UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2012

or

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

For the transition period from                 to                 

Commission File Number 1-05046

Con-way Inc.

(Exact name of registrant as specified in its charter)

Delaware	94-1444798
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2211 Old Earhart Road, Suite 100, Ann Arbor, MI	48105
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (734) 994-6600

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

Title of each class	Name of each exchange on which registered
Common Stock ($.625 par value)	New York Stock Exchange (NYSE)

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

7.25% Senior Notes due 2018

6.70% Senior Debentures due 2034

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    ýYes      oNo  

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    oYes      ýNo  

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ýYes      oNo  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    ýYes      oNo  

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer  ý    Accelerated filer  o    Non-accelerated filer  o    Smaller reporting company  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    oYes     ýNo  

The aggregate market value of the shares of common stock held by non-affiliates of the registrant on June 29, 2012 (based upon the closing price of the common stock as of that date on the NYSE) was approximately $1,658,974,756.

The number of shares of common stock outstanding as of January 31, 2013 was 55,999,176.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive proxy statement related to its annual meeting of shareholders scheduled to be held on May 7, 2013 are incorporated by reference into Part III of this Form 10-K.

Con-way Inc.

FORM 10-K

Year Ended December 31, 2012

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Table of Contents

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Item		Page
	PART I
1.	Business	1
1A.	Risk Factors	4
1B.	Unresolved Staff Comments	7
2.	Properties	8
3.	Legal Proceedings	8
4.	Mine Safety Disclosures	8
	Executive Officers of the Registrant	9
	PART II
5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	10
6.	Selected Financial Data	11
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
7A.	Quantitative and Qualitative Disclosures About Market Risk	33
	Report of Independent Registered Public Accounting Firm	34
8.	Financial Statements and Supplementary Data	35
9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	70
9A.	Controls and Procedures	70
9B.	Other Information	70
	PART III
10.	Directors, Executive Officers and Corporate Governance	71
11.	Executive Compensation	71
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	71
13.	Certain Relationships and Related Transactions, and Director Independence	72
14.	Principal Accounting Fees and Services	72
	PART IV
15.	Exhibits and Financial Statement Schedules	74

Con-way Inc.

FORM 10-K

Year Ended December 31, 2012

PART I

ITEM 1. BUSINESS

Overview

Con-way Inc. was incorporated in Delaware in 1958. Con-way Inc. and its subsidiaries (“Con-way” or “the Company”) provide transportation, logistics and supply-chain management services for a wide range of manufacturing, industrial and retail customers. Con-way’s business units operate in regional and transcontinental less-than-truckload and full-truckload freight transportation, contract logistics and supply-chain management, multimodal freight brokerage, and trailer manufacturing.

Reporting Segments

For financial reporting purposes, Con-way is divided into four reporting segments: Freight, Logistics, Truckload and Other. For financial information concerning Con-way’s geographic and reporting-segment operating results, refer to Note 13, “Segment Reporting,” of Item 8, “Financial Statements and Supplementary Data.”

Freight

The Freight segment consists of the operating results of the Con-way Freight business unit. Con-way Freight is a less-than-truckload (“LTL”) motor carrier that utilizes a network of freight service centers to provide day-definite regional, inter-regional and transcontinental less-than-truckload freight services throughout North America.

LTL carriers transport shipments from multiple shippers utilizing a network of freight service centers combined with a fleet of linehaul and pickup-and-delivery tractors and trailers. Freight is picked up from customers and consolidated for shipment at the originating service center. Freight is consolidated for transportation to the destination service centers or other intermediate service centers (referred to as freight assembly centers). At freight assembly centers, freight from various service centers can be reconsolidated for transportation to other freight assembly centers or destination service centers. From the destination service center, the freight is delivered to the customer. Typically, LTL shipments weigh between 100 and 15,000 pounds. In 2012, Con-way Freight’s average weight per shipment was 1,326 pounds.

The LTL trucking environment is highly competitive. Principal competitors of Con-way Freight include regional and national LTL companies, some of which are subsidiaries of global, integrated transportation service providers. Competition is based on freight rates, service, reliability, transit times and scope of operations.

Logistics

The Logistics segment consists of the operating results of the Menlo Worldwide Logistics business unit. Menlo Worldwide Logistics develops contract-logistics solutions, which can include managing complex distribution networks, and providing supply-chain engineering and consulting, and multimodal freight brokerage services. The term “supply chain” generally refers to a strategically designed process that directs the movement of materials and related information from the acquisition of raw materials to the delivery of products to the end-user.

Menlo Worldwide Logistics’ supply-chain management offerings are primarily related to transportation-management and contract-warehousing services. Transportation management refers to the management of asset-based carriers and third-party transportation providers for customers’ inbound and outbound supply-chain needs through the use of logistics management systems to consolidate, book and track shipments. Contract warehousing refers to the optimization and operation of warehouses for customers using technology and warehouse-management systems to reduce inventory carrying costs and supply-chain cycle times. For several customers, contract-warehousing operations include light assembly or kitting operations. Menlo Worldwide Logistics’ ability to link these systems with its customers’ internal enterprise resource-planning systems is intended to provide customers with improved visibility to their supply chains. Compensation from Menlo Worldwide Logistics’ customers takes different forms, including cost-plus, transactional, fixed-dollar, gain-sharing and consulting-fee arrangements.

Menlo Worldwide Logistics provides its services using a customer- or project-based approach when the supply-chain solution requires customer-specific transportation management, single-client warehouses, and/or single-customer technological solutions. However, Menlo Worldwide Logistics also utilizes a shared-resource, process-based approach that leverages a centralized transportation-management group, multi-client warehouses and technology to provide scalable solutions to multiple

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customers. Additionally, Menlo Worldwide Logistics segments its business based on customer type. These industry-focused groups leverage the capabilities of personnel, systems and solutions throughout the organization to give customers expertise in specific automotive, high-tech, government and consumer-products sectors.

In 2012, Menlo Worldwide Logistics’ three largest customers collectively accounted for 40.2% of the revenue and 16.2% of net revenue (revenue less purchased transportation) reported for the Logistics reporting segment. Menlo Worldwide Logistics’ largest customer accounted for 6.3% of the consolidated revenue of Con-way in 2012.

There are numerous competitors in the contract-logistics market that include domestic and foreign logistics companies, the logistics arms of integrated transportation companies, and contract manufacturers. However, Menlo Worldwide Logistics primarily competes against a limited number of major competitors that have sufficient resources to provide services under large logistics contracts. Competition for projects is generally based on price and the ability to rapidly implement technology-based transportation and logistics solutions.

Truckload

The Truckload segment consists of the operating results of the Con-way Truckload business unit. Con-way Truckload is a full-truckload motor carrier that utilizes a fleet of tractors and trailers to provide short- and long-haul, asset-based transportation services throughout North America. Con-way Truckload provides dry-van transportation services to manufacturing, industrial and retail customers while using single drivers as well as two-person driver teams over long-haul routes, with each trailer containing only one customer’s goods. This origin-to-destination freight movement limits intermediate handling and is not dependent on the same network of locations utilized by LTL carriers. On average, Con-way Truckload transports shipments more than 800 miles from origin to destination. Under its regional service offering, Con-way Truckload transports truckload shipments between 100 and 600 miles, including local-area service for truckload shipments of less than 100 miles.

Con-way Truckload offers “through-trailer” service into and out of Mexico through all major gateways in Texas, Arizona and California. This service eliminates the need for shipment transfer and/or storage fees at the border and typically involves equipment-interchange operations with various Mexican motor carriers. For a shipment with an origin or destination in Mexico, Con-way Truckload provides transportation for the domestic portion of the freight move, and a Mexican carrier provides the pick-up, linehaul and delivery services within Mexico.

The truckload market is fragmented with numerous carriers of varying sizes. Principal competitors of Con-way Truckload include other truckload carriers, logistics providers, railroads, private fleets, and to a lesser extent, LTL carriers. Competition is based on freight rates, service, reliability, transit times, and driver and equipment availability.

Other

The Other reporting segment consists of the operating results of Road Systems, a trailer manufacturer, and certain corporate activities for which the related income or expense has not been allocated to other reporting segments, including results related to corporate re-insurance activities and corporate properties. Road Systems primarily manufactures and refurbishes trailers for Con-way Freight and Con-way Truckload.

General

Employees

At December 31, 2012, Con-way had approximately 29,100 regular full-time employees. The approximate number of regular full-time employees by segment was as follows: Freight, 19,300; Logistics, 5,300; Truckload, 3,600; and Other, 900. The 900 employees included in the Other segment consist primarily of executive, technology and administrative positions that support Con-way’s operating subsidiaries.

Con-way’s business units utilize other sources of labor that provide flexibility in responding to varying levels of economic activity and customer demand. In addition to regular full-time employees, Con-way Freight employs part-time employees; Menlo Worldwide Logistics utilizes non-employee contract labor primarily related to its warehouse-management services; and Con-way Truckload contracts with owner-operators to transport shipments.

Cyclicality and Seasonality

Con-way’s operations are affected, in large part, by conditions in the cyclical markets of its customers and in the U.S. and global economies, as more fully discussed in Item 1A, “Risk Factors.”

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Con-way’s operating results are also affected by seasonal fluctuations that change demand for transportation services. In the Freight segment, the months of September, October and November typically have the highest business levels while the months of December, January and February usually have the lowest business levels. In the Truckload segment, the months of September and October typically have the highest business levels while the months of December and February usually have the lowest business levels. The Logistics segment does not generally experience seasonal fluctuations.

Price and Availability of Fuel

Con-way is exposed to the effects of changes in the price and availability of diesel fuel, as more fully discussed in Item 1A, “Risk Factors.”

Regulation

Ground Transportation

The motor-carrier industry is subject to federal regulation by the Federal Motor Carrier Safety Administration (“FMCSA”), the Pipeline and Hazardous Materials Safety Agency (“PHMSA”), and the Surface Transportation Board (“STB”), which are units of the U.S. Department of Transportation. The FMCSA publishes and enforces comprehensive trucking safety regulations and performs certain functions relating to motor-carrier registration, cargo and liability insurance, extension of credit to motor-carrier customers, and leasing of equipment by motor carriers from owner-operators. The PHMSA publishes and enforces regulations regarding the transportation of hazardous materials. The STB has authority to resolve certain types of pricing disputes and authorize certain types of intercarrier agreements.

The FMCSA operates the Compliance Safety Accountability (“CSA”) program in an effort to improve commercial truck and bus safety. A component of the CSA is the Safety Measurement System, which analyzes all safety-based violations to determine a commercial motor carrier's safety performance. This safety program allows the FMCSA to identify carriers with safety-performance issues and intervene to address a carrier's specific safety problems.

Federal law allows all states to impose insurance requirements on motor carriers conducting business within their borders, and empowers most states to require motor carriers conducting interstate operations through their territory to make annual filings verifying that they hold appropriate registrations from FMCSA. Motor carriers also must pay state fuel taxes and vehicle registration fees, which normally are apportioned on the basis of mileage operated in each state.

