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UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-K


|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|  
|   |  | For the Fiscal Year Ended December 31, 2004                                                 
|  
|or
|  
|o  |  | 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


www.cnf.com


Securities Registered Pursuant to Section 12(b) of the
Act:


|                                                    |  |                                             
|--------------------------------------------------- |  | --------------------------------------------
|Common Stock ($.625 par value)(Title of Each Class) |  | New York Stock Exchange
    Pacific Exchange
|                                                    |  | (Name of Each Exchange on Which Registered) 

Securities Registered Pursuant to Section 12(g) of the
Act:


87/8% Notes Due
2010


7.35% Notes Due 2005


6.70% Senior Debentures due 2034


þ o


o


þ o








DOCUMENTS INCORPORATED BY REFERENCE


Part III












---










CNF INC.


FORM 10-K


Year Ended December 31, 2004


INDEX


|              |     |  |  |                                                                                                    |  |  |    | 
|------------- | --- |  |  | -------------------------------------------------------------------------------------------------- |  |  | -- | 
|Item          |     |  |  | Page                                                                                              
|              |     |  |  |                                                                                                   
|PART I       
|              | 1.  |  |  | Business                                                                                           |  |  | 3  | 
|              | 2.  |  |  | Properties                                                                                         |  |  | 8  | 
|              | 3.  |  |  | Legal Proceedings                                                                                  |  |  | 9  | 
|              | 4.  |  |  | Submission of Matters to a Vote of
    Stockholders                                                |  |  | 10 | 
|PART II      
|              | 5.  |  |  | Market for Registrants Common Equity
    and Related Stockholder Matters                          |  |  | 10 | 
|              | 6.  |  |  | Selected Financial Data                                                                            |  |  | 11 | 
|              | 7.  |  |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations          |  |  | 13 | 
|              | 7A. |  |  | Quantitative and Qualitative Disclosures
    About Market Risk                                     |  |  | 29 | 
|              | 8.  |  |  | Financial Statements and Supplementary
    Data                                                    |  |  | 30 | 
|              | 9.  |  |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure           |  |  | 65 | 
|              | 9A. |  |  | Controls and Procedures                                                                            |  |  | 65 | 
|              | 9B. |  |  | Other Information                                                                                  |  |  | 68 | 
|PART III     
|              | 10. |  |  | Directors and Executive Officers of the
    Registrant                                             |  |  | 68 | 
|              | 11. |  |  | Executive Compensation                                                                             |  |  | 70 | 
|              | 12. |  |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters |  |  | 70 | 
|              | 13. |  |  | Certain Relationships and Related
    Transactions                                                 |  |  | 70 | 
|              | 14. |  |  | Principal Accounting Fees and Services                                                             |  |  | 70 | 
|PART IV      
|              | 15. |  |  | Exhibits and Financial Statement
    Schedules                                                     |  |  | 71 | 
|EXHIBIT 4.9  
|EXHIBIT 4.10 
|EXHIBIT 10.74
|EXHIBIT 10.75
|EXHIBIT 10.76
|EXHIBIT 10.7 
|EXHIBIT 12   
|EXHIBIT 21   
|EXHIBIT 23   
|EXHIBIT 31   
|EXHIBIT 32   



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CNF INC.


Form 10-K


Year Ended December 31, 2004





PART I







|        |         
|------- | --------
|ITEM 1. | BUSINESS

Legal Organization






Reporting Segments






| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Con-Way Transportation Services reporting segment
    (Con-Way). Includes the combined operating
    results of Con-Way Transportation Services, Inc. and its
    subsidiaries and affiliated companies. Con-Way provides regional
    next-day, second-day and transcontinental freight trucking
    throughout the U.S., Canada, Puerto Rico, and Mexico, as well as
    expedited transportation, freight forwarding, contract logistics
    and warehousing, and truckload brokerage services.
|
| | Menlo Worldwide Logistics reporting segment
    (Logistics). Includes the operating results of
    Menlo Worldwide Logistics and its subsidiaries. Logistics
    develops integrated contract logistics solutions, including the
    management of complex distribution networks and supply chain
    engineering and consulting.                                                                                                                                                                 
|
| | Menlo Worldwide Other reporting segment. Includes the
    operating results of Vector SCM (Vector), a company
    jointly owned by MW and General Motors (GM). It
    serves as the lead logistics manager for GM.                                                                                                                                                                                                                                                                              
|
| | CNF Other reporting segment. Includes the operating
    results of Road Systems, Inc., a trailer manufacturer, and
    certain corporate activities.                                                                                                                                                                                                                                                                                                                                                



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| |                                 
| | --------------------------------
| | Information Available on Website







Con-Way Transportation Services




| |                          
| | -------------------------
| | Con-Way Regional Carriers







| |                                                                              
| | -----------------------------------------------------------------------------
| | Con-Way NOW, Con-Way Logistics, Con-Way Air Express and
    Con-Way Truckload







4



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| |            
| | -----------
| | Competition



Menlo Worldwide




Menlo Worldwide  Logistics








5



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| |                              
| | -----------------------------
| | Con-Way Logistics Integration







| |            
| | -----------
| | Competition



Menlo Worldwide Other








CNF Other




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Discontinued Operations




| |                           
| | --------------------------
| | Menlo Worldwide Forwarding





| |                       
| | ----------------------
| | Priority Mail Contract





| |                
| | ---------------
| | Spin-Off of CFC



General




| |          
| | ---------
| | Employees





| |                            
| | ---------------------------
| | Cyclicality and Seasonality



Regulation




| |                      
| | ---------------------
| | Ground Transportation







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| |              
| | -------------
| | Environmental









| |                  
| | -----------------
| | Homeland Security










|        |           
|------- | ----------
|ITEM 2. | PROPERTIES



Con-Way Transportation Services




8



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Menlo Worldwide Logistics






CNF Other









|        |                  
|------- | -----------------
|ITEM 3. | LEGAL PROCEEDINGS











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|        |                                                
|------- | -----------------------------------------------
|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS






PART II







|        |                                                                          
|------- | -------------------------------------------------------------------------
|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED
    STOCKHOLDER MATTERS







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|        |                        
|------- | -----------------------
|ITEM 6. | SELECTED FINANCIAL DATA

CNF Inc.


Five-Year Financial Summary


|                                                          |                        |                                              |          |           |           |   |         |           |           |   |         |           |           |      |          |           |           |   |         |           |           |  
|--------------------------------------------------------- | ---------------------- | -------------------------------------------- | -------- | --------- | --------- | - | ------- | --------- | --------- | - | ------- | --------- | --------- | ---- | -------- | --------- | --------- | - | ------- | --------- | --------- | -
|                                                          |                        | 2004                                         |          |           | 2003      |   |         | 2002      |           |   | 2001    |           |           | 2000 |         
|                                                          |                        |                                              |          |           |           |   |         |           |           |   |         |           |           |      |         
|                                                          |                        | (Dollars in thousands except per share data) |         
|SUMMARY OF OPERATIONS                                     |                        |                                              |          |           |           |   |         |           |           |   |         |           |           |      |          |           |           |   |         |          
|                                                          | Revenues               |                                              |          |           |           |   |         |           |           |   |         |           |           |      |          |           |           |   |         |           |          
|                                                          |                        | Con-Way Transportation Services              |          | $         | 2,604,004 |   |         | $         | 2,212,692 |   |         | $         | 2,011,577 |      |          | $         | 1,912,578 |   |         | $         | 2,045,249 |  
|                                                          |                        | Menlo Worldwide Logistics                    |          |           | 1,103,028 |   |         |           | 1,013,987 |   |         |           | 978,929   |      |          |           | 927,503   |   |         |           | 926,880   |  
|                                                          |                        | CNF Other                                    |          |           | 5,347     |   |         |           | 287       |   |         |           | 2,841     |      |          |           | 7,442     |   |         |           | 28,539    |  
|                                                          |                        |                                              |          |           |           |   |         |           |           |   |         |           |           |      |         
|                                                          | Total Revenues         |                                              | $        | 3,712,379 |           |   | $       | 3,226,966 |           |   | $       | 2,993,347 |           |      | $        | 2,847,523 |           |   | $       | 3,000,668 |          
|                                                          |                        |                                              |          |           |           |   |         |           |           |   |         |           |           |      |         
|Operating Income (Loss)[a]                                |                        |                                              |          |           |           |   |         |           |           |   |         |           |           |      |          |           |           |   |         |          
|                                                          |                        | Con-Way Transportation Services              |          | $         | 245,488   |   |         | $         | 183,095   |   |         | $         | 135,001   | [b]  |          | $         | 144,800   |   |         | $         | 211,040   |  
|                                                          |                        | Menlo Worldwide Logistics                    |          |           | 24,399    |   |         |           | 23,492    |   |         |           | 30,523    |      |          |           | (18,751   | ) |         |           | 23,398    |  
|                                                          |                        | Menlo Worldwide Other                        |          |           | 18,253    |   |         |           | 20,718    |   |         |           | 18,188    |      |          |           | (9,415    | ) |         |           | (560      | )
|                                                          |                        |                                              |          |           |           |   |         |           |           |   |         |           |           |      |         
|                                                          |                        |                                              | 42,652   |           |           |   | 44,210  |           |           |   | 48,711  |           |           |      | (28,166  | )         |           |   | 22,838  |          
|                                                          |                        | CNF Other                                    |          |           | (3,973    | ) |         |           | (2,357    | ) |         |           | (3,369    | )    |          |           | (2,540    | ) |         |           | 1,546     |  
|                                                          |                        |                                              |          |           |           |   |         |           |           |   |         |           |           |      |         
|                                                          | Total Operating Income |                                              | $        | 284,167   |           |   | $       | 224,948   |           |   | $       | 180,343   |           |      | $        | 114,094   |           |   | $       | 235,424   |          
|                                                          |                        |                                              |          |           |           |   |         |           |           |   |         |           |           |      |         
|Depreciation and Amortization, net of Accretion           |                        | $                                            | 115,096  |           |           | $ | 113,417 |           |           | $ | 117,084 |           |           | $    | 123,743  |           |           | $ | 110,448 |          
|Interest Expense                                          |                        |                                              | 39,695   |           |           |   | 29,597  |           |           |   | 22,825  |           |           |      | 27,009   |           |           |   | 29,967  |          
|Income from Continuing Operations Before Taxes            |                        |                                              | 246,823  |           |           |   | 197,517 |           |           |   | 152,328 |           |           |      | 85,007   |           |           |   | 212,054 |          
|                                                          |                        | Income Tax Provision                         |          |           | 96,378    |   |         |           | 77,032    |   |         |           | 38,234    | [c]  |          |           | 32,124    |   |         |           | 89,550    |  
|Net Income from Continuing Operations                     |                        |                                              | 142,206  |           |           |   | 112,246 |           |           |   | 105,844 |           |           |      | 44,600   |           |           |   | 114,243 |          
|Gain (Loss) from Disposal, net of tax                     |                        |                                              | (278,749 | )         |           |   |        |           |           |   | (12,398 | )         |           |      | 38,975   |           |           |   | (13,508 | )        
|Income (Loss) from Discontinued Operations, net of tax[a] |                        |                                              | 12,415   |           |           |   | (28,461 | )         |           |   | 115     |           |           |      | (486,449 | )         |           |   | 28,812  |          
|Cumulative Effect of Accounting Change, net of tax        |                        |                                              |         |           |           |   |        |           |           |   |        |           |           |      |         |           |           |   | (2,744  | )        
|                                                          |                        |                                              |          |           |           |   |         |           |           |   |         |           |           |      |         
|Net Income (Loss) Applicable to Common Shareholders       |                        | $                                            | (124,128 | )         |           | $ | 83,785  |           |           | $ | 93,561  |           |           | $    | (402,874 | )         |           | $ | 126,803 |          
|                                                          |                        |                                              |          |           |           |   |         |           |           |   |         |           |           |      |         

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|                                                  |                                                        |                                              |              |       |      |   |              |       |   |   |              |       |   |      |              |       |   |   |              |       |  
|------------------------------------------------- | ------------------------------------------------------ | -------------------------------------------- | ------------ | ----- | ---- | - | ------------ | ----- | - | - | ------------ | ----- | - | ---- | ------------ | ----- | - | - | ------------ | ----- | -
|                                                  |                                                        | 2004                                         |              |       | 2003 |   |              | 2002  |   |   | 2001         |       |   | 2000 |             
|                                                  |                                                        |                                              |              |       |      |   |              |       |   |   |              |       |   |      |             
|                                                  |                                                        | (Dollars in thousands except per share data) |             
|EARNINGS (LOSS) PER COMMON SHARE                  |                                                        |                                              |              |       |      |   |              |       |   |   |              |       |   |      |              |       |   |   |              |      
|Basic                                             |                                                        |                                              |              |       |      |   |              |       |   |   |              |       |   |      |              |       |   |   |              |      
|                                                  | Net Income from Continuing Operations                  |                                              | $            | 2.82  |      |   | $            | 2.27  |   |   | $            | 2.15  |   |      | $            | 0.91  |   |   | $            | 2.36  |  
|                                                  | Gain (Loss) from Disposal, net of tax                  |                                              |              | (5.53 | )    |   |              |      |   |   |              | (0.25 | ) |      |              | 0.80  |   |   |              | (0.28 | )
|                                                  | Income (Loss) from Discontinued Operations, net of tax |                                              |              | 0.25  |      |   |              | (0.58 | ) |   |              |      |   |      |              | (9.97 | ) |   |              | 0.59  |  
|                                                  | Cumulative Effect of Accounting Change, net of tax     |                                              |              |      |      |   |              |      |   |   |              |      |   |      |              |      |   |   |              | (0.06 | )
|                                                  |                                                        |                                              |              |       |      |   |              |       |   |   |              |       |   |      |             
|                                                  | Net Income (Loss) Applicable to Common Shareholders    |                                              | $            | (2.46 | )    |   | $            | 1.69  |   |   | $            | 1.90  |   |      | $            | (8.26 | ) |   | $            | 2.61  |  
|                                                  |                                                        |                                              |              |       |      |   |              |       |   |   |              |       |   |      |             
|Diluted                                           |                                                        |                                              |              |       |      |   |              |       |   |   |              |       |   |      |              |       |   |   |              |      
|                                                  | Net Income from Continuing Operations                  |                                              | $            | 2.57  |      |   | $            | 2.07  |   |   | $            | 1.96  |   |      | $            | 0.91  |   |   | $            | 2.14  |  
|                                                  | Gain (Loss) from Disposal, net of tax                  |                                              |              | (4.94 | )    |   |              |      |   |   |              | (0.22 | ) |      |              | 0.80  |   |   |              | (0.24 | )
|                                                  | Income (Loss) from Discontinued Operations, net of tax |                                              |              | 0.22  |      |   |              | (0.50 | ) |   |              |      |   |      |              | (9.97 | ) |   |              | 0.51  |  
|                                                  | Cumulative Effect of Accounting Change, net of tax     |                                              |              |      |      |   |              |      |   |   |              |      |   |      |              |      |   |   |              | (0.05 | )
|                                                  |                                                        |                                              |              |       |      |   |              |       |   |   |              |       |   |      |             
|                                                  | Net Income (Loss) Applicable to Common Shareholders    |                                              | $            | (2.15 | )    |   | $            | 1.57  |   |   | $            | 1.74  |   |      | $            | (8.26 | ) |   | $            | 2.36  |  
|                                                  |                                                        |                                              |              |       |      |   |              |       |   |   |              |       |   |      |             
|Common dividends per share                        |                                                        | $                                            | 0.40         |       |      | $ | 0.40         |       |   | $ | 0.40         |       |   | $    | 0.40         |       |   | $ | 0.40         |      
|Common shareholders equity per share             |                                                        | $                                            | 13.68        |       |      | $ | 15.21        |       |   | $ | 13.43        |       |   | $    | 12.04        |       |   | $ | 20.90        |      
|STATISTICS                                        |                                                        |                                              |              |       |      |   |              |       |   |   |              |       |   |      |              |       |   |   |              |      
|Total assets                                      |                                                        | $                                            | 2,496,401    |       |      | $ | 2,773,640    |       |   | $ | 2,786,874    |       |   | $    | 2,953,622    |       |   | $ | 3,352,097    |      
|Long-term obligations                             |                                                        |                                              | 601,344      |       |      |   | 554,981      |       |   |   | 571,299      |       |   |      | 560,121      |       |   |   | 548,182      |      
|Capital expenditures                              |                                                        |                                              | 151,460      |       |      |   | 127,763      |       |   |   | 75,831       |       |   |      | 168,279      |       |   |   | 167,828      |      
|Effective tax provision rate                      |                                                        |                                              | 39.05        | %     |      |   | 39.00        | %     |   |   | 25.10        | %     |   |      | 37.79        | %     |   |   | 42.23        | %    
|Basic average shares                              |                                                        |                                              | 50,455,006   |       |      |   | 49,537,945   |       |   |   | 49,139,134   |       |   |      | 48,752,480   |       |   |   | 48,490,662   |      
|Market price range                                |                                                        | $                                            | 30.50-$50.96 |       |      | $ | 24.44-$35.77 |       |   | $ | 27.36-$38.28 |       |   | $    | 21.05-$39.88 |       |   | $ | 20.25-$34.75 |      
|Number of shareholders at December 31             |                                                        |                                              | 7,435        |       |      |   | 8,006        |       |   |   | 8,131        |       |   |      | 8,561        |       |   |   | 8,802        |      
|Approximate number of regular full-time employees |                                                        |                                              | 20,100       |       |      |   | 19,500       |       |   |   | 19,200       |       |   |      | 18,400       |       |   |   | 18,500       |      








|    |                                                                                                                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|[a] | As more fully discussed in Note 2, Discontinued
    Operations, in Item 8, Financial Statements and
    Supplementary Data, continuing operations has been
    allocated general corporate overhead charges that were
    previously allocated to the discontinued Forwarding segment.
    These corporate overhead charges were

12



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| |                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------
| | allocated from discontinued operations to the Con-Way and
    Logistics reporting segments based on segment revenue and
    capital employed.



|    |                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------
|[b] | Includes an $8.7 million first-quarter net gain,
    $5.3 million after tax, ($0.09 per diluted share) from
    the sale of a property.



|    |                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|[c] | Includes a $14.0 million third-quarter ($0.25 per
    diluted share) reversal of accrued taxes related to the
    settlement with the IRS of aircraft maintenance issues.






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
    CONDITION AND RESULTS OF OPERATIONS

Introduction






| |   |                                              
| | - | ---------------------------------------------
| |  | Overview of Business                         
|
| |  | Results of Operations and Related Information
|
| |  | Liquidity and Capital Resources              
|
| |  | Estimates and Critical Accounting Policies   
|
| |  | Other Matters                                

Overview of Business








Results of Operations




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|                                  |                                   |                                         |           |          |      |   |           |         |   |   |           |         |  
|--------------------------------- | --------------------------------- | --------------------------------------- | --------- | -------- | ---- | - | --------- | ------- | - | - | --------- | ------- | -
|                                  |                                   | 2004                                    |           |          | 2003 |   |           | 2002    |  
|                                  |                                   |                                         |           |          |      |   |           |         |  
|                                  |                                   | (Dollars in thousands, except per share |          
|                                  |                                   | amounts)                                |          
|Revenues                          |                                   | $                                       | 3,712,379 |          |      | $ | 3,226,966 |         |   | $ | 2,993,347 |        
|Operating Income                  |                                   |                                         | 284,167   |          |      |   | 224,948   |         |   |   | 180,343   |        
|Net Income (Loss)                 |                                   |                                         |           |          |      |   |           |         |   |   |           |        
|                                  | Continuing
    Operations1,
    2 |                                         | $         | 142,206  |      |   | $         | 112,246 |   |   | $         | 105,844 |  
|                                  | Discontinued
    Operations2      |                                         |           | (266,334 | )    |   |           | (28,461 | ) |   |           | (12,283 | )
|                                  |                                   |                                         |           |          |      |   |           |         |  
|                                  | Applicable to Common Shareholders |                                         | $         | (124,128 | )    |   | $         | 83,785  |   |   | $         | 93,561  |  
|Diluted Earnings (Loss) per Share |                                   |                                         |           |          |      |   |           |         |   |   |           |        
|                                  | Continuing
    Operations1        |                                         | $         | 2.57     |      |   | $         | 2.07    |   |   | $         | 1.96    |  
|                                  | Discontinued Operations           |                                         |           | (4.72    | )    |   |           | (0.50   | ) |   |           | (0.22   | )
|                                  |                                   |                                         |           |          |      |   |           |         |  
|                                  | Applicable to Common Shareholders |                                         | $         | (2.15    | )    |   | $         | 1.57    |   |   | $         | 1.74    |  






|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1 | After income taxes and preferred stock dividends                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| 
|2 | As required by EITF 87-24, Allocation of Interest to
    Discontinued Operations, continuing operations has been
    allocated general corporate overhead charges that were
    previously allocated to the discontinued Forwarding segment.
    These corporate overhead charges of $16.9 million in 2004,
    and $14.0 million in 2003 and 2002 were allocated from
    discontinued operations to the Con-Way and Logistics reporting
    segments based on segment revenue and capital employed.

