CNF Inc. Is a $4.8 Billion Company That Provides Supply
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CNF’sCompany Description CNF Inc. is a $4.8 billion company that provides supply chain management and transportation services for commercial and industrial customers throughout North America and the world. The company has two principal business units: Con-Way Transportation Services and Menlo Worldwide. Con-Way offers full-service less-than-truckload (LTL) regional next-day and second-day trucking, expedited transportation, logistics, air freight forwarding and truckload brokerage services. The companies of Menlo Worldwide provide global air and ocean freight forwarding, customs brokerage, expedited transportation and logistics services, including third- and fourth-party logistics, as well as supply chain technology, engineering and consulting. Additional information about CNF and its companies can be found at www.cnf.com. For CNF, 2002 was a year in which your company faced and overcame many challenges. Although results were not record setting, CNF’s performance was commendable in a struggling global economy. Our employees at CNF, Con-Way Transportation We ended the year with a very good balance Services and Menlo Worldwide showed the depth of sheet including $270 million in cash. The strong their dedication and experience in rising to the many cash position was achieved despite the fact that we tasks presented last year. paid more than $300 million to aircraft lessors for the early return of many aircraft and other restruc- At the end of 2001, we restructured Emery turing charges following the closure of the airline. Worldwide, joining it with Menlo Logistics and Vector SCM, our joint venture with General Motors, Strategically, we made a great deal of progress in under the new Menlo WorldwideSM brand. This involved getting Menlo Worldwide off to a strong start. many organizational issues. We Harmonizing three corporate also closed our all-cargo airline. cultures, even though they were Together, these actions necessitated all CNF companies, is not without the company taking after-tax restruc- its challenges. Our overarching turing charges of approximately $400 strategy is to convert these opera- million in 2001, resulting in a loss of tions from transactional trans- more than $8.00 per share. This set portation and logistics concerns into of dynamics, coupled with the strug- a leading services and solutions gling global economy, certainly set organization. We are making continual the stage for a challenging 2002. progress in this regard. Our objective is to have Emery emerge as a clear The ability of our employees to provide leader in global air and ocean premier service in trucking and supply forwarding, with expanded capabilities chain management for our customers in logistics management for its has long been a hallmark of our 74- customers. Likewise, we want Menlo year-old enterprise. When the company Gregory L. Quesnel Worldwide Logistics to have access most needs them, our employees have President and Chief Executive Officer to customers around the world always demonstrated that they are the through the Emery organization best. 2002 was no exception in this regard. and the capability to harness the full array of In 2002, we achieved a strong financial turnaround forwarding operations and trade services for its from 2001. For the year, the company earned $93.6 global customers. The synergy among the million in net income for common shareholders, equal companies has surpassed our high expectations, and to $1.74 a share. That compares with a loss of customers are responding positively. $402.9 million, or $8.26 a share, in 2001, including Menlo Worldwide had $38 million in operating income the restructuring charges. Revenue in 2002 was on revenue of $2.7 billion. The loss at Emery narrowed $4.8 billion, down $100 million from 2001. Operating to $12 million from $790 million, including restruc- income was $182 million. turing charges, as the company succeeded in reducing North American transportation expense by more than $125 million with the closure of the airline. “We have a positive growth outlook even with the weakness evident in the U.S. and global economies and a likelihood of war.” Vector SCM earned $18 In January, we were pleased to add John C. Pope and million in 2002. This 1998 $130.8 Kevin Burns to our board. They bring a valuable blend pioneering fourth-party of global experience that will greatly benefit our board. logistics management 1999 $182.3 We are delighted that such capable executives have company continues as a agreed to serve CNF and its shareholders in a period joint venture with GM to 2000 $126.8 of corporate governance revolution that requires increased manage that company’s time, commitment and involvement by all directors. vast automotive supply 2001 $ (402.9) BUSINESS OUTLOOK chain. Vector SCM is a precise fit with our long- 2002 $93.6 We have a positive growth term strategy of reducing outlook, even with the 1998 $4.5 asset intensity in our Net Income, in Millions weakness evident in the companies. The company U.S. and global economies 1999 $5.0 made progress in 2002 establishing its brand on a and a likelihood of war. We global basis as a platform for additional fourth-party have capable companies 2000 $5.6 logistics business. that are well positioned in the transportation and 2001 $4.9 Con-Way Transportation Services had another solid supply chain management year, with operating profit of $147.2 million on markets. We have strong 2002 $4.8 revenue of just over $2 billion. The Con-Way regional cash flow, low capital carriers are 20 years old in 2003, and the company expenditure needs and a Revenue, in Billions will be celebrating this important anniversary steady and improving throughout the year with its employees and customers. earnings outlook. In summary, we will continue to Longevity is important, especially in the less-than-truckload manage the business tightly in the current environment industry, but performance is a better measure of and maintain a strong balance sheet. Each of our units success. Con-Way has been the No.1 or No.2 profit will benefit significantly when the economy improves. producer in its industry for almost a decade and We all look forward to that day. continues to lead as an innovator. With the company’s new extended service lanes and deferred product, Con-Way We have great people and the services and solutions continues to demonstrate that it can differentiate itself to meet our customers’ demands. This enables our as the full-service carrier of choice. continued success. MANAGEMENT AND BOARD OF DIRECTORS In December, Richard Clarke, a member of our Board Gregory L. Quesnel of Directors for 10 years, died. Dick was a valued President and Chief Executive Officer colleague to many of us at CNF, and his death was a CNF Inc. loss for the company. He was a distinguished business March 3, 2003 leader as long-time Chairman and CEO of Pacific Gas and Electric Corp. and a great asset to me and the CNF board with his wise counsel and business acumen. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2002 or ‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to Commission File Number 1-5046 CNF INC. Incorporated in the State of Delaware I.R.S. Employer Identification No. 94-1444798 3240 Hillview Avenue, Palo Alto, California 94304 Telephone Number (650) 494-2900 Securities Registered Pursuant to Section 12(b) of the Act: New York Stock Exchange Common Stock ($.625 par value) Pacific Exchange (Title of Each Class) (Name of Each Exchange on Which Registered) Securities Registered Pursuant to Section 12(g) of the Act: 8 7⁄8% Notes Due 2010 7.35% Notes Due 2005 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes È 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. È Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes È No ‘ State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. Aggregate market value of voting stock held by persons other than Directors, Officers and those shareholders holding more than 5% of the outstanding voting stock, based upon the closing price per share Composite Tape on June 30, 2002: $1,302,584,450. Number of shares of Common Stock outstanding as of February 28, 2003: 49,517,951 DOCUMENTS INCORPORATED BY REFERENCE Part III Proxy Statement dated March 24, 2003 (only those portions referenced specifically herein are incorporated in this Form 10-K). CNF INC. FORM 10-K Year Ended December 31, 2002 INDEX Item Page PART I 1.