UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
X ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES AND EXCHANGE ACT
--- OF 1934
For the fiscal year ended December 31, 2005
OR
TRANSITION REPORT PURSUANT TO SECTION 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. THRIFT AND STOCK PLAN
Con-way Inc.
Incorporated in the State of Delaware
I.R.S. Employer Identification No. 94-1444798
2855 Campus Drive, Suite 300, San Mateo, California 94403
Telephone Number (650) 378-5200
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons administering the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
CNF Inc. Thrift and Stock Plan
June 22, 2006 /s/ Mark C. Thickpenny
----------------------------
Mark C. Thickpenny
Chairman, Con-way Inc. Benefits
Administrative Committee
CNF INC. THRIFT AND STOCK PLAN
Financial Statements and Schedule
December 31, 2005 and 2004
(With Report of Independent Registered Public Accounting Firm)
CNF INC. THRIFT AND STOCK PLAN
Index to Financial Statements and Schedule
Page
Report of Independent Registered Public Accounting Firm 1
Financial Statements:
Statement of Net Assets Available for Benefits as of December 31,
2005 3
Statement of Net Assets Available for Benefits as of December 31,
2004 4
Statement of Changes in Net Assets Available for Benefits for the
year ended December 31, 2005 5
Statement of Changes in Net Assets Available for Benefits for the
year ended December 31, 2004 6
Notes to Financial Statements 7
Supplemental Schedule:
Schedule I: Schedule H, Line 4i - Schedule of Assets (Held at End
of Year) as of December 31, 2005 17
Report of Independent Registered Public Accounting Firm
The Finance Committee
Con-way Inc. Board of Directors:
We have audited the accompanying statements of net assets available for
benefits of the CNF Inc. Thrift and Stock Plan as of December 31, 2005 and
2004, and the related statements of changes in net assets available for
benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as
of December 31, 2005 and 2004, and the changes in its net assets available
for benefits for the years then ended in conformity with U.S. generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets
(held at end of year) is presented for purposes of additional analysis and is
not a required part of the basic financial statements but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The supplemental schedule is the responsibility of the Plan's
management. The supplemental schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The fund information in the statements
of net assets available for benefits and statements of changes in net assets
available for benefits is presented for purposes of additional analysis
rather than to present the net assets available for benefits and changes in
net assets available for benefits of each fund. The fund information has been
subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, is fairly stated in all material
respects, in relation to the basic financial statements taken as a whole.
/s/ KPMG LLP
---------------
KPMG LLP
Portland, Oregon
June 12, 2006
CNF INC. THRIFT AND STOCK PLAN
Statement of Net Assets Available for Benefits
December 31, 2005
Nonparticipant-
Directed
----------------
Retiree
Con-way Health
Preferred Savings
Participant- Stock Fund- Account
Directed Unallocated (401(h)) Total
-------------- -------------- -------------- --------------
Assets:
Investments, at fair value:
Shares in registered
investment companies $ 432,118,708 $ - $ - $ 432,118,708
Common trust funds 172,426,214 - - 172,426,214
Con-way Common Stock 148,397,087 - - 148,397,087
Con-way Preferred Stock 92,455,475 75,214,555 - 167,670,030
Investments, at cost:
Participant loans 50,780,054 - - 50,780,054
-------------- -------------- -------------- --------------
Total investments 896,177,538 75,214,555 - 971,392,093
-------------- -------------- -------------- --------------
Net assets held in 401(h)
account (notes 3 and 8) - - 17,849,515 17,849,515
Contributions receivable:
Participants 1,141,711 - - 1,141,711
Con-way 2,763,154 - - 2,763,154
-------------- -------------- -------------- --------------
Total contributions
receivable 3,904,865 - - 3,904,865
-------------- -------------- -------------- --------------
Due from Con-way Preferred
Stock Fund - Unallocated 3,383,979 - - 3,383,979
Dividend receivable - 4,309,958 - 4,309,958
Cash 247,816 - - 247,816
-------------- -------------- -------------- --------------
Total assets 903,714,198 79,524,513 17,849,515 1,001,088,226
-------------- -------------- -------------- --------------
Liabilities:
Notes payable (note 5) - (77,000,000) - (77,000,000)
Accrued interest payable - (3,098,150) - (3,098,150)
Due to Con-way (note 1) - (1,211,808) - (1,211,808)
Due to Con-way Preferred Stock
Fund - Allocated - (3,383,979) - (3,383,979)
Amounts related to
obligation of 401(h)
account (notes 3 and 8) - - (17,849,515) (17,849,515)
-------------- -------------- -------------- --------------
Total liabilities - (84,693,937) (17,849,515) (102,543,452)
-------------- -------------- -------------- --------------
Net assets available for
benefits $ 903,714,198 $ (5,169,424) $ - $ 898,544,774
============== ============== ============== ==============
See accompanying notes to financial statements.