Continuing Operations


Overview  2004 Compared to 2003






14



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Overview  2003 Compared to 2002








Con-Way Transportation Services




|                             |                  |      |   |           |      |  |   |           |   |  |   |           |  
|---------------------------- | ---------------- | ---- | - | --------- | ---- |  | - | --------- | - |  | - | --------- | -
|                             |                  | 2004 |   |           | 2003 |  |   | 2002      |  
|                             |                  |      |   |           |      |  |   |           |  
|Summary of Operating Results |                  |      |   |           |      |  |   |           |   |  |   |          
|                             | Revenues         |      | $ | 2,604,004 |      |  | $ | 2,212,692 |   |  | $ | 2,011,577 |  
|                             | Operating Income |      |   | 245,488   |      |  |   | 183,095   |   |  |   | 135,001   |  
|                             | Operating Margin |      |   | 9.4       | %    |  |   | 8.3       | % |  |   | 6.7       | %

|                                               |                 |                     |  |       |               |  |  |      |      | 
|---------------------------------------------- | --------------- | ------------------- |  | ----- | ------------- |  |  | ---- | ---- | 
|                                               |                 | 2004 vs. 2003       |  |       | 2003 vs. 2002 | 
|                                               |                 |                     |  |       |               | 
|Selected Regional-Carrier Operating Statistics |                 |                     |  |       |               |  |  |     
|                                               | Revenue per day |                     |  | +16.0 | %             |  |  | +8.8 | %   
|                                               | Yield           |                     |  | +3.1  |               |  |  | +5.7 |     
|                                               | Weight per day: |                     |  |       |               |  |  |      |     
|                                               |                 | Less-than-truckload |  |       | +10.5         |  |  |      | +2.5 | 
|                                               |                 | Total               |  |       | +12.5         |  |  |      | +3.0 | 



15



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Menlo Worldwide




16



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Logistics




|                             |                  |      |   |           |      |  |   |           |   |  |   |         |  
|---------------------------- | ---------------- | ---- | - | --------- | ---- |  | - | --------- | - |  | - | ------- | -
|                             |                  | 2004 |   |           | 2003 |  |   | 2002      |  
|                             |                  |      |   |           |      |  |   |           |  
|Summary of Operating Results |                  |      |   |           |      |  |   |           |   |  |   |        
|                             | Revenues         |      | $ | 1,103,028 |      |  | $ | 1,013,987 |   |  | $ | 978,929 |  
|                             | Operating Income |      |   | 24,399    |      |  |   | 23,492    |   |  |   | 30,523  |  
|                             | Operating Margin |      |   | 2.2       | %    |  |   | 2.3       | % |  |   | 3.1     | %







Menlo Worldwide Other




| |                  
| | -----------------
| | Operating Results





| |                  
| | -----------------
| | Vector Agreements



17



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| |                                     
| | ------------------------------------
| | 2003 Amendments to Vector Agreements









| |                             
| | ----------------------------
| | 2005 Regional ABC Amendments



CNF Other




18



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Discontinued Operations




Menlo Worldwide Forwarding








19



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Spin-Off of CFC






Priority Mail Contract




20



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Liquidity and Capital Resources






|                                                       |                                   |                                                                                        |          |          |         |   |          |         |         |   |          |         |         |  
|------------------------------------------------------ | --------------------------------- | -------------------------------------------------------------------------------------- | -------- | -------- | ------- | - | -------- | ------- | ------- | - | -------- | ------- | ------- | -
|                                                       |                                   | 2004                                                                                   |          |          | 2003    |   |          | 2002    |        
|                                                       |                                   |                                                                                        |          |          |         |   |          |         |        
|                                                       |                                   | (Dollars in thousands)                                                                 |         
|Operating Activities                                   |                                   |                                                                                        |          |          |         |   |          |         |         |   |          |        
|                                                       | Net income (loss)                 |                                                                                        | $        | (115,889 | )       |   | $        | 92,024  |         |   | $        | 101,811 |        
|                                                       | Discontinued operations           |                                                                                        |          | 266,334  |         |   |          | 28,461  |         |   |          | 12,283  |        
|                                                       | Non-cash adjustments(1)           |                                                                                        |          | 138,106  |         |   |          | 140,439 |         |   |          | 123,461 |        
|                                                       |                                   |                                                                                        |          |          |         |   |          |         |        
|                                                       |                                   |                                                                                        | 288,551  |          |         |   | 260,924  |         |         |   | 237,555  |        
|                                                       | Changes in assets and liabilities |                                                                                        |          |          |         |   |          |         |         |   |          |         |        
|                                                       |                                   | Receivables                                                                            |          |          | (34,870 | ) |          |         | (13,073 | ) |          |         | (8,967  | )
|                                                       |                                   | Accounts payable and accrued liabilities, excluding accrued
    incentive compensation |          |          | 43,289  |   |          |         | (10,609 | ) |          |         | 22,898  |  
|                                                       |                                   | Accrued incentive compensation                                                         |          |          | 29,367  |   |          |         | (27,876 | ) |          |         | 42,282  |  
|                                                       |                                   | Income taxes                                                                           |          |          | 22,009  |   |          |         | 28,267  |   |          |         | (77,970 | )
|                                                       |                                   | Employee benefits                                                                      |          |          | (24,658 | ) |          |         | (4,178  | ) |          |         | (18,624 | )
|                                                       |                                   | Deferred charges and credits                                                           |          |          | 67,081  |   |          |         | 17,415  |   |          |         | 30,002  |  
|                                                       |                                   | Other                                                                                  |          |          | (11,144 | ) |          |         | (24,693 | ) |          |         | 6,805   |  
|                                                       |                                   |                                                                                        |          |          |         |   |          |         |        
|                                                       |                                   |                                                                                        | 91,074   |          |         |   | (34,747  | )       |         |   | (3,574   | )      
|Net Cash Provided by Operating Activities              |                                   |                                                                                        | 379,625  |          |         |   | 226,177  |         |         |   | 233,981  |        
|                                                       |                                   |                                                                                        |          |          |         |   |          |         |        
|Net Cash Provided by (Used in) Investing Activities    |                                   |                                                                                        | (184,273 | )        |         |   | (303,436 | )       |         |   | 20,161   |        
|                                                       |                                   |                                                                                        |          |          |         |   |          |         |        
|Net Cash Provided by (Used in) Financing Activities    |                                   |                                                                                        | 175,479  |          |         |   | (33,639  | )       |         |   | (31,899  | )      
|                                                       |                                   |                                                                                        |          |          |         |   |          |         |        
|Net Cash Provided by Continuing Operations             |                                   |                                                                                        | 370,831  |          |         |   | (110,898 | )       |         |   | 222,243  |        
|Net Cash Provided by (Used in) Discontinued Operations |                                   |                                                                                        | (22,117  | )        |         |   | 7,268    |         |         |   | (247,747 | )      
|                                                       |                                   |                                                                                        |          |          |         |   |          |         |        
|Increase (Decrease) in Cash and Cash Equivalents       |                                   | $                                                                                      | 348,714  |          |         | $ | (103,630 | )       |         | $ | (25,504  | )      
|                                                       |                                   |                                                                                        |          |          |         |   |          |         |        






|    |                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Non-cash adjustments refer to depreciation,
    amortization, deferred income taxes, provision for uncollectible
    accounts, equity in earnings of joint venture, and other
    non-cash gains and losses.

Continuing Operations




| |                     
| | --------------------
| | Operating Activities



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| |                     
| | --------------------
| | Investing Activities





| |                     
| | --------------------
| | Financing Activities







22



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Defined Benefit Pension Plans






Contractual Cash Obligations




|                              |  |                        |         |                        |      |        |         |           |  |   |           |  |  |            |        |  |  |   |         | 
|----------------------------- |  | ---------------------- | ------- | ---------------------- | ---- | ------ | ------- | --------- |  | - | --------- |  |  | ---------- | ------ |  |  | - | ------- | 
|                              |  |                        |         | Payments Due by Period |     
|                              |  |                        |         |                        |     
|                              |  |                        |         |                        |      | 2010 & |        
|                              |  | Total                  |         |                        | 2005 |        |         | 2006-2007 |  |   | 2008-2009 |  |  | Thereafter |       
|                              |  |                        |         |                        |      |        |         |           |  |   |           |  |  |            |       
|                              |  | (Dollars in thousands) |        
|Long-Term Debt and Guarantees |  | $                      | 691,799 |                        |      | $      | 112,727 |           |  | $ | 33,668    |  |  | $          | 45,404 |  |  | $ | 500,000 | 
|Operating Leases              |  |                        | 146,997 |                        |      |        | 60,751  |           |  |   | 58,273    |  |  |            | 18,861 |  |  |   | 9,112   | 
|                              |  |                        |         |                        |      |        |         |           |  |   |           |  |  |            |       
|Total                         |  | $                      | 838,796 |                        |      | $      | 173,478 |           |  | $ | 91,941    |  |  | $          | 64,265 |  |  | $ | 509,112 | 
|                              |  |                        |         |                        |      |        |         |           |  |   |           |  |  |            |       



23



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Other




Discontinued Operations


Sale Agreement with UPS




Spin-Off of CFC




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Estimates and Critical Accounting Policies




Self-Insurance Accruals




Income Taxes




Disposition and Restructuring Estimates




Uncollectible Accounts Receivable




Defined Benefit Pension Plans




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Goodwill and Long-Lived Assets








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Other Matters


Cyclicality and Seasonality




Business Interruption




Homeland Security




Employees




New Accounting Standards




| |                           
| | --------------------------
| | Variable Interest Entities





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| |                    
| | -------------------
| | Share-Based Payment







Forward-Looking Statements








| |   |                                                                                            
| | - | -------------------------------------------------------------------------------------------
| |  | changes in general business and economic conditions, including
    the global economy;     
|
| |  | the creditworthiness of CNFs customers and their ability
    to pay for services rendered;
|
| |  | increasing competition and pricing pressure;                                               
|
| |  | changes in fuel prices;                                                                    
|
| |  | the effects of the cessation of EWAs air carrier
    operations;                          

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the possibility that CNF may, from time to time, be required to
    record impairment charges for long-lived assets;                                                                                                                                                                                                                                                                                                          
|
| |  | the possibility of defaults under CNFs $400 million
    credit agreement and other debt instruments, including defaults
    resulting from additional unusual charges or from any costs or
    expenses that CNF may incur, and the possibility that CNF may be
    required to repay certain indebtedness in the event that the
    ratings assigned to its long-term senior debt by credit rating
    agencies are reduced;
|
| |  | labor matters, including the grievance by furloughed pilots and
    crew members, labor organizing activities, work stoppages or
    strikes; enforcement of and changes in governmental regulations,
    including the effects of new regulations issued by the
    Department of Homeland Security;                                                                                                                         
|
| |  | environmental and tax matters;                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | matters relating to CNFs 1996 spin-off of CFC, including
    the possibility that CFCs multi-employer pension plans may
    assert claims against CNF, that CNF may not prevail in those
    proceedings and may not have the financial resources necessary
    to satisfy amounts payable to those plans, and matters relating
    to CNFs defined benefit pension plans;                                                 
|
| |  | matters relating to the sale of MWF, including CNFs
    obligation to indemnify UPS for certain losses in connection
    with the sale;                                                                                                                                                                                                                                                                                      








|         |                                                               
|-------- | --------------------------------------------------------------
|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK









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|        |                                            
|------- | -------------------------------------------
|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CNF Inc.


Consolidated Balance Sheets


|                                        |                                                        |                            |              |          |           |           |           |          |           |           | 
|--------------------------------------- | ------------------------------------------------------ | -------------------------- | ------------ | -------- | --------- | --------- | --------- | -------- | --------- | --------- | 
|                                        |                                                        | December 31,               |             
|                                        |                                                        |                            |             
|                                        |                                                        | 2004                       |              |          | 2003      |          
|                                        |                                                        |                            |              |          |           |          
|                                        |                                                        | (Dollars in thousands)     |             
|ASSETS                                 
|Current Assets                          |                                                        |                            |              |          |           |           |           |         
|                                        | Cash and cash equivalents (Note 1)                     |                            | $            | 386,897  |           |           | $         | 38,183   |          
|                                        | Marketable securities (Note 1)                         |                            |              | 446,300  |           |           |           | 260,440  |          
|                                        | Trade accounts receivable, net (Note 1)                |                            |              | 425,783  |           |           |           | 380,898  |          
|                                        | Other accounts receivable (Notes 1 and 2)              |                            |              | 134,577  |           |           |           | 66,112   |          
|                                        | Operating supplies, at lower of average cost or market |                            |              | 16,665   |           |           |           | 9,468    |          
|                                        | Prepaid expenses                                       |                            |              | 48,092   |           |           |           | 45,114   |          
|                                        | Deferred income taxes (Note 7)                         |                            |              | 51,453   |           |           |           | 53,141   |          
|                                        | Assets of discontinued operations (Note 2)             |                            |              | 5,128    |           |           |           | 475,878  |          
|                                        |                                                        |                            |              |          |           |          
|                                        |                                                        | Total Current Assets       |              |          | 1,514,895 |           |           |          | 1,329,234 |          
|                                        |                                                        |                            |              |          |           |          
|Property, Plant, and Equipment, at cost |                                                        |                            |              |          |           |           |           |         
|                                        | Land                                                   |                            |              | 142,857  |           |           |           | 147,713  |          
|                                        | Buildings and leasehold improvements                   |                            |              | 618,698  |           |           |           | 591,797  |          
|                                        | Revenue equipment                                      |                            |              | 677,499  |           |           |           | 593,830  |          
|                                        | Other equipment                                        |                            |              | 210,102  |           |           |           | 210,374  |          
|                                        |                                                        |                            |              |          |           |          
|                                        |                                                        |                            | 1,649,156    |          |           |           | 1,543,714 |         
|                                        | Accumulated depreciation and amortization              |                            |              | (789,835 | )         |           |           | (725,763 | )        
|                                        |                                                        |                            |              |          |           |          
|                                        |                                                        | Net Property and Equipment |              |          | 859,321   |           |           |          | 817,951   |          
|                                        |                                                        |                            |              |          |           |          
|Other Assets                            |                                                        |                            |              |          |           |           |           |         
|                                        | Deferred charges and other assets (Note 3)             |                            |              | 56,618   |           |           |           | 122,208  |          
|                                        | Capitalized software, net                              |                            |              | 50,347   |           |           |           | 54,646   |          
|                                        | Assets of discontinued operations (Note 2)             |                            |              | 15,220   |           |           |           | 449,601  |          
|                                        |                                                        |                            |              |          |           |          
|                                        |                                                        |                            | 122,185      |          |           |           | 626,455   |         
|                                        |                                                        |                            |              |          |           |          
|                                        |                                                        |                            | Total Assets |          | $         | 2,496,401 |           |          | $         | 2,773,640 | 
|                                        |                                                        |                            |              |          |           |          



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CNF Inc.


Consolidated Balance Sheets


|                                                     |                                                                                                                             |                                                                                                                                                 |                                            |          |           |           |         |          |           |           | 
|---------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | -------- | --------- | --------- | ------- | -------- | --------- | --------- | 
|                                                     |                                                                                                                             | December 31,                                                                                                                                    |                                           
|                                                     |                                                                                                                             |                                                                                                                                                 |                                           
|                                                     |                                                                                                                             | 2004                                                                                                                                            |                                            |          | 2003      |          
|                                                     |                                                                                                                             |                                                                                                                                                 |                                            |          |           |          
|                                                     |                                                                                                                             | (Dollars in thousands except                                                                                                                    |                                           
|                                                     |                                                                                                                             | per share data)                                                                                                                                 |                                           
|LIABILITIES AND SHAREHOLDERS EQUITY                
|Current Liabilities                                  |                                                                                                                             |                                                                                                                                                 |                                            |          |           |           |         |         
|                                                     | Accounts payable                                                                                                            |                                                                                                                                                 | $                                          | 252,867  |           |           | $       | 215,203  |          
|                                                     | Accrued liabilities (Note 4)                                                                                                |                                                                                                                                                 |                                            | 226,437  |           |           |         | 196,153  |          
|                                                     | Self-insurance accruals (Note 1)                                                                                            |                                                                                                                                                 |                                            | 86,095   |           |           |         | 94,291   |          
|                                                     | Current maturities of long-term debt (Note 5)                                                                               |                                                                                                                                                 |                                            | 112,727  |           |           |         | 14,055   |          
|                                                     | Liabilities of discontinued operations (Note 2)                                                                             |                                                                                                                                                 |                                            | 34,705   |           |           |         | 302,448  |          
|                                                     |                                                                                                                             |                                                                                                                                                 |                                            |          |           |          
|                                                     |                                                                                                                             | Total current liabilities                                                                                                                       |                                            |          | 712,831   |           |         |          | 822,150   |          
|Long-Term Liabilities                                |                                                                                                                             |                                                                                                                                                 |                                            |          |           |           |         |         
|                                                     | Long-term debt and guarantees (Note 5)                                                                                      |                                                                                                                                                 |                                            | 601,344  |           |           |         | 554,981  |          
|                                                     | Self-insurance accruals (Note 1)                                                                                            |                                                                                                                                                 |                                            | 102,512  |           |           |         | 113,785  |          
|                                                     | Employee benefits (Note 9)                                                                                                  |                                                                                                                                                 |                                            | 245,989  |           |           |         | 276,685  |          
|                                                     | Other liabilities and deferred credits                                                                                      |                                                                                                                                                 |                                            | 20,296   |           |           |         | 24,828   |          
|                                                     | Deferred income taxes (Note 7)                                                                                              |                                                                                                                                                 |                                            | 29,200   |           |           |         | 11,153   |          
|                                                     | Liabilities of discontinued operations (Note 2)                                                                             |                                                                                                                                                 |                                            | 6,862    |           |           |         | 151,250  |          
|                                                     |                                                                                                                             |                                                                                                                                                 |                                            |          |           |          
|                                                     |                                                                                                                             | Total Liabilities                                                                                                                               |                                            |          | 1,719,034 |           |         |          | 1,954,832 |          
|                                                     |                                                                                                                             |                                                                                                                                                 |                                            |          |           |          
|Commitments and Contingencies (Notes 2, 5, 6 and 11) |                                                                                                                             |                                                                                                                                                 |                                            |          |           |           |         |         
|Shareholders Equity (Note 8)                        |                                                                                                                             |                                                                                                                                                 |                                            |          |           |           |         |         
|                                                     | Preferred stock, no par value; authorized 5,000,000 shares:                                                                 |                                                                                                                                                 |                                            |          |           |           |         |          |          
|                                                     |                                                                                                                             | Series B, 8.5% cumulative, convertible, $.01 stated
    value; designated 1,100,000 shares; issued 742,995 and
    763,674 shares, respectively |                                            |          | 7         |           |         |          | 8         |          
|                                                     | Additional paid-in capital, preferred stock                                                                                 |                                                                                                                                                 |                                            | 113,002  |           |           |         | 116,147  |          
|                                                     | Deferred compensation, Thrift and Stock Plan (Note 9)                                                                       |                                                                                                                                                 |                                            | (49,117  | )         |           |         | (57,687  | )        
|                                                     |                                                                                                                             |                                                                                                                                                 |                                            |          |           |          
|                                                     |                                                                                                                             | Total Preferred Shareholders Equity                                                                                                            |                                            |          | 63,892    |           |         |          | 58,468    |          
|                                                     |                                                                                                                             |                                                                                                                                                 |                                            |          |           |          
|                                                     | Common stock, $.625 par value; authorized
    100,000,000 shares; issued 58,544,254 and
    56,436,981 shares, respectively |                                                                                                                                                 |                                            | 36,590   |           |           |         | 35,273   |          
|                                                     | Additional paid-in capital, common stock                                                                                    |                                                                                                                                                 |                                            | 429,134  |           |           |         | 356,700  |          
|                                                     | Retained earnings                                                                                                           |                                                                                                                                                 |                                            | 426,300  |           |           |         | 570,751  |          
|                                                     | Deferred compensation, restricted stock (Note 10)                                                                           |                                                                                                                                                 |                                            | (5,744   | )         |           |         | (6,188   | )        
|                                                     | Cost of repurchased common stock (6,364,868 and
    6,459,732 shares, respectively)                                         |                                                                                                                                                 |                                            | (157,069 | )         |           |         | (159,273 | )        
|                                                     |                                                                                                                             |                                                                                                                                                 |                                            |          |           |          
|                                                     |                                                                                                                             |                                                                                                                                                 | 729,211                                    |          |           |           | 797,263 |         
|                                                     | Accumulated Other Comprehensive Loss (Note 8)                                                                               |                                                                                                                                                 |                                            | (15,736  | )         |           |         | (36,923  | )        
|                                                     |                                                                                                                             |                                                                                                                                                 |                                            |          |           |          
|                                                     |                                                                                                                             | Total Common Shareholders Equity                                                                                                               |                                            |          | 713,475   |           |         |          | 760,340   |          
|                                                     |                                                                                                                             |                                                                                                                                                 |                                            |          |           |          
|                                                     |                                                                                                                             | Total Shareholders Equity                                                                                                                      |                                            |          | 777,367   |           |         |          | 818,808   |          
|                                                     |                                                                                                                             |                                                                                                                                                 |                                            |          |           |          
|                                                     |                                                                                                                             |                                                                                                                                                 | Total Liabilities and Shareholders Equity |          | $         | 2,496,401 |         |          | $         | 2,773,640 | 
|                                                     |                                                                                                                             |                                                                                                                                                 |                                            |          |           |          



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CNF Inc.


