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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1997 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
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
Common Stock ($.625 par value) New York Stock Exchange
Pacific Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act:
9-1/8% Notes Due 1999
Medium-Term Notes, Series A
7.35% Notes Due 2005
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes___X___ No_______
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
Yes ___X__ No ___ ___
Aggregate market value of voting stock held by persons other than
Directors, Officers and those shareholders holding more than 5% of the
outstanding voting stock, based upon the closing price per share Composite
Tape on January 31, 1998: $1,905,071,000.
Number of shares of Common Stock outstanding
as of January 31, 1998: 47,438,525
DOCUMENTS INCORPORATED BY REFERENCE
Parts I, II and IV
CNF Transportation Inc. 1997 Annual Report to Shareholders (only those
portions referenced herein are incorporated in this Form 10-K).
Part III
Proxy Statement dated March 17, 1998 (only those portions referenced herein
are incorporated in this Form 10-K).
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CNF TRANSPORTATION INC.
FORM 10-K
Year Ended December 31, 1997
___________________________________________________________________________
INDEX
Item Page
PART I
1. Business 3
2. Properties 15
3. Legal Proceedings 16
4. Submission of Matters to a Vote of Security Holders 16
PART II
5. Market for the Company's Common Stock and
Related Security Holder Matters 16
6. Selected Financial Data 16
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 17
8. Financial Statements and Supplementary Data 18
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 18
PART III
10. Directors and Executive Officers of the Company 18
11. Executive Compensation 19
12. Security Ownership of Certain Beneficial
Owners and Management 19
13. Certain Relationships and Related Transactions 20
PART IV
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 20
SIGNATURES 21
INDEX TO FINANCIAL INFORMATION 24
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CNF TRANSPORTATION INC.
FORM 10-K
Year Ended December 31, 1997
___________________________________________________________________________
PART I
ITEM 1. BUSINESS
(a) General Development of Business
CNF Transportation Inc. and subsidiaries (collectively the Registrant or
the Company) is a leading provider of regional less-than-truckload (LTL)
trucking, heavy air freight and logistics services. The Company has three
principal business units: Con-Way Transportation Services (Con-Way), which
provides regional LTL trucking services in all 50 states; Emery Worldwide
(Emery), which provides domestic and international air freight services;
and Menlo Logistics (Menlo), a contract logistics company. Con-Way and
Emery have established infrastructures which enable them to provide time-
definite and day-definite delivery services throughout the United States
and internationally. Emery also provides nightly air transportation
services to the United States Postal Service (USPS), and entered into a new
postal contract in 1997 which has broadened these services to include
sortation and ground transportation of Priority Mail in the eastern United
States. Menlo, the Company's contract logistics subsidiary, specializes in
designing and managing complex supply and distribution networks for
national and multi-national companies. The Company also provides a number
of other transportation services, including truckload services, ocean
forwarding and customs brokerage.
On December 2, 1996, the Company completed the tax-free distribution (the
Spin-off) to its shareholders of a new publicly traded company,
Consolidated Freightways Corporation (CFC), a long-haul LTL motor carrier
and related businesses. The Registrant's shareholders received one share of
CFC stock for every two shares of the Registrant's stock owned on November
15, 1996. Following the Spin-off, the Company changed its name to CNF
Transportation Inc.
CNF Transportation Inc., formerly Consolidated Freightways, Inc., was
incorporated in Delaware in 1958 as a successor to a business originally
established in 1929.
(b) Financial Information About Industry Segments
The operations of the Company are primarily conducted in the U.S. but to an
increasing extent are conducted in major foreign countries. An analysis by
industry group of revenues, operating income, depreciation and capital
expenditures for the years ended December 31, 1997, 1996 and 1995, and
identifiable assets as of those dates is presented in Note 14 on pages 37
and 38 of the 1997 Annual Report to Shareholders and is incorporated herein
by reference. Geographic group information is also presented therein.
Intersegment revenues and related earnings have been eliminated.
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(c) Narrative Description of Business
The Company, for reporting purposes, has designated three principal
operating segments: the Con-Way Transportation Services group which
provides primarily one- and two-day, LTL service as well as highway, rail
and multi-modal logistics services; the Emery Worldwide group which is
responsible for all domestic and international air freight activities and
ocean forwarding services; and the Other segment which is comprised of the
full-service contract logistics subsidiary, Menlo Logistics, Road Systems,
VantageParts and the sortation operations of the Priority Mail contract.
Each segment is described in greater detail as follows:
CON-WAY TRANSPORTATION SERVICES
Con-Way Transportation Services, Inc. (CTS) provides time-definite and day-
definite ground transportation to all 50 states through its three regional
LTL motor carriers. In addition to time-definite and day-definite regional
and inter-regional LTL freight transportation, CTS provides full-service,
nationwide truckload freight service and ground expedited delivery.
Having largely completed its geographic expansion in North America, CTS has
the infrastructure in place to serve all 50 states of the United States and
certain major population centers in Canada, as well as Puerto Rico and
parts of Mexico. CTS' strategy will continue to emphasize operating margin
improvements, particularly through efforts to increase the utilization of
its freight system in the Pacific northwest and northeastern U.S. (areas in
which it expanded its operations in 1995 and 1996) and through general
market penetration.
Con-Way Regional Carriers
CTS' primary business units are three regional LTL motor carriers, each of
which operates a dedicated regional trucking network principally serving
core geographic territories with next-day and second-day service. The
regional carriers serve manufacturing, industrial, commercial and retail
business-to-business customers with a fleet of approximately 25,000 trucks,
tractors and trailers at December 31, 1997. The regional carriers are as
follows:
Con-Way Central Express (CCX) was founded in June 1983 and today serves 23
states of the central and northeast U.S., Ontario and Quebec, Canada and
Puerto Rico. At December 31, 1997, CCX operated 206 service centers.
Con-Way Southern Express (CSE) was founded in April 1987. CSE serves a 12-
state southern market from Texas to the Carolinas and Florida, and also
serves Puerto Rico and parts of Mexico. CSE operated 102 service centers
at December 31, 1997.
Con-Way Western Express (CWX) was founded in May 1983 and today operates in
15 western states and serves parts of Canada and Mexico. CWX completed
major geographic expansions in 1995 in the Pacific northwest and British
Columbia. At December 31, 1997, CWX operated 61 service centers.
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The expansion of the territories through CTS' joint service offerings
permits CTS' three regional carriers to provide full regional service
throughout the U.S. and to certain major population centers in Canada. By
offering joint services, the three regional carriers can now provide next-
day and second-day freight delivery between their respective core
territories utilizing existing infrastructure. The joint service program
is intended to generate additional business by allowing each carrier to
provide coverage of inter-regional market lanes not serviced as part of its
core territory. Due in large part, to implementation of the joint service
program, the average length of haul for shipments handled by the regional
carriers grew from approximately 353 miles in 1994 to approximately 497 in
1997. Also, average revenue per shipment grew from approximately $111 in
1994 to approximately $126 in 1997. The average weight per shipment was
approximately 1,095 pounds in 1997.
