PAGE 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
___TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A to N/A
COMMISSION FILE NUMBER 1-5046
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 April 30, 2000: 48,526,036
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CNF TRANSPORTATION INC.
FORM 10-Q
Quarter Ended March 31, 2000
___________________________________________________________________________
___________________________________________________________________________
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 2000 and December 31, 1999 3
Statements of Consolidated Income -
Three Months Ended March 31, 2000 and 1999 5
Statements of Consolidated Cash Flows -
Three Months Ended March 31, 2000 and 1999 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 20
PAGE 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CNF TRANSPORTATION INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
March 31, December 31,
2000 1999
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 111,415 $ 146,263
Trade accounts receivable, net of
allowances (Note 1) 1,012,703 914,307
Other accounts receivable 27,974 25,419
Operating supplies, at lower of average
cost or market 42,670 46,019
Prepaid expenses 60,980 41,971
Deferred income taxes 27,322 26,254
Total Current Assets 1,283,064 1,200,233
PROPERTY, PLANT AND EQUIPMENT, NET
Land 122,563 119,403
Buildings and leasehold improvements 601,336 573,688
Revenue equipment 859,327 854,519
Other equipment 460,786 447,962
2,044,012 1,995,572
Accumulated depreciation and amortization (899,716) (864,538)
1,144,296 1,131,034
OTHER ASSETS
Deferred charges and other assets (Note 7) 189,107 200,739
Capitalized software, net 89,483 88,157
Unamortized aircraft maintenance, net (Note 1) 238,507 226,629
Goodwill, net 263,116 265,896
780,213 781,421
TOTAL ASSETS $3,207,573 $3,112,688
The accompanying notes are an integral part of these statements.
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CNF TRANSPORTATION INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
March 31, December 31,
2000 1999
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 321,467 $ 305,954
Accrued liabilities 491,750 543,353
Accrued claims costs 120,999 99,940
Current maturities of long-term debt and
capital leases 7,552 6,452
Short-term borrowings - 40,000
Income taxes payable 74,367 53,455
Total Current Liabilities 1,016,135 1,049,154
LONG-TERM LIABILITIES
Long-term debt and guarantees (Note 2) 424,060 322,800
Long-term obligations under capital leases 110,619 110,646
Accrued claims costs 57,462 81,978
Employee benefits 226,804 217,519
Other liabilities and deferred credits 44,892 45,450
Aircraft lease return provision (Note 1) 60,154 63,678
Deferred income taxes 144,078 128,515
Total Liabilities 2,084,204 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 834,312 and 840,407
shares, respectively 8 8
Additional paid-in capital, preferred stock 126,890 127,817
Deferred compensation, Thrift and Stock Plan (85,791) (87,600)
Total Preferred Shareholders' Equity 41,107 40,225
Common stock, $.625 par value; authorized
100,000,000 shares; issued 55,336,005
and 55,306,947 shares, respectively 34,585 34,567
Additional paid-in capital, common stock 329,633 328,721
Retained earnings 780,385 747,936
Deferred compensation, restricted stock (1,965) (2,010)
Cost of repurchased common stock
(6,826,731 and 6,856,567 shares,
respectively) (168,322) (169,057)
974,316 940,157
Accumulated foreign currency translation
adjustment (12,659) (8,039)
Minimum pension liability adjustment (4,395) (4,395)
Accumulated Other Comprehensive Loss (17,054) (12,434)
Total Common Shareholders' Equity 957,262 927,723
Total Shareholders' Equity 998,369 967,948
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,207,573 $3,112,688
The accompanying notes are an integral part of these statements.
PAGE 5
CNF TRANSPORTATION INC.
STATEMENTS OF CONSOLIDATED INCOME
(Dollars in thousands except per share amounts)
Three Months Ended
March 31,
2000 1999
REVENUES $1,462,753 $1,255,323
Costs and Expenses
Operating expenses 1,211,565 1,029,150
General and administrative expenses 132,577 121,082
Depreciation 45,194 38,962
Net gain on legal settlement - (16,466)
1,389,336 1,172,728
OPERATING INCOME 73,417 82,595
Other Income (Expense)
Interest expense (6,400) (7,126)
Dividend requirement on preferred
securities of subsidiary trust (Note 6) (1,563) (1,563)
Miscellaneous, net 2,950 955
(5,013) (7,734)
Income before income taxes 68,404 74,861
Income taxes 29,072 32,565
Net Income 39,332 42,296
Preferred stock dividends 2,034 2,027
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 37,298 $ 40,269
Average Common Shares Outstanding (Note 5)
Basic 48,417,660 47,925,476
Diluted 56,073,670 55,814,095
Earnings Per Share (Note 5)
Basic $ 0.77 $ 0.84
Diluted $ 0.69 $ 0.74
The accompanying notes are an integral part of these statements.
PAGE 6
CNF TRANSPORTATION INC.
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in thousands)
Three Months Ended
March 31,
2000 1999
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $ 146,263 $ 73,897
OPERATING ACTIVITIES
Net income 39,332 42,296
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 52,074 44,528
Increase in deferred income taxes 14,495 390
Amortization of deferred compensation 1,992 2,707
Provision for uncollectable accounts 4,483 2,711
Gain on sale of equity securities, net (2,619) -
Gains from property disposals, net (1,106) (417)
Changes in assets and liabilities:
Receivables (105,434) 54,038
Prepaid expenses (19,009) (21,907)
Accounts payable 18,266 (18,322)
Accrued liabilities (35,089) (7,498)
Accrued incentive compensation (16,514) (17,557)
Accrued claims costs (3,457) 6,088
Income taxes 20,912 22,842
Employee benefits 9,285 7,992
Deferred charges and credits 4,004 (6,379)
Other (8,291) (15,139)
Net Cash Provided by (Used in) Operating
Activities (26,676) 96,373
INVESTING ACTIVITIES
Capital expenditures (59,654) (55,799)
Software expenditures (5,310) (11,381)
Proceeds from sale of equity securities 2,619 -
Proceeds from sales of property 3,164 2,540
Net Cash Used in Investing Activities (59,181) (64,640)
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 (96,419) (5,223)
Repayment of short-term borrowings (40,000) (14,000)
Proceeds from exercise of stock options 295 3,488
Payments of common dividends (4,849) (4,808)
Payments of preferred dividends (5,470) (5,556)
Net Cash Provided by (Used in) Financing
Activities 51,009 (26,099)
Increase (Decrease) in Cash and Cash
Equivalents (34,848) 5,634
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 111,415 $ 79,531
The accompanying notes are an integral part of these statements.
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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 March 31, 2000 and
December 31, 1999 was $144.1 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 has reclassified Emery's aircraft lease return provision.
Accordingly, the aircraft lease return provision is reported separately as
a liability rather than being included in Unamortized Aircraft Maintenance,
Net. Prior periods have been reclassified.
Certain other amounts in prior year financial statements have been
reclassified to conform to current year presentation.
2. Long-Term Debt
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
are 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
covenants that limit 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.