CNF INC. THRIFT AND STOCK PLAN
Statement of Net Assets Available for Benefits
December 31, 2004
Nonparticipant-Directed
--------------------------------------------
Retiree
Restricted Con-way Con-way Health
Con-way Preferred Preferred Savings
Participant- Common Stock Stock Fund- Stock Fund- Account
Directed Fund Allocated Unallocated (401(h)) Total
-------------- -------------- -------------- -------------- -------------- ---------------
Assets:
Investments, at fair value:
Shares in registered
investment companies $ 462,279,394 $ - $ - $ - $ - $ 462,279,394
Common trust funds 185,924,705 - - - - 185,924,705
Con-way Common Stock 58,945,926 100,784,667 - - - 159,730,593
Con-way Preferred Stock - - 100,874,660 87,238,011 - 188,112,671
Investments, at cost:
Participant loans 54,838,141 - - - - 54,838,141
-------------- -------------- -------------- -------------- -------------- ---------------
Total investments 761,988,166 100,784,667 100,874,660 87,238,011 - 1,050,885,504
-------------- -------------- -------------- -------------- -------------- ---------------
Net assets held in 401(h)
account (notes 3 and 8) - - - - 13,712,186 13,712,186
Contributions receivable:
Participants 1,063,577 - - - - 1,063,577
Con-way 179,627 2,624,673 - - - 2,804,300
-------------- -------------- -------------- -------------- -------------- ---------------
Total contributions
receivable 1,243,204 2,624,673 - - - 3,867,877
-------------- -------------- -------------- -------------- -------------- ---------------
Due from Con-way Preferred
Stock Fund - Unallocated - - 3,452,522 - - 3,452,522
Dividend receivable - - - 4,860,705 - 4,860,705
Cash 19,604 - - - - 19,604
-------------- -------------- -------------- -------------- -------------- ---------------
Total assets 763,250,974 103,409,340 104,327,182 92,098,716 13,712,186 1,076,798,398
-------------- -------------- -------------- -------------- -------------- ---------------
Liabilities:
Notes payable (note 5) - - - (89,700,000) - (89,700,000)
Accrued interest payable - - - (3,479,150) - (3,479,150)
Due to Con-way (note 1) - - - (1,381,555) - (1,381,555)
Due to Con-way Preferred Stock - - - (3,452,522) - (3,452,522)
Fund - Allocated
Amounts related to
obligation of 401(h)
account (notes 3 and 8) - - - - (13,712,186) (13,712,186)
-------------- -------------- -------------- -------------- -------------- ---------------
Total liabilities - - - (98,013,227) (13,712,186) (111,725,413)
-------------- -------------- -------------- -------------- -------------- ---------------
Net assets available for
benefits $ 763,250,974 $ 103,409,340 $ 104,327,182 $ (5,914,511) $ - $ 965,072,985
============== ============== ============== ============== ============== ===============
See accompanying notes to financial statements.
CNF INC. THRIFT AND STOCK PLAN
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 2005
Nonparticipant-Directed
--------------------------------------------
Restricted Con-way Con-way
Con-way Preferred Preferred
Participant- Common Stock Stock Fund- Stock Fund-
Directed Fund Allocated Unallocated Total
-------------- -------------- -------------- -------------- --------------
Additions:
Participant contributions $ 63,742,419 $ - $ - $ - $ 63,742,419
Con-way contributions (note 1) 5,272,152 4,726,994 - 9,782,878 19,782,024
Rollover contributions 2,971,960 - - - 2,971,960
Allocation of preferred shares
to TASP participants, at
cost 2,780,220 - 5,644,688 - 8,424,908
Dividend and interest income 5,543,156 354,711 - 9,113,423 15,011,290
Transfers from other plans 15,818 - - - 15,818
Net appreciation in fair
value of investments
(Note 4) 35,240,652 5,538,499 4,381,587 (3,465,998) 41,694,740
-------------- -------------- -------------- -------------- --------------
Total additions 115,566,377 10,620,204 10,026,275 15,430,303 151,643,159
-------------- -------------- -------------- -------------- --------------
Deductions:
Distributions to
participants (note 1) (182,179,512) (21,306,642) - - (203,486,154)
Allocation of preferred shares
to TASP participants, at
cost - - - (8,424,908) (8,424,908)
Allocation of preferred shares
to Menlo Worldwide
Forwarding Inc. Savings Plan
participants, at cost - - - (64,008) (64,008)
Interest expense - - - (6,196,300) (6,196,300)
-------------- -------------- -------------- -------------- --------------
Total deductions (182,179,512) (21,306,642) - (14,685,216) (218,171,370)
-------------- -------------- -------------- -------------- --------------
Interfund transfers, net
(note 1) 207,076,359 (92,722,902) (114,353,457) - -
-------------- -------------- -------------- -------------- --------------
Net increase (decrease) 140,463,224 (103,409,340) (104,327,182) 745,087 (66,528,211)
Net assets available for
benefits, December 31, 2004 763,250,974 103,409,340 104,327,182 (5,914,511) 965,072,985
-------------- -------------- -------------- -------------- --------------
Net assets available for
benefits, December 31, 2005 $ 903,714,198 $ - $ - $ (5,169,424) $ 898,544,774
============== ============== ============== ============== ==============
See accompanying notes to financial statements.
