UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS AND SIMILAR
PLANS PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
_X_ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
OR
___ TRANSITION REPORT PURSUANT TO SECTION 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 INC. THRIFT AND STOCK PLAN
CNF 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
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons administering the employee benefit
plan) have duly caused this annual report to be signed on its behalf
by the undersigned hereunto duly authorized.
CNF Inc. Thrift and Stock Plan
June 27, 2003 /s/ Mark C. Thickpenny
----------------------------
Mark C. Thickpenny
Chairman, CNF Inc. Benefits Administrative
Committee
CNF INC. THRIFT AND STOCK PLAN
FINANCIAL STATEMENTS AND SCHEDULE
AS OF DECEMBER 31, 2002 AND 2001
AND FOR THE YEAR ENDED DECEMBER 31, 2002
TOGETHER WITH AUDITORS' REPORT
Independent Auditors' Report
To the Compensation Committee of the
CNF Inc. Board of Directors:
We have audited the accompanying statements of net assets available
for benefits of the CNF Inc. Thrift and Stock Plan as of December 31,
2002 and 2001, and the related statement of changes in net assets
available for benefits for the year ended December 31, 2002. These
financial statements are the responsibility of the plan administrator.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the net assets available for
benefits of the Plan as of December 31, 2002 and 2001, and the changes
in its net assets available for benefits for the year ended December
31, 2002, in conformity with accounting principles generally accepted
in the United States of America.
Our audits were performed for the purpose of forming an opinion on the
basic financial statements taken as a whole. The supplemental
schedule of assets (held at end of year) is presented for purposes of
additional analysis and is not a required part of the basic financial
statements but is supplementary information required by the Department
of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The supplemental
schedule is the responsibility of the Plan's management. The
supplemental schedule has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects, in relation to the
basic financial statements taken as a whole.
Our audits were performed for the purpose of forming an opinion on the
basic financial statements taken as a whole. The fund information in
the statements of net assets available for benefits and statement of
changes in net assets available for benefits is presented for purposes
of additional analysis rather than to present the net assets available
for benefits and changes in net assets available for benefits of each
fund. The fund information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects, in relation
to the basic financial statements taken as a whole.
/s/ KPMG LLP
Portland, Oregon,
June 20, 2003
CNF INC. THRIFT AND STOCK PLAN
DECEMBER 31, 2002 AND 2001
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
FINANCIAL STATEMENTS:
Statement of Net Assets Available for Benefits as of
December 31, 2002 1
Statement of Net Assets Available for Benefits as of
December 31, 2001 2
Statement of Changes in Net Assets Available for
Benefits for the Year Ended December 31, 2002 3
NOTES TO FINANCIAL STATEMENTS 4
SUPPLEMENTAL SCHEDULE:
Schedule I: Schedule H, Line 4i - Schedule of Assets
(Held at End of Year) as of December 31, 2002 10
PAGE 1
CNF INC. THRIFT AND STOCK PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 2002
Participant
Directed Non-Participant Directed
------------- --------------------------------------------
Restricted CNF Preferred CNF Preferred
CNF Common Stock Fund- Stock Fund-
Stock Fund Allocated Unallocated Total
--------------- ------------- -------------- -------------- -------------
ASSETS:
Investments, at fair value-
Shares in registered
investment companies $ 285,376,840 $ - $ - $ - $285,376,840
Common trust funds 147,310,760 - - - 147,310,760
Participant loans 44,596,428 - - - 44,596,428
CNF equity 36,590,663 56,917,091 70,296,253 95,348,592 259,152,599
--------------- ------------- -------------- -------------- -------------
Total investments 513,874,691 56,917,091 70,296,253 95,348,592 736,436,627
Contributions receivable-
Participants 2,101,154 - - - 2,101,154
CNF - 1,741,339 - - 1,741,339
--------------- ------------- -------------- -------------- -------------
Total contributions receivable 2,101,154 1,741,339 - - 3,842,493
Due from CNF Preferred Stock Fund -
Unallocated - 981,383 3,096,095 - 4,077,478
Dividend receivable - - - 5,123,532 5,123,532
Cash 7,608 - - - 7,608
--------------- ------------- -------------- -------------- -------------
Total assets 515,983,453 59,639,813 73,392,348 100,472,124 749,487,738
--------------- ------------- -------------- -------------- -------------
LIABILITIES:
Notes payable (Note 4) - - - (111,800,000) (111,800,000)
Accrued interest payable - - - (4,142,150) (4,142,150)
Due to CNF Restricted Common Stock Fund - - - (981,383) (981,383)
Due to CNF Preferred Stock Fund - Allocated - - - (3,096,095) (3,096,095)
--------------- ------------- -------------- -------------- -------------
Total liabilities - - - (120,019,628) (120,019,628)
--------------- ------------- -------------- -------------- -------------
NET ASSETS AVAILABLE FOR BENEFITS $ 515,983,453 $ 59,639,813 $ 73,392,348 $ (19,547,504) $629,468,110
=============== ============= ============== ============== =============
See accompanying notes to financial statements.
