ITEM 1. BUSINESS
(a) General Development of Business - -----------------------------------
Consolidated Freightways, Inc. is a company which participates through subsidiaries in various forms of nationwide and regional trucking, truckload and intermodal rail, domestic and international air cargo services, contract logistics and related transportation activities. These operations are organized into three primary business groups: nationwide, full-service trucking (CF MotorFreight), regional trucking and full-service truckload (Con-Way Transportation Services), and air freight (Emery Worldwide). Consolidated Freightways, Inc. was incorporated in Delaware in 1958 as a successor to a business originally established in 1929. It is herein referred to as the "Registrant" or "Company".
(b) Financial Information About Industry Segments - -------------------------------------------------
The operations of the Company are primarily conducted in the U.S. and Canada and to a lesser extent in major foreign countries. An analysis by industry group of revenues, operating income (loss), depreciation and capital expenditures for the years ended December 31, 1994, 1993 and 1992, and identifiable assets as of those dates is presented in Note 11 on pages 37 and 38 of the 1994 Annual Report to Shareholders and is incorporated herein by reference. Geographic group information is also presented therein. Intersegment revenues and earnings thereon have been eliminated.
(c) Narrative Description of Business - -------------------------------------
The Company has designated three principal operating groups: the CF MotorFreight Group provides intermediate and long-haul, less-than-truckload freight service in the U.S. and portions of Mexico, Canada, the Caribbean, Latin and Central America, Europe and Asia; the Con-Way Transportation Services Group provides regional trucking and intermodal movements of truckload freight, and the Emery Worldwide Group is responsible for all domestic and international air freight activities and ocean container freight services.
CF MOTORFREIGHT ----------------
CF MotorFreight (CFMF), the Company's largest single operating unit, is based in Menlo Park, California. The group is composed of Consolidated Freightways Corporation of Delaware (CFCD), which includes CF MotorFreight and Canadian operating units, and three non-carrier component operations. Its carrier group provides general freight services nationwide and in portions of Canada, Mexico, the Caribbean area, Latin and Central America, Europe and the Pacific Rim countries. Operations consist of an extensive transportation network moving freight that is typically shipments of manufactured or non-perishable processed products having high value and requiring expedited service, compared to the bulk raw materials characteristically transported by railroads, pipelines and water carriers. The basic business of the general freight industry is to transport freight that is less-than-truckload (LTL), an industry designation for shipments weighing less than 10,000 pounds. CFMF is one of the nation's largest motor carriers in terms of 1994 revenues.
Competition has increased with trends toward regionalization, continued pricing pressures and new competitors moving into the small shipment segment of the business. To address this, CFMF undertook major changes to its line- haul operations and terminals beginning in the fourth quarter of 1994. These changes are expected to create new efficiencies and flexibilities by reducing freight handling and make greater use of lower cost rail. When combined with innovative, value-added services, customer partnerships and sole-source contracts, among other services, CFMF expects to offset competitive trends.
As a large carrier of LTL general commodity freight, CFMF has pick-up and delivery fleets in each area served, and a fleet of intercity tractors and trailers. It has a network of 437 U.S. and Canadian freight terminals, metro centers and regional consolidation centers. Certain regional consolidation centers have become metro centers. The metro centers reduce freight handling by allowing more direct city to city service, thereby improving productivity. CFMF operations are supported by a sophisticated data processing system for the control and management of the business.
There is a broad diversity in the customers served, size of shipments, commodities transported and length of haul. No single customer or commodity accounts for more than a small fraction of total revenues.
CFMF operates daily schedules utilizing primarily relay drivers driving approximately eight to ten hours each. Some schedules operate with sleeper teams driving designated routes. 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. Legislation enacted in 1982 has provided for the use of 28-foot double trailers and 48-foot semi-trailers throughout the United States. (See "State Regulation" below.) Trailers in double or triple combination are more efficient and economical, and safer, than a tractor and single semi-trailer combination. CFMF utilizes trailer equipment 102-inches in width. In 1994, the Company operated in excess of 472 million linehaul miles in North America, about 90% of which was conducted by equipment in doubles and triples configuration. The accident frequency of the triples configuration was better than all other types of vehicle combinations used by the Company.
CFMF and other subsidiaries of CFCD 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 size of over 1,100 trucks, tractors and trailers.
Employees ---------
Approximately 85% of CFMF's domestic employees are represented by various labor unions, primarily the International Brotherhood of Teamsters (IBT). CFMF and the IBT are parties to a National Master Freight Agreement. The current agreement with the IBT expires in April 1998.
