UNITED STATES
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 1-12149
CONSOLIDATED FREIGHTWAYS CORPORATION
Incorporated in the State of Delaware
I.R.S. Employer Identification No. 77-0425334
175 Linfield Drive, Menlo Park, CA 94025
Telephone Number (650) 326-1700
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each
Exchange on
Title of Each Class Which Registered
Common Stock ($.01 par value) NASDAQ
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. ___X___
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 on the
National Automated System of the National Association of Securities
Dealers Inc. Automated Quotation System on February 27, 1998:
$288,354,420
Number of shares of Common Stock outstanding
as of February 27, 1998: 23,020,286
DOCUMENTS INCORPORATED BY REFERENCE
Parts I, II and IV
Consolidated Freightways Corporation 1997 Annual Report to Shareholders
(only those portions referenced herein are incorporated in this Form
10-K).
Part III
Part III is incorporated by reference from the proxy statement to be
filed in connection with the Company's 1998 Annual Meeting of
Shareholders. (Only those portions referenced herein are incorporated
in this Form 10-K).
Page 1
CONSOLIDATED FREIGHTWAYS CORPORATION
FORM 10-K
Year Ended December 31, 1997
_______________________________________________________________________
INDEX
Item Page
PART I
1. Business 3
2. Properties 8
3. Legal Proceedings 9
4. Submission of Matters to a Vote of Security Holders 9
PART II
5. Market for the Company's Common Stock and
Related Security Holder Matters 9
6. Selected Financial Data 9
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
7A. Quantitative and Qualitative Disclosures About
Market Risk 10
8. Financial Statements and Supplementary Data 10
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 10
PART III
10. Directors and Executive Officers of the Company 11
11. Executive Compensation 11
12. Security Ownership of Certain Beneficial
Owners and Management 11
13. Certain Relationships and Related Transactions 12
PART IV
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 12
SIGNATURES 13
INDEX TO FINANCIAL INFORMATION 15
Page 2
CONSOLIDATED FREIGHTWAYS CORPORATION
FORM 10-K
Year Ended December 31, 1997
_______________________________________________________________________
PART I
ITEM 1. BUSINESS
(a) General Development of Business
Consolidated Freightways Corporation is a holding company that was
incorporated in Delaware in 1996. It is herein referred to as the
"Registrant" or "Company". Formerly a subsidiary of CNF Transportation
Inc. (the former parent) through December 1, 1996, the Company was spun-
off in a tax free distribution (the Distribution) to shareholders of
the former parent. The Company consists of Consolidated Freightways
Corporation of Delaware (CFCD), a nationwide motor carrier,
incorporated in 1958 as successor to the original trucking company
organized in 1929, and its Canadian operations, including Canadian
Freightways, Ltd., Epic Express, Milne & Craighead, Canadian Sufferance
Warehouses, Blackfoot Logistics and other related businesses; Redwood
Systems, a third party logistics provider; and the Leland James Service
Corporation, an administrative service provider. The Company provides
less-than-truckload transportation and logistics services nationwide
and in parts of Canada, Mexico, the Caribbean area, Latin and Central
America, Europe and Pacific Rim countries.
(b) Financial Information About Industry Segments
The Company operates in a single industry segment.
(c) Narrative Description of Business
The Company, headquartered in Menlo Park, California, is the holding
company of CFCD, a full-service trucking company providing less-than-
truckload freight services nationwide and in Canada and Mexico, and one-
stop international freight service between the United States and 70
countries worldwide through operating agreements with ocean carriers
and a network of international partners. Operations consist of an
extensive transportation network that typically moves shipments of
manufactured or non-perishable processed products having relatively
high value and requiring consistent, expedited service, compared to the
bulk raw materials characteristically transported by railroads,
pipelines and water carriers. Less-than-truckload (LTL) is an industry
designation for shipments weighing less than 10,000 pounds. CFCD is
one of the nation's largest LTL motor carriers in terms of 1997
revenues. The Company also provides logistics services through its
wholly-owned subsidiary, Redwood Systems, Inc. (Redwood). Established
in January 1997, Redwood is a third party, non-asset based logistics
company that offers complete supply chain management services including
dedicated contract warehousing and carriage, just-in-time delivery and
specialized time-definite distribution, information-based logistics
services and worldwide multi-modal logistics.