Statements of Consolidated Operations


|                                                              |                                              |                                                        |           |            |       |   |           |            |       |   |           |            |       |  
|------------------------------------------------------------- | -------------------------------------------- | ------------------------------------------------------ | --------- | ---------- | ----- | - | --------- | ---------- | ----- | - | --------- | ---------- | ----- | -
|                                                              |                                              | Years Ended December 31,                               |          
|                                                              |                                              |                                                        |          
|                                                              |                                              | 2004                                                   |           |            | 2003  |   |           | 2002       |      
|                                                              |                                              |                                                        |           |            |       |   |           |            |      
|                                                              |                                              | (Dollars in thousands except per share data)           |          
|Revenues                                                      |                                              | $                                                      | 3,712,379 |            |       | $ | 3,226,966 |            |       | $ | 2,993,347 |           
|                                                              |                                              |                                                        |           |            |       |   |           |            |      
|Costs and Expenses                                            |                                              |                                                        |           |            |       |   |           |            |       |   |           |           
|                                                              | Operating expenses (Note 3)                  |                                                        |           | 2,953,665  |       |   |           | 2,549,467  |       |   |           | 2,438,622  |      
|                                                              | Selling, general and administrative expenses |                                                        |           | 372,122    |       |   |           | 351,507    |       |   |           | 271,398    |      
|                                                              | Depreciation                                 |                                                        |           | 102,425    |       |   |           | 101,044    |       |   |           | 102,984    |      
|                                                              |                                              |                                                        |           |            |       |   |           |            |      
|                                                              |                                              |                                                        | 3,428,212 |            |       |   | 3,002,018 |            |       |   | 2,813,004 |           
|                                                              |                                              |                                                        |           |            |       |   |           |            |      
|Operating Income                                              |                                              |                                                        | 284,167   |            |       |   | 224,948   |            |       |   | 180,343   |           
|                                                              |                                              |                                                        |           |            |       |   |           |            |      
|Other Income (Expense)                                        |                                              |                                                        |           |            |       |   |           |            |       |   |           |           
|                                                              | Investment income                            |                                                        |           | 7,485      |       |   |           | 2,527      |       |   |           | 5,557      |      
|                                                              | Interest expense                             |                                                        |           | (39,695    | )     |   |           | (29,597    | )     |   |           | (22,825    | )    
|                                                              | Miscellaneous, net (Note 1)                  |                                                        |           | (5,134     | )     |   |           | (361       | )     |   |           | (10,747    | )    
|                                                              |                                              |                                                        |           |            |       |   |           |            |      
|                                                              |                                              |                                                        | (37,344   | )          |       |   | (27,431   | )          |       |   | (28,015   | )         
|                                                              |                                              |                                                        |           |            |       |   |           |            |      
|Income from Continuing Operations Before Income Tax Provision |                                              |                                                        | 246,823   |            |       |   | 197,517   |            |       |   | 152,328   |           
|                                                              | Income Tax Provision (Note 7)                |                                                        |           | 96,378     |       |   |           | 77,032     |       |   |           | 38,234     |      
|                                                              |                                              |                                                        |           |            |       |   |           |            |      
|Income from Continuing Operations                             |                                              |                                                        | 150,445   |            |       |   | 120,485   |            |       |   | 114,094   |           
|                                                              |                                              |                                                        |           |            |       |   |           |            |      
|Discontinued Operations, net of tax (Note 2)                  |                                              |                                                        |           |            |       |   |           |            |       |   |           |           
|                                                              | Loss from Disposal                           |                                                        |           | (278,749   | )     |   |           |           |       |   |           | (12,398    | )    
|                                                              | Income (Loss) from Discontinued Operations   |                                                        |           | 12,415     |       |   |           | (28,461    | )     |   |           | 115        |      
|                                                              |                                              |                                                        |           |            |       |   |           |            |      
|                                                              |                                              |                                                        | (266,334  | )          |       |   | (28,461   | )          |       |   | (12,283   | )         
|                                                              |                                              |                                                        |           |            |       |   |           |            |      
|Net Income (Loss)                                             |                                              |                                                        | (115,889  | )          |       |   | 92,024    |            |       |   | 101,811   |           
|                                                              | Preferred Stock Dividends                    |                                                        |           | 8,239      |       |   |           | 8,239      |       |   |           | 8,250      |      
|                                                              |                                              |                                                        |           |            |       |   |           |            |      
|Net Income (Loss) Applicable to Common Shareholders           |                                              | $                                                      | (124,128  | )          |       | $ | 83,785    |            |       | $ | 93,561    |           
|                                                              |                                              |                                                        |           |            |       |   |           |            |      
|Weighted-Average Common Shares Outstanding (Note 1)           |                                              |                                                        |           |            |       |   |           |            |       |   |           |           
|                                                              | Basic                                        |                                                        |           | 50,455,006 |       |   |           | 49,537,945 |       |   |           | 49,139,134 |      
|                                                              | Diluted                                      |                                                        |           | 56,452,629 |       |   |           | 56,725,667 |       |   |           | 56,655,570 |      
|Earnings (Loss) Per Common Share (Note 1)                     |                                              |                                                        |           |            |       |   |           |            |       |   |           |           
|                                                              | Basic                                        |                                                        |           |            |       |   |           |            |       |   |           |            |      
|                                                              |                                              | Net Income from Continuing Operations                  |           | $          | 2.82  |   |           | $          | 2.27  |   |           | $          | 2.15  |  
|                                                              |                                              | Loss from Disposal, net of tax                         |           |            | (5.53 | ) |           |            |      |   |           |            | (0.25 | )
|                                                              |                                              | Income (Loss) from Discontinued Operations, net of tax |           |            | 0.25  |   |           |            | (0.58 | ) |           |            |      |  
|                                                              |                                              |                                                        |           |            |       |   |           |            |      
|                                                              |                                              | Net Income (Loss) Applicable to Common Shareholders    |           | $          | (2.46 | ) |           | $          | 1.69  |   |           | $          | 1.90  |  
|                                                              |                                              |                                                        |           |            |       |   |           |            |      
|                                                              | Diluted                                      |                                                        |           |            |       |   |           |            |       |   |           |            |      
|                                                              |                                              | Net Income from Continuing Operations                  |           | $          | 2.57  |   |           | $          | 2.07  |   |           | $          | 1.96  |  
|                                                              |                                              | Loss from Disposal, net of tax                         |           |            | (4.94 | ) |           |            |      |   |           |            | (0.22 | )
|                                                              |                                              | Income (Loss) from Discontinued Operations, net of tax |           |            | 0.22  |   |           |            | (0.50 | ) |           |            |      |  
|                                                              |                                              |                                                        |           |            |       |   |           |            |      
|                                                              |                                              | Net Income (Loss) Applicable to Common Shareholders    |           | $          | (2.15 | ) |           | $          | 1.57  |   |           | $          | 1.74  |  
|                                                              |                                              |                                                        |           |            |       |   |           |            |      



32



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##### Table of Contents



CNF Inc.


Statements of Consolidated Cash Flows


|                                             |                                                                                              |                                                    |                                                     |                                                               |          |         |         |          |          |         |         |          |         |         |         |  
|-------------------------------------------- | -------------------------------------------------------------------------------------------- | -------------------------------------------------- | --------------------------------------------------- | ------------------------------------------------------------- | -------- | ------- | ------- | -------- | -------- | ------- | ------- | -------- | ------- | ------- | ------- | -
|                                             |                                                                                              | Years Ended December 31,                           |                                                    
|                                             |                                                                                              |                                                    |                                                    
|                                             |                                                                                              | 2004                                               |                                                     |                                                               | 2003     |         |         | 2002     |         
|                                             |                                                                                              |                                                    |                                                     |                                                               |          |         |         |          |         
|                                             |                                                                                              | (Dollars in thousands)                             |                                                    
|Cash and Cash Equivalents, Beginning of Year |                                                                                              | $                                                  | 38,183                                              |                                                               |          | $       | 141,813 |          |          | $       | 167,317 |         
|                                             |                                                                                              |                                                    |                                                     |                                                               |          |         |         |          |         
|Operating Activities                         |                                                                                              |                                                    |                                                     |                                                               |          |         |         |          |          |         |         |         
|                                             | Net income (loss)                                                                            |                                                    |                                                     | (115,889                                                      | )        |         |         | 92,024   |          |         |         | 101,811  |        
|                                             | Adjustments to reconcile net income (loss) to net cash provided
    by operating activities: |                                                    |                                                     |                                                               |          |         |         |          |          |         |         |          |        
|                                             |                                                                                              |                                                    | Discontinued operations, net of tax                 |                                                               |          | 266,334 |         |          |          | 28,461  |         |          |         | 12,283  |        
|                                             |                                                                                              |                                                    | Depreciation and amortization, net of accretion     |                                                               |          | 115,096 |         |          |          | 113,417 |         |          |         | 117,084 |        
|                                             |                                                                                              |                                                    | Increase in deferred income taxes                   |                                                               |          | 22,528  |         |          |          | 27,052  |         |          |         | 13,289  |        
|                                             |                                                                                              |                                                    | Amortization of deferred compensation               |                                                               |          | 13,244  |         |          |          | 9,376   |         |          |         | 8,607   |        
|                                             |                                                                                              |                                                    | Provision for uncollectible accounts                |                                                               |          | 5,103   |         |          |          | 5,425   |         |          |         | 10,058  |        
|                                             |                                                                                              |                                                    | Equity in earnings of joint venture                 |                                                               |          | (18,253 | )       |          |          | (20,718 | )       |          |         | (18,188 | )      
|                                             |                                                                                              |                                                    | Loss (Gain) on sales of property and equipment, net |                                                               |          | 88      |         |          |          | 2,182   |         |          |         | (11,974 | )      
|                                             |                                                                                              |                                                    | Loss from equity ventures                           |                                                               |          | 300     |         |          |          | 3,705   |         |          |         | 4,585   |        
|                                             |                                                                                              |                                                    | Changes in assets and liabilities:                  |                                                               |          |         |         |          |          |         |         |          |         |         |        
|                                             |                                                                                              |                                                    |                                                     | Receivables                                                   |          |         | (34,870 | )        |          |         | (13,073 | )        |         |         | (8,967  | )
|                                             |                                                                                              |                                                    |                                                     | Prepaid expenses                                              |          |         | (2,978  | )        |          |         | (10,472 | )        |         |         | (1,345  | )
|                                             |                                                                                              |                                                    |                                                     | Accounts payable                                              |          |         | 42,372  |          |          |         | (18,112 | )        |         |         | 7,761   |  
|                                             |                                                                                              |                                                    |                                                     | Accrued incentive compensation                                |          |         | 29,367  |          |          |         | (27,876 | )        |         |         | 42,282  |  
|                                             |                                                                                              |                                                    |                                                     | Accrued liabilities, excluding accrued incentive compensation |          |         | 917     |          |          |         | 7,503   |          |         |         | 15,137  |  
|                                             |                                                                                              |                                                    |                                                     | Self-insurance accruals                                       |          |         | (2,956  | )        |          |         | (25,654 | )        |         |         | (1,643  | )
|                                             |                                                                                              |                                                    |                                                     | Income taxes                                                  |          |         | 22,009  |          |          |         | 28,267  |          |         |         | (77,970 | )
|                                             |                                                                                              |                                                    |                                                     | Employee benefits                                             |          |         | (24,658 | )        |          |         | (4,178  | )        |         |         | (18,624 | )
|                                             |                                                                                              |                                                    |                                                     | Deferred charges and credits                                  |          |         | 67,081  |          |          |         | 17,415  |          |         |         | 30,002  |  
|                                             |                                                                                              |                                                    |                                                     | Other                                                         |          |         | (5,210  | )        |          |         | 11,433  |          |         |         | 9,793   |  
|                                             |                                                                                              |                                                    |                                                     |                                                               |          |         |         |          |         
|                                             | Net Cash Provided by Operating Activities                                                    |                                                    |                                                     | 379,625                                                       |          |         |         | 226,177  |          |         |         | 233,981  |        
|                                             |                                                                                              |                                                    |                                                     |                                                               |          |         |         |          |         
|Investing Activities                         |                                                                                              |                                                    |                                                     |                                                               |          |         |         |          |          |         |         |         
|                                             |                                                                                              | Capital expenditures                               |                                                     |                                                               | (151,460 | )       |         |          | (127,763 | )       |         |          | (75,831 | )      
|                                             |                                                                                              | Software expenditures                              |                                                     |                                                               | (10,960  | )       |         |          | (12,442  | )       |         |          | (13,496 | )      
|                                             |                                                                                              | Proceeds from sales of property and equipment, net |                                                     |                                                               | 14,007   |         |         |          | 6,209    |         |         |          | 13,488  |        
|                                             |                                                                                              | Proceeds from sale of discontinued operations      |                                                     |                                                               | 150,000  |         |         |          |         |         |         |          |        |        
|                                             |                                                                                              | Net decrease (increase) in marketable securities   |                                                     |                                                               | (185,860 | )       |         |          | (169,440 | )       |         |          | 96,000  |        
|                                             |                                                                                              |                                                    |                                                     |                                                               |          |         |         |          |         
|                                             | Net Cash Provided by (Used in) Investing Activities                                          |                                                    |                                                     | (184,273                                                      | )        |         |         | (303,436 | )        |         |         | 20,161   |        
|                                             |                                                                                              |                                                    |                                                     |                                                               |          |         |         |          |         
|Financing Activities                         |                                                                                              |                                                    |                                                     |                                                               |          |         |         |          |          |         |         |         
|                                             |                                                                                              | Net proceeds from issuance of long-term debt       |                                                     |                                                               | 292,587  |         |         |          | 2,156    |         |         |          |        |        
|                                             |                                                                                              | Repayment of long-term debt and guarantees         |                                                     |                                                               | (142,925 | )       |         |          | (12,142  | )       |         |          | (8,700  | )      
|                                             |                                                                                              | Proceeds from exercise of stock options            |                                                     |                                                               | 56,081   |         |         |          | 6,389    |         |         |          | 6,948   |        
|                                             |                                                                                              | Payments of common dividends                       |                                                     |                                                               | (20,323  | )       |         |          | (19,850  | )       |         |          | (19,663 | )      
|                                             |                                                                                              | Payments of preferred dividends                    |                                                     |                                                               | (9,941   | )       |         |          | (10,192  | )       |         |          | (10,484 | )      
|                                             |                                                                                              |                                                    |                                                     |                                                               |          |         |         |          |         
|                                             | Net Cash Provided by (Used in) Financing Activities                                          |                                                    |                                                     | 175,479                                                       |          |         |         | (33,639  | )        |         |         | (31,899  | )      
|                                             |                                                                                              |                                                    |                                                     |                                                               |          |         |         |          |         
|                                             | Net Cash Provided by Continuing Operations                                                   |                                                    |                                                     | 370,831                                                       |          |         |         | (110,898 | )        |         |         | 222,243  |        
|                                             |                                                                                              |                                                    |                                                     |                                                               |          |         |         |          |         
|                                             | Net Cash Provided by (Used in) Discontinued Operations                                       |                                                    |                                                     | (22,117                                                       | )        |         |         | 7,268    |          |         |         | (247,747 | )      
|                                             |                                                                                              |                                                    |                                                     |                                                               |          |         |         |          |         
|                                             | Increase (Decrease) in Cash and Cash Equivalents                                             |                                                    |                                                     | 348,714                                                       |          |         |         | (103,630 | )        |         |         | (25,504  | )      
|                                             |                                                                                              |                                                    |                                                     |                                                               |          |         |         |          |         
|Cash and Cash Equivalents, End of Year       |                                                                                              | $                                                  | 386,897                                             |                                                               |          | $       | 38,183  |          |          | $       | 141,813 |         
|                                             |                                                                                              |                                                    |                                                     |                                                               |          |         |         |          |         
|Supplemental Disclosure                      |                                                                                              |                                                    |                                                     |                                                               |          |         |         |          |          |         |         |         
|                                             | Cash Paid (Refunded) for income taxes, net                                                   |                                                    | $                                                   | 59,797                                                        |          |         | $       | (14,548  | )        |         | $       | (3,779   | )      
|                                             |                                                                                              |                                                    |                                                     |                                                               |          |         |         |          |         
|                                             | Cash Paid for interest of continuing operations, net of amounts
    capitalized              |                                                    | $                                                   | 37,267                                                        |          |         | $       | 29,210   |          |         | $       | 23,698   |        
|                                             |                                                                                              |                                                    |                                                     |                                                               |          |         |         |          |         



33



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##### Table of Contents



CNF INC.


