CNF Inc. Reports Second-Quarter Results; Company Takes Restructuring Charge at Emery; Write-off at Menlo.Business Editors/Transportation Writers PALO ALTO Palo Alto, city, California Palo Alto (păl`ō ăl`tō), city (1990 pop. 55,900), Santa Clara co., W Calif.; inc. 1894. Although primarily residential, Palo Alto has aerospace, electronics, and advanced research industries. , Calif.--(BUSINESS WIRE)--July 18, 2001 CNF CNF Configuration (File Name Extension) CNF Conference CNF Conjunctive Normal Form CNF Could Not Find CNF Chin National Front (Burma) CNF Canadian Nature Federation CNF Cornell NanoScale Facility Inc. (NYSE NYSE See: New York Stock Exchange :CNF) today reported second-quarter net income for common shareholders of $8.2 million, or 17 cents per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, excluding previously announced special charges. In the second quarter of 2000, net income for common shareholders was $43.7 million, or 80 cents per diluted share. Including these special charges, CNF reported a second-quarter 2001 net loss for common shareholders of $227.9 million, or $4.67 per diluted share. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. for the 2001 second quarter, excluding special charges, was $24.8 million compared with $87.1 million in 2000. Including special charges, the company reported a second-quarter 2001 operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $352.0 million. Revenue in the 2001 second quarter was $1.26 billion compared with $1.40 billion in the prior-year period. Special charges in the 2001 second quarter included a charge of $207.7 million net of tax ($4.26 per diluted share) for an operational restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). at Emery Worldwide Emery Worldwide was a cargo airline, once was one of the leading carriers in the cargo airline world. Emery started in 1946 and was the first freight forwarder to receive a carrier certificate from the United States Government. Airlines reflecting an impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. and planned disposal of assets, a charge of $2.9 million net of tax ($0.06 per diluted share) for a legal settlement on returned aircraft, and a write-off of $19.3 million net of tax ($0.40 per diluted share) of unrealizable accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying at Menlo Logistics from a customer that has ceased operations. Net income for common shareholders for the first six months of 2001 was $21.7 million, or $0.43 per diluted share, excluding the special charges. This compares with net income for common shareholders of $79.9 million, or $1.46 per diluted share, in the same period of 2000, excluding the effect of an accounting change. When the 2001 special charges are included, CNF reported a six-month net loss for common shareholders of $214.4 million ($4.40 per diluted share). Operating income, excluding special charges, was $58.6 million in 2001 compared with $158.6 million in second-quarter 2000. Including special charges, the operating loss for the first six months of 2001 was $318.3 million. Revenue for the first six months of 2001 was $2.54 billion compared with $2.72 billion in the same period of 2000. "Overall results from our core operations before the special charges remained weak due to the severity of the economic downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. ," said Gregory L. Quesnel, CNF president and chief executive officer. The operational restructuring at Emery emery: see corundum. emery Granular rock consisting of a mixture of the mineral corundum (aluminum oxide, Al2O3) and iron oxides such as magnetite (Fe3O4) or hematite (Fe2O3). was originally announced on June 14. The redesign re·de·sign tr.v. re·de·signed, re·de·sign·ing, re·de·signs To make a revision in the appearance or function of. re of Emery's North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. network will reduce airlift capacity to better match changes in market demand, make Emery a stronger company for its customers, and deliver more value to CNF shareholders. The benefits of the restructuring, which included reducing the fleet of Emery Worldwide Airlines to 38 aircraft from 54 a year ago, are not reflected in the company's second-quarter results. The additional $2.9 million net-of-tax charge at Emery was from a legal settlement related to the return of leased aircraft. "We have put these special charges behind us and we can now focus more intently on increasing value for CNF shareholders," Quesnel said. The write-off of accounts receivable at Menlo Logistics was announced on July 13 and involves Homelife, a retail customer that has ceased operations. "While Homelife's demise Death. A conveyance of property, usually of an interest in land. Originally meant a posthumous grant but has come to be