Con-Way Truckload Services and Con-Way NOW
CTS' operations also include Con-Way Truckload Services (CWT), a full-
service, multi-modal truckload company, and Con-Way NOW, which serves the
expedited surface shipment market. CWT provides door-to-door delivery of
truckload shipments by highway and rail forwarding with domestic intermodal
marketing services, and assembly and distribution services. Con-Way NOW
specializes in time definite shipments, such as replacement parts, medical
equipment and other urgent shipments, where expedited delivery is critical.
Con-Way NOW began operations in 1996 in the Midwest, expanded to parts of
the southeastern U.S. in 1997, and has now extended delivery service to 48
states.
Employees
CTS' domestic employment has increased to approximately 15,000 regular and
supplemental employees at December 31, 1997 from approximately 14,300 at
December 31, 1996, and 12,400 employees at December 31, 1995.
Customers
There is broad diversity among customers served, size of shipments,
commodities transported and length of haul. No single customer or
commodity accounted for more than a small fraction of total revenues.
Competition
The trucking industry is intensely competitive and some of CTS' competitors
have greater financial and other resources than the Company. Principal
competitors of CTS include both regional and inter-regional companies and
national LTL companies (some of which have continued to extend into
regional markets). Competition in the trucking industry is based on, among
other things, freight rates, quality of service, reliability, transit times
and scope of operations. Intense competition in the trucking industry,
coupled with industry over-capacity, has resulted in aggressive price
discounting, narrow margins and a significant number of business failures.
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Federal and State Regulation
CTS' business is subject to extensive regulation by various federal and
state governmental entities. As described below, deregulation of the
trucking industry allowed easier access to the industry by new trucking
companies, and has removed many restrictions on expansion of services by
existing carriers and increased price competition. These and other factors
have contributed to a consolidation in the trucking industry, as a number
of trucking companies have either merged or gone out of business.
Regulation of motor carriers has changed substantially in recent years.
The process started with the Motor Carrier Act of 1980, which allowed
easier access to the industry by new trucking companies, removed many
restrictions on expansion of services by existing carriers, and increased
price competition by narrowing the antitrust immunities available to the
industry's collective ratemaking organizations. This deregulatory trend
was continued by subsequent legislation. The process culminated with
federal preemption of most economic regulation of intrastate trucking
regulatory bodies effective January 1, 1995, and with legislation to
terminate the Interstate Commerce Commission (ICC) effective January 1,
1996.
Currently, the motor carrier industry is subject to federal regulation by
the Federal Highway Administration (FHWA) and the Surface Transportation
Board (STB), both of which are units of the United States Department of
Transportation (DOT). The FHWA performs certain functions inherited from
the ICC relating chiefly to motor carrier registration, cargo and liability
insurance, extension of credit to motor carrier customers, and leasing of
equipment by motor carriers from owner-operators. In addition, the FHWA
enforces comprehensive trucking safety regulations relating to driver
qualifications, driver hours of service, safety-related equipment
requirements, vehicle inspection and maintenance, record keeping on
accidents, and transportation of hazardous materials. As pertinent to the
general freight trucking industry, the STB has authority to resolve certain
types of pricing disputes and authorize certain types of intercarrier
agreements under jurisdiction inherited from the ICC.
At the state level, federal preemption of economic regulation does not
prevent the states from regulating motor vehicle safety on their highways.
In addition, federal law allows all states to impose insurance requirements
on motor carriers conducting business within their borders, and empowers
most states to require motor carriers conducting interstate operations
through their territory to make annual filings verifying that they hold
appropriate registrations from FHWA. Motor carriers also must pay state
fuel taxes and vehicle registration fees, which normally are apportioned on
the basis of mileage operated in each state.
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EMERY WORLDWIDE
Emery Worldwide (Emery), the Company's air freight unit, was formed when
the Company purchased Emery Air Freight Corporation in April 1989. Emery
provides domestic and international air freight services. Through a
separate subsidiary of the Company, Emery Worldwide Airlines, Inc. (EWA),
the Company provides nightly air transportation services to the USPS. In
addition, as the result of a contract that the USPS awarded to EWA in 1997,
EWA has broadened these services to include sortation and ground
transportation of Priority Mail in the eastern United States. The ground
transportation is contracted to another subsidiary of the Company. In
North America, Emery relies principally on its dedicated aircraft and
ground fleet to provide commercial door-to-door delivery for same-day, next-
day, second-day and deferred shipments and through EWA provides air
transportation services to the USPS. Internationally, Emery acts
principally as a freight forwarder in providing door-to-door and airport-to-
airport commercial services in approximately 200 countries. International
business is defined by Emery as shipments that either originate or
terminate outside of North America. Commercial business is defined by
Emery as all operations except those services it provides domestically to
the USPS.
While Emery's freight system is designed to handle parcels, packages and
shipments of a variety of sizes and weights, its commercial operations are
focused primarily on heavy air freight (defined as shipments of 70 pounds
or more) as opposed to envelopes. In 1997, Emery's commercial shipments
weighed an average of approximately 220 pounds and generated average
revenue of approximately $209 per shipment.
Customers are typically concerned with timely deliveries rather than the
mode of transportation used to transport freight. Because the average cost
of ground transportation is considerably less than air transportation,
Emery seeks to manage its costs by using trucks, rather than aircraft, to
transport freight whenever possible, typically in connection with second-
day deliveries.
The Company believes that Emery's competitive position versus air freight
forwarders in the domestic air freight industry has improved over the last
several years as the availability of cargo capacity on domestic passenger
airlines has decreased. Several major domestic airlines have reduced the
number of wide-body aircraft they use for domestic passenger service in
favor of narrow-body aircraft. This change greatly reduces the amount of
belly space available for cargo. The Company believes that this trend
toward the use of passenger aircraft with lower cargo capacities has
reduced the availability of airlift for freight forwarders (which do not
operate their own aircraft) and benefited Emery and other asset-based air
freight companies.
Emery provides services in North America through a system of sales offices
and service centers, and overseas through foreign subsidiaries, branch
sales offices, service centers and agents. Emery's door-to-door service
within North America relies on Emery's own airlift system, supplemented
with commercial airlines. Internationally, Emery operates primarily as an
air freight forwarder using commercial airlines, while utilizing controlled
lift only on a limited basis. Due in part to the Company's heightened
focus on opportunities in the expanding worldwide economy, Emery's total
international commercial revenues increased 76% from 1994 through 1997,
compared with a 27% increase for its total North American
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commercial revenues for the same period. For 1997, international revenues
of approximately $900 million comprised nearly 45% of Emery's total
commercial revenues. Emery's fastest-growing regions internationally are
Latin America and Asia.
As of December 31, 1997, Emery utilized a fleet of 74 dedicated aircraft
for its commercial operations. Of these aircraft, 50 were leased on a long-
term basis, 9 were owned and 15 were contracted on a short-term basis to
supplement nightly capacity and to provide feeder services. At December
31, 1997, the nightly lift capacity of this aircraft fleet, excluding
charters, was over 4 million pounds. At December 31, 1997, Emery also
operated approximately 2,000 trucks, vans and tractor-trailers, as well as
equipment provided by its agents.
