SFAS 133 will now be
effective January 1, 2001. We plan to adopt the statement in the first
quarter of 2001 and are evaluating the impact of adoption on our financial
condition and results of operations.
YEAR 2000
---------
Since 1996, our Information Technology professionals have coordinated
our continuing Year 2000 (Y2K) compliance effort. We believe our efforts
to address Y2K issues have been successful and do not expect any material
adverse effect on our financial condition or results of operations. We
will continue to monitor for Y2K-related problems. Should problems arise,
we will implement the Y2K business resumption contingency plans we
previously established.
Since 1996, we expensed $38.1 million on Y2K compliance through
December 31, 1999. All Y2K costs have been funded from operations. A
portion of our capitalized software costs was for new financial and
administrative systems that are Y2K compliant. Some of these systems
replaced non-compliant systems.
FORWARD-LOOKING STATEMENTS
--------------------------
Certain statements included 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 number of risks and
uncertainties. Any such forward-looking statements contained 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," "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 the matters discussed below and elsewhere in this document,
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; uncertainty regarding EWA's
Priority Mail contract with the United States Postal Service, including
uncertainties regarding EWA's claims under the contract described herein;
PAGE 21
labor matters, including changes in labor costs, renegotiations of labor
contracts and the risk of work stoppages or strikes, including the fact
that ALPA has been authorized by its members to strike against EWA; changes
in governmental regulation; environmental and tax matters, including
aircraft maintenance and other tax matters discussed herein; and matters
relating to the spin-off of CFC. In that regard, we are 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, tax and
environmental matters, including the tax matters described herein. Although
CFC is, in general, either the primary or secondary obligor or jointly and
severally liable with us with respect to these matters, a failure to pay or
other default by CFC with respect to the obligations as to which we are 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 us. As a result of the foregoing, no assurance can be given as to
future results of operations or financial condition.
PAGE 22
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 costs will not have a material adverse effect on the Company's
financial condition or results of operations.
The Department of Transportation, through its Office of Inspector
General, and the Federal Aviation Administration are conducting an
investigation relating to the handling of so-called hazardous materials by
Emery. The investigation is ongoing and Emery is cooperating fully.
Because the investigation is at a preliminary stage, the Company is unable
to predict the outcome of this investigation.
On February 16, 2000, a DC-8 cargo aircraft operated by EWA crashed
shortly after take-off from Mather Field, near Sacramento, California. The
crew of three was killed. There were no reported injuries on the ground.
The cause of the crash has not been determined. The National
Transportation Safety Board is conducting an investigation. The Company is
currently unable to predict the outcome of this matter or the effect it may
have on the Company. The Company may be subject to claims and proceedings
relating to the crash, which could include private lawsuits seeking
monetary damages and governmental proceedings. Although EWA maintains
insurance that is intended to cover claims that may arise in connection
with an airplane crash, the Company cannot assure that the insurance will
in fact be adequate to cover all possible types of claims. In particular,
any claims for punitive damages or any impact of possible government
proceedings or other sanctions would not be covered by insurance.
Certain legal matters are discussed in Note 7 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 25, 2000, the following
proposals were presented with the indicated voting results:
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 Against
Robert Alpert 44,667,226 894,516
Margaret G. Gill 44,685,648 876,094
Robert Jaunich II 44,684,233 877,509
Robert P. Wayman 44,689,533 872,209
The following directors did not stand for election and continued in
office as directors after the Annual Shareholders Meeting: Richard A.
Clarke, W. Keith Kennedy, Jr., Richard B. Madden, Donald E. Moffitt,
Michael J. Murray, Gregory L. Quesnel, Robert D. Rogers, and William J.
Schroeder.
PAGE 23
Amendments to the Company's 1997 Equity and Incentive Plan, and the re-
approval of the Plan in its entirety was approved by the following vote:
For 35,474,173; Against 4,341,725; Abstain 443,444.
The appointment of Arthur Andersen LLP as independent public
accountants for the year 2000 was approved by the following vote: For
44,885,937; Against 387,301; Abstain 288,504.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10 Agreement Resolving Certain Matters Under the
Tax Sharing Agreement
27 Financial Data Schedule
99(a) Computation of Ratios of Earnings to Fixed
Charges -- the ratios of earnings to fixed charges
were 3.8x and 4.2x for the six months ended
June 30, 2000 and 1999, respectively.
(b) Computation of Ratios of Earnings to Combined
Fixed Charges and Preferred Stock Dividends -- the
ratios of earnings to combined fixed charges and
preferred stock dividends were 3.7x and 4.0x for
the six months ended June 30, 2000 and 1999,
respectively.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
June 30, 2000.
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)
August 11, 2000 /s/Chutta Ratnathicam
Chutta Ratnathicam
Senior Vice President and
Chief Financial Officer