PAGE 2
CNF INC. THRIFT AND STOCK PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 2001
Participant
Directed Non-Participant Directed
------------- --------------------------------------------
Restricted CNF Preferred CNF Preferred
CNF Common Stock Fund- Stock Fund-
Stock Fund Allocated Unallocated Total
--------------- ------------- -------------- -------------- -------------
ASSETS:
Investments, at fair value-
Shares in registered
investment companies $ 340,254,896 $ - $ - $ - $340,254,896
Common trust funds 140,715,551 - - - 140,715,551
Participant loans 43,657,726 - - - 43,657,726
CNF equity 39,299,517 51,528,893 66,533,565 109,507,587 266,869,562
--------------- ------------- -------------- -------------- -------------
Total investments 563,927,690 51,528,893 66,533,565 109,507,587 791,497,735
Contributions receivable-
Participants 2,101,891 - - - 2,101,891
CNF - 1,406,151 - - 1,406,151
--------------- ------------- -------------- -------------- -------------
Total contributions receivable 2,101,891 1,406,151 - - 3,508,042
Due from CNF Preferred Stock Fund -
Unallocated - 869,440 2,698,322 - 3,567,762
Dividend receivable - - - 5,273,576 5,273,576
Cash 125,116 - - - 125,116
--------------- ------------- -------------- -------------- -------------
Total assets 566,154,697 53,804,484 69,231,887 114,781,163 803,972,231
--------------- ------------- -------------- -------------- -------------
LIABILITIES:
Notes payable (Note 4) - - - (120,500,000) (120,500,000)
Accrued interest payable - - - (4,403,150) (4,403,150)
Due to CNF Restricted Common Stock Fund - - - (869,440) (869,440)
Due to CNF Preferred Stock Fund - Allocated - - - (2,698,322) (2,698,322)
--------------- ------------- -------------- -------------- -------------
Total liabilities - - - (128,470,912) (128,470,912)
--------------- ------------- -------------- -------------- -------------
NET ASSETS AVAILABLE FOR BENEFITS $ 566,154,697 $ 53,804,484 $ 69,231,887 $ (13,689,749) $675,501,319
=============== ============= ============== ============== =============
See accompanying notes to financial statements.