Emery's hub-and-spoke system is based at the Dayton, Ohio International
Airport (DAY), where its leased air cargo facility (the Hub) and related
support facilities are located. The Hub handles a wide variety of
shipments, ranging from small packages to heavyweight cargo, with a total
effective sort capacity of approximately 1.2 million pounds per hour.
Beginning in 1997, Emery began a redesign and upgrade of the Hub that is
expected to increase capacity 30% by the year 2000. The operation of the
Hub in conjunction with Emery's airlift system enables Emery to maintain a
high level of service reliability. In addition to the Dayton Hub, Emery
operates nine regional hubs, strategically located around the United States
near Sacramento and Los Angeles, California; Dallas, Texas; Chicago,
Illinois; Poughkeepsie, New York; Charlotte, North Carolina; Atlanta,
Georgia; Nashville, Tennessee; and Orlando, Florida. In 1997, Emery opened
new distribution centers in Singapore and Miami to serve Asia and Latin
America, respectively.
Emery added a new guaranteed time-definite product in 1997, called Gold
Priority Service. These services offered in North America include; 9:30
Service, which is premium service with a guaranteed 9:30 delivery to
specified regions; Gold Priority Plus, which provides time specific
delivery by appointment; and Gold Priority Standard, that provides
guaranteed delivery by noon to a wide range of destinations.
USPS contracts
Through the separate subsidiary of the Company, Emery Worldwide Airlines,
Inc. (EWA), the Company provides nightly air delivery services for Express
Mail (a next-day delivery service) under a ten-year contract with the USPS.
The original contract for this operation was awarded to EWA in 1989, and
the current contract was awarded to EWA in 1993. At December 31, 1997, EWA
used 24 dedicated aircraft to provide services to the USPS under this
contract. In addition, EWA has also received separate contracts to carry
peak-season Christmas and other mail for the USPS. The Company recognized
approximately $136 million, $140 million and $126 million of revenue in
1997, 1996 and 1995, respectively from contracts to carry mail, primarily
Express Mail, for the USPS.
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On April 23, 1997, the USPS awarded EWA a new contract for the sortation
and transportation of Priority Mail (a second-day delivery service) in
portions of 13 states in the eastern United States. This contract has an
initial term that ends in 2002 and may be renewed by the USPS for two
successive three-year terms. The USPS has indicated that the Company could
receive revenues of approximately $1.7 billion over the initial term of the
contract. However, this amount is subject to a number of uncertainties and
assumptions, and there can be no assurance that the revenues realized by
the Company will not be less than this amount.
The Priority Mail contract calls for EWA to lease or acquire, improve,
equip, fully staff and operate Priority Mail Processing Centers (PMPCs) in
ten major metropolitan areas, primarily along the eastern seaboard. Five
of the PMPCs are operational and are currently in a start-up phase, and the
remaining five are scheduled to be fully operational by the end of the
second quarter of 1998. The Company must pay liquidated damages if the
remaining centers are not operational on time.
The Company expects that EWA will provide air transportation under the new
USPS contract, that Menlo Postal Logistics, a division of EWA, will manage
the ten PMPCs and provide ground transportation between the PMPCs and other
USPS facilities, and that Con-Way Truckload Services, a subsidiary of the
Company that provides full-service, multi-modal truckload services, will
act as a subcontractor and will provide highway transportation between
PMPCs. Revenues from air transportation are reported in the Emery
Worldwide segment, the PMPC sortation operations are reported in the Other
segment, and the highway transportation service is reported in the Con-Way
Transportation segment.
Other services
To enhance the range of services it can offer to its customers and to
provide further avenues for growth, Emery has established several non-asset
based strategic business units. (The Company defines a non-asset-based
business as one requiring substantially less capital investment than its
principal domestic air freight and trucking business). These other units
include Emery Expedite!, a rapid response freight handling subsidiary
providing door-to-door delivery of shipments in North America and overseas.
Emery's logistics subsidiary, Emery Global Logistics, which operates
warehouse and distribution centers for customers in six countries. Emery
Customs Brokerage provides full service customs clearance regardless of
mode or carrier. Another business unit, Emery Ocean Services, is a global
freight forwarder and non-vessel-operating common carrier that provides
full and less-than-container load service.
Employees
As of December 31, 1997, Emery had approximately 10,000 regular full-time
employees compared with approximately 9,000 employees at December 31, 1996
and 7,800 at December 31, 1995.
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Approximately 11% of the regular full-time employees were represented by
various labor unions. However, on July 2, 1997, Emery's pilots at the Hub
voted to approve representation by the Airline Pilots Association.
Contract negotiations are expected to begin prior to July 1998. The
Company is unable to predict the outcome of the contract negotiations or
its effect on results of operations.
Customers
The air freight industry is intensely competitive. Principal competitors
of Emery include other integrated air freight carriers, air freight
forwarders and international airlines and, to a lesser extent, trucking
companies, passenger and cargo air carriers. Competition in the air
freight industry is based on, among other things, freight rates, quality of
service, reliability, transit times and scope of operations.
Technology
An important element in the movement of goods is the rapid movement of
information to track freight, optimize carrier selections, and interlink
and analyze customer data. Starting in 1996, Emery began to invest in what
is expected to be a $75 million multi-year technology program to upgrade
its hardware and software systems architecture, including its global
tracking system called Emcon 2000. The Emcon 2000 system is expected to
provide enhanced tracking information for shipments to reduce mis-sorts,
avoid potential overloads and to signal freight with specialized handling
requirements.
Regulation of Air Transportation
Emery's business is subject to extensive regulation by various federal,
state and foreign governmental entities. The air transportation industry
is subject to federal regulation under the Federal Aviation Act of 1958, as
amended (Aviation Act) and regulations issued by the Department of
Transportation (DOT) pursuant to the Aviation Act. Emery, as an air
freight forwarder, and EWA, as an airline, are subject to different
regulations. Air freight forwarders are exempted from most DOT economic
regulations and are not subject to Federal Aviation Administration (FAA)
safety regulations, except security-related rules. Airlines such as EWA
are subject to, among other things, maintenance, operating and other safety-
related regulations by the FAA, including Airworthiness Directives
promulgated by the FAA which require airlines such as EWA to make
modifications to aircraft. In that regard, EWA expects that it will be
required to make expenditures to reinforce the floors and modify the doors
of up to 17 of its Boeing 727 aircraft to comply with Airworthiness
Directives. Likewise, the relative age of EWA's aircraft fleet may
increase the likelihood that EWA will be required to make expenditures in
order for its aircraft to comply with future government regulations.
During recent years, operations at several airports have been subject to
restrictions or curfews on arrivals or departures during certain night-time
hours designed to reduce or eliminate noise for surrounding residential
areas. None of these restrictions have materially affected Emery's
operations. If such restrictions were to be imposed with respect to the
airports at which Emery's activities are centered (particularly Emery's
major Hub at the Dayton International Airport), and no alternative airports
were available to serve the affected areas,
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there could be a material adverse effect on Emery's operations. Under
applicable law, the FAA is authorized to establish aircraft noise standards
and the administrator of the Environmental Protection Agency is authorized
to issue regulations setting forth standards for aircraft emissions. The
Company believes that its present fleet of owned, leased and chartered
aircraft is operating in substantial compliance with currently applicable
noise and emission laws.