Hours of service (“HOS”) regulations establish the maximum number of hours that a commercial truck driver may work. The FMCSA issued a new HOS rule in December 2011. This rule reduces the number of hours a commercial truck driver may work during his or her work day. The full effects of this rule on various trucking operations are unclear due to a court challenge brought by the American Trucking Association. The major provisions of the new rule are scheduled to go into effect in July 2013 and Con-way is proceeding with plans to be in compliance at that time despite the uncertainty created by the court challenge. Should the courts require a change in the rule or in the effective date, Con-way will respond appropriately to ensure compliance. Additionally, in January 2011, the FMCSA issued a proposed rule requiring all motor carriers to use electronic onboard recorders (“EOBRs”) to monitor their drivers' compliance with HOS requirements. This rule was overturned by a court challenge, but it is expected that the agency will issue a new rule mandating the use of EOBRs. Con-way Truckload's entire fleet already utilizes EOBRs to capture HOS data, and Con-way Freight plans to implement the devices across its fleet.

Environmental

Con-way's operations involve the storage, handling and use of diesel fuel and other hazardous substances. Con-way is subject to laws and regulations that (1) govern activities or operations that may have adverse environmental effects such as discharges to air and water, and the handling and disposal practices for solid and hazardous waste, and (2) impose liability for the costs of cleaning up, and certain damages resulting from, sites of past spills, disposals, or other releases of hazardous materials. Environmental liabilities relating to Con-way's properties may be imposed regardless of whether Con-way leases or owns the properties in question and regardless of whether such environmental conditions were created by Con-way or by a prior owner or tenant, and also may be imposed with respect to properties that Con-way may have owned or leased in the past. Con-way has accrued for its estimate of remediation costs at these sites.

Homeland Security

Con-way is subject to compliance with various cargo-security and transportation regulations issued by the Department of Homeland Security, including regulation by the Transportation Security Administration and the Bureau of Customs and Border Protection.

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Other Information

Information Available on Website

Con-way makes available, free of charge, on its website at “www.con-way.com,” under the heading “Annual Reports & SEC Filings,” within the "Investors" tab, copies of its annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K and any amendments to those reports, in each case as soon as reasonably practicable after such reports are electronically filed with or furnished to the Securities and Exchange Commission.

In addition, Con-way makes available, free of charge, on its website at “www.con-way.com,” under the heading “Corporate Governance,” within the "Investors" tab, current copies of the following documents: (1) the charters of the Audit, Compensation, and Governance and Nominating Committees of its Board of Directors; (2) its Corporate Governance Guidelines; and (3) its Code of Business Ethics. Copies of these documents are also available in print to shareholders upon request, addressed to the Corporate Secretary at 2211 Old Earhart Road, Suite 100, Ann Arbor, Michigan 48105.

None of the information on Con-way’s website shall be deemed to be a part of this report.

Regulatory Certifications

In 2012, Con-way filed the written affirmations and Chief Executive Officer certifications required by Section 303A.12 of the NYSE Listing Manual and Section 302 of the Sarbanes-Oxley Act.

ITEM 1A. RISK FACTORS

Con-way’s consolidated financial condition, results of operations and cash flows could be adversely affected by various risks. These risks include, but are not limited to, the principal factors listed below and other matters set forth in this Annual Report on Form 10-K. You should carefully consider all of these risks before making any investment or other decisions.

Economic Cyclicality

Con-way’s operating results are affected, in large part, by cyclical conditions in its customers’ markets and in the U.S. and global economies. While economic conditions affect most companies, the transportation industry is cyclical and susceptible to trends in economic activity. When individuals and companies purchase and produce fewer goods, Con-way’s businesses transport fewer goods. In addition, Con-way Freight and Con-way Truckload are capital-intensive and Con-way Freight has a relatively high fixed-cost structure that is difficult to adjust to match shifting volume levels. Accordingly, any sustained weakness in demand or continued downturn or uncertainty in the economy generally would have an adverse effect on Con-way.

Government Regulation

Con-way is subject to various federal, state and local, as well as foreign, laws and regulations that apply to its business activities. These include regulations related to, among other things, driver hours-of-service limitations, labor-organizing activities, cargo-security requirements, anti-corruption and anti-bribery laws, tax laws, employment practices, and environmental matters, including potential limits on carbon emissions under climate-change legislation. The costs of compliance with, liabilities under, or violations of, existing or future laws or regulations could have an adverse effect on Con-way. Con-way is not able to accurately predict how new governmental laws and regulations, or changes to existing laws and regulations, will affect the transportation industry generally, or Con-way in particular. Although government regulation that affects Con-way and its competitors may simply result in higher costs that can be passed to customers with no adverse consequences, there can be no assurance that this will be the case. As a result, Con-way believes that any additional measures that may be required by future laws and regulations or changes to existing laws and regulations could result in additional costs and could have an adverse effect on Con-way.

Concern over climate change has led to increased legislative and regulatory efforts to limit carbon dioxide and other greenhouse gas emissions. Even without such regulation, Con-way’s response to customer-led sustainability initiatives could lead to increased costs to implement additional efforts to reduce its emissions. Additionally, Con-way may experience reduced demand for its services if it does not comply with customers’ sustainability requirements. As a result, increased costs or loss of revenue resulting from sustainability initiatives could have an adverse effect on Con-way.

Capital Markets

Significant disruptions or volatility in the global capital markets may increase Con-way’s cost of borrowing or affect its ability to access credit, debt and equity capital markets. Market conditions may affect Con-way’s ability to refinance indebtedness as

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and when it becomes due. In addition, changes in Con-way’s credit ratings could adversely affect its ability and cost to borrow funds. Con-way is unable to predict how conditions in the capital markets will affect its financial condition, results of operations or cash flows.

Price and Availability of Fuel

Con-way is subject to risks associated with the availability and price of fuel, which are subject to political, economic and market factors that are outside of Con-way’s control.

Con-way would be adversely affected by an inability to obtain fuel in the future. Although, historically, Con-way has been able to obtain fuel from various sources and in the desired quantities, there can be no assurance that this will continue to be the case in the future.

Con-way may also be adversely affected by the timing and degree of fluctuations in fuel prices. Currently, Con-way’s business units have fuel-surcharge revenue programs or cost-recovery mechanisms in place with a majority of customers. Con-way Freight and Con-way Truckload maintain fuel-surcharge programs designed to offset or mitigate the adverse effect of rising fuel prices. Menlo Worldwide Logistics has cost-recovery mechanisms incorporated into most of its customer contracts under which it recognizes fuel-surcharge revenue designed to eliminate the adverse effect of rising fuel prices on purchased transportation.

Con-way’s competitors in the less-than-truckload (“LTL”) and truckload markets also impose fuel surcharges. Although fuel surcharges are generally based on a published national index, there is no industry-standard fuel-surcharge formula. As a result, fuel-surcharge revenue constitutes only part of the overall rate structure. Revenue excluding fuel surcharges (sometimes referred to as base freight rates) represents the collective pricing elements that exclude fuel surcharges. Ultimately, the total amount that Con-way Freight and Con-way Truckload can charge for their services is determined by competitive pricing pressures and market factors.

Historically, Con-way Freight’s fuel-surcharge program has enabled it to more than recover increases in fuel costs and fuel-related increases in purchased transportation. As a result, Con-way Freight may be adversely affected if fuel prices fall and the resulting decrease in fuel-surcharge revenue is not offset by an equivalent increase in base freight-rate revenue. Although lower fuel surcharges may improve Con-way Freight’s ability to increase the freight rates that it would otherwise charge, there can be no assurance in this regard. Con-way Freight may also be adversely affected if fuel prices increase. Customers faced with fuel-related increases in transportation costs often seek to negotiate lower rates through reductions in the base freight rates and/or limitations on the fuel surcharges charged by Con-way Freight, which adversely affect Con-way Freight’s ability to offset higher fuel costs with higher revenue.

Con-way Truckload’s fuel-surcharge program mitigates the effect of rising fuel prices but does not always result in Con-way Truckload fully recovering increases in its cost of fuel. The extent of recovery may vary depending on the amount of customer-negotiated adjustments and the degree to which Con-way Truckload is not compensated due to empty and out-of-route miles or from engine idling during cold or warm weather.

Con-way would be adversely affected if, due to competitive and market factors, its business units are unable to continue their current fuel-surcharge programs and/or cost-recovery mechanisms. In addition, there can be no assurance that these programs, as currently maintained or as modified in the future, will be sufficiently effective to offset increases in the price of fuel.

Employees

The workforce of Con-way and its subsidiaries is not affiliated with labor unions. Con-way believes that the non-unionized operations of its business units have advantages over unionized competitors in providing reliable and cost-competitive customer services, including greater efficiency and flexibility. There can be no assurance that Con-way’s business units will be able to maintain their non-unionized status.

Con-way hires drivers primarily for Con-way Freight and Con-way Truckload. At times, there is significant competition for qualified drivers in the transportation industry. As a result, these business units may be required to increase driver compensation and benefits, or face difficulty meeting customer demands, all of which could adversely affect Con-way.

Business Interruption

A sustained interruption in Con-way's systems or operations in the event of a catastrophic event, such as terrorist activity, earthquake, weather event, or cyber attack, could have a material adverse effect on Con-way.

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Con-way and its business units rely on shared-service facilities that provide shared administrative and technology services. Con-way is dependent on its automated systems and technology to operate its businesses and to increase employee productivity. Con-way has outsourced a significant portion of its information-technology infrastructure function and a small portion of its administrative and accounting functions. Although Con-way and the third-party service providers collectively maintain backup systems and have disaster-recovery processes and procedures in place, a sustained interruption in the operation of these facilities, whether due to transition to upgraded or replacement technology or any other reason, could have a material adverse effect on Con-way. Certain of the outsourced services are performed in developing countries and, as a result, may be subject to geopolitical uncertainty. A service provider’s failure to perform could have a material adverse effect on Con-way.

Additionally, Con-way’s dependence on its automated systems and technology gives rise to cyber-security risks. Although Con-way and its third-party providers have preventive systems and processes in place to protect against the risk of cyber attacks, a security breach may cause a disruption of Con-way’s business or the loss of information and could have a material adverse effect on Con-way.

Capital Intensity

Two of Con-way’s primary businesses are capital-intensive. Con-way Freight and Con-way Truckload make significant investments in revenue equipment and Con-way Freight also makes significant investments in freight service centers. The amount and timing of capital investments depend on various factors, including anticipated volume levels, and the price and availability of appropriate-use property for service centers and newly manufactured tractors and diesel engines, which are subject to restrictive Environmental Protection Agency engine-design requirements. If anticipated service-center and/or fleet requirements differ materially from actual usage, Con-way’s capital-intensive business units may have too much or too little capacity. Con-way attempts to mitigate the risk associated with too much or too little revenue equipment capacity by adjusting capital expenditures and by utilizing short-term equipment rentals and sub-contracted operators in order to match capacity with business volumes. Con-way’s investments in revenue equipment and freight service centers depend on its ability to generate cash flow from operations and its access to credit, debt and equity capital markets. A decline in the availability of these funding sources could adversely affect Con-way.

Asset Impairments

Con-way’s assets include significant amounts of goodwill and other long-lived assets. Con-way’s regular reviews of the carrying value of its assets have resulted, from time to time, in significant impairment charges. It is possible that Con-way may be required to recognize additional impairment charges in the future, which could adversely affect Con-way’s financial condition or results of operations.