PAGE 8
3. Comprehensive Income
SFAS 130, "Reporting Comprehensive Income", requires companies to
report a measure of all changes in equity except those resulting from
investments by owners and distributions to owners. Comprehensive income
was as follows:
Three Months Ended
(Dollars in thousands) March 31,
2000 1999
---------- ----------
Net income $ 39,332 $ 42,296
Foreign currency
translation adjustment (4,620) (160)
---------- ----------
$ 34,712 $ 42,136
========== ==========
4. Business Segments
SFAS 131, "Disclosures about Segments of an Enterprise and Related
Information", established standards for reporting information about
operating segments in annual financial statements and requires selected
information in interim financial statements. Selected financial
information is reported below for the three-month periods ended March 31,
2000 and 1999:
(Dollars in
thousands) Con-Way Emery Menlo Other(2) Total
----------- ---------- ----------- ----------- -----------
2000
Revenues $515,513 $607,487 $213,552 $153,693 $1,490,245
Inter-company
eliminations (4,997) (6,249) (3,649) (12,597) (27,492)
--------- --------- --------- --------- -----------
Net revenues $510,516 $601,238 $209,903 $141,096 $1,462,753
========= ========= ========= ========= ===========
Operating
Income $ 58,116 $ 7,352 $ 7,638 $ 311 $73,417
========= ========= ========= ========= ===========
1999
Revenues $438,511 $532,827 $162,987 $144,128 $1,278,453
Inter-company
eliminations (5,132) (3,406) (2,428) (12,164) (23,130)
--------- --------- --------- --------- -----------
Net revenues $433,379 $529,421 $160,559 $131,964 $1,255,323
========= ========= ========= ========= ===========
Operating
Income (1) $ 53,947 $ 3,551 $ 4,556 $ 20,541 $ 82,595
========= ========= ========= ========= ===========
(1) For the three months ended March 31, 1999, the Other segment included
a $16.5 million net gain on a lawsuit settled in January 1999.
(2) 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.
PAGE 9
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
(Dollars in thousands except March 31,
per share data) 2000 1999
------------ ------------
Earnings:
Net income available to
common shareholders $ 37,298 $ 40,269
Add-backs:
Dividends on preferred
stock, net of replacement
funding 329 332
Dividends on preferred
securities of subsidiary
trust, net of tax 954 954
----------- -----------
$ 38,581 $ 41,555
----------- -----------
Shares:
Weighted-average shares
outstanding 48,417,660 47,925,476
Stock option and restricted
stock dilution 396,309 765,435
Series B preferred stock 4,134,701 3,998,184
Preferred securities of
subsidiary trust 3,125,000 3,125,000
----------- -----------
56,073,670 55,814,095
----------- -----------
Diluted earnings per share $ 0.69 $ 0.74
=========== ===========
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
PAGE 10
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.
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
March 31, 2000, CFC had provided the Company with approximately $11.0
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 is 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
provides 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. The Company believes it is entitled to and will pursue
reimbursement from CFC under the tax sharing agreement for any payments
that the Company makes to the IRS with respect to these additional taxes.
Any failure to receive reimbursement for a significant portion of those
payments, whether due to CFC successfully contesting their obligation to
reimburse the Company or for any other reason, could have a material
adverse effect on the Company's financial condition or results of
operations. At March 31, 2000, the Company had recognized approximately $53
million in Deferred Charges and Other Assets in the Consolidated Balance
Sheet for amounts receivable from CFC and a corresponding payable for
amounts due the IRS.
The IRS proposed a substantial 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. In addition, the Company believes it is likely that the IRS will
propose an additional adjustment, based on the same IRS position with
respect to aircraft maintenance costs, for subsequent tax years. The
Company believes that its practice of expensing these types of aircraft
maintenance costs is consistent with industry practice.
PAGE 11
The Company filed a protest concerning the proposed adjustment 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 the aircraft maintenance issue
described above, and with respect to various other matters, including some
related to CFC for years prior to the spin-off. Based upon the Notice, the
total amount of the deficiency for items in years 1987 through 1990,
including taxes and interest, is $191 million. The Company intends to
vigorously contest the Notice as it pertains to the aircraft maintenance
issue, and is evaluating courses of action for the other items covered
under the Notice. However, there can be no assurance that the Company will
not be liable for all of the amounts due under the Notice. 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.
The IRS has also proposed adjustments that would require Emery
Worldwide to 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 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,
accordingly, the Company intends to continue to vigorously 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 be liable for a substantial amount of additional
aviation excise taxes for the 1990 through 1995 tax period, plus interest.
In addition, it is possible that the IRS may seek to increase the amount of
the aviation excise tax payable by Emery Worldwide for periods subsequent
to September 30, 1995. As a result, 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 12
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 first quarter of
2000 was $37.3 million ($0.77 per basic share and $0.69 per diluted share)
compared to $40.3 million ($0.84 per basic share and $0.74 per diluted
share) in the same quarter of last year. The first quarter of 2000
included a $2.6 million net gain ($0.03 per basic and diluted share) from
the sale of securities. The first quarter of last year benefited from a
$16.5 million net gain ($0.19 per basic share and $0.16 per diluted share)
on the settlement of a lawsuit, which was recognized in operating income.
Excluding the non-recurring net gains, net income available to common
shareholders increased 15.6% due to higher operating income, lower interest
expense, and a lower effective tax rate.
Revenue for the first quarter of 2000 increased 16.5% over the same
quarter of 1999 due primarily to revenue growth at Con-Way, Emery, and
Menlo. Revenue for the Other segment, which primarily includes operations
under a Priority Mail contract with the U.S. Postal Service, increased 6.9%
from the same period last year.
Operating income for the 2000 first quarter was $73.4 million compared
to $82.6 million in the 1999 first quarter. Excluding the $16.5 million net
gain on the settlement of a lawsuit in last year's first quarter, operating
income in the first quarter of 2000 would have increased 11.0% over the
first quarter of 1999. Higher operating income at Con-Way, Emery and Menlo
for the 2000 first quarter was partially offset by lower operating income
from the Priority Mail operations.
Other net expenses in the first quarter of 2000 decreased 35.2% from
the first quarter of last year due primarily to a $2.6 million net gain
from the sale of securities in March 2000 and lower interest expense.
Interest expense declined 10.2% due primarily to the refinancing of long-
term debt and higher capitalized interest. The first quarter of last year
included interest expense on $117.7 million of 9 1/8% Notes, which were
repaid in August 1999 in part with $90.0 million of lower-interest rate
borrowings under unsecured lines of credit. In March 2000, we issued $200.0
million of new 8 7/8% Notes, of which $152.0 million of proceeds were used
to repay short-term and long-term borrowings outstanding under lines of
credit.
The effective tax rate for the first quarter of 2000 was 42.5%
compared to 43.5% in the same period last year. The reduction was due
primarily to tax planning strategies and higher estimated income in 2000.
Con-Way Transportation Services
Con-Way's revenue in the first three months of 2000 increased 17.8%
over the same period last year due primarily to higher tonnage (weight) and
revenue per hundredweight (yield), and to a lesser extent, fuel surcharges.
In the first quarter of 2000, total and less-than-truckload (LTL)
weight for Con-Way's regional carriers increased 9.3% and 9.2%,
respectively, over the first quarter of 1999. The higher weight reflects
continued growth in core regional service and inter-regional joint
services. Net revenue per hundredweight in the first quarter of 2000
increased 7.3% over the same period last year due primarily to higher rates
PAGE 13
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 first quarter of 2000 grew 7.7% over
the first quarter of 1999. The increase was due primarily to higher
revenue, increased load factor, and continued emphasis on operating
efficiencies, partially offset by higher pension expense. Higher diesel
fuel costs in the first quarter of 2000 were substantially mitigated by a
fuel surcharge implemented by Con-Way in August 1999. The first quarters
of 2000 and 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
In the first quarter of 2000, Emery's revenue increased 13.6% over the
same period last year due primarily to higher international airfreight
revenue and, to a lesser extent, increased revenue from an Express Mail
contract with the U.S. Postal Service and fuel surcharges.