STATEMENTS OF CONSOLIDATED SHAREHOLDERS EQUITY


|                                                                                    |                                                                             |                                              |         |   |              |   |           |            |  |  |            |         |  |         |             |             |              |          |         |          |        |   |         |               |  |               |               |   |               |   |          |   |  |   |         |         |   |   |          |         |         |  
|----------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | -------------------------------------------- | ------- | - | ------------ | - | --------- | ---------- |  |  | ---------- | ------- |  | ------- | ----------- | ----------- | ------------ | -------- | ------- | -------- | ------ | - | ------- | ------------- |  | ------------- | ------------- | - | ------------- | - | -------- | - |  | - | ------- | ------- | - | - | -------- | ------- | ------- | -
|                                                                                    |                                                                             | Preferred Stock                              |         |   |              |   |           |            |  |  |            |         |  |         |             |             |             
|                                                                                    |                                                                             | Series B                                     |         |   | Common Stock |   |           |            |  |  |            |         |  |         |             | Accumulated |              |          |        
|                                                                                    |                                                                             |                                              |         |   |              |   |           | Additional |  |  |            |         |  |         | Repurchased |             |              | Other    |         |          |       
|                                                                                    |                                                                             | Number of                                    |         |   |              |   | Number of |            |  |  |            | Paid-in |  |         | Deferred    |             |              | Retained |         |          | Common |   |         | Comprehensive |  |               | Comprehensive |  
|                                                                                    |                                                                             | Shares                                       |         |   | Amount       |   |           | Shares     |  |  | Amount     |         |  | Capital |             |             | Compensation |          |         | Earnings |        |   | Stock   |               |  | Income (Loss) |               |   | Income (Loss) |  
|                                                                                    |                                                                             |                                              |         |   |              |   |           |            |  |  |            |         |  |         |             |             |              |          |         |          |        |   |         |               |  |               |               |   |               |  
|                                                                                    |                                                                             | (Dollars in thousands except per share data) |        
|Balance, December 31, 2001                                                          |                                                                             |                                              | 805,895 |   |              | $ | 8         |            |  |  | 55,559,909 |         |  | $       | 34,725      |             |              | $        | 454,634 |          |        | $ | (74,333 | )             |  | $             | 432,918       |   |               | $ | (164,441 | ) |  | $ | (45,424 | )       |   |   |          |        
|Net income                                                                          |                                                                             |                                              |        |   |              |   |          |            |  |  |           |         |  |         |            |             |              |          |        |          |        |   |        |               |  |               | 101,811       |   |               |   |         |   |  |   |        |         |   | $ | 101,811  |        
|Other comprehensive income (loss):                                                  |                                                                             |                                              |         |   |              |   |           |            |  |  |            |         |  |         |             |             |              |          |         |          |        |   |         |               |  |               |               |   |               |   |          |   |  |   |         |         |   |   |          |        
|                                                                                    | Foreign currency translation adjustment (Note 1)                            |                                              |         |   |              |   |           |            |  |  |            |        |  |         |             |            |              |          |         |         |        |   |         |              |  |               |               |  |               |   |          |  |  |   |         | 6,934   |   |   |          | 6,934   |        
|                                                                                    | Change in fair value of cash flow hedges, net of deferred tax of
    $736   |                                              |         |  |              |   |           |           |  |  |            |        |  |         |             |            |              |          |         |         |        |   |         |              |  |               |               |  |               |   |          |  |  |   |         | 1,149   |   |   |          | 1,149   |        
|                                                                                    | Minimum pension liability adjustment, net of deferred tax of
    $19,586    |                                              |         |  |              |   |           |           |  |  |            |        |  |         |             |            |              |          |         |         |        |   |         |              |  |               |               |  |               |   |          |  |  |   |         | (19,533 | ) |   |          | (19,533 | )      
|                                                                                    |                                                                             |                                              |         |   |              |   |           |            |  |  |            |         |  |         |             |             |              |          |         |          |        |   |         |               |  |               |               |   |               |  
|                                                                                    |                                                                             | Comprehensive income                         |         |   |              |   |           |            |  |  |            |         |  |         |             |             |              |          |         |          |        |   |         |               |  |               |               |   |               |   |          |   |  |   |         |         |   |   |          | $       | 90,361  |  
|                                                                                    |                                                                             |                                              |         |   |              |   |           |            |  |  |            |         |  |         |             |             |              |          |         |          |        |   |         |               |  |               |               |   |               |  
|Exercise of stock options, including tax benefits of $1,884                         |                                                                             |                                              |        |   |              |   |          |            |  |  | 377,789    |         |  |         | 237         |             |              |          | 8,595   |          |        |   |        |               |  |               |              |   |               |   |         |   |  |   |        |         |   |   |          |        
|Stock-based compensation                                                            |                                                                             |                                              |        |   |              |   |          |            |  |  | 109,092    |         |  |         | 67          |             |              |          | 3,647   |          |        |   | (2,697  | )             |  |               |              |   |               |   | 17       |   |  |   |        |         |   |   |          |        
|TASP deferred compensation                                                          |                                                                             |                                              |        |   |              |   |          |            |  |  |           |         |  |         |            |             |              |          |        |          |        |   | 7,597   |               |  |               |              |   |               |   |         |   |  |   |        |         |   |   |          |        
|Repurchased common stock issued for conversion of preferred stock                   |                                                                             |                                              | (21,888 | ) |              |   |          |            |  |  |           |         |  |         |            |             |              |          | (2,583  | )        |        |   |        |               |  |               |              |   |               |   | 2,583    |   |  |   |        |         |   |   |          |        
|Common dividends declared ($.40 per share)                                          |                                                                             |                                              |        |   |              |   |          |            |  |  |           |         |  |         |            |             |              |          |        |          |        |   |        |               |  |               | (19,663       | ) |               |   |         |   |  |   |        |         |   |   |          |        
|Series B, Preferred dividends ($12.93 per share), net
    of tax benefits of $2,081 |                                                                             |                                              |        |   |              |   |          |            |  |  |           |         |  |         |            |             |              |          |        |          |        |   |        |               |  |               | (8,250        | ) |               |   |         |   |  |   |        |         |   |   |          |        
|                                                                                    |                                                                             |                                              |         |   |              |   |           |            |  |  |            |         |  |         |             |             |              |          |         |          |        |   |         |               |  |               |               |   |               |  
|Balance, December 31, 2002                                                          |                                                                             |                                              | 784,007 |   |              |   | 8         |            |  |  | 56,046,790 |         |  |         | 35,029      |             |              |          | 464,293 |          |        |   | (69,433 | )             |  |               | 506,816       |   |               |   | (161,841 | ) |  |   | (56,874 | )       |   |   |          |        
|Net income                                                                          |                                                                             |                                              |        |   |              |   |          |            |  |  |           |         |  |         |            |             |              |          |        |          |        |   |        |               |  |               | 92,024        |   |               |   |         |   |  |   |        |         |   | $ | 92,024   |        
|Other comprehensive income (loss):                                                  |                                                                             |                                              |         |   |              |   |           |            |  |  |            |         |  |         |             |             |              |          |         |          |        |   |         |               |  |               |               |   |               |   |          |   |  |   |         |         |   |   |          |        
|                                                                                    | Unrealized gain on marketable securities, net of deferred tax of
    $1,307 |                                              |         |  |              |   |           |           |  |  |            |        |  |         |             |            |              |          |         |         |        |   |         |              |  |               |               |  |               |   |          |  |  |   |         | 2,044   |   |   |          | 2,044   |        
|                                                                                    | Foreign currency translation adjustment (Note 1)                            |                                              |         |  |              |   |           |           |  |  |            |        |  |         |             |            |              |          |         |         |        |   |         |              |  |               |               |  |               |   |          |  |  |   |         | 6,509   |   |   |          | 6,509   |        
|                                                                                    | Change in fair value of cash flow hedges, net of deferred tax of
    $252   |                                              |         |  |              |   |           |           |  |  |            |        |  |         |             |            |              |          |         |         |        |   |         |              |  |               |               |  |               |   |          |  |  |   |         | 394     |   |   |          | 394     |        
|                                                                                    | Minimum pension liability adjustment, net of deferred tax of
    $7,036     |                                              |         |  |              |   |           |           |  |  |            |        |  |         |             |            |              |          |         |         |        |   |         |              |  |               |               |  |               |   |          |  |  |   |         | 11,004  |   |   |          | 11,004  |        
|                                                                                    |                                                                             |                                              |         |   |              |   |           |            |  |  |            |         |  |         |             |             |              |          |         |          |        |   |         |               |  |               |               |   |               |  
|                                                                                    |                                                                             | Comprehensive income                         |         |   |              |   |           |            |  |  |            |         |  |         |             |             |              |          |         |          |        |   |         |               |  |               |               |   |               |   |          |   |  |   |         |         |   |   |          | $       | 111,975 |  
|                                                                                    |                                                                             |                                              |         |   |              |   |           |            |  |  |            |         |  |         |             |             |              |          |         |          |        |   |         |               |  |               |               |   |               |  
|Exercise of stock options, including tax benefits of $1,120                         |                                                                             |                                              |        |   |              |   |          |            |  |  | 276,206    |         |  |         | 172         |             |              |          | 7,336   |          |        |   |        |               |  |               |              |   |               |   |         |   |  |   |        |         |   |   |          |        
|Stock-based compensation                                                            |                                                                             |                                              |        |   |              |   |          |            |  |  | 113,985    |         |  |         | 72          |             |              |          | 3,752   |          |        |   | (2,478  | )             |  |               |              |   |               |   | 34       |   |  |   |        |         |   |   |          |        
|TASP deferred compensation                                                          |                                                                             |                                              |        |   |              |   |          |            |  |  |           |         |  |         |            |             |              |          |        |          |        |   | 8,036   |               |  |               |              |   |               |   |         |   |  |   |        |         |   |   |          |        
|Repurchased common stock issued for conversion of preferred stock                   |                                                                             |                                              | (20,333 | ) |              |   |          |            |  |  |           |         |  |         |            |             |              |          | (2,534  | )        |        |   |        |               |  |               |              |   |               |   | 2,534    |   |  |   |        |         |   |   |          |        
|Common dividends declared ($.40 per share)                                          |                                                                             |                                              |        |   |              |   |          |            |  |  |           |         |  |         |            |             |              |          |        |          |        |   |        |               |  |               | (19,850       | ) |               |   |         |   |  |   |        |         |   |   |          |        
|Series B, Preferred dividends ($12.93 per share), net
    of tax benefits of $1,833 |                                                                             |                                              |        |   |              |   |          |            |  |  |           |         |  |         |            |             |              |          |        |          |        |   |        |               |  |               | (8,239        | ) |               |   |         |   |  |   |        |         |   |   |          |        
|                                                                                    |                                                                             |                                              |         |   |              |   |           |            |  |  |            |         |  |         |             |             |              |          |         |          |        |   |         |               |  |               |               |   |               |  
|Balance, December 31, 2003                                                          |                                                                             |                                              | 763,674 |   |              |   | 8         |            |  |  | 56,436,981 |         |  |         | 35,273      |             |              |          | 472,847 |          |        |   | (63,875 | )             |  |               | 570,751       |   |               |   | (159,273 | ) |  |   | (36,923 | )       |   |   |          |        
|Net loss                                                                            |                                                                             |                                              |        |   |              |   |          |            |  |  |           |         |  |         |            |             |              |          |        |          |        |   |        |               |  |               | (115,889      | ) |               |   |         |   |  |   |        |         |   | $ | (115,889 | )      
|Other comprehensive income (loss):                                                  |                                                                             |                                              |         |   |              |   |           |            |  |  |            |         |  |         |             |             |              |          |         |          |        |   |         |               |  |               |               |   |               |   |          |   |  |   |         |         |   |   |          |        
|                                                                                    | Unrealized gain on marketable securities, net of deferred tax of
    $1,307 |                                              |         |  |              |   |           |           |  |  |            |        |  |         |             |            |              |          |         |         |        |   |         |              |  |               |               |  |               |   |          |  |  |   |         | (2,044  | ) |   |          | (2,044  | )      
|                                                                                    | Foreign currency translation adjustment (Note 1)                            |                                              |         |  |              |   |           |           |  |  |            |        |  |         |             |            |              |          |         |         |        |   |         |              |  |               |               |  |               |   |          |  |  |   |         | 18,283  |   |   |          | 18,283  |        
|                                                                                    | Minimum pension liability adjustment, net of deferred tax of
    $3,163     |                                              |         |  |              |   |           |           |  |  |            |        |  |         |             |            |              |          |         |         |        |   |         |              |  |               |               |  |               |   |          |  |  |   |         | 4,948   |   |   |          | 4,948   |        
|                                                                                    |                                                                             |                                              |         |   |              |   |           |            |  |  |            |         |  |         |             |             |              |          |         |          |        |   |         |               |  |               |               |   |               |  
|                                                                                    |                                                                             | Comprehensive loss                           |         |   |              |   |           |            |  |  |            |         |  |         |             |             |              |          |         |          |        |   |         |               |  |               |               |   |               |   |          |   |  |   |         |         |   |   |          | $       | (94,702 | )
|                                                                                    |                                                                             |                                              |         |   |              |   |           |            |  |  |            |         |  |         |             |             |              |          |         |          |        |   |         |               |  |               |               |   |               |  
|Exercise of stock options, including tax benefits of $12,647                        |                                                                             |                                              |        |   |              |   |          |            |  |  | 2,080,380  |         |  |         | 1,300       |             |              |          | 67,429  |          |        |   |        |               |  |               |              |   |               |   |         |   |  |   |        |         |   |   |          |        
|Stock-based compensation                                                            |                                                                             |                                              |        |   |              |   |          |            |  |  | 26,893     |         |  |         | 17          |             |              |          | 4,262   |          |        |   | 444     |               |  |               |              |   |               |   | (198     | ) |  |   |        |         |   |   |          |        
|TASP deferred compensation                                                          |                                                                             |                                              |        |   |              |   |          |            |  |  |           |         |  |         |            |             |              |          |        |          |        |   | 8,570   |               |  |               |              |   |               |   |         |   |  |   |        |         |   |   |          |        
|Repurchased common stock issued for conversion of preferred stock                   |                                                                             |                                              | (20,679 | ) |              |   | (1        | )          |  |  |           |         |  |         |            |             |              |          | (2,402  | )        |        |   |        |               |  |               |              |   |               |   | 2,402    |   |  |   |        |         |   |   |          |        
|Common dividends declared ($.40 per share)                                          |                                                                             |                                              |        |   |              |   |          |            |  |  |           |         |  |         |            |             |              |          |        |          |        |   |        |               |  |               | (20,323       | ) |               |   |         |   |  |   |        |         |   |   |          |        
|Series B, Preferred dividends ($12.93 per share), net
    of tax benefits of $1,558 |                                                                             |                                              |        |   |              |   |          |            |  |  |           |         |  |         |            |             |              |          |        |          |        |   |        |               |  |               | (8,239        | ) |               |   |         |   |  |   |        |         |   |   |          |        
|                                                                                    |                                                                             |                                              |         |   |              |   |           |            |  |  |            |         |  |         |             |             |              |          |         |          |        |   |         |               |  |               |               |   |               |  
|Balance, December 31, 2004                                                          |                                                                             |                                              | 742,995 |   |              |   | 7         |            |  |  | 58,544,254 |         |  |         | 36,590      |             |              |          | 542,136 |          |        |   | (54,861 | )             |  |               | 426,300       |   |               |   | (157,069 | ) |  |   | (15,736 | )       |   |   |          |        
|                                                                                    |                                                                             |                                              |         |   |              |   |           |            |  |  |            |         |  |         |             |             |              |          |         |          |        |   |         |               |  |               |               |   |               |  



34



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##### Table of Contents



CNF Inc.


Notes to Consolidated Financial Statements


1.     Principal Accounting
Policies


Organization:










Principles of Consolidation:


Recognition of Revenues:




Cash Equivalents and Marketable Securities:




35



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CNF Inc.


Notes to Consolidated Financial
Statements  (Continued)




Trade Accounts Receivable, Net:


Property, Plant and Equipment:




Capitalized Software:


Goodwill and Long-Lived Assets:






36



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##### Table of Contents



CNF Inc.


Notes to Consolidated Financial
Statements  (Continued)


Income Taxes:


Self-Insurance Accruals:




Foreign Currency Translation:




37



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##### Table of Contents



CNF Inc.


Notes to Consolidated Financial
Statements  (Continued)


Earnings (Loss) Per Share (EPS):


|                                   |                                                                          |                                                                                                    |            |            |       |  |            |            |       |  |            |            |       | 
|---------------------------------- | ------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------- | ---------- | ---------- | ----- |  | ---------- | ---------- | ----- |  | ---------- | ---------- | ----- | 
|                                   |                                                                          | Years Ended December 31,                                                                           |           
|                                   |                                                                          |                                                                                                    |           
|                                   |                                                                          | 2004                                                                                               |            |            | 2003  |  |            | 2002       |      
|                                   |                                                                          |                                                                                                    |            |            |       |  |            |            |      
|                                   |                                                                          | (Dollars in thousands except per share data)                                                       |           
|Numerator:                         |                                                                          |                                                                                                    |            |            |       |  |            |            |       |  |            |           
|                                   | Continuing operations (after preferred stock dividends), as
    reported |                                                                                                    | $          | 142,206    |       |  | $          | 112,246    |       |  | $          | 105,844    |      
|                                   | Add-backs:                                                               |                                                                                                    |            |            |       |  |            |            |       |  |            |            |      
|                                   |                                                                          | Dividends on Series B preferred stock, net of replacement
    funding                              |            |            | 1,337 |  |            |            | 1,379 |  |            |            | 1,334 | 
|                                   |                                                                          | Interest expense on convertible subordinated debentures, net of
    trust dividend income (Note 5) |            |            | 1,590 |  |            |            | 3,816 |  |            |            | 3,816 | 
|                                   |                                                                          |                                                                                                    |            |            |       |  |            |            |      
|                                   | Continuing operations                                                    |                                                                                                    |            | 145,133    |       |  |            | 117,441    |       |  |            | 110,994    |      
|                                   |                                                                          |                                                                                                    |            |            |       |  |            |            |      
|                                   | Discontinued operations                                                  |                                                                                                    |            | (266,334   | )     |  |            | (28,461    | )     |  |            | (12,283    | )    
|                                   |                                                                          |                                                                                                    |            |            |       |  |            |            |      
|                                   | Applicable to common shareholders                                        |                                                                                                    | $          | (121,201   | )     |  | $          | 88,980     |       |  | $          | 98,711     |      
|                                   |                                                                          |                                                                                                    |            |            |       |  |            |            |      
|Denominator:                       |                                                                          |                                                                                                    |            |            |       |  |            |            |       |  |            |           
|                                   | Weighted-average common shares outstanding                               |                                                                                                    |            | 50,455,006 |       |  |            | 49,537,945 |       |  |            | 49,139,134 |      
|                                   | Stock options and restricted stock                                       |                                                                                                    |            | 1,197,519  |       |  |            | 467,340    |       |  |            | 700,331    |      
|                                   | Series B preferred stock                                                 |                                                                                                    |            | 3,498,021  |       |  |            | 3,595,382  |       |  |            | 3,691,105  |      
|                                   | Convertible subordinated debentures (Note 5)                             |                                                                                                    |            | 1,302,083  |       |  |            | 3,125,000  |       |  |            | 3,125,000  |      
|                                   |                                                                          |                                                                                                    |            |            |       |  |            |            |      
|                                   |                                                                          |                                                                                                    | 56,452,629 |            |       |  | 56,725,667 |            |       |  | 56,655,570 |           
|                                   |                                                                          |                                                                                                    |            |            |       |  |            |            |      
|Earnings (Loss) per Diluted Share: |                                                                          |                                                                                                    |            |            |       |  |            |            |       |  |            |           
|                                   | Continuing operations                                                    |                                                                                                    | $          | 2.57       |       |  | $          | 2.07       |       |  | $          | 1.96       |      
|                                   | Discontinued operations                                                  |                                                                                                    |            | (4.72      | )     |  |            | (0.50      | )     |  |            | (0.22      | )    
|                                   |                                                                          |                                                                                                    |            |            |       |  |            |            |      
|                                   | Applicable to common shareholders                                        |                                                                                                    | $          | (2.15      | )     |  | $          | 1.57       |       |  | $          | 1.74       |      
|                                   |                                                                          |                                                                                                    |            |            |       |  |            |            |      



Stock-Based Compensation:


38



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##### Table of Contents



CNF Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                                                                                                                                               |          |                          |          |   |       |   |        |      |      |   |        |   |      | 
|---------------------------------------------------------------------------------------------------------------------------------------------- | -------- | ------------------------ | -------- | - | ----- | - | ------ | ---- | ---- | - | ------ | - | ---- | 
|                                                                                                                                               |          | Years Ended December 31, |         
|                                                                                                                                               |          |                          |         
|                                                                                                                                               |          | 2004                     |          |   | 2003  |   |        | 2002 |     
|                                                                                                                                               |          |                          |          |   |       |   |        |      |     
|                                                                                                                                               |          | (Dollars in thousands,   |         
|                                                                                                                                               |          | except per share data)   |         
|Net income (loss) applicable to common shareholders, as reported                                                                               |          | $                        | (124,128 | ) |       | $ | 83,785 |      |      | $ | 93,561 |  
|Stock-based compensation cost included in reported income, net
    of related tax effects                                                      |          |                          | 2,852    |   |       |   | 817    |      |      |   | 616    |  
|Additional compensation cost, net of tax, that would have been
    included in net income (loss) if the fair-value method had been
    applied |          |                          | (11,683  | ) |       |   | (9,631 | )    |      |   | (8,776 | )
|                                                                                                                                               |          |                          |          |   |       |   |        |      |     
|Adjusted net income (loss) as if the fair-value method had been
    applied                                                                    |          | $                        | (132,959 | ) |       | $ | 74,971 |      |      | $ | 85,401 |  
|                                                                                                                                               |          |                          |          |   |       |   |        |      |     
|Earnings (loss) per share                                                                                                                      |          |                          |          |   |       |   |        |      |      |   |        |  
|                                                                                                                                               | Basic:   |                          |          |   |       |   |        |      |      |   |        |   |     
|                                                                                                                                               |          | As reported              |          | $ | (2.46 | ) |        | $    | 1.69 |   |        | $ | 1.90 | 
|                                                                                                                                               |          |                          |          |   |       |   |        |      |     
|                                                                                                                                               |          | Adjusted                 |          | $ | (2.64 | ) |        | $    | 1.51 |   |        | $ | 1.74 | 
|                                                                                                                                               |          |                          |          |   |       |   |        |      |     
|                                                                                                                                               | Diluted: |                          |          |   |       |   |        |      |      |   |        |   |     
|                                                                                                                                               |          | As reported              |          | $ | (2.15 | ) |        | $    | 1.57 |   |        | $ | 1.74 | 
|                                                                                                                                               |          |                          |          |   |       |   |        |      |     
|                                                                                                                                               |          | Adjusted                 |          | $ | (2.30 | ) |        | $    | 1.41 |   |        | $ | 1.60 | 
|                                                                                                                                               |          |                          |          |   |       |   |        |      |     



Derivative Instruments and Hedging Activities:


Equity-Method Investments:


New Accounting Standards:


39



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##### Table of Contents



CNF Inc.


Notes to Consolidated Financial
Statements  (Continued)












Estimates:


2.     Discontinued
Operations






40



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##### Table of Contents



CNF Inc.