Labor costs, including fringe benefits, average approximately 66% of revenues. CFMF's domestic employment has declined to 20,700 employees at December 31, 1994 from approximately 21,000 at December 31, 1993, primarily the result of several programs during 1994 to streamline the handling and movement of freight by restructuring its linehaul and terminal operations.
Fuel ----
Fuel prices have steadily declined during the last three years. CFMF's average annual diesel fuel cost per gallon (without tax) declined from $.636 in 1992 to $.621 and $.578 in 1993 and 1994, respectively. These savings have been somewhat mitigated by an increase in fuel taxes.
Federal and State Regulation ----------------------------
On July 1, 1980, the Motor Carrier Act of 1980 became effective. The Act made substantial changes in federal regulation of the motor carrier industry. It provided for easier access to the industry by new trucking companies and eased restrictions on expansion of services by existing carriers. In addition, CFMF's operations are subject to a variety of economic regulations by state authorities. Historically, such regulations also covered, among other things, size and weight of motor carrier equipment.
Federal legislation applies to the interstate highway system and to other qualifying federal-aid primary system highways in all states. Full implementation of the federal legislation has been hampered by regulations in certain states, which have imposed trailer length, size and weight limitations on access and intercity routes. These limitations do not conform with the federal requirements and therefore are obstacles to efficient operations. CFMF's mainline operations are designed to avoid locales with these limitations. In August 1994, Federal legislation preempted intrastate operating rights which eliminated certain restrictions on intrastate pricing and operations. As a result, the Company wrote off all its unamortized intrastate operating rights in the third quarter 1994.
Canadian Regulation -------------------
The provinces in Canada have regulatory authority over intra-provincial operations of motor carriers and have been delegated by the federal authority to regulate inter-provincial motor carrier activity. Federal legislation to phase in deregulation of the inter-provincial motor carrier industry took effect January 1, 1988. The new legislation relaxes economic regulation of inter-provincial trucking by easing market entry regulations, and implements effective safety regulations of trucking services under Federal jurisdiction. The Company wrote-off substantially all of the unamortized cost of its Canadian operating authority in 1992.
Menlo Logistics ---------------
Menlo Logistics Inc. (MLI), founded in 1990, provides customized single- source logistics solutions for manufacturing, industrial and retail businesses. These services include carrier management, dedicated fleet and warehouse operations, just-in-time delivery programs, customer order processing and freight bill payment and auditing. MLI has approximately 500 employees. As a relatively new industry, competition is expected to come from new entrants into the markets it serves. MLI will address the increased competition by utilizing technologies and its established experience.
Non-Carrier Operations ----------------------
Two non-carrier operations within the CF MotorFreight Group generate a majority of their sales from other companies within the CF Group. Road Systems, Inc. primarily manufactures trailers. Willamette Sales Co. serves as a distributor of heavy-duty truck, marine and construction equipment parts.
CON-WAY TRANSPORTATION SERVICES -------------------------------
Con-Way Transportation Services, Inc. (CTS) is an operating company with business units that provide regional LTL freight trucking, full-service truckload freight delivery utilizing highway over-the-road and intermodal rail stack train resources for transcontinental, inter-regional and regional transportation; local and interstate container drayage and international shipping. CTS has four operating units and approximately 10,000 employees. The regional companies face more competition as national LTL companies extend into regional markets, and acquire and combine formerly independent regional carriers into inter-regional groups. New service offerings, continued expansion of regional carrier networks, extension of next-day and second-day service standards and enhanced inter-regional network capabilities are positioning the Con-Ways for growth opportunities. Refer to the CF MotorFreight section for a discussion of federal and state regulations.
Con-Way Regional Carriers -------------------------
CTS has three regional motor carriers each of which operate dedicated regional trucking networks 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 in excess of 16,700 trucks, tractors and trailers.
Con-Way Western Express, Inc. (CWX) was founded in May 1983 and today operates in 11 western states and serves Canada and Mexico. In 1994, CWX expanded operations to include Utah and Colorado. At December 31, 1994, CWX operated 74 service centers. In January 1995, CWX expanded operations into Oregon, Washington, Idaho and Vancouver, British Columbia, opening 22 new service centers in the Pacific Northwest.
Con-Way Central Express, Inc. (CCX) was founded in June 1983 and today serves 22 states of the central and northeast U.S., and Ontario, Canada. CCX expanded into the New England states in 1994 and at December 31 operated 187 service centers. In February 1995, CCX expanded into New Jersey and began providing service for metropolitan New York City.