CNF INC. THRIFT AND STOCK PLAN
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 2004
Nonparticipant-Directed
--------------------------------------------
Restricted Con-way Con-way
Con-way Preferred Preferred
Participant- Common Stock Stock Fund- Stock Fund-
Directed Fund Allocated Unallocated Total
-------------- -------------- -------------- -------------- --------------
Additions:
Participant contributions $ 67,234,135 $ - $ - $ - $ 67,234,135
Con-way contributions (note 1) 792,715 9,781,873 - 9,160,443 19,735,031
Rollover contributions 4,195,538 - - - 4,195,538
Allocation of preferred shares
to TASP participants, at
cost - - 8,437,726 - 8,437,726
Dividend and interest income 4,087,407 789,331 - 9,797,859 14,674,597
Net appreciation in fair
value of Investments
(note 4) 66,841,309 31,369,712 18,181,852 9,847,291 126,240,164
-------------- -------------- -------------- -------------- --------------
Total additions 143,151,104 41,940,916 26,619,578 28,805,593 240,517,191
-------------- -------------- -------------- -------------- --------------
Deductions:
Distributions to participants (45,149,447) (6,855,322) - - (52,004,769)
Transfers to other plans (46,453) (7,496) (15,999) - (69,948)
Allocation of preferred shares
to TASP participants, at
cost - - - (8,437,726) (8,437,726)
Allocation of preferred shares
to Menlo Worldwide
Forwarding Inc. Savings Plan
participants, at cost - - - (72,269) (72,269)
Interest expense - - - (6,958,300) (6,958,300)
-------------- -------------- -------------- -------------- --------------
Total deductions (45,195,900) (6,862,818) (15,999) (15,468,295) (67,543,012)
-------------- -------------- -------------- -------------- --------------
Interfund transfers, net 2,993,943 569,589 (3,563,532) - -
-------------- -------------- -------------- -------------- --------------
Net increase 100,949,147 35,647,687 23,040,047 13,337,298 172,974,179
Net assets available for
benefits, December 31, 2003 662,301,827 67,761,653 81,287,135 (19,251,809) 792,098,806
-------------- -------------- -------------- -------------- --------------
Net assets available for
benefits, December 31, 2004 $ 763,250,974 $ 103,409,340 $ 104,327,182 $ (5,914,511) $ 965,072,985
============== ============== ============== ============== ==============
See accompanying notes to financial statements.
CNF INC. THRIFT AND STOCK PLAN
Notes to Financial Statements
December 31, 2005 and 2004
(1) Description of Plan
The following description of the CNF Inc. Thrift and Stock Plan (the Plan
or TASP) is provided for general information purposes only. Participants
should refer to the Employee Benefits Handbook for more complete
information.
The term "Con-way" or "Company" refers to Con-way Inc., formerly CNF
Inc., and subsidiaries. On April 18, 2006, shareholders approved
management's proposal to change the Company's name to Con-way Inc. from
CNF Inc. The name of the Plan remains CNF Inc. Thrift and Stock Plan.
(a) General
The Plan, which is sponsored by Con-way, consists of a profit-sharing
portion and a stock-bonus portion that provides eligible employees the
opportunity to save for their retirement. The plan also provides
medical benefits for retired participants, as described in note 3,
Retiree Health Savings Account.
The Plan is intended to qualify as a profit-sharing plan under
Section 401(a) of the Internal Revenue Code (the Code), with a salary-
deferral feature qualified under Section 401(k) of the Code and is
subject to the provisions of the Employee Retirement Income Security
Act of 1974, as amended (ERISA). The Plan also operates, in relevant
part, as a leveraged employee stock ownership plan (ESOP), and is
designed to comply with Section 4975(e)(7) of the Code. Overall
responsibility for administering the Plan rests with the Con-way Inc.
Benefits Administrative Committee (the Committee), which is appointed
by the Chief Executive Officer of Con-way. The Plan's trustee, T. Rowe
Price (the Trustee), is responsible for the management and control of
the Plan's assets, which are held in individual participant investment
accounts, collectively known as "the Trust."