The Aviation Noise and Capacity Act of 1990 establishes a national aviation
noise policy. The FAA has promulgated regulations under this Act regarding
the phase-in requirements for compliance. This legislation and the related
regulations will require all of Emery's owned and leased aircraft eligible
for operation in the contiguous United States to either undergo
modifications or otherwise comply with Stage 3 noise restrictions by year-
end 1999. Although the ultimate cost of complying with these requirements
cannot be predicted with certainty, the Company may be required to make
expenditures, which could be substantial, to modify owned or leased
aircraft in order to comply with these requirements.
Regulation of Ground Transportation
When Emery provides ground transportation of cargo having prior or
subsequent air movement, the ground transportation is exempt from the motor
carrier registration requirements and economic regulations that were
inherited from the ICC by FHWA and STB, respectively. Such ground
transportation, however, is subject to comprehensive trucking safety
regulation by FHWA as described in the Con-Way Transportation Services
section. In addition, Emery holds FHWA motor carrier registrations which
can be utilized in providing non-exempt ground transportation. For a
description of applicable state regulations, refer to the discussion in the
Con-Way Transportation Services section.
OTHER
The Other segment, in terms of revenues, is comprised primarily of Menlo
Logistics Inc., but also includes the operations of VantageParts, Road
Systems and the sortation operations of the Priority Mail contract.
Menlo Logistics
Menlo Logistics, Inc. (Menlo), founded in 1990, specializes in developing
and managing complex national and global supply and distribution networks,
including transportation management, dedicated contract warehousing,
dedicated contract carriage and just-in-time delivery programs. In serving
its customers, Menlo uses and develops transportation optimization and
carrier tracking software, and also provides real time warehouse and
transportation management systems. Menlo has developed the ability to link
these systems both with each other and with its customers' internal
systems. The Company believes that Menlo's software skills, operations
processes and design expertise with respect to sophisticated logistics
systems have established it as a leader in the emerging field of contract
logistics. Complex projects which call upon Menlo's skills in managing
carrier networks, dedicated vehicle fleets and automated warehouses as an
integrated system recently have been the fastest growing segment of Menlo's
business.
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Menlo operates in a relatively new business area and has a limited number
of major competitors. Nonetheless, competition for the provision of
logistics services is intense.
The Company believes that three industry trends have driven Menlo's recent
growth. First, the Company believes that a number of businesses are
increasingly evaluating their overall logistics costs, including
transportation, warehousing and inventory carrying costs. In addition, the
Company believes that outsourcing of non-core services, such as
distribution, has become more commonplace with many businesses. Finally,
the Company believes that the ability to access information through
computer networks has increased the value of capturing real time logistics
information to track inventories, shipments and deliveries.
One of Menlo's primary strategies is to build upon existing relationships
by increasing the services that it provides to current customers. In 1996,
Menlo expanded the services it provides to existing clients such as Hewlett-
Packard, Sears, Coca-Cola and IBM. Menlo was also awarded projects in 1996
and 1997 by new clients such as Imation, Nike, Frigidaire, Herman Miller,
Delphi and Bell Atlantic. More than 60% of Menlo's 1997 business came from
existing clients. Compensation from Menlo's customers takes different
forms, including cost-plus, gain-sharing, per-piece, fixed dollar and
consulting fees. In some cases, customers reimburse start-up and
development costs.
Menlo has sought to limit the financial commitments it undertakes by
typically providing that any facility or major equipment lease that it
enters into on behalf of a customer must be assumed by the customer upon
termination of the contract with Menlo. However, to date relatively few
customer relationships have been ended by either Menlo or its customers.
At December 31, 1997, Menlo had a regular full-time workforce of
approximately 1,300 employees compared to nearly 1,000 at December 31,
1996. Menlo also uses a significant number of professionals under contract
for various projects.
While the Company seeks to take advantage of cross-business synergies
whenever possible, Menlo is operated as an independent business segment
within the Company and not merely as a conduit through which business can
be referred to Con-Way or Emery. The Company estimates that, for 1997,
less than 4% of Menlo's operating expenses were attributable to operations
that resulted in revenues to other business units of the Company. The
relative independence of Menlo from the Company's other primary business
units is viewed as essential to maintaining Menlo's credibility with its
customers.
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Road Systems and VantageParts
Two non-carrier operations that are included in the Other segment generate
a majority of their revenues from sales to other subsidiaries of the
Company and, prior to year-end 1996, from CFC. Road Systems primarily
manufactures and rebuilds trailers, converter dollies and other
transportation equipment. VantageParts serves as a distributor and
remanufacturer of vehicle component parts and accessories to the heavy-duty
truck and trailer industry, as well as the maritime, construction and
aviation industries.
GENERAL
The research and development activities of the Company are not significant.
During 1997, 1996 and 1995 there was no single customer of the Company that
accounted for more than 10% of consolidated revenues.
The total number of regular, full-time employees is presented in the "Five
Year Financial Summary" on page 40 of the 1997 Annual Report to
Shareholders and is incorporated herein by reference.
The trucking and airfreight industries are affected directly by general
economic conditions and seasonal fluctuations, both of which affect the
amount of freight to be transported. Freight shipments, operating costs
and other results of operations can also be affected adversely by inclement
weather conditions. The months of September and October of each year
usually have the highest business levels while the months of January and
February of each year usually have the lowest business levels.
The Company is subject to stringent laws and regulations that (i) govern
activities or operations that may have adverse environmental effects such
as discharges to air and water, as well as handling and disposal practices
for solid and hazardous waste, and (ii) impose liability for the costs of
cleaning up, and certain damages resulting from, sites of past spills,
disposals or other releases of hazardous materials. In particular, under
applicable environmental laws, the company may be responsible for
remediation of environmental conditions and may be subject to associated
liabilities (including liabilities resulting from lawsuits brought by
private litigants) relating to its operations and properties.
Environmental liabilities relating to the Company's properties may be
imposed regardless of whether the Company leases or owns the properties in
question and regardless of whether such environmental conditions were
created by the Company or by a prior owner or tenant, and also may be
imposed with respect to properties which the Company may have owned or
leased in the past.
The Company's operations involve the storage, handling and use of diesel
and jet fuel and other hazardous substances. In particular, the Company is
subject to stringent environmental laws and regulations dealing with
underground fuel storage tanks and the transportation of hazardous
materials. 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 that its share of the clean-up costs
will not have a material adverse effect on the
Page 14
Company's financial position or results of operations. The Company expects
the costs of complying with existing and future environmental laws and
regulations to continue to increase. On the other hand, it does not
anticipate that such cost increases will have a materially adverse effect
on the Company.
(d) Financial Information About Foreign
and Domestic Operations and Export Sales
Information as to revenues, operating income and identifiable assets for
each of the Company's business segments and for its foreign operations in
1997, 1996 and 1995 is contained in Note 14 on pages 37 and 38 of the 1997
Annual Report to Shareholders and is incorporated herein by reference.
