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 June 30, 2004

                                  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 July 30, 2004:  50,939,112



                               CNF INC.
                               FORM 10-Q
                      Quarter Ended June 30, 2004

_______________________________________________________________________
_______________________________________________________________________


                                 INDEX



PART I.   FINANCIAL INFORMATION                                    Page

  Item 1. Financial Statements

          Consolidated Balance Sheets -
            June 30, 2004 and December 31, 2003                       3

          Statements of Consolidated Income -
            Three and Six Months Ended June 30, 2004 and 2003         5

          Statements of Consolidated Cash Flows -
            Six Months Ended June 30, 2004 and 2003                   6

          Notes to Consolidated Financial Statements                  7

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

  Item 3. Quantitative and Qualitative Disclosures about Market
            Risk                                                     30

  Item 4. Controls and Procedures                                    31


PART II.  OTHER INFORMATION

  Item 1. Legal Proceedings                                          32

  Item 6. Exhibits and Reports on Form 8-K                           33

  Signatures                                                         34


                                 PAGE 3

                     PART I. FINANCIAL INFORMATION



ITEM 1.  Financial Statements


                                   CNF INC.
                        CONSOLIDATED BALANCE SHEETS
                           (Dollars in thousands)


                                                June 30,
                                                 2004             December 31,
ASSETS                                        (Unaudited)            2003
------                                        -----------         -----------
Current Assets
        Cash and cash equivalents               $605,622            $321,460
        Trade accounts receivable, net           809,308             769,707
        Other accounts receivable                 95,217              68,611
        Operating supplies, at lower of
          average cost or market                  18,392              14,333
        Prepaid expenses                          55,085              53,144
        Deferred income taxes                    100,035              89,440
                                              -----------         -----------
          Total Current Assets                 1,683,659           1,316,695
                                              -----------         -----------


Property, Plant and Equipment, at Cost
        Land                                     159,709             159,645
        Buildings and leasehold improvements     808,892             792,289
        Revenue equipment                        648,309             652,818
        Other equipment                          374,080             373,034
                                              -----------         -----------
                                               1,990,990           1,977,786
        Accumulated depreciation
          and amortization                    (1,009,162)           (980,331)
                                              -----------         -----------
                                                 981,828             997,455
                                              -----------         -----------


Other Assets
        Deferred charges and other
          assets (Note 3)                         69,322             130,324
        Capitalized software, net                 65,461              68,589
        Goodwill, net                            240,673             240,671
                                              -----------         -----------
                                                 375,456             439,584
                                              -----------         -----------

Total Assets                                  $3,040,943          $2,753,734
                                              ===========         ===========



          The accompanying notes are an integral part of these statements.


                                 PAGE 4

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


                                                June 30,
                                                 2004             December 31,
LIABILITIES AND SHAREHOLDERS' EQUITY          (Unaudited)            2003
------------------------------------          -----------         -----------


Current Liabilities
        Accounts payable                        $406,457            $354,401
        Accrued liabilities (Note 7)             331,560             320,250
        Accrued claims costs                     124,527             120,730
        Current maturities of long-term debt
          and capital leases (Note 6)            112,902              14,230
                                              -----------         -----------
                Total Current Liabilities        975,446             809,611


Long-Term Liabilities
        Long-term debt and
          guarantees (Note 6)                    603,681             554,981
        Long-term obligations under
          capital leases                         110,112             110,199
        Accrued claims costs                     105,625             114,793
        Employee benefits (Note 4)               269,101             269,318
        Other liabilities and
          deferred credits                        40,780              38,149
        Deferred income taxes                     37,806              37,875
                                              -----------         -----------
                Total Liabilities              2,142,551           1,934,926
                                              -----------         -----------

Commitments and Contingencies (Note 8)

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 751,849 and
          763,674 shares, respectively                 8                   8
        Additional paid-in capital,
          preferred stock                        114,349             116,147
        Deferred compensation,
          Thrift and Stock Plan                  (53,427)            (57,687)
                                              -----------         -----------
                Total Preferred
                  Shareholders' Equity            60,930              58,468
                                              -----------         -----------
        Common stock, $.625 par value;
          authorized 100,000,000 shares;
          issued 57,207,901 and
          56,436,981 shares, respectively         35,755              35,273
        Additional paid-in capital,
          common stock                           373,899             356,700
        Retained earnings                        620,591             570,751
        Deferred compensation,
          restricted stock                        (4,067)             (6,188)
        Cost of repurchased common stock
          (6,402,718 and 6,459,732 shares,
          respectively)                         (157,867)           (159,273)
                                              -----------         -----------
                                                 868,311             797,263
        Accumulated Other
          Comprehensive Loss (Note 5)            (30,849)            (36,923)
                                              -----------         -----------
                Total Common Shareholders'
                  Equity                         837,462             760,340
                                              -----------         -----------
                Total Shareholders' Equity       898,392             818,808
                                              -----------         -----------
                    Total Liabilities and
                      Shareholders' Equity    $3,040,943          $2,753,734
                                              ===========         ===========


             The accompanying notes are an integral part of these statements.


                                 PAGE 5

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



                             Three Months Ended            Six Months Ended
                                   June 30,                    June 30,
                         -------------------------   -------------------------
                            2004          2003          2004           2003
                         -----------   -----------   -----------   -----------

REVENUES                 $1,441,726    $1,236,905    $2,790,131    $2,443,146

Costs and Expenses
   Operating expenses
     (Note 3)             1,207,450     1,042,036     2,345,954     2,055,707
   Selling, general
     and administrative
     expenses               128,853       124,053       253,927       242,343
   Depreciation              32,031        33,496        64,116        66,728
                         -----------   -----------   -----------   -----------
                          1,368,334     1,199,585     2,663,997     2,364,778
                         -----------   -----------   -----------   -----------
OPERATING INCOME             73,392        37,320       126,134        78,368
                         -----------   -----------   -----------   -----------

Other Income (Expense)
   Investment income          1,408           630         2,135         1,216
   Interest expense
     (Note 6)               (11,847)       (8,974)      (20,887)      (18,246)
   Miscellaneous, net        (1,469)        1,137        (2,572)       (1,790)
                         -----------   -----------   -----------   -----------
                            (11,908)       (7,207)      (21,324)      (18,820)
                         -----------   -----------   -----------   -----------

Income Before Taxes          61,484        30,113       104,810        59,548
   Income Tax Provision      23,979        11,744        40,876        23,224
                         -----------   -----------   -----------   -----------

Net Income                   37,505        18,369        63,934        36,324
   Preferred
     Stock Dividends          2,022         2,069         4,044         4,095
                         -----------   -----------   -----------   -----------
NET INCOME AVAILABLE
  TO COMMON
  SHAREHOLDERS              $35,483       $16,300       $59,890       $32,229
                         ===========   ===========   ===========   ===========

Weighted-Average Common
  Shares Outstanding
  (Note 1)
         Basic           50,319,659    49,494,145    50,075,246    49,445,348
         Diluted         56,883,738    57,127,187    56,981,429    54,004,772

Earnings per Common
  Share (Note 1)
         Basic                $0.71         $0.33         $1.20         $0.65
                         ===========   ===========   ===========   ===========
         Diluted              $0.64         $0.31         $1.09         $0.61
                         ===========   ===========   ===========   ===========


        The accompanying notes are an integral part of these statements.


                                 PAGE 6

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

                                                         Six Months Ended
                                                              June 30,
                                                      -------------------------
                                                          2004          2003
                                                      -----------   -----------
Cash and Cash Equivalents, Beginning of Period          $321,460      $270,404
                                                      -----------   -----------

Operating Activities
Net income                                                63,934        36,324
Adjustments to reconcile net income to net cash
  provided by operating activities:
    Depreciation and amortization, net of accretion       73,586        74,730
    Increase in deferred income taxes                         59        16,295
    Amortization of deferred compensation                  6,569         4,953
    Provision for uncollectible accounts                   5,650         6,092
    Equity in earnings of Vector joint venture            (5,380)       (6,548)
    Loss (Gain) on sales of property and
      equipment, net                                        (330)        1,782
    Loss from equity ventures                                  -         2,223
    Changes in assets and liabilities:
      Receivables                                        (40,567)       36,838
      Prepaid expenses                                    (1,941)       (7,504)
      Accounts payable                                    56,688        (6,592)
      Accrued liabilities, excluding accrued
        incentive compensation                           (16,139)       15,834
      Accrued incentive compensation                      33,406       (43,713)
      Accrued claims costs                                (5,371)      (19,614)
      Income taxes                                         7,271        38,293
      Employee benefits                                   (5,166)         (510)
      Accrued aircraft lease return provision             (5,002)      (29,186)
      Deferred charges and credits                        15,419        20,636
      Other                                               (1,824)        8,084
                                                      -----------   -----------
    Net Cash Provided by Operating Activities            180,862       148,417
                                                      -----------   -----------

Investing Activities
  Capital expenditures                                   (47,963)      (65,305)
  Software expenditures                                   (7,143)       (7,665)
  Proceeds from sales of property and equipment, net       7,771         4,554
                                                      -----------   -----------
    Net Cash Used in Investing Activities                (47,335)      (68,416)
                                                      -----------   -----------

Financing Activities
  Net proceeds from issuance of long-term debt           292,587         2,156
  Net repayment of long-term debt, guarantees and
    capital leases                                      (142,998)      (12,219)
  Proceeds from exercise of stock options                 17,055         1,805
  Payments of common dividends                           (10,050)       (9,911)
  Payments of preferred dividends                         (5,004)       (5,124)
                                                      -----------   -----------
    Net Cash Provided by (Used in)
      Financing Activities                               151,590       (23,293)
                                                      -----------   -----------

    Net Cash Provided by Continuing Operations           285,117        56,708
                                                      -----------   -----------
    Net Cash Provided by (Used in)
      Discontinued Operations                               (955)          206
                                                      -----------   -----------
    Increase in Cash and Cash Equivalents                284,162        56,914
                                                      -----------   -----------
  Cash and Cash Equivalents, End of Period              $605,622      $327,318
                                                      ===========   ===========

Supplemental Disclosure
  Cash Paid (Refunded) for income taxes, net             $31,813      $(32,275)
  Cash Paid for interest, net of amounts capitalized      18,377        18,285


            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 2003 Annual Report
on Form 10-K.

