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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-Q


_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2003

OR

___TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from N/A to N/A


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

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months and (2) has been subject to
such filing requirements for the past 90 days.
Yes _X_ No __



Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).
Yes _X_ No __



Number of shares of Common Stock, $.625 par value,
outstanding as of April 30, 2003: 49,596,218



CNF INC.
FORM 10-Q
Quarter Ended March 31, 2003

_______________________________________________________________________
_______________________________________________________________________


INDEX



PART I. FINANCIAL INFORMATION Page

Item 1. Financial Statements

Consolidated Balance Sheets -
March 31, 2003 and December 31, 2002 3

Statements of Consolidated Income -
Three Months Ended March 31, 2003 and 2002 5

Statements of Consolidated Cash Flows -
Three Months Ended March 31, 2003 and 2002 6

Notes to Consolidated Financial Statements 7

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 16

Item 4. Controls and Procedures 28


PART II. OTHER INFORMATION

Item 1. Legal Proceedings 29

Item 4. Submission of Matters to a Vote of Security Holders 30

Item 6. Exhibits and Reports on Form 8-K 31

Signatures 32

Certification of Officers pursuant to Section 302
of Sarbanes-Oxley Act of 2002 33


PAGE 3


PART I. FINANCIAL INFORMATION



ITEM 1. Financial Statements


CNF INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)


March 31, December 31,
2003 2002
------------ ------------
ASSETS

Current Assets
Cash and cash equivalents $ 237,897 $ 270,404
Trade accounts receivable, net 717,124 716,037
Other accounts receivable 112,818 129,535
Operating supplies, at lower of average
cost or market 20,660 19,612
Prepaid expenses 56,593 43,885
Deferred income taxes 86,953 89,015
------------ ------------
Total Current Assets 1,232,045 1,268,488
------------ ------------


Property, Plant and Equipment, at Cost
Land 162,767 162,767
Buildings and leasehold improvements 772,453 769,536
Revenue equipment 643,306 609,631
Other equipment 381,304 377,110
------------ ------------
1,959,830 1,919,044
Accumulated depreciation and amortization (933,957) (903,690)
------------ ------------
1,025,873 1,015,354
------------ ------------
Other Assets
Deferred charges and other assets 126,851 133,411
Capitalized software, net 74,519 75,674
Goodwill, net 240,614 240,593
Deferred income taxes 1,791 6,241
------------ ------------
443,775 455,919
------------ ------------

Total Assets $ 2,701,693 $ 2,739,761
============ ============



The accompanying notes are an integral part of these statements.


PAGE 4


CNF INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except per share amounts)


March 31, December 31,
2003 2002
LIABILITIES AND SHAREHOLDERS' EQUITY ------------ ------------

Current Liabilities
Accounts payable $ 347,707 $ 356,605
Accrued liabilities (Note 3) 319,785 334,758
Accrued claims costs 137,109 141,632
Accrued aircraft leases and return provision
(Note 4) 12,529 27,770
Current maturities of long-term debt and
capital leases 14,210 12,289
------------ ------------
Total Current Liabilities 831,340 873,054

Long-Term Liabilities
Long-term debt and guarantees 434,245 447,234
Long-term obligations under capital leases 110,339 110,376
Accrued claims costs 124,876 128,447
Employee benefits 304,093 294,541
Other liabilities and deferred credits 38,914 43,111
------------ ------------
Total Liabilities 1,843,807 1,896,763
------------ ------------
Commitments and Contingencies (Note 8)

Company-Obligated Mandatorily Redeemable
Preferred Securities of Subsidiary Trust
Holding Solely Convertible Debentures of
the Company (Note 6) 125,000 125,000

Shareholders' Equity

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 778,800 and 784,007
shares, respectively 8 8
Additional paid-in capital, preferred stock 118,448 119,239
Deferred compensation, Thrift and Stock Plan (63,732) (65,723)
------------ ------------
Total Preferred Shareholders' Equity 54,724 53,524
------------ ------------
Common stock, $.625 par value; authorized
100,000,000 shares; issued 56,112,785 and
56,046,790 shares, respectively 35,070 35,029
Additional paid-in capital, common stock 346,790 345,054
Retained earnings 517,794 506,816
Deferred compensation, restricted stock (3,530) (3,710)
Cost of repurchased common stock
(6,537,843 and 6,563,868 shares, respectively) (161,199) (161,841)
------------ ------------
734,925 721,348
Accumulated Other Comprehensive Loss (Note 5) (56,763) (56,874)
------------ ------------
Total Common Shareholders' Equity 678,162 664,474
------------ ------------
Total Shareholders' Equity 732,886 717,998
------------ ------------
Total Liabilities and Shareholders' Equity $ 2,701,693 $ 2,739,761
============ ============


The accompanying notes are an integral part of these statements.


PAGE 5


CNF INC.
STATEMENTS OF CONSOLIDATED INCOME
(Dollars in thousands except per share amounts)


Three Months Ended
March 31,
---------------------------
2003 2002
------------ ------------
REVENUES $ 1,206,241 $ 1,067,074

Costs and Expenses
Operating expenses 1,013,671 881,090
General and administrative expenses 118,290 109,776
Depreciation 33,232 35,844
------------ ------------
1,165,193 1,026,710
------------ ------------
OPERATING INCOME 41,048 40,364
------------ ------------

Other Income (Expense)
Investment income 586 1,608
Interest expense (Note 7) (7,661) (5,885)
Dividend requirement on preferred
securities of subsidiary trust (Note 6) (1,563) (1,563)
Miscellaneous, net (2,975) (1,302)
------------ ------------
(11,613) (7,142)

------------ ------------
Income before Taxes 29,435 33,222
Income Tax Provision 11,480 12,956
------------ ------------

Net Income 17,955 20,266
Preferred Stock Dividends 2,026 2,005
------------ ------------
NET INCOME AVAILABLE TO COMMON
SHAREHOLDERS $ 15,929 $ 18,261
============ ============

Weighted-Average Common Shares Outstanding (Note 1)
Basic 49,396,071 48,928,532
Diluted 53,652,665 56,482,649

Earnings per Common Share (Note 1)
Basic $ 0.32 $ 0.37
============ ============
Diluted $ 0.30 $ 0.35
============ ============


The accompanying notes are an integral part of these statements.



PAGE 6

CNF INC.
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in thousands)

Three Months Ended
March 31,
--------------------------
2003 2002
----------- -----------

Cash and Cash Equivalents, Beginning of Period $ 270,404 $ 400,763

Operating Activities
Net income 17,955 20,266
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization, net of accretion 37,434 40,492
Increase in deferred income taxes 6,453 6,512
Amortization of deferred compensation 2,471 1,899
Provision for uncollectible accounts 2,835 3,521
Equity in earnings of Vector (2,976) (1,309)
Loss (Gain) on sales of property and equipment, net 873 (14,078)
Loss from equity ventures 1,370 561
Changes in assets and liabilities:
Receivables 16,613 11,830
Prepaid expenses (12,708) (16,062)
Accounts payable (6,307) 10,541
Accrued liabilities 38,787 22,612
Accrued incentive compensation (50,694) 8,742
Accrued claims costs (8,094) 684
Income taxes - 2,763
Employee benefits 7,352 3,109
Accrued aircraft leases and return provision (23,656) (46,052)
Deferred charges and credits 6,467 1,297
Other (635) (1,966)
----------- -----------
Net Cash Provided by Operating Activities 33,540 55,362
----------- -----------

Investing Activities
Capital expenditures (44,866) (24,142)
Software expenditures (3,797) (4,287)
Proceeds from sales of property and equipment, net 458 5,396
----------- -----------
Net Cash Used in Investing Activities (48,205) (23,033)
----------- -----------

Financing Activities
Repayments of long-term debt, guarantees and
capital leases (10,024) (14,398)
Proceeds from exercise of stock options 1,327 1,532
Payments of common dividends (4,951) (4,898)
Payments of preferred dividends (5,124) (5,274)
----------- -----------
Net Cash Used in Financing Activities (18,772) (23,038)
----------- -----------

Net Cash Provided by (Used in) Continuing Operations (33,437) 9,291
----------- -----------
Net Cash Provided by (Used in) Discontinued
Operations 930 (2,432)
----------- -----------
Increase (Decrease) in Cash and Cash Equivalents (32,507) 6,859
----------- -----------
Cash and Cash Equivalents, End of Period $ 237,897 $ 407,622
=========== ===========


The accompanying notes are an integral part of these statements.



PAGE 7

CNF INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. Principal Accounting Policies

Basis of Presentation

Pursuant to the rules and regulations of the Securities and Exchange
Commission, the accompanying consolidated financial statements of CNF
Inc. and its wholly owned subsidiaries ("CNF") have been prepared by
CNF, without audit by independent public accountants. In the opinion of
management, the consolidated financial statements include all normal
recurring adjustments necessary to present fairly the information
required to be set forth therein. Certain information and note
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted from these statements pursuant to such rules and
regulations and, accordingly, should be read in conjunction with the
consolidated financial statements included in CNF's 2002 Annual Report
on Form 10-K.

Earnings per Share

Basic earnings per common share ("EPS") is computed by dividing
reported net income available to common shareholders by the weighted-
average common shares outstanding. The calculation of diluted EPS is
calculated as follows:


Three Months Ended
(Dollars in thousands except per share data) March 31,
--------------------------
2003 2002
------------ ------------
Earnings:
Net income available to common
shareholders $ 15,929 $ 18,261
Add-backs:
Dividends on preferred stock, net of
replacement funding 324 283
Dividends on preferred securities of
subsidiary trust, net of tax - 954
------------ ------------
$ 16,253 $ 19,498
============ ============
Shares:
Weighted-average common shares
outstanding 49,396,071 48,928,532
Stock options 487,615 674,991
Series B preferred stock 3,768,979 3,754,126
Preferred securities of subsidiary trust - 3,125,000
------------ ------------
53,652,665 56,482,649
============ ============

Diluted earnings per share $ 0.30 $ 0.35
============ ============

For the three months ended March 31, 2003, the preferred securities of
subsidiary trust were anti-dilutive. As a result, the assumed shares
and related add-back to net income available to common shareholders
under the if-converted method have been excluded from the calculation
of diluted EPS. If the securities had been dilutive, the assumed
shares from the preferred securities of subsidiary trust under the if-
converted method would have been 3,125,000 shares for the three months
ended March 31, 2003.

Stock-Based Compensation

Officers and non-employee directors have been granted options under
CNF's stock option plans to purchase common stock of CNF at prices
equal to the market value of the stock on the date of grant. CNF
accounts for stock-based compensation utilizing the intrinsic value
method in accordance with the provisions of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees."
Accordingly, no compensation expense is recognized for fixed option
plans because the exercise prices of employee stock options equal or
exceed the market prices of the underlying stock on the dates of grant.

