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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, 1998 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, 1999: $1,763,505,000.
Number of shares of Common Stock outstanding
as of February 28, 1999: 48,108,715
DOCUMENTS INCORPORATED BY REFERENCE
Parts I, II and IV
CNF Transportation Inc. 1998 Annual Report to Shareholders (only those
portions referenced herein are incorporated in this Form 10-K).
Part III
Proxy Statement dated March 22, 1999 (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, 1998
___________________________________________________________________________
INDEX
Item Page
PART I
1. Business 3
2. Properties 13
3. Legal Proceedings 15
4. Submission of Matters to a Vote of Security Holders 15
PART II
5. Market for the Company's Common Stock and Related
Security Holder Matters 15
6. Selected Financial Data 16
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 16
8. Financial Statements and Supplementary Data 17
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 17
PART III
10. Directors and Executive Officers of the Company 17
11. Executive Compensation 18
12. Security Ownership of Certain Beneficial Owners
and Management 18
13. Certain Relationships and Related Transactions 18
PART IV
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 19
SIGNATURES 20
INDEX TO FINANCIAL INFORMATION 23
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CNF TRANSPORTATION INC.
FORM 10-K
Year Ended December 31, 1998
___________________________________________________________________________
PART I
ITEM 1. BUSINESS
CNF Transportation Inc. and subsidiaries (collectively the Registrant or
the Company) is a leading provider of transportation and logistics
services. The continuing operations of the Company encompass four business
segments: Con-Way Transportation Services (Con-Way), Emery Worldwide
(Emery), Menlo Logistics (Menlo), and Other. Con-Way provides regional
one- and two-day LTL freight trucking and full-service truckload freight
delivery throughout the U.S., portions of Canada and Mexico, and expedited
and guaranteed ground transportation. In 1998, Con-Way introduced
integrated supply chain services to provide logistics solutions to targeted
customers. Emery provides expedited and deferred domestic and
international air cargo services, ocean delivery, and customs brokerage.
Domestically, Emery relies primarily on aircraft operated by Emery
Worldwide Airlines (EWA) and its ground fleet to provide its services.
Internationally, Emery acts principally as a freight forwarder. Menlo is a
full-service contract logistics company that specializes in developing and
managing complex distribution networks. The Other operations consist
primarily of the Priority Mail contract with the U.S. Postal Service
(USPS), and include Road Systems, a trailer manufacturer, and VantageParts,
a wholesale distributor of truck parts and supplies.
EWA provides nightly air delivery services for Emery and Express Mail (a
next-day delivery service) under a contract awarded by the USPS. The
operations of the Express Mail contract are reported in the Emery business
segment. In 1997, EWA was awarded a new contract for the sortation and
transportation of Priority Mail (a second-day delivery service) in the
eastern United States. The operations of the Priority Mail contract are
included in the Other business segment.
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 its related businesses. The Registrant's shareholders received one
share of CFC stock for every two shares of the Registrant's stock that was
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.
In the fourth quarter of 1998, the Company adopted SFAS 131, "Disclosures
about Segments of an Enterprise and Related Information". SFAS 131 changed
the method of disclosing segment information to the manner in which the
Company's chief operating decision maker organizes the components for
making operating decisions, assessing performance and allocating resources.
Further discussion of SFAS 131, and an
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analysis by operating segment of revenues, operating income,
depreciation and amortization and capital expenditures
for the years ended December 31, 1998, 1997 and 1996, and
identifiable assets as of those dates are presented in Note 15 on pages 42
and 43 of the 1998 Annual Report to Shareholders and is incorporated herein
by reference.
The operations of the Company are primarily conducted in the U.S. but to an
increasing extent are conducted in major foreign countries. Geographic
group information is also presented in Note 15 of the 1998 Annual Report to
Shareholders. Intersegment revenues and related earnings have been
eliminated to reconcile to consolidated revenue and operating income.