Con-Way Southern Express, Inc., and Con-Way Southwest Express, Inc., were founded in April 1987 and November 1989, respectively. In December 1994, the two carriers were combined into a single operating unit under the Con-Way Southern Express, Inc., (CSE) name serving a 12-state southern market from Texas to the Carolinas and Florida, and encompassing Puerto Rico and Mexico. CSE operated 92 service centers at December 31, 1994.
A service expansion program initiated by CTS in 1994 allows the regional carriers to provide next-day and second-day freight delivery between their principal geographic regions, utilizing existing infrastructure. The program generates additional business by allowing each carrier to compete for new traffic and provide coverage of regional markets lanes not individually serviced as part of the carrier's core territory.
Con-Way Truckload Service -------------------------
Con-Way Truckload Services Inc., (CWT), formerly known as Con-Way Intermodal, is a full-service, multi-modal truckload company. It provides door-to-door transcontinental movement of truckload shipments by rail container stack train and rail trailer, utilizing nationwide operating alliances with major railroads. It also provides expedited inter-regional and regional over-the- road truckload service with a fleet of company-owned trucks and trailers. Additionally, the company provides rail freight forwarding with domestic intermodal marketing services, assembly and distribution services, local and interstate container drayage and international shipping.
EMERY WORLDWIDE ---------------
Emery Worldwide (EWW), the Company's air freight unit, was formed when the Company purchased Emery Air Freight Corporation in April 1989 and merged it with its air freight operation, CF AirFreight, Inc. The combined companies expanded EWW's ability to deliver air freight within North America and to 89 countries worldwide.
EWW provides global air cargo services through an integrated freight system designed for the movement of parcels and packages of all sizes and weights. In North America, EWW provides these services through a system of sales offices and terminals, and overseas through foreign subsidiaries, branches and agents.
EWW provides door-to-door service within North America by using its own airlift system, supplemented with commercial airlines. International services are performed by operating primarily as an air freight forwarder, using commercial airlines, and with controlled lift, only when necessary. Emery also operates approximately 1,300 trucks, vans and tractors.
As of December 31, 1994, EWW utilized a fleet of 69 aircraft, 42 of which are leased on a long-term basis, 9 are owned and 18 are contracted on a short- term basis to supplement nightly volumes and to provide feeder services. The nightly lift capacity of the aircraft fleet, excluding charters, is approximately 4.0 million pounds.
Emery Worldwide's hub-and-spoke system is centralized at the Dayton International Airport where a leased air cargo facility (Hub) and related support facilities are located. The Hub handles all types of shipments, ranging from small packages to heavyweight cargo, with a total effective sort capacity of approximately 1.2 million pounds per hour. The operation of the Hub in conjunction with EWW's airlift system enables it to maintain a high level of service reliability.
Through a separate subsidiary of the Company, Emery Worldwide Airlines, Inc. (EWA), the Company provides nightly cargo airline services under a contract with the U.S. Postal Service (USPS) to carry Express and Priority Mail, using 23 aircraft, 6 of which are leased on a long-term basis and 17 are owned. The original contract for this operation was awarded to EWA in 1989 and had been renewed and extended through early January 1994. A ten year USPS contract was awarded to the Company during 1993 with service beginning in January 1994.
The Company has recognized approximately $112 million, $138 million and $141 million of revenue in 1994, 1993 and 1992, respectively, from contracts to carry Express and Priority Mail for the U.S. Postal Service.
Customers ---------
EWW services, among others, the automotive, aviation, machinery, metals, electronic and electrical equipment, chemical, apparel, film and technology industries. Service industries and governmental entities also utilize EWW's services. Both U.S. and International operations of EWW have wide customer bases.
Competition -----------
The heavy air-freight market within North American is highly competitive and price sensitive. EWW has the largest market share in the heavy air-freight segment. EWW competes with other integrated air freight carriers as well as freight forwarders. The North Atlantic market is especially price sensitive due to the abundance of airlift capacity. However, less competition is expected from passenger airlines as many continue to downsize their widebody aircraft.
Competition in the international markets is also service and price sensitive. In these markets, which are more fragmented than the domestic market, EWW competes with both United States and international airlines and air freight forwarders.
Customers are seeking companies such as EWW with combined integrated carrier and freight forwarding capabilities for flexible, cost effective service. EWW believes this infrastructure and the convenience of its extensive network of worldwide terminal, agent and service locations are its principal methods of competing in the market in which it operates.