PAGE 8

The following table sets forth the effect on net income and earnings
per share if CNF had applied the fair-value based method and
recognition provisions of SFAS 123, " Accounting for Stock-Based
Compensation," to stock-based compensation:

(Dollars in thousands, except per share Three months ended
data) March 31,
--------------------------
2003 2002
----------- ------------
Net income available to common
shareholders, as reported $ 15,929 $ 18,261
Additional compensation cost, net of
tax, that would have been included in
net income if the fair value method
had been applied (421) (294)
----------- ------------
Pro forma net income available to
common shareholders as if the fair
value method had been applied $ 15,508 $ 17,967
=========== ============

Earnings per share:
Basic:
As reported $ 0.32 $ 0.37
=========== ============
Pro Forma $ 0.31 $ 0.37
=========== ============
Diluted:
As reported $ 0.30 $ 0.35
=========== ============
Pro Forma $ 0.30 $ 0.34
=========== ============

These pro forma effects of applying SFAS 123 may not be indicative of
future amounts.


New Accounting Standards

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others" ("FIN 45"). During the
quarter ended December 31, 2002, CNF adopted the disclosure provisions
of FIN 45, which require increased disclosure of guarantees, including
those for which likelihood of payment is remote. FIN 45 also requires
that, upon issuance of a guarantee, the guarantor must recognize a
liability for the fair value of the obligation it assumes under that
guarantee. The initial recognition and measurement provisions of FIN
45 are to be applied on a prospective basis to guarantees issued or
modified after December 31, 2002. CNF adopted FIN 45 with no material
impact.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities: an Interpretation of ARB No. 51" ("FIN
46"). FIN 46 addresses consolidation by business enterprises of
entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk
for the entity to finance its activities without additional
subordinated financial support from other parties. Variable interest
entities are required to be consolidated by their primary beneficiaries
if they do not effectively disperse risks among parties involved. The
primary beneficiary of a variable interest entity is the party that
absorbs a majority of the entity's expected losses or receives a
majority of its expected residual returns. The consolidation
requirements of FIN 46 apply immediately to variable interest entities
created or modified after January 31, 2003 and apply to existing
entities in the first fiscal year or interim period beginning after
June 15, 2003. Certain new disclosure requirements apply to all
financial statements issued after January 31, 2003. CNF has adopted
the currently applicable sections of FIN 46 with no material impact.

Reclassification

Certain amounts in the prior-period financial statements have been
reclassified to conform to the current-period presentation.

PAGE 9


2. Reporting Segments

Consistent with SFAS 131, "Disclosures about Segments of an Enterprise
and Related Information," CNF discloses segment information in the
manner in which the components are organized for making operating
decisions, assessing performance and allocating resources. CNF's
principal businesses consist of Con-Way Transportation Services ("Con-
Way") and Menlo Worldwide. For financial reporting purposes, CNF is
divided into five reporting segments. The operating results of Con-Way
are reported as one reporting segment while Menlo Worldwide is divided
into three reporting segments: Menlo Worldwide Forwarding, Menlo
Worldwide Logistics ("Logistics"), and Menlo Worldwide Other. Also,
certain corporate activities and the results of Road Systems, a trailer
manufacturer, are reported in the CNF Other reporting segment.

In an effort to unite services offered by the Menlo Worldwide group of
businesses under a single brand identity, Menlo Worldwide announced in
February 2003 a plan to change the name of its forwarding segment from
Emery Forwarding to Menlo Worldwide Forwarding ("Forwarding"). The
Forwarding segment consists of the combined operating results of Menlo
Worldwide Forwarding, Inc. and its subsidiaries (formerly Emery Air
Freight Corporation, Inc), Menlo Worldwide Expedite!, Inc. and a
portion of the operations of Emery Worldwide Airlines, Inc. ("EWA"),
which ceased air carrier operations in December 2001. In March 2003,
Emery Air Freight Corporation, Inc. changed its name to Menlo Worldwide
Forwarding, Inc. ("MWF").

PAGE 10

Financial Data

Intersegment revenue and related operating income have been eliminated
to reconcile to consolidated revenue and operating income. Management
evaluates segment performance primarily based on revenue and operating
income; therefore, other items included in pretax income, consisting
primarily of interest income or expense, are not reported in segment
results. Corporate expenses are generally allocated based on
measurable services provided to each segment or, for general corporate
expenses, based on segment revenue and capital.

(Dollars in thousands) Three months ended
March 31,
--------------------------
2003 2002
------------ ------------
Revenues from External Customers
Con-Way Transportation Services $ 519,108 $ 454,731
Menlo Worldwide
Forwarding 445,622 394,761
Logistics 241,502 216,509
------------ ------------
687,124 611,270
CNF Other 9 1,073
------------ ------------
$ 1,206,241 $ 1,067,074
============ ============

Intersegment Revenue Eliminations by
Segment
Con-Way Transportation Services $ 110 $ 68
Menlo Worldwide
Forwarding 72 35
Logistics 1,675 3,447
------------ ------------
1,747 3,482
CNF Other 5,141 2,345
------------ ------------
$ 6,998 $ 5,895
============ ============
Revenues before Intersegment
Eliminations
Con-Way Transportation Services $ 519,218 $ 454,799
Menlo Worldwide
Forwarding 445,694 394,796
Logistics 243,177 219,956
------------ ------------
688,871 614,752
CNF Other 5,150 3,418
Intersegment Revenue Eliminations (6,998) (5,895)
------------ ------------
$ 1,206,241 $ 1,067,074
============ ============

Operating Income (Loss)
Con-Way Transportation Services $ 37,192 $ 33,721
Menlo Worldwide
Forwarding (5,431) (5,713)
Logistics 6,036 7,753
Other 2,976 1,309
------------ ------------
3,581 3,349
CNF Other 275 3,294
------------ ------------
$ 41,048 $ 40,364
============ ============

PAGE 11


Special Items

CNF's results of operations included various items that affected the
period-to-period comparability of the reported operating income (loss)
of its reporting segments that CNF has identified as "special" items in
the periods presented. Items were identified as such by CNF's
management based in part on their materiality to the relevant reporting
segment.

(Dollars in thousands) Three months ended
March 31,
--------------------------
2003 2002
------------ ------------
Con-Way Transportation Services -
Net gain from the sale of a property $ - $ 8,675
Menlo Worldwide -
Forwarding -
Net gains from payments under the
Air Transportation Safety and
System Stabilization Act 7,230 9,895
Logistics -
Net gain from a contract termination - 1,850
CNF Other -
Net gain from the sale of a property - 2,367


Terrorist Attacks

In response to the September 11, 2001 terrorist attacks, the U.S.
Congress passed the Air Transportation Safety and System Stabilization
Act (the "Act"), a $15 billion emergency economic assistance package
intended to mitigate financial losses in the air carrier industry. The
legislation provides for $5 billion in direct loss reimbursement and
$10 billion in federal loan guarantees and credits, expands war risk
insurance coverage for air carriers, and provides some government
assistance for short-term increases in insurance premiums. In March
2002, Forwarding received an $11.9 million payment under the Act,
resulting in the recognition of a $9.9 million first-quarter net gain
in 2002. In March 2003, Forwarding received a final payment of $7.5
million, resulting in a $7.2 million first-quarter net gain in 2003.


3. Discontinued Operations

Priority Mail Contract

As a result of the termination of the Priority Mail contract described
below, the results of operations, and cash flows of the Priority Mail
operations have been segregated and classified as discontinued
operations. On November 3, 2000, EWA and the U.S. Postal Service
("USPS") announced an agreement (the "Termination Agreement") to
terminate their contract for the transportation and sortation of
Priority Mail (the "Priority Mail contract"). As described below, all
claims relating to amounts owed to EWA under the Priority Mail contract
were fully settled in connection with payments from the USPS to EWA in
2002 and 2001.

Under the terms of the Termination Agreement, the USPS agreed to
reimburse EWA for Priority Mail contract termination costs. On January
7, 2001, the USPS paid EWA $60.0 million toward the termination costs
and on July 3, 2002, the USPS paid EWA $6.0 million to fully settle
EWA's Priority Mail contract termination costs, which resulted in a
2002 third-quarter gain from discontinuance of $2.9 million, net of
$1.8 million of income taxes.

On September 26, 2001, EWA entered into an agreement with the USPS to
settle claims relating to the underpayment of amounts owed to EWA under
the Priority Mail contract with the USPS (the "Settlement Agreement").
Under the Settlement Agreement, EWA received a $235.0 million payment
from the USPS on September 28, 2001 to settle all non-termination
claims under the Priority Mail contract as well as a $70.0 million
provisional payment for termination costs related to the separate
Express Mail contract with the USPS. These claims were to recover
costs of operating under the contract as well as profit and interest
thereon. The Priority Mail Termination Agreement described above was
unaffected by the Settlement Agreement. As a result of the payment
under the Settlement Agreement, unbilled revenue under the contract was
fully recovered and EWA in the third quarter of 2001 recognized a gain
from discontinuance of $39.0 million, net of $24.9 million of income
taxes.

PAGE 12

Net current liabilities of the discontinued Priority Mail operations of
$4.1 million and $3.2 million at March 31, 2003 and December 31, 2002,
respectively, were included in Accrued Liabilities in the Consolidated
Balance Sheets.

Spin-Off of CFC

On December 2, 1996, CNF completed the spin-off of Consolidated
Freightways Corporation ("CFC") to CNF's shareholders. CNF recognized
2002 third-quarter and fourth-quarter losses from discontinuance of
$13.0 million (net of $8.3 million of income taxes) and $2.3 million
(net of $1.4 million of income taxes), respectively, in connection with
the bankruptcy of CFC in September 2002. For further detailed
discussion of this matter, see Note 8, "Commitments and Contingencies,"
and Item 2, "Management's Discussion and Analysis - Liquidity and
Capital Resources - Discontinued Operations - Spin-Off of CFC."


4. Restructuring Plan

In June 2001, Forwarding began an operational restructuring to align it
with management's estimates of future business prospects for domestic
heavy air freight and address changes in market conditions, which
deteriorated due primarily to a slowing domestic economy and loss of
EWA's contracts with the USPS to transport Express Mail and Priority
Mail. The $340.5 million second-quarter restructuring charge in 2001
consisted primarily of non-cash impairment charges of $278.0 million
and $62.5 million of estimated future cash expenditures related
primarily to the return to lessors of certain aircraft leased to EWA.
Based on issues identified during inspections conducted by the Federal
Aviation Administration ("FAA"), on August 13, 2001, EWA was required
to suspend its air carrier operations as part of an interim settlement
agreement with the FAA. As a result, EWA furloughed approximately 400
pilots and crewmembers and Forwarding made arrangements to continue its
service to customers by utilizing aircraft operated by several other
air carriers. Primarily in response to the FAA action and a worsening
global economic downturn, Forwarding re-evaluated its restructuring
plan. On December 5, 2001, CNF announced that Forwarding (formerly
known as "Emery" or "Emery Forwarding") in 2002 would become part of
CNF's new Menlo Worldwide group of supply chain services providers and
in North America would utilize aircraft operated by other air carriers
instead of EWA operating its own fleet of aircraft, and that EWA would
permanently cease air carrier operations. In connection with the
revised restructuring plan, in the fourth quarter of 2001 Forwarding
recognized additional restructuring charges of $311.7 million,
including $305.6 million for the planned disposal of leased aircraft,
cessation of EWA's remaining operations, and other costs, and $6.1
million for employee separation costs for 157 of Forwarding's non-pilot
employees.