Page 3
CFCD's primary competitors in the national LTL market are Yellow
Freight System, Inc., Roadway Express, Inc. and Arkansas Best
Corporation. CFCD also competes for LTL freight with regional LTL
motor carriers, small package carriers, private carriage and freight
forwarders. Competition for freight is based primarily upon price,
service consistency and transit time. In an effort to provide faster
service and to better compete, CFCD implemented a comprehensive
reengineering of its line-haul operations in October 1995. This
reengineering, called the Business Accelerator System (BAS), replaced
CFCD's traditional hub-and-spoke network with one that moves freight
directionally from point-to-point and streamlines the freight network.
BAS has the effect of reducing miles and freight handling, thereby
reducing transit times and costs as well as more efficiently using
system capacity. This reengineering, in conjunction with value added
service offerings and use of lower-cost rail services allowed the
Company to return to profitability in 1997.
As a large carrier of LTL general freight, at December 31, 1997, CFCD
operated approximately 39,100 vehicle units including inter-city
tractors and trailers and pick-up and delivery units. It had a network
of 357 U.S. and Canadian freight terminals, metro centers and regional
consolidation centers.
CFCD's operations are supported by a sophisticated data processing
system for the control and management of the business. Management is in
the initial phases of replacing or converting the Company's financial
and operational systems and applications for Year 2000 compliance.
Based upon a current assessment of systems and applications requiring
modification, management expects to spend $25 to $30 million over
the next two years. Of this amount, approximately $11 million
relates to the purchase of new hardware and software, which
will be capitalized and amortized over their estimated useful lives.
Management expects to have all of its financial and operational systems
converted by mid 1999. However, to the extent systems are not
converted by the year 2000, there could be a material adverse effect on
the Company's operations.
There is a broad diversity in the customers served, size of shipments,
commodities transported and length of haul. No single commodity
accounted for more than a small fraction of total revenues.
CFCD operates daily schedules utilizing relay drivers who drive
approximately eight to ten hours each day and sleeper teams which in
1997 approximated 33% of all linehaul miles in North America. Road
equipment consists of one tractor pulling two 28-foot double trailers
or, to a limited extent, one semi-trailer or three 28-foot trailers.
CFCD generally utilizes trailer equipment that is 102 inches in width.
In 1997, CFCD operated in excess of 426 million linehaul miles in North
America, almost all of which was conducted by equipment in doubles and
triples configuration. The accident frequency of the triples
configuration was lower than all other types of vehicle combinations
used by CFCD.
CFCD and several Canadian subsidiaries serve Canada through terminals
in the provinces of Alberta, British Columbia, Manitoba, New Brunswick,
Nova Scotia, Ontario, Quebec, Saskatchewan and in the Yukon Territory.
The Canadian operations utilize a fleet of over 1,250 trucks, tractors
and trailers.
Page 4
Cyclicality and Seasonality
The LTL trucking industry is affected directly by the state of the
overall economy and seasonal fluctuations, which affect the amount of
freight to be transported. Freight shipments, operating costs and
earnings are also affected adversely by inclement weather conditions.
The months of September, October and November of each year usually have
the highest business levels while the first quarter has the lowest.
Employees
At December 31, 1997, approximately 85% of the Company's domestic
employees were represented by various labor unions, primarily the
International Brotherhood of Teamsters (IBT). CFCD and the IBT are
parties to the National Master Freight Agreement (NMFA) which expires
on March 31, 1998. On February 9, 1998, CFCD, along with three other
national motor freight carriers, agreed on a tentative, new five-year
NMFA with the IBT. The agreement, subject to ratification by members
of the IBT, will grant among other things, a one-time, $750 signing
bonus and increased wage and pension benefits for CFCD'S union
employees.
Labor costs, including fringe benefits, averaged approximately 66% of
the Company's 1997 revenues. The Company had approximately 21,600,
20,300 and 20,200 employees at December 31, 1997, 1996 and 1995,
respectively.
Fuel
The Company's average annual fuel cost per gallon (without tax) was
$.576 in 1995. During 1996, the Company experienced a significant
increase in fuel prices, with the average annual fuel cost per gallon
increasing to $.697. To partially offset this increase, the Company
instituted a fuel surcharge program in the second half of 1996. This
program continued throughout 1997, as the average annual fuel cost per
gallon was $.659. As fuel prices moderated towards the latter half of
1997 and into 1998, the Company eliminated its fuel surcharge effective
February 3, 1998.