PAGE 3
CNF INC. THRIFT AND STOCK PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2002
Participant
Directed Non-Participant Directed
------------- --------------------------------------------
Restricted CNF Preferred CNF Preferred
CNF Common Stock Fund- Stock Fund-
Stock Fund Allocated Unallocated Total
--------------- ------------- -------------- -------------- -------------
ADDITIONS:
Participant contributions $ 60,069,481 $ - $ - $ - $ 60,069,481
CNF contributions - 9,248,496 - 6,650,661 15,899,157
Rollover contributions 3,063,891 - - - 3,063,891
Allocation of preferred shares
to TASP participants at cost - - 7,574,624 - 7,574,624
Dividend and interest income 5,001,119 656,079 - 10,333,639 15,990,837
Net depreciation in fair value of
investments (Note 3) (84,996,894) (813,583) (584,404) (6,879,949) (93,274,830)
--------------- ------------- -------------- -------------- -------------
Total additions (16,862,403) 9,090,992 6,990,220 10,104,351 9,323,160
DEDUCTIONS:
Distributions to participants (33,861,648) (5,137,057) - - (38,998,705)
Transfers to other plans (338,453) (19,997) (37,108) - (395,558)
Allocation of preferred shares
to TASP participants at cost - - - (7,574,624) (7,574,624)
Allocation of preferred shares
to CNF EWW Savings Plan
participants at cost - - - (103,182) (103,182)
Interest expense - - - (8,284,300) (8,284,300)
--------------- ------------- -------------- -------------- -------------
Total deductions (34,200,101) (5,157,054) (37,108) (15,962,106) (55,356,369)
INTERFUND TRANSFERS, net 891,260 1,901,391 (2,792,651) - -
--------------- ------------- -------------- -------------- -------------
Net increase (decrease) (50,171,244) 5,835,329 4,160,461 (5,857,755) (46,033,209)
--------------- ------------- -------------- -------------- -------------
NET ASSETS AVAILABLE FOR BENEFITS,
December 31, 2001 566,154,697 53,804,484 69,231,887 (13,689,749) 675,501,319
--------------- ------------- -------------- -------------- -------------
NET ASSETS AVAILABLE FOR BENEFITS,
December 31, 2002 $ 515,983,453 $ 59,639,813 $73,392,348 $ (19,547,504) $629,468,110
=============== ============= ============== ============== =============
See accompanying notes to financial statements.
PAGE 4
CNF INC. THRIFT AND STOCK PLAN
NOTES TO FINANCIAL STATEMENTS AND SCHEDULE
1. Description of Plan
The following description of the CNF Inc. Thrift and Stock Plan
("the Plan" or "TASP") is provided for general information purposes
only. Participants should refer to the Employee Benefits Handbook for
more complete information.
General: The Plan, which is administered by CNF Inc. ("CNF"),
consists of a profit-sharing portion and a stock bonus portion that
provides eligible employees the opportunity to save for their
retirement and to increase their ownership in CNF by accumulating CNF
stock.
The Plan is intended to qualify as a profit sharing plan under
Section 401(a) of the Internal Revenue Code ("the Code"), with a
salary deferral feature qualified under Section 401(k) of the Code and
is subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). The Plan also operates,
in relevant part, as a leveraged employee stock ownership plan
("ESOP"), and is designed to comply with Section 4975(e)(7) of the
Code. Overall responsibility for administering the Plan rests with
the CNF Inc. Benefits Administrative Committee ("the Committee"),
which is appointed by the Chief Executive Officer of CNF. The
Committee reports directly to the Compensation Committee of the CNF's
Board of Directors. The Plan's trustee, T. Rowe Price ("the
Trustee"), is responsible for the management and control of the Plan's
assets.
Amendment: During 2000, CNF amended the Plan and the CNF Inc. EWW
Savings Plan ("EWW Savings Plan"). Effective September 19, 2000, the
pilots of Emery Worldwide Airlines ceased participation in the Plan
and their elective deferrals began being contributed to the EWW
Savings Plan. Transfer of the EWW pilots' vested balance in the Plan
was transferred to the EWW Savings Plan effective December 20, 2000.
The transferred EWW Savings Plan participant accounts will continue to
be allocated additional shares of CNF's Series B Cumulative
Convertible Preferred Stock ("Preferred Stock") as a substitute for
Preferred Stock cash dividends used for debt service, as described
below.
In December 2002, the Plan was amended to reflect certain provisions
of the Economic Growth and Tax Relief and Reconciliation Act of 2001
("EGTRRA"), and to reflect compliance with final regulations under
Internal Revenue Code ("Code") section 401(a)(9) by adoption of the
Internal Revenue Service ("IRS") model amendment pursuant to Rev.
Proc. 2002-29. The changes made in this amendment were effective
generally January 1, 2002, except for the changes made with respect
to Code section 401(a)(9) which are effective January 1, 2003.
Eligibility: An employee is eligible to participate in the Plan if
the employee is not covered by a collective bargaining agreement, is
not a leased employee or is not a nonresident alien. There are no age
or service requirements for eligibility except that a supplemental
employee must perform 1 year of service and complete 1000 hours before
entering the Plan.