Defined Benefit Plans

Con-way maintains defined benefit plans, including funded qualified pension plans, unfunded non-qualified pension plans, and an unfunded postretirement medical plan. A decline in interest rates and/or lower returns on funded plan assets may cause increases in the expense and funding requirements for Con-way’s defined benefit pension plans. Despite past amendments that permanently curtailed benefits under its primary defined benefit pension plan, Con-way’s defined benefit pension plans remain subject to volatility associated with interest rates, returns on plan assets and funding requirements. In addition to being subject to volatility associated with interest rates, Con-way’s expense and obligation under its postretirement medical plan are also subject to trends in health-care costs. As a result, Con-way is unable to predict the financial-statement effect associated with the defined benefit pension plans and the postretirement medical plan.

Self-Insurance Accruals

Con-way uses a combination of large-deductible purchased insurance and self-insurance programs to provide for the costs of employee medical, vehicular, cargo and workers’ compensation claims. Con-way’s estimated liability for self-retained insurance claims reflects certain actuarial assumptions and judgments, which are subject to a high degree of variability. Con-way periodically evaluates the level of insurance coverage and adjusts insurance levels based on risk tolerance and premium expense. An increase in the number or severity of self-insured claims or an increase in insurance premiums could have an adverse effect on Con-way.

Con-way has a captive insurance company that participates in a reinsurance pool to reinsure a portion of Con-way’s workers’ compensation claims. Each company that participates in the pool cedes claims to the pool and assumes an equivalent amount of claims. The operating results of the captive insurance company are affected by the number and severity of claims and the

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associated premiums paid or received. Con-way’s financial condition, results of operations and cash flows could be adversely affected by the risk assumed and ceded by the captive insurance company.

The cost of medical claims is also affected by health-care reform legislation. In March 2010, the Patient Protection and Affordable Care Act, as modified by the Health Care and Education Reconciliation Act, was signed into law. This health-care reform legislation is expected to increase the costs associated with providing benefits under postretirement medical plans and employee medical plans. Changes made to the design of Con-way’s medical plans have the potential to mitigate some of the cost impact of the provisions included in the legislation. Ultimately, the cost of providing benefits under medical plans is dependent on a variety of factors, including governmental laws and regulations, health-care cost trends, claims experience, and health-care decisions by plan participants. As a result, Con-way is unable to predict how the cost of providing benefits under medical plans will affect its financial condition, results of operations or cash flows.

Customer Concentration

Menlo Worldwide Logistics is subject to risk related to customer concentration because of the relative importance of its largest customers and the increased ability of those customers to influence pricing and other contract terms. Many of its competitors in the logistics industry segment are subject to the same risk. Although Menlo Worldwide Logistics strives to broaden and diversify its customer base, a significant portion of its revenue is derived from a relatively small number of customers, as more fully discussed in Item 1, “Business.” Consequently, a significant loss of business from, or adverse performance by, Menlo Worldwide Logistics’ major customers, may have a material adverse effect on Con-way’s financial condition, results of operations and cash flows. Similarly, the renegotiation of major customer contracts may also have an adverse effect on Con-way.

Menlo Worldwide Logistics is also subject to credit risk associated with its customer concentration. If one or more of its largest customers were to become bankrupt, insolvent or otherwise were unable to pay for services provided, Menlo Worldwide Logistics may incur significant write-offs of accounts receivable or incur lease or asset-impairment charges that may have a material adverse effect on Con-way's financial condition, results of operations or cash flows. Menlo Worldwide Logistics generally seeks to reduce risks related to the termination of a customer relationship, for reasons other than the business failure of a customer, by requiring, upon the termination of the contract by the customer, that the customer assume any related lease obligations and/or purchase contract-specific assets purchased by Menlo Worldwide Logistics.

Other Factors

In addition to the risks identified above, Con-way’s annual and quarterly operating results may be affected by a number of business, economic, regulatory and competitive factors, including:

•increasing competition and pricing pressure;

•the creditworthiness of Con-way’s customers and their ability to pay for services rendered;

•the effect of litigation;

• the effect that the sovereign debt crisis and economic uncertainty in Europe may have on the global economy and capital markets;

•the possibility of defaults under Con-way’s $325 million credit agreement and other debt instruments; and

•labor matters, including labor-organizing activities, work stoppages or strikes.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

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ITEM 2. PROPERTIES

Con-way believes that its facilities are suitable and adequate, that they are being appropriately utilized and that they have sufficient capacity to meet current operational needs. Management continuously reviews anticipated requirements for facilities and may acquire additional facilities and/or dispose of existing facilities as appropriate.

Freight

At December 31, 2012, Con-way Freight operated 303 freight service centers, of which 150 were owned and 153 were leased. The service centers are strategically located to cover the geographic areas served by Con-way Freight and represent physical buildings and real property with dock, office and/or shop space. These facilities do not include meet-and-turn points or zone operations, which generally represent small owned or leased real property with no physical structures. At December 31, 2012, Con-way Freight’s owned service centers account for 69% of its door capacity. At December 31, 2012, Con-way Freight owned and operated approximately 9,300 tractors and 26,000 trailers, including tractors held under capital lease agreements. The headquarters for Con-way Freight are located at a leased facility in Ann Arbor, Michigan.

Logistics

At December 31, 2012, Menlo Worldwide Logistics operated 65 warehouses in North America, of which 45 were leased by Menlo Worldwide Logistics and 20 were leased or owned by clients of Menlo Worldwide Logistics. Outside of North America, Menlo Worldwide Logistics operated an additional 74 warehouses, of which 60 were leased by Menlo Worldwide Logistics and 14 were leased or owned by clients. Menlo Worldwide Logistics owns and operates a small fleet of tractors and trailers to support its operations, but primarily utilizes third-party transportation providers for the movement of customer shipments. The headquarters for Menlo Worldwide Logistics are located at a leased facility in San Francisco, California.

Truckload

At December 31, 2012, Con-way Truckload operated five owned terminals with bulk fuel, tractor and trailer parking, and in some cases, equipment maintenance and washing facilities. In addition, Con-way Truckload also utilizes various drop yards for temporary trailer storage throughout the United States. At December 31, 2012, Con-way Truckload owned and operated approximately 2,700 tractors and 8,000 trailers, including tractors held under capital lease agreements. The Con-way Truckload headquarters are located at an owned facility in Joplin, Missouri.

Other

Principal properties of the Other segment included Con-way’s leased executive offices in Ann Arbor, Michigan and its owned shared-services center in Portland, Oregon. Road Systems owns and operates a manufacturing facility in Searcy, Arkansas.

ITEM 3. LEGAL PROCEEDINGS

Certain legal proceedings of Con-way are discussed in Note 12, “Commitments and Contingencies,” of Item 8, “Financial Statements and Supplementary Data.”

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

8

Executive Officers of Con-way Inc.

The name, age and relevant business experience of Con-way's executive officers as of February 25, 2013, are set forth below.

Name, Age and Positions with the Company	Relevant Business Experience
Douglas W. Stotlar 52, President and Chief Executive Officer	Served as Con-way's President and Chief Executive Officer since April 2005. Prior to this, served as Con-way's Senior Vice President and Con-way Freight's President and Chief Executive Officer since December 2004. Prior to this, served as Con-way Freight's Executive Vice President and Chief Operating Officer since June 2002. Prior to this, served as Con-way Freight's Executive Vice President of Operations since 1999. Prior to this, from 1985 to 1999, served in various capacities with Con-way and Con-way Freight, including as Vice President and General Manager of Con-way's expediting business.
Stephen L. Bruffett 49, Executive Vice President and Chief Financial Officer	Served as Con-way's Executive Vice President and Chief Financial Officer since September 2008. Prior to this, from 1998 to 2008, served in various capacities in finance and accounting, operations, investor relations and sales and marketing with YRC Worldwide, including as Chief Financial Officer.
Robert L. Bianco Jr. 48, Executive Vice President of Con-way and President of Menlo Worldwide LLC	Served as Con-way's Executive Vice President and Menlo Worldwide LLC's President since June 2005. Prior to this, served as Menlo Worldwide Logistics' President since 2002. Prior to this, from 1992 to 2002, served in various capacities with Menlo Worldwide Logistics, including as Vice President of Operations since 1997.
Kevin S. Coel 54, Senior Vice President and Corporate Controller	Served as Con-way's Senior Vice President since April 2009 and Corporate Controller since 2000. Prior to this, from 1990 to 2000, served in various capacities in finance and accounting with Con-way.
Saul Gonzalez 55, Executive Vice President of Con-way and President of Con-way Truckload	Served as Con-way's Executive Vice President and Con-way Truckload's President since September 2012. Prior to this, from 1991 to 2012, served in various capacities with Con-way Truckload and its predecessor, Contract Freighters, Inc. , including as Vice President, Operations and as Vice President, Mexican Carrier Relations.
Stephen K. Krull 48, Executive Vice President, General Counsel and Secretary	Served as Con-way's Executive Vice President, General Counsel and Secretary since April 2011. Prior to this, from 2003 to 2011, served as Senior Vice President, General Counsel and Secretary of Owens Corning. Prior to this, from 1996 to 2003, served in various capacities in legal and corporate communications with Owens Corning.
W. Gregory Lehmkuhl 40, Executive Vice President of Con-way and President of Con-way Freight Inc.	Served as Con-way's Executive Vice President and Con-way Freight Inc.'s President since September 2011. Prior to this, served as Con-way Freight's Executive Vice President of Operations since August 2008. Served previously in various capacities with Menlo Worldwide Logistics LLC, including as Vice President of Menlo's Automotive Industry Group since January 2005.
Leslie P. Lundberg 55, Senior Vice President, Human Resources	Served as Con-way's Senior Vice President, Human Resources since January 2006. Prior to this, served as Executive Director of Compensation, Benefits and Human Resource Information Systems for a division of Sun Microsystems since 2003.
Charles R. Mullett 59, Vice President, Government Relations and Public Affairs	Served as Con-way's Vice President, Government Relations and Public Affairs since September 2007. Prior to this, served as Vice President of Government Relations since January 2005, and before that as Director Government Relations since January 2003. Prior to this, from 1989 to 2003, served in various capacities in operations and sales management with Con-way Freight Inc.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Con-way’s common stock is listed for trading on the New York Stock Exchange (“NYSE”) under the symbol “CNW.”

See Note 14, “Quarterly Financial Data,” of Item 8, “Financial Statements and Supplementary Data” for the range of common stock prices as reported on the NYSE and for the common stock dividends paid in 2012 and 2011. At January 31, 2013, Con-way had 5,761 common stockholders of record.

Performance Graph

The following performance graph compares Con-way’s five-year cumulative return (assuming an initial investment of $100 and reinvestment of dividends), with the S&P Midcap 400 Index and Dow Jones Transportation Average Index.

	Cumulative Total Returns
	12/07		12/08	12/09	12/10	12/11	12/12
Con-way Inc.	$	100.00	64.65	86.01	91.23	73.71	71.24
S&P Midcap 400	$	100.00	63.77	87.61	110.94	109.02	128.51
DJ Transportation Average	$	100.00	78.59	93.19	118.11	118.12	127.03

*$100 invested on 12/31/07 in stock or index, including reinvestment of dividends.

Fiscal year ending December 31.

Copyright© 2013 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.

Copyright© 2013 Dow Jones & Co. All rights reserved.

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ITEM 6. SELECTED FINANCIAL DATA

The following table includes selected financial and operating data for Con-way as of and for the five years ended December 31, 2012. This information should be read in conjunction with Item 7, “Management’s Discussion and Analysis,” and Item 8, “Financial Statements and Supplementary Data.”

Con-way Inc.