CON-WAY TRANSPORTATION SERVICES SEGMENT
Con-Way Transportation Services (Con-Way) provides time-definite and day-
definite ground transportation services in the form of regional one- and
two-day LTL freight trucking, and full-service nationwide truckload freight
delivery, inter-regional joint service, guaranteed service and expedited
delivery. In 1998, Con-Way also introduced integrated supply chain
services to provide logistics solutions to targeted customers. Con-Way's
infrastructure facilitates service to all 50 states in the U.S. and Puerto
Rico and certain major population centers in Canada and Mexico.
Con-Way's strategies continue to emphasize operating margin improvement,
particularly through efforts to secure pricing commensurate with its
premium service. In addition, Con-Way's strategies include efforts to
increase the utilization of its freight system especially in the Pacific
Northwest and northeastern U.S. (areas in which it expanded its operations
in 1995 and 1996) and through the introduction and expansion of new premium
services.
Con-Way Regional Carriers
Con-Way's 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 26,000
trucks, tractors and trailers at December 31, 1998. The regional carriers
include:
Con-Way Central Express (CCX), which was founded in June 1983, today
serves 23 states of the central and northeast U.S., Ontario and Quebec,
Canada and Puerto Rico. At December 31, 1998, CCX operated 211 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 100 service
centers at December 31, 1998.
Con-Way Western Express (CWX), which was founded in May 1983, 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, 1998, CWX operated 81 service
centers.
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In 1998, Con-Way completed coast-to-coast service by fully linking its
three regional carriers. The expansion of Con-Way's joint service
offerings permits Con-Way's three regional carriers to provide full 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
generates 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
to 561 in 1998. Also, average revenue per shipment grew from $111 in 1994
to $140 in 1998. The average weight per shipment was approximately 1,100
pounds in 1998.
Con-Way Truckload Services, Con-Way NOW and Con-Way Integrated Services
Con-Way's 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. In addition,
CWT provides on-time service as a subcontractor for the Priority Mail
operation. 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 now has
delivery service to 48 states and parts of Canada. In 1998, Con-Way
introduced Con-Way Integrated Services to provide logistics services
including operating multi-client warehouses for medium-sized shipping
customers.
Employees
Con-Way's domestic employment has increased to approximately 16,600 regular
and supplemental employees at December 31, 1998 from 15,000 employees at
December 31, 1997 and approximately 14,300 at December 31, 1996.
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. Principal competitors of
Con-Way include both regional carriers and national LTL companies (some
of which have continued to extend into regional markets and to acquire
and combine formerly independent regional carriers into inter-regional
groups). Competition in the trucking industry is based on, among other
things, freight rates, quality of service, reliability, transit times and
scope of operations. Over the past 15 years, periods of over-capacity in
the trucking industry have led to intense competition and price
discounting, resulting in decreased margins and a significant number of
business failures.
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Federal and State Regulation
Con-Way's business is subject to extensive regulation by various federal
and state governmental entities. 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.
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.
EMERY WORLDWIDE SEGMENT
Emery Worldwide (Emery) was formed when the Company purchased Emery Air
Freight Corporation (EAFC) in April 1989. EAFC provides both domestic and
international air freight services. In North America, EAFC relies
principally on the dedicated aircraft of a separate subsidiary of the
Company, Emery Worldwide Airlines, Inc. (EWA) and EAFC's own ground fleet
to provide commercial door-to-door delivery for next-day, second-day and
deferred shipments. Internationally, EAFC acts principally as a freight
forwarder by providing door-to-door and airport-to-airport commercial
services in approximately 200 countries. International business is defined
as shipments that either originate or terminate outside of the United
States. At December 31, 1998, EAFC operated approximately 2,000 trucks,
vans, tractors and trailers, as well as equipment provided by its agents.
In providing the airlift for the commercial air freight operations of EAFC,
EWA utilized a fleet of 76 dedicated aircraft as of December 31, 1998. Of
these aircraft, 49 were leased on a long-term basis, 6 were owned and 21
were contracted on a short-term basis to supplement nightly capacity and to
provide feeder services. At December 31, 1998, the nightly lift capacity
of this aircraft fleet, excluding charters, was over 4 million pounds.