Regulation ----------
Regulation of Air Transportation --------------------------------
The air transportation industry is subject to federal regulation by the Federal Aviation Act of 1958, as amended (Aviation Act) and regulations issued by the Department of Transportation (DOT) pursuant to the Aviation Act. EWW, 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 they are not subject to Federal Aviation Administration (FAA) safety regulations so long as they do not have operational control of aircraft. Airlines are subject to economic regulation by DOT and maintenance, operating and other safety-related regulation by FAA. Thus, EWA and other airlines conducting operations for EWW are subject to DOT and FAA regulation while EWW, itself, is not covered by most DOT and FAA regulations.
Regulation of Ground Transportation -----------------------------------
When EWW provides ground transportation of cargo having a prior or subsequent air movement, the ground transportation is exempt from regulation by the Interstate Commerce Commission (ICC). However, EWW holds ICC and intrastate motor carrier authorities which can be utilized in providing non-exempt ground transportation. Registration of ICC authorities is required in each state where a motor carrier conducts non-exempt operations, and some states also have required EWW to register as an exempt interstate operator.
Environmental Matters ---------------------
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 EWW's operations. If such restrictions were to be imposed with respect to the airports at which EWW's activities are centered and no alternative airports were available to serve the affected areas, EWW's operations could be more adversely affected.
As provided in Section 611 of the Aviation Act, the FAA with the assistance of the Environmental Protection Agency (EPA), is authorized to establish aircraft noise standards. Under the National Emission Standards Act of 1967, as amended by the Clean Air Act Amendments of 1970, the administrator of the EPA is authorized to issue regulations setting forth standards for aircraft emissions. EWW believes that its present fleet of owned, leased or chartered aircraft is operating in compliance with the applicable noise and emission laws.
The Aviation Noise and Capacity Act of 1990 was passed in November of 1990 to establish 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 EWW's and EWA's owned and leased aircraft to either undergo modifications or otherwise comply with Stage 3 noise restrictions by year-end 1999.
Fuel and Supplies Cost ----------------------
EWW purchases substantially all of its jet fuel from major oil companies, refiners and trading companies on annual contracts with prepaid and/or volume discounts. These contract purchases are supplemented by spot purchases. The weighted average price of domestic jet fuel declined in 1994 and 1993, respectively. The 1994 domestic cost per gallon was approximately $.59 compared with 1993 and 1992 weighted average prices of approximately $.64 and $.67 per gallon, respectively.
EWW believes that it has the flexibility to continue its operations without material interruption unless there are significant curtailments of its jet fuel supplies. Neither EWW nor the operators of the aircraft it charters have experienced or anticipate any fuel supply problems. There is
a four-million gallon fuel storage facility at the Hub.
Employees ---------
As of December 31, 1994, EWW had approximately 8,000 full and permanent part-time employees as compared to 7,500 in 1993 and 6,700 in 1992. Approximately 14% of these employees are covered by union contracts.
GENERAL - -------
The research and development activities of the Company are not significant.
During 1994, 1993 and 1992 there was no single customer of the Company that accounted for more than 10% of consolidated revenues.
The total number of employees is presented in the "Ten Year Financial Summary" on pages 40 and 41 of the 1994 Annual Report to Shareholders and is incorporated herein by reference.
The Company has been designated a Potentially Responsible Party (PRP) by the EPA with respect to the disposal of hazardous substances at various sites. The Company expects its share of the clean-up cost to be immaterial. The Company expects the costs of complying with existing and future federal, state and local environmental regulations to continue to increase. On the other hand, they do not anticipate that such cost increases will have any materially adverse effects on capital expenditures, earnings or competitive position.
(d) Financial Information About Foreign and Domestic Operations and Export Sales ----------------------------------------
Information as to revenues, operating income (loss) and identifiable assets for each of the Company's business segments and for its foreign operations for 1994, 1993 and 1992 is contained in Note 11 on page 37 and 38 of the 1994 Annual Report to Shareholders and is incorporated herein by reference.
ITEM 2.