Five-Year Financial Summary

(Dollars in thousands, except per share data)
	2012		2011		2010		2009			2008
Results of Operations
Revenues	$	5,580,247	$	5,289,953	$	4,952,000	$	4,269,239		$	5,036,817
Operating Income (Loss) [a]	228,841		207,928		78,170		(25,928		)	192,622
Income (Loss) from Continuing
Operations Before Income Tax Provision	170,954		148,072		16,557		(90,269		)	134,917
Income Tax Provision [b]	66,408		59,629		12,572		17,478			69,494
Net Income (Loss) from
Continuing Operations Applicable to Common Shareholders	104,546		88,443		3,985		(110,936		)	58,635
Net Income (Loss) Applicable to
Common Shareholders [c]	104,546		88,443		3,985		(110,936		)	66,961
Per Common Share
Basic Earnings (Loss)
Net Income (Loss) from Continuing
Operations	$	1.87	$	1.60	$	0.08	$	(2.33	)	$	1.29
Net Income (Loss) Applicable
to Common Shareholders	1.87		1.60		0.08		(2.33		)	1.47
Diluted Earnings (Loss)
Net Income (Loss) from Continuing
Operations	1.85		1.58		0.07		(2.33		)	1.23
Net Income (Loss) Applicable
to Common Shareholders	1.85		1.58		0.07		(2.33		)	1.40
Cash Dividends	0.40		0.40		0.40		0.40			0.40
Market Price
High	38.78		42.38		40.34		48.32			55.00
Low	25.97		20.56		26.15		12.99			20.03
Weighted-Average Common Shares
Outstanding
Basic	55,837,574		55,388,297		52,507,320		47,525,862			45,427,317
Diluted	56,485,987		56,101,903		53,169,299		47,525,862			48,619,292
Financial Condition
Cash and cash equivalents	$	429,784	$	438,010	$	421,420	$	476,575		$	278,253
Total assets	3,141,464		3,100,016		2,943,732		2,896,217			3,071,707
Long-term debt, guarantees and capital
leases	749,371		770,238		793,950		760,789			926,224
Other Data at Year-End
Number of shareholders	5,803		6,168		6,481		6,745			7,016
Approximate number of regular full-time
employees	29,100		27,800		27,900		27,400			26,600

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[a] The comparability of Con-way's consolidated operating income (loss) was affected by the following:

• Gain of $10.0 million in 2011 at Menlo Worldwide Logistics resulting from a purchase-price adjustment to settle a dispute associated with the 2007 acquisition of Chic Logistics.

• Charge of $19.2 million in 2010 for the impairment of goodwill and other intangible assets at Menlo Worldwide Logistics.

• Charge of $134.8 million in 2009 for the impairment of goodwill at Con-way Truckload.

• Charge of $23.9 million in 2008 related to restructuring activities at Con-way Freight.

• Charge of $37.8 million in 2008 for the impairment of goodwill and other intangible assets at Menlo Worldwide Logistics.

[b] The comparability of Con-way's income tax provision was affected by the following:

• 2010 reflects a non-deductible goodwill impairment charge at Menlo Worldwide Logistics.

• 2009 reflects a non-deductible goodwill impairment charge at Con-way Truckload.

• 2008 reflects a non-deductible goodwill impairment charge and write-down of an acquisition-related receivable at Menlo Worldwide Logistics.

[c] In 2008, net income (loss) applicable to common shareholders included an $8.3 million gain (net of tax) primarily related to the shut-down of Emery Worldwide Airlines, Inc.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

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 a historical and prospective understanding of Con-way’s financial condition, results of operations and cash flows, including a discussion and analysis of the following:

•Overview of Business

•Results of Operations

•Liquidity and Capital Resources

•Critical Accounting Policies and Estimates

•New Accounting Standards

•Forward-Looking Statements

Overview of Business

Con-way provides transportation, logistics and supply-chain management services for a wide range of manufacturing, industrial and retail customers. Con-way’s business units operate in regional and transcontinental less-than-truckload and full-truckload freight transportation, contract logistics and supply-chain management, multimodal freight brokerage, and trailer manufacturing. For financial reporting purposes, Con-way is divided into four reporting segments: Freight, Logistics, Truckload and Other.

Con-way Freight primarily transports shipments utilizing a network of freight service centers combined with a fleet of company-operated linehaul and pickup-and-delivery tractors and trailers. Menlo Worldwide Logistics manages the logistics functions of its customers and primarily utilizes third-party transportation providers for the movement of customer shipments. Con-way Truckload primarily transports shipments using a fleet of company-operated tractors and trailers.

Con-way's primary business-unit results generally depend on the number, weight and distance of shipments transported, the prices received on those shipments or services and the mix of services provided to customers, as well as the fixed and variable costs incurred by Con-way in providing the services and the ability to manage those costs under changing circumstances. Due to Con-way Freight's relatively high fixed-cost structure, sudden or severe changes in shipment volumes can have a negative impact on management's ability to manage costs.

Con-way's primary business units are affected by the timing and degree of fluctuations in fuel prices and their ability to recover incremental fuel costs through fuel-surcharge programs and/or cost-recovery mechanisms, as more fully discussed in Item 1A, “Risk Factors.”

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Results of Operations

The overview below provides a high-level summary of Con-way’s results from continuing operations for the periods presented and is intended to provide context for the remainder of the discussion on reporting segments. Refer to “Reporting Segment Review” below for more complete and detailed discussion and analysis.

(Dollars in thousands, except per share amounts)	2012			2011			2010
Revenues	$	5,580,247		$	5,289,953		$	4,952,000
Costs and expenses
Other costs and expenses	5,351,406			5,090,044			4,849,659
Loss (gain) from asset impairments and purchase-price adjustment	—			(10,000		)	19,181
Restructuring charges	—			1,981			4,990
	5,351,406			5,082,025			4,873,830
Operating income	228,841			207,928			78,170
Other non-operating expense	57,887			59,856			61,613
Income before income tax provision	170,954			148,072			16,557
Income tax provision	66,408			59,629			12,572
Net income	$	104,546		$	88,443		$	3,985
Diluted earnings per share	$	1.85		$	1.58		$	0.07
Operating margin	4.1		%	3.9		%	1.6		%

Overview

2012 Compared to 2011

Con-way’s consolidated revenue of $5.6 billion in 2012 increased 5.5% from $5.3 billion in 2011 reflecting higher revenue from all segments. Higher revenue from Freight and Truckload was primarily the result of increased base freight rates and higher fuel surcharges. Higher revenue from Logistics was due to increased revenue for both transportation-management and warehouse-management services.

Con-way’s operating income increased to $228.8 million in 2012 from $207.9 million in 2011. The increase in operating income was due to improved operating income at Freight and Truckload, offset by reduced operating income at Logistics.Higher operating income at Freight and Truckload was due to increased revenues and improved operating margins. Lower operating income at Logistics was primarily due to a 2011 gain of $10.0 million from a purchase-price adjustment to settle a dispute associated with the acquisition of Chic Logistics.

Other non-operating expense in 2012 decreased $2.0 million compared with 2011, largely due to a $1.2 million decrease in other miscellaneous expenses, mostly from letters-of-credit fees. Also, interest expense declined $0.8 million.

Con-way’s effective tax rate in 2012 was 38.8% compared to 40.3% in 2011. Con-way's tax provision in 2012 benefited from discrete tax adjustments, while the effective tax rate in 2011 was adversely affected by discrete tax adjustments. The 2011 income tax provision also included the effect of the $10.0 million gain, for which there was only $1.1 million of related tax. The effective tax rate in 2011 benefited from a fuel-related tax credit which expired and was not available for 2012. Con-way's effective tax rate in 2013 is expected to be lower than its 2012 rate as the result of legislation that extended the fuel-related tax credit, as more fully discussed in Note 8, “Income Taxes,” of Item 8, “Financial Statements and Supplementary Data.”

2011 Compared to 2010

Con-way’s consolidated revenue of $5.3 billion in 2011 increased 6.8% from $5.0 billion in 2010, reflecting higher revenue from Freight, Truckload and Logistics. Higher revenue from Freight and Truckload benefited from higher fuel surcharges and increased base freight rates. Logistics’ higher revenue was primarily due to increased transportation-management services.

Con-way’s operating income increased to $207.9 million in 2011 from $78.2 million in 2010. The increase in operating income was due to improved operating income at Freight, Logistics and Truckload. Higher operating income at Freight and Truckload

14

was due in large part to increased revenues. Higher operating income at Logistics reflects the $10.0 million gain in 2011, while 2010 included $19.2 million of asset-impairment charges.

Other non-operating expense in 2011 decreased $1.8 million compared with 2010, largely due to a $3.4 million decline in interest expense, partially offset by a $1.3 million increase in other miscellaneous expenses, primarily from letters-of-credit fees. The decline in interest expense reflects the $200.0 million repayment in the second quarter of 2010 of Con-way’s 8 7/8% Notes due 2010.

Con-way’s effective tax rate in 2011 was 40.3% compared to 75.9% in 2010. As noted above, the effective tax rate in 2011 included the effect of the $10.0 million gain and discrete items. Con-way’s effective tax rate in 2010 was adversely affected by non-deductible goodwill-impairment charges.

Cost-Reduction Actions

In response to economic conditions, in March 2009, Con-way announced several employee-related measures to reduce costs and conserve cash. For the periods presented, Con-way's comparative expenses were affected by various reinstatements of previously suspended benefits, including the fourth-quarter 2011 reinstatement of certain employer contributions to the defined contribution retirement plan, the January 2010 and 2011 reinstatements of salary and wage reductions for certain employees, and the second-quarter 2010 reinstatement of compensated-absences benefits at the Freight and Logistics segments. The remaining suspended benefit, the matching contributions to the defined contribution retirement plan, has not been reinstated. Any potential reinstatement of Con-way's matching contributions is based on a number of considerations.

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Reporting Segment Review

For the discussion and analysis of segment operating results, management utilizes revenue before inter-segment eliminations. Management believes that revenue before inter-segment eliminations, combined with the detailed operating expense information, provides the most meaningful analysis of segment results. Revenue before inter-segment eliminations is reconciled to revenue from external customers in Note 13, “Segment Reporting,” of Item 8, “Financial Statements and Supplementary Data.”

Freight

The following table compares operating results, operating margins and the percentage change in selected operating statistics of the Freight reporting segment for the years ended December 31:

(Dollars in thousands)	2012			2011			2010
Revenue before inter-segment eliminations	$	3,392,596		$	3,247,107		$	3,075,064
Salaries, wages and employee benefits	1,551,742			1,493,421			1,492,512
Purchased transportation	585,489			532,059			510,406
Other operating expenses	445,940			441,891			458,603
Fuel and fuel-related taxes	376,323			386,928			316,627
Depreciation and amortization	124,372			109,875			101,391
Maintenance	93,402			94,654			88,025
Rents and leases	48,755			47,159			49,218
Purchased labor	22,704			21,341			29,374
Total operating expenses	3,248,727			3,127,328			3,046,156
Operating income	$	143,869		$	119,779		$	28,908
Operating margin	4.2		%	3.7		%	0.9		%

	2012 vs. 2011		2011 vs. 2010
Selected Operating Statistics
Weight per day	-0.3	%	-4.6	%
Revenue per hundredweight ("yield")	+4.4	%	+10.3	%
Shipments per day ("volume")	-1.9	%	-5.7	%
Weight per shipment	+1.6	%	+1.2	%

2012 Compared to 2011

Freight’s revenue in 2012 increased 4.5% from 2011, primarily due to a 4.4% increase in yield, partially offset by a 0.3% decline in weight per day. The 4.4% increase in yield was largely due to increased base freight rates, while the 0.3% decline in weight per day reflects a 1.9% decline in shipments per day, partially offset by a 1.6% increase in weight per shipment.