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In addition to providing aircraft for EAFC's commercial air freight
operations, EWA also provides 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, 1998, EWA
used 23 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. Excluding Priority
Mail, Emery recognized approximately $214 million, $163 million and $140
million of revenue in 1998, 1997 and 1996, respectively, from contracts and
other arrangements to carry mail, primarily Express Mail, for the USPS.
The operations of the Express Mail contract and the separate peak-season
mail contracts are reported in the Emery Worldwide segment.
In 1997, EWA was also awarded a new contract for the sortation and
transportation of Priority Mail (a second-day delivery service) originating
in the eastern United States. In compliance with the adoption of SFAS 131,
the operations of the Priority Mail contract are included in the Other
segment. (Refer to Other Segment for discussion of the Priority Mail
operations).
While Emery's freight system is designed to handle parcels, packages and
shipments of a variety of sizes and weights, its air freight operations are
focused primarily on heavy air freight (defined as shipments of 70 pounds
or more) as opposed to envelopes. In 1998, Emery's air freight shipments
weighed an average of approximately 248 pounds and generated average
revenue of approximately $229 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 and deferred deliveries.
EAFC provides services in North America through a system of sales offices
and service centers, and overseas through foreign subsidiaries, branches,
service centers and agents. EAFC's door-to-door service within North
America relies on the airlift system of EWA, supplemented with commercial
airlines. Internationally, EAFC operates primarily as an air freight
forwarder using commercial airlines, while utilizing controlled lift only
on a limited basis. EAFC's expansion plans have been focused on
international operations due to the expectation of greater opportunities in
an expanding worldwide economy and the lower capital requirements of the
non-asset based international operations. As a result of this strategy,
EAFC's total international air freight revenues increased 67% from 1994
through 1998, compared with a 15% increase for its total North American air
freight revenues for the same period. For 1998, total international
revenues of approximately $960 million comprised nearly 44% of Emery's
total revenues. Emery's fastest-growing regions internationally have been
Latin America and Asia, although in 1998 Asia declined as a result of a
severe regional economic downturn which also adversely impacted other
international regions.
EAFC's strategic initiatives include efforts to improve service and
reliability in order to achieve higher revenue-per-pound. Combined with
efforts to improve
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efficiencies, management expects these initiatives to
improve financial results. Accordingly, EAFC is modernizing its main Hub
facility, initiating programs to improve freight handling, increasing use
of owned agents in international markets and globally applying new
technologies. In addition, EWA is making modifications to its aircraft
fleet and increasing the pool of available aircraft.
EAFC's hub-and-spoke system is based at the Dayton, Ohio International
Airport, 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, generally
handling over 5 million pounds of freight daily. In 1997, EAFC began a $60
million redesign and expansion of the Hub that is expected to increase
capacity 30% by the year 2000. The operation of the Hub in conjunction
with EWA's airlift system contributes to EAFC's ability to maintain service
reliability. In addition to the Dayton Hub, EAFC 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, EAFC opened new distribution
centers in Singapore and Miami to serve Asia and Latin America,
respectively.
Because of the growing prominence of its international and logistics
services, Emery management modified certain of its strategic initiatives in
1998. Emery's growth strategy is focused on leveraging its unique position
as a worldwide, integrated forwarder. To execute this strategy, Emery will
further emphasize its inter-related logistics, expedited customs clearance
and ocean capabilities, while maintaining its key strength of time-
definite, global air freight services. Among its efforts to grow worldwide
revenues, Emery has acquired several agents in key international locations
and entered into partnerships with several others. In 1998, Emery launched
a joint venture in China to provide freight forwarding and logistics
services.
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 ground transportation 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,
operates warehouse and distribution centers for customers in six countries.
Emery Customs Brokerage (ECB) provides full service customs clearance
regardless of mode or carrier. Through ECB, Emery also serves as a global
freight forwarder and non-vessel-operating common carrier that provides
full and less-than-container load service.
Employees
As of December 31, 1998, Emery had approximately 11,500 regular full-time
employees compared with approximately 10,000 employees at December 31, 1997
and about 9,000 at December 31, 1996.