ITEM 2. PROPERTIES
The following summarizes the terminals and freight service centers operated by the Company at December 31, 1994:
Owned Leased Total ----- ------ -----
CF MotorFreight 230 207 437 Con-Way Transportation Services 57 296 353 Emery Worldwide 9 174 183
The following table sets forth the location and square footage of the Company's principal freight handling facilities:
Location Square Footage -------- -------------- CFMF - motor carrier LTL consolidation center terminals
Mira Loma, CA 280,672 Chicago, IL 231,159 * Columbus, OH 118,774 Memphis, TN 118,745 Nashville, TN 118,622 Orlando, FL 101,557 * Minneapolis, MN 94,890 St. Louis, MO 88,640 * Pocono, PA 86,285 Chicopee, MA 85,164 Akron, OH 82,494 Sacramento, CA 81,286 Atlanta, GA 77,920 Houston, TX 77,346 Dallas, TX 75,358 * Fremont, IN 73,760 * Peru, IL 73,760 Buffalo, NY 73,380 Cheyenne, WY 71,298 Milwaukee, WI 70,661 Salt Lake City, UT 68,480 Charlotte, NC 66,896 Seattle, WA 59,720 * York, PA 56,384 Kansas City, MO 55,288 * Indianapolis, IN 54,716 Portland, OR 47,824 Phoenix, AZ 20,237
CTS - freight assembly centers
Chicago, IL 113,116 Des Plains, IL 100,440 Oakland, CA 85,600 Dallas, TX 82,000 Atlanta, GA 56,160 Cincinnati, OH 55,618 Columbus, OH 48,527 Detroit, MI 46,240 Santa Fe Springs, CA 45,936 Aurora, IL 44,235 Ft. Wayne, IN 35,400 Pontiac, MI 34,450 St. Louis, MO 29,625 Milwaukee, WI 22,940
Location Square Footage -------- --------------
Emery - facilities
*Dayton, OH 620,000 Los Angeles, CA 78,264 Chicago, IL 59,976 Boston, MA 42,236 Indianapolis, IN 38,500
* Facility partially or wholly financed through the issuance of industrial revenue bonds. Principal amount of debt is secured by the property.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The legal proceedings of the Company are summarized in Note 10 on page 37 of the 1994 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable. PART II -------
ITEM 5.
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.
The Company's Common Stock Price is included in Note 12 on page 39 of the 1994 Annual Report to Shareholders and is incorporated herein by reference. Cash dividends on common shares had been paid in every year from 1962 to 1990. In June 1990, however, the Company's Board of Directors suspended the quarterly dividend to minimize the Company's cash requirements. In December 1994, the Board of Directors reinstated a $.10 per share quarterly cash dividend on common stock. Under the terms of the restructured TASP Notes, as set forth on page 29 of the 1994 Annual Report to Shareholders, the Company is restricted from paying dividends in excess of $10 million plus 50% of the cumulative net income applicable to common shareholders since the commencement of the agreement.
As of December 31, 1994, there were 16,015 holders of record of the common
stock ($.625 par value) of the Company. The number of shareholders is also presented in the "Ten Year Financial Summary" on pages 40 and 41 of the 1994 Annual Report to Shareholders and is incorporated herein by reference.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The Selected Financial Data is presented in the "Ten Year Financial Summary" on pages 40 and 41 of the 1994 Annual Report to Shareholders and is incorporated herein by reference.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of Operations is presented in the "Financial Review and Management Discussion" on pages 18 through 20, inclusive, of the 1994 Annual Report to Shareholders and is incorporated herein by reference.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and Auditors' Report are presented on pages 21 through 41, inclusive, of the 1994 Annual Report to Shareholders and are incorporated herein by reference. The unaudited quarterly financial data is included in Note 12 on page 39 of the 1994 Annual Report to Shareholders and is incorporated herein by reference.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.
PART III --------
ITEM 10.
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 Proxy Statement dated March 17, 1995 and those pages are incorporated herein by reference.
The Executive Officers of the Company, their ages at December 31, 1994 and their applicable business experience are as follows:
Donald E. Moffitt, 62, President and Chief Executive Officer. Mr. Moffitt joined Consolidated Freightways Corporation of Delaware, the Company's nationwide, full-service subsidiary, as an accountant in 1955 and advanced to Vice President - Finance in 1973. In 1975, he transferred to the Company as Vice President - Finance and Treasurer and in 1981, was elected Executive Vice President - Finance and Administration. In 1983, he assumed the additional duties of President, CF International and Air, Inc., where he directed the Company's international and air freight businesses. Mr. Moffitt was elected Vice Chairman of the Board of the Company in 1986. He retired as an employee and as Vice Chairman of the Board of Directors in 1988 and returned to the Company as Executive Vice President - Finance and Chief Financial Officer in 1990. Mr. Moffitt was named President and Chief Executive Officer of the Company and was elected to the Board of Directors in
1991. Mr. Moffitt serves on the Executive Committee of the Board of Directors of the Highway Users Federation and is a member of the Board of Directors of the Bay Area Council, the Automotive Safety Foundation and the American Red Cross. He is a member of the California Business Roundtable and a member of the Business Advisory Council of the Northwestern University Transportation Center. He also serves on the Advisory Council of the Peninsula Conflict Resolution Center. Mr. Moffitt is a member of the Advisory Nominating and the Executive Committees of the Company.