International airfreight revenue grew 25.1% over the 1999 first
quarter due primarily to a 20.9% increase in pounds transported (weight or
freight volume) and 3.5% higher revenue per pound (yield). Freight volume
and yield in the 2000 first quarter were favorably affected by improved
economic conditions in the international markets served by Emery.
North American airfreight revenue for the first quarter of 2000 was
essentially flat, increasing 0.6% over the same quarter last year due
primarily to a 5.1% increase in revenue per pound (yield) partially offset
by a 4.3% decline in weight. Improved revenue per pound in the 2000 first
quarter 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.
Emery's operating income in the first quarter of 2000 more than
doubled from the same period last year, increasing to $7.4 million from
$3.6 million due primarily to higher airfreight revenue. Operating income
in the first quarter of 2000 was adversely affected by aircraft maintenance
costs on aircraft during the implementation of the service initiatives
discussed below. Higher jet fuel costs in the first quarter 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 recent reconfiguration of Emery's hub
sortation center 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.
Menlo Logistics
Menlo's revenue in the first quarter of 2000 exceeded the same period
last year by 30.7% due primarily to higher revenue from contracts that were
initially entered into prior to the first quarter of last year and
consulting fees earned on contracts entered into in the first quarter of
PAGE 14
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, net of purchased
transportation, increased 31.9% to $65.0 million in the first quarter of
2000 from $49.6 million in the first quarter of last year.
Operating income for Menlo in the first three months of 2000 increased
67.6% over the same period last year. Higher operating income was
primarily attributable to increased revenue.
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 was a
net gain on the settlement of a lawsuit in January 1999.
The Other segment's revenue of $141.1 million in the first quarter of
2000 increased 6.9% over the same quarter of 1999 due primarily to first-
quarter 2000 revenue of $135.2 million from the Priority Mail operation, a
14.4% increase over the first quarter of 1999. Higher Priority Mail
revenue was partially offset by loss of revenue from VantageParts following
the sale of its assets in May 1999.
In the first quarter of 2000, operating income of $311,000 for the
Other segment decreased from $20.5 million in the first quarter last year.
The 1999 first quarter included a $16.5 million net gain from a lawsuit
settled in January 1999 and operating income of $3.5 million 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.
PAGE 15
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.
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 $20.3 million of
unbilled revenue in the first quarter of 2000 and has recognized $144.1
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.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
In the first quarter of 2000, cash and cash equivalents decreased
$34.8 million to $111.4 million. Net capital expenditures of $56.5 million
and $26.7 million of net cash used in operating activities were funded with
$51.0 million generated from financing activities and a reduction in cash.
Cash provided by net income before depreciation, amortization and
deferred taxes in the first quarter of 2000 was more than offset by
increases in receivables and prepaid expenses and a decrease in accrued
liabilities, contributing to a net use of $26.7 million of cash in
operating activities.
Investing activities in the first quarter of 2000 used $5.5 million of
cash less than in the first quarter of 1999. Capital expenditures of $59.7
million in the first three months of 2000 increased $3.9 million over the
same period last year. For the first three months of 2000, Con-Way spent
PAGE 16
$26.9 million of cash primarily on revenue equipment and infrastructure and
Emery spent $18.3 million of cash primarily on infrastructure. Software
expenditures in the 2000 first quarter decreased $6.1 million from the same
period last year.
Financing activities in the first three months of 2000 provided $51.0
million compared to a $26.1 million use for the same period last year. As
discussed above under "Results of Operations", 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 a total of $152.0 million of
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 it's cost of operating under the
contract.
We maintain a $350 million unsecured credit facility and a
supplemental $100 million unsecured credit facility. At March 31, 2000, we
had no borrowings outstanding under the unsecured credit facilities.
The $350 million facility is also available for issuance of letters of
credit. Under that facility, outstanding letters of credit totaled $52.5
million at March 31, 2000. Available capacity under the $350 million
facility and the supplemental line of credit was $397.5 million at March
31, 2000.
At March 31, 2000 we also had $65.0 million of uncommitted lines with
$53.7 million in letters of credit outstanding, leaving $11.3 million of
additional short-term borrowing availability. Under other unsecured
facilities, $12.9 million in letters of credit were outstanding at March
31, 2000.
Our ratio of total debt to capital increased to 32.6% at March 31,
2000, from 30.5% at December 31, 1999, primarily due to the March 2000
issuance of the $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 or liability
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.
PAGE 17
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 quarter 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 March
31, 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 March 31, 2000, we estimate
that the net payments under the 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.
As of April 30, 2000, the change in the fair value of these interest rate
swaps given a hypothetical 10% change in interest rates would be
approximately $12 million.
Since December 31, 1999, there have been no significant changes in our
foreign currency risk and commodity price risk.
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.
PAGE 18
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. 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;
labor matters, including changes in labor costs, renegotiations of labor
contracts and the risk of work stoppages or strikes; changes in
governmental regulation; environmental and tax matters, including the
aviation excise tax, aircraft maintenance, and other tax matters discussed
herein; Y2K matters; 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 19
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 has begun 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 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3 CNF Transportation Inc. By-laws, as amended May 1, 2000
27 Financial Data Schedule
99(a) Computation of Ratios of Earnings to Fixed Charges --
the ratios of earnings to fixed charges were 3.6 and
3.9 for the three months ended March 31, 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 3.4 and 3.8 for the three months ended
March 31, 2000 and 1999, respectively.
(b) Reports on Form 8-K
On March 8, 2000, the Registrant filed a Report on Form 8-K in
connection with the issuance of $200 million aggregate principal
amount of its 8 7/8% Notes due 2010 (the "Notes") under the
Company's shelf registration statement on Form S-3
(File No. 333-56667). In the Report on Form 8-K, the Company
filed an Underwriting Agreement, Indenture and form of Note
executed in connection with the previously announced public
offering of the Notes.
PAGE 20
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 10, 2000 /s/Chutta Ratnathicam
Chutta Ratnathicam
Senior Vice President and
Chief Financial Officer
Exhibit 3
CNF TRANSPORTATION INC.
BYLAWS
As Amended May 1, 2000
ARTICLE I
OFFICES
SECTION 1. Registered Office. The registered office of the Corporation in
the State of Delaware shall be in the City of Wilmington, County of New
Castle.
SECTION 2. Other Offices. The Corporation shall also have and maintain a
principal office or place of business at such place as may be fixed by the
Board of Directors, and may also have other offices at such other places
both within and without the State of Delaware as the Board of Directors may
from time to time determine or as the business of the Corporation may
require.
ARTICLE II
STOCKHOLDERS' MEETINGS
SECTION 1. Place of Meetings. Meetings of the stockholders of the
Corporation shall be held at such place, either within or without the State
of Delaware, as may be designated from time to time by the Board of
Directors or, if not so designated, then at the principal office of the
Corporation.
SECTION 2. Annual Meetings. The annual meetings of the stockholders of the
Corporation for the purpose of election of directors and for such other
business as may lawfully come before the meetings shall be held on a date
and at a time designated from time to time by the Board of Directors. No
business may be transacted at an annual meeting of stockholders, other than
business that is either (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors
(or any duly authorized committee thereof), (b) otherwise properly brought
before the annual meeting by or at the direction of the Board of Directors
(or any duly authorized committee thereof) or (c) otherwise properly
brought before the annual meeting by any stockholder of the Corporation (i)
who is a stockholder of record on the date of the giving of the notice
provided for in this Section 2 and on the record date for the determination
of stockholders entitled to vote at such annual meeting and (ii) who
complies with the notice procedures set forth in this Section 2.
In addition to any other applicable requirement, for business to be
properly brought before an annual meeting by a stockholder, such
stockholder must have given timely notice thereof in proper written form to
the Secretary of the Corporation.