Effective September 19, 2000, the pilots of Emery Worldwide Airlines
ceased participation in the Plan and their elective deferrals began
being contributed to the Menlo Worldwide Forwarding Inc. Savings Plan
(MWF Savings Plan), formerly the CNF Inc. EWW Savings Plan. The
pilots' vested balance in the Plan was transferred to the MWF Savings
Plan effective December 20, 2000. The transferred MWF Savings Plan
participant accounts will continue to be allocated additional shares
of Con-way's Series B Cumulative Convertible Preferred Stock
(Preferred Stock) as a substitute for Preferred Stock cash dividends
used for debt service, as described below.
In 2002, Con-way designated a portion of the ESOP feature of the Plan
to be a money purchase pension plan and added medical benefits for
retired participants, as described in note 3, Retiree Health Savings
Account and note 8, Reconciliation to Form 5500.
(b) Amendments
In December 2004, Con-way completed the sale of Menlo Worldwide
Forwarding, Inc. and its subsidiaries and Menlo Worldwide Expedite!,
Inc. (collectively referred to as MWF) to United Parcel Service, Inc.
(UPS). The active employees of MWF ceased participation in the Plan as
of the sale date and were permitted to rollover their Plan account
balances to a UPS-sponsored defined contribution plan. In 2005,
approximately $146,000,000, including rollovers, was distributed from
the TASP to former employees as a result of the sale of MWF.
Effective September 6, 2005, the Plan was amended to remove certain
restrictions prohibiting the transfer of assets from the Preferred
Stock Fund - Allocated and the Restricted Con-way Common Stock Fund.
Prior to the amendment, balances in the nonparticipant-directed funds
could only be transferred to the participant-directed funds upon a
participant reaching age 55 and having completed at least 10 years of
participation in the Plan. Following the change, Con-way's matching
contributions are deposited into the participant-directed Con-way
Preferred Stock Fund - Allocated and the Unrestricted Con-way Common
Stock Fund. The change effectively allows participants to transfer
Con-way's matching contributions to investments other than Con-way
equity. In September 2005, balances in the Restricted Con-way Common
Stock Fund were transferred to the Unrestricted Con-way Common Stock
Fund, and balances in the nonparticipant-directed Preferred Stock Fund
- Allocated were changed to the participant-directed Preferred Stock
Fund - Allocated.
Accordingly, in the Statement of Changes in Net Assets Available for
Benefits, Plan additions and deductions related to matching Common
Stock and allocated Preferred Stock are included in participant-
directed investments in the last quarter of 2005, but are reported
separately as nonparticipant-directed investments in the first three
quarters of 2005 and for the year ended December 31, 2004. In the
Statements of Net Assets Available for Benefits, participant account
balances in the matching Con-way Common Stock Fund and the Con-way
Preferred Stock Fund - Allocated are included in participant-directed
investments as of December 31, 2005, but are reported separately as
nonparticipant-directed investments as of December 31, 2004.
(c) Eligibility
An employee is eligible to participate in the Plan if the employee is
not covered by a collective bargaining agreement, is not a leased
employee or is not a nonresident alien. There are no age or service
requirements for eligibility except that a supplemental employee must
complete one year of service during which the employee works
1,000 hours.
(d) Contributions
Participants may contribute up to 50% of their compensation, as
defined by the Plan and subject to certain limitations. Con-way makes
matching contributions equal to 50% of participants' contributions,
but generally not exceeding 1.5% of participants' compensation, as
defined in the Plan document. Con-way matching contributions are in
the form of allocations of Preferred Stock and open-market purchases
of Con-way Common Stock (Common Stock) from cash contributions by Con-
way.
Matching contributions to the Plan consisted of the following:
Years ended December 31
-------------------------
2005 2004
------------ ------------
Matching contributions:
Preferred Stock:
Con-way match of Preferred Stock $ 3,907,415 $ 3,448,310
Forfeited Preferred Stock 130,000 89,956
Common Stock:
Con-way match of unrestricted Common Stock 5,707,152 792,715
Con-way match of restricted Common Stock 4,726,994 9,781,873
Forfeited Common Stock 435,000 330,000
------------ ------------
$14,906,561 $14,442,854
============ ============
Cash dividends on the Preferred Stock are used for debt service on the
notes payable (see note 5). Participants are allocated additional
Preferred Stock as a substitute for the cash dividends used for debt
service. For the years ended December 31, 2005 and 2004, annual
interest requirements were less than annual Preferred Stock cash
dividends received by the Plan.