Excluding fuel surcharges, yield increased 3.7% in 2012. Fuel-surcharge revenue increased to 17.5% of revenue in 2012 from 17.0% in 2011. The fuel surcharge is intended to compensate Con-way Freight for the adverse effects of higher fuel costs and fuel-related increases in purchased transportation. Fuel surcharges are only one part of Con-way Freight’s overall rate structure, and the total price that Con-way Freight receives from customers for its services is governed by market forces, as more fully discussed in Item 1A, “Risk Factors.”

In 2012, Freight’s operating income increased $24.1 million when compared with 2011. Higher operating income in 2012 was largely due to higher revenue and higher operating margins.

Expenses for salaries, wages and employee benefits increased 3.9% in 2012 compared to 2011. 2012 included higher expenses than 2011 due in part to the timing of the reinstatement of certain employee-related costs that were suspended under the cost-reduction measures, as more fully discussed above in “Overview.” Salaries and wages, excluding variable compensation, increased 1.9% due to annual pay increases and a new sales bonus program, partially offset by a decline in the number of miles driven by company drivers. Employee benefits expense increased 8.4% primarily due to higher costs for employee medical benefits, and defined contribution and defined benefit retirement plans. Higher costs for employee medical benefits were

16

largely due to an increase in the number of claims. The increase in defined contribution retirement plan expense was mainly due to the restoration of certain benefits in the fourth quarter of 2011.

Purchased transportation expense increased 10.0% in 2012 due to increased third-party miles and higher carrier rates.

Expenses for fuel and fuel-related taxes decreased 2.7% primarily due to lower fuel consumption, the result of decreased miles driven by company drivers, partly offset by an increase in the cost per gallon of diesel fuel.

The increase in purchased transportation expense and the decrease in fuel expense are related. Both are largely due to a shift toward a higher proportion of miles driven by third-party carriers as opposed to company drivers. The increase in third-party miles is part of Con-way Freight's effort to reduce total linehaul costs by reducing empty miles. The increase in third-party miles was more than offset by the decrease in miles driven by company-operated tractors.

Depreciation and amortization expense increased 13.2% in 2012 compared to 2011 primarily due to the replacement of older tractors with newer models. Newer models are more costly due in part to the inclusion of more expensive emissions-control and safety technology.

2011 Compared to 2010

Freight’s revenue in 2011 increased 5.6% from 2010 primarily due to a 10.3% increase in yield, partially offset by a 4.6% decline in weight per day. The 4.6% decline in weight per day reflects a 5.7% decline in shipments per day, partially offset by a 1.2% increase in weight per shipment. In 2011, yield benefited from increases in fuel-surcharge revenue and base freight rates, but was adversely affected by the increase in weight per shipment. Excluding fuel surcharges, yield increased 5.7% in 2011. Fuel-surcharge revenue increased to 17.0% of revenue in 2011 from 13.2% in 2010.

Higher yield and lower weight per day were due in part to sales and pricing initiatives implemented in the third quarter of 2010 that increased base freight rates and moderated the amount of freight transported in the network. Management initiatives in 2011 were adapted to focus on pricing improvements while maintaining volume.

In 2011, Freight’s operating income increased $90.9 million when compared with 2010. Higher operating income in 2011 was largely due to higher revenue and strategic efforts to improve network efficiency and control costs. Results in 2010 were adversely affected by $5.1 million of expense for employee severance and the consolidation of Con-way’s executive offices under which Freight was allocated a portion of the restructuring charges.

Expenses for salaries, wages and employee benefits were essentially flat in 2011 compared to 2010. Salaries and wages, excluding variable compensation, decreased 1.5% due in part to lower average employee counts, which reflected a decline in shipment volumes, a reduction in miles driven and increased productivity, partially offset by salary and wage restorations. Employee benefits expense decreased 1.3%, primarily due to lower expense for workers’ compensation claims, partially offset by higher expenses for compensated absences. Lower expense for workers’ compensation claims reflects a decrease in the number of claims and lower expense per claim. The increase in expense for compensated-absences benefits was primarily due to the reinstatement of the benefit effective in April 2010. Variable-compensation expense increased $22.4 million, due to variations in performance measures relative to variable-compensation plan targets.

Purchased transportation expense increased 4.2% in 2011 reflecting fuel-related rate increases and higher base rates, partially offset by declines in freight transported by third-party providers.

In 2011, other operating expenses decreased 3.6%, mainly due to lower self-insurance expense from cargo-loss and damage claims, partially offset by higher costs for information-technology services. The decrease in cargo-claims expense reflects lower shipment volumes and improved freight handling, which was due in part to increased investment in training and the utilization of the SafeStack^™ cargo loading system for trailers that was deployed during 2010.

Expenses for fuel and fuel-related taxes increased 22.2% primarily due to the increase in the cost per gallon of diesel fuel, partially offset by lower fuel consumption due to fewer miles driven as a result of a moderation in shipment volumes.

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Logistics

The table below compares operating results and operating margins of the Logistics reporting segment. The table summarizes Logistics’ revenue as well as net revenue (revenue less purchased transportation expense). Transportation-management revenue is attributable to contracts for which Menlo Worldwide Logistics manages the transportation of freight but subcontracts to carriers the actual transportation and delivery of products, which Menlo Worldwide Logistics refers to as purchased transportation. Menlo Worldwide Logistics’ management places emphasis on net revenue as a meaningful measure of the relative importance of its principal services since revenue earned on most transportation-management services includes the carriers’ charges to Menlo Worldwide Logistics for transporting the shipments. The table also includes operating income and operating margin excluding the loss (gain) from asset impairments and a purchase-price adjustment. Management believes these measures are relevant to evaluate its on-going operations.

(Dollars in thousands)	2012			2011			2010
Revenue before inter-segment eliminations	$	1,726,200		$	1,589,994		$	1,477,988
Purchased transportation	(1,087,056		)	(988,405		)	(906,389		)
Net revenue	639,144			601,589			571,599
Salaries, wages and employee benefits	260,863			230,760			218,126
Other operating expenses	167,478			156,334			148,174
Fuel and fuel-related taxes	850			1,034			846
Depreciation and amortization	9,605			10,846			12,226
Maintenance	3,132			2,998			2,617
Rents and leases	64,508			65,046			63,692
Purchased labor	88,092			89,824			80,462
Loss (Gain) from asset impairments and purchase-price adjustment	—			(10,000		)	19,181
Total operating expenses excluding purchased transportation	594,528			546,842			545,324
Operating income	$	44,616		$	54,747		$	26,275
Operating income excluding impairments and purchase-price adjustment	$	44,616		$	44,747		$	45,456
Operating margin on revenue	2.6		%	3.4		%	1.8		%
Operating margin on net revenue	7.0		%	9.1		%	4.6		%
Operating margin on revenue excluding asset impairments and
purchase-price adjustment	2.6		%	2.8		%	3.1		%
Operating margin on net revenue excluding asset impairments and
purchase-price adjustment	7.0		%	7.4		%	8.0		%

2012 Compared to 2011

In 2012, Logistics’ revenue increased8.6% due to increases in revenue from both transportation-management and warehouse-management services. In 2012, revenue from transportation-management services increased11.5%, while revenue from warehouse-management services increased1.2%. Higher revenue from transportation-management services was primarily due to new customers. Increased revenue from warehouse-management services was primarily due to growth at existing customers.

Logistics’ net revenue in 2012 increased6.2%, as revenue growth was partially offset by purchased transportation expense that grew at a faster rate than revenue. Purchased transportation expense increased10.0% in 2012 primarily due to increased transportation-management volumes.

In 2012, Logistics reported operating income of $44.6 million compared to $54.7 million in 2011. Operating results in 2011 included a $10.0 million gain resulting from a purchase-price adjustment to settle a dispute associated with the 2007 acquisition of Chic Logistics. Excluding this item, Logistics’ operating income in 2012 decreased 0.3% from 2011, reflecting increases in salaries, wages and employee benefits expense, and higher other operating expenses.

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Salaries, wages and employee benefits increased13.0% in 2012. Salaries and wages, excluding variable compensation, rose 14.9% primarily due to increased average employee counts in response to growth from new and existing customers, and salary and wage rate increases. Employee benefits expense increased 14.5% in 2012, primarily due to increased costs for employee medical benefits, payroll taxes and compensated absences. Higher costs for employee medical benefits were largely due to increases in the number of claims. Increased expense for compensated absences and payroll taxes was primarily due to the increase in salaries and wages.

Other operating expenses increased7.1% in 2012 primarily due to increased administrative corporate allocations, higher expenses for warehouse-related packaging materials and supplies, higher expenses for professional services that support customer operations, and an increase in the provision for uncollectible accounts receivable. The increase in the provision for uncollectible accounts receivable in 2012 was primarily due to a single international customer.

2011 Compared to 2010

In 2011, Logistics’ revenue increased7.6% due to increases in revenue from both transportation-management and warehouse-management services. In 2011, revenue from transportation-management services increased 9.6%, while revenue from warehouse-management services increased 2.8%. Higher revenue from transportation-management services was primarily due to increased freight-brokerage volumes and growth at existing customers, and, to a lesser extent, fuel-related increases in purchased transportation. Increased revenue from warehouse-management services was primarily due to the addition of new customers.

Logistics' net revenue in 2011 increased 5.2%, as revenue growth was partially offset by purchased transportation expense that grew at a faster rate than revenue. Purchased transportation expense increased 9.0% in 2011 primarily due to increased transportation-management volumes and, to a lesser extent, fuel-related rate increases.

In 2011, Logistics reported operating income of $54.7 million compared to $26.3 million in 2010. Operating results in 2011 included the $10.0 million gain. Operating results in 2010 were adversely affected by a $16.4 million goodwill-impairment charge and a $2.8 million charge for the impairment of a customer-relationship intangible asset. These items are more fully discussed in Note 2, “Goodwill and Intangible Assets,” of Item 8, “Financial Statements and Supplementary Data.” Excluding these items, Logistics' operating income in 2011 decreased 1.6% from 2010 primarily due to lower margins on warehouse-management services. Lower margins on warehouse-management services reflect costs for warehouse-facility relocations, changes in customer mix and increased start-up costs associated with new customers.

Salaries, wages and employee benefits increased 5.8% in 2011. Salaries and wages, excluding variable compensation, rose 9.2% due to salary and wage rate increases and increased average employee counts due to new customer contracts. Variable-compensation expense decreased $3.4 million or 18.1% in 2011 based on variations in performance measures relative to variable-compensation plan targets. Employee benefits expense increased 5.0% in 2011, primarily due to increased expenses for international employee benefits and payroll taxes.

Other operating expenses increased 5.5% in 2011 reflecting higher costs for information-technology services and increased facility costs due to new warehouse-management customers.

Purchased labor expense increased 11.6% in 2011 due to increased workloads from the start-up of new warehouse-management facilities and warehouse relocations.

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Truckload

The table below compares operating results, operating margins and the percentage change in selected operating statistics of the Truckload reporting segment. The table summarizes the segment’s revenue before inter-segment eliminations, including freight revenue, fuel-surcharge revenue and other non-freight revenue. The table also includes operating income and operating margin excluding fuel-surcharge revenue. Truckload’s management believes these measures are relevant to evaluate its on-going operations.