W. Roger Curry, 56, President and Chief Executive Officer of Consolidated Freightways Corporation of Delaware and Senior Vice President of the Company. Mr. Curry joined CFCD in 1969 as a Systems Analyst and became Coordinator, On-Line Systems of the Company in 1970. In 1972, he was named Director of Terminal Properties for CFCD. He became President of CF AirFreight in 1975 and Chief Executive Officer in 1984. Mr. Curry relinquished both offices with CF AirFreight in 1986 when he was elected Senior Vice President-Marketing of the Company. In 1991, he was elected President of Emery Air Freight Corporation, relinquishing the position in 1994 to become President of CFCD.
David I. Beatson, 47, President and Chief Executive Officer of Emery Air Freight Corporation and Senior Vice President of the Company. Mr. Beatson joined CF AirFreight Corporation in 1977, advancing through several increasingly responsible positions to Vice President of National Accounts. After leaving the Company for a time, he returned to EWW in 1986 as Vice President of Sales and Marketing. He became President and Chief Executive Officer of Emery Air Freight Corporation in 1994.
Gregory L. Quesnel, 46, Executive Vice President and Chief Financial Officer. Mr. Quesnel joined Consolidated Freightways Corporation of Delaware in 1975 as Director of Financial Accounting. Through several increasingly responsible financial positions, he advanced to become the top financial officer of CFCD. In 1989 he was elected Vice President-Accounting for the Company and in 1990 was named Vice President and Treasurer. Mr. Quesnel became Senior Vice President-Finance and Chief Financial Officer of the Company in 1991 and Executive Vice President and Chief Financial Officer in 1993.
Robert T. Robertson, 53, President and Chief Executive Officer of Con-Way Transportation Services, Inc. and Senior Vice President of the Company. Mr. Robertson joined CFCD in 1970 as a sales representative and advanced to Manager of Eastern Area Sales by 1973. He transferred to Texas in 1976 where he became involved in CFCD's operations and was promoted to Division Manager in 1978. In 1983, he was named Vice President and General Manager of Con-Way Transportation Services, Inc. In 1986, Mr. Robertson was elected President of CTS.
Eberhard G.H. Schmoller, 51, Senior Vice President and General Counsel of the Company. Mr. Schmoller joined CFCD in 1974 as a staff attorney and in 1976 was promoted to CFCD assistant general counsel. In 1983, he was appointed Vice President and General Counsel of CF AirFreight and assumed the same position with EWW after the acquisition in 1989. Mr. Schmoller was named Senior Vice President and General Counsel of the Company in 1993.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The required information for Item 11 is presented on pages 13 through 15, inclusive, of the Proxy Statement dated March 17, 1995, and those pages are incorporated herein by reference.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The required information for Item 12 is included on pages 10 and 11 of the Proxy Statement dated March 17, 1995 and is incorporated herein by reference.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV -------
ITEM 14.
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 -------------------
There were no reports on Form 8-K filed for the three months ended December 31, 1994.
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, INC. (Registrant)
March 27, 1995 /s/Donald E. Moffitt -------------------------------------- Donald E. Moffitt President and Chief Executive Officer
March 27, 1995 /s/Gregory L. Quesnel -------------------------------------- Gregory L. Quesnel Executive Vice President and Chief Financial Officer
March 27, 1995 /s/Gary D. Taliaferro -------------------------------------- Gary D. Taliaferro Vice President and Controller
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, 1995 /s/Raymond F. O'Brien ------------------------------------- Raymond F. O'Brien Chairman of the Board
March 27, 1995 /s/Donald E. Moffitt ------------------------------------- Donald E. Moffitt President, Chief Executive Officer and Director
March 27, 1995 /s/Earl F. Cheit ------------------------------------- Earl F. Cheit, Director
March 27, 1995 /s/G. Robert Evans ------------------------------------- G. Robert Evans, Director
March 27, 1995 /s/Robert Jaunich II ------------------------------------- Robert Jaunich II, Director
March 27, 1995 /s/William D. Walsh ------------------------------------- William D. Walsh, Director
March 27, 1995 /s/Robert P. Wayman ------------------------------------- Robert P. Wayman, Director
CONSOLIDATED FREIGHTWAYS, INC. FORM 10-K Year Ended December 31, 1994
- --------------------------------------------------------------------------- - ---------------------------------------------------------------------------
INDEX TO FINANCIAL INFORMATION ------------------------------
Consolidated Freightways, Inc. and Subsidiaries - -----------------------------------------------
The following Consolidated Financial Statements of Consolidated Freightways, Inc. and Subsidiaries appearing on pages 21 through 41, inclusive, of the Company's 1994 Annual Report to Shareholders are incorporated herein by reference:
Report of Independent Public Accountants
Consolidated Balance Sheets - December 31, 1994 and 1993
Statements of Consolidated Operations - Years Ended December 31, 1994, 1993 and 1992
Statements of Consolidated Cash Flows - Years Ended December 31, 1994, 1993 and 1992
Statements of Consolidated Shareholders' Equity - Years Ended December 31, 1994, 1993 and 1992
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 21
Report of Independent Public Accountants 21
Schedule II - Valuation and Qualifying Accounts 22
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.