As reported in the Statements of Changes in Net Assets Available for
Plan Benefits, Preferred Stock was allocated to TASP and MWF Savings
Plan participants at a historical cost of $8,424,908 and $64,008 for
the year ended December 31, 2005, respectively, and at a historical
cost of $8,437,726 and $72,269 for the year ended December 31, 2004,
respectively. The total allocation to the TASP and MWF Savings Plan
participants consisted of the following:
Years ended December 31
-------------------------
2005 2004
------------ ------------
Con-way match of Preferred Stock $ 3,907,415 $ 3,448,310
Additional Preferred Stock allocated
to participants as a substitute for cash
dividends used for debt service 4,581,501 5,061,685
------------ ------------
Total allocations to participants $ 8,488,916 $ 8,509,995
============ ============
In addition to its match of Preferred and Common Stock, Con-way made
contributions to the Plan for repayment of the notes payable described
in note 5. Principal payments consisted of the following:
Years ended December 31
-------------------------
2005 2004
------------ ------------
Cash contributions $ 9,782,878 $ 9,160,443
Con-way preferred stock cash dividends
in excess of interest on the notes payable 2,917,122 2,839,557
------------ ------------
Total principal payments $12,700,000 $12,000,000
============ ============
At December 31, 2005 and 2004, the Preferred Stock cash dividend
payable in excess of interest payable on the TASP notes is reported in
the Statements of Net Assets Available for Benefits as amounts Due to
Con-way of $1,211,808 and $1,381,555, respectively.
(e) Participant Accounts
The Plan allows participants to select any one or more of the
22 investment funds established under the Plan in which contributions
can be invested. Con-way's matching contributions are deposited into
the participant-directed Con-way Preferred Stock Fund - Allocated and
the Unrestricted Con-way Common Stock Fund. Effective in September
2005, participants became able to transfer Con-way's matching
contributions into investments other than Con-way equity, as described
above.
Allocations of Con-way's matching contributions are based upon a
percentage of participant contributions, as described above.
Allocations of net Plan earnings are based upon participant account
balances, as defined. Participants are only entitled to the vested
benefits.
(f) Vesting
Participants' contributions plus earnings thereon vest immediately.
Con-way's matching contributions generally vest after two years of
service with Con-way. If the employee is terminated prior to two years
of service, the matching contributions are forfeited. Forfeited shares
of Common and Preferred Stock are used to reduce future Con-way
contributions. At December 31, 2005 and 2004, forfeitures totaling
$162,998 and $128,000, respectively, were available to reduce future
contributions.
(g) Participant Loans
The Plan has a loan provision allowing participants access to funds on
a tax-free basis. Loans can be no less than $1,000 and cannot exceed
the lesser of $50,000 or 50% of a participant's vested account balance
(subject to administrative adjustment to assure compliance with the
50% limit). Loans can be made for a term not to exceed 4-1/2 years.
Loans outstanding at December 31, 2005 bear interest at rates ranging
from 5.00% to 10.50%. Principal and interest are paid ratably through
payroll deductions.
(h) Payments and Benefits
Participants can receive a total distribution from their accounts upon
death or termination of employment. Disabled participants can receive
a partial distribution of their accounts, excluding matching
contributions received after January 1, 2002, upon determination of
disability, provided they qualify for benefits under Con-way's long-
term disability coverage. Other types of withdrawals are permitted by
the Plan in limited situations. Participants can elect to have their
accounts distributed in a single lump sum or in a series of
substantially equal annual installments, as defined by the Plan.
Distributions will be made in cash except that (1) participant
accounts invested in Common Stock can, at the direction of the
participant, be paid in shares and (2) participant allocations of
Preferred Stock will be converted into shares of Common Stock and can,
at the direction of the participant, then be paid in common shares or
in cash.
(i) Plan Termination
Although Con-way has no current intention of terminating the Plan, it
may do so at any time by resolution of the board of directors. In the
event that the Plan is terminated, the net assets of the Plan shall be
distributed to participants in the amount credited to their accounts.
(2) Summary of Significant Accounting Policies
(a) Basis of Accounting
The accompanying financial statements have been prepared using the
accrual method of accounting.
(b) Financial Instruments
The investments in the accompanying financial statements are stated at
quoted market prices, which approximate fair value as of December 31,
2005 and 2004, except for (1) participant loans outstanding that are
valued at cost, which approximates fair value, and (2) Con-way
preferred stock, which does not have a quoted market value and is
stated at fair value, as determined by an annual independent
appraisal.
The notes payable of $77,000,000 and $89,700,000 at December 31, 2005
and 2004, respectively, in the accompanying financial statements are
stated at their carrying value. The fair value of the notes payable as
of December 31, 2005 and 2004 was approximately $83,000,000 and
$101,000,000, respectively. Fair value was estimated based on the
expected future payments discounted at market rates.
(c) Investments
The Plan offers various investments in securities that are generally
exposed to various risks, such as interest rate, credit and overall
market volatility risks. Due to the level of risk associated with
certain investment securities, it is reasonably possible that changes
in the value of investment securities will occur and that such changes
could materially affect amounts reported in the Statements of Net
Assets Available for Benefits.