(Dollars in thousands)	2012			2011			2010
Freight revenue	$	470,429		$	459,221		$	459,748
Fuel-surcharge revenue	145,972			138,549			94,175
Other revenue	19,155			17,244			15,818
Revenue before inter-segment eliminations	635,556			615,014			569,741
Salaries, wages and employee benefits	210,515			209,220			212,311
Purchased transportation	36,397			27,650			24,384
Other operating expenses	64,723			61,267			65,696
Fuel and fuel-related taxes	175,635			177,633			147,225
Depreciation and amortization	69,799			70,003			64,109
Maintenance	31,184			32,171			32,910
Rents and leases	1,242			1,097			996
Purchased labor	1,140			1,160			1,266
Total operating expenses	590,635			580,201			548,897
Operating income	$	44,921		$	34,813		$	20,844
Operating margin on revenue	7.1		%	5.7		%	3.7		%
Operating margin on revenue excluding fuel-surcharge
revenue	9.2		%	7.3		%	4.4		%

	2012 vs. 2011		2011 vs. 2010
Selected Operating Statistics
Freight revenue per loaded mile	+2.6	%	+4.1	%
Loaded miles	-0.2	%	-4.0	%

2012 Compared to 2011

In 2012, Truckload’s revenue increased3.3% from 2011, primarily due to a 2.4% increase in freight revenue and a 5.4% increase in fuel-surcharge revenue. The 2.4% increase in freight revenue reflects a 2.6% increase in revenue per loaded mile, partially offset by a 0.2% decrease in loaded miles. The higher revenue per loaded mile included the effect of negotiated rate increases. The decrease in loaded miles was primarily due to a decline in the number of tractors operated by two-person teams, which resulted in lower miles per tractor. Higher fuel-surcharge revenue reflects higher fuel prices in 2012 compared to 2011 and an improved fuel-surcharge recovery rate.

In 2012, Truckload earned operating income of $44.9 million compared to $34.8 million in 2011, primarily reflecting the increase in revenue and higher operating margins.

Salaries, wages and employee benefits increased0.6% in 2012, reflecting an increase in variable-compensation expense, partially offset by decreases in salaries and wages, excluding variable compensation, and employee benefits expense. Variable-compensation expense increased $1.8 million or 79.7% in 2012 based on variations in performance measures relative to variable-compensation plan targets. Salaries and wages, excluding variable compensation, decreased0.3% primarily due to lower wages as a result of fewer miles driven by company drivers. Employee benefits expense decreased0.1% in 2012, primarily due to a decrease in costs for workers compensation claims, partially offset by increases for employee medical benefits and defined contribution retirement plans. The decreases in expense for workers' compensation claims were due to decreases in expense per claim and the number of claims. The increases in expense for employee medical benefits were largely

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due to increases in the number of claims. The increase in expenses for defined contribution retirement plans was mainly due to the restoration of certain benefits in the fourth quarter of 2011.

Purchased transportation increased31.6% in 2012 due to increased miles driven by Truckload's owner-operator fleet, which grew during the period, and fuel-related rate increases.

Expenses for fuel and fuel-related taxes decreased1.1% in 2012 primarily due to improved miles per gallon and lower fuel consumption due to fewer miles driven by company drivers compared to 2011. These decreases were partially offset by higher fuel cost per gallon in 2012 compared to 2011.

Other operating expenses increased5.6% in 2012 primarily due to increases for vehicular self-insurance and employee development expenses, partially offset by gains from the disposition of equipment. The increase in expenses for vehicular self-insurance was due to an increase in expense per claim, partially offset by a decline in the number of claims. Higher expenses for employee development relate to increased driver certification and training costs. The increase in gains from the disposition of equipment reflect improved conditions in the used tractor market.

2011 Compared to 2010

In 2011, Truckload’s revenue increased 7.9% from 2010, primarily due to a 47.1% increase in fuel-surcharge revenue. Freight revenue was essentially flat reflecting a 4.1% increase in revenue per mile and a 4.0% decline in loaded miles. Higher fuel-surcharge revenue was due to higher fuel prices in 2011 compared to 2010. The decrease in loaded miles was primarily due to a decline in the number of tractors operated by two-person teams, which resulted in lower miles per tractor, and to a slightly smaller fleet.

In 2011, Truckload earned operating income of $34.8 million compared to $20.8 million in 2010, primarily reflecting the effect of an improved fuel-surcharge recovery rate.

Salaries, wages and employee benefits decreased 1.5% in 2011, reflecting decreases in salaries and wages, excluding variable compensation, partially offset by an increase in employee benefits expense. Salaries and wages, excluding variable compensation, decreased 2.7% primarily due to lower wages as a result of fewer miles driven by company drivers. Employee benefits expense increased 2.3% in 2011, primarily reflecting increased costs for employee medical benefits, which were primarily due to an increase in the severity of claims, partially offset by a decline in the number of claims.

Purchased transportation increased 13.4% in 2011, primarily due to fuel-related increases for Truckload’s owner-operator fleet.

Expenses for fuel and fuel-related taxes increased 20.7% in 2011 primarily due to a higher fuel cost per gallon, partially offset by lower fuel consumption due to fewer miles driven by company drivers.

Other operating expenses decreased 6.7% in 2011, primarily reflecting declines in the severity of vehicular self-insurance claims. Vehicular self-insurance expense decreased $5.5 million in 2011 compared to 2010.

Depreciation and amortization expense increased 9.2% in 2011 reflecting a tractor replacement program initiated in 2010.

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Other

The Other reporting segment consists of the operating results of Road Systems, a trailer manufacturer, and certain corporate activities for which the related income or expense has not been allocated to other reporting segments. The table below summarizes the operating results for the Other reporting segment:

(Dollars in thousands)	2012			2011			2010
Revenue
Road Systems	$	57,664		$	46,685		$	52,890
Operating income (loss)
Road Systems	$	(112	)	$	(123	)	$	(112	)
Unallocated corporate operating income (loss)
Con-way reinsurance activities	(3,049		)	(4,921		)	3,567
Con-way corporate properties	(1,363		)	3,750			(1,248		)
Other	(41		)	(117		)	(64		)
	$	(4,565	)	$	(1,411	)	$	2,143

The results from reinsurance activities primarily relate to Con-way’s participation in a reinsurance pool, as more fully discussed in Note 1, “Principal Accounting Policies,” of Item I, “Financial Statements and Supplementary Data.”

In 2011, the operating results related to corporate properties included a $5.1 million gain from the sale of excess real estate.

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Liquidity and Capital Resources

Cash and cash equivalents decreased to $429.8 million at December 31, 2012 from $438.0 million at December 31, 2011, as $265.8 millionused in investing activities and $53.8 millionused in financing activities exceeded $311.4 millionprovided by operating activities. Cash used in investing activities primarily reflects capital expenditures. Cash used in financing activities primarily reflects the repayment of capital leases and payment of common dividends. Cash provided by operating activities came from net income after non-cash adjustments, partially offset by changes in assets and liabilities.

(Dollars in thousands)	2012			2011			2010
Operating Activities
Net income	$	104,546		$	88,443		$	3,985
Non-cash adjustments (1)	309,182			265,489			310,849
Changes in assets and liabilities	(102,317		)	(9,222		)	(129,962		)
Net Cash Provided by Operating Activities	311,411			344,710			184,872
Net Cash Used in Investing Activities	(265,845		)	(287,028		)	(161,064		)
Net Cash Used in Financing Activities	(53,792		)	(41,092		)	(78,963		)
Increase (Decrease) in Cash and Cash Equivalents	$	(8,226	)	$	16,590		$	(55,155	)

(1) “Non-cash adjustments” refer to depreciation, amortization, impairment charges, purchase-price adjustments, deferred income taxes, provision for uncollectible accounts and other non-cash income and expenses.

Operating Activities

The most significant items affecting the comparison of Con-way’s operating cash flows for the periods presented are summarized below:

2012 Compared to 2011

In 2012, net income and non-cash adjustments collectively increased operating cash flows $59.8 million from 2011. Changes in assets and liabilities decreased operating cash flows by $93.1 million in 2012 when compared to the prior-year period. Significant comparative changes include accrued income taxes, accrued variable compensation and employee benefits.

In 2012, accrued income taxes used$2.3 million, compared to $34.4 millionprovided in 2011, reflecting variations in income tax refunds and payments as well as variations in current income tax provisions. In 2012, Con-way made net payments of $6.2 million, compared to $28.7 million of net refunds in 2011.

Accrued variable compensation provided$1.2 million in 2012, compared to $22.4 millionprovided in 2011. Variations in performance measures relative to variable-compensation plan targets resulted in a higher level of payments in 2012 when compared to 2011.

Employee benefits used$67.3 million in 2012, compared to $52.7 millionused in 2011. Comparative period changes were primarily due to a change in the funding method for contributions to the defined contribution retirement plan and a decline in the amount of funding for the defined benefit pension plans. As detailed in Note 10, "Employee Benefit Plans," of Item 8, "Financial Statements," Con-way used repurchased common stock (also referred to as treasury stock) to fund contributions to the defined contribution retirement plan in the first six months of 2011. In 2011, Con-way used 461,151 shares of treasury stock to fund $17.3 million of contributions to the defined contributions retirement plans. In 2012, Con-way contributed $51.4 million to its qualified defined benefit pension plans, compared to $62.6 million in 2011.

2011 Compared to 2010

In 2011, net income and non-cash adjustments collectively increased operating cash flows $39.1 million from 2010. Changes in assets and liabilities improved operating cash flows by $120.7 million in 2011 when compared to the prior-year period. Changes in accrued income taxes, accrued liabilities (excluding variable compensation and employee benefits) and employee

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benefits increased operating cash flows in 2011 when compared to the prior year, while changes in self-insurance accruals decreased operating cash flows.

In 2011, accrued income taxes provided $34.4 million, compared to $39.6 million used in 2010, reflecting variations in income tax refunds and payments as well as variations in current income tax provisions. In 2011, Con-way received $28.7 million of net refunds, compared to $10.4 million of net refunds in 2010.

Accrued liabilities (excluding variable compensation and employee benefits) provided $3.8 million in 2011, compared to $20.5 million used in 2010, primarily due to changes in the liability for compensated absences. As more fully discussed under “Results of Operations – Overview,” a compensated-absence benefit was suspended at Con-way Freight from April 2009 through April 2010. During the period of suspension, no compensated-absences benefits were earned. This suspension was not in effect at any point during 2011, resulting in increased compensated-absence benefits for 2011 compared to 2010.

Employee benefits used $52.7 million in 2011, compared to $67.6 million used in 2010 primarily due to a decrease in pension funding contributions. In 2011, Con-way contributed $62.6 million to its qualified pension plans, compared to $93.8 million in 2010.

Self-insurance accruals used $12.0 million in 2011, compared to $30.5 million provided in 2010. The cash used in 2011 was primarily due to decreases in the liabilities for vehicular and workers’ compensation claims. The cash provided in 2010 was primarily due to increases in the liabilities for vehicular and workers’ compensation claims.