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Approximately 13% of the Emery's full-time employees were represented by
various labor unions. This percentage includes EWA's pilots who, on July
2, 1997, voted to approve representation by the Airline Pilots Association
(ALPA). Although contract negotiations between the Company and ALPA have
begun, the Company is unable to predict the outcome of those negotiations
or their effect on its 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. In 1998, Emery saw an
increase in competition from ground based competitors for shipments under
1000 pounds and moving less than 1000 miles. 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
EWA's and EAFC'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. EAFC, 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 EWA's or EAFC's
operations. If such restrictions were to be imposed with respect to the
airports at which EWA's or EAFC's activities are centered (particularly
EAFC's major Hub at the Dayton International Airport), and no alternative
airports were available to serve the
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affected areas, there could be a material adverse
effect on EWA's or EAFC'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 EWA'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 estimates it will make
capital expenditures of approximately $10 million in 1999 to modify owned
or leased aircraft in order to comply with these requirements.
Regulation of Ground Transportation
When EAFC 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 the FHWA and the STB, respectively. Such ground
transportation, however, is subject to comprehensive trucking safety
regulation by the FHWA as described in the Con-Way Transportation Services
section. In addition, EAFC 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.
MENLO LOGISTICS SEGMENT
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 and
dedicated contract carriage. In serving its customers, Menlo uses and
develops logistics optimization and customer order and shipment tracking
software, and also provides real time warehouse, transportation and order
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 technology 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.
Menlo operates in a relatively new industry and has a limited number of
major competitors. Nonetheless, competition for the provision of logistics
services is intense. Menlo's competitors include both domestic and foreign
logistics companies and the logistics arms of integrated transportation
companies. Competition in this industry is based largely on computer
system skills and the ability to rapidly implement logistics solutions.
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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. Second, 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.
Menlo's ability to provide solutions to intricate distribution issues for
large companies with complex supply chains helped them secure six new
projects in 1998. One of Menlo's primary strategies is also to increase
the services that it provides to current customers. In 1997 and 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 1997
and 1996 by new clients such as Imation, Nike, Frigidaire, Herman Miller,
GM Delphi and Bell Atlantic. 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 seeks 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, 1998, Menlo had a regular full-time workforce of
approximately 1,800 compared to approximately 1,300 employees at December
31, 1997 and 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 as a conduit through which business can be
referred to Con-Way or Emery. The independence of Menlo from the Company's
other primary business units is viewed as essential to maintaining Menlo's
credibility with its customers.
OTHER SEGMENT
The Other segment comprises primarily operations under the Priority Mail
contract with the USPS, but also includes the operations of Road Systems
and VantageParts.
Priority Mail Contract
In April 1997, the USPS awarded EWA a 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. At the time the Priority Mail contract was entered into,
the USPS 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
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Company will not be less than this amount.
Although the contract does not specifically set forth a
minimum volume of Priority Mail to be handled by the Company, current
revenue run rates are consistent with the Company receiving at least the
projected $1.7 billion of revenue over the life of the contract.
Among other things, the Priority Mail contract called for EWA to lease or
acquire, improve, equip, fully staff and operate ten Priority Mail
Processing Centers (PMPCs) in ten major metropolitan areas, primarily along
the eastern seaboard. All ten of the PMPCs were operational as of June 30,
1998. In 1998, the PMPC's processed over 350 million pieces of priority
mail.
EWA provides air transportation under the new USPS contract, manages the
ten PMPCs and provides ground transportation between the PMPCs and other
USPS facilities. Con-Way Truckload Services, a subsidiary of Con-Way
Transportation Services, acts as a subcontractor and provides highway
transportation between PMPCs. All revenues from the Priority Mail
operations are reported in the Other segment.
At December 31, 1998, the Priority Mail operations had approximately 3,800
regular full-time employees.
Road Systems and VantageParts
Two non-carrier operations are included in the Other segment and 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 1998, 1997 and 1996 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 46 of the 1998 Annual Report to
Shareholders and is incorporated herein by reference.