Earnings per Share ("EPS")

Basic EPS is computed by dividing reported net income available to
common shareholders by the weighted-average common shares outstanding.
Diluted EPS is calculated as follows:


(Dollars in thousands except     Three Months Ended        Six Months Ended
per share data)                      June 30,                  June 30,
                            ------------------------- -------------------------
                                2004         2003         2004         2003
Earnings:                   ------------ ------------ ------------ ------------
 Net income available to
  common shareholders       $    35,483  $    16,300  $    59,890  $    32,229
  Add-backs:
   Dividends on Series B
    preferred stock, net
    of replacement funding          343          367          651          691
   Interest expense on
    convertible subordinated
    debentures, net of trust
    dividend income (Note 6)        636          954        1,590           --
                            ------------ ------------ ------------ ------------
                            $    36,462  $    17,621  $    62,131  $    32,920
                            ============ ============ ============ ============
Shares:

 Weighted-average common
  shares outstanding         50,319,659   49,494,145   50,075,246   49,445,348
 Stock options                  941,041      386,228      762,311      437,610
 Series B preferred stock     3,539,705    4,121,814    3,539,705    4,121,814
 Convertible subordinated
  debentures (Note 6)         2,083,333    3,125,000    2,604,167           --
                            ------------ ------------ ------------ ------------
                             56,883,738   57,127,187   56,981,429   54,004,772
                            ============ ============ ============ ============

Diluted earnings per share  $      0.64  $      0.31  $      1.09  $      0.61
                            ============ ============ ============ ============

For the three and six months ended June 30, 2004, diluted shares
reflect the effect of CNF's redemption in June 2004 of its convertible
subordinated debentures, as more fully discussed in Note 6, "Debt."

For the six months ended June 30, 2003, the convertible subordinated
debentures 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 convertible subordinated debentures under the if-converted
method would have been 3,125,000 shares for the six months ended June
30, 2003.


                                 PAGE 8

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.

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     Three Months Ended        Six Months Ended
per share data)                       June 30,                 June 30,
                            ------------------------- -------------------------
                                2004         2003         2004         2003
                            ------------ ------------ ------------ ------------
Net income available to
 common shareholders,
 as reported                $    35,483  $    16,300  $    59,890  $    32,229
Additional compensation
 cost, net of tax, that
 would have been included
 in net income if
 the fair-value method had
 been applied                    (1,927)      (2,238)      (3,934)      (4,452)
                            ------------ ------------ ------------ ------------
Adjusted net income
 available to common
 shareholders as if the
 fair-value method had
 been applied               $    33,556  $    14,062  $    55,956  $    27,777
                            ============ ============ ============ ============

Earnings per share:
 Basic:
  As reported               $      0.71  $      0.33  $      1.20  $      0.65
                            ============ ============ ============ ============
  Adjusted                  $      0.67  $      0.28  $      1.12  $      0.56
                            ============ ============ ============ ============
 Diluted:
  As reported               $      0.64  $      0.31  $      1.09  $      0.61
                            ============ ============ ============ ============
  Adjusted                  $      0.61  $      0.27  $      1.02  $      0.53
                            ============ ============ ============ ============

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

Foreign Currency

CNF recognizes deferred taxes to reflect the effect of temporary
differences between tax and book accounting on the translation of
foreign subsidiary financial statements.  Based on expectations in
certain tax jurisdictions, CNF re-evaluated its assumptions regarding
the repatriation of foreign earnings in the first quarter of 2004.  CNF
will no longer assume that past and future earnings of foreign
subsidiaries are indefinitely reinvested.  Accordingly, CNF in the
first quarter of 2004 recorded a deferred tax asset of $9.4 million to
recognize the associated tax effect of the accumulated foreign currency
translation adjustment.

New Accounting Standards

In January 2003, the FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities: an Interpretation of ARB No. 51" ("FIN
46"). FIN 46 requires that all special-purpose entities be designated
as either a voting-interest entity or a variable-interest entity
("VIE").  A VIE is an entity for which equity investors do not have the
characteristics of a controlling financial interest or do not have
sufficient equity at risk for the VIE to finance its activities without
additional subordinated financial support from other parties.  A VIE is
required to be consolidated by its primary beneficiary if it does not
effectively disperse risks among parties involved.  The primary
beneficiary of a VIE is the party that absorbs a majority of the VIE's
expected losses or receives a majority of its expected residual
returns.

The implementation of FIN 46 was required for periods beginning after
June 15, 2003.  However, in October 2003, the FASB deferred the
effective date for applying FIN 46 to VIEs created before February 1,
2003 until the end of the first interim period ending after December
15, 2003.  In December 2003, the FASB revised FIN 46 ("FIN 46R") to
incorporate certain revisions, including the requirement to disregard
certain rights in determining whether an entity is the primary
beneficiary in a VIE.  Under FIN 46R, CNF was not the primary
beneficiary of CNF Trust 1 (the "Trust"), a wholly owned subsidiary,


                                 PAGE 9

and CNF was therefore required to deconsolidate the Trust effective in
the quarter ended March 31, 2004.  Accordingly, CNF's 5% convertible
subordinated debentures held by the Trust, which were redeemed by CNF
on June 1, 2004, were included in long-term debt at March 31, 2004, and
prior periods were restated to reflect adoption of FIN 46R, as more
fully discussed in Note 6, "Debt."


Reclassification

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

2.  Reporting Segments

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.

The Menlo Worldwide Forwarding ("Forwarding") segment consists of the
combined operating results of Menlo Worldwide Forwarding, Inc. ("MWF")
and its subsidiaries, Menlo Worldwide Expedite!, Inc. and a portion of
the operations of Emery Worldwide Airlines, Inc. ("EWA"), which ceased
air carrier operations in December 2001.


                                PAGE 10

Financial Data

Management evaluates segment performance primarily based on revenue
and operating income (loss); therefore, other non-operating items,
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 or capital employed.
Inter-segment revenue and related operating income have been
eliminated to reconcile to consolidated revenue and operating income.

                                Three Months Ended        Six Months Ended
                                    June 30,                 June 30,
(Dollars in thousands)      ------------------------- -------------------------
                                2004         2003         2004         2003
                            ------------ ------------ ------------ ------------
Revenues
 Con-Way Transportation
  Services                  $   657,541  $   541,446  $ 1,251,385  $ 1,060,554
 Menlo Worldwide
  Forwarding                    517,376      442,421    1,018,893      888,043
  Logistics                     265,857      253,012      518,647      494,514
                            ------------ ------------ ------------ ------------
                                783,233      695,433    1,537,540    1,382,557
 CNF Other                          952           26        1,206           35
                            ------------ ------------ ------------ ------------
                            $ 1,441,726  $ 1,236,905  $ 2,790,131  $ 2,443,146
                            ============ ============ ============ ============
Intersegment Revenue
 Eliminations by Segment
  Con-Way Transportation
   Services                 $     1,429  $       146  $     2,723  $       256
  Menlo Worldwide
   Forwarding                     3,324           48        5,871          120
   Logistics                         --        1,300           --        2,975
                            ------------ ------------ ------------ ------------
                                  3,324        1,348        5,871        3,095
  CNF Other                       6,564        5,595       12,664       10,736
                            ------------ ------------ ------------ ------------
                            $    11,317  $     7,089  $    21,258  $    14,087
                            ============ ============ ============ ============
Revenues before
 Intersegment Eliminations
  Con-Way Transportation
   Services                 $   658,970  $   541,592  $ 1,254,108  $ 1,060,810
  Menlo Worldwide
   Forwarding                   520,700      442,469    1,024,764      888,163
   Logistics                    265,857      254,312      518,647      497,489
                            ------------ ------------ ------------ ------------
                                786,557      696,781    1,543,411    1,385,652
  CNF Other                       7,516        5,621       13,870       10,771
  Intersegment Revenue
   Eliminations                 (11,317)      (7,089)     (21,258)     (14,087)
                            ------------ ------------ ------------ ------------
                            $ 1,441,726  $ 1,236,905  $ 2,790,131  $ 2,443,146
                            ============ ============ ============ ============

Operating Income (Loss)
 Con-Way Transportation
  Services                  $    67,136  $    43,575  $   118,241  $    80,767
 Menlo Worldwide
  Forwarding                     (2,355)     (13,818)      (8,764)     (19,249)
  Logistics                       6,549        6,303       13,055       12,339
  Other                           2,988        3,572        5,380        6,548
                            ------------ ------------ ------------ ------------
                                  7,182       (3,943)       9,671         (362)
 CNF Other                         (926)      (2,312)      (1,778)      (2,037)
                            ------------ ------------ ------------ ------------
                            $    73,392  $    37,320  $   126,134  $    78,368
                            ============ ============ ============ ============

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 provided for $5 billion in direct loss reimbursement and
other financial assistance.  In March 2002, Forwarding received an
initial $11.9 million payment under the Act, resulting in 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.