Notes to Consolidated Financial
Statements  (Continued)






|                                        |                                            |                                   |          |           |        |   |         |           |         |   |         |           |        |  
|--------------------------------------- | ------------------------------------------ | --------------------------------- | -------- | --------- | ------ | - | ------- | --------- | ------- | - | ------- | --------- | ------ | -
|                                        |                                            | Years Ended December 31 ,         |         
|                                        |                                            |                                   |         
|                                        |                                            | 2004                              |          |           | 2003   |   |         | 2002      |        
|                                        |                                            |                                   |          |           |        |   |         |           |        
|                                        |                                            | (Dollars in thousands)            |         
|Menlo Worldwide Forwarding              |                                            |                                   |          |           |        |   |         |           |         |   |         |          
|                                        | Revenues                                   |                                   | $        | 2,189,791 |        |   | $       | 1,886,048 |         |   | $       | 1,775,971 |       
|                                        | Income (Loss) from Discontinued Operations |                                   |          |           |        |   |         |           |         |   |         |           |       
|                                        |                                            | Income (loss) before income taxes |          |           | 1,501  |   |         |           | (41,501 | ) |         |           | (6,084 | )
|                                        |                                            | Income tax benefit                |          |           | 10,914 |   |         |           | 13,040  |   |         |           | 6,199  |  
|                                        |                                            |                                   |          |           |        |   |         |           |        
|                                        |                                            | $                                 | 12,415   |           |        | $ | (28,461 | )         |         | $ | 115     |          
|                                        |                                            |                                   |          |           |        |   |         |           |        
|Income (Loss) from Disposal, net of tax |                                            |                                   |          |           |        |   |         |           |         |   |         |          
|                                        | Menlo Worldwide Forwarding                 |                                   | $        | (276,309  | )      |   | $       |          |         |   | $       |          |       
|                                        | CFC                                        |                                   |          | (2,440    | )      |   |         |          |         |   |         | (15,259   | )     
|                                        | Priority Mail Contract                     |                                   |          |          |        |   |         |          |         |   |         | 2,861     |       
|                                        |                                            |                                   |          |           |        |   |         |           |        
|                                        |                                            | $                                 | (278,749 | )         |        | $ |        |           |         | $ | (12,398 | )        
|                                        |                                            |                                   |          |           |        |   |         |           |        



|            |                                          |                                                 |                   |         |        |        |   |         |         |         | 
|----------- | ---------------------------------------- | ----------------------------------------------- | ----------------- | ------- | ------ | ------ | - | ------- | ------- | ------- | 
|            |                                          | December 31,                                    |                  
|            |                                          |                                                 |                  
|            |                                          | 2004                                            |                   |         | 2003   |       
|            |                                          |                                                 |                   |         |        |       
|            |                                          | (Dollars in thousands)                          |                  
|ASSETS     
|            | Cash                                     |                                                 | $                 |        |        |        | $ | 22,837  |        
|            | Trade and other receivables              |                                                 |                   |        |        |        |   | 388,809 |        
|            | Other                                    |                                                 |                   | 5,128   |        |        |   | 64,232  |        
|            |                                          |                                                 |                   |         |        |       
|            |                                          | Current Assets                                  |                   |         | 5,128  |        |   |         | 475,878 |        
|            |                                          | Deferred taxes, goodwill, and long-lived assets |                   |         | 15,220 |        |   |         | 449,601 |        
|            |                                          |                                                 |                   |         |        |       
|            |                                          |                                                 | Total Assets      |         |        | 20,348 |   |         |         | 925,479 | 
|            |                                          |                                                 |                   |         |        |       
|           
|LIABILITIES
|            | Accounts payable and accrued liabilities |                                                 |                   | 33,243  |        |        |   | 274,907 |        
|            | Other                                    |                                                 |                   | 1,462   |        |        |   | 27,541  |        
|            |                                          |                                                 |                   |         |        |       
|            |                                          | Current Liabilities                             |                   |         | 34,705 |        |   |         | 302,448 |        
|            | Long-term debt and capital leases        |                                                 |                   |        |        |        |   | 110,199 |        
|            | Employee benefits and other              |                                                 |                   | 6,862   |        |        |   | 41,051  |        
|            |                                          |                                                 |                   |         |        |       
|            |                                          |                                                 | Total Liabilities |         |        | 41,567 |   |         |         | 453,698 | 
|            |                                          |                                                 |                   |         |        |       
|            | Net Assets (Liabilities)                 |                                                 | $                 | (21,219 | )      |        | $ | 471,781 |        
|            |                                          |                                                 |                   |         |        |       

Menlo Worldwide Forwarding:


41



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##### Table of Contents



CNF Inc.


Notes to Consolidated Financial
Statements  (Continued)








42



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##### Table of Contents



CNF Inc.


Notes to Consolidated Financial
Statements  (Continued)








Spin-Off of CFC:




Priority Mail Contract:


3.     Investment in
Unconsolidated Joint Venture




43



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##### Table of Contents



CNF Inc.


Notes to Consolidated Financial
Statements  (Continued)










4.     Accrued Liabilities




|                              |                           |                        |        |         |      |   |        |         | 
|----------------------------- | ------------------------- | ---------------------- | ------ | ------- | ---- | - | ------ | ------- | 
|                              |                           | December 31,           |       
|                              |                           |                        |       
|                              |                           | 2004                   |        |         | 2003 |  
|                              |                           |                        |        |         |      |  
|                              |                           | (Dollars in thousands) |       
|Holiday and vacation pay      |                           | $                      | 55,739 |         |      | $ | 49,455 |        
|Incentive compensation        |                           |                        | 53,800 |         |      |   | 24,433 |        
|Wages and salaries            |                           |                        | 24,719 |         |      |   | 31,910 |        
|Employee benefits             |                           |                        | 24,491 |         |      |   | 19,345 |        
|Taxes other than income taxes |                           |                        | 20,102 |         |      |   | 17,670 |        
|Estimated revenue adjustments |                           |                        | 8,753  |         |      |   | 8,956  |        
|Accrued interest              |                           |                        | 6,865  |         |      |   | 4,263  |        
|Other accrued liabilities     |                           |                        | 31,968 |         |      |   | 40,121 |        
|                              |                           |                        |        |         |      |  
|                              | Total accrued liabilities |                        | $      | 226,437 |      |   | $      | 196,153 | 
|                              |                           |                        |        |         |      |  

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##### Table of Contents



CNF Inc.


Notes to Consolidated Financial
Statements  (Continued)


5.     Debt and Other Financing
Arrangements




|                                                                                                                          |                                     |                        |          |         |      |   |         |         | 
|------------------------------------------------------------------------------------------------------------------------- | ----------------------------------- | ---------------------- | -------- | ------- | ---- | - | ------- | ------- | 
|                                                                                                                          |                                     | December 31,           |         
|                                                                                                                          |                                     |                        |         
|                                                                                                                          |                                     | 2004                   |          |         | 2003 |  
|                                                                                                                          |                                     |                        |          |         |      |  
|                                                                                                                          |                                     | (Dollars in thousands) |         
|Mortgage note payable, 3.50%, due 2004 (interest payable
    annually)                                                    |                                     | $                      |         |         |      | $ | 2,034   |        
|7.35% Notes due 2005 (interest payable semi-annually)                                                                     |                                     |                        | 100,000  |         |      |   | 100,000 |        
|Mortgage note payable, 7.63%, due 2008 (interest payable monthly)                                                         |                                     |                        | 2,102    |         |      |   | 2,147   |        
|TASP Notes guaranteed, 6.00% to 8.54%, due through 2009
    (interest payable semi-annually)                              |                                     |                        | 89,700   |         |      |   | 101,700 |        
|87/8% Notes
    due 2010 (interest payable semi-annually), net of discount and
    including fair market value adjustment |                                     |                        | 229,632  |         |      |   | 234,289 |        
|5.0% Convertible Subordinated Debentures due 2012 (interest
    payable quarterly)                                        |                                     |                        |         |         |      |   | 128,866 |        
|6.70% Senior Debentures due 2034 (interest payable
    semi-annually), net of discount                                    |                                     |                        | 292,637  |         |      |   |        |        
|                                                                                                                          |                                     |                        |          |         |      |  
|                                                                                                                          |                                     |                        | 714,071  |         |      |   | 569,036 |        
|Less current maturities                                                                                                   |                                     |                        | (112,727 | )       |      |   | (14,055 | )      
|                                                                                                                          |                                     |                        |          |         |      |  
|                                                                                                                          | Total long-term debt and guarantees |                        | $        | 601,344 |      |   | $       | 554,981 | 
|                                                                                                                          |                                     |                        |          |         |      |  

Revolving Credit Facility:






45



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##### Table of Contents



CNF Inc.


Notes to Consolidated Financial
Statements  (Continued)




Other Uncommitted Credit Facilities:


Convertible Subordinated Debentures:




Senior Debentures due 2034:




46



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##### Table of Contents



CNF Inc.


Notes to Consolidated Financial
Statements  (Continued)




Thrift and Stock Plan Notes:






87/8% Notes Due
2010: 7 8 7 8 7 8 7 8


7.35% Notes:


Mortgage Notes Payable:




47



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##### Table of Contents



CNF Inc.


Notes to Consolidated Financial
Statements  (Continued)




6.     Leases




|                             |                           |                  |         |        | 
|---------------------------- | ------------------------- | ---------------- | ------- | ------ | 
|                             |                           | Operating Leases |        
|                             |                           |                  |        
|                             |                           | (Dollars in      |        
|                             |                           | thousands)       |        
|Year ending December 31:     |                           |                  |         |       
|                             | 2005                      |                  | $       | 60,751 | 
|                             | 2006                      |                  |         | 36,648 | 
|                             | 2007                      |                  |         | 21,625 | 
|                             | 2008                      |                  |         | 11,517 | 
|                             | 2009                      |                  |         | 7,344  | 
|                             | Thereafter (through 2013) |                  |         | 9,112  | 
|                             |                           |                  |        
|Total minimum lease payments |                           | $                | 146,997 |       
|                             |                           |                  |        







|                 |  |                          |        |   |      |   |        |      |  |   |        |  
|---------------- |  | ------------------------ | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                 |  | Years Ended December 31, |       
|                 |  |                          |       
|                 |  | 2004                     |        |   | 2003 |   |        | 2002 | 
|                 |  |                          |        |   |      |   |        |      | 
|                 |  | (Dollars in thousands)   |       
|Minimum rentals  |  | $                        | 89,696 |   |      | $ | 90,966 |      |  | $ | 88,611 |  
|Sublease rentals |  |                          | (3,899 | ) |      |   | (4,680 | )    |  |   | (3,015 | )
|                 |  |                          |        |   |      |   |        |      | 
|                 |  | $                        | 85,797 |   |      | $ | 86,286 |      |  | $ | 85,596 |  
|                 |  |                          |        |   |      |   |        |      | 

48



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CNF Inc.


Notes to Consolidated Financial
Statements  (Continued)


7.     Income Taxes




|                             |                 |                          |        |        |      |   |        |        |   |   |        |        |  
|---------------------------- | --------------- | ------------------------ | ------ | ------ | ---- | - | ------ | ------ | - | - | ------ | ------ | -
|                             |                 | Years Ended December 31, |       
|                             |                 |                          |       
|                             |                 | 2004                     |        |        | 2003 |   |        | 2002   |  
|                             |                 |                          |        |        |      |   |        |        |  
|                             |                 | (Dollars in thousands)   |       
|Current provision (benefit)  |                 |                          |        |        |      |   |        |        |   |   |        |       
|                             | Federal         |                          | $      | 57,129 |      |   | $      | 37,474 |   |   | $      | 18,821 |  
|                             | State and local |                          |        | 13,574 |      |   |        | 10,255 |   |   |        | (1,172 | )
|                             | Foreign         |                          |        | 1,957  |      |   |        | 1,634  |   |   |        | 1,855  |  
|                             |                 |                          |        |        |      |   |        |        |  
|                             |                 |                          | 72,660 |        |      |   | 49,363 |        |   |   | 19,504 |       
|                             |                 |                          |        |        |      |   |        |        |  
|Deferred provision (benefit) |                 |                          |        |        |      |   |        |        |   |   |        |       
|                             | Federal         |                          |        | 24,392 |      |   |        | 25,821 |   |   |        | 20,675 |  
|                             | State and local |                          |        | 335    |      |   |        | 2,475  |   |   |        | (1,646 | )
|                             | Foreign         |                          |        | (1,009 | )    |   |        | (627   | ) |   |        | (299   | )
|                             |                 |                          |        |        |      |   |        |        |  
|                             |                 |                          | 23,718 |        |      |   | 27,669 |        |   |   | 18,730 |       
|                             |                 |                          |        |        |      |   |        |        |  
|                             |                 | $                        | 96,378 |        |      | $ | 77,032 |        |   | $ | 38,234 |       
|                             |                 |                          |        |        |      |   |        |        |  





|                                                                            |  |              |      |   |      |  |      |      |  |  |      |  
|--------------------------------------------------------------------------- |  | ------------ | ---- | - | ---- |  | ---- | ---- |  |  | ---- | -
|                                                                            |  | Years Ended  |     
|                                                                            |  | December 31, |     
|                                                                            |  |              |     
|                                                                            |  | 2004         |      |   | 2003 |  |      | 2002 | 
|                                                                            |  |              |      |   |      |  |      |      | 
|Federal statutory tax provision rate                                        |  |              | 35.0 | % |      |  | 35.0 | %    |  |  | 35.0 | %
|State income tax provision (benefit), net of federal income tax
    benefit |  |              | 4.1  |   |      |  | 4.0  |      |  |  | (1.4 | )
|Foreign taxes in excess of U.S. statutory rate                              |  |              | 0.1  |   |      |  | 0.1  |      |  |  | 0.5  |  
|Non-deductible operating expenses                                           |  |              | 0.9  |   |      |  | (0.3 | )    |  |  | 1.9  |  
|Foreign tax credits, net                                                    |  |              | (0.2 | ) |      |  |     |      |  |  | (0.7 | )
|IRS Settlement                                                              |  |              |     |   |      |  |     |      |  |  | (9.2 | )
|Other, net                                                                  |  |              | (0.9 | ) |      |  | 0.2  |      |  |  | (1.0 | )
|                                                                            |  |              |      |   |      |  |      |      | 
|Effective income tax provision rate                                         |  |              | 39.0 | % |      |  | 39.0 | %    |  |  | 25.1 | %
|                                                                            |  |              |      |   |      |  |      |      | 



49



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CNF Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                         |                               |                        |         |         |      |  |         |         | 
|------------------------ | ----------------------------- | ---------------------- | ------- | ------- | ---- |  | ------- | ------- | 
|                         |                               | December 31,           |        
|                         |                               |                        |        
|                         |                               | 2004                   |         |         | 2003 | 
|                         |                               |                        |         |         |      | 
|                         |                               | (Dollars in thousands) |        
|Deferred tax assets      |                               |                        |         |         |      |  |         |        
|                         | Employee benefits             |                        | $       | 105,213 |      |  | $       | 123,823 | 
|                         | Self-insurance accruals       |                        |         | 62,983  |      |  |         | 48,775  | 
|                         | Other                         |                        |         | 7,682   |      |  |         | 16,413  | 
|                         |                               |                        |         |         |      | 
|                         |                               |                        | 175,878 |         |      |  | 189,011 |        
|                         |                               |                        |         |         |      | 
|Deferred tax liabilities |                               |                        |         |         |      |  |         |        
|                         | Property, plant and equipment |                        |         | 137,548 |      |  |         | 130,334 | 
|                         | Revenue                       |                        |         | 6,070   |      |  |         | 4,702   | 
|                         | Other                         |                        |         | 10,007  |      |  |         | 11,987  | 
|                         |                               |                        |         |         |      | 
|                         |                               |                        | 153,625 |         |      |  | 147,023 |        
|                         |                               |                        |         |         |      | 
|                         | Net deferred tax asset        |                        | $       | 22,253  |      |  | $       | 41,988  | 
|                         |                               |                        |         |         |      | 





8.     Shareholders
Equity


Series B Preferred Stock:


Accumulated Other Comprehensive Income (Loss):


50



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CNF Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                                                                                                                                           |                                                                   |                        |         |         |      |   |         |         |  
|------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------- | ---------------------- | ------- | ------- | ---- | - | ------- | ------- | -
|                                                                                                                                           |                                                                   | December 31,           |        
|                                                                                                                                           |                                                                   |                        |        
|                                                                                                                                           |                                                                   | 2004                   |         |         | 2003 |  
|                                                                                                                                           |                                                                   |                        |         |         |      |  
|                                                                                                                                           |                                                                   | (Dollars in thousands) |        
|Unrealized gain on marketable securities, net of deferred taxes
    of $1,307 at December 31, 2003                                         |                                                                   | $                      |        |         |      | $ | 2,044   |        
|                                                                                                                                           | Accumulated foreign currency translation adjustments
    (Note 1) |                        |         | (1,056  | )    |   |         | (19,339 | )
|Minimum pension liability adjustment, net of deferred tax
    benefit of $9,386 and $12,549 at December 31, 2004 and 2003
    respectively |                                                                   |                        | (14,680 | )       |      |   | (19,628 | )      
|                                                                                                                                           |                                                                   |                        |         |         |      |  
|                                                                                                                                           | Accumulated other comprehensive loss                              |                        | $       | (15,736 | )    |   | $       | (36,923 | )
|                                                                                                                                           |                                                                   |                        |         |         |      |  

9.     Benefit Plans




Pension Plans:






51



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CNF Inc.


Notes to Consolidated Financial
Statements  (Continued)






|                |                      |              |  |     |      |  |  |                   |   |  |  |     |  
|--------------- | -------------------- | ------------ |  | --- | ---- |  |  | ----------------- | - |  |  | --- | -
|                |                      | December 31, | 
|                |                      |              | 
|                |                      | 2004         |  |     | 2003 |  |  | Target Allocation |  
|                |                      |              |  |     |      |  |  |                   |  
|Asset Category: |                      |              |  |     |      |  |  |                   |   |  |  |    
|                | Domestic Equity      |              |  | 62  | %    |  |  | 63                | % |  |  | 60  | %
|                | International Equity |              |  | 17  | %    |  |  | 17                | % |  |  | 15  | %
|                | Fixed Income         |              |  | 18  | %    |  |  | 15                | % |  |  | 18  | %
|                | Real Estate          |              |  | 2   | %    |  |  | 3                 | % |  |  | 7   | %
|                | Other                |              |  | 1   | %    |  |  | 2                 | % |  |  |    |  
|                |                      |              |  |     |      |  |  |                   |  
|                | Total                |              |  | 100 | %    |  |  | 100               | % |  |  | 100 | %



52



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CNF Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                                                |                                                   |                                                |          |         |         |   |          |          |         |  
|----------------------------------------------- | ------------------------------------------------- | ---------------------------------------------- | -------- | ------- | ------- | - | -------- | -------- | ------- | -
|                                                |                                                   | 2004                                           |          |         | 2003    |  
|                                                |                                                   |                                                |          |         |         |  
|                                                |                                                   | (Dollars in thousands)                         |         
|Accumulated benefit obligation                  |                                                   | $                                              | 755,908  |         |         | $ | 673,879  |         
|Change in benefit obligation:                   |                                                   |                                                |          |         |         |   |          |         
|                                                | Projected benefit obligation at beginning of year |                                                | $        | 797,992 |         |   | $        | 651,160  |        
|                                                |                                                   | Service cost  benefits earned during the year |          |         | 56,198  |   |          |          | 43,602  |  
|                                                |                                                   | Interest cost on projected benefit obligation  |          |         | 49,817  |   |          |          | 47,054  |  
|                                                |                                                   | Curtailment  sale of MWF                      |          |         | (46,900 | ) |          |          |        |  
|                                                |                                                   | Actuarial loss                                 |          |         | 25,235  |   |          |          | 70,080  |  
|                                                |                                                   | Benefits paid                                  |          |         | (19,231 | ) |          |          | (13,904 | )
|                                                |                                                   |                                                |          |         |         |  
|                                                | Projected benefit obligation at end of year       |                                                | $        | 863,111 |         |   | $        | 797,992  |        
|                                                |                                                   |                                                |          |         |         |  
|Change in plan assets:                          |                                                   |                                                |          |         |         |   |          |         
|                                                | Fair value of plan assets at beginning of year    |                                                | $        | 548,426 |         |   | $        | 388,892  |        
|                                                |                                                   | Actual return on plan assets                   |          |         | 65,626  |   |          |          | 98,438  |  
|                                                |                                                   | CNF contributions                              |          |         | 90,000  |   |          |          | 75,000  |  
|                                                |                                                   | Benefits paid                                  |          |         | (19,231 | ) |          |          | (13,904 | )
|                                                |                                                   |                                                |          |         |         |  
|                                                | Fair value of plan assets at end of year          |                                                | $        | 684,821 |         |   | $        | 548,426  |        
|                                                |                                                   |                                                |          |         |         |  
|Funded status of the plans                      |                                                   | $                                              | (178,290 | )       |         | $ | (249,567 | )       
|Unrecognized actuarial loss                     |                                                   |                                                | 102,473  |         |         |   | 142,933  |         
|Unrecognized prior service costs                |                                                   |                                                | 2,961    |         |         |   | 5,146    |         
|                                                |                                                   |                                                |          |         |         |  
|                                                | Accrued benefit cost                              |                                                | $        | (72,856 | )       |   | $        | (101,488 | )      
|                                                |                                                   |                                                |          |         |         |  
|Weighted-average assumptions as of December 31: |                                                   |                                                |          |         |         |   |          |         
|                                                | Discount rate                                     |                                                |          | 6.25    | %       |   |          | 6.25     | %      
|                                                | Expected long-term rate of return on plan assets  |                                                |          | 8.50    | %       |   |          | 9.00     | %      
|                                                | Rate of compensation increase                     |                                                |          | 4.00    | %       |   |          | 4.00     | %      



|                                               |                                                  |                        |         |        |      |   |         |        |   |   |         |        |  
|---------------------------------------------- | ------------------------------------------------ | ---------------------- | ------- | ------ | ---- | - | ------- | ------ | - | - | ------- | ------ | -
|                                               |                                                  | 2004                   |         |        | 2003 |   |         | 2002   |  
|                                               |                                                  |                        |         |        |      |   |         |        |  
|                                               |                                                  | (Dollars in thousands) |        
|Service cost  benefits earned during the year |                                                  | $                      | 56,198  |        |      | $ | 43,602  |        |   | $ | 38,643  |       
|Interest cost on benefit obligation            |                                                  |                        | 49,817  |        |      |   | 47,054  |        |   |   | 42,066  |       
|Expected return on plan assets                 |                                                  |                        | (52,701 | )      |      |   | (37,642 | )      |   |   | (36,483 | )     
|Net amortization and deferral                  |                                                  |                        | 7,414   |        |      |   | 7,343   |        |   |   | 463     |       
|                                               |                                                  |                        |         |        |      |   |         |        |  
|                                               | Net pension expense                              |                        | $       | 60,728 |      |   | $       | 60,357 |   |   | $       | 44,689 |  
|                                               |                                                  |                        |         |        |      |   |         |        |  
|Weighted-average assumptions:                  |                                                  |                        |         |        |      |   |         |        |   |   |         |       
|                                               | Discount rate                                    |                        |         | 6.25   | %    |   |         | 6.75   | % |   |         | 7.25   | %
|                                               | Expected long-term rate of return on plan assets |                        |         | 9.00   | %    |   |         | 9.00   | % |   |         | 9.50   | %
|                                               | Rate of compensation increase                    |                        |         | 4.00   | %    |   |         | 4.00   | % |   |         | 4.50   | %

53



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CNF Inc.