Page 15
ITEM 2. PROPERTIES
The following summarizes the freight service centers and warehouses
operated by the Company at December 31, 1997:
Owned Leased Total
Con-Way Transportation Services 80 289 369
Emery Worldwide 29 229 258
Menlo Logistics - 16 16
The following table sets forth the location and square footage of the
Company's principal freight service centers at December 31, 1997:
Location Square Footage
CTS - freight service centers
Chicago, IL 113,116
Charlotte, NC 102,743
Des Plains, IL 100,440
Columbus, OH 86,537
Oakland, CA 85,600
Dallas, TX 82,000
Cleveland, OH 70,995
Atlanta, GA 56,160
Cincinnati, OH 55,618
Detroit, MI 66,320
St. Louis, MO 49,065
Carlstadt, NJ 48,360
Santa Fe Springs, CA 45,936
Jackson, MS 44,596
Knoxville, TN 44,460
Aurora, IL 44,235
South Bend, IN 39,320
Milwaukee, WI 36,560
Ft. Wayne, IN 35,400
Pontiac, MI 34,450
Sacramento, CA 25,968
Braintree, MA 22,160
Emery - freight service centers
* Dayton, OH 620,000
Los Angeles, CA 78,264
Chicago, IL 59,976
Dallas, TX 55,104
Boston, MA 42,236
Indianapolis, IN 38,500
* Facility partially or wholly financed through the issuance of
industrial revenue bonds. Principal amount of debt is secured by the
property.
Page 16
ITEM 3. LEGAL PROCEEDINGS
The legal proceedings of the Company are summarized in Note 13 on pages 36
and 37 of the 1997 Annual Report to Shareholders and are incorporated
herein by reference. Discussions of certain environmental matters are
presented in Item 1 and Item 7.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The Company's common stock is listed for trading on the New York and
Pacific Stock Exchanges under the symbol "CNF".
The Company's common stock prices for each of the quarters in 1997 and 1996
are included in Note 15 on page 39 of the 1997 Annual Report to
Shareholders and are incorporated herein by reference.
Cash dividends on common shares had been paid in every year from 1962 to
1990. In June 1990 the Company's Board of Directors suspended the
quarterly dividend. In December 1994, the Board of Directors reinstated a
$.10 per share quarterly cash dividend on common stock. The amounts of
quarterly dividends declared on common stock for the last two years are
included in Note 15 on page 39 of the 1997 Annual Report to Shareholders
and are incorporated herein by reference.
Under the terms of the restructured TASP Notes, as set forth in Note 4 on
pages 30 and 31 of the 1997 Annual Report to Shareholders, the Company is
restricted from paying dividends in an aggregate amount in excess of $10
million plus one half of the cumulative net income applicable to common
shareholders since the commencement of the agreement (which allows for $148
million of dividend payments at December 31, 1997).
Effective March 15, 1995, all of the 690,000 shares of the Company's Series
C Preferred Stock were converted to 6,900,000 shares of common stock.
As of December 31, 1997, there were 15,560 holders of record of the common
stock ($.625 par value) of the Company. The number of shareholders is also
presented in the "Five Year Financial Summary" on page 40 of the 1997
Annual Report to Shareholders and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The Selected Financial Data is presented in the "Five Year Financial
Summary" on page 40 of the 1997 Annual Report to Shareholders and is
incorporated herein by reference.
Page 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations is presented in the "Financial Review and Management Discussion"
on pages 18 through 20, inclusive, of the 1997 Annual Report to
Shareholders and is incorporated herein by reference.
On March 17, 1998, the Company issued a press release reporting that lower
than expected domestic and international air freight revenues and
continuing startup costs from the new Priority Mail contract would result
in first quarter 1998 earnings below expectations. Partially offsetting
this is the expectation of the best quarterly operating income from CTS in
its history. A $6 million charge will be taken in the first quarter to
recognize the costs of extending the openings of five PMPC's under the
Priority Mail contract. The Company expects to earn between 27 cents and
32 cents per diluted share in the quarter.
Certain statements included or incorporated by reference herein constitute
"forward-looking statements" within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, and are subject to a number of
risks and uncertainties. Any such forward-looking statements contained or
incorporated by reference herein should not be relied upon as predictions
of future events. Certain such forward-looking statements can be
identified by the use of forward-looking terminology such as "believes,"
"expects," "may," "will," "should," "seeks," "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 and in documents
incorporated or deemed to be incorporated by reference herein, 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 the Company's new
contract with the USPS, including costs of extending the openings of the
PMPCs; 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 and aircraft maintenance tax matters discussed in
documents incorporated by reference; Emery's results of operations for the
first quarter of 1998 that have been adversely affected by less than
planned revenues; and matters relating to the Spin-off of Consolidated
Freightways Corporation (CFC). In that regard, the Company is or may be
subject to substantial liabilities with respect to certain matters relating
to CFC's business and operations, including, without limitation, guarantees
of certain indebtedness of CFC and liabilities for employment-related
matters. Although CFC is, in general, either the primary obligor or
jointly and severally liable with the Company with respect to these
matters, a failure to pay or other default by CFC with respect to the
obligations as to which the Company is or may be, or may be perceived to
be, liable, whether because of CFC's bankruptcy or insolvency or otherwise,
could lead to substantial claims against the Company. As a result of
Page 18
the foregoing, no assurance can be given as to future results of operations
or financial condition.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and Report of Independent Public
Accountants are presented on pages 21 through 39, inclusive, of the 1997
Annual Report to Shareholders and are incorporated herein by reference.
The unaudited quarterly financial data is included in Note 15 on page 39 of
the 1997 Annual Report to Shareholders and is incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The identification of the Company's Directors is presented on pages 3
through 8, inclusive, of the Proxy Statement dated March 17, 1998 and those
pages are incorporated herein by reference.
The Executive Officers of the Company, their ages at December 31, 1997, and
their applicable business experience are as follows:
Donald E. Moffitt, 65, Chairman of the Board and Chief Executive Officer of
the Company. Mr. Moffitt joined Consolidated Freightways Corporation of
Delaware, the Company's former nationwide, full-service trucking
subsidiary, as an accountant in 1955 and advanced to Vice President -
Finance in 1973. In 1975, he transferred to the Company as Vice President
- - Finance and Treasurer and in 1981, was elected Executive Vice President -
Finance and Administration. In 1983, he assumed the additional duties of
President, CF International and Air, Inc., where he directed the Company's
international and air freight businesses. Mr. Moffitt was elected Vice
Chairman of the Board of the Company in 1986. He retired as an employee
and as Vice Chairman of the Board of Directors in 1988 and returned to the
Company as Executive Vice President - Finance and Chief Financial Officer
in 1990. Mr. Moffitt was named President and Chief Executive Officer of the
Company and was elected to the Board of Directors in 1991. In 1995, Mr.
Moffitt was named Chairman of the Board of Directors. Mr. Moffitt is
regional Vice President and a member of the executive committee of the U.S.