                                PAGE 11

3.   Investment in Unconsolidated Joint Venture

Vector SCM ("Vector") is a joint venture formed with General Motors
("GM") in December 2000 for the purpose of providing logistics
management services on a global basis for GM, and ultimately for
customers in addition to GM.  Although Menlo Worldwide, LLC ("MW") owns
a majority interest in Vector, MW's portion of Vector's operating
results are reported in the Menlo Worldwide Other reporting segment as
an equity-method investment based on GM's ability to control certain
operating decisions.  Vector is organized as a limited liability
company that has elected to be taxed as a partnership.  Therefore, the
joint venture partners are responsible for income taxes applicable to
their share of Vector's taxable income.  MW's portion of Vector's net
income, which is reported as a reduction of operating expenses in the
accompanying Statements of Consolidated Income, does not include any
provision for income taxes that will be incurred by CNF.  MW's
undistributed earnings from Vector at June 30, 2004 and December 31,
2003, before provision for CNF's related parent income taxes, was $28.0
million and $22.6 million, respectively.

Vector participates in CNF's centralized cash management system, and,
consequently, Vector's domestic trade accounts payable are paid by CNF
and settled through Vector's affiliate accounts with CNF.  In addition,
excess cash balances in Vector's bank accounts, if any, are invested by
CNF and settled through affiliate accounts, which earn interest income
based on a rate earned by CNF's cash-equivalent investments.  As a
result of Vector's excess cash invested by CNF, Vector's affiliate
receivable from CNF as of June 30, 2004 and December 31, 2003 was $21.0
million and $16.0 million, respectively.

As required by the Vector Agreements, CNF provides Vector with a $20
million line of credit for Vector's working capital and capital
expenditure requirements.  Under the credit facility, which matures on
December 13, 2005, Vector may obtain loans with an annual interest rate
based on the rate CNF pays under its $385 million revolving credit
facility.  CNF provides a portion of its $20 million credit commitment
to Vector through CNF's guarantee of $7.5 million of uncommitted local
currency overdraft facilities available to Vector by international
banks.  At June 30, 2004, there was no balance outstanding under
Vector's uncommitted local currency overdraft facilities and no
borrowings were directly payable to CNF.  At December 31, 2003, Vector
owed $5.8 million under the uncommitted local currency overdraft
facilities and no borrowings were directly payable to CNF.

CNF's capital transactions with Vector, including cash advances to and
from Vector under CNF's centralized cash management system and credit
facility described above, are reported as adjustments to MW's
investment in Vector in Deferred Charges and Other Assets in CNF's
Consolidated Balance Sheets.

4.  Employee Benefit Plans

Effective in 2004, CNF adopted the interim disclosure provisions of
SFAS No. 132R, "Employers' Disclosure about Pensions and Other
Postretirement Benefits, an Amendment of FASB Statements No. 87, 88 and
106 and a Revision of FASB Statement No. 132."  The revised statement
requires the disclosure of the components of the net periodic benefit
expense recognized in interim periods, which is summarized in the
tables below.
                                       Defined Benefit Pension Plans
                            ---------------------------------------------------
                                Three Months Ended        Six Months Ended
                                    June 30,                 June 30,
                            ------------------------- -------------------------
(Dollars in thousands)          2004         2003         2004         2003
                            ------------ ------------ ------------ ------------

 Service cost - benefits
  earned during the quarter $    12,083  $    10,966  $    27,474  $    21,931
 Interest cost on benefit
  obligation                     12,445       12,495       28,297       24,989
 Expected return on plan
  assets                        (12,227)     (10,391)     (27,802)     (20,782)
 Net amortization and
  deferral                        1,677        2,268        3,814        4,539
                            ------------ ------------ ------------ ------------
   Net periodic benefit
    expense                 $    13,978  $    15,338  $    31,783  $    30,677
                            ============ ============ ============ ============


                                PAGE 12

CNF previously disclosed in its financial statements for the quarter
ended March 31, 2004, that it expects to contribute $90.0 million to
its defined benefit pension plans in 2004.  As of June 30, 2004, CNF
has contributed $40.0 million to those plans.

                                        Postretirement Medical Plan
                            ---------------------------------------------------
                                Three Months Ended        Six Months Ended
                                    June 30,                 June 30,
                            ------------------------- -------------------------
(Dollars in thousands)          2004         2003         2004         2003
                            ------------ ------------ ------------ ------------

 Service cost - benefits
  earned during the quarter $       550  $       457  $     1,037  $       913
 Interest cost on benefit
  obligation                      1,666        1,384        3,143        2,768
 Net amortization and
  deferral                           79           65          149          131
                            ------------ ------------ ------------ ------------
   Net periodic benefit
    expense                 $     2,295  $     1,906  $     4,329  $     3,812
                            ============ ============ ============ ============

In December 2003, the Medicare Prescription Drug Improvement and
Modernization Act of 2003 (the "Act") was enacted in the U.S.  The Act
introduced a prescription drug benefit under Medicare, as well as a
federal subsidy to sponsors of retiree health benefit plans that
provide a prescription drug benefit that is at least actuarially
equivalent to Medicare's prescription drug benefit.  In January and May
2004, the FASB issued FASB Staff Position No. 106-1 and 106-2,
"Accounting and Disclosure Requirements Related to the Medicare
Prescription Drug, Improvement and Modernization Act of 2003" ("FSP 106-
1" and "FSP 106-2").

Under FSP 106-2, CNF concluded that its postretirement medical plan
provided an actuarially equivalent benefit and recognized the Act's
effect retrospectively to the date of enactment.  CNF's adoption of FSP
106-2 resulted in a $4.9 million reduction to its projected
postretirement benefit obligation, which will be recognized as a
reduction to its net periodic postretirement benefit expense in future
periods when costs are subsidized under the Act.  The effect of
adoption of FSP 106-2 on CNF's financial condition, results of
operations and cash flows for the three and six months ended June 30,
2004 was not significant.

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:

                               Three Months Ended        Six Months Ended
                                    June 30,                 June 30,
                            ------------------------- -------------------------
(Dollars in thousands)          2004         2003         2004         2003
                            ------------ ------------ ------------ ------------
Net income                  $    37,505  $    18,369  $    63,934  $    36,324

Other comprehensive income
(loss):
 Realized gain on
  marketable securities          (1,833)          --       (2,044)          --
 Change in fair value of
  cash flow hedge                    --          101           --          194
 Foreign currency
  translation adjustment
  (Note 1)                       (1,741)       3,420        8,118        3,438
                            ------------ ------------ ------------ ------------
                                 (3,574)       3,521        6,074        3,632
                            ------------ ------------ ------------ ------------
Comprehensive income        $    33,931       21,890       70,008       39,956
                            ============ ============ ============ ============


                                PAGE 13

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

                              June 30,   December 31,
(Dollars in thousands)          2004         2003
                            ------------ ------------
Unrealized gain on
 marketable securities      $        --  $     2,044
Accumulated foreign
 currency translation
 adjustments (Note 1)           (11,221)     (19,339)
Minimum pension liability
 adjustment                     (19,628)     (19,628)
   Accumulated other        ------------ ------------
    comprehensive loss      $   (30,849)     (36,923)
                            ============ ============


6.  Debt

Convertible Subordinated Debentures

On June 1, 2004, CNF redeemed $128.9 million aggregate principal amount
of its 5% Convertible Subordinated Debentures due 2012 (the
"Convertible Debentures").  The Convertible Debentures were redeemable
for cash 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.  CNF Trust 1 (the "Trust"), a trust wholly owned by CNF,
applied the proceeds from the redemption of the Convertible Debentures
to redeem CNF's $3.9 million interest in the common stock of the Trust
and $125 million of Term Convertible Securities, Series A ("TECONS"),
which the Trust issued to the public in June 1997.  In connection with
the redemption of the Convertible Debentures, CNF recognized $2.7
million of expenses in the second quarter of 2004 for an early
redemption call premium and for the write-off of the unamortized cost
of issuing the Convertible Debentures.

Prior to their redemption in June 2004, the Convertible Debentures were
reported in long-term debt as the result of CNF's adoption in the first
quarter of 2004 of the revised FASB Interpretation No. 46
"Consolidation of Variable Interest Entities, an Interpretation of ARB
No. 51" ("FIN 46R").  Under FIN 46R, CNF was not deemed to be the
primary beneficiary of the Trust and CNF was therefore required to
deconsolidate the Trust effective in the quarter ended March 31, 2004.
Prior to adoption of FIN 46R, CNF reported the TECONS as a mezzanine
security with cash distributions reported as a non-operating expense.
Under FIN 46R, CNF's consolidated financial statements, for all periods
presented, reflect the deconsolidation of the Trust.  Accordingly, long-
term debt and interest expense reflect the obligation and interest
cost, respectively, of the Convertible Debentures prior to their
redemption.  Also, prior to redemption of the Convertible Debentures,
CNF's $3.9 million interest in the common securities of the Trust is
reported as an investment in Deferred Charges and Other Assets while
dividend income on the common securities are reported by CNF as non-
operating income.

The TECONS, the Trust, and the Convertible Debentures are more fully
discussed in Note 9, "Preferred Securities of Subsidiary Trust," of
Item 8, "Financial Statements and Supplementary Data," in CNF's 2003
Annual Report on Form 10-K.