Significant increases in fuel prices, to the extent not offset by
increases in transportation rates, would have a material adverse effect
on the profitability of the Company. Historically, the Company has
responded to periods of sharply higher fuel prices by implementing fuel
surcharge programs or base rate increases, or both, to recover
additional costs. However, there can be no assurance that the Company
will be able to successfully implement such surcharges or increases in
response to increased fuel costs in the future.
Federal and State Regulation
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 in 1982,
1986, 1993 and 1994. The process culminated with federal pre-emption
of most economic regulation of intrastate trucking regulatory bodies
effective January 1, 1995, and with legislation which terminated the
Interstate Commerce Commission (ICC) effective January 1, 1996.
Page 5
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, drivers'
hours of service, safety-related equipment requirements, vehicle
inspection and maintenance, recordkeeping on accidents, and
transportation of hazardous materials. Because of its large and
increasing use of rail "piggyback" (trailer-on-flatcar) service
permitted under its current collective bargaining agreements, CFCD must
also comply with the hazardous materials transportation regulations of
DOT's Federal Railroad Administration. 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
agreement 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.
Canadian Regulation
Although the provinces in Canada have regulatory authority over
intra-provincial operations of motor carriers, they have elected to
substantially eliminate intra-provincial regulation of the general
freight trucking industry. Federal legislation to phase in deregulation
of the extra-provincial motor carrier industry took effect January 1,
1988 and the phase in was completed in 1997. The new legislation
relaxed economic regulation of extra-provincial trucking by easing
market entry restrictions, and implemented safety regulations of
trucking services under Federal jurisdiction. CFCD and its Canadian
affiliates wrote off substantially all of the unamortized cost of their
Canadian operating authorities in 1992.
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 10% or more of consolidated revenues.
Page 6
The Company is subject to Federal, state and local environmental laws
and regulations relating to, among other things, contingency planning
for spills of petroleum products, and its disposal of waste oil.
Additionally, the Company is subject to significant regulations dealing
with underground fuel storage tanks. The Company stores some of its
fuel for its trucks and tractors in approximately 302 underground tanks
located in 48 states. The Company believes that it is in substantial
compliance with all such environmental laws and regulations and is not
aware of any leaks from such tanks that could reasonably be expected to
have a material adverse effect on the Company's competitive position,
operations or financial position. However, there can be no assurances
that environmental matters existing with respect to the Company, or
compliance by the Company with laws relating to environmental matters,
will not have a material adverse effect on the Company's business,
financial position or results of operations.
The Company has in place policies and methods designed to conform with
these regulations. The Company estimates that capital expenditures for
upgrading underground tank systems and costs associated with cleaning
activities for 1998 will not be material.
The Company has received notices from the Environmental Protection
Agency and others that it has been identified as a potentially
responsible party (PRP) under the Comprehensive Environmental Response
Compensation and Liability Act (CERCLA) or other Federal and state
environmental statutes at various Superfund sites. Under CERCLA, PRP's
are jointly and severally liable for all site remediation and expenses.
Based upon cost studies performed by independent third parties, the
Company believes its obligations with respect to such sites would not
have a material adverse effect on its financial condition or results of
operations.
(d) Financial Information About Foreign and Domestic Operations and
Export Sales.
Approximately 5% of the Company's revenues are derived from
international business.
Page 7
ITEM 2. PROPERTIES
The following summarizes the terminals and freight service centers
operated by the Company at December 31, 1997. In general, the Company
believes such facilities are suitable and adequate to handle CFCD's
current business needs. These facilities generally consist of a large
dock with loading doors, a small office and a large yard for the
movement of tractors and trailers in the normal business operations.