Chamber of Commerce, and is on the board of the California Business
Roundtable, the Conference Board and the Business Advisory Council of the
Northwestern University Transportation Center. He also serves on the
boards of the San Francisco Bay Area Council, Boy Scouts of America and the
American Red Cross, and is a member of the Board of Trustees of the
Automotive Safety Foundation and the National Commission Against Drunk
Driving. He is a former member of the Board of Directors and the Executive
Committee of the Highway Users Federation. Mr. Moffitt is Chairman of the
Executive Committee and serves on the Director Affairs Committee of the
Company.
Page 19
Gregory L. Quesnel, 49, President and Chief Operating Officer of the
Company. Mr. Quesnel joined Consolidated Freightways Corporation of
Delaware in 1975 as Director of Financial Accounting. Through several
increasingly responsible financial positions, he advanced to become the top
financial officer of CFCD. In 1989, he was elected Vice President-
Accounting for the Company and in 1990, was named Vice President and
Treasurer. Mr. Quesnel became Senior Vice President-Finance and Chief
Financial Officer of the Company in 1991 and Executive Vice President and
Chief Financial Officer in 1993. In 1997, Mr Quesnel was named President
and Chief Operating Officer of the Company.
David I. Beatson, 50, President and Chief Executive Officer of Emery Air
Freight Corporation and Senior Vice President of the Company. Mr. Beatson
joined CF AirFreight in 1977, advancing through several increasingly
responsible positions to Vice President of National Accounts. After
leaving the Company for a time, he returned to Emery in 1991 as Vice
President of Sales and Marketing. He became President and Chief Executive
Officer of Emery Air Freight Corporation in 1994.
Gerald L. Detter, 53, President and Chief Executive Officer of Con-Way
Transportation Services, Inc. and Senior Vice President of the Company.
Mr. Detter joined CFCD in 1964 as a dockman and advanced through several
positions of increasing responsibility to become Division Manager in
Detroit, Michigan in 1976. In 1982, he was named the first president and
chief executive officer of Con-Way Central Express. In 1997, Mr. Detter
was named President and Chief Executive Officer of Con-Way Transportation
Services, Inc. and Senior Vice President of the Company.
Eberhard G.H. Schmoller, 54, Senior Vice President, General Counsel and
Secretary of the Company. Mr. Schmoller joined CFCD in 1974 as a staff
attorney and in 1976 was promoted to CFCD assistant general counsel. In
1983, he was appointed Vice President and General Counsel of CF AirFreight
and assumed the same position with Emery after the acquisition in 1989.
Mr. Schmoller was named Senior Vice President and General Counsel of the
Company in 1993.
Chutta Ratnathicam, 50, Senior Vice President and Chief Financial Officer
of the Company. Mr. Ratnathicam joined the Company in 1977 as a corporate
auditor and following several increasingly responsible positions was named
Vice President internal auditing for the Company in 1989. In 1991, he was
promoted to Vice President-international for Emery Air Freight Corporation.
In 1997, Mr. Ratnathicam was named Senior Vice President and Chief
Financial Officer of the Company.
ITEM 11. EXECUTIVE COMPENSATION
The required information for Item 11 is presented on pages 12 through 16,
inclusive, of the Proxy Statement dated March 17, 1998, and is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The required information for Item 12 is included on pages 9, 10 and 22 of
the Proxy Statement dated March 17, 1998 and is incorporated herein by
reference.
Page 20
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements and Exhibits Filed
1. Financial Statements
See Index to Financial Information.
2. Financial Statement Schedules
See Index to Financial Information.
3. Exhibits
See Index to Exhibits.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended December 31,
1997.
Page 21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-K Annual
Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CNF TRANSPORTATION INC.
(Registrant)
March 24, 1998 /s/Donald E. Moffitt
Donald E. Moffitt
Chairman and Chief Executive Officer
March 24, 1998 /s/Gregory L. Quesnel
Gregory L. Quesnel
President and Chief Operating Officer
March 24, 1998 /s/Chutta Ratnathicam
Chutta Ratnathicam
Senior Vice President and Chief
Financial Officer
March 24, 1998 /s/Gary D. Taliaferro
Gary D. Taliaferro
Vice President and Controller
Page 22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
March 24, 1998 /s/Donald E. Moffitt
Donald E. Moffitt
Chairman of the Board and Chief
Executive Officer
March 24, 1998
Robert Alpert, Director
March 24, 1998 /s/Earl F. Cheit
Earl F. Cheit, Director
March 24, 1998
Richard A. Clarke, Director
March 24, 1998 /s/Margaret G. Gill _
Margaret G. Gill, Director
March 24, 1998 /s/Robert Jaunich II
Robert Jaunich II, Director
March 24, 1998 /s/W. Keith Kennedy, Jr.
W. Keith Kennedy, Jr., Director
March 24, 1998 /s/Richard B. Madden
Richard B. Madden, Director
Page 23
SIGNATURES
March 24, 1998
Michael J. Murray, Director
March 24, 1998
Robert D. Rogers, Director
March 24, 1998 /s/William J. Schroeder
William J. Schroeder, Director
March 24, 1998 /s/Robert P. Wayman
Robert P. Wayman, Director
Page 24
CNF TRANSPORTATION INC.
FORM 10-K
Year Ended December 31, 1997
___________________________________________________________________________
INDEX TO FINANCIAL INFORMATION
CNF Transportation Inc. and Subsidiaries
The following Consolidated Financial Statements of CNF Transportation Inc.
and Subsidiaries appearing on pages 21 through 39, inclusive, of the
Company's 1997 Annual Report to Shareholders are incorporated herein by
reference:
Report of Independent Public Accountants
Consolidated Balance Sheets - December 31, 1997 and 1996
Statements of Consolidated Income - Years Ended December 31, 1997,
1996 and 1995
Statements of Consolidated Cash Flows - Years Ended December 31, 1997,
1996 and 1995
Statements of Consolidated Shareholders' Equity - Years Ended
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
In addition to the above, the following consolidated financial information
is filed as part of this Form 10-K:
Page
Consent of Independent Public Accountants 25
Report of Independent Public Accountants 25
Schedule II - Valuation and Qualifying Accounts 26
The other schedules have been omitted because either (1) they are neither
required nor applicable or (2) the required information has been included
in the consolidated financial statements or notes thereto.
Page 25
SIGNATURE
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports included and incorporated by reference in this Form 10-K,
into the Company's previously filed Registration Statement File Nos. 2-
81030, 33-52599, 33-60619, 33-60625, 33-60629, 333-26595 and 333-30327.
/s/Arthur Andersen LLP
ARTHUR ANDERSEN LLP
San Francisco, California
March 23, 1998
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
CNF Transportation Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in CNF Transportation Inc.'s
1997 Annual Report to Shareholders incorporated by reference in this Form
10-K, and have issued our report thereon dated January 23, 1998. Our audit
was made for the purpose of forming an opinion on those statements taken as
a whole. The Schedule II--Valuation and Qualifying Accounts on page 26 is
the responsibility of the Company's management and is presented for the
purpose of complying with the Securities and Exchange Commission's rules
and is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in relation to
the basic financial statements taken as a whole.