To be timely, a stockholders notice to the Secretary must be delivered to
or mailed and received at the principal executive offices of the
Corporation not less than ninety (90) days nor more than one hundred twenty
(120) days prior to the anniversary date of the immediately preceding
annual meeting of stockholders; provided, however, that in the event that
the annual meeting is called for a date that is not within thirty (30) days
before or after such anniversary date, notice by the stockholder in order
to be timely must be so received not later than the close of business on
the tenth (10th) day following the day on which notice of the date of the
annual meeting was mailed or public disclosure of the date of the annual
meeting was made, whichever first occurs.
To be in proper written form, a stockholders notice to the Secretary must
set forth as to each matter such stockholder proposes to bring before this
annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and record address of such
stockholder, (iii) the class or series and number of shares of capital
stock of the Corporation which are owned beneficially or of record by such
stockholder, (iv) a description of all arrangements or understandings
between such stockholder and any other person or persons (including their
names) in connection with the proposal of such business by such stockholder
and any material interest of such stockholder in business and (v) a
representation that such stockholder intends to appear in person or by
proxy at the annual meeting to bring such business before the meeting.
Notwithstanding anything in the Bylaws to the contrary, no business shall
be conducted at the annual meeting except in accordance with the procedures
set forth in this Section 2.
The Chairman of an annual meeting shall, if the facts warrant, determine
and declare to the meeting that business was not properly brought before
the meeting in accordance with the provisions of this Section 2, and if he
should so determine, he shall so declare to the meeting and any such
business shall not be transacted.
SECTION 3. Special Meetings. Special meetings of the stockholders of the
Corporation may be called, for any purpose or purposes, by the Chief
Executive Officer or the Board of Directors at any time. Upon written
request of any stockholder or stockholders holding in the aggregate a
majority of the voting power of all stockholders, the Secretary shall call
a meeting of stockholders to be held not less than thirty (30) and not more
than ninety (90) days after the receipt of the request, on such date and at
such time and place as may be designated by the Board of Directors. If the
Secretary, within forty-five (45) days following receipt of the request,
shall neglect or refuse to call the meeting in accordance with the
provisions of the preceding sentence, the stockholder or stockholders
making the request may do so.
SECTION 4. Notice of Meetings. Except as otherwise provided by law or the
Certificate of Incorporation, written notice of each meeting of
stockholders shall be given not less than ten nor more than 50 days before
the date of the meeting to each stockholder entitled to vote thereat,
directed to his address as it appears upon the books of the Corporation;
said notice to specify the place, date and hour and purpose or purposes of
the meeting. When a meeting is adjourned to another time or place, notice
need not be given of the adjourned meeting if the time and place thereof
are announced at the meeting at which the adjournment is taken unless the
adjournment is for more than thirty days, or unless after the adjournment a
new record date is fixed for the adjourned meeting, in which event a notice
of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting. Notice of the time, place and purpose of
any meeting of stockholders may be waived in writing, either before or
after such meeting, and will be waived by any stockholder by his attendance
thereat in person or by proxy. Any stockholder so waiving notice of such
meeting shall be bound by the proceedings of any such meeting in all
respects as if due notice thereof had been given.
SECTION 5. Quorum. At all meetings of stockholders, except where otherwise
provided by statute or by the Certificate of Incorporation, or by the
Bylaws, the presence, in person or by proxy duly authorized, of the holders
of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. Shares, the voting of
which at said meeting has been enjoined, or which for any reason cannot be
lawfully voted at such meeting shall not be counted to determine a quorum
at said meeting. In the absence of a quorum any meeting of stockholders may
be adjourned, from time to time, by vote of the holders of a majority of
the shares represented thereat, but no other business shall be transacted
at such meeting. At such adjourned meeting at which a quorum is present or
represented any business may be transacted which might have been transacted
at the original meeting. The stockholders present at a duly called or
convened meeting, at which a quorum is present, may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum. Except as otherwise provided by
law, the Certificate of Incorporation or these Bylaws, all action taken by
the holders of a majority of the voting power represented at any meeting at
which a quorum is present shall be valid and binding upon the Corporation.
SECTION 6. Voting Rights. Except as otherwise provided by law, only persons
in whose names shares entitled to vote stand on the stock records of the
Corporation on the record date for determining the stockholders entitled to
vote at said meeting shall be entitled to vote at such meeting. Shares
standing in the names of two or more persons shall be voted or represented
in accordance with the determination of the majority of such persons, or,
if only one of such persons is present in person or represented by proxy,
such person shall have the right to vote such shares and such shares shall
be deemed to be represented for the purpose of determining a quorum. Every
person entitled to vote or execute consents shall have the right to do so
either in person or by an agent or agents authorized by a written proxy
executed by such person or his duly authorized agent, which proxy shall be
filed with the Secretary of the Corporation at or before the meeting at
which it is to be used. Said proxy so appointed need not be a stockholder.
No proxy shall be voted on after three years from its date unless the proxy
provides for a longer period.
SECTION 7. List of Stockholders. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least ten (10) days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at said meeting, arranged in alphabetical order, showing
the address of and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for
a period of at least ten (10) days prior to the meeting, either at a place
within the city where the meeting is to be held and which place shall be
specified in the notice of the meeting, or, if not specified, at the place
where said meeting is to be held, and the list shall be produced and kept
at the time and place of meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
SECTION 8. Action Without Meeting. Whenever the vote of stockholders at a
meeting thereof is required or permitted to be taken in connection with any
corporate action by any provisions of the statutes or of the Certificate of
Incorporation, the meeting and vote of stockholders may be dispensed with:
(1) if all of the stockholders who would have been entitled to vote upon
the action if such meeting were held shall consent in writing to such
corporate action being taken; or (2) if the Certificate of Incorporation
authorizes the action to be taken with the written consent of the holders
of less than all of the stock who would have been entitled to vote upon the
action if a meeting were held, then on the written consent of the
stockholders having not less than such percentage of the number of votes as
may be authorized in the Certificate of Incorporation; provided that in no
case shall the written consent be by the holders of stock having less than
the minimum percentage of the vote required by statute for the proposed
corporate action, and provided that prompt notice must be given to all
stockholders of the taking of corporate action without a meeting and by
less than unanimous written consent.
SECTION 9. Rules of Conduct. The Board of Directors of the Company shall be
entitled to make such rules or regulations for the conduct of meetings of
stockholders as it shall deem necessary, appropriate or convenient. Subject
to such rules and regulations of the Board of Directors, if any, the
chairman of the meeting shall have the right and authority to prescribe
such rules, regulations and procedures and to do all such acts as, in the
judgment of such chairman, are necessary, appropriate or convenient for the
proper conduct of the meeting, including, without limitation, establishing
an agenda or order of business for the meeting, rules and procedures for
maintaining order at the meeting and the safety of those present,
limitations on participation in such meeting to stockholders of record of
the Corporation and their duly authorized and constituted proxies, and such
other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on
the time allotted to questions or comments by participants and regulation
of the opening and closing of the polls for balloting on matters which are
to be voted on by ballot. Unless, and to the extent, determined by the
Board of Directors or the chairman of the meeting, meetings of shareholders
shall not be required to be held in accordance with rules of parliamentary
procedure.
ARTICLE III
DIRECTORS
SECTION 1. Powers. The powers of the Corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors.