Owned Leased Total
226 131 357
The following table sets forth the location and square footage of
CFCD's principal freight handling facilities:
Location Square Footage
Mira Loma, CA 280,672
** Chicago, IL 231,159
Carlisle, PA 151,100
Kansas City, MO 131,916
** Columbus, OH 118,774
** Memphis, TN 118,745
Nashville, TN 118,622
* Indianapolis, IN 109,460
Orlando, FL 101,557
* Minneapolis, MN 94,890
Charlotte, NC 89,204
St. Louis, MO 88,640
** Akron, OH 82,494
Sacramento, CA 81,286
Atlanta, GA 77,920
Houston, TX 77,346
Dallas, TX 75,358
* Freemont, IN 73,760
* Peru, IL 73,760
Buffalo, NY 73,380
Milwaukee, WI 70,661
Salt Lake City, UT 68,480
Seattle, WA 59,720
*** Springfield, MA 51,760
Portland, OR 47,824
Phoenix, AZ 20,237
* Facility partially or wholly financed through the issuance of
industrial revenue bonds. Principal amount of debt is secured by
the property.
** Property pledged as collateral for the benefit of CNF Transportation
Inc. for workers' compensation claims prior to the Distribution,
as required under the Reimbursement and Indemnification Agreement
dated October 1, 1996.
*** Property is leased from a subsidiary of CNF Transportation Inc.
through December 1, 2005.
Page 8
ITEM 3. LEGAL PROCEEDINGS
The legal proceedings of the Company are summarized in Note 9 on pages
26 and 27 of the 1997 Annual Report to Shareholders and are
incorporated herein by reference. Discussions of certain environmental
matters are presented in Items 1 and 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 Nasdaq Stock
Market's National Market. The Company's common stock began trading on
December 3, 1996. The market price range of the common stock for the
period January 1, 1997 to December 31, 1997 was $7.00 to $18.50.
Currently there are no cash dividends paid on the Company's common
stock. The Company presently expects that it will not pay a dividend in
1998. The Company's dividend policy thereafter will be dependent on the
circumstances then in existence. There can be no assurance, however,
that the Company will pay any cash dividends on its common stock in the
future.
As of December 31, 1997, there were 31,650 holders of record of the
common stock ($.01 par value) of the Company.
ITEM 6. SELECTED FINANCIAL DATA
The Selected Financial Data is presented in the "Five Year Financial
Summary" on page 30 of the 1997 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 on pages 16 through 18 of the 1997 Annual
Report to Shareholders and is incorporated herein by reference.
Page 9
Certain statements included or incorporated by reference herein,
including certain statements under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" referred to
above, constitute "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and 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 included 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," "pro forma," "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 matters discussed elsewhere
herein 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; increases in domestic and international
competition and pricing pressure; increases in fuel prices; uncertainty
regarding the Company's ability to improve results of operations; labor
matters, including shortages of drivers and increases in labor costs;
changes in governmental regulation, environmental and tax matters,
increases in costs associated with the conversion of financial and
operational systems and applications for Year 2000 compliance and
failure to convert all systems by the year 2000. As a result of the
foregoing, no assurance can be given as to future results of operations
or financial condition.
ITEM 7A. QUANTITITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and Auditors' Report are
presented on pages 19 through 28, inclusive, of the 1997 Annual Report
to Shareholders and are incorporated herein by reference. The
unaudited quarterly financial data is included on page 29 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.
Page 10
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The identification of the Company's Directors is presented on pages 2
and 3 of the Company's 1998 Proxy Statement 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:
W. Roger Curry, 59, President and Chief Executive Officer of the
Company since December 2, 1996. Mr. Curry has served as President and
Chief Executive Officer of CFCD since July 1994. Mr. Curry served as a
Senior Vice President of the former parent from 1986 to December 2,
1996. In 1991, he was elected President of Emery Air Freight
Corporation, relinquishing the position in 1994 to become President of
CFCD.
Patrick H. Blake, 48, Executive Vice President - Operations of the
Company since December 2, 1996. Mr. Blake has served as Executive Vice
President - Operations of CFCD since July 1994. He was Vice President
Eastern Region of CFCD from 1992-1994 and a Division Manager from 1985-
1992.
David F. Morrison, 44, Executive Vice President and Chief Financial
Officer of the Company since December 2, 1996. Mr. Morrison served as
Vice President and Treasurer of the former parent from October 1991 to
October 1996 when he became Executive Vice President and Chief
Financial Officer of CFCD.
Stephen D. Richards, 54, Senior Vice President and General Counsel of
the Company since December 2, 1996. Mr. Richards has been Vice
President and General Counsel of CFCD since September 1995. He was
Deputy General Counsel of the former parent for the preceding four
years.