Notes to Consolidated Financial
Statements  (Continued)






|                         |           |                        |   |         | 
|------------------------ | --------- | ---------------------- | - | ------- | 
|                         |           | Pension Benefits       |  
|                         |           |                        |  
|                         |           | (Dollars in thousands) |  
|Year ending December 31: |           |                        |   |        
|                         | 2005      |                        | $ | 22,046  | 
|                         | 2006      |                        |   | 23,810  | 
|                         | 2007      |                        |   | 26,059  | 
|                         | 2008      |                        |   | 28,842  | 
|                         | 2009      |                        |   | 32,316  | 
|                         | 2010-2014 |                        |   | 235,125 | 



Supplemental Pension Plan:




Minimum Pension Liability Adjustment:


54



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CNF Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                                                                                      |  |                        |        |  |      |   |        | 
|------------------------------------------------------------------------------------- |  | ---------------------- | ------ |  | ---- | - | ------ | 
|                                                                                      |  | December 31,           |       
|                                                                                      |  |                        |       
|                                                                                      |  | 2004                   |        |  | 2003 |  
|                                                                                      |  |                        |        |  |      |  
|                                                                                      |  | (Dollars in thousands) |       
|Intangible asset reported in Other Assets                                             |  | $                      | 2,270  |  |      | $ | 5,146  | 
|Pension liability adjustment reported in Employee Benefits                            |  |                        | 26,336 |  |      |   | 37,323 | 
|Accumulated other comprehensive loss reported in
    Shareholders Equity, net of tax |  |                        | 14,680 |  |      |   | 19,628 | 

Postretirement Medical Plan:




|                                 |                                                                   |                                                |          |         |        |   |         |         |         |  
|-------------------------------- | ----------------------------------------------------------------- | ---------------------------------------------- | -------- | ------- | ------ | - | ------- | ------- | ------- | -
|                                 |                                                                   | 2004                                           |          |         | 2003   |  
|                                 |                                                                   |                                                |          |         |        |  
|                                 |                                                                   | (Dollars in thousands)                         |         
|Change in benefit obligation:    |                                                                   |                                                |          |         |        |   |         |        
|                                 | Projected and accumulated benefit obligation at beginning of year |                                                | $        | 76,690  |        |   | $       | 90,319  |        
|                                 |                                                                   | Service cost  benefits earned during the year |          |         | 1,308  |   |         |         | 1,826   |  
|                                 |                                                                   | Interest cost on projected benefit obligation  |          |         | 5,231  |   |         |         | 5,536   |  
|                                 |                                                                   | Actuarial loss (gain)                          |          |         | 35,891 |   |         |         | (15,767 | )
|                                 |                                                                   | Benefits paid                                  |          |         | (5,251 | ) |         |         | (5,224  | )
|                                 |                                                                   |                                                |          |         |        |  
|                                 | Projected and accumulated benefit obligation at end of year       |                                                | $        | 113,869 |        |   | $       | 76,690  |        
|                                 |                                                                   |                                                |          |         |        |  
|Funded Status of the Plan        |                                                                   | $                                              | (113,869 | )       |        | $ | (76,690 | )      
|Unrecognized actuarial loss      |                                                                   |                                                | 37,160   |         |        |   | 1,506   |        
|Unrecognized prior service costs |                                                                   |                                                | 758      |         |        |   | 806     |        
|                                 |                                                                   |                                                |          |         |        |  
|                                 | Accrued benefit cost                                              |                                                | $        | (75,951 | )      |   | $       | (74,378 | )      
|                                 |                                                                   |                                                |          |         |        |  
|                                 | Discount rate assumption as of December 31                        |                                                |          | 6.00    | %      |   |         | 6.25    | %      



|                                               |                                          |                        |       |       |      |   |       |       |   |   |       |       |  
|---------------------------------------------- | ---------------------------------------- | ---------------------- | ----- | ----- | ---- | - | ----- | ----- | - | - | ----- | ----- | -
|                                               |                                          | 2004                   |       |       | 2003 |   |       | 2002  |  
|                                               |                                          |                        |       |       |      |   |       |       |  
|                                               |                                          | (Dollars in thousands) |      
|Service cost  benefits earned during the year |                                          | $                      | 1,308 |       |      | $ | 1,826 |       |   | $ | 1,671 |      
|Interest cost on benefit obligation            |                                          |                        | 5,231 |       |      |   | 5,536 |       |   |   | 5,418 |      
|Net amortization and deferral                  |                                          |                        | 285   |       |      |   | 262   |       |   |   | (150  | )    
|                                               |                                          |                        |       |       |      |   |       |       |  
|                                               | Net benefit expense                      |                        | $     | 6,824 |      |   | $     | 7,624 |   |   | $     | 6,939 |  
|                                               |                                          |                        |       |       |      |   |       |       |  
|                                               | Discount rate assumption at December 31: |                        |       | 6.25  | %    |   |       | 6.75  | % |   |       | 7.25  | %



55



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CNF Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                         |           |                        |   |        | 
|------------------------ | --------- | ---------------------- | - | ------ | 
|                         |           | Pension Benefits      
|                         |           |                       
|                         |           | (Dollars in thousands)
|Year ending December 31: |           |                        |   |       
|                         | 2005      |                        | $ | 6,603  | 
|                         | 2006      |                        |   | 6,987  | 
|                         | 2007      |                        |   | 7,405  | 
|                         | 2008      |                        |   | 7,898  | 
|                         | 2009      |                        |   | 8,394  | 
|                         | 2010-2014 |                        |   | 48,764 | 





|                              |                                                                                       |      |  |       |      |  |  |       |  
|----------------------------- | ------------------------------------------------------------------------------------- | ---- |  | ----- | ---- |  |  | ----- | -
|                              |                                                                                       | 2004 |  |       | 2003 | 
|                              |                                                                                       |      |  |       |      | 
|Change in benefit obligation: |                                                                                       |      |  |       |      |  |  |      
|                              | Health care cost trend rate assumed for next year                                     |      |  | 11.50 | %    |  |  | 10.25 | %
|                              | Rate to which the cost trend rate is assumed to decline (the
    ultimate trend rate) |      |  | 5.50  | %    |  |  | 5.50  | %
|                              | Year that the rate reaches the ultimate trend rate                                    |      |  | 2013  |      |  |  | 2011  |  







Thrift and Stock Plan:




56



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CNF Inc.


Notes to Consolidated Financial
Statements  (Continued)










Other Compensation Plans:


10.     Stock-Based
Compensation


Stock Options:






57



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CNF Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                        |  |      |           |  |      |  |           |      |  |  |           | 
|----------------------- |  | ---- | --------- |  | ---- |  | --------- | ---- |  |  | --------- | 
|                        |  | 2004 |           |  | 2003 |  |           | 2002 | 
|                        |  |      |           |  |      |  |           |      | 
|Estimated fair value    |  |      | $16.07    |  |      |  | $14.65    |      |  |  | $13.91    | 
|Risk-free interest rate |  |      | 3.1%-3.8% |  |      |  | 2.9%-3.6% |      |  |  | 3.1%-5.3% | 
|Expected life (years)   |  |      | 5.8       |  |      |  | 5.9       |      |  |  | 5.9       | 
|Expected volatility     |  |      | 45%       |  |      |  | 48%       |      |  |  | 47%       | 
|Expected dividend yield |  |      | 1.2%      |  |      |  | 1.2%      |      |  |  | 1.2%      | 



|                                       |                     |           |           |            |                |   |       |       | 
|-------------------------------------- | ------------------- | --------- | --------- | ---------- | -------------- | - | ----- | ----- | 
|                                       |                     | Number of |           |            | Wtd. Avg.      |  
|                                       |                     | Options   |           |            | Exercise Price |  
|                                       |                     |           |           |            |                |  
|Outstanding at December 31, 2001       |                     |           | 5,723,774 |            |                | $ | 26.69 |      
|                                       | Granted             |           |           | 866,748    |                |   |       | 31.53 | 
|                                       | Exercised           |           |           | (377,789   | )              |   |       | 18.39 | 
|                                       | Expired or canceled |           |           | (90,942    | )              |   |       | 30.12 | 
|                                       |                     |           |           |            |                |  
|Outstanding at December 31, 2002       |                     |           | 6,121,791 |            |                | $ | 27.84 |      
|                                       | Granted             |           |           | 455,876    |                |   |       | 32.90 | 
|                                       | Exercised           |           |           | (276,206   | )              |   |       | 23.13 | 
|                                       | Expired or canceled |           |           | (177,032   | )              |   |       | 30.17 | 
|                                       |                     |           |           |            |                |  
|Outstanding at December 31, 2003       |                     |           | 6,124,429 |            |                | $ | 28.34 |      
|                                       | Granted             |           |           | 116,800    |                |   |       | 38.43 | 
|                                       | Exercised           |           |           | (2,080,380 | )              |   |       | 26.96 | 
|                                       | Expired or canceled |           |           | (37,472    | )              |   |       | 29.87 | 
|                                       |                     |           |           |            |                |  
|Outstanding at December 31, 2004       |                     |           | 4,123,377 |            |                | $ | 29.30 |      
|                                       |                     |           |           |            |                |  
|Options exercisable as of December 31: |                     |           |           |            |                |   |       |      
|                                       | 2004                |           |           | 2,711,199  |                |   | $     | 29.23 | 
|                                       | 2003                |           |           | 3,055,314  |                |   | $     | 28.58 | 
|                                       | 2002                |           |           | 2,630,626  |                |   | $     | 28.05 | 



|                         |  |                     |           |         |                     |  |           |          |  |   |           |           |  |          |           |  |  |   |       | 
|------------------------ |  | ------------------- | --------- | ------- | ------------------- |  | --------- | -------- |  | - | --------- | --------- |  | -------- | --------- |  |  | - | ----- | 
|                         |  | Outstanding Options |           |         | Exercisable Options | 
|                         |  |                     |           |         |                     | 
|                         |  |                     |           | Average |                     |  | Wtd. Avg. |          |  |   |           | Wtd. Avg. | 
|                         |  | Number of           |           |         | Remaining           |  |           | Exercise |  |   | Number of |           |  | Exercise |          
|Range of Exercise Prices |  | Options             |           |         | Life in Years       |  |           | Price    |  |   | Options   |           |  | Price    |          
|                         |  |                     |           |         |                     |  |           |          |  |   |           |           |  |          |          
|$18.05 - $27.06          |  |                     | 2,096,325 |         |                     |  | 5.8       |          |  | $ | 25.32     |           |  |          | 1,411,249 |  |  | $ | 25.24 | 
|$28.30 - $35.03          |  |                     | 1,610,252 |         |                     |  | 6.9       |          |  |   | 31.92     |           |  |          | 923,150   |  |  |   | 31.78 | 
|$35.50 - $49.11          |  |                     | 416,800   |         |                     |  | 4.2       |          |  |   | 39.18     |           |  |          | 376,800   |  |  |   | 37.91 | 

Restricted Stock:


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CNF Inc.


Notes to Consolidated Financial
Statements  (Continued)




|          |  |        |        |           |            |   |       |        |           |  |            |  |  |           |       |  |            |  |         |  |  |   |       | 
|--------- |  | ------ | ------ | --------- | ---------- | - | ----- | ------ | --------- |  | ---------- |  |  | --------- | ----- |  | ---------- |  | ------- |  |  | - | ----- | 
|          |  | 2004   |        |           | 2003       |   |       | 2002   |          
|          |  |        |        |           |            |   |       |        |          
|          |  |        |        | Wtd. Avg. |            |   |       |        | Wtd. Avg. |  |            |  |  | Wtd. Avg. |      
|          |  | Shares |        |           | Fair Value |   |       | Shares |           |  | Fair Value |  |  | Shares    |       |  | Fair Value | 
|          |  |        |        |           |            |   |       |        |           |  |            |  |  |           |       |  |            | 
|Awarded   |  |        | 94,727 |           |            | $ | 44.13 |        |           |  | 129,321    |  |  | $         | 32.82 |  |            |  | 109,092 |  |  | $ | 31.46 | 
|Forfeited |  |        | 67,834 |           |            |   | 35.33 |        |           |  | 15,336     |  |  |           | 27.80 |  |            |  |        |  |  |   |      | 





11.     Commitments and
Contingencies




| |                
| | ---------------
| | Spin-Off of CFC











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CNF Inc.


Notes to Consolidated Financial
Statements  (Continued)




| |      
| | -----
| | Other







12.     Segment Reporting






Financial Data






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CNF Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                                                |                                    |                          |           |           |        |   |           |           |        |   |           |           |        | 
|----------------------------------------------- | ---------------------------------- | ------------------------ | --------- | --------- | ------ | - | --------- | --------- | ------ | - | --------- | --------- | ------ | 
|                                                |                                    | Years Ended December 31, |          
|                                                |                                    |                          |          
|                                                |                                    | 2004                     |           |           | 2003   |   |           | 2002      |       
|                                                |                                    |                          |           |           |        |   |           |           |       
|                                                |                                    | (Dollars in thousands)   |          
|Revenues                                        |                                    |                          |           |           |        |   |           |           |        |   |           |          
|                                                | Con-Way Transportation Services    |                          | $         | 2,604,004 |        |   | $         | 2,212,692 |        |   | $         | 2,011,577 |       
|                                                | Menlo Worldwide Logistics          |                          |           | 1,103,028 |        |   |           | 1,013,987 |        |   |           | 978,929   |       
|                                                | CNF Other                          |                          |           | 5,347     |        |   |           | 287       |        |   |           | 2,841     |       
|                                                |                                    |                          |           |           |        |   |           |           |       
|                                                |                                    | $                        | 3,712,379 |           |        | $ | 3,226,966 |           |        | $ | 2,993,347 |          
|                                                |                                    |                          |           |           |        |   |           |           |       
|Inter-segment Revenue Eliminations              |                                    |                          |           |           |        |   |           |           |        |   |           |          
|                                                | Con-Way Transportation Services    |                          | $         | 5,461     |        |   | $         | 2,549     |        |   | $         | 334       |       
|                                                | Menlo Worldwide Logistics          |                          |           |          |        |   |           | 2,975     |        |   |           | 6,804     |       
|                                                | CNF Other                          |                          |           | 29,450    |        |   |           | 21,724    |        |   |           | 10,428    |       
|                                                |                                    |                          |           |           |        |   |           |           |       
|                                                |                                    | $                        | 34,911    |           |        | $ | 27,248    |           |        | $ | 17,566    |          
|                                                |                                    |                          |           |           |        |   |           |           |       
|Revenues before Inter-segment Eliminations      |                                    |                          |           |           |        |   |           |           |        |   |           |          
|                                                | Con-Way Transportation Services    |                          | $         | 2,609,465 |        |   | $         | 2,215,241 |        |   | $         | 2,011,911 |       
|                                                | Menlo Worldwide Logistics          |                          |           | 1,103,028 |        |   |           | 1,016,962 |        |   |           | 985,733   |       
|                                                | CNF Other                          |                          |           | 34,797    |        |   |           | 22,011    |        |   |           | 13,269    |       
|                                                |                                    |                          |           |           |        |   |           |           |       
|                                                | Inter-segment Revenue Eliminations |                          |           | (34,911   | )      |   |           | (27,248   | )      |   |           | (17,566   | )     
|                                                |                                    |                          |           |           |        |   |           |           |       
|                                                |                                    | $                        | 3,712,379 |           |        | $ | 3,226,966 |           |        | $ | 2,993,347 |          
|                                                |                                    |                          |           |           |        |   |           |           |       
|Operating Income (Loss)                         |                                    |                          |           |           |        |   |           |           |        |   |           |          
|                                                | Con-Way Transportation Services    |                          | $         | 245,488   |        |   | $         | 183,095   |        |   | $         | 135,001   |       
|                                                | Menlo Worldwide                    |                          |           |           |        |   |           |           |        |   |           |           |       
|                                                |                                    | Logistics                |           |           | 24,399 |   |           |           | 23,492 |   |           |           | 30,523 | 
|                                                |                                    | Other                    |           |           | 18,253 |   |           |           | 20,718 |   |           |           | 18,188 | 
|                                                |                                    |                          |           |           |        |   |           |           |       
|                                                |                                    |                          | 42,652    |           |        |   | 44,210    |           |        |   | 48,711    |          
|                                                | CNF Other                          |                          |           | (3,973    | )      |   |           | (2,357    | )      |   |           | (3,369    | )     
|                                                |                                    |                          |           |           |        |   |           |           |       
|                                                |                                    | $                        | 284,167   |           |        | $ | 224,948   |           |        | $ | 180,343   |          
|                                                |                                    |                          |           |           |        |   |           |           |       
|Depreciation and Amortization, net of Accretion |                                    |                          |           |           |        |   |           |           |        |   |           |          
|                                                | Con-Way Transportation Services    |                          | $         | 97,523    |        |   | $         | 94,179    |        |   | $         | 95,484    |       
|                                                | Menlo Worldwide                    |                          |           |           |        |   |           |           |        |   |           |           |       
|                                                |                                    | Logistics                |           |           | 7,005  |   |           |           | 7,402  |   |           |           | 10,344 | 
|                                                |                                    | Other                    |           |           | 4,117  |   |           |           | 5,367  |   |           |           |       | 
|                                                |                                    |                          |           |           |        |   |           |           |       
|                                                |                                    |                          | 11,122    |           |        |   | 12,769    |           |        |   | 10,344    |          
|                                                | CNF Other                          |                          |           | 6,451     |        |   |           | 6,469     |        |   |           | 11,256    |       
|                                                |                                    |                          |           |           |        |   |           |           |       
|                                                |                                    | $                        | 115,096   |           |        | $ | 113,417   |           |        | $ | 117,084   |          
|                                                |                                    |                          |           |           |        |   |           |           |       
|Capital Expenditures                            |                                    |                          |           |           |        |   |           |           |        |   |           |          
|                                                | Con-Way Transportation Services    |                          | $         | 144,479   |        |   | $         | 118,150   |        |   | $         | 65,122    |       
|                                                | Menlo Worldwide                    |                          |           |           |        |   |           |           |        |   |           |           |       
|                                                |                                    | Logistics                |           |           | 4,687  |   |           |           | 6,054  |   |           |           | 8,991  | 
|                                                |                                    | Other                    |           |           | 948    |   |           |           | 2,815  |   |           |           |       | 
|                                                |                                    |                          |           |           |        |   |           |           |       
|                                                |                                    |                          | 5,635     |           |        |   | 8,869     |           |        |   | 8,991     |          
|                                                | CNF Other                          |                          |           | 1,346     |        |   |           | 744       |        |   |           | 1,718     |       
|                                                |                                    |                          |           |           |        |   |           |           |       
|                                                |                                    | $                        | 151,460   |           |        | $ | 127,763   |           |        | $ | 75,831    |          
|                                                |                                    |                          |           |           |        |   |           |           |       

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CNF Inc.