SECTION 2. Number, Qualifications and Classification. (a) A majority of the
directors holding office may by resolution increase or decrease the number
of directors, provided, however, that the number thereof shall never be
less than twelve nor greater than fifteen. A director need not be a
stockholder. The directors shall be divided into three classes, designated
Class I, Class II and Class III, as nearly equal in number as the then
total number of directors permits. At the 1985 annual meeting of
stockholders, Class I directors shall be elected for a one-year term, Class
II directors for a two-year term and Class III directors for a three-year
term. At each succeeding annual meeting of stockholders beginning in 1986,
successors to the class of directors whose term expires at that annual
meeting shall be elected for a three-year term. If the number of directors
is changed, any increase or decrease shall be apportioned among the classes
so as to maintain the number of directors in each class as nearly equal as
possible, and any additional directors of any class elected to fill a
vacancy resulting from an increase in such class shall hold office for a
term that shall coincide with the remaining term of that class, but in no
case will a decrease in the number of directors shorten the term of any
incumbent director. A director shall hold office until the annual meeting
for the year in which his term expires and until his successor shall be
elected and shall qualify, subject, however, to prior death, resignation,
retirement, disqualification or removal from office. Any vacancy on the
Board of Directors, including any vacancy that results from an increase in
the number of directors, may be filled by a majority of the Board of
Directors then in office, although less than a quorum, or by a sole
remaining director. Any director elected to fill a vacancy shall have the
same remaining term as that of his predecessor.
(b) Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation shall have
the right, voting separately by class or series, to elect directors at an
annual or special meeting of stockholders, the election, term of office,
filling of vacancies and other features of such directorships shall be
governed by the terms of the Certificate of Incorporation applicable
thereto, and such directors so elected shall not be divided into classes
pursuant to these Bylaws unless expressly provided by such terms.
(c) Any amendment, change or repeal of this Section 2 of Article III, or
any other amendment to these Bylaws that will have the effect of permitting
circumvention of or modifying this Section 2 of Article III, shall require
the favorable vote, at a stockholders' meeting, of the holders of at least
80 of the then-outstanding shares of stock of the Corporation entitled to
vote.
SECTION 3. "Intentionally Omitted."
SECTION 4. Vacancies. A vacancy in the Board of Directors shall be deemed
to exist in the case of the death, resignation or removal of any director,
or if the number of directors constituting the whole Board be increased, or
if the stockholders, at any meeting of stockholders at which directors are
to be elected, fail to elect the number of directors then constituting the
whole Board.
SECTION 5. Resignations. Any director may resign at any time by delivering
his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the
Secretary or at the pleasure of the Board of Directors. If no such
specification is made, it shall be deemed effective at the pleasure of the
Board of Directors.
SECTION 6. Meetings. (a) The annual meeting of the Board of Directors shall
be held at such time and place as the Board may determine. No notice of the
annual meeting of the Board of Directors shall be necessary if such meeting
is held immediately after the annual stockholders meeting and at the place
where such stockholders meeting is held. If the annual meeting of the Board
of Directors is held on a different date, or at a different time or place,
notice of the date, time and place of such annual meeting of the Board of
Directors shall be furnished to each director in accordance with the
procedures of Article III, Section 6(c) of these Bylaws. The annual meeting
of the Board of Directors shall be held for the purpose of electing
officers and transacting such other business as may lawfully come before
it.
(b) Regular meetings of the Board of Directors shall be held at such place
within or without the State of Delaware, and at such times as the Board may
from time to time determine, and if so determined no notice thereof need be
given.
(c) Special meetings may be called at any time and place within or without
the State of Delaware upon the call of the Chief Executive Officer or
Secretary or any two directors. Notice of the date, time, place and
purposes of each special meeting, and notice of the date, time and place of
each annual and regular meeting for which notice is required to be given,
shall be sent by mail at least seventy-two hours in advance of the time of
the meeting, or by telegram at least forty-eight hours in advance of the
time of the meeting, or by facsimile at least twenty-four hours in advance
of the time of the meeting, to the address or facsimile number (as
applicable) of each director. Notice of any special meeting may be waived
in writing at any time before or after the meeting and will be waived by
any director by attendance thereat.
SECTION 7. Quorum and Voting. (a) A majority of the whole Board of
Directors shall constitute a quorum for all purposes, provided, however, at
any meeting whether a quorum be present or otherwise, a majority of the
directors present may adjourn from time to time and place to place, within
or without the State of Delaware, without notice other than by announcement
at the meeting.
(b) At each meeting of the Board at which a quorum is present all questions
and business shall be determined by a vote of a majority of the directors
present, unless a different vote be required by law or by the Certificate
of Incorporation.
SECTION 8. Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all members of the
Board or of such committee, as the case may be, consent thereto in writing,
and such writing or writings are filed with the minutes of proceedings of
the Board or committee.
SECTION 9. Fees and Compensation. Directors shall not receive any stated
salary for their services as directors, but, by resolution of the Board,
compensation in a reasonable amount may be fixed by the Board, including,
without limitation, compensation in the form of an annual retainer, a fee
for each Board or Board Committee meeting attended, reimbursement for
expenses of attendance at any such meeting, or any combination of any of
the foregoing. Nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity as an officer,
agent, employee, or otherwise, and receiving compensation therefor.
SECTION 10. Maximum Age of Directors. Directors who have attained the age
of 72 years shall be ineligible to stand for election or reelection as a
director. Except as may otherwise be determined by the Board of Directors,
a director who has attained the age of 72 years whose term as a director
continues beyond the annual meeting of shareholders next following
attainment of 72 years shall retire and resign as a director at the first
directors meeting following such annual meeting of shareholders. Unless
otherwise determined by the Board of Directors in accordance with the
preceding sentence, for this purpose such resignation will be automatic and
need not meet the requirements for resignation set forth in Section 5 of
this Article III.
SECTION 11. Nominations of Persons for Election to the Board of Directors.
Only persons who are nominated in accordance with the following procedures
set forth in these Bylaws shall be eligible for election as directors of
the Corporation. Nominations of persons for election to the Board of
Directors may be made at any annual meeting of stockholders (a) by or at
the direction of the Board of Directors (or any duly authorized committee
thereof) or (b) by any stockholder of the Corporation (i) who is a
stockholder of record on the date of the giving of the notice provided for
in this Section 11 and on the record date for the determination of
stockholders entitled to vote and (II) who complies with the notice
procedures set forth in this Section 11.
In addition to any other applicable requirements, for a nomination to be
made by a stockholder, such stockholder must have given timely notice
thereof in proper written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be delivered to
or mailed and received at the principal executive offices of the
Corporation not less than ninety (90) days nor more than one hundred and
twenty (120) days prior to the anniversary date of the immediately
preceding annual meeting of stockholders; provided, however, that in the
event that the annual meeting is called for a date that is not within
thirty (30) days before or after such anniversary date, notice by the
stockholder in order to be timely must be so received not later than the
close of business on the tenth (10th) day following the day on which notice
of the date of the annual meeting was mailed or public disclosure of the
date of the annual meeting was made, whichever first occurs.