Investing Activities

The most significant items affecting the comparison of Con-way’s investing cash flows for the periods presented are summarized below:

In 2012, capital expenditures were $293.1 million, compared with $289.0 million in 2011 and $186.5 million in 2010. Increased capital expenditures in 2012 were primarily due to increased acquisitions of tractor equipment at Con-way Freight. Increased capital expenditures in 2011 were primarily due to the acquisition of tractor equipment at Con-way Truckload. Con-way received sale-related proceeds of $20.8 million in 2012, $13.2 million in 2011 and $32.8 million in 2010. Proceeds in 2012 were primarily due to the sale of facilities in the Freight segment. Proceeds in 2011 were primarily due to the sale of excess corporate properties and the sale of tractors in connection with the fleet-replacement program at Con-way Truckload. Proceeds in 2010 include sale-leaseback transactions in which $20.4 million was received from the sale of revenue equipment.

In 2011, Con-way received $10.0 million as an adjustment of the original purchase price to settle a dispute associated with the 2007 acquisition of Chic Logistics, as more fully discussed in Note 2, “Goodwill and Intangible Assets,” of Item 8, “Financial Statements and Supplementary Data.”

Investment transactions involving the purchase and sale of marketable securities resulted in $15.4 million of net proceeds in 2012, $12.6 million of cash used in 2011 and $0.7 million of net proceeds in 2010.

Financing Activities

The most significant items affecting the comparison of Con-way’s financing cash flows for the periods presented are summarized below:

Con-way used $29.0 million in 2012 for the repayment of debt obligations, compared to $19.8 million in 2011 and $211.1 million in 2010. Payments in 2012, 2011 and 2010 reflect repayments of capital leases, while 2010 also includes the $200.0 million repayment of the amount outstanding under the 8 7/8% Notes due 2010.

In 2010, Con-way issued common stock in a public offering and received net proceeds of $143.3 million, as discussed more fully in Note 9, “Shareholders’ Equity,” of Item 8, “Financial Statements and Supplementary Data.”

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Contractual Cash Obligations

The table below summarizes contractual cash obligations for Con-way as of December 31, 2012. Some of the amounts in the table are based on management’s estimates and assumptions about these obligations, including their duration, the possibility of renewal, and other factors. Because of these estimates and assumptions, the actual future payments may vary from those reflected in the table. Certain liabilities, including those related to self-insurance accruals, are reported in Con-way’s consolidated balance sheets but not reflected in the table below due to the absence of stated due dates.

(Dollars in thousands)	Total		Payments Due by Period
			2013		2014-2015		2016-2017		2018 & Thereafter
Long-term debt	$	1,327,221	50,928		101,854		102,383		1,072,056
Capital leases	48,936		17,441		31,495		—		—
Operating leases	276,888		80,022		98,779		58,922		39,165
Outsourcing contracts	187,435		51,146		99,161		37,128		—
Employee benefit plans	129,244		11,723		24,222		25,952		67,347
Total	$	1,969,724	$	211,260	$	355,511	$	224,385	$	1,178,568

As presented above, contractual obligations on long-term debt and capital leases represent principal and interest payments.

Contractual obligations for operating leases represent the payments under the lease arrangements and are not included in Con-way’s consolidated balance sheets.

The employee benefit plan-related cash obligations in the table represent estimated payments under Con-way’s non-qualified defined benefit pension plans and postretirement medical plan through December 31, 2022. Expected benefit payments for Con-way’s qualified defined benefit pension plans are not included in the table, as these benefits will be satisfied by the use of plan assets. Con-way estimates that it will make $55 million of contributions to its qualified defined benefit pension plans in 2013; however, the contribution amount could change based on variations in interest rates, asset returns, Pension Protection Act ("PPA") requirements and other factors.

Con-way has agreements with third-party service providers to outsource a significant portion of its information-technology infrastructure function and a small portion of its administrative and accounting functions. The payments under the terms of the agreements are subject to change depending on the quantities and types of services consumed. As presented above, the payments reflect amounts based on projections of services expected to be consumed. The contracts also contain provisions that allow Con-way to terminate the contract at any time; however, Con-way would be required to pay additional fees if termination is for causes other than the failure of the service providers to perform.

The contractual obligations reported above exclude Con-way’s liability of $15.0 million for unrecognized tax benefits, which is more fully discussed in Note 8, “Income Taxes,” of Item 8, “Financial Statements and Supplementary Data.”

Letters of credit outstanding under Con-way’s credit facilities, as described below under “Capital Resources and Liquidity Outlook,” are generally required as collateral to support self-insurance programs and do not represent additional liabilities as the underlying self-insurance accruals are already included in Con-way’s consolidated balance sheets.

For further discussion, see Note 6, “Debt and Other Financing Arrangements,” Note 7, “Leases,” Note 8, “Income Taxes,” and Note 10, “Employee Benefit Plans,” of Item 8, “Financial Statements and Supplementary Data.”

Capital Resources and Liquidity Outlook

Con-way’s capital requirements relate primarily to the acquisition of revenue equipment to support growth and/or replacement of older equipment with newer equipment. In funding these capital expenditures and meeting working-capital requirements, Con-way may utilize various sources of liquidity and capital, including cash and cash equivalents, cash flow from operations, credit facilities and access to capital markets. Con-way may also manage its liquidity requirements and cash-flow generation by varying the timing and amount of capital expenditures.

As more fully discussed in Note 6, “Debt and Other Financing Arrangements,” of Item 8, “Financial Statements and Supplementary Data,” Con-way has a $325 million unsecured revolving credit facility. At December 31, 2012, no cash borrowings were outstanding under the credit facility; however, $138.5 million of letters of credit were outstanding, leaving $186.5 million of available capacity for additional letters of credit or cash borrowings. At December 31, 2012, Con-way was in compliance with the revolving credit facility's financial covenants and expects to remain in compliance.

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Con-way had other uncommitted unsecured credit facilities totaling $63.8 million at December 31, 2012, which are available to support short-term borrowings, letters of credit, bank guarantees and overdraft facilities. At December 31, 2012, $7.0 million of cash borrowings and $17.5 million of other credit commitments were outstanding leaving $39.4 million of available capacity.

In 2013, Con-way anticipates capital and software expenditures of approximately $300 million, net of asset dispositions, primarily for the acquisition of tractor equipment. Con-way’s actual 2013 capital expenditures may differ from the estimated amount depending on factors such as availability and timing of delivery of equipment.

At December 31, 2012, Con-way’s senior unsecured debt was rated as investment grade by Standard and Poor’s (BBB-), Fitch Ratings (BBB-), and Moody’s (Baa3). Standard and Poor's, Fitch Ratings, and Moody’s assigned an outlook of “stable.”

Con-way believes that its working-capital requirements and capital-expenditure plans in 2013 will be adequately met with various sources of liquidity and capital, including Con-way’s cash and cash equivalents, cash flow from operations, credit facilities and access to capital markets.

As detailed in Note 8, “Income Taxes,” of Item 8, “Financial Statements and Supplementary Data,” the cumulative undistributed earnings of Con-way’s foreign subsidiaries were $33.0 million at December 31, 2012, which if remitted, are subject to withholding and U.S. taxes. Of Con-way’s $429.8 million in cash and cash equivalents at December 31, 2012, $42.8 million was related to its foreign subsidiaries. Con-way currently does not expect to rely on these foreign cash and cash-equivalent balances as a source of liquidity or capital to fund its domestic operations.

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Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the U.S. requires management to adopt accounting policies and make significant judgments and estimates. In many cases, there are alternative policies or estimation techniques that could be used. Con-way maintains a process to evaluate the appropriateness of its accounting policies and estimation techniques, including discussion with and review by the Audit Committee of its Board of Directors and its independent auditors. Accounting policies and estimates may require adjustment based on changing facts and circumstances and actual results could differ from estimates. Con-way believes that the accounting policies that are most judgmental and material to the financial statements are those related to the following:

•Defined Benefit Pension Plans

•Goodwill

•Income Taxes

•Property, Plant and Equipment and Other Long-Lived Assets

•Revenue Recognition

•Self-Insurance Accruals

Defined Benefit Pension Plans

In the periods presented, certain employees of Con-way and its subsidiaries in the U.S. were covered under several retirement benefit plans, including several qualified and non-qualified defined benefit pension plans.

Significant assumptions

The net periodic benefit expense (income) and the projected benefit obligation for Con-way’s defined benefit pension plans depend upon a number of assumptions and factors, the most significant being the discount rate used to measure the present value of pension obligations and the expected rate of return on plan assets for the funded qualified plans. Con-way assesses its plan assumptions for the discount rate, expected rate of return on plan assets, and other significant assumptions on a periodic basis, but concludes on those assumptions at the actuarial plan measurement date.

Discount Rate

In determining the appropriate discount rate, Con-way is assisted by actuaries who utilize a yield-curve model based on a universe of high-grade corporate bonds (rated Aa or better by Moody's rating service). The model determines a single equivalent discount rate by applying the yield curve to Con-way's expected future benefit payments. For the December 31, 2012 measurement, Con-way used a newly developed yield curve that more closely matches the expected portfolio of bonds that would be used to settle the obligation. The yield-curve model used for the December 31, 2012 measurement produced a discount rate 35 basis points higher than the previous model, which resulted in a $93.6 million reduction in the projected benefit obligation. The discount rate used in determining net periodic benefit expense (income) for the periods presented and for 2013 are as follows:

	2013		2012		2011		2010
Discount rate on plan obligations	4.25	%	4.65	%	5.55	%	6.05	%

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Rate of Return on Plan Assets

For its qualified defined benefit pension plans, Con-way sets the expected return on plan assets using current market expectations and historical returns. The expected return on plan assets is based on estimates of long-term expected returns and considers the plans' anticipated asset allocation over the course of the next year. The expected return includes the effect of actively managing the plan assets, and is net of fees and expenses. The plan assets are managed pursuant to a long-term allocation strategy that seeks to mitigate the plans’ funded status volatility by increasing the plans’ investment in fixed-income investments over time. This strategy was developed by analyzing a variety of diversified asset-class combinations in conjunction with the projected liabilities of the plans. As a result of these strategies, the expected return on plan assets has declined over time as follows:

	2013		2012		2011		2010
Expected rate of return on plan assets	7.10	%	7.65	%	8.00	%	8.50	%

Significant assumption sensitivity

The decline in the discount rate from 4.65% at December 31, 2011 to 4.25% at December 31, 2012 caused a $101.5 million increase in the benefit obligation for Con-way's defined benefit pension plans. For the year ended December 31, 2012, Con-way's expected return on plan assets was $84.4 million compared to the actual return on plan assets of $170.9 million. The sensitivity analysis below shows the effect on net periodic benefit expense (income) and the projected benefit obligation from a 25 basis point change in the assumed discount rate and expected return on plan assets.

(Dollars in thousands)	25 Basis Point Increase			25 Basis Point Decrease
Discount rate
Effect on 2012 net periodic benefit expense (income)	$	(895	)	$	866
Effect on December 31, 2012 projected benefit obligation	(67,793		)	71,924
Expected return on plan assets
Effect on 2012 net periodic benefit expense (income)	(2,759		)	2,759

Actuarial gains and losses

Changes in the discount rate and/or differences between the expected and actual rate of return on plan assets may result in unrecognized actuarial gains or losses. For Con-way’s defined benefit pension plans, accumulated unrecognized actuarial losses decreased to $704.2 million at December 31, 2012 from $721.8 million at December 31, 2011. Any portion of the unrecognized actuarial gain (loss) that exceeds 10% of the greater of the projected benefit obligation or the fair value of plan assets at the beginning of the year is amortized and recognized as expense (income) over the estimated average remaining life expectancy of plan participants.