Senior Debentures due 2034

On April 27, 2004, CNF issued $300 million of 6.70% Senior Debentures
due 2034 in a private placement with exchange rights for proceeds of
$292.6 million, net of a $7.4 million discount.  In connection with the
issuance of the Senior Debentures, CNF capitalized $2.6 million of
underwriting fees and $0.3 million of related debt costs in the second
quarter, which will be amortized until maturity in 2034.  CNF used a
portion of the proceeds to redeem $128.9 million of CNF's Convertible
Debentures on June 1, 2004, as discussed above.  CNF intends to use the
remaining proceeds to repurchase from time to time or pay at maturity,
$100 million of 7.35% Notes due in June 2005, and for working capital
and general corporate purposes.

On July 27, 2004, CNF completed the exchange of registered senior
debentures (the "Senior Debentures") for the debentures issued in the
private placement. The Senior Debentures bear interest at the rate of
6.70% per year, payable semi-annually on May 1 and November 1 of each
year, beginning on November 1, 2004.  CNF may redeem the Senior
Debentures, in whole or in part, on not less than 30 nor more than 60
days' notice, at a redemption price equal to the greater of (1) the
principal amount being redeemed, or (2) the sum of the present values
of the remaining scheduled payments of principal and interest on the
Senior Debentures being redeemed, discounted at the redemption date on
a semiannual basis at the Treasury rate payable on an equivalent
debenture plus 35 basis points. The Senior Debentures were issued under
an indenture that restricts CNF's ability, with certain exceptions, to
incur debt secured by liens.



                                PAGE 14

Thrift and Stock Plan Notes

CNF guarantees the notes issued by CNF's Thrift and Stock Plan
("TASP"), as more fully discussed in Note 6, "Debt and Other Financing
Arrangements," of Item 8, "Financial Statements and Supplementary
Data," included in CNF's 2003 Annual Report on Form 10-K.

As of June 30, 2004, there was $27.7 million aggregate principal amount
of Series A TASP 6.00% notes outstanding and $62.0 million of Series B
TASP 8.54% notes outstanding.  Holders of the Series B notes issued by
CNF's TASP have the right to require CNF to repurchase those notes if,
among other things, both Moody's and Standard & Poor's have publicly
rated CNF's long-term senior debt at less than investment grade unless,
within 45 days, CNF 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.

Following CNF's issuance of debentures in April 2004, as described
above, Moody's and Standard & Poors affirmed their investment-grade
ratings on CNF's senior unsecured debt.  Also, Moody's upgraded its
outlook to "stable" from "negative."


7.  Restructuring Plans

2001 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.  CNF
announced in December 2001 that Forwarding 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.  As a result, EWA terminated the employment of all of its
pilots and crew members.  Those pilots and crew members 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 crew members protesting the cessation of EWA's air
carrier operations and Forwarding'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 provided for 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.

Forwarding's restructuring reserves decreased to $34.7 million at June
30, 2004 from $34.8 million at December 31, 2003, primarily due to
payments of restructuring-related obligations, partially offset by
proceeds from sales of aircraft equipment. No aircraft remained under
lease as of June 30, 2004.  Restructuring reserves at June 30, 2004
consisted primarily of CNF's estimated exposure related to the labor
matters described above, as well as other estimated remaining
restructuring-related obligations.

Refer to Note 3, "Restructuring Plans," of Item 8, "Financial
Statements and Supplementary Data," included in CNF's 2003 Annual
Report on Form 10-K for a more detailed discussion of Forwarding's 2001
restructuring plan.


2003 Restructuring Plan

In response to continued declines in North American air freight
revenue, Forwarding continued restructuring its operations in the
fourth quarter of 2003, primarily to reduce the costs of its North
American freight service center network.  Under the restructuring plan,
nine service centers were closed in markets for which Forwarding
believes it can utilize cartage agents to transport customer shipments
more cost effectively.  In connection with the restructuring plan,
Forwarding recognized a $7.8 million charge in the fourth quarter of
2003, primarily for the accrual of future lease payments on closed
facilities and employee termination costs.  Forwarding's reserves
related to the 2003 restructuring plan declined to $2.9 million at June
30, 2004, from $6.6 million at December 31, 2003, due to cash payments
related to employee terminations and lease payments on closed
facilities.  These payments are reflected in Forwarding's cash flows
when paid but are not included in Forwarding's operating expenses as
these costs were accrued in connection with the restructuring charge.
In addition to actions taken in connection with the restructuring
charge, Forwarding's restructuring plan also included the renegotiation
of contracts with third-party cartage agents and other service
providers.


                                PAGE 15

8.  Commitments and Contingencies

Spin-Off of CFC

On December 2, 1996, CNF completed the spin-off of Consolidated
Freightways Corporation ("CFC") to CNF's shareholders.  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.

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, could be material, and a
judgment against CNF for all or a significant part of these claims
could have a material adverse effect on CNF's financial condition, cash
flow and results of operations.

Prior to the enactment in April 2004 of the Pension Funding Equity Act
of 2004, if the multiemployer funds had asserted such claims against
CNF, CNF would have had a statutory obligation to make cash payments to
the funds prior to any arbitral or judicial decisions on the funds'
determinations.  Under the facts related to the CFC withdrawals and the
law in effect after enactment of the Pension Funding Equity Act of
2004, CNF would no longer be required to make such payments to the
multiemployer funds unless and until final decisions in arbitration
proceedings, or in court, upheld the funds' determinations.

As a result of the matters discussed above, 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 included in CNF's 2003 Annual Report
on Form 10-K.

CNF provides supply chain management services for commercial and
industrial shipments by land, air and sea throughout the world.  CNF's
principal businesses consist of Con-Way and the Menlo Worldwide group
of businesses.  However, for financial reporting purposes, CNF is
divided into five reporting segments.  The operating results of Con-
Way, primarily a provider of regional less-than-truckload ("LTL")
freight services, are reported as one reporting segment while Menlo
Worldwide is divided into three reporting segments: Forwarding,
primarily a global provider of air freight and ocean forwarding
services; Logistics, a provider of integrated contract logistics
solutions; and Menlo Worldwide Other, which consists of Vector, a joint
venture with General Motors ("GM") that serves as the lead logistics
manager for GM.  Also, certain corporate activities and the results of
Road Systems, a trailer manufacturer, are reported in the separate CNF
Other reporting segment.

CNF's operating results are generally expected to depend on the number
and weight of shipments transported, the prices received on those
shipments, and the mix of services provided to customers, as well as
the fixed and variable costs incurred by CNF in providing the services
and the ability to manage those costs under changing shipment levels.
Con-Way and Forwarding primarily transport shipments through freight
service center networks while Logistics and Vector manage the logistics
functions of their customers and primarily utilize third-party
transportation providers for the movement of customer shipments.


                         RESULTS OF OPERATIONS

CONSOLIDATED RESULTS

CNF in the second quarter of 2004 earned net income available to common
shareholders of $35.5 million ($0.64 per diluted share), more than
double the $16.3 million ($0.31 per diluted share) earned in last
year's second quarter.  Net income available to common shareholders in
the first half of 2004 was $59.9 million ($1.09 per diluted share), an
85.8% increase from $32.2 million ($0.61 per diluted share) earned in
the first half of 2003, which included a $7.2 million pre-tax net gain
($4.4 million after-tax or $0.08 per diluted share) from a payment
under the Air Transportation Safety and System Stabilization Act.
CNF's improved second-quarter and first-half net income in 2004 was
primarily due to higher operating income, partially offset by an
increase in other net non-operating expenses.

The following table compares operating results (dollars in thousands,
except per share amounts) for the three and six months ended June 30:


                               Three Months Ended        Six Months Ended
                                    June 30,                 June 30,
                            ------------------------- -------------------------
                                 2004         2003         2004         2003
                            ------------ ------------ ------------ ------------
 Revenues                   $ 1,441,726  $ 1,236,905  $ 2,790,131  $ 2,443,146
 Operating Income                73,392       37,320      126,134       78,368
 Net Income Available to
  Common Shareholders            35,483       16,300       59,890       32,229
 Diluted Earnings per Share $      0.64  $      0.31  $      1.09  $      0.61



                                PAGE 17

Amid improved global economic conditions, CNF's revenue and operating
income in the second quarter and first half of 2004 increased from the
same prior-year periods as both Con-Way and the Menlo Worldwide group
of businesses achieved improved operating results on continued revenue
growth.  CNF's second-quarter operating income rose 96.7% on a 16.6%
increase in revenue while consolidated operating income in the first
half of 2004 grew 61.0% on a 14.2% increase in revenue.  Significantly
higher operating income at Con-Way was due principally to operating
leverage and revenue growth while improvement in the collective
operating results of the Menlo Worldwide companies was primarily due to
reduced operating losses from Forwarding.

Con-Way's operating income grew 54.1% in the second quarter of 2004 to
a record $67.1 million and rose 46.4% to $118.2 million in the first
half of the year.  In 2004, the Menlo Worldwide companies reported
second-quarter and first-half operating income of $7.2 million and $9.7
million, respectively, compared to operating losses of $3.9 million and
$0.4 million, respectively, in the same periods of 2003.  The prior-
year first quarter benefited from Forwarding's $7.2 million net gain
from a payment under the Stabilization Act.  Forwarding accounted for
substantially all of the improvement in Menlo Worldwide's operating
results in 2004, as it reduced operating losses on growth in both
international and North American air freight revenue.  In 2004,
Logistics reported a 3.9% increase in second-quarter operating income,
and in the first half of the year, reported a 5.8% improvement in
operating income.  Vector's operating income of $3.0 million in the
second quarter of 2004 and $5.4 million in the first half of 2004,
which declined 16.3% and 17.8% from the respective periods last year,
reflects compensation earned under amended agreements with GM, its
joint venture partner and customer.