Contributions: Participants may contribute up to 50% of their
compensation, as defined by the Plan and subject to certain
limitations. CNF makes matching contributions equal to 50% of
participants' contributions, but not exceeding 1.5% of their
compensation, as defined. CNF contributions are in the form of
allocations of Preferred Stock and CNF Inc. Common Stock ("Common
Stock") or in the form of cash.
PAGE 5
For the year ended December 31, 2002, contributions to the Plan
consisted of the following:
Matching Contributions:
Preferred Stock
CNF match of Preferred Stock $ 3,477,056
Forfeited Preferred Stock 63,913
Common Stock
CNF match of Common Stock 9,248,496
Forfeited Common Stock 51,100
-------------
$12,840,565
=============
Cash dividends on Preferred Stock are used for debt service on the
notes payable (see Note 4). Participants are allocated additional
Preferred Stock as a substitute for the cash dividends used for debt
service. For the year ended December 31, 2002, annual interest
requirements were less than annual Preferred Stock cash dividends
received by the Plan.
As reported in the Statement of Changes in Net Assets Available
for Plan Benefits for the year ended December 31, 2002, preferred
shares were allocated to TASP and EWW Savings Plan participants at a
historical cost of $7,574,624 and $103,182, respectively. The total
allocation to TASP and EWW Savings Plan participants consisted of
$3,477,056 from CNF's match of preferred stock and $4,200,750 from
additional preferred stock allocated to participants as a substitute
for the cash dividends used for debt service.
In addition to its match of Preferred and Common Stock, CNF made
contributions to the Plan for repayment of the notes payable described
in Note 4. Principal of $8,700,000 was paid in 2002 with $6,650,661
of CNF cash contributions and $2,049,339 from Preferred Stock cash
dividends in excess of interest expense on the notes payable.
Participant Accounts: The Plan allows participants to select any one
or more of the twelve investment funds established under the Plan in
which contributions can be invested. CNF's matching contributions
cannot be directed by the participant and are deposited into the
Preferred Stock Fund - Allocated and Restricted CNF Common Stock Fund.
Upon reaching age 55 and having completed at least 10 years of
participation in the Plan, participants may elect once each year to
transfer up to 100% of their assets from the Restricted CNF Common
Stock Fund and Preferred Stock Fund - Allocated to investment options
other than CNF stock.
Allocations of CNF's matching contributions are based upon a
percentage of participant contributions, as described above.
Allocations of net Plan earnings are based upon participants' account
balances, as defined. The benefits to which participants are entitled
are the benefits that can be provided from participants' vested
accounts.
Vesting: Participants' contributions plus earnings thereon are
immediately vested. CNF's matching contributions are fully vested
after two years of service with CNF. If the employee is terminated
prior to two years of service with CNF, the matching contributions are
forfeited. Forfeited shares of common and preferred stock are used to
reduce future CNF contributions.
Participant Loans: The Plan has a loan provision allowing
participants access to funds on a tax-free basis. Loans are allowed
to the extent of employee contributions and can be no less than $1,000
and cannot exceed the lesser of $50,000 or 50% of a participant's
vested account balance. Loans can be made for a term not to exceed 4-
1/2 years and bear interest at a rate determined by the loan committee
(prime rate plus 1% for 2002). Loans outstanding at December 31, 2002
bear interest at rates ranging from 5.75% to 11.00%. Principal and
interest are paid ratably through payroll deductions.
PAGE 6
Payments and Benefits: Participants can receive a total distribution
from their accounts upon death or termination of employment. Disabled
participants can receive a distribution of their accounts upon
determination of disability by the U.S. Social Security Administration
or CNF's benefit department. Other types of withdrawals are permitted
by the Plan in limited situations. Participants can elect to have
their accounts distributed in a single lump sum or in a series of
substantially equal annual installments, as defined by the Plan.
Distributions will be made in cash except that (1) participants'
accounts invested in Common Stock can, at the direction of the
participant, be paid in shares and (2) participants' allocation of
Preferred Stock will be converted into shares of Common Stock and can,
at the direction of the participant, be paid in shares or in cash.