The Company operates in industries that are affected directly by general
economic conditions and seasonal fluctuations, both of which affect demand
for transportation services. In a typical year for the trucking and air
freight industries, the months of September and October usually have the
highest business levels while the months of January and February usually
have the lowest business levels. Operations under the Priority Mail
contract peak in December due primarily to higher shipping demand related
to the holiday season.
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
PAGE 13
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 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.
ITEM 2. PROPERTIES
The following summarizes the freight service centers, warehouses and
sortation centers operated by the Company at December 31, 1998:
Owned Leased Total
Con-Way Transportation Services 80 289 369
Emery Worldwide 29 229 258
Menlo Logistics - 16 16
Priority Mail - 10 10
The following table sets forth the location and square footage of the
Company's principal freight service centers, warehouses and sortation
centers at December 31, 1998:
Location Square Footage
Con-Way - freight service centers
Des Plaines, IA 100,440
Indianapolis, IN 95,498
Columbus, OH 95,430
Oakland, CA 91,240
Coldwater, MI 88,234
Atlanta, GA 88,095
PAGE 14
Aurora, IL 86,475
Chicago, IL 84,500
Dallas, TX 82,000
Cincinnati, OH 80,346
Cleveland, OH 77,419
Shreveport, LA 74,040
Little Falls, NJ 73,190
Newburgh, NY 69,106
Houston, TX 67,160
Detroit, MI 66,320
Minneapolis, MN 65,873
Santa Fe Springs, CA 63,136
Chicopee, MA 62,378
Jackson, MS 61,860
Charlotte, NC 59,450
Carlstadt, NJ 54,629
Jacksonville, FL 53,667
Gary, IN 51,950
Milwaukee, WI 51,460
New Orleans, LA 51,050
Emery - freight service centers and warehouses
* Dayton, OH 800,000
Miami, FL 118,370
Kennedy Airport, NY 104,355
Los Angeles, CA 75,707
San Jose, CA 73,500
Chicago, IL 66,000
Dallas, TX 58,200
Atlanta, GA 56,000
Columbus, OH 55,000
* Facility partially or wholly financed through the issuance of
industrial revenue bonds. Principal amount of debt is secured by the
property.
Menlo - warehouses
Richmond, VA 315,867
Lathrop, CA 276,000
Memphis, CA 250,600
Holland, MI 120,000
Kansas City, MO 115,260
Dayton, OH 103,062
Ontario, CA 96,950
Middletown, PA 90,571
Boise, ID 80,600
Grove City, OH 78,505
Medford, OR 70,000
PAGE 15
Priority Mail - processing centers
Newark, NJ 301,742
Bethpage, NY 281,054
Boston, MA 260,000
Philadelphia, PA 246,091
Pittsburgh, PA 205,718
Miami, FL 195,148
Orlando, FL 167,051
Rochester, NY 161,211
Hartford, CT 158,200
Jacksonville, FL 124,507
ITEM 3. LEGAL PROCEEDINGS
The legal proceedings of the Company are summarized in Notes 6 and 13 on
pages 35, 36, 41 and 42 of the 1998 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 1998 and 1997
are included in Note 16 on page 44 of the 1998 Annual Report to
Shareholders and are incorporated herein by reference.
Cash dividends on common shares were 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 16 on page 44 of the 1998 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
page 33 of the 1998 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 $194
million of dividend payments at December 31, 1998).
As of December 31, 1998, there were 9,870 holders of record of the common
stock ($.625 par value) of the Company. The number of shareholders is also
presented in
PAGE 16
the "Five Year Financial Summary" on page 46 of the 1998
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 46 of the 1998 Annual Report to Shareholders and is
incorporated herein by reference.
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 23, inclusive, of the 1998 Annual Report to
Shareholders and is incorporated herein by reference.
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 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 Priority Mail contract with the USPS;
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; 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, tax and environmental matters. Although CFC is, in
general, either the primary or secondary obligor or jointly and severally
liable with the Company with respect to these matters, a failure to pay or
other default by CFC with respect to the obligations as to which the
Company is or may be, or may be perceived to be, liable, whether because of
CFC's bankruptcy or insolvency or otherwise, could lead to substantial
claims against the Company. As a result of the foregoing, no assurance can
be given as to future results of operations or financial condition.