Other net expense increased $4.7 million in the second quarter of 2004
and rose $2.5 million in the first half of 2004, due primarily to
increases in interest expense and other net miscellaneous non-operating
expenses, partially offset by higher interest income on cash-equivalent
investments.  Interest expense in the second quarter and first half of
2004 rose $2.9 million and $2.7 million, respectively, due largely to
the net effect of financing transactions, including the issuance in May
2004 of 6.7% Senior Debentures and the redemption in June 2004 of 5%
Convertible Debentures, as more fully discussed, in Note 6, "Debt" of
Item 1, "Financial Statements."  In 2004, second-quarter and first-half
net increases in other miscellaneous non-operating expenses primarily
reflect $2.7 million of costs associated with the redemption of the
Convertible Debentures as well as declines in income from the cash-
surrender value of corporate-owned life insurance policies, partially
offset by a $2.0 million net gain from the sale of securities in the
second quarter of 2004 and equity venture losses included in the prior
year.  In 2003, CNF recognized second-quarter and first-half losses
from equity ventures of $0.9 million and $2.2 million, respectively.


CON-WAY TRANSPORTATION SERVICES

The following table compares operating results (dollars in thousands),
operating margins, and the percentage increase in selected operating
statistics of the Con-Way reporting segment:


                              Three Months Ended        Six Months Ended
                                    June 30,                 June 30,
                            ------------------------- -------------------------
                                 2004         2003         2004         2003
                            ------------ ------------ ------------ ------------
Summary of Operating
 Results
  Revenues                  $   657,541  $   541,446  $ 1,251,385  $ 1,060,554
  Operating Income               67,136       43,575      118,241       80,767
 Operating Margin                  10.2%         8.0%         9.4%         7.6%


                            2004 vs. 2003             2004 vs. 2003
                            -------------             -------------
Selected Regional-Carrier
 Operating Statistics
  Revenue per day                  +19.1%                    +15.2%
  Yield                             +2.8                      +1.7
  Weight per day:
    Less-than-truckload            +13.9                     +12.0
    Total                          +15.8                     +13.3


Con-Way's revenue in the second quarter and first half of 2004 rose
21.4% and 18.0%, respectively, from the same periods in 2003 due to
higher revenue from Con-Way's regional carriers and continued growth
from Con-Way's asset-light businesses, which include Con-Way NOW, Con-
Way Logistics, and Con-Way Air Express.  Revenue per day from the
regional carriers rose 19.1% and 15.2% from the second quarter and


                                PAGE 18

first half of 2003 on a 15.8% and 13.3% increase in weight per day
("weight"), respectively, and a 2.8% and 1.7% increase in revenue per
hundredweight ("yield"), respectively.   Weight improvement in the
second quarter and first half of 2004 was due primarily to
comparatively better economic conditions in the U.S., and to a lesser
extent, continued consolidation of the LTL industry.  Second-quarter
and first-half yield in 2004 reflects higher rates, an increase in fuel
surcharges and continued growth in higher-rated interregional joint
services.  Yields in 2004 were adversely affected by a 4.6% and 3.7%
increase in second-quarter and first-half weight per shipment,
respectively.  Rates typically decline when weight per shipment
increases, as freight with a higher weight per shipment typically has a
lower transportation cost per unit of weight. In the second quarter and
first half of 2004, Con-Way's asset-light businesses increased revenue
by 62.7% and 76.4%, respectively, from the same periods in 2003.  Con-
Way defines "asset-light" businesses as those that require a
comparatively smaller capital investment than its LTL operations.

Con-Way's second-quarter and first-half operating income in 2004
increased 54.1% and 46.4%, respectively, due primarily to higher
revenue from the regional carriers, as well as revenue growth from Con-
Way's asset-light businesses, which reduced their collective net
operating loss in the second quarter and first half of 2004 by $2.8
million and $5.5 million, respectively, over the same periods in 2003.
The improvement in Con-Way's operating margin in the second quarter and
first half of 2004 reflects operating leverage, as Con-Way's regional
carrier service center network accommodated additional shipments with
proportionally smaller cost increases.  Second-quarter and first-half
operating income in 2004 was affected by employee costs, which rose
9.8% and 12.9%, respectively, due primarily to increases in base
salaries, variable compensation, employee headcount and employee
benefits.

In June 2004, Con-Way announced the formation of a new operating
company, Con-Way Truckload ("CTL"), that is scheduled to begin
operations in the first quarter of 2005.  The new company will serve
Con-Way's three regional LTL carriers by providing linehaul service on
full loads of LTL shipments moving in transcontinental lanes and
eventually offer the services to other customers.  The formation of CTL
is expected to allow Con-Way to reduce linehaul expense, and protect
service with inter-company operations that operate in tandem with
current truckload vendors.  CTL will utilize Con-Way's existing
infrastructure and administrative support services to minimize the
required investment.  Con-Way's management expects the new company will
allow Con-Way to build a potential truckload revenue base by providing
truckload services to its customers, and does not expect that the new
operation will have a material effect on CNF's financial condition,
results of operations or cash flows as of and for the year ending
December 31, 2004.


MENLO WORLDWIDE

For financial reporting purposes, the Menlo Worldwide group is divided
into three reporting segments:  Forwarding, Logistics, and Menlo
Worldwide Other.  Vector SCM, a joint venture with GM, is reported in
the Menlo Worldwide Other segment as an equity-method investment.  In
2004, the Menlo Worldwide group of businesses reported second-quarter
operating income of $7.2 million on revenue of $783.2 million, and in
the first half of the year, reported operating income of $9.7 million
on revenue of $1.54 billion.


                                PAGE 19

FORWARDING

The following table compares operating results (dollars in thousands),
operating margins, and the percentage increase (decrease) in selected
operating statistics of the Forwarding reporting segment:

                               Three Months Ended         Six Months Ended
                                      June 30,                June 30,
                            ------------------------  ------------------------
                               2004         2003         2004         2003
                            -----------  -----------  -----------  -----------
Summary of Operating
  Results
    Revenues                $  517,376   $  442,421   $1,018,893   $  888,043
    Operating Loss (1)          (2,355)     (13,818)      (8,764)     (19,249)
    Operating Margin              -0.5%        -3.1%        -0.9%        -2.2%


                            2004 vs. 2003             2004 vs. 2003
                            -------------             -------------
Selected Air Freight
  Operating Statistics
    International
      Revenue per day            +22.8%                    +18.6%
      Weight per day             +20.6                     +20.5
      Yield                       +1.8                      -1.6
    North America
      Revenue per day             +6.6                      +3.6
      Weight per day              +7.5                      +7.3
      Yield                       -0.8                      -3.5

  (1)  The six months ended June 30, 2003 included a $7.2 million net gain
       from a payment under the Air Transportation Safety and System
       Stabilization Act.

Forwarding's revenue in the second quarter and first half of 2004 rose
16.9% and 14.7% over the respective periods last year, as improved
global economic conditions contributed to growth in both international
and domestic air freight revenue.
International air freight revenue per day in the second quarter and
first half of 2004 increased 22.8% and 18.6%, respectively, over the
same periods last year, while domestic airfreight revenue per day grew
6.6% and 3.6% from the same periods of 2003.  Forwarding's first
quarter of 2004 included one more working day than the same quarter of
last year.

International air freight revenue in the second quarter and first half
of 2004 rose considerably over the same periods last year due largely
to growth in average pounds transported ("weight") per day, which
reflects stronger business levels in the Asian, European, and Latin
American markets.  International yield in the second quarter and first
half of 2004 was positively affected by higher fuel-surcharge revenue,
but was adversely affected by an increase in the percentage of lower-
yield delivery services.  The decline in international yield in the
first half of 2004 was also due in part to reduced volumes of higher-
yield military supply business, which benefited the first quarter of
last year. Excluding fuel surcharges, second-quarter international
yield in 2004 rose 0.5% over last year while international yield in the
first half of the year fell 2.7% from the same period in 2003.

North American air freight revenue in the second quarter and first half
of 2004 increased over the same prior-year periods due primarily to an
increase in weight, partially offset by a decline in yield.  North
American yield in the second quarter of 2004 fell 0.8% including the
fuel-surcharge revenue and declined 0.6% excluding the effect of fuel
surcharges.  In the first half of the year, North American yield fell
3.5% with fuel surcharges and declined 4.2% excluding the fuel-
surcharge impact.

In 2004, Forwarding reduced its second-quarter operating loss by $11.5
million from last year's second quarter and, in the first half of 2004,
reduced its operating loss by $10.5 million from the same period of
2003, which benefited from a $7.2 million net gain from a Stabilization
Act payment, as more fully discussed below under " - Terrorist
Attacks."  Improved second-quarter and first-half operating results in
2004 were achieved principally from growth in air freight revenue.
Forwarding's international gross margin as a percentage of
international air freight revenue in the second quarter of 2004 was
essentially flat compared to the same period last year, but declined in
the first half of 2004 compared to the first half of last year.  Lower
international gross margin percentage in the first half of 2004 was due
primarily to reduced volumes of higher-yield military supply business,
which benefited gross margins in the first quarter of last year.
Second-quarter and first-half operating results in 2004 also reflect
higher fuel costs and employee-related expenses.  In the second quarter
of 2004, Forwarding's fuel surcharge revenue was insufficient to


                                PAGE 20

recover higher fuel costs.  Employee costs in the second quarter and
first half of 2004 rose 9.5% and 9.6%, respectively, due primarily to
increases in employee compensation (including variable compensation and
the effect of foreign currency fluctuations) and employee benefits,
partially offset by a reduction in employee headcount.