In connection with CNF's announcement of the cessation of EWA's air
carrier operations on December 5, 2001, EWA terminated the employment
of all of its pilots and crewmembers, bringing the total number of
terminated employees in 2001 to 800. Those pilots and crewmembers are
represented by the Air Line Pilots Association ("ALPA") union under a
collective bargaining agreement. Subsequently, ALPA filed a grievance
on behalf of the pilots and crewmembers protesting the cessation of
EWA's air carrier operations and Forwarding's use of other air
carriers. Some aspects of the ALPA matters may be subject to binding
arbitration. Based on CNF's current evaluation, management believes
that it has addressed its estimated exposure related to the ALPA
matters. However, there can be no assurance in this regard as CNF
cannot predict with certainty the ultimate outcome of these matters.

Following the fourth-quarter restructuring charge in 2001, Forwarding's
cash flows have reflected the cost of having other air carriers provide
service to Forwarding's North American customers as well as lease
payments and other costs associated with Forwarding's restructuring
plan; however, Forwarding's operating expenses have reflected the cost
of aircraft operated by other carriers but have not included scheduled
rental payments and return costs or other restructuring-related
payments, as these expenses were accrued in connection with the
restructuring charges.

Forwarding's restructuring reserves for aircraft and other costs
declined to $43.0 million at March 31, 2003 from $67.7 million at
December 31, 2002 due primarily to payments for costs of terminating
aircraft leases and returning aircraft to lessors. In April 2003,
Forwarding paid $7.6 million in connection with the return of the last
aircraft of the 37-aircraft fleet that was grounded in connection with
Forwarding's restructuring plan. Excluding accruals related to the
aircraft returned in April 2003, restructuring reserves at March 31,
2003 consisted primarily of CNF's estimated exposure related to labor
matters in arbitration, as described above, as well as other estimated
remaining restructuring-related obligations.

PAGE 13

The restructuring charges recognized during 2001 reflect CNF's estimate
of the costs of terminating EWA's air carrier operations and
restructuring Forwarding's business and related matters. CNF believes
that the estimate is adequate to cover these costs based on information
currently available and assumptions management believes are reasonable
under the circumstances. However, there can be no assurance that actual
costs will not differ from this estimate, and that difference would be
recognized as additional expense or income in the period when and if
that determination can be made.


5. Comprehensive Income

Comprehensive income, which is a measure of all changes in equity
except those resulting from investments by owners and distributions to
owners, was as follows:


(Dollars in thousands) Three Months Ended
March 31,
--------------------------
2003 2002
------------ ------------

Net income $ 17,955 $ 20,266

Other comprehensive income (loss):
Change in fair value of cash flow
hedges (Note 7) 93 1,179
Foreign currency translation
adjustment 18 (1,282)
------------ ------------
111 (103)
------------ ------------
Comprehensive income $ 18,066 $ 20,163
============ ============


The following is a summary of the components of Accumulated Other
Comprehensive Loss:

March 31, December 31,
(Dollars in thousands) 2003 2002
------------ ------------

Accumulated change in fair value of
cash flow hedges (Note 7) $ (301) $ (394)
Accumulated foreign currency
translation adjustments (25,830) (25,848)
Minimum pension liability adjustment (30,632) (30,632)
------------ ------------
Accumulated other comprehensive loss $ (56,763) $ (56,874)
============ ============



6. Preferred Securities of Subsidiary Trust

On June 11, 1997, CNF Trust I (the "Trust"), a Delaware business trust
wholly owned by CNF, issued 2,500,000 of its $2.50 Term Convertible
Securities, Series A ("TECONS") to the public for gross proceeds of
$125 million. The combined proceeds from the issuance of the TECONS and
the issuance to CNF of the common securities of the Trust were invested
by the Trust in $128.9 million aggregate principal amount of 5%
convertible subordinated debentures due June 1, 2012 (the "Debentures")
issued by CNF. The Debentures are the sole assets of the Trust.

Holders of the TECONS are entitled to receive cumulative cash
distributions at an annual rate of $2.50 per TECONS (equivalent to a
rate of 5% per annum of the stated liquidation amount of $50 per
TECONS). CNF has guaranteed, on a subordinated basis, distributions
and other payments due on the TECONS, to the extent the Trust has funds
available therefore and subject to certain other limitations (the
"Guarantee"). The Guarantee, when taken together with the obligations
of CNF under the Debentures, the Indenture pursuant to which the
Debentures were issued, and the Amended and Restated Declaration of
Trust of the Trust, including its obligations to pay costs, fees,
expenses, debts and other obligations of the Trust (other than with
respect to the TECONS and the common securities of the Trust), provide
a full and unconditional guarantee of amounts due on the TECONS.

PAGE 14

The Debentures are redeemable for cash, at the option of CNF, in whole
or in part, on or after June 1, 2000, at a price equal to 103.125% of
the principal amount, declining annually to par if redeemed on or after
June 1, 2005, plus accrued and unpaid interest. In certain
circumstances relating to federal income tax matters, the Debentures
may be redeemed by CNF at 100% of the principal plus accrued and unpaid
interest. Upon any redemption of the Debentures, a like aggregate
liquidation amount of TECONS will be redeemed. The TECONS do not have a
stated maturity date, although they are subject to mandatory redemption
upon maturity of the Debentures on June 1, 2012, or upon earlier
redemption.

Each TECONS is convertible at any time prior to the close of business
on June 1, 2012, at the option of the holder into shares of CNF's
common stock at a conversion rate of 1.25 shares of CNF's common stock
for each TECONS, subject to adjustment in certain circumstances.

7. Derivative Instruments and Hedging Activities

Effective January 1, 2001, CNF adopted SFAS 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended by SFAS 137
and SFAS 138. SFAS 133 establishes accounting and reporting standards
requiring that every derivative instrument, as defined, be recorded on
the balance sheet as either an asset or liability measured at fair
value and that changes in fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Qualifying
hedges allow a derivative's gain or loss to offset related results on
the hedged item in the income statement or be deferred in Other
Comprehensive Income (Loss) until the hedged item is recognized in
earnings.

CNF is exposed to a variety of market risks, including the effects of
interest rates, commodity prices, foreign currency exchange rates and
credit risk. CNF enters into derivative financial instruments only in
circumstances that warrant the hedge of an underlying asset, liability
or future cash flow against exposure to the related risk.
Additionally, the designated hedges should have high correlation to the
underlying exposure such that fluctuations in the value of the
derivatives offset reciprocal changes in the underlying exposure.

CNF formally documents its hedge relationships, including identifying
the hedge instruments and hedged items, as well as its risk management
objectives and strategies for entering into the hedge transaction. At
hedge inception and at least quarterly thereafter, CNF assesses whether
the derivatives are effective in offsetting changes in either the cash
flows or fair value of the hedged item. If a derivative ceases to be a
highly effective hedge, CNF will discontinue hedge accounting, and any
gains or losses on the derivative instrument would be recognized in
earnings during the period it no longer qualifies for hedge accounting.

For derivatives designated as cash flow hedges, changes in the
derivative's fair value are recognized in Other Comprehensive Income
(Loss) until the hedged item is recognized in earnings. Any change in
fair value resulting from ineffectiveness is recognized immediately in
earnings. For derivatives designated as fair value hedges, changes in
the derivative's fair value are recognized in earnings and offset by
changes in the fair value of the hedged item, which are recognized in
earnings to the extent that the derivative is effective.

In accordance with the transition provisions of SFAS 133, in the first
quarter of 2001 CNF recorded in Other Assets a transition adjustment of
$20.6 million to recognize the estimated fair value of interest rate
swap derivatives, a $4.9 million ($3.0 million after tax) transition
adjustment in Accumulated Other Comprehensive Income (Loss) to
recognize the estimated fair value of interest rate swap derivatives
designated as cash flow hedges, and a $15.7 million transition
adjustment in Long-Term Debt to recognize the estimated effect of
interest rate changes on the fair value of fixed-rate debt, which was
hedged with interest rate swap derivatives designated as fair value
hedges.

At March 31, 2003, CNF held three interest rate swap derivatives that
were initially entered into as cash flow hedges to mitigate the effects
of interest rate volatility on floating-rate operating lease payments.
One of the three outstanding interest rate swap derivatives qualified
for hedge accounting under SFAS 133. At March 31, 2003, the fair value
of this interest rate swap designated as a cash flow hedge was reported
as a liability of $0.5 million ($0.3 million after tax). In connection
with the restructuring charges described above, EWA made payments in
the fourth quarter of 2002 to settle its obligation to pay certain
future floating-rate aircraft lease payments previously hedged with two
of CNF's interest rate swap derivatives. The estimated fair value of
these interest rate swaps at December 31, 2002 was reported as a $3.9
million liability in Forwarding's restructuring reserves. Following
repayment of EWA's leases, these interest rate swap derivatives did not
qualify for hedge accounting under SFAS 133 and were therefore
freestanding derivatives. As freestanding derivatives, the $0.1
million increase in the estimated fair value of these interest rate
swaps in the first quarter of 2003 was recognized as non-operating
income.

PAGE 15

Prior to their termination in December 2002, CNF had designated four
interest rate swap derivatives as fair value hedges to mitigate the
effects of interest rate volatility on the fair value of fixed-rate
long-term debt. Immediately prior to CNF receiving cash payments in
settlement of the interest rate swaps, the $39.8 million estimated fair
value of these derivative instruments was reported in Other Assets in
CNF's Consolidated Balance Sheets with an offsetting fair-value
adjustment to the carrying amount of the hedged fixed-rate long-term
debt. Consistent with SFAS 133, the $39.8 million cumulative
adjustment of the carrying amount of long-term debt will be accreted to
future earnings at the effective interest rate until the debt is
extinguished, at which time any unamortized fair-value adjustment would
be fully recognized in earnings. Absent the terminated fair value
hedges, the long-term debt will cease to be adjusted for fluctuations
in fair value attributable to changes in interest rate risk.