PAGE 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and Report of Independent Public
Accountants are presented on pages 24 through 45, inclusive, of the 1998
Annual Report to Shareholders and are incorporated herein by reference.
The unaudited quarterly financial data is included in Note 16 on page 44 of
the 1998 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 9, inclusive, of the Company's Proxy Statement dated March 22, 1999
and those pages are incorporated herein by reference.
The Executive Officers of the Company, their ages at December 31, 1998, and
their applicable business experience are as follows:
Gregory L. Quesnel, 50, President and Chief Executive Officer of the
Company. Mr. Quesnel joined the CNF organization as Director of Accounting
in 1975, following several years of professional experience with major
corporations in the petroleum and wood products industries. Mr. Quesnel
advanced through increasingly responsible positions and in 1986 was
promoted to the top financial officer position at the Company's largest
subsidiary. In 1990, Mr. Quesnel was elected Vice President and Treasurer
of CNF; in 1991, he was elected Senior Vice President and Chief Financial
Officer; and he was promoted to Executive Vice President and Chief
Financial Officer in 1994. As part of a planned succession, Mr. Quesnel
was elected President and Chief Operating Officer in July 1997. In May
1998, Mr. Quesnel was named President and Chief Executive Officer of the
Company. At that time, he was also elected as a member of the CNF Board of
Directors. Mr. Quesnel is a member of the Financial Executives Institute,
the California Business Roundtable, and the Conference Board. He also
serves as a member of the Executive Committee of the Bay Area Council of
the Boy Scouts of America. Mr. Quesnel earned a bachelor's degree in
finance from the University of Oregon and holds a master's degree in
business administration from the University of Portland. Mr. Quesnel is a
member of the Executive and Director Affairs Committees of the Board.
Gerald L. Detter, 54, President and Chief Executive Officer of Con-Way
Transportation Services and Senior Vice President of the Company. Mr.
Detter joined the former Consolidated Freightways Corporation of Delaware
(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 to his
current position.
PAGE 18
Roger Piazza, 59, President and Chief Executive Officer of Emery Worldwide
and Senior Vice President of the Company. Mr. Piazza originally joined the
former CF AirFreight in 1976 as manager of the Detroit Service Center.
During the following ten years he served as a division manager and area
vice president. Following the merger of CF AirFreight and Emery Worldwide
in 1989, Mr. Piazza was named Vice President - North America. In 1998, Mr.
Piazza was named to his current position.
Chutta Ratnathicam, 51, 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 Audit for the Company in 1989. In 1991, he was
promoted to Vice President-International for Emery. In 1997, Mr.
Ratnathicam was named Senior Vice President and Chief Financial Officer of
the Company.
Eberhard G.H. Schmoller, 55, 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 the former 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.
John H. Williford, 42, President and Chief Executive Officer of Menlo
Logistics and Senior Vice President of the Company. Mr. Williford joined
the Company in 1981 as an Economics/Senior Marketing Analyst. In 1984, he
was named Director of Marketing for the Company's international operations
and was later appointed Director of Marketing for the Company. Since its
inception in 1990, Mr. Williford has been the principal executive in charge
of Menlo Logistics, first as General Manager and then as President and
Chief Executive Officer. In 1998, Mr. Williford was named Senior Vice
President of the Company.
ITEM 11. EXECUTIVE COMPENSATION
The required information for Item 11 is presented on pages 13 through 17,
inclusive, of the Company's Proxy Statement dated March 22, 1999, 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 10, 11 and 25 of
the Proxy Statement dated March 22, 1999 and is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PAGE 19
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,
1998.