applied commonly to a conveyance that is made for a definitive term, such as an estate for a term of years. had a significant effect, Menlo remains a great business with a bright future," said Quesnel. Con-Way Transportation Services reported second-quarter 2001 operating income of $42.4 million, down 35 percent from $65.5 million in the same quarter a year ago. Revenues were $489.2 million, down 7 percent from $528.4 million in second-quarter 2000, which included $20.9 million of revenue from Con-Way's truckload truck·load n. The quantity that a truck can hold. truckload n → camión m lleno operation that was sold in August of 2000. Total CTS (1) (Clear To Send) The RS-232 signal sent from the receiving station to the transmitting station that indicates it is ready to accept data. Contrast with RTS. (2) (Common Type System) The data typing used in . regional carrier tonnage TONNAGE, mar. law. The capacity of a ship or vessel. 2. The act of congress of March 2, 1799, s. 64, 1 Story's L. U. S. 630, directs that to ascertain the tonnage of any ship or vessel, the surveyor, &c. declined 4 percent in the second quarter and LTL LTL - Linear Temporal Logic tonnage decreased 3 percent. "Con-Way's second-quarter of 2000 was a record making the comparison with this quarter particularly difficult," said Quesnel. "While Con-Way continues to be affected by the weak economy, we are encouraged that its yields remain firm and that it is now beginning to see the seasonal up-tick in tonnage levels that usually occurs in the third quarter, albeit on a lower base. While these increases are not nearly as strong as in past years, we are nevertheless encouraged that the movement is in the right direction. Con-Way's efficiency and productivity are at the highest levels in its history and it's well positioned to convert any economic rebound rebound (rē´bownd), n/v 1. a recovery from illness. n 2. an outbreak of fresh reflex activity after withdrawal of a stimulus rebound adjective into strong results." Emery Worldwide reported a $25.2 million loss from operations in the second quarter before the restructuring charge restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. and legal settlement. This compared with $12.9 million of operating income in the second quarter of 2000. When the charges are included, Emery had a second-quarter operating loss of $370.4 million. Revenues in second-quarter 2001 were $530.2 million, down 16 percent from $629.6 million in 2000. In the second quarter of 2001, Emery's North American air freight air freight n → flete m por avión air freight n → fret aérien air freight air n → Luftfracht f revenue per day was down 24 percent and international revenue per day declined by 12 percent from the second quarter of 2000. North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. air freight tonnage per day fell 29 percent while international tonnage per day decreased by 13 percent. North America yield increased 8 percent from the second quarter of 2000 and international yield rose 2 percent. Menlo Logistics reported second quarter operating income of $9.4 million before the accounts receivable write-off, compared with operating income of $8.5 million in the year-ago quarter. Including the write-off, Menlo reported an operating loss of $22.3 million. Menlo's revenue in the second quarter was $234.5 million, down 2 percent from $238.6 million. CNF's "Other" operations reported an operating loss of $1.7 million in the quarter. This segment primarily includes operating losses on the startup of Vector SCM (1) (Software Configuration Management, Source Code Management) See configuration management. (2) See supply chain management. , CNF's joint venture company with General Motors, which is on track as it begins to assume the management of significant elements of GM's global supply chain. "We are very pleased with the progress of Vector SCM, which is exceeding our expectations. We currently anticipate that it will be modestly profitable for the remainder of this year," said Quesnel. Outlook Though tonnage levels appear to be strengthening somewhat, Con-Way is expected to continue to report a decline in year-over-year earnings in the third quarter. At Emery, North America and International year-over-year tonnage declines are expected to continue at the second-quarter rate and the company is currently expected to report a loss in the range of $8 million to $10 million in the third quarter. At Menlo, revenue and operating income are expected to be lower in the low- to mid-single digit range. Menlo will take an additional, but much smaller, write-off in the third quarter for the Homelife account. Vector SCM is expected to report a small profit in the third quarter. CNF's tax rate is expected to be about 37 percent. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Certain statements in this news release constitute "forward-looking statements" and are subject to a number of risks and uncertainties, and should not be relied upon as predictions of future events. All statements other than statements of historical fact are forward-looking statements including any projections and objectives of management for future operations, any statements concerning proposed new products or services, any statements regarding future economic conditions or performance, statements of belief and any statements or assumptions underlying the foregoing. Specific factors that could cause actual earnings, results of operations and other matters to differ materially from those discussed in such forward-looking statements include: changes in general business and economic conditions, the creditworthiness Creditworthiness The condition in which the risk of default on a debt obligation by that entity is deemed low. Creditworthiness Eligibility of an individual or firm to borrow money. of the Company's customers and their ability to pay for services rendered, increasing competition and pricing pressure, changes in fuel prices, uncertainties regarding Emery Worldwide Airlines' (EWA EWA Enterprise Wireless Alliance EWA Electronic Warfare Associates, Inc. EWA Energy from Waste Association (UK) EWA Engineered Wood Association EWA Edgewood Arsenal EWA Earl Walls Associates ) claims under its former Priority Mail contract with the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. Postal Service postal service, arrangements made by a government for the transmission of letters, packages, and periodicals, and for related services. Early courier systems for government use were organized in the Persian Empire under Cyrus, in the Roman Empire, and in medieval (USPS (1) (Uninterruptible Switching Power Supply) A power supply for a computer that contains its own battery and uninterruptible power supply (UPS) circuitry. See power supply and UPS. ), uncertainties regarding EWA's existing Express Mail contract with the USPS, labor matters, enforcement of and changes in governmental regulations, environmental and tax matters (including claims made by the Internal Revenue Service with respect to aircraft maintenance tax matters), the Department of Transportation investigation relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc Emery Worldwide's handling of hazardous materials and aircraft maintenance, the February 2000 crash of an EWA aircraft and related litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. , matters relating to the company's 1996 spin-off The situation that arises when a parent corporation organizes a subsidiary corporation, to which it transfers a portion of its assets in exchange for all of the subsidiary's capital stock, which is subsequently transferred to the parent corporation's shareholders. of Consolidated Freightways Consolidated Freight was the 3rd biggest trucking company in the US. In the 1930s they started their own truck manufacturing operation, Freightliner, now part of DaimlerChrysler. Corporation. The factors included here and in Item 7 of our 2000 Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. as well as other filings with the Securities and Exchange Commission could cause actual results and other matters to differ materially from those in such forward-looking statements. As a result, no assurance can be given as to future financial position or results of operations. Conference Call CNF will host a conference call for shareholders and the investing community to discuss first-quarter results at 11:00 a.m. Eastern time (8:00 a.m. Pacific) on July 18. The call can be accessed by dialing 800/230-1085 and is expected to last approximately one hour. Callers are requested to dial in at least five minutes before the start of the call. The call will also be available through a live web cast at www.streetevents.com and in the investor relations Investor relations The process by which the corporation communicates with its investors. section of the CNF web site at www. cnf.com. An audio replay will be available for 48 hours following the call at 800/475-6701, confirmation no. 593464. The replay will also be available for 48 hours on demand at the web sites providing access to the live call. CNF (NYSE:CNF) is a $6 billion management company of global supply chain services with businesses in regional trucking, air freight, ocean freight, customs brokerage, global logistics management Logistics Management is that part of Supply Chain Management that plans, implements, and controls the efficient, effective, forward, and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet and trailer In communications, a code or set of codes that make up the last part of a transmitted message. See trailer label. manufacturing.
CNF INC.