To be in proper written form, a stockholders notice to the Secretary must
set forth (a) as to each person whom the stockholder proposes to nominate
for election as a director (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or
employment of the person, (iii) the class or series and number of shares of
capital stock of the Corporation which are owned beneficially or of record
by the person and (iv) any other information relating to the person that
would be required to be disclosed in a proxy statement or other filings
required to be made in connection with solicitations of proxies for
election of directors pursuant to Section 14 of the Securities Exchange Act
of 1934, as amended (the |Exchange Act|), and the rules and regulations
promulgated thereunder; and (b) as to the stockholder giving the notice (i)
the name and record address of such stockholder, (ii) the class or series
and number of shares of capital stock of the Corporation which are owned
beneficially or of record by such stockholder, (iii) a description of all
arrangements or understandings between such stockholder and each proposed
nominee and any other person or persons (including their names) pursuant to
which the nomination(s) are to be made by such stockholder, (iv) a
representation that such stockholder intends to appear in person or by
proxy at the annual meeting to nominate the persons named in its notice and
(v) any other information relating to such stockholder that would be
required to be disclosed in a proxy statement or other filings required to
be made in connection with solicitations of proxies for election of
directors pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder. Such notice must be accompanied by a
written consent of each proposed nominee to be named as a nominee and to
serve as a director if elected. The Corporation may require any proposed
nominee to furnish any other information that may reasonably be required by
the Corporation to determine the qualifications of such proposed nominee to
serve as a director of the Corporation. No person shall be eligible for
election as a director of the Corporation unless nominated in accordance
with the procedures set forth herein. These provisions shall not apply to
nomination of any persons entitled to be separately elected by holders of
Preferred Stock.
The Chairman of the annual meeting shall, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance
with the foregoing procedures, and if he should so determine, he shall so
declare to the meeting and the defective nomination shall be disregarded.
ARTICLE IV
OFFICERS AND COMMITTEES
SECTION 1. Officers Designated. The executive officers of the Corporation
shall be chosen by the Board of Directors and shall be the Chairman of the
Board, the President, one or more Vice Presidents, the Secretary, one or
more Assistant Secretaries, the Treasurer, one or more Assistant
Treasurers, and such other executive officers as the Board of Directors
from time to time may designate. The Board of Directors shall designate
either the Chairman of the Board or the President as the Chief Executive
Officer of the Corporation. The officer so designated shall have charge of
the actual conduct and operation of the business of the Corporation,
subject to the control and direction of the Board of Directors. The Chief
Executive Officer shall, with the consent of the Board of Directors, assign
such additional titles to Vice Presidents as he shall deem appropriate and
designate the succession of officers to act in his stead in his absence or
disability. He may appoint additional Vice Presidents who shall not,
however, be executive officers. He shall assign all duties not otherwise
specified by these Bylaws to all officers and employees of the Corporation.
SECTION 2. Election, Qualification, Tenure of Office, and Duties of
Executive Officers and Other Officers. (a) At the annual meeting of the
Board of Directors following their election by the stockholders, the
directors shall elect all executive officers of the Corporation. Any one
person may hold any number of offices of the Corporation at any one time
unless specifically prohibited therefrom by law. The Chairman of the Board
shall be a director but no other officer need be a director.
(b) Each executive officer shall hold office from the date of his election
either until the date of his voluntary resignation, or death, or until the
next annual meeting of the Board of Directors and until a successor shall
have been duly elected and qualified, whichever shall first occur; provided
that any such officer may be removed by the Board of Directors whenever in
its judgment the best interest of the Corporation will be served thereby,
and the Board may elect another in the place and stead of the person so
removed.
(c) Chairman of the Board: The Chairman of the Board shall preside at all
meetings of the stockholders, of the Board of Directors, and of the
Executive Committee. He shall have the responsibility of keeping the
directors informed on all policy matters, and shall have such other powers
and perform such other duties as may be prescribed by the Board.
(d) President: The President shall, in the absence of the Chairman of the
Board preside at all meetings of the stockholders, the Board of Directors
and the Executive Committee. He shall exercise all of the powers and
discharge all of the other duties of the Chairman of the Board in the
absence of the Chairman of the Board. He shall perform such other duties as
may be prescribed by the Chairman of the Board.
(e) Vice Presidents: The Vice Presidents shall have such duties and have
such other powers as shall be prescribed by the Chief Executive Officer.
Such Vice President as may be designated by the Board of Directors or the
Chairman of the Board shall preside at all meetings of the stockholders.
(f) Secretary: The Secretary shall record all the proceedings of the
meetings of the Corporation and of the directors in a book or books kept
for that purpose. He shall attend to the giving and serving of all notices
on behalf of the Corporation. He shall have the custody of the corporate
seal and affix the same to such instruments as may be required. He shall
have such other powers and perform such other duties as may be prescribed
by the Chief Executive Officer.
(g) Assistant Secretaries: Assistant Secretaries shall assist the Secretary
in the performance of his duties and any one of the Assistant Secretaries
may perform all of the duties of the Secretary if at any time he shall be
unable to act. Assistant Secretaries shall have such other powers and
perform such other duties as may be prescribed by the Chief Executive
Officer.
(h) Treasurer: The Treasurer shall have charge of the custody, control and
disposition of all funds of the Corporation and shall account for same. He
shall have such other powers and perform such other duties as may be
prescribed by the Chief Executive Officer.
(i) Assistant Treasurers: Assistant Treasurers shall assist the Treasurer
in the performance of his duties and any one of the Assistant Treasurers
may perform all of the duties of the Treasurer if at any time he shall be
unable to act. Assistant Treasurers shall have such other powers and
perform such other duties as may be prescribed by the Chief Executive
Officer.
SECTION 3. Committees. (a) Executive Committee. The Board of Directors
shall, by resolution passed by a majority of the whole Board, appoint an
Executive Committee of not less than three members, all of whom shall be
directors. The Executive Committee, to the extent permitted by law, shall
have and may exercise when the Board of Directors is not in session all
powers of the Board in the management of the business and affairs of the
Corporation and may authorize the seal of the Corporation to be affixed to
all papers which may require it. It shall be the duty of the Secretary of
the Corporation to record the minutes of all actions of the Executive
Committee.
(b) Other Committees. The Board of Directors may, by resolution passed by a
majority of the whole Board, from time to time appoint such other
committees as may be permitted by law. The Chief Executive Officer may
appoint such other committees as he finds necessary to the conduct of the
Corporation's business. Such other committees appointed by the Board of
Directors or the Chief Executive Officer shall have such powers and perform
such duties as may be prescribed by the body or person appointing such
committee.
(c) Term; Number of Committee Members. The members of all committees of the
Board of Directors shall serve a term coexistent with that members
remaining term as a member of the Board of Directors, or until such time as
the Board of Directors shall replace that member on such committee or ask
that member to accept another committee assignment in its stead. The Board,
subject to the provisions of subsection (a) and (b) of this Section 3, may
at any time increase or decrease the number of members of a committee or
terminate the existence of a committee; provided, that no committee, while
it exists, shall consist of less than three members. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation, but the Board may at any time for any reason remove any
individual committee member and the Board may fill any committee vacancy
created by death, resignation, removal or increase in the number of members
of the committee. The Board of Directors may designate one or more
directors as alternate members of any committee, to replace any absent or
disqualified member at any meeting of the committee. If the qualified
members of a committee, in attendance at a committee meeting, believe that
the absence or disqualification of one or more members of that committee
seriously impairs the function of that committee, such remaining qualified
members, whether or not constituting a quorum, may by unanimous action
appoint another member of the Board of Directors to act as a committee
member at that meeting.
(d) Notice of Committee Meetings. Notice of the date, time and place of
each committee meeting shall be sent to each committee member by mail at
least seventy-two hours in advance of the time of the meeting, or by
telegram at least forty-eight hours in advance of the time of the meeting,
or by facsimile at least twenty-four hours in advance of the time of the
meeting, to the address or facsimile number (as applicable) of each
committee member.