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, 33-29793, and 33-52599.
/s/Arthur Andersen LLP ------------------------- ARTHUR ANDERSEN LLP
San Francisco, California March 27, 1995
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------
To the Shareholders and Board of Directors of Consolidated Freightways, Inc.:
We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Consolidated Freightways, Inc.'s 1994 Annual Report to Shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated January 27, 1995. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule on page 22 is the responsibility of the Company's management and is presented for the purposes 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 27, 1995
SCHEDULE II
CONSOLIDATED FREIGHTWAYS, INC. VALUATION AND QUALIFYING ACCOUNTS THREE YEARS ENDED DECEMBER 31, 1994 (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 ---------- ---------- ---------- ---------- ----------
1994 $29,780 $ 6,676 $ - $ (9,518) (a) $26,938 ------- ------- -------- --------- -------
1993 $26,198 $27,127 $ - $(23,545)(a) $29,780 ------- ------- -------- --------- -------
1992 $25,742 $29,707 $ - $(29,251)(a) $26,198 ------- ------- -------- --------- -------
a) Accounts written off net of recoveries.
INDEX TO EXHIBITS ITEM 14(a)(3)
Exhibit No. - -----------
(3) Articles of incorporation and by-laws:
3.1 Consolidated Freightways, Inc. Certificates of Incorporation, as amended. (Exhibit 3(a)(2) to the Company's Quarterly Report Form 10-Q for the quarter ended March 31, 1987*) 3.2 Consolidated Freightways, Inc. By-laws, as amended, September 26,
(4) Instruments defining the rights of security holders, including debentures:
4.1 Consolidated Freightways, Inc. Stockholder Rights Plan. (Exhibit 1 on Form 8-A dated October 27, 1986*) 4.2 Certificate of Designations of the Series B Cumulative Convertible Preferred Stock. (Exhibit 4.1 as filed on Form SE dated May 25, 1989*) 4.3 Indenture between the Registrant and Security Pacific National Bank, trustee, with respect to 9-1/8% Notes Due 1999 and Medium- Term Notes, Series A. (Exhibit 4.1 as filed on Form SE dated March 20, 1990*) 4.4 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*) 4.5 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*) 4.6 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*) 4.7 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*)
Instruments defining the rights of security holders of long-term debt of Consolidated Freightways, 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 Consolidated Freightways, 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.
* Previously filed with the Securities and Exchange Commission and incorporated herein by reference.
Exhibit No. - -----------
(10) Material contracts:
10.1 Consolidated Freightways, Inc. Long-Term Incentive Plan of 1978, as amended through Amendment No. 4. (Exhibit 10(e) to the Company's Form 10-K for the year ended December 31, 1983*#) 10.2 Amendments 5, 6 and 7 to the Consolidated Freightways, Inc. Long-Term Incentive Plan of 1978, as amended through Amendment No. 4. (Exhibit 10.1 as filed on Form SE dated March 25, 1991*#) 10.3 Consolidated Freightways, Inc. Long-Term Incentive Plan of 1988. (Exhibit 10(g) to the Company's Form 10-K for the year ended December 31, 1987*#) 10.4 Amendment 3 to the Consolidated Freightways, Inc. Long-Term Incentive Plan of 1988. (Exhibit 10.2 as filed on Form SE dated March 25, 1991*#) 10.5 Consolidated Freightways, Inc. Stock Option Plan of 1978, as amended through Amendment No. 1. (Exhibit 10(e) to the Company's Form 10-K for the year ended December 31, 1981*#) 10.6 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*#) 10.7 Forms of Stock Option Agreement (with and without Cash Surrender Rights) under the Consolidated Freightways, Inc. Stock Option Plan of 1988. (Exhibit 10(j) to the Company's Form 10-K for the year ended December 31, 1987*#) 10.8 Form of Consolidated Freightways, Inc. Deferred Compensation Agreement. (Exhibit 10(i) to the Company's Form 10-K for the year ended December 31, 1981*#) 10.9 Consolidated Freightways, Inc. Retirement Plan (formerly Emery Air Freight Corporation Pension Plan), as amended effective through January 1, 1985, and amendments dated as of October 30, 1987. (Exhibit 4.22 to the Emery Air Freight Corporation Quarterly Report on Form 10-Q dated November 16, 1987**) 10.10 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**) 10.11 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.