8. Commitments and Contingencies

Spin-Off of CFC

On December 2, 1996, CNF completed the spin-off of CFC to CNF's
shareholders. In connection with the spin-off of CFC, CNF agreed to
indemnify certain states, insurance companies and sureties against the
failure of CFC to pay certain workers' compensation, tax and public
liability claims that were pending as of September 30, 1996. In some
cases, these indemnities are supported by letters of credit and surety
bonds under which CNF is liable to the issuing bank or the surety
company.

In September 2002, CFC filed for bankruptcy and ceased most U.S.
operations. Following the commencement of its bankruptcy proceeding,
CFC ceased making payments with respect to these workers' compensation
and public liability claims. CNF was required to take over payment of
some of these claims, and expects that demands for payment will likely
be made against it with respect to the remaining claims. CNF estimates
the aggregate amount of all of these claims, plus other costs, to be
$25.0 million. As a result, CNF accrued additional reserves in 2002,
primarily in accrued claims costs in the Consolidated Balance Sheets,
and recognized 2002 third-quarter and fourth-quarter losses from
discontinuance of $13.0 million (net of $8.3 million of income taxes)
and $2.3 million (net of $1.4 million of income taxes), respectively.
CNF intends to seek reimbursement from CFC in its bankruptcy proceeding
of amounts that CNF pays in respect of all of these claims, although
there can be no assurance that CNF will be successful in recovering all
or any portion of such payments.

In addition, CFC was, at the time of the spin-off, and remains a party
to certain multiemployer pension plans covering some of its current and
former employees. The cessation of its U.S. operations will result in
CFC's "complete withdrawal" (within the meaning of applicable federal
law) from these multiemployer plans, at which point it will become
obligated, under federal law, to pay its share of any unfunded vested
benefits under those plans. It is possible that the trustees of CFC's
multiemployer pension plans may assert claims that CNF is liable for
amounts owing to the plans as a result of CFC's withdrawal from those
plans and, if so, there can be no assurance that those claims would not
be material. For further detailed discussion of this matter, see Item
2, "Management's Discussion and Analysis - Liquidity and Capital
Resources - Discontinued Operations - Spin-Off of CFC."

As a result of the matters discussed above and in Item 2, under
"Management's Discussion and Analysis," CNF can provide no assurance
that matters relating to the spin-off of CFC and CFC's bankruptcy will
not have a material adverse effect on CNF's financial condition, cash
flows or results of operations.

Other

CNF is a defendant in various lawsuits incidental to its businesses.
It is the opinion of management that the ultimate outcome of these
actions will not have a material impact on CNF's financial condition,
cash flows, or results of operations.

PAGE 16


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS


Management's Discussion and Analysis of Financial Condition and Results
of Operations (referred to as Management's Discussion and Analysis) is
intended to assist in the understanding and assessment of the principal
factors affecting the results of operations, liquidity and capital
resources, as well as the critical accounting policies of CNF and its
subsidiaries. This discussion and analysis should be read in
conjunction with the information, including the audited consolidated
financial statements and accompanying notes, included in CNF's 2002
Annual Report on Form 10-K.

CNF Inc. provides supply chain management and transportation services
for commercial and industrial customers throughout North America and
the world. CNF's principal businesses consist of Con-Way
Transportation Services ("Con-Way") and Menlo Worldwide. For financial
reporting purposes, CNF is divided into five reporting segments. The
operating results of Con-Way are reported as one reporting segment
while Menlo Worldwide is divided into three reporting segments: Menlo
Worldwide Forwarding, Menlo Worldwide Logistics ("Logistics"), and
Menlo Worldwide Other. Also, certain corporate activities and the
results of Road Systems, a trailer manufacturer, are reported in the
CNF Other reporting segment.

In an effort to unite services offered by the Menlo Worldwide group of
businesses under a single brand identity, Menlo Worldwide announced in
February 2003 a plan to change the name of its forwarding segment from
Emery Forwarding to Menlo Worldwide Forwarding ("Forwarding"). The
Forwarding segment consists of the combined operating results of Menlo
Worldwide Forwarding, Inc. and its subsidiaries (formerly Emery Air
Freight Corporation, Inc), Menlo Worldwide Expedite!, Inc. and a
portion of the operations of Emery Worldwide Airlines, Inc. ("EWA"),
which ceased air carrier operations in December 2001. In March 2003,
Emery Air Freight Corporation, Inc. changed its name to Menlo Worldwide
Forwarding, Inc. ("MWF").

As used in Management's Discussion and Analysis, all references to CNF,
"the Company," "we," "us," and "our" and all similar references mean
CNF Inc. and its subsidiaries, unless otherwise expressly stated or the
context otherwise requires.


RESULTS OF OPERATIONS


CONTINUING OPERATIONS

Net income available to common shareholders of $15.9 million in the
first quarter of 2003 ($0.30 per diluted share) declined from $18.3
million ($0.35 per diluted share) in the first quarter of last year as
a 1.7% increase in 2003 first-quarter operating income was more than
offset by higher net non-operating expenses in the first quarter of
2003. First-quarter operating income of $41.0 million in 2003 included
a net gain of $7.2 million ($0.08 per diluted share) from a payment
under the Air Transportation Safety and System Stabilization Act (the
"Act") while first-quarter operating income of $40.4 million in 2002
included $22.8 million ($0.25 per diluted share) of special items, as
summarized below, including a net gain of $9.9 million ($0.11 per
diluted share) from a payment under the Act. Excluding the identified
special items affecting comparability, CNF's operating income in the
first quarter of 2003 increased from the prior-year first quarter due
substantially to higher operating income from Con-Way and Menlo
Worldwide. CNF's revenue in the first quarter of 2003 rose 13.0% from
the same quarter of 2002 due to revenue growth at Con-Way and Menlo
Worldwide.

Other net expense in the first quarter of 2003 increased to $11.6
million from $7.1 million in the prior-year first quarter due primarily
to higher interest expense on long-term debt, a decrease in investment
income on lower cash-equivalent investments, declines in the cash-
surrender value of corporate-owned life insurance policies, and losses
from equity ventures. First-quarter interest expense in 2003 rose $1.8
million over 2002 due primarily to the settlement of interest rate
swaps in December 2002, which had effectively converted long-term debt
from fixed-rate to floating-rate prior to their termination, as more
fully discussed in Note 7, "Derivative Instruments and Hedging
Activities," included in the accompanying Notes to Consolidated
Financial Statements. CNF recognized equity venture losses of $1.4
million in the first quarter of 2003 and $0.6 million in the first
quarter of last year.

PAGE 17

CNF's results of operations included various items that affected the
period-to-period comparability of the reported operating income (loss)
of its reporting segments that CNF has identified as "special" items in
the periods presented. Items were identified as such by CNF's
management based in part on their materiality to the relevant reporting
segment.


(Dollars in thousands) Three months ended
March 31,
--------------------------
2003 2002
------------ ------------
Con-Way Transportation Services -
Net gain from the sale of a property $ - $ 8,675
Menlo Worldwide -
Forwarding -
Net gains from payments under the
Air Transportation Safety and
System Stabilization Act 7,230 9,895
Logistics -
Net gain from a contract termination - 1,850
CNF Other -
Net gain from the sale of a property - 2,367



CON-WAY TRANSPORTATION SERVICES

Con-Way's revenue in the first quarter of 2003 grew 14.2% from the
first quarter of 2002 due primarily to a 12.9% increase in revenue from
Con-Way's regional less-than-truckload ("LTL") carriers, and to a
lesser extent, revenue growth from Con-Way's asset-light businesses, as
described below. First-quarter regional-carrier revenue per day in
2003 increased 11.3% due primarily to a 10.3% improvement in revenue
per hundredweight ("yield") and a 0.9% increase in weight per day
("weight"). First-quarter yield improvement in 2003 primarily reflects
higher fuel surcharges and continued growth of interregional joint
services, which typically command higher rates on longer lengths of
haul. Excluding fuel surcharges, first-quarter yield in 2003 increased
5.4% over the prior-year first quarter. In the first quarter of 2003,
Con-Way's asset-light businesses, including Con-Way NOW, Con-Way
Logistics, and Con-Way Air Express, increased revenue by $7.7 million
over the first quarter of 2002 to $21.7 million. Con-Way defines
"asset-light" businesses as those that require a comparatively smaller
capital investment than its LTL operations.

Con-Way's first-quarter operating income of $37.2 million in 2003 rose
10.3% over the first quarter of last year, which included an $8.7
million net gain from the sale of an excess property, due primarily to
higher revenue, partially offset by a 7.0% increase in employee
compensation and benefits expense and higher fuel and winter weather-
related costs.

MENLO WORLDWIDE

For financial reporting purposes, the Menlo Worldwide group, which was
formed effective January 1, 2002, is divided into three reporting
segments: Forwarding, Logistics, and Menlo Worldwide Other. Vector
SCM, a joint venture with General Motors, is reported in the Menlo
Worldwide Other segment as an equity-method investment. In the first
quarter of 2003, the Menlo Worldwide group of businesses reported
revenue of $687.1 million and operating income of $3.6 million,
compared to revenue of $611.3 million and operating income of $3.3
million in the prior-year first quarter.

Forwarding

Revenue for Forwarding in the first quarter of 2003 increased 12.9%
over the first quarter of 2002 due primarily to a significant increase
in international airfreight revenue per day ("airfreight revenue"),
partially offset by a decline in North American airfreight revenue.
International airfreight revenue in the first quarter of 2003,
including fuel surcharges, rose 25.8% over the prior-year first quarter
due primarily to a 14.8% increase in average international pounds per
day ("weight") and a 9.6% improvement in international revenue per
pound ("yield"), which benefited from higher fuel surcharges. The
first-quarter increase in international weight in 2003 was due largely
to improved business levels in international markets, with Forwarding's
Asian and war-related military business improving most. North American
first-quarter airfreight revenue in 2003, including fuel surcharges,
fell 5.7% from the prior-year first quarter on a 7.9% decline in yield
and a 2.5% increase in weight. North American first-quarter yield and
weight in 2003 were affected primarily by Forwarding's efforts to
increase second-day and deferred delivery services, which contributed
to growth in weight and to a higher percentage of lower-yield second-
day and deferred delivery services. First-quarter yield in 2003
benefited from an increase in fuel surcharges compared to the prior-
year first quarter.

PAGE 18

Forwarding's first-quarter operating loss in 2003 improved to $5.4
million from $5.7 million in 2002. Forwarding's first-quarter
operating loss in 2003 included a $7.2 million net gain from a payment
under the Air Transportation Safety and System Stabilization Act while
the first-quarter operating loss in 2002 included a $9.9 million net
gain from a payment under the Act, as described below under "Terrorist
Attacks." Excluding the net gains from payments under the Act,
Forwarding's first-quarter operating loss in 2003 declined due largely
to higher revenue, partially offset by an increase in fuel and winter
weather-related costs and higher service center expense, including
costs of reducing and reconfiguring elements of the North American
service center network.