Plan Termination: Although CNF has no intention of terminating the
Plan, it may do so at any time by resolution of the Board of
Directors. In the event that the Plan is terminated, the net assets
of the Plan shall be distributed to participants in the amount
credited to their accounts.
2. Summary of Significant Accounting Policies
Basis of Accounting: The accompanying financial statements have been
prepared using the accrual method of accounting.
Financial Instruments: The investments in the accompanying financial
statements are stated at quoted market prices, which approximate fair
value as of December 31, 2002 and 2001 except for (1) participant
loans outstanding that are valued at cost, which approximates fair
value and (2) Preferred Stock, which does not have a quoted market
value, and is stated at fair value as determined by an annual
independent appraisal.
The notes payable in the accompanying financial statements are
stated at their carrying value. The fair value of the notes payable
as of December 31, 2002 and 2001 was approximately $118,000,000 and
$126,000,000, respectively. Fair value was estimated based on the
expected future payments discounted at market rates.
Investments: The Plan invests in various investments. Investment
securities are generally exposed to various risks, such as interest
rate, credit and overall market volatility risks. Due to the level of
risk associated with certain investment securities, it is reasonably
possible that changes in the value of investment securities will occur
in the near term and that such changes could materially affect amounts
reported in the Statements of Net Assets Available for Benefits.
Income Recognition: The difference in market value from one period
to the next is included in net depreciation in fair value of
investments in the accompanying Statement of Changes in Net Assets
Available for Benefits. The net depreciation in fair value of
investments also includes realized gains and losses.
Interest income is recorded on the accrual basis. Dividends are
recorded on the ex-dividend date. Purchases and sales of securities
are recorded on the trade-date basis.
The Plan is charged a wrap fee for each investment transaction
recorded in the Trust. Accordingly, these costs result in an overall
reduction in the investment returns recorded by each underlying asset.
Operating Expenses: During 2002, all administrative expenses of the
Plan were paid by CNF.
Payment of Benefits: Benefits paid to participants are recorded upon
distribution.
PAGE 7
Reclassifications: Certain prior-year amounts have been reclassified
to conform with the current-year presentation.
Estimates: Management makes estimates and assumptions when preparing
the financial statements in conformity with accounting principles
generally accepted in the United States of America. These estimates
and assumptions affect the amounts reported in the accompanying
financial statements and notes thereto. Actual results could differ
from those estimates.
3. Investments
The investment options available to participants were revised during
2002. A fund with shares in registered investment companies was added
as a participant-directed investment option while a common trust fund
was removed from the plan.
The following presents investments that represent 5 percent or more
of the Plan's net assets as of December 31, 2002 and 2001.
December 31,
2002 2001
------------ ------------
Participant Directed Investments:
Shares in Registered Investment Companies:
T. Rowe Price Growth Stock Fund, 4,960,814
and 4,951,431 shares, respectively $ 92,171,921 $119,725,591
T. Rowe Price Equity Income Fund,
3,777,698 and 3,617,790 shares,
respectively 74,760,642 85,560,736
T. Rowe Price Science and Technology Fund,
4,457,776 and 3,866,038 shares,
respectively 55,410,154 80,877,515
T. Rowe Price PIMCO Fund, 3,195,715 and
2,562,942 shares, respectively 34,098,275 26,808,373
Common Trust Funds:
T. Rowe Price U.S. Treasury Money Market
Trust, 79,118,495 and 70,383,475 shares,
respectively 79,118,495 70,383,475
T. Rowe Price Retirement Strategy Trust -
Balanced, 1,779,598 and 1,703,991
shares, respectively 33,883,548 35,766,765
Participant Loans 44,596,428 43,657,726
Unrestricted CNF Common Stock, 1,100,802
and 1,171,372 shares, respectively 36,590,663 39,299,517
Non-Participant Directed Investments:
Restricted CNF Common Stock, 1,712,307
and 1,535,884 shares, respectively 56,917,091 51,528,893
CNF Preferred Stock - Allocated, 330,029
and 301,056 shares, respectively 70,296,253 66,533,565
CNF Preferred Stock - Unallocated,
447,646 and 495,509 shares,
respectively 95,348,592 109,507,587
PAGE 8
During 2002, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year)
depreciated in value as follows:
Shares in registered investment companies $ (76,500,982)
Common trust funds (8,318,879)
CNF Common Stock (990,616)
CNF Preferred Stock (7,464,353)
--------------
$ (93,274,830)
==============
In May 1989, the Plan purchased 986,259 shares of Preferred Stock
for $150,009,863 using proceeds from the issuance of the notes
described in Note 4. The Preferred Stock can only be issued to the
Plan Trustee. The shares are held by the Trustee and allocated to
participant accounts. Upon allocation, the shares are first used to
pay the Preferred Stock cash dividend on shares previously allocated
to the participants with the remainder used to satisfy a portion of
CNF's matching contribution requirement. In connection with a
participant's termination from the Plan, the Preferred Stock is
automatically converted into Common Stock at a rate generally equal to
that number of shares of Common Stock that could be purchased for
$152.10, but not less than the minimum conversion rate of 4.708 shares
of Common Stock for each share of Preferred Stock.