ARTICLE V
CAPITAL STOCK
SECTION 1. Form and Execution of Certificates. Certificates for the shares
of stock of the Corporation shall be in such form as are consistent with
the Certificate of Incorporation and applicable law. Every holder of stock
in the Corporation shall be entitled to have a certificate signed by, or in
the name of the Corporation by, the Chairman of the Board, President or any
Vice President and by the Treasurer or Assistant Treasurer or the Secretary
or Assistant Secretary, certifying the number of shares owned by him in the
Corporation. Where such certificate is countersigned by a transfer agent
other than the Corporation or its employee, or by a registrar other than
the Corporation or its employee, any other signature on the certificate may
be a facsimile. In case any officer, transfer agent, or registrar who has
signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent, or registrar before
such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent, or registrar at the
date of issue.
SECTION 2. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been
lost or destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost or destroyed certificate
or certificates, or his legal representative, to advertise the same in such
manner as it shall require and/or to give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have
been lost or destroyed.
SECTION 3. Transfers. Transfers of record of shares of the capital stock of
the Corporation shall be made upon its books by the holders thereof, in
person or by attorney duly authorized, and upon the surrender of a
certificate or certificates for a like number of shares, properly endorsed
or accompanied by a properly endorsed stock power.
SECTION 4. Fixing Record Dates. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of
stock or for the purpose of any other lawful action, the Board of Directors
may fix, in advance, a record date, which shall not be more than sixty nor
less than ten days before the date of such meeting, nor more than sixty
days prior to any other action. If no record date is fixed: (1) the record
date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held; and (2) the record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the
adjourned meeting.
SECTION 5. Registered Stockholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall
not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not it
shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
ARTICLE VI
OTHER SECURITIES OF THE CORPORATION
All bonds, debentures and other corporate securities of the Corporation,
other than stock certificates, may be signed by the Chairman of the Board,
the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed
thereon or a facsimile of such seal imprinted thereon and attested by the
signature of the Secretary or an Assistant Secretary, or the Treasurer or
an Assistant Treasurer, or such other person as may be authorized by the
Board of Directors; provided, however, that where any such bond, debenture
or other corporate security shall be authenticated by a trustee under an
indenture pursuant to which such bond, debenture or other corporate
securities shall be issued, the signatures of the persons signing and
attesting the corporate seal on such bond, debenture or other corporate
security may be the imprinted facsimile of the signatures of such persons.
Interest coupons appertaining to any such bond, debenture or other
corporate security, authenticated by a trustee as aforesaid, shall be
signed by the Treasurer or an Assistant Treasurer of the Corporation, or
such other person as may be authorized by the Board of Directors, or bear
imprinted thereon the facsimile signature of such person. In case any
person who shall have signed or attested any bond, debenture or other
corporate security, or whose facsimile signature shall appear thereon or on
any such interest coupon, shall have ceased to be an officer before the
bond, debenture or other corporate security so signed or attested shall
have been delivered, such bond, debenture or other corporate security
nevertheless may be adopted by the Corporation and issued and delivered as
though the person who signed the same or whose facsimile signature shall
have been used thereon had not ceased to be such officer of the
Corporation.
ARTICLE VII
SECURITIES OWNED BY THE CORPORATION
Power to Vote. Unless otherwise ordered by the Board of Directors, the
Chief Executive Officer, or any officer designated in writing by the Chief
Executive Officer, shall have full power and authority in the name and on
behalf of the Corporation, to vote and to act either in person or by proxy
at any meeting of the holders of stock or securities in any corporation
upon and in respect of any securities therein which the Corporation may
hold, and shall possess and may exercise in the name of the Corporation any
and all rights and powers incident to the ownership of such stock or
securities which, as the owner thereof, the Corporation shall possess and
might exercise including the right to give written consents in respect to
action taken or to be taken. The Board of Directors may from time to time
confer like powers upon any other person or persons.
ARTICLE VIII
CORPORATE SEAL
The corporate seal shall consist of a die bearing the inscription, CNF
Transportation Inc. Corporate Seal Delaware.
ARTICLE IX
AMENDMENTS
These Bylaws may be repealed, altered or amended or new Bylaws adopted by
written consent of stockholders in the manner authorized by Section 8 of
Article II or at any meeting of the stockholders, either annual or special,
by the affirmative vote of a majority of the stock entitled to vote at such
meeting. The Board of Directors shall also have the authority to repeal,
alter or amend these Bylaws or adopt new Bylaws by unanimous written
consent or by the affirmative vote of a majority of the whole Board at any
annual, regular, or special meeting subject to the power of the
stockholders to change or repeal such Bylaws.
ARTICLE X
MISCELLANEOUS
SECTION 1. Definitions. As used in these Bylaws and wherever the context
shall require, the word |person| shall include associations, partnerships
and corporations as well as individuals; words in the masculine gender
shall include the feminine and associations, partnerships and corporations;
words in the singular shall include the plural and words in the plural may
mean only the singular, and words |additional compensation| shall mean and
include all bonus, profit sharing, retirement, deferred compensation, and
all other additional compensation plans or arrangements affecting persons
individually or as a group.
SECTION 2. Notices. Whenever, under any provisions of these Bylaws, notice
is required to be given to any stockholder, the same shall be given in
writing, timely and duly deposited in the United States Mail, postage
prepaid, and addressed to his last known post office address as shown by
the stock record of the Corporation or its transfer agent. Any notice
required to be given to any director may be given by the method hereinabove
stated, by personal delivery, or by telegram, except that such notice,
other than one which is delivered personally, shall be sent to such address
as such director shall have filed in writing with the Secretary of the
Corporation, or, in the absence of such filing, to the last known post
office address of such director. If no address of a stockholder or director
be known, such notice may be sent to the principal office of the
Corporation. An affidavit of mailing, executed by a duly authorized and
competent employee of the Corporation or its transfer agent appointed with
respect to the class of stock affected, specifying the name and address or
the names and addresses of the stockholder or stockholders, director or
directors, to whom any such notice or notices was or were given, and the
time and method of giving the same, shall be conclusive evidence of the
statements therein contained. All notices given by mail, as above provided,
shall be deemed to have been given as at the time of mailing and all
notices given by telegram shall be deemed to have been given as at the
sending time recorded by the telegraph company transmitting the same. It
shall not be necessary that the same method of giving be employed in
respect of all directors, but one permissible method may be employed in
respect of any one or more, and any other permissible method or methods may
be employed in respect of any other or others.
The period or limitation of time within which any stockholder may exercise
any option or right, or enjoy any privilege or benefit, or be required to
act, or within which any directors may exercise any power or right, or
enjoy any privilege, pursuant to any notice sent him in the manner above
provided, shall not be affected or extended in any manner by the failure of
such stockholder or such director to receive such notice. Whenever any
notice is required to be given under the provisions of the statutes or of
the Certificate of Incorporation, or of these Bylaws, a waiver thereof in
writing signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed equivalent
thereto. Whenever notice is required to be given, under any provision of
law or of the Certificate of Incorporation or Bylaws of the Corporation, to
any person with whom communication is unlawful, the giving of such notice
to such person shall not be required and there shall be no duty to apply to
any governmental authority or agency for a license or permit to give such
notice to such person. Any action or meeting which shall be taken or held
without notice to any such person with whom communication is unlawful shall
have the same force and effect as if such notice had been duly given. In
the event that the action taken by the Corporation is such as to require
the filing of a certificate under any provision of the Delaware General
Corporation Law, the certificate shall state, if such is the fact and if
notice is required, that notice was given to all persons entitled to
receive notice except such persons with whom communication is unlawful.