Restructuring Plan

In June 2001, Forwarding began an operational restructuring to align it
with management's estimates of future business prospects for domestic
heavy air freight and address changes in market conditions, which
deteriorated due primarily to a slowing domestic economy and loss of
EWA's contracts with the USPS to transport Express Mail and Priority
Mail. The $340.5 million second-quarter restructuring charge in 2001
consisted primarily of non-cash impairment charges of $278.0 million
and estimated future cash expenditures related primarily to the return
to lessors of certain aircraft leased to EWA. Based on issues
identified during inspections conducted by the Federal Aviation
Administration ("FAA"), on August 13, 2001, EWA was required to suspend
its air carrier operations as part of an interim settlement agreement
with the FAA. As a result, EWA furloughed approximately 400 pilots and
crewmembers and Forwarding made arrangements to continue its service to
customers by utilizing aircraft operated by several other air carriers.
Primarily in response to the FAA action and a worsening global economic
downturn, Forwarding re-evaluated its restructuring plan. On December
5, 2001, CNF announced that Forwarding (formerly known as "Emery" or
"Emery Forwarding") in 2002 would become part of CNF's new Menlo
Worldwide group of supply chain services providers and in North America
would utilize aircraft operated by other air carriers instead of EWA
operating its own fleet of aircraft, and that EWA would permanently
cease air carrier operations. In connection with the revised
restructuring plan, in the fourth quarter of 2001 Forwarding recognized
additional restructuring charges of $311.7 million, including $305.6
million for the planned disposal of leased aircraft, cessation of EWA's
remaining operations, and other costs, and $6.1 million for employee
separation costs for 157 of Forwarding's non-pilot employees.

In connection with CNF's announcement of the cessation of EWA's air
carrier operations on December 5, 2001, EWA terminated the employment
of all of its pilots and crewmembers, bringing the total number of
terminated employees in 2001 to 800. Those pilots and crewmembers are
represented by the Air Line Pilots Association ("ALPA") union under a
collective bargaining agreement. Subsequently, ALPA filed a grievance
on behalf of the pilots and crewmembers protesting the cessation of
EWA's air carrier operations and Forwarding's use of other air
carriers. Some aspects of the ALPA matters may be subject to binding
arbitration. Based on CNF's current evaluation, management believes
that it has addressed its estimated exposure related to the ALPA
matters. However, there can be no assurance in this regard as CNF
cannot predict with certainty the ultimate outcome of these matters.

Following the fourth-quarter restructuring charge in 2001, Forwarding's
cash flows have reflected the cost of having other air carriers provide
service to Forwarding's North American customers as well as lease
payments and other costs associated with Forwarding's restructuring
plan; however, Forwarding's operating expenses have reflected the cost
of aircraft operated by other carriers but have not included scheduled
rental payments and return costs or other restructuring-related
payments, as these expenses were accrued in connection with the
restructuring charges.

Forwarding's restructuring reserves for aircraft and other costs
declined to $43.0 million at March 31, 2003 from $67.7 million at
December 31, 2002 due primarily to payments for costs of terminating
aircraft leases and returning aircraft to lessors. In April 2003,
Forwarding paid $7.6 million in connection with the return of the last
aircraft of the 37-aircraft fleet that was grounded in connection with
Forwarding's restructuring plan. Excluding accruals related to the
aircraft returned in April 2003, restructuring reserves at March 31,
2003 consisted primarily of CNF's estimated exposure related to labor
matters in arbitration, as described above, as well as other estimated
remaining restructuring-related obligations.

The restructuring charges recognized during 2001 reflect CNF's estimate
of the costs of terminating EWA's air carrier operations and
restructuring Forwarding's business and related matters. CNF believes
that the estimate is adequate to cover these costs based on information
currently available and assumptions management believes are reasonable
under the circumstances. However, there can be no assurance that actual
costs will not differ from this estimate, and that difference would be
recognized as additional expense or income in the period when and if
that determination can be made.

PAGE 19

Terrorist Attacks

In response to the September 11, 2001 terrorist attacks, the U.S.
Congress passed the Air Transportation Safety and System Stabilization
Act (the "Act"), a $15 billion emergency economic assistance package
intended to mitigate financial losses in the air carrier industry. The
legislation provides for $5 billion in direct loss reimbursement and
$10 billion in federal loan guarantees and credits, expands war risk
insurance coverage for air carriers, and provides some government
assistance for short-term increases in insurance premiums. In March
2002, Forwarding received an $11.9 million payment under the Act,
resulting in the recognition of a $9.9 million first-quarter net gain
in 2002. In March 2003, Forwarding received a final payment of $7.5
million, resulting in a $7.2 million first-quarter net gain in 2003.

Forwarding is not able to accurately quantify how the events of
September 11, or any subsequent terrorist activities, will affect the
global economy, governmental regulation, the air transportation
industry, Forwarding's costs of providing airfreight services and the
demand for Forwarding's airfreight services. However, Forwarding
believes that any additional security measures that may be required by
future regulations could result in additional costs and could have an
adverse effect on its operations and service.

Outlook

Management will continue Forwarding's focus on increasing the revenue
and operating margins of its variable-cost-based international
operations. In North America, management's strategy is to continue to
utilize aircraft operated by other carriers and to implement a more
flexible variable-cost-based operating structure in North America to
increase the proportion of revenue generated by second-day and deferred
delivery services. Management will continue its efforts to reduce the
cost structure of the North American service center and hub network as
well as administrative costs.

Logistics

Logistics' revenue of $241.5 million in the first quarter of 2003
increased 11.5% over the prior-year first quarter due primarily to
higher revenue recognized from carrier and warehouse management
services.

A portion of Logistics' revenue is attributable to contracts for which
Logistics manages the transportation of freight but subcontracts the
actual transportation and delivery of products to third parties.
Logistics refers to this as purchased transportation. Logistics' net
revenue (revenue less purchased transportation) was $70.2 million in
the first quarter of 2003 and $63.1 million in the first quarter of
2002.

Logistics' first-quarter operating income of $6.0 million in 2003
declined from $7.8 million in the prior-year first quarter, which
included a $1.9 million net gain from the early termination of a
contract. Excluding the first-quarter net gain in the prior year,
operating income in the 2003 first quarter increased over the prior-
year first quarter, reflecting higher revenue from warehouse and
carrier management services and essentially flat consulting fees, which
typically carry higher operating margins than warehouse and carrier
management services. First-quarter operating income in 2003 was
adversely affected by increases in administrative costs, primarily
because of increasing infrastructure capacity in international markets
and higher amortization of logistics management software placed in
service in March 2002.

Menlo Worldwide Other

The Menlo Worldwide Other reporting segment consists of the results of
Vector SCM, a joint venture formed with General Motors ("GM") in
December 2000 to provide logistics services to GM. Although CNF owns a
majority equity interest in Vector, the operating results of Vector are
reported as an equity-method investment based on GM's ability to
control certain operating decisions.

Menlo Worldwide Other reported first-quarter operating income of $3.0
million in 2003 compared to $1.3 million in the first quarter of 2002.
Menlo Worldwide Other's operating income in the first quarter of 2002
included substantially all of Vector's net income for that period
(rather than CNF's pro rata portion of that net income), because CNF
was contractually entitled to substantially all of Vector's net income
to the extent of Vector's cumulative losses because, under the
contract, all of Vector's losses in prior periods were allocated to
CNF. During the second quarter of 2002, CNF's allocated cumulative
losses from the Vector joint venture had been recouped through
allocated net income. As a result, GM began sharing in Vector's net
income in the third quarter of 2002.

PAGE 20

Increased operating income from Vector in the first quarter of 2003
benefited from an increase in the number of fully operational approved
business cases ("ABC"), which generated higher gain-share revenue and
from improved operational efficiencies. An ABC is a project, developed
with and approved by the customer, aimed at reducing costs, assuming
operational responsibilities, and/or achievement of operational changes
for GM in a particular service area or service areas.

Under the agreement with GM ("LLC Agreement"), GM has the right to
purchase CNF's membership interest in Vector ("Call Right") and CNF has
the right to require GM to purchase CNF's membership interest in Vector
("Put Right"). The Call Right and Put Right are exercisable at the
sole discretion of GM and CNF, respectively. Exercise of the Call
Right or Put Right would require GM to pay CNF for the full value of
CNF's membership interest in Vector, as determined by approved
appraisers using a predetermined valuation formula.

CNF Other

The CNF Other segment consists of the results of Road Systems and
certain corporate activities. First-quarter operating income of the
CNF Other segment fell to $0.3 million from $3.3 million in the first
quarter of 2002, which included a $2.4 million net gain from the sale
of excess corporate property.


DISCONTINUED OPERATIONS

Priority Mail Contract

On November 3, 2000, EWA and the USPS announced an agreement (the
"Termination Agreement") to terminate their contract for the
transportation and sortation of Priority Mail (the "Priority Mail
contract"). All claims relating to amounts owed to EWA under the
Priority Mail contract were fully settled in connection with payments
from the USPS to EWA in 2002 and 2001, including a $6.0 million payment
in July 2002 that fully settled EWA's Priority Mail contract
termination costs and resulted in a 2002 third-quarter gain from
discontinuance of $2.9 million, net of $1.8 million of income taxes.
Refer to Note 3, "Discontinued Operations," included in the
accompanying Notes to Consolidated Financial Statements.

Spin-Off of CFC

As more fully discussed below under "Liquidity and Capital Resources -
Discontinued Operations - Spin-off of CFC," CNF recognized 2002 third-
quarter and fourth-quarter losses from discontinuance of $13.0 million
(net of $8.3 million of income taxes) and $2.3 million (net of $1.4
million of income taxes), respectively, in connection with the
bankruptcy of CFC in September 2002.


LIQUIDITY AND CAPITAL RESOURCES


In the first quarter of 2003, cash and cash equivalents fell $32.5
million from December 31, 2002 to $237.9 million at March 31, 2003.
Cash used in investing activities of $48.2 million and financing
activities of $18.8 million was funded primarily with $33.5 million of
cash from operating activities and a reduction in cash and cash
equivalents.

Continuing Operations

Operating activities in the first quarter of 2003 provided $33.5
million, a decline from $55.4 million generated by first-quarter
operating activities in 2002. Cash from operations in the first
quarter of 2003 was provided primarily by net income before non-cash
items. "Non-cash items" refers to depreciation, amortization, deferred
income taxes, provision for uncollectible accounts, equity in earnings
of Vector, non-cash gains and losses, and losses from equity ventures.
Positive first-quarter operating cash flows in 2003 were also provided
by a $38.8 million increase in accrued liabilities and the collection
of $16.6 million of receivables. First-quarter cash outflows in 2003
consisted primarily of a $50.7 million decrease in accrued incentive
compensation, which is included in Accrued Liabilities in the
Consolidated Balance Sheets, and $23.7 million of restructuring-related
aircraft lease payments and return costs, as described above under
"Results of Operations - Menlo Worldwide - Forwarding - Restructuring
Plan."