Restructuring Plans

      2001 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.  CNF
announced in December 2001 that Forwarding 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.  As a result, EWA terminated the employment of all of its
pilots and crew members.  Those pilots and crew members 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 crew members protesting the cessation of EWA's air
carrier operations and Forwarding'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 provided for 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.

Forwarding's restructuring reserves decreased to $34.7 million at June
30, 2004 from $34.8 million at December 31, 2003, primarily due to
payments of restructuring-related obligations, partially offset by
proceeds from sales of aircraft and equipment.  No aircraft remained
under lease as of June 30, 2004.  Restructuring reserves at June 30,
2004 consisted primarily of CNF's estimated exposure related to the
labor matters described above, as well as other estimated remaining
restructuring-related obligations.

Refer to Note 3, "Restructuring Plans," of Item 8, "Financial
Statements and Supplementary Data," included in CNF's 2003 Annual
Report on Form 10-K for a more detailed discussion of Forwarding's 2001
restructuring plan.

      2003 Restructuring Plan

In response to continued declines in North American air freight
revenue, Forwarding continued restructuring its operations in the
fourth quarter of 2003, primarily to reduce the costs of its North
American freight service center network.  Under the restructuring plan,
nine service centers were closed in markets for which Forwarding
believes it can utilize cartage agents to transport customer shipments
more cost effectively.  In connection with the restructuring plan,
Forwarding recognized a $7.8 million charge in the fourth quarter of
2003, primarily for the accrual of future lease payments on closed
facilities and employee termination costs.  Forwarding's reserves
related to the 2003 restructuring plan declined to $2.9 million at June
30, 2004, from $6.6 million at December 31, 2003, due to cash payments
related to employee terminations and lease payments on closed
facilities.  These payments are reflected in Forwarding's cash flows
when paid but are not included in Forwarding's operating expenses as
these costs were accrued in connection with the restructuring charge.
In addition to actions taken in connection with the restructuring
charge, Forwarding's restructuring plan also included the renegotiation
of contracts with third-party cartage agents and other service
providers.

Forwarding's restructuring charges recognized during 2001 and 2003
reflect CNF's estimate of the costs of the related restructuring
activities. CNF believes that these estimates are 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.

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 provided for $5 billion in direct loss reimbursement and
other financial assistance.  In March 2002, Forwarding received an
$11.9 million payment under the Act, resulting in 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.


                                PAGE 21

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 air freight services and the
demand for Forwarding's air freight 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.


LOGISTICS

The following table compares operating results (dollars in thousands)
and operating margins of the Logistics reporting segment:

                               Three Months Ended        Six Months Ended
                                     June 30,                 June 30,
                            ------------------------  ------------------------
                                2004         2003        2004          2003
                            -----------  -----------  -----------  -----------
Summary of Operating
  Results
    Revenues                $  265,857   $  253,012   $  518,647   $  494,514
    Operating Income             6,549        6,303       13,055       12,339
    Operating Margin               2.5%         2.5%         2.5%         2.5%


Logistics' revenue in the second quarter and first half of 2004
increased 5.1% and 4.9%, respectively, from the same periods in 2003,
due principally to an increase in warehouse management services and a
slight increase in carrier management services, partially offset by
lower revenue from contract carriage services.  Revenue from carrier
management services in the second quarter and first half of 2004
increased slightly despite the loss of a significant customer in the
fourth quarter of 2003, a division of a large company that terminated
the logistics outsourcing arrangements at many of its divisions.  The
customer accounted for 7.5% and 8.3% of Logistics' revenue in the
second quarter and first half of 2003, respectively, but was among
Logistics' lowest-margin accounts.  Logistics' operating income in the
second quarter and first half of 2004 grew 3.9% and 5.8%, respectively,
due largely to higher revenue.

Logistics' carrier-management 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,
which Logistics refers to as purchased transportation.  Logistics' net
revenue (revenue less purchased transportation) in the second quarter
and first half of 2004 was $76.4 million and $152.7 million,
respectively, and $73.2 million and $143.4 million in the comparative
periods of 2003, respectively.


MENLO WORLDWIDE OTHER

The Menlo Worldwide Other reporting segment consists of the results of
Vector, a joint venture formed with GM in December 2000 for the purpose
of providing logistics management services on a global basis for GM,
and ultimately for customers in addition to GM.  Prior to the
amendments described below, agreements pertaining to Vector
(collectively, "Vector Agreements") provided that Vector would be
compensated by sharing in efficiency gains and cost savings achieved
through the implementation of Approved Business Cases ("ABCs") and
other special projects in GM's North America region and GM's three
international regions.  An ABC is a project, developed with and
approved by GM, aimed at reducing costs, assuming operational
responsibilities, and/or achieving operational changes.

In August 2003, the Vector Agreements were amended, primarily to
expedite the transition of logistics management services in the North
America region from GM to Vector.  The amendments changed the
compensation principles for GM's North American logistics operations,
revised the allocation of Vector's profit between GM and Menlo
Worldwide, LLC ("MW"), and modified the formula for the valuation of
Vector in the event that MW exercises its Put Right, as described
below.

The amendments to the Vector Agreements provide for Vector to be
compensated for its management of logistics for all of GM's North
America operations rather than through its sharing in efficiency gains
and cost savings under individual and separately approved ABCs in North
America.  In each year of a five-year period retroactive to January 1,
2003, Vector will be compensated with a management fee based on
shipment volumes and can earn additional compensation if certain
performance criteria are achieved.  In accordance with GAAP,
compensation under the volume-based management fee will be recognized
as vehicles are shipped while performance-based compensation will not
be recognized until specified levels of cost savings are achieved,


                                PAGE 22

which will generally not be determinable until the fourth quarter of
each contract year.  Vector will also be compensated by GM for its
direct and administrative costs in North America, subject to certain
limitations.

The amended Vector Agreements also increase MW's allocation of profit
and loss from 80% to 85%.  Although MW owns a majority equity interest,
the operating results of Vector are reported as an equity-method
investment based on GM's ability to control certain operating
decisions.

Under the Vector Agreements, GM has the right to purchase MW's
membership interest in Vector ("Call Right") and MW has the right to
require GM to purchase MW's membership interest in Vector ("Put
Right").  The Call Right and Put Right are exercisable at the sole
discretion of GM and MW, respectively.  Under the amended Vector
Agreements, the amount payable by GM to MW under the Put Right is based
on a mutually agreed-upon estimated value for MW's membership interest
as of the contract amendment date and will decline on a straight-line
basis over an 8-year period beginning January 1, 2004.  Exercise of
MW's Put Right or GM's Call Right would result in MW retaining
commercialization contracts involving customers other than GM.

Operating income reported by the Menlo Worldwide Other segment declined
16.3% to $3.0 million in the second quarter of 2004 and fell 17.8% to
$5.4 million in the first half of 2004.  Vector began recognizing
compensation in accordance with the amended Vector Agreements in the
third quarter of 2003.  As a result, operating income in the second
quarter and first half of 2004 reflects the recognition of Vector's
compensation in accordance with the amended Vector Agreements while
operating income in the same periods of the prior year was determined
under the compensation principles of the original Vector Agreements, as
described above.

In each successive year covered by the amended Vector agreements,
management anticipates that performance-based compensation will
represent a growing percentage of compensation earned in GM's North
America region. Management believes that Vector's long-term
profitability growth depends on its ability to grow compensation earned
from commercialization activities and from GM's international regions
and aftermarket parts-supply operations, which are unaffected by the
amended Vector Agreements.

CNF OTHER

The CNF Other segment consists of the results of Road Systems and
certain corporate activities.  A majority of the revenue from Road
Systems was from sales to other CNF subsidiaries.   The CNF Other
second-quarter operating loss decreased to $0.9 million in 2004 from
$2.3 million in 2003, while the $1.8 million operating loss in the
first half of 2004 decreased from $2.0 million in 2003.  Operating
results for the CNF Other segment were affected by the sales of
corporate properties, which resulted in a $0.7 million first-quarter
net loss in 2004 and a $1.1 million second-quarter net loss in 2003.



                                PAGE 23

                    LIQUIDITY AND CAPITAL RESOURCES

In the first six months of 2004, cash and cash equivalents rose to
$605.6 million at June 30, 2004, as $180.9 million provided by
operating activities and $151.6 million provided by financing
activities significantly exceeded $47.3 million used in investing
activities.  The excess cash flow from operating and financing
activities increased cash and cash equivalents by $284.2 million.  Cash
provided by financing activities primarily reflects net proceeds of
$292.6 million received from the issuance of $300 million of Senior
Debentures in May 2004, partially offset by the redemption in June 2004
of its $128.9 million of Convertible Debentures, as more fully
discussed below and in Note 6, "Debt" of Item 1, "Financial
Statements."  CNF's cash flows (dollars in thousands) are summarized in
the table below.