/s/Arthur Andersen LLP
ARTHUR ANDERSEN LLP
San Francisco, California
January 23, 1998
Page 26
SCHEDULE II
CNF TRANSPORTATION INC.
VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1997
(In thousands)
DESCRIPTION
ALLOWANCE FOR DOUBTFUL ACCOUNTS
ADDITIONS
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
1997 $18,712 $12,528 $ - $(11,085)(a) $20,155
1996 $16,870 $16,729 $ - $(14,887)(a) $18,712
1995 $15,889 $11,017 $ - $(10,036)(a) $16,870
(a) Accounts written off net of recoveries.
Page 27
INDEX TO EXHIBITS
ITEM 14(a)(3)
Exhibit No.
(3) Articles of incorporation and by-laws:
3.1 CNF Transportation Inc. Certificate of Incorporation, as
amended. (Exhibit 4(a) to the Company's registration statement
on Form S-3 dated May 6, 1997.*)
3.2 CNF Transportation Inc. By-laws, as amended, May 3, 1997
(Exhibit 4(b) to the Company's registration statement on Form S-
3 dated May 6, 1997*).
(4) Instruments defining the rights of security holders, including
debentures:
4.1 Certificate of Designations of the Series B Cumulative
Convertible Preferred Stock. (Exhibit 4.1 as filed on Form SE
dated May 25, 1989*)
4.2 Indenture between the Registrant and Bank One, Columbus, NA, as
successor trustee, with respect to 9-1/8% Notes Due 1999, Medium-
Term Notes, Series A and 7.35% Notes due 2005. (Exhibit 4.1 as
filed on Form SE dated March 20, 1990*)
4.3 Form of Security for 9-1/8% Notes Due 1999 issued by
Consolidated Freightways, Inc. (Exhibit 4.1 as filed on Form SE
dated August 25, 1989*)
4.4 Officers' Certificate dated as of August 24, 1989 establishing
the form and terms of debt securities issued by Consolidated
Freightways, Inc. (Exhibit 4.2 as filed on Form SE dated August
25, 1989*)
4.5 Form of Security for Medium-Term Notes, Series A to be issued by
Consolidated Freightways, Inc. (Exhibit 4.1 as filed on Form SE
dated September 18, 1989*)
4.6 Officers' Certificate dated September 18, 1989, establishing the
form and terms of debt securities to be issued by Consolidated
Freightways, Inc. (Exhibit 4.2 as filed on Form SE dated
September 19, 1989*)
4.7 Indenture between the Registrant and The First National Bank of
Chicago Bank, trustee, with respect to debt securities. (Exhibit
4(d) as filed on Form S-3 dated June 27, 1995*)
4.8 Indenture between the Registrant and Bank One, Columbus, NA,
trustee, with respect to subordinated debt securities. (Exhibit
4(e) as filed on Form S-3 dated June 27, 1995*)
4.9 Form of Security for 7.35% Notes due 2005 issued by Consolidated
Freightways, Inc. (Exhibit 4.4 as filed on Form S-4 dated June
27, 1995*)
* Previously filed with the Securities and Exchange Commission
and incorporated herein by reference.
Page 28
Exhibit No.
4.10 Declaration of Trust of the Trust (Exhibit 4(k) to the
Company's Amendment 1 to Form S-3 dated May 30, 1997*)
4.11 Form of Amended and Restated Declaration of Trust of the Trust,
including form of Trust Preferred Security. (Exhibit 4(l) to
the Company's Amendment 1 to Form S-3 dated May 9, 1997*)
4.12 Form of Guarantee Agreement with respect to Trust Preferred
Securities. (Exhibit 4(m) to the Company's Amendment 1 to Form
S-3 dated May 30, 1997*)
Instruments defining the rights of security holders of long-term debt
of CNF Transportation Inc., and its subsidiaries for which
financial statements are required to be filed with this Form 10-K,
of which the total amount of securities authorized under each such
instrument is less than 10% of the total assets of CNF Transportation
Inc. and its subsidiaries on a consolidated basis, have not been filed
as exhibits to this Form 10-K. The Company agrees to furnish a copy
of each applicable instrument to the Securities and Exchange
Commission upon request.
(10) Material contracts:
10.1 Consolidated Freightways, Inc. Long-Term Incentive Plan of 1988
as amended through Amendment 3. (Exhibit 10.2 as filed on Form
SE dated March 25, 1991*#)
10.2 Consolidated Freightways, Inc. Stock Option Plan of 1988 as
amended. (Exhibit 10(i) to the Company's Form 10-K for the year
ended December 31, 1987 as amended in Form S-8 dated
December 16, 1992*#)
10.3 Emery Air Freight Plan for Retirees, effective October 31, 1987.
(Exhibit 4.23 to the Emery Air Freight Corporation
Quarterly Report on Form 10-Q dated November 16, 1987**)
10.4 Consolidated Freightways, Inc. Common Stock Fund (formerly Emery
Air Freight Corporation Employee Stock Ownership Plan,
as effective October 1, 1987 ("ESOP"). (Exhibit 4.33 to
the Emery Air Freight Corporation Annual Report on Form 10-K
dated March 28, 1988**)
* Previously filed with the Securities and Exchange Commission and
incorporated herein by reference.
** Incorporated by reference to indicated reports filed under the
Securities Act of 1934, as amended, by Emery Air Freight
Corporation File No. 1-3893.
# Designates a contract or compensation plan for Management or
Directors.
Page 29
Exhibit No.
10.5 Employee Stock Ownership Trust Agreement, dated as of October 8,
1987, as amended, between Emery Air Freight Corporation and
Arthur W. DeMelle, Daniel J. McCauley and Daniel W. Shea, as
Trustees under the ESOP Trust. (Exhibit 4.34 to the Emery Air
Freight Corporation Annual Report on Form 10-K dated March
28, 1988**)
10.6 Amended and Restated Subscription and Stock Purchase Agreement
dated as of December 31, 1987 between Emery Air Freight
Corporation and Boston Safe Deposit and Trust Company in its
capacity as successor trustee under the Emery Air Freight
Corporation Employee Stock Ownership Plan Trust ("Boston Safe").
(Exhibit B to the Emery Air Freight Corporation Current Report
on Form 8-K dated January 11, 1988**)
10.7 Supplemental Subscription and Stock Purchase Agreement dated as
of January 29, 1988 between Emery Air Freight Corporation and
Boston Safe. (Exhibit B to the Emery Air Freight Corporation
Current Report on Form 8-K dated February 12, 1988**)
10.8 Trust Indenture, dated as of November 1, 1988, between City of
Dayton, Ohio and Security Pacific National Trust Company (New
York), as Trustee and Bankers Trust Company, Trustee. (Exhibit
4.1 to Emery Air Freight Corporation Current Report on Form 8-K
dated December 2, 1988**)
10.9 Bond Purchase Agreement dated November 7, 1988, among the City
of Dayton, Ohio, the Emery Air Freight Corporation and Drexel
Burnham Lambert Incorporated. (Exhibit 28.7 to the Emery Air
Freight Corporation Current Report on Form 8-K dated December
2, 1988**)
10.10 Lease agreement dated November 1, 1988 between the City of
Dayton, Ohio and Emery Air Freight Corporation. (Exhibit 10.1
to the Emery Air Freight Corporation Annual Report on Form 10-K
for the year ended December 31, 1988**)
10.11 $350 million Amended and Restated Credit Agreement dated November
21, 1996 among Consolidated Freightways, Inc. and various
financial institutions. (Exhibit 10.18 to
the Company's Form 10-K for the year ended December 31, 1996*).