Joseph R. Schillaci, 55, Executive Vice President - Sales and Marketing
of the Company since April 1997. Prior to joining the Company, Mr.
Schillaci was president and chief operating officer of Petro Travel
Plazas, LP, a national fueling, maintenance and retail provider to the
trucking industry, since 1993.
Robert E. Wrightson, 58, Senior Vice President and Controller of the
Company since December 2, 1996. Mr. Wrightson has served as Senior
Vice President and Controller of CFCD since July 1994. Prior to
joining CFCD, he was Vice President and Controller of the former
parent, assuming that position in 1989.
ITEM 11. EXECUTIVE COMPENSATION
The required information for Item 11 is presented on pages 6 through
10, inclusive, of the Company's 1998 Proxy Statement, and those pages
are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The required information for Item 12 is included on pages 4 and 12 of
the Company's 1998 Proxy Statement and is incorporated herein by
reference.
Page 11
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 in the quarter ended December
31, 1997.
Page 12
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.
CONSOLIDATED FREIGHTWAYS CORPORATION
(Registrant)
March 27, 1998 /s/W. Roger Curry
W. Roger Curry
President and Chief Executive Officer
March 27, 1998 /s/David F. Morrison
David F. Morrison
Executive Vice President, Chief
Financial Officer and Treasurer
March 27, 1998 /s/Robert E. Wrightson
Robert E. Wrightson
Senior Vice President and Controller
Page 13
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 27, 1998 /s/William D. Walsh
William D. Walsh, Chairman of the Board
March 27, 1998 /s/W. Roger Curry
W. Roger Curry
President, Chief Executive Officer
and Director
March 27, 1998 /s/G. Robert Evans
G. Robert Evans, Director
March 27, 1998 /s/Paul B. Guenther
Paul B. Guenther, Director
March 27, 1998 /s/John M. Lillie
John M. Lillie, Director
Page 14
CONSOLIDATED FREIGHTWAYS CORPORATION
FORM 10-K
Year Ended December 31, 1997
_______________________________________________________________________
INDEX TO FINANCIAL INFORMATION
Consolidated Freightways Corporation and Subsidiaries
The following Consolidated Financial Statements of Consolidated
Freightways Corporation and Subsidiaries appearing on pages 19 through
28, 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 Operations - 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 16
Report of Independent Public Accountants 16
Schedule II - Valuation and Qualifying Accounts 17
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 15
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. 333-16851, 333-16835 and 333-25167.
/s/Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Portland, Oregon
March 27, 1998
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Consolidated Freightways Corporation:
We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements included in
Consolidated Freightways Corporation's 1997 Annual Report to
Shareholders incorporated by reference in this Form 10-K, and have
issued our report thereon dated January 27, 1998. Our audit was made
for the purpose of forming an opinion on those statements taken as a
whole. The schedule on page 17 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
Portland, Oregon
January 27, 1998
Page 16
SCHEDULE II
CONSOLIDATED FREIGHTWAYS CORPORATION
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
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
1997 $ 9,692 $ 8,374 $ - $(10,599)(a) $ 7,467
1996 $ 9,349 $ 6,534 $ - $ (6,191)(a) $ 9,692
1995 $11,049 $ 2,326 $ - $ (4,026)(a) $ 9,349
a) Accounts written off net of recoveries.
Page 17
INDEX TO EXHIBITS
ITEM 14(a)(3)
Exhibit No.
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession:
2.1 Distribution Agreement between Consolidated Freightways
Corporation and Consolidated Freightways, Inc., dated
November 25, 1996. (Exhibit 2.1 to the Company's Form 8-K
dated March 12, 1997.) (*)
(3) Articles of incorporation and bylaws:
3.1 Amended and Restated Certificate of Incorporation of Consolidated
Freightways Corporation. (Exhibit 3.1 to the Company's Form 10 filed
October 2, 1996) (*)