At December 31, 2002, outstanding CNF Preferred Stock of 784,007
shares consisted of 356,718 allocated shares and 427,289 unallocated
shares. Allocated shares at December 31, 2002 included 350,385 shares
allocated to TASP participant accounts and 6,333 shares allocated to
EWW Savings Plan participant accounts. At December 31, 2001,
outstanding CNF Preferred Stock of 805,895 shares consisted of 328,128
allocated shares and 477,767 unallocated shares. Allocated shares at
December 31, 2001 included 318,797 shares allocated to TASP
participant accounts and 9,331 shares allocated to EWW Savings Plan
participant accounts. Unallocated shares at December 31, 2002 and
2001 were pledged as collateral against the Plan Notes, as described
below. Preferred Stock of 20,356 and 17,741 shares were allocated to
participant accounts after December 31, 2002 and 2001, respectively,
but related to participant activity for the years ended December 31,
2002 and 2001, respectively. Accordingly, this Preferred Stock is
accrued as Due from (Due to) the Preferred Stock Fund - Unallocated
(Preferred Stock Fund - Allocated) to reflect the accrued allocation
between funds. Preferred Stock is allocated at historical cost.
4. Notes Payable
On July 18, 1989, the Plan completed the sale of $150,000,000 in
aggregate principal amount of notes ("the Plan Notes") to a group of
institutional investors. The proceeds from the sale of the original
Plan Notes were used to repay the $150,000,000 bridge loan from CNF
to the Plan. The bridge loan had earlier been made to finance the
purchase of the Preferred Stock.
CNF guarantees the Plan Notes issued by CNF's TASP. As of December 31,
2002, there was $49,800,000 aggregate principal amount of Series A
TASP notes outstanding, bearing interest at a rate of 6.00% per annum
and maturing on January 1, 2006, and $62,000,000 aggregate principal
amount of Series B TASP notes outstanding, bearing interest at a rate
of 8.54% per annum and maturing on January 1, 2009. The Series A
notes contain financial covenants that require CNF to maintain minimum
amounts of net worth and fixed-charge coverage. Holders of the
Series B notes issued by CNF's TASP have the right to require CNF to
repurchase those notes if, among other things, both Moody's and
Standard & Poor's have publicly rated CNF's long-term senior debt at
less than investment grade unless, within 45 days, CNF shall have
obtained, through a guarantee, letter of credit or other permitted
credit enhancement or otherwise, a credit rating for such notes of at
least "A" from Moody's or Standard & Poor's (or another nationally
recognized rating agency selected by the holders of such notes) and
shall maintain a rating on such notes of "A" or better thereafter.
As a result, any further decrease in CNF's long-term senior debt
ratings by both of these credit rating agencies would give the holders
of TASP notes the right to require CNF to repurchase those notes unless
CNF was able to obtain appropriate credit enhancement as described
above, and there can be no assurance that CNF would be able to do so.