(d) Income Recognition
The difference in market value from one period to the next is included
in net appreciation (depreciation) in fair value of investments in the
accompanying Statements of Changes in Net Assets Available for
Benefits. The net appreciation (depreciation) in fair value of
investments also includes realized gains and losses.
Interest income is recorded on the accrual basis. Dividends are
recorded on the ex-dividend date. Purchases and sales of securities
are recorded on the trade-date basis.
(e) Operating Expenses
During 2005 and 2004, all administrative expenses of the Plan were
paid by Con-way.
(f) Payment of Benefits
Benefits paid to participants are recorded upon distribution.
(g) Estimates
Con-way makes estimates and assumptions when preparing the financial
statements in conformity with U.S. generally accepted accounting
principles. These estimates and assumptions affect the amounts
reported in the accompanying financial statements and notes. Actual
results could differ from those estimates.
(3) Retiree Health Savings Account
Effective January 1, 2002, the Plan was amended to include a medical-
benefit component to fund a portion of the postretirement obligations for
retirees and their beneficiaries in accordance with Section 401(h) of the
Code. A separate account has been established and maintained in the Plan
for the net assets related to the medical-benefit component (the 401(h)
account). In accordance with Code Section 401(h), the Plan's investments
in the 401(h) account may not be used for, or diverted to, any other
purpose other than providing health benefits for retirees and their
beneficiaries. Plan participants do not contribute to the 401(h) account.
Employer contributions to the 401(h) account are determined annually at
the discretion of Con-way and are subject to certain limitations as
defined by the Code.
Upon reaching age 45, completing five or more years of service and
completing 1,000 or more paid hours of service in the Plan year, each
noncontractual employee is eligible for a retiree medical allocation with
respect to that Plan year. Retiree medical allocations for each 401(h)
Plan participant are equal, except participants retiring in the current
plan year, for whom the allocation will be a pro-rata portion of the
amount allocated to other participants based on the number of quarters
employed in the year of retirement. Benefits to individual participants
are limited to the total accumulated retiree medical allocation, plus
interest credited at an annual rate equal to the five-year Treasury
Constant Maturity rate as published by the Federal Reserve Board. In
order to access their benefit balance during retirement, a participant
must be at least age 55 with at least 10 years of service at retirement,
or be at least age 65 at retirement. Any remaining unclaimed benefit will
be forfeited to the Plan upon a participant's death or termination of
employment prior to retirement eligibility.
(4) Investments
The following investments represent 5% or more of the Plan's net assets
as of December 31, 2005 or 2004:
2005 2004
------------ ------------
Participant-directed investments:
Shares in registered investment companies:
T. Rowe Price Growth Stock Fund, 4,203,011 and
5,161,418 shares, respectively $119,365,513 $137,655,027
T. Rowe Price Equity Income Fund, 3,643,492 and
4,188,428 shares, respectively 94,439,308 111,370,306
T. Rowe Price Science and Technology Fund,
3,845,826 and 4,874,452 shares, respectively 75,262,820 93,102,041
Common trust funds:
T. Rowe Price U.S. Treasury Money Market Trust,
82,352,262 and 86,891,263 shares, respectively 82,352,262 86,891,263
T. Rowe Price Retirement Strategy Trust-Balanced,
1,745,491 and 1,995,902 shares, respectively 45,417,666 49,458,452
Participant loans 50,780,054 54,838,141
Con-way equity:
Unrestricted Con-way Common Stock, 2,655,163 and
1,176,565 shares, respectively 148,397,087 58,945,926
Con-way Preferred Stock - Allocated, 351,368 and
zero shares, respectively 92,455,475 -
Nonparticipant-directed investments:
Restricted Con-way Common Stock, zero and
2,011,670 shares, respectively - 100,784,667
Con-way Preferred Stock - Allocated, zero and
395,587 shares, respectively - 100,874,660
Con-way Preferred Stock - Unallocated, 285,846 and
342,110 shares, respectively 75,214,555 87,238,011
The Plan's investments (including gains and losses on investments bought
and sold, as well as held during the year) appreciated in value as
follows:
Years ended December 31
-------------------------
2005 2004
------------ ------------
Shares in registered investment companies $ 21,398,100 $ 38,866,209
Common trust funds 3,903,738 7,925,263
Con-way Common Stock 14,230,417 51,419,549
Con-way Preferred Stock 2,162,485 28,029,143
------------ ------------
$ 41,694,740 $126,240,164
============ ============
In May 1989, the Plan purchased 986,259 shares of Preferred Stock for
$150,009,863 using proceeds from the issuance of the notes described in
note 5. The Preferred Stock can only be issued to and held by the Plan
Trustee. The shares are held by the Trustee and allocated to participant
accounts. Upon allocation, the shares are first used to pay the Preferred
Stock cash dividend on shares previously allocated to the participants
with the remainder used to satisfy a portion of Con-way's matching
contribution requirement. In connection with a participant's account
distribution, the Preferred Stock is automatically converted into Common
Stock at a rate generally equal to that number of shares of Common Stock
that could be purchased for $152.10, but not less than the minimum
conversion rate of 4.708 shares of Common Stock for each share of
Preferred Stock.