STATEMENTS OF CONSOLIDATED RESULTS
(Dollars in thousands except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
---------- ----------- --------- ---------
REVENUES $1,256,608 $1,401,146 $2,535,073 $2,723,040
Costs and Expenses
Operating expenses 1,095,964 1,148,795 2,169,749 2,235,590
General and
administrative 127,913 124,926 255,115 248,280
Depreciation 44,187 40,294 87,937 80,570
Restructuring and
related charges 340,531 -- 340,531 --
---------- ----------- --------- ---------
1,608,595 1,314,015 2,853,332 2,564,440
---------- ----------- --------- ---------
OPERATING INCOME (LOSS) (351,987) 87,131 (318,259) 158,600
Operating Expense,
net (7,674) (7,542) (15,474) (12,555)
---------- ----------- --------- ---------
Income (Loss) from
Continuing Operations
before Taxes (359,661) 79,589 (333,733) 146,045
Income Tax Benefit
(Provision) 133,852 (33,825) 123,481 (62,069)
---------- ----------- --------- ---------
INCOME (LOSS) FROM
CONTINUING OPERATIONS
BEFORE ACCOUNTING
CHANGE (225,809) 45,764 (210,252) 83,976
---------- ----------- --------- ---------
Cumulative Effect
of Accounting
Change, net of tax -- -- -- (2,744)
---------- ----------- --------- ---------
Net Income (Loss) (225,809) 45,764 (210,252) 81,232
Preferred Stock
Dividends 2,079 2,072 4,119 4,106
---------- ----------- --------- ---------
NET INCOME (LOSS)
APPLICABLE TO
COMMON SHAREHOLDERS $(227,888) $43,692 $(214,371) $77,126
========== =========== ========= =========
Weighted-Average Common
Shares Outstanding
Basic shares 48,760,668 48,463,040 48,704,866 48,440,350
Diluted shares(a) 48,760,668 56,361,884 48,704,866 56,377,108
Earnings per Common
Share
Basic
Net Income (Loss)
before Accounting
Change $(4.67) $0.90 $(4.40) $1.65
Accounting change,
net of tax -- -- -- (0.06)
---------- ----------- --------- ---------
Net Income (Loss)
Applicable to
Common Shareholders $(4.67) $0.90 $(4.40) $1.59
========== =========== ========= =========
Diluted(a)
Net Income (Loss)
before Accounting
Change $(4.67) $0.80 $(4.40) $1.46
Accounting change,
net of tax -- -- -- (0.05)
---------- ----------- --------- ---------
Net Income (Loss)
Applicable to
Common
Shareholders $(4.67) $0.80 $(4.40) $1.41
========== =========== ========= =========
(a) In 2000, diluted shares include the dilutive effect of stock
options, Series B (TASP) preferred stock and Series A "TECONs",
convertible preferred stock of subsidiary trust.
OPERATING SEGMENTS
REVENUES
Con-Way Transportation
Services $489,193 $528,422 $958,163 $1,036,826
Emery Worldwide 530,158 629,621 1,113,356 1,227,356
Menlo Logistics 234,503 238,551 457,098 448,454
Other 2,754 4,552 6,456 10,404
---------- ----------- --------- ---------
$1,256,608 $1,401,146 $2,535,073 $2,723,040
========== =========== ========= =========
OPERATING INCOME (LOSS)
BEFORE SIGNIFICANT
UNUSUAL ITEMS
Con-Way Transportation
Services $42,431 $65,452 $79,166 $122,148
Emery Worldwide (29,911)(a) 12,861 (36,458)(a) 19,685
Menlo Logistics 9,352 8,473 17,523 16,111
Other (1,723) 345 (6,354) 656
---------- ----------- --------- ---------
$20,149 $87,131 $53,877 $158,600
========== =========== ========= =========
Significant Unusual
Items
Emery -- Restructuring
and related
charges $(340,531) $ -- $(340,531) $ --
Menlo -- Loss on
failure of significant
customer (31,605) -- (31,605) --
---------- ----------- --------- ---------
Consolidated
operating results $(351,987) $87,131 $(318,259) $158,600
========== =========== ========= =========
(a) Includes costs of $4.7 million, $2.9 million net of tax ($0.06 per
basic and diluted share), for a legal settlement on returned
aircraft.
CNF INC.
CONDENSED BALANCE SHEETS
(Dollars in thousands)
June 30, December 31,
2001 2000
---------- ----------
ASSETS
Current assets(a) $1,163,631 $1,240,335
Property, plant and
equipment, net 1,083,785 1,106,522
Other assets(b) 628,169 898,084
---------- ----------
Total Assets $2,875,585 $3,244,941
========== ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities(c) $861,062 $958,909
Long-term debt and
guarantees 541,126 534,649
Other long-term liabilities
and deferred credits 508,883 564,461
Preferred stock --
Subsidiary Trust 125,000 125,000
Shareholders' equity 839,514 1,061,922
---------- ----------
Total Liabilities and
Shareholders' Equity $2,875,585 $3,244,941
========== ==========
(a) Includes net current assets of discontinued operations of $2.9
million as of June 30, 2001.
(b) Includes net non-current assets of discontinued operations of
$105.9 million and $173.5 million as of June 30, 2001 and December
31, 2000, respectively.
(c) Includes net current liabilities of discontinued operations of
$68.2 million as of December 31, 2000.
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