The interest expense on all Plan Notes is payable semiannually on
January 1 and July 1 and is subject to adjustment in certain
circumstances including some changes in applicable tax laws. For the
years ended December 31, 2002 and 2001, principal payments were
$8,700,000 and $7,500,000, respectively.
PAGE 9
Future maturities of the notes payable to be paid from preferred
cash dividends and/or additional cash contributions from CNF are as
follows:
Series A Series B Total
------------ ------------ ------------
2003 $ 10,100,000 $ - $ 10,100,000
2004 12,000,000 - 12,000,000
2005 12,700,000 - 12,700,000
2006 15,000,000 - 15,000,000
2007 - 18,600,000 18,600,000
Thereafter - 43,400,000 43,400,000
------------ ------------ ------------
$ 49,800,000 $ 62,000,000 $111,800,000
============ ============ ============
5. Income Tax Status
The Internal Revenue Service has determined and informed CNF by a
letter dated October 3, 2001 that the Plan and related trust are
designed in accordance with applicable sections of the Code. The Plan
has been amended since receiving the determination letter. However,
the Plan administrator believes that the Plan is designed and is
currently being operated in compliance with the applicable
requirements of the Code. Therefore, the Plan administrator believes
that the Plan was qualified and the related trust was tax exempt as of
the financial statement date.
6. Related Party Transactions
Certain Plan investments are shares in registered investment
companies and common trust funds managed by T. Rowe Price. T. Rowe
Price is the trustee as defined by the Plan and, therefore, these
investments and investment transactions qualify as party-in-interest
transactions.
PAGE 10
SCHEDULE I
CNF INC. THRIFT AND STOCK PLAN
EIN 94-1444798
PLAN NO. 003
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
AS OF DECEMBER 31, 2002
Identity of Issue Description of Investment
Borrower, Lessor Including Maturity Date,
Similar Rate of Interest, Collateral, Current
Party Par or Maturity Value Cost Value
- ----------------- ----------------------------- ------------- ------------
Shares in registered
investment companies:
*T. Rowe Price Growth Stock Fund
(4,960,813.817 shares) $ 131,371,086 $ 92,171,921
*T. Rowe Price Equity Income Fund
(3,777,697.953 shares) 85,291,689 74,760,642
*T. Rowe Price Science and Technology Fund
(4,457,775.889 shares) 135,755,508 55,410,154
*T. Rowe Price International Stock Fund
(1,731,831.148 shares) 22,862,091 15,378,661
*T. Rowe Price Small-Cap Stock Fund
(571,298.578 shares) 13,625,145 12,282,919
*T. Rowe Price PIMCO Total Return Fund
(3,195,714.663 shares) 34,054,442 34,098,275
*T. Rowe Price Undiscovered Managers Small
Cap Growth Fund
(208,213.750 shares) 1,247,125 1,274,268
Common Trust Funds:
*T. Rowe Price Equity Index Trust
(894,629.752 shares) 26,738,263 21,489,007
*T. Rowe Price Bond Index Trust (633,384.891
shares) 11,414,440 12,819,710
*T. Rowe Price U.S. Treasury Money Market
Trust (79,118,495.260 shares) 79,118,495 79,118,495
*T. Rowe Price Retirement Strategy
Trust-Balanced
(1,779,598.118 shares) 34,288,300 33,883,548
*Plan Participant loans with
Participants interest from 5.75% to
11.00% and maturity dates
from 2003 to 2007 - 44,596,428
Common Stock:
*CNF Inc. Unrestricted CNF Common Stock
(1,100,802.133 shares) 32,056,661 36,590,663
*CNF Inc. Restricted CNF Common Stock
(1,712,307.204 shares) 48,227,667 56,917,091
Preferred Stock:
*CNF Inc. CNF Preferred Stock -
Allocated (330,029.355
shares) 50,169,542 70,296,253
*CNF Inc. CNF Preferred Stock -
Unallocated (447,645.974
shares) 68,086,953 95,348,592
------------
$736,436,627
============
*Represents a party-in-interest as of December 31, 2002.
NOTE: Cost is calculated using the moving average method.
See accompanying independent auditors' report.