At December 31, 2005, outstanding Preferred Stock of 641,359 shares
consisted of 377,762 allocated shares and 263,597 unallocated shares.
Allocated shares at December 31, 2005 included 373,616 shares allocated
to TASP participant accounts and 4,146 shares allocated to MWF Savings
Plan participant accounts. At December 31, 2004, outstanding Preferred
Stock of 742,995 shares consisted of 423,586 allocated shares and
319,409 unallocated shares. Allocated shares at December 31, 2004
included 418,286 shares allocated to TASP participant accounts and 5,300
shares allocated to MWF Savings Plan participant accounts. Unallocated
shares at December 31, 2005 and 2004 were pledged as collateral against
the Plan Notes, as described below. Preferred Stock of 22,248 and
22,699 shares were allocated to participant accounts after December 31,
2005 and 2004, respectively, but related to participant activity for the
years ended December 31, 2005 and 2004, respectively. Accordingly, this
Preferred Stock is accrued as Due from (Due to) the Preferred Stock Fund
- Unallocated (Preferred Stock Fund - Allocated) to reflect the accrued
allocation between funds. Con-way preferred stock is allocated at
historical cost.
(5) Notes Payable
On July 18, 1989, the Plan completed the sale of $150,000,000 in
aggregate principal amount of notes (the Plan Notes) to a group of
institutional investors. The proceeds from the sale of the original Plan
Notes were used to repay the $150,000,000 bridge loan from Con-way to the
Plan. The bridge loan had earlier been made to finance the purchase of
the Preferred Stock.
Con-way guarantees the Plan Notes. As of December 31, 2005, there was
$15,000,000 aggregate principal amount of Series A Plan Notes
outstanding, bearing interest at an annual rate of 6.00% and maturing on
January 1, 2006, and $62,000,000 aggregate principal amount of Series B
Plan Notes outstanding, bearing interest at an annual rate of 8.54% and
maturing on January 1, 2009. On January 3, 2006 the remaining
$15,000,000 Series A Plan Notes were repaid.
Holders of the Series B Plan Notes have the right to require Con-way to
repurchase those notes if, among other things, both Moody's and Standard
& Poor's have publicly rated Con-way's long-term senior debt at less than
investment grade unless, within 45 days, Con-way shall have obtained,
through a guarantee, letter of credit or other permitted credit
enhancement or otherwise, a credit rating for such notes of at least "A"
from Moody's or Standard & Poor's (or another nationally recognized
rating agency selected by the holders of such notes) and shall maintain a
rating on such notes of "A" or better thereafter. At December 31, 2005,
Con-way's senior long-term debt was rated as investment grade by both
Moody's (Baa3) and Standard and Poor's (BBB-). On February 1, 2006,
Standard and Poor's raised Con-way's senior long-term debt rating to
"BBB" from "BBB-."
The interest expense on all Plan Notes is payable semiannually on
January 1 and July 1 and is subject to adjustment in certain
circumstances including some changes in applicable tax laws. For the
years ended December 31, 2005 and 2004, principal payments were
$12,700,000 and $12,000,000, respectively.
Future maturities of the Plan Notes to be paid from excess Preferred
Stock cash dividends and/or additional cash contributions from Con-way
are as follows:
Series A Series B Total
------------ ------------ ------------
2006 $ 15,000,000 $ - $ 15,000,000
2007 - 18,600,000 18,600,000
2008 - 20,700,000 20,700,000
2009 - 22,700,000 22,700,000
------------ ------------ ------------
$ 15,000,000 $ 62,000,000 $ 77,000,000
============ ============ ============
(6) Income Tax Status
The Internal Revenue Service has determined and informed Con-way by a
letter dated August 20, 2003 that the Plan and related trust are designed
in accordance with applicable sections of the Code. The Plan has been
amended since receiving the determination letter. However, the Plan
administrator believes that the Plan is designed and is currently being
operated in compliance with the applicable requirements of the Code.
Therefore, the Plan administrator believes that the Plan was qualified
and the related trust was tax exempt as of the financial statement date.
(7) Related Party Transactions
Certain Plan investments are shares in registered investment companies
and common trust funds managed by T. Rowe Price, the Plan trustee, as
defined. Therefore, these investments and investment transactions
qualify as party-in-interest transactions.
(8) Reconciliation to Form 5500
The following is a reconciliation of net assets available for plan
benefits.