Notes to Consolidated Financial
Statements  (Continued)


|                    |                                   |                          |           |           |         |   |           |           |         |   |           |           |         | 
|------------------- | --------------------------------- | ------------------------ | --------- | --------- | ------- | - | --------- | --------- | ------- | - | --------- | --------- | ------- | 
|                    |                                   | Years Ended December 31, |          
|                    |                                   |                          |          
|                    |                                   | 2004                     |           |           | 2003    |   |           | 2002      |        
|                    |                                   |                          |           |           |         |   |           |           |        
|                    |                                   | (Dollars in thousands)   |          
|Identifiable Assets |                                   |                          |           |           |         |   |           |           |         |   |           |          
|                    | Con-Way Transportation Services   |                          | $         | 1,185,835 |         |   | $         | 1,098,022 |         |   | $         | 1,028,233 |        
|                    | Menlo Worldwide                   |                          |           |           |         |   |           |           |         |   |           |           |        
|                    |                                   | Logistics                |           |           | 201,274 |   |           |           | 179,518 |   |           |           | 176,941 | 
|                    |                                   | Other                    |           |           | 21,891  |   |           |           | 29,255  |   |           |           |        | 
|                    |                                   |                          |           |           |         |   |           |           |        
|                    |                                   |                          | 223,165   |           |         |   | 208,773   |           |         |   | 176,941   |          
|                    | CNF Other                         |                          |           | 1,067,053 |         |   |           | 541,366   |         |   |           | 600,765   |        
|                    | Assets of discontinued operations |                          |           | 20,348    |         |   |           | 925,479   |         |   |           | 980,935   |        
|                    |                                   |                          |           |           |         |   |           |           |        
|                    |                                   | $                        | 2,496,401 |           |         | $ | 2,773,640 |           |         | $ | 2,786,874 |          
|                    |                                   |                          |           |           |         |   |           |           |        

Geographic Data




|         |               |                          |   |           |           |  |   |           |           |  |   |           |           | 
|-------- | ------------- | ------------------------ | - | --------- | --------- |  | - | --------- | --------- |  | - | --------- | --------- | 
|         |               | Years Ended December 31, |  
|         |               |                          |  
|         |               | 2004                     |   |           | 2003      |  |   | 2002      |          
|         |               |                          |   |           |           |  |   |           |          
|         |               | (Dollars in thousands)   |  
|Revenues |               |                          |   |           |           |  |   |           |           |  |   |          
|         | United States |                          | $ | 3,604,685 |           |  | $ | 3,142,446 |           |  | $ | 2,920,544 |          
|         | Canada        |                          |   | 51,993    |           |  |   | 44,201    |           |  |   | 36,858    |          
|         |               |                          |   |           |           |  |   |           |          
|         |               | North America            |   |           | 3,656,678 |  |   |           | 3,186,647 |  |   |           | 2,957,402 | 
|         | International |                          |   | 55,701    |           |  |   | 40,319    |           |  |   | 35,945    |          
|         |               |                          |   |           |           |  |   |           |          
|         |               | Total                    |   | $         | 3,712,379 |  |   | $         | 3,226,966 |  |   | $         | 2,993,347 | 
|         |               |                          |   |           |           |  |   |           |          

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CNF Inc.


Notes to Consolidated Financial
Statements  (Continued)


13.     Quarterly Financial Data
(Unaudited):


|                                                                            |         |                                                        |                                                     |   |         |      |              |              |      |      |              |   |       |       |              |   |       |      | 
|--------------------------------------------------------------------------- | ------- | ------------------------------------------------------ | --------------------------------------------------- | - | ------- | ---- | ------------ | ------------ | ---- | ---- | ------------ | - | ----- | ----- | ------------ | - | ----- | ---- | 
|2004  Quarter Ended                                                        |         | March 31                                               |                                                     |   | June 30 |      |              | September 30 |      |      | December 31  |  
|                                                                            |         |                                                        |                                                     |   |         |      |              |              |      |      |              |  
|                                                                            |         | (Dollars in thousands except per share data)           |                                                    
|Revenues                                                                    |         | $                                                      | 846,920                                             |   |         | $    | 924,382      |              |      | $    | 973,619      |   |       | $     | 967,458      |  
|Operating income                                                            |         |                                                        | 55,448                                              |   |         |      | 71,279       |              |      |      | 78,435       |   |       |       | 79,005       |  
|Income from Continuing Operations Before Income Tax Provision               |         |                                                        | 48,271                                              |   |         |      | 58,719       |              |      |      | 68,712       |   |       |       | 71,121       |  
|Income Tax Provision                                                        |         |                                                        | 18,826                                              |   |         |      | 22,900       |              |      |      | 26,798       |   |       |       | 27,854       |  
|Net Income from Continuing Operations (after preferred stock
    dividends) |         |                                                        | 27,423                                              |   |         |      | 33,797       |              |      |      | 39,839       |   |       |       | 41,147       |  
|Loss from Disposal, net of tax                                              |         |                                                        |                                                    |   |         |      |             |              |      |      | (260,490     | ) |       |       | (18,259      | )
|Income (Loss) from Discontinued Operations, net of tax                      |         |                                                        | (3,016                                              | ) |         |      | 1,686        |              |      |      | 4,444        |   |       |       | 9,301        |  
|Net Income (Loss) Applicable to Common Shareholders                         |         | $                                                      | 24,407                                              |   |         | $    | 35,483       |              |      | $    | (216,207     | ) |       | $     | 32,189       |  
|Earnings (Loss) Per Common Share:                                           |         |                                                        |                                                     |   |         |      |              |              |      |      |              |   |       |       |              |  
|                                                                            | Basic   |                                                        |                                                     |   |         |      |              |              |      |      |              |   |       |       |              |   |      
|                                                                            |         | Net Income from Continuing Operations                  |                                                     | $ | 0.55    |      |              | $            | 0.67 |      |              | $ | 0.79  |       |              | $ | 0.80  |     
|                                                                            |         | Loss from Disposal, net of tax                         |                                                     |   |        |      |              |              |     |      |              |   | (5.15 | )     |              |   | (0.35 | )   
|                                                                            |         | Income (Loss) from Discontinued Operations, net of tax |                                                     |   | (0.06   | )    |              |              | 0.04 |      |              |   | 0.09  |       |              |   | 0.18  |     
|                                                                            |         |                                                        |                                                     |   |         |      |              |              |      |      |              |  
|                                                                            |         |                                                        | Net Income (Loss) Applicable to Common Shareholders |   | $       | 0.49 |              |              | $    | 0.71 |              |   | $     | (4.27 | )            |   | $     | 0.63 | 
|                                                                            |         |                                                        |                                                     |   |         |      |              |              |      |      |              |  
|                                                                            | Diluted |                                                        |                                                     |   |         |      |              |              |      |      |              |   |       |       |              |   |      
|                                                                            |         | Net Income from Continuing Operations                  |                                                     | $ | 0.50    |      |              | $            | 0.61 |      |              | $ | 0.72  |       |              | $ | 0.74  |     
|                                                                            |         | Loss from Disposal, net of tax                         |                                                     |   |        |      |              |              |     |      |              |   | (4.70 | )     |              |   | (0.33 | )   
|                                                                            |         | Income (Loss) from Discontinued Operations, net of tax |                                                     |   | (0.05   | )    |              |              | 0.03 |      |              |   | 0.08  |       |              |   | 0.17  |     
|                                                                            |         |                                                        |                                                     |   |         |      |              |              |      |      |              |  
|                                                                            |         |                                                        | Net Income (Loss) Applicable to Common Shareholders |   | $       | 0.45 |              |              | $    | 0.64 |              |   | $     | (3.90 | )            |   | $     | 0.58 | 
|                                                                            |         |                                                        |                                                     |   |         |      |              |              |      |      |              |  
|Market price range                                                          |         | $                                                      | 30.50-$35.84                                        |   |         | $    | 33.55-$42.57 |              |      | $    | 38.66-$43.01 |   |       | $     | 41.67-$50.96 |  
|Common dividends (paid quarterly)                                           |         |                                                        | 0.10                                                |   |         |      | 0.10         |              |      |      | 0.10         |   |       |       | 0.10         |  

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CNF Inc.


Notes to Consolidated Financial
Statements  (Continued)


|                                                                            |         |                                               |                                              |   |         |      |              |              |       |      |              |   |       |      |              |   |       |      | 
|--------------------------------------------------------------------------- | ------- | --------------------------------------------- | -------------------------------------------- | - | ------- | ---- | ------------ | ------------ | ----- | ---- | ------------ | - | ----- | ---- | ------------ | - | ----- | ---- | 
|2003  Quarter Ended                                                        |         | March 31                                      |                                              |   | June 30 |      |              | September 30 |       |      | December 31  |  
|                                                                            |         |                                               |                                              |   |         |      |              |              |       |      |              |  
|Revenues                                                                    |         | $                                             | 762,550                                      |   |         | $    | 796,609      |              |       | $    | 837,361      |   |       | $    | 830,446      |  
|Operating income                                                            |         |                                               | 43,381                                       |   |         |      | 47,961       |              |       |      | 68,311       |   |       |      | 65,295       |  
|Income from Continuing Operations Before Income Tax Provision               |         |                                               | 33,714                                       |   |         |      | 42,876       |              |       |      | 60,879       |   |       |      | 60,048       |  
|Income Tax Provision                                                        |         |                                               | 13,149                                       |   |         |      | 16,721       |              |       |      | 23,743       |   |       |      | 23,419       |  
|Net Income from Continuing Operations (after preferred stock
    dividends) |         |                                               | 18,539                                       |   |         |      | 24,086       |              |       |      | 35,106       |   |       |      | 34,515       |  
|Loss from Discontinued Operations, net of tax                               |         |                                               | (2,610                                       | ) |         |      | (7,786       | )            |       |      | (10,315      | ) |       |      | (7,750       | )
|Net Income Applicable to Common Shareholders                                |         | $                                             | 15,929                                       |   |         | $    | 16,300       |              |       | $    | 24,791       |   |       | $    | 26,765       |  
|Earnings Per Common Share:                                                  |         |                                               |                                              |   |         |      |              |              |       |      |              |   |       |      |              |  
|                                                                            | Basic   |                                               |                                              |   |         |      |              |              |       |      |              |   |       |      |              |   |      
|                                                                            |         | Net Income from Continuing Operations         |                                              | $ | 0.37    |      |              | $            | 0.49  |      |              | $ | 0.71  |      |              | $ | 0.69  |     
|                                                                            |         | Loss from Discontinued Operations, net of tax |                                              |   | (0.05   | )    |              |              | (0.16 | )    |              |   | (0.21 | )    |              |   | (0.15 | )   
|                                                                            |         |                                               |                                              |   |         |      |              |              |       |      |              |  
|                                                                            |         |                                               | Net Income Applicable to Common Shareholders |   | $       | 0.32 |              |              | $     | 0.33 |              |   | $     | 0.50 |              |   | $     | 0.54 | 
|                                                                            |         |                                               |                                              |   |         |      |              |              |       |      |              |  
|                                                                            | Diluted |                                               |                                              |   |         |      |              |              |       |      |              |   |       |      |              |   |      
|                                                                            |         | Net Income from Continuing Operations         |                                              | $ | 0.35    |      |              | $            | 0.44  |      |              | $ | 0.64  |      |              | $ | 0.62  |     
|                                                                            |         | Loss from Discontinued Operations, net of tax |                                              |   | (0.05   | )    |              |              | (0.13 | )    |              |   | (0.18 | )    |              |   | (0.13 | )   
|                                                                            |         |                                               |                                              |   |         |      |              |              |       |      |              |  
|                                                                            |         |                                               | Net Income Applicable to Common Shareholders |   | $       | 0.30 |              |              | $     | 0.31 |              |   | $     | 0.46 |              |   | $     | 0.49 | 
|                                                                            |         |                                               |                                              |   |         |      |              |              |       |      |              |  
|Market price range                                                          |         | $                                             | 27.19-$34.70                                 |   |         | $    | 24.44-$31.47 |              |       | $    | 24.95-$33.26 |   |       | $    | 31.83-$35.77 |  
|Common dividends (paid quarterly)                                           |         |                                               | 0.10                                         |   |         |      | 0.10         |              |       |      | 0.10         |   |       |      | 0.10         |  

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|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
    ACCOUNTING AND FINANCIAL DISCLOSURE








|         |                        
|-------- | -----------------------
|ITEM 9A. | CONTROLS AND PROCEDURES















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Report of Independent Registered Public Accounting
Firm

















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| |             
| | ------------
| | /s/ KPMG LLP
| |             
| | KPMG LLP    





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|         |                  
|-------- | -----------------
|ITEM 9B. | OTHER INFORMATION












PART III









|         |                                                   
|-------- | --------------------------------------------------
|ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT







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|         |                       
|-------- | ----------------------
|ITEM 11. | EXECUTIVE COMPENSATION








|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
    MANAGEMENT AND RELATED STOCKHOLDER MATTERS







|                                                           |                  |                         |           |           |                      |                      |                         |                         |  |  |           |           |    
|---------------------------------------------------------- | ---------------- | ----------------------- | --------- | --------- | -------------------- | -------------------- | ----------------------- | ----------------------- |  |  | --------- | --------- | ---
|                                                           |                  |                         |           |           |                      | Number of Securities |                        
|                                                           |                  | Number of Securities to |           |           |                      |                      | Remaining Available for |                        
|                                                           |                  | be Issued upon          |           |           | Weighted-Average     |                      |                         | Future Issuance under   | 
|                                                           |                  | Exercise of             |           |           | Exercise Price of    |                      |                         | Equity Compensation     | 
|                                                           |                  | Outstanding Options,    |           |           | Outstanding Options, |                      |                         | Plans (Excluding        | 
|                                                           |                  | Warrants, and           |           |           | Warrants, and        |                      |                         | Securities Reflected in | 
|Plan Category                                              |                  | Rights(a)               |           |           | Rights(b)            |                      |                         | Column(a))(c)           | 
|                                                           |                  |                         |           |           |                      |                      |                         |                         | 
|Equity compensation plans approved by                      |                  |                         |           |           |                      |                      |                         |                         |  |  |           |          
|                                                           | security holders |                         |           | 2,711,199 | (1)                  |                      | $                       | 29.30                   |  |  |           | 3,885,622 | (2)
|Equity compensation plans not approved by security holders |                  |                         | 0         | (3)       |                      |                      | 0                       |                         |  |  | 0         | (3)      
|                                                           |                  |                         |           |           |                      |                      |                         |                         | 
|Total                                                      |                  |                         | 2,711,199 |           |                      | $                    | 29.30                   |                         |  |  | 3,885,622 |          
|                                                           |                  |                         |           |           |                      |                      |                         |                         | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Excludes 8,585 phantom stock units, issued under CNFs
    deferred compensation plan for executives upon election of
    certain participants to convert a portion of their deferred
    compensation account balances into phantom stock units.                                                                                                                                                                                                                                                                                                                            
|   
|(2) | Includes 3,653,541 securities available for issuance in the form
    of restricted stock, stock options, or other equity-based awards
    under CNFs 1997 Equity and Incentive Plans. Also includes
    12,808 securities available for issuance in the form of
    restricted stock or stock options under CNFs 1994 Amended
    and Restated Equity Incentive Plan for Non-Employee Directors
    and 219,273 securities available for issuance in the form of
    restricted or stock options under CNFs 2003 Equity and
    Incentive Plan for Non-Employee Directors.
|   
|(3) | Does not include shares purchased under CNFs Employee
    Stock Purchase Plan. The Employee Stock Purchase Plan offers
    participants the opportunity to purchase shares at fair market
    value using payroll deductions. The shares are purchased by the
    Plans administrator in the open market. The Plan does not
    contain specific limitation on the number of shares that can be
    purchased under the plan.                                                                                                                                              






|         |                                               
|-------- | ----------------------------------------------
|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS








|         |                                       
|-------- | --------------------------------------
|ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES



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PART IV







|         |                                           
|-------- | ------------------------------------------
|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES











71



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Report of Independent Registered Public Accounting
Firm














| |             
| | ------------
| | /s/ KPMG LLP
| |             
| | KPMG LLP    





72



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##### Table of Contents



Report of Independent Registered Public Accounting Firm on
Financial Schedule










| |             
| | ------------
| | /s/ KPMG LLP
| |             
| | KPMG LLP    





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Schedule II


CNF Inc.


Valuation and Qualifying Accounts


Three Years Ended December 31, 2004






|     |  |                        |        |           |                  |   |        |                  |  |   |            |  |  |                |        |   |  |   |        | 
|---- |  | ---------------------- | ------ | --------- | ---------------- | - | ------ | ---------------- |  | - | ---------- |  |  | -------------- | ------ | - |  | - | ------ | 
|     |  |                        |        | Additions |                  |   |        |                  | 
|     |  |                        |        |           |                  |   |        |                  | 
|     |  | Balance at             |        |           | (1)              |   |        | (2)              |  |   |            |  | 
|     |  | Beginning of           |        |           | Charged to Costs |   |        | Charged to Other |  |   | Deductions |  |  | Balance at End |       
|     |  | Period                 |        |           | and Expenses     |   |        | Accounts         |  |   | (a)        |  |  | of Period      |       
|     |  |                        |        |           |                  |   |        |                  |  |   |            |  |  |                |       
|     |  | (Dollars in thousands) |       
|2004 |  | $                      | 10,958 |           |                  | $ | 5,103  |                  |  | $ | 203        |  |  | $              | (9,648 | ) |  | $ | 6,616  | 
|2003 |  |                        | 12,046 |           |                  |   | 5,425  |                  |  |   |           |  |  |                | (6,513 | ) |  |   | 10,958 | 
|2002 |  |                        | 11,814 |           |                  |   | 10,058 |                  |  |   |           |  |  |                | (9,826 | ) |  |   | 12,046 | 






|    |                                        
|--- | ---------------------------------------
|(a) | Accounts written off net of recoveries.

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SIGNATURES






| |             
| | ------------
| | CNF INC.    
| | (Registrant)



| |  |                          
| |  | -------------------------
| |  | /s/ W. Keith Kennedy, Jr.

| |                                
| | -------------------------------
| |                                
| | W. Keith Kennedy, Jr.          
| | Interim Chief Executive Officer





| |  |                       
| |  | ----------------------
| |  | /s/ Chutta Ratnathicam

| |                                                  
| | -------------------------------------------------
| |                                                  
| | Chutta Ratnathicam                               
| | Senior Vice President and Chief Financial Officer





| |  |                  
| |  | -----------------
| |  | /s/ Kevin S. Coel

| |                              
| | -----------------------------
| |                              
| | Kevin S. Coel                
| | Vice President and Controller



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SIGNATURES






| |  |                          
| |  | -------------------------
| |  | /s/ W. Keith Kennedy, Jr.

| |                                
| | -------------------------------
| |                                
| | W. Keith Kennedy, Jr.          
| | Chairman of the Board          
| | Interim Chief Executive Officer





| |  |                     
| |  | --------------------
| |  | /s/ Margaret G. Gill

| |                           
| | --------------------------
| |                           
| | Margaret G. Gill, Director





| |  |                      
| |  | ---------------------
| |  | /s/ Robert Jaunich II

| |                            
| | ---------------------------
| |                            
| | Robert Jaunich II, Director





| |  |                      
| |  | ---------------------
| |  | /s/ Michael J. Murray

| |                            
| | ---------------------------
| |                            
| | Michael J. Murray, Director





| |  |                 
| |  | ----------------
| |  | /s/ John C. Pope

| |                       
| | ----------------------
| |                       
| | John C. Pope, Director





| |  |                     
| |  | --------------------
| |  | /s/ Robert D. Rogers

| |                           
| | --------------------------
| |                           
| | Robert D. Rogers, Director





| |  |                         
| |  | ------------------------
| |  | /s/ William J. Schroeder

| |                               
| | ------------------------------
| |                               
| | William J. Schroeder, Director



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| |  |                   
| |  | ------------------
| |  | /s/ Peter W. Stott

| |                         
| | ------------------------
| |                         
| | Peter W. Stott, Director





| |  |                     
| |  | --------------------
| |  | /s/ Robert P. Wayman

| |                           
| | --------------------------
| |                           
| | Robert P. Wayman, Director





| |  |                         
| |  | ------------------------
| |  | /s/ Chelsea C. White III

| |                               
| | ------------------------------
| |                               
| | Chelsea C. White III, Director



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##### Table of Contents






INDEX TO EXHIBITS


ITEM 15(3)


Exhibit No.