3.2 Amended and Restated Bylaws of Consolidated Freightways Corporation.
(Exhibit 3.2 to the Company's Form 10 filed October 2, 1996)(*)
(10) Material Contracts:
10.1 Transition Services Agreement between Consolidated Freightways
Corporation and CNF Service Company, Inc., dated as of December
2, 1996. (Exhibit 10.1 to the Company's Form 8-K dated March
12, 1997.) (*)
10.2 Alternative Dispute Resolution Agreement Between Consolidated
Freightways Corporation and Consolidated Freightways,Inc., dated
as of December 2, 1996. (Exhibit 10.2 to the Company's Form 8-K
dated March 12, 1997.) (*)
10.3 Employee Benefit Matters Agreement between Consolidated
Freightways Corporation and Consolidated Freightways, Inc., dated as
of December 2, 1996. (Exhibit 10.3 to the Company's Form 8-K dated
March 12, 1997.) (*)
10.4 Tax Sharing Agreement between Consolidated Freightways Corporation
and Consolidated Freightways, Inc., dated as of December 2, 1996.
(Exhibit 10.4 to the Company's Form 8-K dated March 12,1997.) (*)
10.5 Reimbursement and Indemnification Agreement between Consolidated
Freightways Corporation of Delaware and Consolidated Freightways,
Inc., dated as of October 1, 1996. (Exhibit 10.5 to the
Company's Form 8-K dated March 12, 1997.) (*)
10.6 Consolidated Freightways Corporation 1996 Stock Option and Incentive
Plan. (Exhibit 10.6 to the Company's Form 10 filed October 2,
1996)(*)(#)
10.7 Loan and Security Agreement among Consolidated Freightways
Corporation of Delaware, BankAmerica Business Credit Inc. and various
other financial institutions dated as of November 27, 1996. (Exhibit
10.7 to the Company's Form 10-K for the year ended December 31,
1996.)(*)
10.8 Consolidated Freightways Corporation 1996 Restricted Stock Award
Agreements. (Exhibit 10.8 to the Company's Form 10-K for the year
ended December 31, 1996.) (*)(#)
10.9 Consolidated Freightways Corporation Senior Executive Incentive Plan
for 1998. (#)
(*) Previously filed with the Securities and Exchange Commission and
incorporated by reference.
(#) Designates a contract or compensation plan for Management or Directors.
Page 18
INDEX TO EXHIBITS
ITEM 14(a)(3)
Exhibit No.
10.10 Consolidated Freightways Corporation Deferred Compensation Plan
for Executives. (Exhibit 10.10 to the Company's Form 10-K for
the year ended December 31, 1996.) (*)(#)
10.11 Consolidated Freightways Corporation Supplemental Executive
Retirement Plan. (Exhibit 10.11 to the Company's Form 10-K for
the year ended December 31, 1996.) (*)(#)
10.12 Consolidated Freightways Inc. Executive Split-Dollar Life
Insurance Plan. (Exhibit 10.12 to the Company's Form 10-K for
the year ended December 31, 1996.) (*)(#)
10.13 Participation Agreement dated as of December 22, 1995 between
Consolidated Freightways Corporation of Delaware, as lessee,
and ABN AMRO Bank N.V., as lessor, as amended. (Exhibit 10.1
to the Company's Form 10-Q for the quarter ended March
31, 1997.) (*)
10.14 Participation Agreement dated as of September 30, 1994
between Consolidated Freightways Corporation of Delaware, as
lessee, and BA Leasing & Capital Corporation and various other
financial institutions, as lessors, as amended. (Exhibit 10.2
to the Company's Form 10-Q for the quarter ended March
31, 1997.) (*)
10.15 Reimbursement and Security Agreement dated July 3, 1997 between
Consolidated Freightways Corporation and CNF Transportation Inc.
(Exhibit 10.1 to the Company's Form 10-Q for the quarter ended
June 30, 1997.) (*)
10.16 Third Amendment to Participation Agreement and Master Lease
intended as Security dated December 12, 1997 between Consolidated
Freightways Corporation of Delaware and ABN AMRO Bank N.V.
10.17 Amendment No. 3 to Loan and Security Agreement dated November
1, 1997 between Consolidated Freightways Corporation of Delaware
and BankAmerica Business Credit, Inc.
(13) Annual Report to Security Holders:
Consolidated Freightways Corporation 1997 Annual Report to
Shareholders. (Only those portions referenced herein are incorporated
in this Form 10-K. Other portions such as the "Letter to Shareholders"
are not required and therefore 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 by reference.
(#) Designates a contract or compensation plan for Management or Directors.
Page 19