December 31
-------------------------
2005 2004
------------ ------------
Net assets available for benefits -
financial statements $898,544,774 $965,072,985
Net assets held in 401(h) account included
as assets in Form 5500:
Employer contribution receivable 4,121,029 4,608,136
Shares in registered investment companies 13,728,486 9,104,050
------------ ------------
Net assets available for benefits - Form 5500 $916,394,289 $978,785,171
============ ============
The assets in the 401(h) account included in Form 5500 are not available
to pay 401(k) benefits and can be used only to pay retiree health
benefits.
The following are reconciliations of the changes in net assets available
for plan benefits:
Retiree
Health
Savings
Account
Financial (401(h)
statements Account) Form 5500
------------- ------------- -------------
Year ended December 31, 2005:
Net appreciation in
fair value of investments $ 41,694,740 $ 351,626 $ 42,046,366
Dividend and interest income 15,011,290 - 15,011,290
Con-way contributions 19,782,024 4,121,029 23,903,053
Distributions to participants (203,486,154) (335,326) (203,821,480)
Year ended December 31, 2004:
Net appreciation in
fair value of investments $126,240,164 $ 310,224 $ 126,550,388
Dividend and interest income 14,674,597 - 14,674,597
Con-way contributions 19,735,031 4,608,136 24,343,167
Distributions to participants (52,004,769) (134,518) (52,139,287)
Schedule I
CNF INC. THRIFT AND STOCK PLAN
EIN 94-1444798
Plan No. 003
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2005
Identity
of issue
borrower, Description of investment
lessor including maturity date,
or similar rate of interest, collateral, Current
party par or maturity value Cost value
--------------- --------------------------------- ------------ ------------
Shares in registered
investment companies:
*T. Rowe Price Growth Stock Fund
(4,203,011.004 shares) $108,154,921 $119,365,513
*T. Rowe Price Equity Income Fund
(3,643,491.832 shares) 85,763,517 94,439,308
*T. Rowe Price Science and Technology Fund
(3,845,826.282 shares) 95,683,035 75,262,820
*T. Rowe Price International Stock Fund
(1,997,239.505 shares) 25,363,590 29,539,172
*T. Rowe Price Small-Cap Stock Fund
(864,026.84 shares) 24,219,360 28,348,721
Allianz Global PIMCO Total Return Fund
Investors (3,320,997.900 shares) 35,494,154 34,870,478
J.P. Morgan Undiscovered Managers
Investment Small Cap Growth Fund
Management, Inc (532,532.898 shares) 4,769,826 5,453,137
*T. Rowe Price Retirement Income Fund
(100,965.68 shares) 1,214,168 1,258,032
*T. Rowe Price Retirement 2005 Fund
(111,859.078 shares) 1,165,194 1,215,908
*T. Rowe Price Retirement 2010 Fund
(521,504.023 shares) 7,309,779 7,598,314
*T. Rowe Price Retirement 2015 Fund
(787,036.554 shares) 8,386,255 8,830,550
*T. Rowe Price Retirement 2020 Fund
(786,027.294 shares) 11,663,930 12,285,607
*T. Rowe Price Retirement 2025 Fund
(513,461.350 shares) 5,553,219 5,889,402
*T. Rowe Price Retirement 2030 Fund
(281,854.083 shares) 4,358,530 4,647,774
*T. Rowe Price Retirement 2035 Fund
(118,482.726 shares) 1,294,745 1,376,769
*T. Rowe Price Retirement 2040 Fund
(95,854.935 shares) 1,516,212 1,588,316
*T. Rowe Price Retirement 2045 Fund
(13,734.981 shares) 146,288 148,887
Common trust funds:
*T. Rowe Price Equity Index Trust
(899,010.895 shares) 27,299,119 32,193,580
*T. Rowe Price Bond Index Trust
(554,390.840 shares) 10,990,941 12,462,706
*T. Rowe Price U.S. Treasury Money
Market Trust
(82,352,262.400 shares) 82,352,262 82,352,262
*T. Rowe Price Retirement Strategy
Trust-Balanced
(1,745,490.621 shares) 36,448,701 45,417,666
Common stock:
*Con-way Inc. Con-way Common Stock
(2,655,163.479 shares) 88,558,188 148,397,087
Preferred stock:
*Con-way Inc. Con-way Preferred
Stock - Allocated
(351,368.048 shares) 53,425,345 92,455,475
*Con-way Inc. Con-way Preferred
Stock - Unallocated
(285,845.608 shares) 43,477,117 75,214,555
Participant loans:
*Plan
Participants Participant loans with interest
from 5.00% to 10.50% and
maturity dates from 2006 to 2010 - 50,780,054
------------
971,392,093
Investments held in 401(h) account:
Allianz Global PIMCO Total Return Fund
Investors (1,307,474.848 shares) 14,107,478 13,728,486
------------
$985,120,579
============
*Represents a party-in-interest as of December 31, 2005.
Note: Cost is calculated using the moving-average method.
See accompanying report of independent registered public accounting firm.