|    |  |                                                                                                                                  
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------
|3.1 |  | CNF Inc. Certificate of Incorporation, as amended.
    (Exhibit 3.1 to CNFs Form 10-K for the year
    ended December 31, 2002*)
|   
|3.2 |  | CNF Inc. By-laws, as amended September 28, 1998.
    (Exhibit 3.2 to CNFs Form 10-K for the year
    ended December 31, 2002*)  



|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.1  |  | Certificate of Designations of the Series B Cumulative
    Convertible Preferred Stock. (Exhibit 4.1 as filed on
    Form SE dated May 25, 1989*)                                                                                                                                                                                                                                                                                                                                                                                                                      
|4.2  |  | Indenture between the Registrant and Bank One, Columbus, NA, as
    successor trustee, with respect to
    91/8% Notes Due
    1999, Medium-Term Notes, Series A and 7.35% Notes due
    2005. (Exhibit 4.1 as filed on Form SE dated
    March 20, 1990*)                                                                                                                                                                                                                                                                                                             
|    
|4.3  |  | Indenture between the Registrant and The First National Bank of
    Chicago Bank, trustee, with respect to debt securities.
    (Exhibit 4(d) as filed on Form S-3 dated June 27,
    1995*)                                                                                                                                                                                                                                                                                                                                                                           
|    
|4.4  |  | Indenture between the Registrant and Bank One, Columbus, NA,
    trustee, with respect to subordinated debt securities.
    (Exhibit 4(e) as filed on Form S-3 dated June 27,
    1995*)                                                                                                                                                                                                                                                                                                                                                                               
|    
|4.5  |  | Form of Security for 7.35% Notes due 2005 issued by
    Consolidated Freightways, Inc. (Exhibit 4.4 as filed on
    Form S-4 dated June 27, 1995*)                                                                                                                                                                                                                                                                                                                                                                                                                     
|    
|4.6  |  | Form of Indenture between CNF Transportation Inc. and Bank One
    Trust Company, National Association (Exhibit 4(d)(i)
    to CNFs Form  8-K dated March 3, 2000*)                                                                                                                                                                                                                                                                                                                                                                                                   
|    
|4.7  |  | Form of Security for
    87/8% Notes
    due 2010 issued by CNF Transportation Inc. (Exhibit 4(i) to
    CNFs Form 8-K dated March 3, 2000*)                                                                                                                                                                                                                                                                                                                                                                                                                          
|    
|4.8  |  | Amendment dated August 8, 2003 to 6.00% Senior CNF
    Plan Guaranteed Notes. (Exhibit 4.16 to CNFs
    Form 10-Q for the quarter ended June 30, 2003*)                                                                                                                                                                                                                                                                                                                                                                                                               
|    
|4.9  |  | $400 million Credit Agreement dated March 11, 2005
    among CNF and various financial institutions                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    
|4.10 |  | Subsidiary Guaranty Agreement dated as of March 11, 2005,
    made by Con-Way Transportation Services, Inc., Menlo Worldwide,
    LLC and Menlo Logistics Inc. in favor of the banks referred to
    in 4.9.                                                                                                                                                                                                                                                                                                                                                           
|     |  | Instruments defining the rights of security holders of long-term
    debt of CNF Inc., and its subsidiaries for which financial
    statements are required to be filed with this Form 10-K, of
    which the total amount of securities authorized under each such
    instrument is less than 10% of the total assets of CNF Inc. and
    its subsidiaries on a consolidated basis, have not been filed as
    exhibits to this Form 10-K. CNF agrees to furnish a copy of
    each applicable instrument to the Securities and Exchange
    Commission upon request.



|     |  |                                                                                                                                                                                     
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1 |  | 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**)
|    
|10.2 |  | Supplemental Retirement Plan dated January 1, 1990.
    (Exhibit 10.31 to CNFs Form 10-K for the year ended
    December 31, 1993*#)                                               
|    
|10.3 |  | Directors 24-Hour Accidental Death and Dismemberment Plan.
    (Exhibit 10.32 to CNFs Form 10-K for the year ended
    December 31, 1993*#)                                       
|    
|10.4 |  | Board of Directors Compensation Plan dated January 1,
    1994. (Exhibit 10.34 to CNFs Form 10-K for the year
    ended December 31, 1993*#)                                      
|    
|10.5 |  | Directors Business Travel Insurance Plan.
    (Exhibit 10.36 to CNFs Form 10-K for the year ended
    December 31, 1993*#)                                                        

78



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|      |  |                                                                                                                                                                                                                                         
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     
|10.6  |  | Deferred Compensation Plan for Executives 1998 Restatement.
    (Exhibit 10.20 to CNFs Form 10-K for the year ended
    December 31, 1997.*#)                                                                                          
|     
|10.7  |  | Amended and Restated 1993 Nonqualified Employee Benefit Plans
    Trust Agreement dated January 1, 1995. (Exhibit 10.38
    to CNFs Form 10-K for the year ended
    December 31, 1994.*#)                                             
|     
|10.8  |  | Employee Benefit Matters Agreement by and between Consolidated
    Freightways, Inc. and Consolidated Freightways Corporation dated
    December 2, 1996. (Exhibit 10.33 to CNFs form
    10-K for the year ended December 31, 1996.*#)
|     
|10.9  |  | Distribution Agreement between Consolidated Freightways, Inc.,
    and Consolidated Freightways Corporation dated November 25,
    1996. (Exhibit 10.34 to CNFs Form 10-K for the year
    ended December 31, 1996.*)                  
|     
|10.10 |  | Transition Services Agreement between CNF Service Company, Inc.
    and Consolidated Freightways Corporation dated December 2,
    1996. (Exhibit to CNFs Form 10-K for the year ended
    December 31, 1996.*)                        
|     
|10.11 |  | Tax Sharing Agreement between Consolidated Freightways, Inc.,
    and Consolidated Freightways Corporation dated December 2,
    1996. (Exhibit to CNFs Form 10-K for the year ended
    December 31, 1996.*)                          
|     
|10.12 |  | CNF Inc. 1997 Equity and Incentive Plan as amended as of
    January 31, 2000. (Exhibit A to CNFs Proxy
    Statement dated March 20, 2000.*#)                                                                                         
|     
|10.13 |  | CNF Inc. Deferred Compensation Plan for Directors 1998
    Restatement. (Exhibit 10.34 to CNFs Form 10-K for the
    year ended December 31, 1997.*#)                                                                                  
|10.14 |  | CNF Inc. Executive Severance Plan. (Exhibit 10.32 to
    CNFs Form 10-K for the year ended December 31,
    1998.*#)                                                                                                                   
|     
|10.15 |  | Value Management Plan dated June 28, 1999.
    (Exhibit 10.33 to CNFs Form 10-K for the year ended
    December 31, 1999.*#)                                                                                                           
|     
|10.16 |  | Amendment No. 1 dated June 28, 1999, to the Deferred
    Compensation Plan for Executives 1998 Restatement.
    (Exhibit 10.30 to CNFs Form 10-K for the year ended
    December 31, 2002.*#)                                          
|     
|10.17 |  | Amendment No. 2 dated August 21, 2000, to the Deferred
    Compensation Plan for Executives 1998 Restatement.
    (Exhibit 10.31 to CNFs Form 10-K for the year ended
    December 31, 2002.*#)                                        
|     
|10.18 |  | Amendment No. 3 dated January 1, 2001, to the Deferred
    Compensation Plan for Executives 1998 Restatement.
    (Exhibit 10.32 to CNFs Form 10-K for the year ended
    December 31, 2002.*#)                                        
|     
|10.19 |  | Amendment No. 4 dated May 14, 2001, to the Deferred
    Compensation Plan for Executives 1998 Restatement.
    (Exhibit 10.33 to CNFs Form 10-K for the year ended
    December 31, 2002.*#)                                           
|     
|10.20 |  | Amendment No. 5 dated December 4, 2001 to the Deferred
    Compensation Plan for Executives 1998 Restatement.
    (Exhibit 10.34 to CNFs Form 10-K for the year ended
    December 31, 2002.*#)                                        
|     
|10.21 |  | Amendment No. 1 dated April 30, 1999, to the Amended
    and Restated Retirement Plan for Directors of CNF Transportation
    Inc. (Exhibit 10.35 to CNFs Form 10-K for the year
    ended December 31, 2002.*#)                       
|     
|10.22 |  | Amendment No. 1 dated December 13, 2000, to the CNF
    Inc. Executive Severance Plan. (Exhibit 10.39 to CNFs
    Form 10-K for the year ended December 31, 2002.*#)                                                                   
|     
|10.23 |  | Amendment No. 2 dated April 30, 2000, to the CNF Inc.
    Executive Severance Plan. (Exhibit 10.40 to CNFs Form
    10-K for the year ended December 31, 2002.*#)                                                                      
|10.24 |  | Amendment No. 3 dated December 4, 2001, to the CNF
    Inc. Executive Severance Plan. (Exhibit 10.41 to CNFs
    Form 10-K for the year ended December 31, 2002.*#)                                                                    
|     
|10.25 |  | Amendment No. 1 dated August 21, 2000, to the Value
    Management Plan dated June 28, 1999. (Exhibit 10.32 to
    CNFs Form 10-K for the year ended December 31,
    2003.*#)                                                         
|     
|10.26 |  | Amendment No. 2 dated January 29, 2001, to the Value
    Management Plan dated June 28, 1999. (Exhibit 10.33 to
    CNFs Form 10-K for the year ended December 31,
    2003.*#)                                                        

79



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|      |  |                                                                                                                                                                                                                                                   
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     
|10.27 |  | Amendment No. 3 dated May 14, 2001, to the Value
    Management Plan dated June 28, 1999. (Exhibit 10.34 to
    CNFs Form 10-K for the year ended December 31,
    2003.*#)                                                                      
|     
|10.28 |  | Amendment No. 4 dated December 4, 2001, to the Value
    Management Plan dated June 28, 1999. (Exhibit 10.42 to
    CNFs Form 10-K for the year ended December 31,
    2002.*#)                                                                  
|     
|10.29 |  | Consulting Agreement between CNF Inc. and Gregory L. Quesnel
    dated February 18, 2004. (Exhibit 10.36 to CNFs
    Form 10-K for the year ended December 31, 2003.*#)                                                                          
|     
|10.30 |  | Amendment No. 1 to Amended and Restated Severance Agreement
    By and Between CNF Inc. and Gregory L. Quesnel dated
    January 1, 2003. (Exhibit 10.1 to CNFs Form 10-Q
    for the quarter ended March 31, 2004*#)                            
|     
|10.31 |  | Amendment No. 1 to Amended and Restated Severance Agreement
    By and Between CNF Inc. and Gregory L. Quesnel dated
    January 1, 2003. (Exhibit 10.2 to CNFs Form 10-Q
    for the quarter ended March 31, 2004*#)                            
|     
|10.32 |  | Amended and Restated Severance Agreement By and Between CNF Inc.
    and Sanchayan C. Ratnathicam dated December 4, 2001.
    (Exhibit 10.3 to CNFs Form 10-Q for the quarter ended
    March 31, 2004*#)                                        
|     
|10.33 |  | Amendment No. 1 to Amended and Restated Severance Agreement
    By and Between CNF Inc. and Sanchayan C. Ratnathicam dated
    January 1, 2003. (Exhibit 10.4 to CNFs Form 10-Q
    for the quarter ended March 31, 2004*#)                      
|     
|10.34 |  | Amended and Restated Severance Agreement By and Between CNF Inc.
    and Eberhard G.H. Schmoller dated December 4, 2001.
    (Exhibit 10.5 to CNFs Form 10-Q for the quarter ended
    March 31, 2004*#)                                         
|     
|10.35 |  | Amendment No. 1 to Amended and Restated Severance Agreement
    By and Between CNF Inc. and Eberhard G.H. Schmoller dated
    January 1, 2003. (Exhibit 10.6 to CNFs Form 10-Q
    for the quarter ended March 31, 2004* #)                      
|     
|10.36 |  | Amended and Restated Severance Agreement By and Between CNF Inc.
    and Gerald L. Detter dated July 31, 2000.
    (Exhibit 10.7 to CNFs Form 10-Q for the quarter ended
    March 31, 2004*#)                                                   
|     
|10.37 |  | Amendment No. 1 to Amended and Restated Severance Agreement
    By and Between CNF Inc. and Gerald L. Detter dated
    January 1, 2003. (Exhibit 10.8 to CNFs Form 10-Q
    for the quarter ended March 31, 2004*#)                              
|     
|10.38 |  | Severance Agreement By and Between Con-Way Transportation
    Services, Inc. and Gerald L. Detter dated July 31, 2000.
    (Exhibit 10.9 to CNFs Form 10-Q for the quarter ended
    March 31, 2004*#)                                           
|     
|10.39 |  | Amendment No. 1 to Amended and Restated Severance Agreement
    By and Between Con-Way Transportation Services, Inc. and Gerald
    L. Detter dated January 1, 2003. (Exhibit 10.10 to
    CNFs Form 10-Q for the quarter ended March 31, 2004*#)
|     
|10.40 |  | Amended and Restated Severance Agreement By and Between CNF Inc.
    and John H. Williford dated July 31, 2000.
    (Exhibit 10.11 to CNFs Form 10-Q for the quarter
    ended March 31, 2004*#)                                                 
|     
|10.41 |  | Amendment No. 1 to Amended and Restated Severance Agreement
    By and Between CNF Inc. and John H. Williford dated
    January 1, 2003. (Exhibit 10.12 to CNFs Form
    10-Q for the quarter ended March 31, 2004*#)                            
|     
|10.42 |  | Amendment No. 2 to Amended and Restated Severance Agreement
    By and Between CNF Inc. and John H. Williford dated
    January 1, 2003. (Exhibit 10.13 to CNFs Form
    10-Q for the quarter ended March 31, 2004*#)                            
|     
|10.43 |  | Severance Agreement By and Between Menlo Worldwide, LLC and John
    H. Williford dated August 25, 2003. (Exhibit 10.14 to
    CNFs Form 10-Q for the quarter ended March 31,
    2004*#)                                                        
|     
|10.44 |  | Amendment No. 1 to Severance Agreement By and Between Menlo
    Worldwide, LLC and John H. Williford dated January 22,
    2004. (Exhibit 10.15 to CNFs Form 10-Q for the
    quarter ended March 31, 2004*#)                                    
|     
|10.45 |  | Form of CNF Inc. 2001 Amended and Restated Executive Severance
    Agreement, with attached schedule. (Exhibit 10.16 to
    CNFs Form 10-Q for the quarter ended March 31, 2004*#)                                                               

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|      |  |                                                                                                                                                                                                                                             
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     
|10.46 |  | Form of CNF Inc. Executive Severance Agreement, with attached
    schedule. (Exhibit 10.17 to CNFs Form 10-Q for the
    quarter ended March 31, 2004*#)                                                                                   
|     
|10.47 |  | Form of Con-Way Transportation Services, Inc., Executive
    Severance Agreement, with attached schedule. (Exhibit 10.18
    to CNFs Form 10-Q for the quarter ended March 31,
    2004*#)                                                 
|     
|10.48 |  | Form of Menlo Worldwide Forwarding, Inc. (formerly Emery Air
    Freight Corporation) Executive Severance Agreement, with
    attached schedule. (Exhibit 10.19 to CNFs Form 10-Q
    for the quarter ended March 31, 2004*#)              
|     
|10.49 |  | Form of Menlo Logistics, Inc., Executive Severance Agreement,
    with attached schedule. (Exhibit 10.20 to CNFs Form
    10-Q for the quarter ended March 31, 2004*#)                                                                     
|     
|10.50 |  | Form of Menlo Worldwide, LLC Executive Severance Agreement, with
    attached schedule. (Exhibit 10.21 to CNFs Form 10-Q
    for the quarter ended March 31, 2004*#)                                                                       
|     
|10.51 |  | Con-Way Transportation Services, Inc. Executive Severance Plan.
    (Exhibit 10.22 to CNFs Form 10-Q for the quarter
    ended March 31, 2004*#)                                                                                           
|     
|10.52 |  | Menlo Worldwide Forwarding (formerly Emery Air Freight
    Corporation) Executive Severance Plan. (Exhibit 10.23 to
    CNFs Form 10-Q for the quarter ended March 31,
    2004*#)                                                         
|     
|10.53 |  | Menlo Logistics, Inc. Executive Severance Plan.
    (Exhibit 10.24 to CNFs Form 10-Q for the quarter
    ended March 31, 2004*#)                                                                                                           
|     
|10.54 |  | Menlo Worldwide, LLC Executive Severance Plan.
    (Exhibit 10.25 to CNFs Form 10-Q for the quarter
    ended March 31, 2004*#)                                                                                                            
|     
|10.55 |  | Menlo Worldwide Services, LLC Executive Severance Plan.
    (Exhibit 10.26 to CNFs Form 10-Q for the quarter
    ended March 31, 2004*#)                                                                                                   
|     
|10.56 |  | Menlo Worldwide Technologies, LLC Executive Severance Plan.
    (Exhibit 10.27 to CNFs Form 10-Q for the quarter
    ended March 31, 2004*#)                                                                                               
|     
|10.57 |  | CNF Transportation Inc. Executive Severance Plan for Eligible
    Executives of Vector SCM, LLC. (Exhibit 10.28 to CNFs
    Form 10-Q for the quarter ended March 31, 2004*#)                                                              
|     
|10.58 |  | Menlo Worldwide, LLC Executive Severance Plan for Eligible
    Executives of Vector SCM, LLC. (Exhibit 10.29 to CNFs
    Form 10-Q for the quarter ended March 31, 2004*#)                                                                 
|     
|10.59 |  | CNF Inc. Value Management Plan 2004 Amendment and Restatement.
    (Exhibit 10.30 to CNFs Form 10-Q for the quarter
    ended March 31, 2004*#)                                                                                            
|     
|10.60 |  | Stock Purchase Agreement between CNF Inc. and Menlo Worldwide,
    LLC and United Parcel Service dated October 5, 2004.
    (Exhibit 99.1 to CNFs Form 8-K dated October 6,
    2004*)                                                     
|     
|10.61 |  | Transition Services Agreement between CNF Inc and Menlo
    Worldwide, LLC and United Parcel Service date October 5,
    2004. (Exhibit 99.1 to CNFs Form 8-K dated
    October 6, 2004*)                                                  
|     
|10.62 |  | Consulting Agreement between CNF Inc. Gerald L. Detter dated
    December 6, 2004. (Exhibit 99.1 to CNFs Form 8-K
    dated December 8, 2004*)                                                                                             
|     
|10.63 |  | Deferred Compensation Plan for Non-Employee Directors dated
    January 1, 2005. (Exhibit 99.2 to CNFs Form 8-K
    dated December 8, 2004*#)                                                                                              
|     
|10.64 |  | Deferred Compensation Plan for Executives dated January 1,
    2005. (Exhibit 99.3 to CNFs Form 8-K dated
    December 8, 2004*#)                                                                                                          
|     
|10.65 |  | Supplemental Excess Retirement Plan dated January 1, 2005.
    (Exhibit 99.4 to CNFs Form 8-K dated December 8,
    2004*#)                                                                                                                
|     
|10.66 |  | Severance Agreement between CNF Inc. and Eberhard G.H. Schmoller
    dated December 14, 2004. (Exhibit 99.1 to CNFs
    Form 8-K dated December 14, 2004*)                                                                                 
|     
|10.67 |  | Amendment No. 1 dated December 17, 2004 to the Stock
    Purchase Agreement between CNF Inc. and Menlo Worldwide, LLC and
    United Parcel Service dated October 5, 2004.
    (Exhibit 99.1 to CNFs Form 8-K dated
    December 21, 2004*)

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##### Table of Contents



|      |  |                                                                                                                                
|----- |  | -------------------------------------------------------------------------------------------------------------------------------
|     
|10.68 |  | Severance Agreement between the Company and Douglas W. Stotlar.
    (Exhibit 99.1 to CNFs Form 8-K dated March 4,
    2005*#) 
|     
|10.69 |  | Severance Agreement between the Company and Kevin C. Schick.
    (Exhibit 99.2 to CNFs Form 8-K dated March 4,
    2005*#)    
|     
|10.70 |  | Severance Agreement between the Company and Jennifer W. Pileggi.
    (Exhibit 99.3 to CNFs Form 8-K dated March 4,
    2005*#)
|     
|10.71 |  | Severance Agreement between CTS and Douglas W. Sotlar.
    (Exhibit 99.4 to CNFs Form 8-K dated March 4,
    2005*#)          
|     
|10.72 |  | Form of Restricted Stock Award Agreement. (Exhibit 99.5 to
    CNFs Form 8-K dated March 4, 2005*#)                           
|     
|10.73 |  | Form of Stock Option Agreement. (Exhibit 99.6 to CNFs
    Form 8-K dated March 4, 2005*#)                                     
|     
|10.74 |  | Restricted Stock Reward Agreement between CNF Inc. and John H.
    Williford dated December 10, 2004.#                         
|     
|10.75 |  | Restricted Stock Reward Agreement between CNF Inc. and Douglas
    W. Stotlar dated December 17, 2004.#                        
|     
|10.76 |  | Stock Option Agreement between CNF Inc. and Douglas W. Stotlar
    dated December 17, 2004. #                                  
|     
|10.77 |  | CNF Inc. Summary of Incentive Compensation plans for 2005. #                                                                   













|     |  |                                                                                                                                                                                                                                                                                                                 
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|99.1 |  | CNF Inc. 2004 Notice of Annual Meeting and Proxy Statement filed
    on Form DEF 14A. (Only those portions referenced herein are
    incorporated in this Form 10-K. Other portions are not
    required and, therefore, are not filed as a part of
    this Form 10-K.*)                                     
|    
|99.2 |  | Note Agreement dated as of July 17, 1989, between the
    ESOP, Consolidated Freightways, Inc. and the
    Note Purchasers named therein. (Exhibit 28.1 as filed
    on Form SE dated July 21, 1989*)                                                                                                           
|    
|99.3 |  | Guarantee and Agreement dated as of July 17, 1989,
    delivered by Consolidated Freightways, Inc. (Exhibit 28.2
    as filed on Form SE dated July 21, 1989*)                                                                                                                                                  
|    
|99.4 |  | Form of Restructured Note Agreement between Consolidated
    Freightways, Inc., Thrift and Stock Ownership Trust as Issuer
    and various financial institutions as Purchasers named therein,
    dated as of November 3, 1992. (Exhibit 28.4 to
    CNFs Form 10-K for the year ended December 31,
    1992*)

Footnotes to Exhibit Index







|  |                                                                                                       
|- | ------------------------------------------------------------------------------------------------------
|* | Previously filed with the Securities and Exchange Commission and
    incorporated herein by reference.
| 
|# | Designates a contract or compensation plan for Management or
    Directors.                           

82