SECTION 3. Indemnification of Officers, Directors, Employees and Agents.(a)
Right to Indemnification. Each person who was or is made a party or is
threatened to be made a party to or is involved in any threatened, pending,
or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (hereinafter a |Proceeding|), by reason of
the fact that he, or a person of whom he is the legal representative, is or
was a director, officer, employee, or agent of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee,
or agent of another corporation or of a partnership, joint venture, trust,
or other enterprise, including service with respect to employee benefit
plans, whether the basis of the Proceeding is alleged action in an official
capacity as a director, officer, employee, or agent or in any other
capacity while serving as a director, officer, employee, or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to
the extent that such amendment permits the Corporation to provide broader
indemnification rights than were permitted prior to amendment) against all
expenses, liability, and loss (including attorneys' fees, judgments, fines,
ERISA excise taxes or penalties, and amounts paid or to be paid in
settlement) reasonably incurred or suffered by such person in connection
therewith; provided, however, that except as to actions to enforce
indemnification rights pursuant to paragraph (c) of this Section, the
Corporation shall indemnify any such person seeking indemnification in
connection with a Proceeding (or part thereof) initiated by such person
only if the Proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation. The right to indemnification conferred in
this Article shall be a contract right for the benefit of the Corporation's
directors, officers, employees, and agents.
(b) Authority to Advance Expenses. Expenses incurred (including attorneys'
fees) by an officer or director (acting in his capacity as such) in
defending a Proceeding shall be paid by the Corporation in advance of the
final disposition of such Proceeding, provided, however, that if required
by the Delaware General Corporation Law, as amended, such expenses shall be
advanced only upon delivery to the Corporation of an undertaking by or on
behalf of such director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article or otherwise. Such expenses
incurred by other employees or agents of the Corporation (or by the
directors or officers not acting in their capacity as such, including
service with respect to employee benefit plans) may be advanced upon such
terms and conditions as the Board of Directors deems appropriate.
(c) Right of Claimant to Bring Suit. If a claim under paragraph (a) or (b)
of this Section is not paid in full by the Corporation within sixty days
after a written claim has been received by the Corporation, the claimant
may at any time thereafter bring suit against the Corporation to recover
the unpaid amount of the claim and, if successful in whole or in part, the
claimant shall be entitled to be paid also the expense (including
attorneys' fees) of prosecuting such claim. It shall be a defense to any
such action (other than an action brought to enforce a claim for expenses
incurred in defending a Proceeding in advance of its final disposition
where the required undertaking has been tendered to the Corporation) that
the claimant has not met the standards of conduct that make it permissible
under the Delaware General Corporation Law for the Corporation to indemnify
the claimant for the amount claimed. The burden of proving such a defense
shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of
such action that indemnification of the claimant is proper under the
circumstances because he has met the applicable standard of conduct set
forth in the Delaware General Corporation Law, nor an actual determination
by the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) that the claimant had not met such applicable
standard of conduct, shall be a defense to the action or create a
presumption that claimant has not met the applicable standard of conduct.
(d) Provisions Nonexclusive. The rights conferred on any person by this
Section shall not be exclusive of any other rights that such person may
have or hereafter acquire under any statute, provision of the Certificate
of Incorporation, Bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as
to action in another capacity while holding such office.
(e) Authority to Insure. The Corporation may purchase and maintain
insurance to protect itself and any person who is or was a director,
officer, employee, or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise
against any liability, expense, or loss asserted against or incurred by
such person, whether or not the Corporation would have the power to
indemnify him against such liability, expense, or loss under applicable law
or the provisions of this Article.
(f) Survival of Rights. The rights provided by this Section shall continue
as to a person who has ceased to be a director, officer, employee, or agent
and shall inure to the benefit of the heirs, executors, and administrators
of such a person.
(g) Effect of Amendment. Any amendment, repeal, or modification of this
Section shall not (a) adversely affect any right or protection of any
director, officer, employee, or agent existing at the time of such
amendment, repeal, or modification, or (b) apply to the indemnification of
any such person for liability, expense, or loss stemming from actions or
omissions occurring prior to such amendment, repeal, or modification.
CERTIFICATE
The undersigned, Secretary of CNF TRANSPORTATION INC., does hereby certify
that the foregoing is a true and correct copy of the Bylaws of CNF
TRANSPORTATION INC., as amended to date hereof.
In witness whereof the undersigned has hereunto set his hand and affixed
the seal of said corporation this day of , .Secretary of CNF Transportation
Inc.
CNF TRANSPORTATION INC.
INCORPORATED IN DELAWARE AUGUST 13, 1958
UNDER THE CORPORATE NAME OF
CONSOLIDATED FREIGHTWAYS COMPANY
BYLAWS
As Amended May 1, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 111,415
<SECURITIES> 0
<RECEIVABLES> 1,038,941
<ALLOWANCES> (26,238)
<INVENTORY> 42,670
<CURRENT-ASSETS> 1,283,064
<PP&E> 2,044,012
<DEPRECIATION> (899,716)
<TOTAL-ASSETS> 3,207,573
<CURRENT-LIABILITIES> 1,016,135
<BONDS> 534,679
125,000
126,898
<COMMON> 364,218
<OTHER-SE> 507,253
<TOTAL-LIABILITY-AND-EQUITY> 3,207,573
<SALES> 0
<TOTAL-REVENUES> 1,462,753
<CGS> 0
<TOTAL-COSTS> 1,389,336
<OTHER-EXPENSES> 5,013
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,400
<INCOME-PRETAX> 68,404
<INCOME-TAX> 29,072
<INCOME-CONTINUING> 39,332
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,298
<EPS-BASIC> 0.77
<EPS-DILUTED> 0.69
</TABLE>
Exhibit 99(a)
CNF TRANSPORTATION INC.
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(Dollars in thousands)
Three Months Ended
March 31,
2000 1999
---------- ----------
Fixed Charges and Preferred Stock
Dividends:
Interest expense $ 6,400 $ 7,126
Capitalized interest 1,748 1,129
Dividend requirement on Series B
Preferred Stock [1] 2,717 3,063
Interest component of
rental expense [2] 13,806 12,684
-------- --------
$24,671 $24,002
Earnings:
Income before taxes $68,404 $74,861
Fixed Charges and Preferred Stock
Dividends 24,671 24,002
Capitalized interest (1,748) (1,129)
Preferred dividend requirements [3] (2,717) (3,063)
-------- --------
$88,610 $94,671
Ratio 3.6x 3.9x
======== ========
[1] Dividends on shares of the Series B cumulative convertible preferred
stock are used to pay debt service on notes issued by the Company's
Thrift and Stock Plan.
[2] Estimate of the interest portion of lease payments.
[3] Preferred stock dividend requirements included in fixed charges but
not deducted in the determination of the Income before Taxes.
Exhibit 99(b)
CNF TRANSPORTATION INC.
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(Dollars in thousands)
Three Months Ended
March 31,
2000 1999
Fixed Charges: --------- --------
Interest expense $ 6,400 $ 7,126
Capitalized interest 1,748 1,129
Dividend requirement on Series B
Preferred Stock [1] 2,717 3,063
Dividend requirement on preferred
securities of subsidiary trust 1,563 1,563
Interest component of
rental expense [2] 13,806 12,684
-------- --------
$26,234 $25,565
Earnings:
Income before taxes $68,404 $74,861
Fixed charges 26,234 25,565
Capitalized interest (1,748) (1,129)
Preferred dividend requirements [3] (2,717) (3,063)
-------- --------
$90,173 $96,234
Ratio 3.4x 3.8x
======== ========
[1] Dividends on shares of the Series B cumulative convertible preferred
stock are used to pay debt service on notes issued by the Company's
Thrift and Stock Plan.
[2] Estimate of the interest portion of lease payments.
[3] Preferred stock dividend requirements included in fixed charges but
not deducted in the determination of the Income before Taxes.
