CNF Inc. 2005 Annual Report Letter to Shareholders Menlo is transitioning into a process-driven, shared resources model, emphasizing multi-use facilities, scalable, non-proprietary systems and a focus on customers organized by industry group. Today, over 50 percent of its facilities support multiple clients. This company has an arsenal of proven systems, excellent methodologies for designing and implementing customer solutions, and some 12 million square feet of warehouse space in North America and 20 countries to mobilize for its clients. Menlo is well positioned to grow as an agile organization that can respond rapidly to its customers’ changing requirements. I’m also encouraged with Vector SCM, our joint venture with General Motors, and the continuing value it is delivering. Dear Fellow Shareholders: Looking ahead Looking back on 2005, two themes characterized the year Change and culture. One we’ll continue to manage. The other for CNF and our shareholders. The first was change, or more we’ll continue to invest in, nurture and develop. I expect 2006 accurately, the successful management of change. CNF in will be the year in which our collaborative philosophy and our 2005 accomplished the broadest and deepest succession of culture of common values really takes hold. That starts and ends leadership this company has ever experienced. The second with our employees and the vital role they play by engaging our was—and continues to be—the importance of culture. We saw customers and delivering exemplary service performance. They that proven once again through the commitment and attitude of are our service product. I read a quote recently by a business our employees, who despite the changeover in our leadership executive that sums it up: “Culture eats strategy for breakfast.” ranks remained intently focused on our customers and delivering You can have great plans, but if you don’t have employee buy-in the best value proposition in the market. and commitment, you won’t be successful. That’s what culture is all about. When I took over the CEO role a year ago, one of my first objectives was to “flatten” the organization, reconnect our We will face some headwinds. Benefit costs are rising, coupled corporate functions with the business units, and remove barriers with continued contributions to our pension reserves. Mandated so that we could move toward a more streamlined, single expensing of stock options will have an effect, as will somewhat operating company focus. higher administrative and IT expense. Fuel costs continue to be an issue. Fuel has been inflationary for our customers; they are Both the Con-way and Menlo enterprises have embraced this aggressively negotiating these costs as part of their rates, so we strategy, and while we still have work to do, the progress has have to balance cost recovery with customer goodwill. been encouraging. Best practices are being identified and shared. We established and are working toward one set of strategic This industry still struggles with attracting competent, qualified objectives. We are aligning our cultures based on similar values drivers. We’ve been successful finding and keeping professional and philosophies. Collaboration with a new purpose and enthu- drivers in the LTL market. The truckload market will be more of a siasm is uncovering market opportunities to join Menlo and challenge. So far, our approach with Con-way Truckload has been Con-way in unique ways for the customer. working—its driver retention rate is the envy of the industry—but as we grow the company we’ll have to be diligent and creative at These two franchises concluded the year as leaders in their managing driver recruitment and retention. respective markets, and entered 2006 well positioned for sustained growth and momentum. Let me close with a few words about our brand. Over the past 20 years the Con-way name has emerged as an industry leader, Positioning for growth in an evolving world gaining wide acceptance as a respected and successful brand in We operate today in a competitive global economy driven by its own right. It has tremendous customer goodwill and equity, and consolidation on the one hand, and outsourcing trends on the portrays with more clarity and accuracy who we are today, and other. Supply chains are being extended while requiring ever where we are going in the future. more responsive and stringent levels of service. The Asia-Pacific The time has come to change. In this year’s proxy statement we region, particularly China, has become the world’s workshop. have a proposal to change our corporate name to Con-way Inc. Yet in North America, the transportation and logistics services Following shareholder approval, our intent is to launch a market has never been stronger. We have an enviable position, corporate-wide initiative to re-brand the organization with a new with a network, infrastructure and service product second to logo and graphic identity under Con-way as our master brand. none. The capital investment necessary for a new entrant to Your board of directors and management team encourage your compete at a Con-way level is staggering, preventing significant support of this proposal. new capacity from coming into the market. Those who have On a personal note, I want to thank our Chairman, Keith Kennedy, existing plant and infrastructure will have an advantage. Consoli- for his counsel, and our Board of Directors for their guidance dation in the LTL market also is having an impact. We do not and support in my first year as CEO. I also want to thank our believe this market has excess capacity and one outgrowth of employees for doing what they do best: staying focused on our that has been more disciplined pricing. We also are encouraged by customers, and remaining committed to our mission. We are about the opportunities in the truckload market, and the initial success to embark on an exciting new chapter in our history, but one of Con-way Truckload, launched in 2005. We’ll more than double that lives by the same principles of Integrity, Commitment and the size of this operation in 2006. Excellence that have made this a rewarding enterprise for our Our global contract logistics business continues to evolve as employees, customers and shareholders. well. While Menlo Worldwide had a good year winning a record Sincerely, number of new customers in 2005, it did so while successfully implementing fundamental changes to its business model. Menlo historically followed a “one customer, dedicated facility, custom project” model because that’s what its customers demanded. Douglas W. Stotlar Not anymore. Customers will no longer tolerate the risk—or the President and Chief Executive Officer cost—of one-off, single-design, proprietary solutions. March 13, 2006 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ¥ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2005 or n 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. (Exact name of registrant as specified in its charter) Delaware 94-1444798 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2855 Campus Drive, Suite 300, San Mateo, CA 94403 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (650) 378-5200 Securities Registered Pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Common Stock ($.625 par value) New York Stock Exchange Securities Registered Pursuant to Section 12(g) of the Act: 7 8 ⁄8% Notes Due 2010 (Title of class) 6.70% Senior Debentures due 2034 (Title of class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes¥ No n Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes n No ¥ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¥ No n Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. n Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. Large accelerated filer ¥ Accelerated filer n Non-accelerated filer n Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes n No ¥ Aggregate market value of voting stock held by persons other than Directors, Officers and those shareholders holding more than 5% of the outstanding voting stock, based upon the closing price per share on June 30, 2005: $1,691,279,820 Number of shares of Common Stock outstanding as of January 31, 2006: 52,215,570 DOCUMENTS INCORPORATED BY REFERENCE Part III Proxy Statement for CNF’s Annual Meeting of Shareholders to be held on April 18, 2006 (only those portions referenced specifically herein are incorporated in this Form 10-K).