                                           Six Months Ended
                                               June 30,
                                        ------------------------
                                           2004         2003
                                        -----------  -----------
Operating Activities
  Net income                            $   63,934   $   36,324
  Non-cash adjustments (1)                  80,154       99,527
                                        -----------  -----------
                                           144,088      135,851
  Changes in assets and liabilities
    Receivables                            (40,567)      36,838
    Accounts payable and accrued
      liabilities, excluding accrued
      incentive compensation                40,549        9,242
    Accrued incentive compensation          33,406      (43,713)
    Accrued aircraft leases and
      return provision                      (5,002)     (29,186)
    Income taxes                             7,271       38,293
    Employee benefits                       (5,166)        (510)
    Other                                    6,283        1,602
                                        -----------  -----------
                                            36,774       12,566

Net Cash Provided by Operating
  Activities                               180,862      148,417
                                        -----------  -----------

Net Cash Used in Investing
  Activities                               (47,335)     (68,416)
                                        -----------  -----------

Net Cash Provided by (Used in)
  Financing Activities                     151,590      (23,293)
                                        -----------  -----------

Net Cash Provided by Continuing
  Operations                               285,117       56,708
Net Cash Provided by (Used in)
  Discontinued Operations                     (955)         206
                                        -----------  -----------
Increase in Cash and Cash
  Equivalents                           $  284,162   $   56,914
                                        ===========  ===========

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


CONTINUING OPERATIONS

First-half cash flow from operations in 2004 was $180.9 million
compared to $148.4 million in 2003.  In the first half of 2004, an
increase in receivables used $40.6 million while the collective
increase in accounts payable and accrued liabilities (excluding accrued
incentive compensation) provided $40.5 million.  In the first half of
2004, accrued incentive compensation increased by $33.4 million while
the first half of the prior year reflects a $43.7 million reduction.
Changes in accrued incentive compensation reflect CNF's payment
schedule for its employee incentive plans, under which total incentive
compensation earned in an award year is paid to employees with a
partial payment in December of the award year and a final payment in
February of the next award year.  In the first half of 2004, incentive
compensation expense accruals exceeded payments, while in the first
half of last year, payments for incentive compensation exceeded expense
accruals.  Cash flow from operations in the first half of 2004 also
reflects $5.0 million in payments for restructuring-related aircraft
lease payments and return costs while the first half of 2003 includes
$29.2 million for that same purpose.  Changes in employee benefits in


                                PAGE 24

the first half of 2004 and 2003 reflect the net effect of defined
benefit pension plan funding contributions of $40.0 million and $25.0
million, respectively, as described below under "-Defined Benefit
Pension Plans," partially offset by expense accruals for CNF's defined
benefit plan obligation.

In June and July of 2004, CNF fully liquidated its corporate-owned life
insurance policies based on the volatility and insufficiency of returns
on the investments.  The cash-surrender value of policies liquidated in
the second quarter was $40.4 million and the remaining $14.1 million
was liquidated subsequent to the second quarter.  Prior to June 30,
2004, the cash-surrender value of liquidated policies was reported in
Other Assets in CNF's Consolidated Balance Sheets.  As of June 30,
2004, the $40.4 million cash-surrender value of policies liquidated in
the second quarter was recorded in Other Receivables to reflect amounts
receivable by CNF in connection with the liquidation.  Since all cash
payments for settlement of the investments were received by CNF
subsequent to the second quarter of 2004, cash proceeds from the
liquidation of the policies are not reflected in CNF's Consolidated
Statement of Cash Flows for the six months ended June 30, 2004.

Investing activities in the first half of 2004 used $47.3 million, a
decline from $68.4 million used in the first half of last year, due
primarily to $17.3 million of capital expenditure reductions, including
$12.0 million at Con-Way, $1.9 million at Forwarding, and $1.8 million
at Logistics.  In the first half of last year, Con-Way invested in
$54.7 million of capital acquisitions, primarily for revenue equipment.
In 2004, CNF anticipates capital expenditures of between $200 to $215
million, including an estimated $181 million for the acquisition of
additional tractor and trailer equipment at Con-Way to accommodate the
previously described increase in business levels.

Financing activities in the first six months of 2004 provided cash of
$151.6 million compared to cash used in financing activities of $23.3
million in 2003.  In April 2004, CNF issued $300 million of 6.70%
Senior Debentures due 2034 in a private placement with exchange rights
for net proceeds of $292.6 million.  CNF used a portion of the proceeds
to redeem $128.9 million of CNF's Convertible Debentures on June 1,
2004, as more fully discussed in Note 6, "Debt," of Item 1, "Financial
Statements."  CNF expects the remaining portion of the proceeds from
issuance of the Senior Debentures to pay from time to time or at
maturity its $100 million of 7.35% Notes due in June 2005, and for
working capital and general corporate purposes.  Financing activities
in the first six months of 2004 and 2003 also reflect dividend payments
and scheduled principal payments for the Thrift and Stock Plan notes
guaranteed by CNF.

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 June 30, 2004, no borrowings were outstanding under the
facility and $215.1 million of letters of credit were outstanding,
leaving $169.9 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 $134.8 million at June
30, 2004, which are available to support letters of credit, bank
guarantees, and overdraft facilities; at that date, a total of $105.1
million was outstanding under these facilities. Of the total letters of
credit outstanding at June 30, 2004, $242.7 million provided collateral
for CNF workers' compensation and vehicular self-insurance programs.
See "Other Matters - Forward-Looking Statements" below, and Note 6,
"Debt and Other Financing Arrangements," in Item 8, "Financial
Statements and Supplementary Data," of CNF's 2003 Annual Report on Form
10-K for additional information concerning CNF's $385 million credit
facility and some of its other debt instruments.

Defined Benefit Pension Plans

CNF periodically reviews the funding status of its defined benefit
pension plans 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").
Funding of CNF's defined benefit pensions is based on ERISA-defined
measurements rather than the recognition and measurement criteria
prescribed by accounting principles generally accepted in the United
States ("GAAP").

CNF currently estimates it will contribute $90 million to its defined
benefit pension plans in 2004, composed of $40 million paid in the
second quarter and $50 million of payments in the third quarter.  CNF
also made defined benefit pension plan contributions of $75.0 million
in 2003 (including $25.0 million in the first half of 2003),  $76.2
million in 2002 and $13.1 million in 2001, but made no contributions
from 1996 through 2000, due in part to the high rate of return realized
on plan assets and for the lack of tax deductibility of funding during
that period.  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 plans in the future.


                                PAGE 25

Contractual Cash Obligations

CNF's contractual cash obligations as of December 31, 2003 are
summarized in CNF's 2003 Annual Report on Form 10-K under Item 7,
"Management's Discussion and Analysis - Liquidity and Capital Resources
- Contractual Cash Obligations."  In the first half of 2004, there have
been no material changes in CNF's contractual cash obligations outside
the ordinary course of business, except for CNF's issuance of the
Senior Debentures in April 2004 and the redemption of its Convertible
Debentures in June 2004.  These financing transactions, as well as the
effect of CNF's adoption of FIN 46R, are more fully discussed above and
in Note 6, "Debt," of Item 1, "Financial Statements."


Other

CNF's debt-to-capital ratio increased to 47.9% at June 30, 2004 from
45.3% at December 31, 2003 due primarily to the net effect of the
second-quarter financing transactions described above, partially offset
by growth in retained earnings resulting from net income.

DISCONTINUED OPERATIONS

On December 2, 1996, CNF completed the spin-off of Consolidated
Freightways Corporation ("CFC") to CNF's shareholders.  CFC withdrew in
2002 from certain multiemployer pension funds, thereby incurring
withdrawal liabilities to such funds.  Prior to enactment in April 2004
of the Pension Funding Equity Act of 2004, if the multiemployer funds
had asserted claims against CNF for such liabilities, CNF would have
had a statutory obligation to make cash payments to the funds prior to
any arbitral or judicial decisions on the funds' determinations.  Under
the facts relating to the CFC withdrawals and the law in effect after
enactment of the Pension Funding Equity Act of 2004, CNF would no
longer be required to make such payments to the multiemployer funds
unless and until final decisions in arbitration proceedings, or in
court, upheld the funds' determination.  Refer to Note 8, "Commitments
and Contingencies," of Item 1, "Financial Statements."



                                PAGE 26

                             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
described below.

Self-Insurance Reserves

CNF uses a combination of insurance and self-insurance programs 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
undiscounted estimated accruals for these liabilities could be
significantly affected if actual costs differ from these assumptions
and historical trends.

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 a valuation allowance 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 carry forwards and carry
backs, 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 2003 and 2001 were based on
significant estimates and assumptions made by management.  Refer to the
"Menlo Worldwide - Forwarding - Restructuring Plans" section under
"Results of Operations" above for a description of the significant
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 Plans

CNF has defined benefit pension plans that cover 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 the discount rate
used to measure the present value of pension obligations, the assumed
rate of return on plan assets, which are both affected by economic
conditions, market fluctuations, and rate of compensation increase.
CNF adjusts its discount rate periodically by taking into account
changes in high-quality corporate bond yields and the guidance of its
outside actuaries.  CNF adjusts its assumed rate of return on plan
assets based on historic returns of the plan assets and current market
expectations.

CNF used a 6.75% discount rate for purposes of calculating its 2003
pension expense, but used a 6.25% discount rate for calculating its
2003 year-end pension liability and its 2004 pension expense, due
primarily to declines in high-quality corporate bond yields in 2003.