10.12 Official Statement of the Issuer's Special Facilities
Revenue Refunding Bonds, 1993 Series E and F dated
September 29, 1993 among the City of Dayton, Ohio and Emery
Air Freight Corporation.
(Exhibit 10.1 to the Company's Form 10-Q for the quarterly
period ended September 30, 1993*).
* Previously filed with the Securities and Exchange Commission and
incorporated herein by reference.
** Incorporated by reference to indicated reports filed under the
Securities Act of 1934, as amended, by Emery Air Freight
Corporation File No. 1-3893.
# Designates a contract or compensation plan for Management or
Directors.
Page 30
Exhibit No.
10.13 Trust Indenture, dated September 1, 1993 between the City of
Dayton, Ohio and Banker's Trust Company as Trustee.
(Exhibit 10.2 to the Company's Form 10-Q for the quarterly
period ended September 30, 1993*).
10.14 Supplemental Lease Agreement dated September 1, 1993 between
the City of Dayton, Ohio, as Lessor, and Emery Air Freight
Corporation, as Lessee. (Exhibit 10.3 to the Company's Form 10-Q
for the quarterly period ended September 30, 1993*).
10.15 Supplemental Retirement Plan dated January 1, 1990. (Exhibit 10.31
to the Company's Form 10-K for the year ended December 31,
1993*#)
10.16 Directors' 24-Hour Accidental Death and Dismemberment Plan.
(Exhibit 10.32 to the Company's Form 10-K for the year ended
December 31, 1993*#)
10.17 Executive Split-Dollar Life Insurance Plan dated January 1,
1994. (Exhibit 10.33 to the Company's Form 10-K for the year
ended December 31, 1993*#)
10.18 Board of Directors' Compensation Plan dated January 1, 1994.
(Exhibit 10.34 to the Company's Form 10-K for the year ended
December 31, 1993*#)
10.19 Directors' Business Travel Insurance Plan. (Exhibit 10.36 to
the Company's Form 10-K for the year ended December 31, 1993*#)
10.20 Deferred Compensation Plan for Executives 1998 Restatement. #
10.21 Amended and Restated 1993 Nonqualified Employee Benefit Plans
Trust Agreement dated January 1, 1995. (Exhibit 10.38 to the
Company's Form 10-K for the year ended December 31, 1994.*#)
10.22 CNF Transportation Inc., 1997 Equity and Incentive Plan for
Non-Employee Directors, as amended June 30, 1997. #
10.23 Amended and Restated Retirement Plan for Directors of
Consolidated Freightways, Inc. dated January 1, 1994. (Exhibit
10.40 to the Company's Form 10-K for the year ended
December 31, 1994.*#)
10.24 CNF Transportation Inc. Return on Equity Plan, as amended through
Amendment No. 1#
10.25 Employee Benefit Matters Agreement by and between Consolidated
Freightways, Inc. and Consolidated Freightways Corporation dated
December 2, 1996. (Exhibit 10.33 to the Company's form 10-K for
the year ended December 31, 1996.*#)
* Previously filed with the Securities and Exchange Commission and
incorporated herein by reference.
** Incorporated by reference to indicated reports filed under the
Securities Act of 1934, as amended, by Emery Air Freight
Corporation File No. 1-3893.
# Designates a contract or compensation plan for Management or
Directors.
Page 31
Exhibit No.
10.26 Distribution Agreement between Consolidated
Freightways, Inc., and Consolidated Freightways Corporation
dated November 25, 1996. (Exhibit 10.34 to the Company's Form 10-
K for the year ended December 31, 1996.*#)
10.27 Transition Services Agreement between CNF Service
Company, Inc. and Consolidated Freightways Corporation dated
December 2, 1996. (Exhibit to the Company's Form 10-K for the
year ended December 31, 1996.*#)
10.28 Tax Sharing Agreement between Consolidated
Freightways, Inc., and Consolidated Freightways Corporation
dated December 2, 1996. (Exhibit to the Company's Form 10-K for
the year ended December 31, 1996.*#)
10.29 CNF Transportation Inc. Executive Incentive Plan for 1998. #
10.30 Con-Way Transportation Services, Inc. Incentive Plan for 1998. #
10.31 Emery Worldwide Incentive Plan for 1998. #
10.32 CNF Transportation Inc. Special Bonus Plan for 1998. #
10.33 CNF Transportation Inc. 1997 Equity and Incentive Plan as amended
June 30, 1997. #
10.34 CNF Transportation Inc. Deferred Compensation Plan for Directors
1998 Restatement. #
(12a) Computation of ratios of earnings to fixed charges
(12b) Computation of ratios of earnings to combined fixed charges and
preferred stock dividends.
(13) Annual report to security holders:
CNF Transportation Inc. 1997 Annual Report to Shareholders (Only those
portions referenced herein are incorporated in this Form 10-K. Other
portions such as "Letter to Shareholders" are not required and, therefore,
are not "filed" as part of this Form 10-K.)
(21) Significant Subsidiaries of the Company.
(27) Financial Data Schedule
* Previously filed with the Securities and Exchange Commission and
incorporated herein by reference.
# Designates a contract or compensation plan for Management or
Directors.
Page 32
Exhibit No.
(99) Additional documents:
99.1 CNF Transportation Inc. 1997 Notice of Annual Meeting and
Proxy Statement dated March 17, 1998. (Only those portions
referenced herein are incorporated in this Form 10-K. Other
portions are not required and, therefore, are not "filed" as a
part of this Form 10-K. *)
99.2 Note Agreement dated as of July 17, 1989, between the ESOP,
Consolidated Freightways, Inc. and the Note Purchasers named
therein. (Exhibit 28.1 as filed on Form SE dated July 21,
1989*)
99.3 Guarantee and Agreement dated as of July 17, 1989, delivered by
Consolidated Freightways, Inc. (Exhibit 28.2 as filed on Form
SE dated July 21, 1989*).
99.4 Form of Restructured Note Agreement between Consolidated
Freightways, Inc., Thrift and Stock Ownership Trust as Issuer
and various financial institutions as Purchasers named therein,
dated as of November 3, 1992. (Exhibit 28.4 to the Company's
Form 10-K for the year ended December 31, 1992*).
The remaining exhibits have been omitted because either (1) they are
neither required nor applicable or (2) the required information has been
included in the consolidated financial statements or notes thereto.
* Previously filed with the Securities and Exchange Commission and
incorporated herein by reference.
# Designates a compensation plan for Management or Directors.