Exhibit No. - -----------
10.12 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**) 10.13 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**) 10.14 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**) 10.15 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**) 10.16 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**) 10.17 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**) 10.18 Credit Agreement dated January 14, 1993, by and among Emery Receivables Corporation as the borrower, Emery Air Freight Corporation, Consolidated Freightways, Inc., individually and as Servicer and various financial institutions. (Exhibit 10.19 to the Company's Form 10-K for the year ended December 31, 1992*). 10.19 Purchase and Sale Agreement, dated January 14, 1993, among Emery Air Freight Corporation and Emery Distribution Systems, Inc., as Originators, Emery Receivables Corporation, and Consolidated Freightways, Inc., as Servicer. (Exhibit 10.20 to the Company's Form 10-K for the year ended December 31, 1992*). 10.20 Consolidated Freightways, Inc. Directors' Election Form for deferral payment of director's fees. # 10.21 Consolidated Freightways, Inc. 1993 Executive Deferral Plan. (Exhibit 10.22 to the Company's Form 10-K for the year ended December 31, 1992*#).
* 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.
Exhibit No. - -----------
10.22 Consolidated Freightways, Inc. Executive Incentive Plan for 1995. # 10.23 CF MotorFreight Incentive Plan for 1995. # 10.24 Con-Way Transportation Services, Inc. Incentive Plan for 1995. # 10.25 Emery Worldwide Incentive Plan for 1995. # 10.26 Leland James Service Corporation-CFI Executive Incentive Plan for 1995. # 10.27 $300 million Amended and Restated Credit Agreement dated January 10, 1995 among Consolidated Freightways, Inc. and various financial institutions. 10.28 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*). 10.29 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*). 10.30 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*). 10.31 Supplemental Retirement Plan dated January 1, 1990. (Exhibit 10.31 to the Company's Form 10-K for the year ended December 31, 1993*#) 10.32 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*#) 10.33 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*#) 10.34 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*#) 10.35 Excess Benefit Plan dated January 1, 1987. (Exhibit 10.35 to the Company's Form 10-K for the year ended December 31, 1993*#) 10.36 Directors' Business Travel Insurance Plan. (Exhibit 10.36 to the Company's Form 10-K for the year ended December 31, 1993*#) 10.37 Deferred Compensation Plan for Executives dated October 1, 1993. (Exhibit 10.37 to the Company's Form 10-K for the year ended December 31, 1993*#) 10.38 Amended and Restated 1993 Nonqualified Employee Benefit Plans Trust Agreement dated January 1, 1995. # 10.39 Consolidated Freightways, Inc. Equity Incentive Plan for Non- Employee Directors. (Attachment to the Company's 1994 Proxy Statement dated March 18, 1994.*#)
* Previously filed with the Securities and Exchange Commission and incorporated herein by reference. # Designates a contract or compensation plan for Management or Directors.
Exhibit No. - ----------
10.40 Amended and Restated Retirement Plan for Directors of Consolidated Freightways, Inc. dated January 1, 1994. #
(13) Annual report to security holders:
Consolidated Freightways, Inc. 1994 Annual Report to Shareholders (Only those portions referenced herein are incorporated in this Form 10-K. Other portions such as "To Our Shareholders and Employees" are not required and, therefore, are not "filed" as part of this Form 10-K.)
(22) Significant Subsidiaries of the Company.
(27) Financial Data Schedule
(28) Additional documents:
28.1 Consolidated Freightways, Inc. 1995 Notice of Annual Meeting and Proxy Statement dated March 17, 1995. (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.*) 28.2 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*) 28.3 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*). 28.4 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*). 28.5 Form of Restructured Guarantee and Agreement between Consolidated Freightways, Inc., as Issuer and various financial institutions as Purchasers named therein, dated as of November 3, 1992. (Exhibit 28.5 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.