PAGE 21

Investing activities in the first quarter of 2003 used $48.2 million
compared to $23.0 million used in the prior-year first quarter, due
primarily to an $18.4 million increase in capital expenditures at Con-
Way, which reflects the acquisition of revenue equipment in the first
quarter of 2003. Financing activities in the 2003 first quarter used
$18.8 million compared to $23.0 million used in the same quarter of
2002.

CNF has a $385 million revolving credit facility that matures on July
3, 2006. The revolving credit facility is available for cash
borrowings and for the issuance of letters of credit up to $385
million. At March 31, 2003, no borrowings were outstanding under the
facility and $244.0 million of letters of credit were outstanding,
leaving $141.0 million of available capacity for additional letters of
credit or cash borrowings, subject to compliance with financial
covenants and other customary conditions to borrowing. CNF had other
uncommitted unsecured credit facilities totaling $90.8 million at March
31, 2003, which are available to support letters of credit, bank
guarantees, and overdraft facilities; at that date, a total of $66.1
million was outstanding under these facilities. Of the total letters of
credit outstanding at March 31, 2003, $237.3 million provided
collateral for CNF workers' compensation and vehicular self-insurance
programs. See "Other Matters - Forward-Looking Statements" below and
Note 5, "Debt and Other Financing Arrangements," in Item 8, "Financial
Statements and Supplementary Data," included in CNF's 2002 Annual
Report on Form 10-K for additional information concerning CNF's $385
million credit facility and some of its other debt instruments,
including certain rights and remedies available to the lenders, which
could have a material adverse effect on CNF. In particular, in the
event that CNF's long-term senior debt is rated at less than investment
grade by both Standard & Poor's and Moody's, holders of certain
indebtedness would be entitled to require CNF to repurchase that
indebtedness and CNF will be required to pledge collateral securing its
$385 million revolving credit facility and may be required to pledge
collateral securing certain other indebtedness.

Discontinued Operations

Spin-Off of CFC

On December 2, 1996, CNF completed the spin-off of CFC to CNF's
shareholders. In connection with the spin-off of CFC, CNF agreed to
indemnify certain states, insurance companies and sureties against the
failure of CFC to pay certain workers' compensation, tax and public
liability claims that were pending as of September 30, 1996. In some
cases, these indemnities are supported by letters of credit and surety
bonds under which CNF is liable to the issuing bank or the surety
company.

In September 2002, CFC filed for bankruptcy and ceased most U.S.
operations. Following the commencement of its bankruptcy proceeding,
CFC ceased making payments with respect to these workers' compensation
and public liability claims. CNF was required to take over payment of
some of these claims, and expects that demands for payment will likely
be made against it with respect to the remaining claims. CNF estimates
the aggregate amount of all of these claims, plus other costs, to be
$25.0 million. As a result, CNF accrued additional reserves in 2002,
primarily in accrued claims costs in the Consolidated Balance Sheets,
and recognized 2002 third-quarter and fourth-quarter losses from
discontinuance of $13.0 million (net of $8.3 million of income taxes)
and $2.3 million (net of $1.4 million of income taxes), respectively.
CNF intends to seek reimbursement from CFC in its bankruptcy proceeding
of amounts that CNF pays in respect of all of these claims, although
there can be no assurance that CNF will be successful in recovering all
or any portion of such payments.

In addition, CFC was, at the time of the spin-off, and remains a party
to certain multiemployer pension plans covering some of its current and
former employees. The cessation of its U.S. operations will result in
CFC's "complete withdrawal" (within the meaning of applicable federal
law) from these multiemployer plans, at which point it will become
obligated, under federal law, to pay its share of any unfunded vested
benefits under those plans.

It is possible that the trustees of CFC's multiemployer pension plans
may assert claims that CNF is liable for amounts owing to the plans as
a result of CFC's withdrawal from those plans and, if so, there can be
no assurance that those claims would not be material. CNF has received
requests for information regarding the spin-off of CFC from
representatives from some of the pension funds, and, in accordance with
federal law, CNF has responded to those requests. Under federal law,
representatives of CFC's multiemployer plans are entitled to request
such information to assist them in determining whether they believe any
basis exists for asserting a claim against CNF.

PAGE 22

Based on advice of legal counsel and its knowledge of the facts, CNF
believes that it would ultimately prevail if any such claims were made,
although there can be no assurance in this regard. CNF believes that
the amount of those claims, if asserted, would be material, and a
judgment against CNF for all or a significant part of these claims
would likely have a material adverse effect on CNF's financial
condition, cash flow and results of operations.

If such claims were made, CNF, unless relieved of the obligation
through appropriate legal proceedings, would be required under federal
law to make periodic cash payments to the multiemployer plans asserting
claims against CNF, in an aggregate amount of up to the full amount of
those claims. However, under federal law, the claims would initially
be decided through arbitration and, upon a final decision by the
arbitrator in favor of CNF, the plan trustees would be required to
promptly refund those payments, with interest. While the length of
time required to reach a final decision in any such arbitration cannot
be predicted with certainty, CNF believes that such a decision could be
reached within twelve to eighteen months from receipt of claims from
the plans, although there can be no assurance in this regard.

CNF currently estimates that the net amount of quarterly payments
(after deductibility for tax purposes) could range from $20 million to
$25 million (based on certain assumptions), although the actual amount
could be greater or less than this estimate. Based on CNF's current
financial condition and management's projections of CNF's estimated
future financial condition, cash flows and results of operations, as
well as a number of other estimates and assumptions, CNF believes that
it would have sufficient financial resources to make these periodic
payments if it were required to do so. However, there can be no
assurance in that regard, and accordingly any requirement to make these
periodic payments could have a material adverse effect on CNF's
financial condition and cash flows.

As a result of the foregoing, there can be no assurance that matters
relating to the spin-off of CFC and CFC's bankruptcy will not have a
material adverse effect on CNF's financial condition, cash flows or
results of operations, including potentially triggering downgrades of
debt instruments or events of default under credit agreements. See
"Other Matters - Forward-Looking Statements" and Note 5, "Debt and
Other Financing Arrangements," in Item 8, "Financial Statements and
Supplementary Data," included in CNF's 2002 Annual Report on Form 10-K.

Priority Mail Contract

As described above under "Results of Operations-Discontinued
Operations," cash flows from the Priority Mail operations have been
segregated and classified as net cash flows from discontinued
operations in the Statements of Consolidated Cash Flows. As described
in Note 3, "Discontinued Operations," included in the accompanying
Notes to Consolidated Financial Statements, EWA in July 2002 received a
$6.0 million payment to fully settle EWA's Priority Mail contract
termination costs.

Defined Benefit Pension Plan

CNF periodically reviews the funding status of its defined benefit
pension plan for non-contractual employees, and makes contributions
from time to time as necessary in order to comply with the funding
requirements of the Employee Retirement Income Security Act ("ERISA").
In 2002, CNF contributed $76.2 million in cash payments to the defined
benefit pension plans. CNF currently estimates that it will contribute
a total of approximately $75 million of cash in 2003, composed of three
equal quarterly payments of $25 million, beginning in the second
quarter. However, this estimate is subject to uncertainties and
assumptions, including assumptions as to the rate of return on plan
assets and the actual amount of CNF's cash contributions may differ.
Likewise, there can be no assurance that CNF will not be required to
make further cash contributions, which could be substantial, to its
defined benefit pension plan in subsequent years. Except for cash
payments of $76.2 million in 2002 and $13.1 million in 2001, CNF had
made no contributions to the defined benefit pension plans since 1995,
due in part to the high rate of return realized on plan assets from
1996 through 2000.

Recent declines in the equity markets have caused the market value of
the defined benefit pension plan assets to decrease. As a result, the
accumulated benefit obligation ("ABO") of CNF's defined benefit pension
plans exceeded the fair value of plan assets as of March 31, 2003. In
accordance with accounting principles generally accepted in the United
States ("GAAP"), CNF's Consolidated Balance Sheets at March 31, 2003
and December 31, 2002 reflect accumulated minimum pension liability
adjustments, which increased the accrued pension benefit cost for CNF's
qualified and non-qualified defined benefit pension plans by $56.9
million, and resulted in an intangible pension asset of $6.7 million,
and a net-of-tax accumulated other comprehensive loss of $30.6 million
in shareholders' equity. Funding of CNF's defined benefit pension, as
described above, is based on ERISA-defined measurements rather than the
recognition and measurement criteria prescribed by GAAP, which requires
recognition of a minimum pension liability adjustment. However, future
minimum pension liability adjustments, without sufficient levels of
cash funding by CNF, would further reduce shareholders' equity. As a
result of the foregoing, there can be no assurance that matters related
to CNF's defined benefit pension plans will not have a material adverse
effect on CNF's financial condition, cash flows or results of
operations, including potentially triggering downgrades of debt
instruments or events of default under credit agreements. See "Other
Matters - Forward-Looking Statements," and Note 5, "Debt and Other
Financing Arrangements," in Item 8, "Financial Statements and
Supplementary Data," included in CNF's 2002 Annual Report on Form 10-K.

PAGE 23

Other

In general, CNF expects its future liquidity to be affected by the
timing and amount of cash flows related to capital expenditures,
pension plan funding requirements, restructuring charge reserves,
repayment of long-term debt and guarantees, capital and operating
leases and the preferred securities of a subsidiary trust. The table
below summarizes certain contractual cash obligations for CNF as of
March 31, 2003. Certain of these contractual obligations are reflected
in the Consolidated Balance Sheet while others are disclosed as future
obligations under GAAP.

(Dollars in thousands) Payments Due by Period
-----------------------------------------
2008 and
Total 2003 2004-2005 2006-2007 beyond
--------- -------- --------- --------- ---------
Long-Term Debt and
Guarantees $ 410,681 $ - $ 126,734 $ 54,300 $ 229,647
Capital Lease
Obligations 175,533 5,114 13,638 13,638 143,143
Operating Leases 274,061 68,870 118,891 55,032 31,268
Purchase Obligations 15,384 15,384 - - -
--------- -------- --------- --------- ---------
Total $ 875,659 $ 89,368 $ 259,263 $ 122,970 $ 404,058
========= ======== ========= ========= =========


As presented above, cash obligations on long-term debt and guarantees
represent principal payments while cash obligations for capital and
operating leases represent the notional payments under the lease
agreements, including anticipated future cash payments for interest on
capital leases. For further discussion, see Item 8, "Financial
Statements and Supplementary Data," under Note 5, "Debt and Other
Financing Arrangements," and Note 6, "Leases," included in CNF's 2002
Annual Report on Form 10-K.