PAGE 20
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 26, 1999 /s/Gregory L. Quesnel
Gregory L. Quesnel
President and Chief Executive Officer
March 26, 1999 /s/Chutta Ratnathicam
Chutta Ratnathicam
Senior Vice President and Chief
Financial Officer
March 26, 1999 /s/Gary D. Taliaferro
Gary D. Taliaferro
Corporate Controller
PAGE 21
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 26, 1999 /s/Donald E. Moffitt
Donald E. Moffitt
Chairman of the Board
March 26, 1999 /s/Gregory L. Quesnel
Gregory L. Quesnel
President, Chief Executive Officer and
Director
March 26, 1999 /s/Robert Alpert
Robert Alpert, Director
March 26, 1999 /s/Earl F. Cheit
Earl F. Cheit, Director
March 26, 1999 ___________________________
Richard A. Clarke, Director
March 26, 1999 /s/Margaret G. Gill _
Margaret G. Gill, Director
March 26, 1999 /s/Robert Jaunich II
Robert Jaunich II, Director
March 26, 1999 _______________________________
W. Keith Kennedy, Jr., Director
PAGE 22
SIGNATURES
March 26, 1999 /s/Richard B. Madden
Richard B. Madden, Director
March 26, 1999 /s/Michael J. Murray
Michael J. Murray, Director
March 26, 1999 /s/Robert D. Rogers_
Robert D. Rogers, Director
March 26, 1999 /s/William J. Schroeder
William J. Schroeder, Director
March 26, 1999 /s/Robert P. Wayman
Robert P. Wayman, Director
PAGE 23
CNF TRANSPORTATION INC.
FORM 10-K
Year Ended December 31, 1998
___________________________________________________________________________
INDEX TO FINANCIAL INFORMATION
CNF Transportation Inc. and Subsidiaries
The following Consolidated Financial Statements of CNF Transportation Inc.
and Subsidiaries appearing on pages 24 through 45, inclusive, of the
Company's 1998 Annual Report to Shareholders are incorporated herein by
reference:
Report of Independent Public Accountants
Consolidated Balance Sheets - December 31, 1998 and 1997
Statements of Consolidated Income - Years Ended December 31, 1998,
1997 and 1996
Statements of Consolidated Cash Flows - Years Ended December 31, 1998,
1997 and 1996
Statements of Consolidated Shareholders' Equity - Years Ended
December 31, 1998, 1997 and 1996
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 24
Report of Independent Public Accountants 24
Schedule II - Valuation and Qualifying Accounts 25
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 24
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, 333-30327, 333-
48733 and 333-56667.
/s/Arthur Andersen LLP
ARTHUR ANDERSEN LLP
San Francisco, California
March 25, 1999
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
1998 Annual Report to Shareholders incorporated by reference in this Form
10-K, and have issued our report thereon dated January 22, 1999. 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 25 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 22, 1999
PAGE 25
SCHEDULE II
CNF TRANSPORTATION INC.
VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1998
(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
1998 $20,155 $11,050 $ - $(10,107)(a) $21,098
1997 $18,712 $12,528 $ - $(11,085)(a) $20,155
1996 $16,870 $16,729 $ - $(14,887)(a) $18,712
(a) Accounts written off net of recoveries.
PAGE 26
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 September 28,
1998 (Exhibit 4(b) to the Company's registration statement on
Form S-3 dated November 10, 1998.*).
(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 27
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 28
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 29
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.
(Exhibit 10.20 to the Company's Form 10-K for the year ended
December 31, 1997. *#)
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.
(Exhibit 10.33 to the Company's Form 10-K for the year ended
December 31, 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 (Exhibit 10.24 to the Company's Form
10-K for the year ended December 31, 1997. *#)
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 30
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. 1997 Equity and Incentive Plan
as amended June 30, 1997. (Exhibit 10.22 to the Company's Form
10-K for the year ended December 31, 1997. *#)
10.30 CNF Transportation Inc. Deferred Compensation Plan for
Directors 1998 Restatement. (Exhibit 10.34 to the Company's Form
10-K for the year ended December 31, 1997. *#)
10.31 CNF Transportation Inc. Summary of Incentive Compensation plans
for 1999. #
10.32 CNF Transportation Inc. Executive Severance Plan. #
(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. 1998 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 31
Exhibit No.
(99) Additional documents:
99.1 CNF Transportation Inc. 1998 Notice of Annual Meeting and
Proxy Statement dated March 22, 1999. (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.