                                PAGE 27

By way of example, if all other factors were held constant, a 0.5%
decline in the discount rate would have an estimated $6 million
increase in 2004 annual pension expense.  CNF used an assumed rate of
return on plan assets of 9.0% in 2003 and will assume the same rate for
2004.  Using year-end plan asset values, a 0.5% decline in the assumed
rate of return on plan assets would have an estimated $3 million
increase in 2004 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.
Lower amortization of the unrecognized actuarial loss decreases the
annual pension expense in 2004 by approximately $1 million from annual
pension expense in 2003.

Goodwill and Other Long-Lived Assets

SFAS 142, "Goodwill and Other Intangible Assets" specifies that
goodwill and indefinite-lived intangible assets will not be amortized
but instead will be subject to an annual impairment test.  On an annual
basis in the fourth quarter and between annual tests in certain
circumstances, CNF utilizes a third-party independent valuation
consultant to perform an impairment test of goodwill associated with
the Forwarding reporting segment.  Based on an impairment test as of
December 31, 2003, which assumed improving cash flows, CNF was not
required to record a charge for goodwill impairment.

Consistent with SFAS 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," CNF performs an impairment analysis of long-lived
assets (other than goodwill or intangible assets) whenever
circumstances indicate that the carrying amount may not be recoverable.

In assessing the recoverability of goodwill and other long-lived
assets, 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, CNF may be required to record impairment charges
for goodwill or other long-lived 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.  See "- Forward-
Looking Statements" below, and Note 6, "Debt and Other Financing
Arrangements," in Item 8, "Financial Statements and Supplementary Data"
of CNF's 2003 Annual Report on Form 10-K."

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
December, 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 CNF Service Company 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
Administrative and Technology ("AdTech") Center in Portland, Oregon.
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.



                                PAGE 28

HOMELAND SECURITY

CNF is subject to compliance with cargo security and transportation
regulations issued by the Transportation Security Administration and by
the Department of Homeland Security.  CNF is not able to accurately
predict how new governmental regulation will affect 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 ability to serve
customers and on its financial condition, cash flows and results of
operations.

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.

NEW ACCOUNTING STANDARDS

In January 2003, the FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities: an Interpretation of ARB No. 51" ("FIN
46"). FIN 46 requires that all special-purpose entities be designated
as either a voting-interest entity or a variable-interest entity
("VIE").  A VIE is an entity for which equity investors do not have the
characteristics of a controlling financial interest or do not have
sufficient equity at risk for the VIE to finance its activities without
additional subordinated financial support from other parties.  A VIE is
required to be consolidated by its primary beneficiary if it does not
effectively disperse risks among parties involved.  The primary
beneficiary of a VIE is the party that absorbs a majority of the VIE's
expected losses or receives a majority of its expected residual
returns.

The implementation of FIN 46 was required for periods beginning after
June 15, 2003.  However, in October 2003, the FASB deferred the
effective date for applying FIN 46 to VIEs created before February 1,
2003 until the end of the first interim period ending after December
15, 2003.  In December 2003, the FASB revised FIN 46 ("FIN 46R") to
incorporate certain revisions, including the requirement to disregard
certain rights in determining whether an entity is the primary
beneficiary in a VIE.  Under FIN 46R, CNF was not the primary
beneficiary of CNF Trust 1 (the "Trust"), a wholly owned subsidiary,
and CNF was therefore required to deconsolidate the Trust effective in
the quarter ended March 31, 2004.  Accordingly, CNF's 5% Convertible
Debentures held by the Trust, which were redeemed by CNF on June 1,
2004, were included in long-term debt at March 31, 2004, and prior
periods were restated to reflect adoption of FIN 46R, as more fully
discussed in Note 6, "Debt" of Item 1, "Financial Statements."

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 its 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 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


                                PAGE 29

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 that CNF may, from time to time, be required to
     record impairment charges for goodwill and other long-lived assets;

  -  the possibility of defaults under CNF's $385 million credit
     agreement and other debt instruments, including defaults resulting from
     additional unusual charges or from any costs or expenses that CNF may
     incur, and the possibility that CNF may be required to repay certain
     indebtedness in the event that the ratings assigned to its long-term
     senior debt by credit rating agencies are reduced;

  -  labor matters, including the grievance by furloughed pilots and
     crew members, 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 February 2000 crash of an EWA aircraft and related 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 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.

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" in Item 1, "Financial Statements."



                                PAGE 30

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT 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 interest rate,
commodity 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 6, "Debt and Other Financing Arrangements," and Note 7,
"Leases" of CNF's 2003 Annual Report on Form 10-K.   In April 2004, CNF
issued $300 million of 6.70% Senior Debentures in a private placement
with exchange rights for net proceeds of $292.6 million.  CNF used a
portion of the proceeds to redeem $128.9 million of CNF's Convertible
Debentures on June 1, 2004 as more fully discussed in Note 6, "Debt" of
Item 1, "Financial Statements."  Given a hypothetical 10% change in
interest rates, the increase in fair value of CNF's long-term debt and
guarantees at June 30, 2004 would be approximately $36 million.

CNF held two freestanding interest rate swap derivatives at June 30,
2004 that were initially entered into as cash flow hedges to mitigate
the effects of interest rate volatility on floating-rate lease
payments.  In connection with Forwarding's 2001 restructuring plan,
hedge accounting was discontinued for these interest rate swaps when
EWA settled floating-rate operating leases hedged with the interest
rate swaps.  At June 30, 2004, CNF had not entered into any material
derivative contracts to hedge exposure to commodity prices or foreign
currency.



                                PAGE 31

ITEM 4.  CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures.  CNF's management, with the
participation of CNF's Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of CNF's disclosure controls
and procedures (as such term is defined in Rules 13a-15(e) and 15d-
15(e) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) as of the end of the period covered by this report.
Based on such evaluation, CNF's Chief Executive Officer and Chief
Financial Officer have concluded that, as of the end of such period,
CNF's disclosure controls and procedures are effective.

(b) Internal Control Over Financial Reporting.  There have not been any
changes in CNF's internal control over financial reporting (as such
term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act) during the fiscal quarter to which this report relates that have
materially affected, or are reasonably likely to materially affect,
CNF's internal control over financial reporting.



                                PAGE 32

                       PART II. OTHER INFORMATION

ITEM 1.  Legal Proceedings

Certain legal proceedings of CNF are also discussed in Note 8,
"Commitments and Contingencies," of Part 1, Item 1, "Financial
Statements."

In 2001, EWA 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
cooperated fully and provided the documents requested in those
subpoenas.  In September 2003, CNF received notice from the United
States Attorney's Office for the District of Columbia that EWA is being
considered for possible civil action under the False Claims Act for
allegedly submitting false invoices to the USPS for payment under the
Priority Mail contract.  EWA has entered into a tolling agreement with
the government in order to give the parties more time to investigate
the allegations.  EWA is in the process of conducting its own
investigation of the allegations and as a result CNF is currently
unable to predict the outcome of this matter.  Under the False Claims
Act, the government would be entitled to recover treble damages, plus
penalties, if a court was to ultimately conclude that EWA knowingly
submitted false invoices to the USPS.

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 National Transportation
Safety Board subsequently determined that the probable cause of the
crash was the disconnection of the right elevator control tab due to
improper maintenance, but was not able to determine whether the
maintenance errors occurred during the most recent heavy maintenance
"D" check by an outside vendor or during subsequent maintenance of the
aircraft.  MWF, EWA and CNF Inc. have been named as defendants in
wrongful death lawsuits brought by the families of the three deceased
crew members, 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 crew members, bringing the total number of terminated
employees in 2001 to 800. Those pilots and crew members are represented
by the Air Line Pilots Association ("ALPA") under a collective
bargaining agreement. Subsequently, ALPA filed a grievance on behalf of
the pilots and crew members protesting the cessation of EWA's air
carrier operations and Forwarding'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 provided for 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 and CNF Inc. are named as defendants in
a lawsuit filed in state court in California by approximately 140
former EWA pilots and crew members.  The lawsuit alleges wrongful
termination in connection with the termination 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.

CNF has become aware of information that Emery Transnational, a
Philippines-based joint venture in which MWF may be deemed to be a
controlling partner, may be in violation of the Foreign Corrupt
Practices Act.  CNF is conducting an internal investigation and has
notified the Department of Justice and the Securities and Exchange
Commission of this matter.  CNF will share the results of its internal
investigation, when completed, with the appropriate regulatory
agencies, and will fully cooperate with any investigations that may be
conducted by such regulatory agencies.

Certain current and former officers of CNF, EWA and Forwarding and
certain current and former directors of CNF have been named as
defendants in a purported shareholder derivative suit filed in
September 2003 in California Superior Court for the County of San
Mateo.  The complaint alleges breach of fiduciary duty, gross
mismanagement, waste and abuse of control relating to the management,
control and operation of EWA and Forwarding.  CNF is named only as a
nominal defendant and no relief is sought against it.  CNF maintains
insurance for the benefit of its officers and directors, and the
applicable insurance carriers have been notified of the claims asserted
in the lawsuit.



                                PAGE 33

ITEM 6.  Exhibits and Reports on Form 8-K

        (a)  Exhibits

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

             32  Certification of Officers pursuant to Section 906 of the
                 Sarbanes-Oxley Act of 2002

        (b)  Reports on Form 8-K

             On April 20, 2004, CNF filed a current report on Form 8-K
             to furnish under Item 12 CNF's press release presenting
             CNF's results for the three months ended March 31, 2004.



                                PAGE 34

                              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)


August 5, 2004                            /s/Chutta Ratnathicam
                                          -----------------------
                                          Chutta Ratnathicam
                                          Senior Vice President and
                                          Chief Financial Officer