CNF's ratio of total debt to capital decreased to 39.4% at March 31,
2003 from 40.3% at December 31, 2002 due primarily to first-quarter net
income in 2003.


OTHER MATTERS


ESTIMATES AND CRITICAL ACCOUNTING POLICIES

CNF makes estimates and assumptions when preparing its financial
statements in conformity with accounting principles generally accepted
in the United States. These estimates and assumptions affect the
amounts reported in the accompanying financial statements and notes
thereto. Actual results could differ from those estimates. CNF's most
critical accounting policies upon which management bases estimates are
those relating to self-insurance reserves, income taxes, restructuring
reserves, uncollectible accounts receivable, defined benefit pension
plan costs and goodwill and other intangible assets.

Self-Insurance Reserves

CNF uses a combination of insurance and self-insurance mechanisms to
provide for the potential liabilities for medical, casualty, liability,
vehicular, cargo and workers' compensation claims. Liabilities
associated with the risks that are retained by CNF are estimated, in
part, by considering historical claims experience, medical costs,
demographic factors, severity factors and other assumptions. The
estimated accruals for these liabilities could be significantly
affected if actual costs differ from these assumptions and historical
trends.

PAGE 24

Income Taxes

In establishing its deferred income tax assets and liabilities, CNF
makes judgments and interpretations based on the enacted tax laws and
published tax guidance that are applicable to its operations. CNF
records deferred tax assets and liabilities and periodically evaluates
the need for valuation allowances to reduce deferred tax assets to
realizable amounts. The likelihood of a material change in CNF's
expected realization of these assets is dependent on future taxable
income, its ability to use foreign tax credit carryforwards and
carrybacks, final U.S. and foreign tax settlements, and the
effectiveness of its tax planning strategies in the various relevant
jurisdictions. CNF is also subject to examination of its income tax
returns for multiple years by the IRS and other tax authorities. CNF
periodically assesses the likelihood of adverse outcomes resulting from
these examinations to determine the adequacy of its provision and
related accruals for income taxes.

Restructuring Reserves

The restructuring charges recognized in 2001 were based on significant
estimates and assumptions made by management. Refer to the "Menlo
Worldwide - Forwarding - Restructuring Plan" section under "Results of
Operations" above for a description of some of the assumptions used.

Uncollectible Accounts Receivable

CNF and its subsidiaries report accounts receivable at net realizable
value and provide an allowance for uncollectible accounts when
collection is considered doubtful. Con-Way and Forwarding provide for
uncollectible accounts based on various judgments and assumptions,
including revenue levels, historical loss experience, and composition
of outstanding accounts receivable. Logistics, based on the size and
nature of its client base, performs a frequent and periodic evaluation
of its customers' creditworthiness and accounts receivable portfolio
and recognizes expense from uncollectible accounts when losses are both
probable and estimable.

Defined Benefit Pension Plan

CNF has a defined benefit pension plan that covers non-contractual
employees in the United States. The amount recognized as pension
expense and the accrued pension liability depend upon a number of
assumptions and factors, the most significant being (i) the discount
rate used to measure the present value of pension obligations and (ii)
the assumed rate of return on plan assets. CNF adjusts its discount
rate periodically to reflect market conditions, taking into account a
number of factors including changes in high-quality corporate bond
yields and the advice of its outside actuaries. For purposes of
calculating its 2002 pension expense, CNF used a 7.25% discount rate.
Due to declines in market rates, CNF used a 6.75% discount rate for
calculating its 2002 year-end pension liability and its 2003 pension
expense. All other factors held constant, a 0.5% decline in the
discount rate would have an estimated $4 million increase in 2003
annual pension expense.

Rates of return on plan assets are also affected by economic conditions
and market fluctuations. CNF's assumed rate of return on plan assets
is based on historic returns of the plan assets since inception of the
plan. In 2002, the assumed rate of return on plan assets was 9.5%.
Recent declines in market returns have caused CNF to reduce its assumed
rate of return on plan assets for 2003 to 9.0%. Using year-end plan
asset values, a 0.5% decline in the assumed rate of return of plan
assets would have an estimated $2 million increase in 2003 annual
pension expense.

The determination of CNF's accrued pension benefit cost includes an
unrecognized actuarial loss that results from the cumulative difference
between estimated and actual values for the year-end projected pension
benefit obligation and the fair value of plan assets. Under GAAP, any
portion of the unrecognized actuarial loss or gain that exceeds ten
percent of the greater of the projected benefit obligation or fair
value of plan assets must be amortized as an expense over the average
service period for employees, approximately thirteen years for CNF.
Amortization of the unrecognized actuarial loss will increase the
annual pension expense in 2003 by approximately $6 million over annual
pension expense in 2002.

Goodwill and Other Intangible Assets

Effective January 1, 2002, CNF adopted SFAS 142, "Goodwill and Other
Intangible Assets." SFAS 142 specifies that goodwill and indefinite-
lived intangible assets will no longer be amortized but instead will be
subject to an annual impairment test. In accordance with the
provisions of SFAS 142, CNF ceased goodwill amortization associated
with the Forwarding reporting segment.

PAGE 25

Based on an impairment test as of December 31, 2002, CNF was not
required to record a charge for goodwill impairment. CNF will perform
a fourth-quarter goodwill impairment test on an annual basis and
between annual tests in certain circumstances. In assessing the
recoverability of the goodwill, CNF must make various assumptions
regarding estimated future cash flows and other factors in determining
the fair values of the respective assets. If these estimates or their
related assumptions change in the future, Forwarding may be required to
record impairment charges for these assets in future periods. Any such
resulting impairment charges could have a material adverse effect on
CNF's financial condition or results of operations, including
potentially triggering downgrades of debt instruments or events of
default under credit agreements. See "- Forward-Looking Statements,"
and Note 5, "Debt and Other Financing Arrangements," in Item 8,
"Financial Statements and Supplementary Data," included in CNF's 2002
Annual Report on Form 10-K.

MARKET RISK

CNF is exposed to a variety of market risks, including the effects of
interest rates, commodity prices, foreign currency exchange rates and
credit risk. CNF enters into derivative financial instruments only in
circumstances that warrant the hedge of an underlying asset, liability
or future cash flow against exposure to some form of commodity,
interest rate or currency-related risk. Additionally, the designated
hedges should have high correlation to the underlying exposure such
that fluctuations in the value of the derivatives offset reciprocal
changes in the underlying exposure.

CNF is subject to the effect of interest rate fluctuations in the fair
value of its long-term debt and capital lease obligations, as
summarized in Item 8, "Financial Statements and Supplementary Data,"
under Note 5, "Debt and Other Financing Arrangements," and Note 6,
"Leases," included in CNF's 2002 Annual Report on Form 10-K. CNF uses
interest rate swaps to mitigate the impact of interest rate volatility
on cash flows related to operating lease payments, and prior to their
termination in December 2002, CNF used interest rate swaps to mitigate
the impact of interest rate volatility on the fair value of its fixed-
rate long-term debt, as described more fully in Note 7, "Derivative
Instruments and Hedging Activities," included in the accompanying Notes
to Consolidated Financial Statements. At March 31, 2003, CNF had not
entered into any material derivative contracts to hedge foreign
currency exchange exposure.

CYCLICALITY AND SEASONALITY

CNF's businesses operate in industries that are affected directly by
general economic conditions and seasonal fluctuations, both of which
affect demand for transportation services. In the trucking and air
freight industries, for a typical year, the months of September and
October usually have the highest business levels while the months of
January and February usually have the lowest business levels.

BUSINESS INTERRUPTION

Although the operations of CNF's subsidiaries are largely
decentralized, Forwarding maintains a major hub operation at the Dayton
International Airport in Dayton, Ohio. While CNF currently maintains
property and business interruption insurance covering Forwarding's
operations at the Dayton hub, its insurance policies contain limits for
certain causes of loss, including but not limited to earthquake and
flood. Such policies do not insure against property loss or business
interruption resulting from a terrorist act. Accordingly, there can be
no assurance that this insurance coverage will be sufficient. As a
result, a major property loss or sustained interruption in the business
operations at the Dayton hub, whether due to terrorist activities or
otherwise, could have a material adverse effect on CNF's financial
condition, cash flows, and results of operations.

In addition, CNF and its subsidiaries rely on its Administrative and
Technology ("AdTech") Center in Portland, Oregon for the performance of
shared administrative and technology services in the conduct of their
businesses. CNF's centralized computer facilities and its
administrative and technology employees are located at the AdTech
Center campus. Although CNF maintains backup systems and has disaster
recovery processes and procedures in place, a sustained interruption in
the operation of these facilities, whether due to terrorist activities,
earthquakes, floods or otherwise, could have a material adverse effect
on CNF's financial condition, cash flows, and results of operations.

HOMELAND SECURITY

Since 2001, CNF has been subject to compliance with cargo security and
transportation regulations issued by the Transportation Security
Administration. Beginning in 2002, CNF has been subject to regulations
issued by the Department of Homeland Security. CNF is not able to
accurately predict how recent events will affect governmental
regulation and the transportation industry. However, CNF believes that
any additional security measures that may be required by future
regulations could result in additional costs and could have an adverse
effect on its operations and service.

PAGE 26

EMPLOYEES

Most of the workforce of CNF and its subsidiaries is not affiliated
with labor unions. Consequently, CNF believes that the operations of
its subsidiaries have significant advantages over comparable unionized
competitors (particularly in the trucking industry) in providing
reliable and cost-competitive customer services, including greater
efficiency and flexibility. There can be no assurance that CNF's
subsidiaries will be able to maintain their current advantages over
certain of their competitors.

ACCOUNTING STANDARDS

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others" ("FIN 45"). During the
quarter ended December 31, 2002, CNF adopted the disclosure provisions
of FIN 45, which require increased disclosure of guarantees, including
those for which likelihood of payment is remote. FIN 45 also requires
that, upon issuance of a guarantee, the guarantor must recognize a
liability for the fair value of the obligation it assumes under that
guarantee. The initial recognition and measurement provisions of FIN
45 are to be applied on a prospective basis to guarantees issued or
modified after December 31, 2002. CNF adopted FIN 45 with no material
impact.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities: an Interpretation of ARB No. 51" ("FIN
46"). FIN 46 addresses consolidation by business enterprises of
entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk
for the entity to finance its activities without additional
subordinated financial support from other parties. Variable interest
entities are required to be consolidated by their primary beneficiaries
if they do not effectively disperse risks among parties involved. The
primary beneficiary of a variable interest entity is the party that
absorbs a majority of the entity's expected losses or receives a
majority of its expected residual returns. The consolidation
requirements of FIN 46 apply immediately to variable interest entities
created or modified after January 31, 2003 and apply to existing
entities in the first fiscal year or interim period beginning after
June 15, 2003. Certain new disclosure requirements apply to all
financial statements issued after January 31, 2003. CNF has adopted
the currently applicable sections of FIN 46 with no material impact.

FORWARD-LOOKING STATEMENTS

Certain statements included herein constitute "forward-looking
statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended, and are subject to a number of risks
and uncertainties, and should not be relied upon as predictions of
future events. All statements other than statements of historical fact
are forward-looking statements, including any projections of earnings,
revenues, weight, yield, volumes, income or other financial or
operating items, any statements of the plans, strategies, expectations
or objectives of CNF or management for future operations or other
future items, any statements concerning proposed new products or
services, any statements regarding CNF's estimated future contributions
to pension plans, any statements as to the adequacy of reserves, any
statements regarding the outcome of any claims that may be brought
against CNF by CFC's multi-employer pension plans or regarding the
amount of any periodic cash payments that CNF may be required to make
while those claims are pending or CNF's ability to make those periodic
payments, any statements regarding future economic conditions or
performance, any statements regarding the outcome of legal and other
claims and proceedings against CNF; any statements of estimates or
belief and any statements or assumptions underlying the foregoing.
Certain such forward-looking statements can be identified by the use of
forward-looking terminology such as "believes," "expects," "may,"
"will," "should," "seeks," "approximately," "intends," "plans,"
"estimates" or "anticipates" or the negative of those terms or other
variations of those terms or comparable terminology or by discussions
of strategy, plans or intentions. Such forward-looking statements are
necessarily dependent on assumptions, data and methods that may be
incorrect or imprecise and there can be no assurance that they will be
realized. In that regard, the following factors, among others and in
addition to the matters discussed elsewhere in this document and other
reports and documents filed by CNF with the Securities and Exchange
Commission, could cause actual results and other matters to differ
materially from those discussed in such 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, the possibility of additional unusual
charges and other costs and expenses relating to Forwarding's
operations; the possibility of defaults under CNF's $385 million credit

PAGE 27

agreement and other debt instruments, including defaults resulting from
additional unusual charges or from any costs or expenses that CNF may
incur in connection with CFC's bankruptcy proceedings or any claims
that may be asserted by CFC's multi-employer pension plans or CNF's
failure to perform in accordance with management's expectations, or
from any additional minimum pension liability adjustments that CNF may
be required to record in respect of its defined benefit pension plan,
and the possibility that CNF may be required to pledge collateral to
secure some of its indebtedness or to repay other 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 crewmembers, renegotiations of labor contracts,
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; the Department of Transportation, FAA
and Department of Justice investigation relating to Forwarding's
handling of hazardous materials; the February 2000 crash of an EWA
aircraft and related investigation and litigation; and 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 be required to make periodic cash payments while those claims are
pending, and 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, including the possibility that CNF may be required to record
additional minimum pension liability adjustments if the market value of
plan assets declines further. As a result of the foregoing, no
assurance can be given as to future financial condition, cash flows, or
results of operations. See Note 8, "Commitments and Contingencies"
included in the accompanying Notes to Consolidated Financial
Statements.

PAGE 28


ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures. CNF's Chief
Executive Officer and Chief Financial Officer have evaluated the
effectiveness of CNF's disclosure controls and procedures as such term
is defined in Rules 13a-14(c) and 15d-14(c) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") as of a date
within 90 days prior to the filing date of this quarterly report (the
"Evaluation Date"). Based on that evaluation, the Chief Executive
Officer and Chief Financial Officer have concluded that, as of the
Evaluation Date, CNF's disclosure controls and procedures are effective
in alerting them on a timely basis to material information relating to
CNF (including its consolidated subsidiaries) required to be included
in CNF's reports filed or submitted under the Exchange Act.

(b) Changes in Internal Controls. Since the Evaluation Date, there
have not been any significant changes in CNF's internal controls or in
other factors that could significantly affect these internal controls.


PAGE 29

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

As previously reported, CNF has been designated a potentially
responsible party (PRP) by the EPA with respect to the disposal of
hazardous substances at various sites. CNF expects its share of the
clean-up costs will not have a material adverse effect on its financial
condition, cash flows, or results of operations.

The Department of Transportation, through its Office of Inspector
General, and the FAA have been conducting an investigation relating to
the handling of so-called hazardous materials by MWF and EWA. The
Department of Justice has joined in the investigation and has been
seeking to obtain additional information through the grand jury
process. The investigation is ongoing and MWF and EWA are cooperating
fully. CNF is unable to predict the outcome of this investigation or
when an outcome will be reached.

EWA has received subpoenas issued by federal grand juries in
Massachusetts and the District of Columbia and the USPS Inspector
General for documents relating to the Priority Mail contract. EWA has
provided, and is continuing to provide, any documents requested.

On February 16, 2000, a DC-8 cargo aircraft operated by EWA personnel
crashed shortly after take-off from Mather Field, near Sacramento,
California. The crew of three was killed. The cause of the crash has
not been conclusively determined. The National Transportation Safety
Board (NTSB) is conducting an investigation. A NTSB hearing regarding
the crash commenced on May 9 and 10, 2002, and is currently in recess.
CNF is currently unable to predict the outcome of this investigation or
the effect it may have on MWF, EWA or CNF. MWF, EWA and CNF Inc. have
been named as defendants in wrongful death lawsuits brought by the
families of the three deceased crewmembers, seeking compensatory and
punitive damages. MWF, EWA and CNF Inc. also may be subject to other
claims and proceedings relating to the crash, which could include other
private lawsuits seeking monetary damages and governmental proceedings.
Although MWF, EWA and CNF Inc. maintain insurance that is intended to
cover claims that may arise in connection with an airplane crash, there
can be no assurance that the insurance will in fact be adequate to
cover all possible types of claims. In particular, any claims for
punitive damages or any sanctions resulting from possible governmental
proceedings would not be covered by insurance.

On December 5, 2001, EWA announced that it would cease operating as an
air carrier, and in connection therewith terminated the employment of
all pilots and crewmembers, bringing the total number of terminated
employees in 2001 to 800. Subsequently, ALPA filed a grievance on
behalf of the pilots and crewmembers protesting the cessation of EWA's
air carrier operations and Emery's use of other air carriers. The ALPA
matters are the subject of litigation in U.S. District Court and,
depending on the outcome of that litigation, may be subject to binding
arbitration. Based on CNF's current evaluation, management believes
that it has addressed its estimated exposure related to the ALPA
matters. However, CNF cannot predict with certainty the ultimate
outcome of these matters.

EWA, MWF, Menlo Worldwide, LLC, CNF Inc. and certain individuals have
been named as defendants in a lawsuit filed in state court in
California by approximately 140 former EWA pilots and crewmembers. The
lawsuit includes claims for wrongful termination and intentional
interference with an economic relationship in connection with the
suspension and subsequent cessation of EWA's air carrier operations,
and seeks $500 million and certain other unspecified damages. CNF
believes that the lawsuit's claims are without merit, and intends to
vigorously defend the lawsuit.

PAGE 30

ITEM 4. Submission of Matters to a Vote of Security Holders

At the Annual Shareholders Meeting held April 22, 2003, the following
proposals were presented with the indicated voting results:

For the purpose of electing members of the Board of Directors, the
votes representing shares of Common and Preferred stock were cast as
follows:

Nominee For Against
-------------------- ---------- ---------
Robert Alpert 49,493,557 894,471
Margaret G. Gill 49,373,082 1,014,946
Robert Jaunich II 49,496,022 892,006
Robert P. Wayman 48,337,462 2,050,566

The following directors did not stand for election and continued in
office as directors after the Annual Shareholders Meeting: Kevin Burns,
W. Keith Kennedy, Jr., Donald E. Moffitt, Michael J. Murray, John C.
Pope, Gregory L. Quesnel, Robert D. Rogers, and William J. Schroeder.
Richard A. Clarke, a board member since 1996, died on December 14,
2002. Richard B. Madden, a board member since 1992, retired from the
board on April 29, 2002.

The amendments to the 1997 Equity and Incentive Plan and re-approved
Plan were approved by the following vote: For 39,064,913; Against
6,455,144; Abstain 648,475.

The 2003 Equity Incentive Plan for Non-Employee Directors was approved
by the following vote: For 41,085,757; Against 4,377,418; Abstain
705,357.

The appointment of KPMG LLP as independent public accountants for the
year 2003 was approved by the following vote: For 47,147,447; Against
2,870,796; Abstain 369,785.

PAGE 31


ITEM 6. Exhibits and Reports on Form 8-K

(a) Exhibits

99.1 [a] Computation of Ratios of Earnings to Fixed Charges -
For the three months ended March, 2003 and 2002, the
ratios of earnings to fixed charges were 2.5x and 3.0x,
respectively.

[b] Computation of Ratios of Earnings to Combined Fixed
Charges - For the three months ended March 31, 2003
and 2002, the ratios of earnings to combined fixed
charges and preferred stock dividends were 2.4x and 2.8x,
respectively.

99.2 Certification by the Chief Executive Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002

99.3 Certification by the Chief Financial Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K

During the quarter ended March 31, 2003, CNF filed the
following reports on Form 8-K:

On April 2, 2003, CNF filed a current report on Form
8-K to furnish under Item 9 pursuant to Item 12
CNF's press release updating its first-quarter
earnings guidance.

On April 21, 2003, CNF filed a current report on
Form 8-K to furnish under Item 12 CNF's press
release presenting CNF's first-quarter results.


PAGE 32

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company (Registrant) has duly caused this
Form 10-Q Quarterly Report to be signed on its behalf by the
undersigned, thereunto duly authorized.

CNF Inc.
--------
(Registrant)

May 9, 2003 /s/Chutta Ratnathicam
-----------------------
Chutta Ratnathicam
Senior Vice President and
Chief Financial Officer


PAGE 33

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, Gregory L. Quesnel, certify that:

1. I have reviewed this quarterly report on Form 10-Q of CNF Inc.;

2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present
in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented
in this quarterly report;

4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:

a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;

b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and

c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons
performing the equivalent function):

a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and

6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.


May 9, 2003 /s/Gregory L. Quesnel
-----------------------
Gregory L. Quesnel
Chief Executive Officer


PAGE 34



I, Chutta Ratnathicam, certify that:

1. I have reviewed this quarterly report on Form 10-Q of CNF Inc.;

2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present
in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented
in this quarterly report;

4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:

a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;

b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and

c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons
performing the equivalent function):

a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and
have identified for the registrant's auditors any material weaknesses
in internal controls; and

b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and

6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.


May 9, 2003 /s/Chutta Ratnathicam
-----------------------
Chutta Ratnathicam
Chief Financial Officer