Effect on operating results

The effect of the defined benefit pension plans on Con-way’s operating results consist primarily of the net effect of the interest cost on plan obligations for the qualified and non-qualified defined benefit pension plans, the expected return on plan assets for the funded qualified defined benefit pension plans and the amortization of gains or losses. Con-way estimates that the defined benefit pension plans will result in annual expense of $4 million in 2013. For its defined benefit pension plans, Con-way recognized annual expense of $9.6 million in 2012, $0.4 million in 2011 and $7.5 million in 2010.

Funding

In determining the amount and timing of its pension contributions, Con-way considers its cash position, both the PPA- and GAAP-based measurements of funded status, and the tax deductibility of contributions, among other factors. Con-way made contributions of $51.4 million and $62.6 million to its qualified defined benefit pension plans in 2012 and 2011, respectively. Con-way estimates that it will make $55 million of contributions to its qualified defined benefit pension plans in 2013. The level of Con-way’s annual contributions to its qualified pension plans is subject to change based on variations in interest rates, asset returns, PPA requirements and other factors.

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Goodwill

Goodwill is recorded as the excess of the acquired entity’s purchase price over the amounts assigned to assets acquired (including identified intangible assets) and liabilities assumed. Con-way tests for impairment of goodwill annually (with a measurement date of November 30) or whenever events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Each quarter, Con-way considers events that may trigger an impairment of goodwill, including such factors as changes in the total company market value compared to underlying book value, and significant adverse changes that may impact reporting segments or underlying reporting units. A reporting unit for goodwill impairment purposes may be a component of a reporting segment that independently generates revenues and has discrete financial information that is regularly reviewed by management.

Con-way uses multiple valuation methods when possible to determine the fair value of a reporting unit. The methods used include the use of public-company multiples, precedent transactions and discounted cash flow models, and may vary depending on the availability of information. In any of the valuation methods, assumptions used to determine the fair value of reporting units may significantly impact the result. The key assumptions used in discounted cash flow models are cash flow projections involving forecasted revenues and expenses, capital expenditures, working capital changes, and the discount rate and the terminal growth rate applied to projected cash flows. Cash flow projections are developed from Con-way’s annual planning process. The discount rate equals the estimated weighted-average cost of capital of the reporting unit from a market-participant perspective. Terminal growth rates are based on inflation assumptions adjusted for factors that may impact future growth such as industry-specific expectations. These estimates and assumptions may be incomplete or inaccurate because of unanticipated events and circumstances. As a result, changes in assumptions and estimates related to goodwill could have a material effect on Con-way’s valuation result, and accordingly, its financial condition or results of operations.

Con-way Truckload had $329.8 million of goodwill at December 31, 2012. For the valuation of Con-way Truckload, Con-way applied two equally weighted methods: public-company multiples and discounted cash flow models. In the assessment of Con-way Truckload’s goodwill, the fair value of the reporting unit exceeded its carrying value by 15% or approximately $93 million. A 100 basis point change in the assumed discount rate would result in a $24 million change in fair value. A 10% change in estimated operating income for each of the next five years would result in a $34 million change in fair value.

Income Taxes

In establishing its deferred income tax assets and liabilities, Con-way makes judgments and interpretations based on the enacted tax laws and published tax guidance that are applicable to its operations. Con-way periodically evaluates the need for a valuation allowance to reduce deferred tax assets to realizable amounts. The likelihood of a material change in Con-way’s expected realization of these assets is dependent on future taxable income, future capital gains, its ability to use tax loss and credit carryforwards and carrybacks, final U.S. and foreign tax settlements, and the effectiveness of its tax-planning strategies in the various relevant jurisdictions.

Con-way assesses its income tax positions and records tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances, and information available at the reporting date. For those positions where it is more likely than not that a tax benefit will be sustained, Con-way has recorded the largest amount of tax benefit with a greater-than-50-percent likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions that do not meet the more-likely-than-not criteria, no tax benefit has been recognized in the financial statements.

Property, Plant and Equipment and Other Long-Lived Assets

In accounting for property, plant and equipment, Con-way makes estimates about the expected useful lives and the expected residual values of these assets, and the potential for impairment based on the fair values of the assets and the cash flows generated by these assets.

The depreciation of property, plant and equipment over their estimated useful lives and the determination of any salvage values require management to make judgments about future events. Con-way periodically evaluates whether changes to estimated useful lives or salvage values are necessary to ensure these estimates accurately reflect the economic use of the assets. Con-way’s periodic evaluation may result in changes in the estimated lives and/or salvage values used to depreciate its assets, which can affect the amount of periodic depreciation expense recognized and, ultimately, the gain or loss on the disposal of the asset.

Long-lived assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. For assets that are to be held and used, an impairment charge is recognized when the estimated undiscounted cash flows associated with the asset or group of assets is less than carrying value. If impairment exists, a charge is recognized for the difference between the carrying value and the fair value. Fair values are determined using quoted market

29

values, discounted cash flows or external appraisals, as applicable. Assets held for disposal are carried at the lower of carrying value or estimated net realizable value.

Each quarter, Con-way considers events that may trigger an impairment of long-lived assets. Indicators of impairment that Con-way considers include such factors as a significant decrease in market value of the long-lived asset, a significant change in the extent or manner in which the long-lived asset is being used, and current-period losses combined with a history of losses or a projection of continuing losses associated with the use of the long-lived asset.

Revenue Recognition

Con-way Freight recognizes revenue between reporting periods based on relative transit time in each period and recognizes expense as incurred. Con-way Truckload recognizes revenue and related direct costs when the shipment is delivered. Menlo Worldwide Logistics recognizes revenue under the proportional-performance model based on the service outputs delivered to the customer.

Critical revenue-related policies and estimates for Con-way Freight and Con-way Truckload include those related to revenue adjustments and uncollectible accounts receivable. Critical revenue-related policies and estimates for Menlo Worldwide Logistics include those related to uncollectible accounts receivable, measuring the proportion of service provided to customers, and gross- or net-basis revenue recognition. Con-way believes that its revenue recognition policies are appropriate and that its use of revenue-related estimates and judgments provide a reasonable approximation of the actual revenue earned.

Estimated revenue adjustments

Generally, the pricing assessed by companies in the transportation industry is subject to subsequent adjustment due to several factors, including weight and freight-classification verifications and pricing discounts. Revenue adjustments are estimated based largely on historical experience.

Uncollectible accounts receivable

Con-way Freight and Con-way Truckload report accounts receivable at net realizable value and provide an allowance for uncollectible accounts when losses are probable. Estimates for uncollectible accounts are based on various judgments and assumptions, including revenue levels, historical loss experience, economic conditions and the aging of outstanding accounts receivable.

Menlo Worldwide Logistics, based on the size and nature of its client base, performs a periodic evaluation of its customers’ creditworthiness and accounts receivable portfolio and recognizes expense from uncollectible accounts when losses are both probable and reasonably estimable.

Proportional performance of service outputs

For certain customer contracts, Menlo Worldwide Logistics makes estimates when measuring the proportion of service outputs delivered to the customer, including services provided under performance-based incentive arrangements.

Gross- or net-basis revenue recognition

Determining whether revenue should be reported on a gross or net basis is based on an assessment of whether Menlo Worldwide Logistics is acting as the principal or the agent in the transaction and involves judgment based on the terms of the arrangement.

Self-Insurance Accruals

Con-way uses a combination of large-deductible purchased insurance and self-insurance programs to provide for the costs of medical, vehicular, cargo and workers’ compensation claims. The long-term portion of self-insurance accruals relates primarily to workers’ compensation and vehicular claims that are expected to be payable over several years. Con-way periodically evaluates the level of insurance coverage and adjusts insurance levels based on risk tolerance and premium expense.

The measurement and classification of self-insured costs requires the consideration of historical cost experience, demographic and severity factors, and judgments about the current and expected levels of cost per claim and retention levels. These methods provide estimates of undiscounted liability associated with claims incurred as of the balance sheet date, including claims not reported. Con-way believes its actuarial methods are appropriate for measuring these highly judgmental self-insurance accruals. However, based on the magnitude of claims and the length of time from incurrence of the claims to ultimate settlement, the use

30

of any estimation method is sensitive to the assumptions and factors described above. Accordingly, changes in these assumptions and factors can materially affect the estimated liability and those amounts may be different than the actual costs paid to settle the claims.

New Accounting Standards

Refer to Note 1, “Principal Accounting Policies,” of Item 8, “Financial Statements and Supplementary Data” for a discussion of recently issued accounting standards that Con-way has not yet adopted.

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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 Con-way’s management for future operations or other future items;

• any statements concerning proposed new products or services;

• any statements regarding Con-way’s estimated future contributions to pension plans;

• any statements as to the adequacy of reserves;

• any statements regarding the outcome of any legal and other claims and proceedings that may be brought against Con-way;

• any statements regarding future economic conditions or performance;

• any statements regarding strategic acquisitions; and

• 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, certain important factors, among others and in addition to the matters discussed elsewhere in this document and other reports and documents filed by Con-way with the Securities and Exchange Commission, could cause actual results and other matters to differ materially from those discussed in such forward-looking statements. A detailed description of certain of these risk factors is included in Item 1A, “Risk Factors.” Any forward-looking statements speak only as of the date the statement is made, and Con-way does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by law.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Con-way is exposed to a variety of market risks, including the effects of interest rates, fuel prices and foreign currency exchange rates.

Con-way 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. For the periods presented, Con-way held no material derivative financial instruments.

Interest Rates

Con-way invests in cash-equivalent investments and marketable securities that earn investment income. For the periods presented, the amount of investment income earned on Con-way’s investments was not material.

Based on the fixed interest rates and maturities of its long-term debt, fluctuations in market interest rates would not significantly affect Con-way’s operating results or cash flows.

As discussed more fully above in “Critical Accounting Policies and Estimates,” the amounts recognized as pension expense and the accrued pension liability for Con-way’s defined benefit pension plans depend upon a number of assumptions and factors, including the discount rate used to measure the present value of the pension obligations.

Fuel

Con-way is exposed to the effects of changes in the price and availability of diesel fuel, as more fully discussed in Item 1A, “Risk Factors.” For the periods presented, Con-way used no material derivative financial instruments to manage the risk associated with changes in the price of diesel fuel.

Foreign Currency

The assets and liabilities of Con-way’s foreign subsidiaries are denominated in foreign currencies, which create exposure to changes in foreign currency exchange rates. However, the market risk related to foreign currency exchange rates is not material to Con-way’s financial condition, results of operations or cash flows. For the periods presented, Con-way used no material derivative financial instruments to manage foreign currency risk.

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Con-way Inc.:

We have audited the accompanying consolidated balance sheets of Con-way Inc. (the Company) and subsidiaries as of December 31, 2012 and 2011, and the related statements of consolidated income, comprehensive income (loss), shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2012. We also have audited the Company's internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting in Item 9A. Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the Company's internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Con-way Inc. and subsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2012, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

/s/ KPMG LLP

Portland, Oregon

February 25, 2013

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Con-way Inc.

Consolidated Balance Sheets

(Dollars in thousands)	December 31,
	2012			2011
Assets
Current Assets
Cash and cash equivalents	$	429,784		$	438,010
Marketable securities	3,200			13,255
Trade accounts receivable, net	567,097			577,522
Other accounts receivable	43,912			43,849
Operating supplies, at lower of average cost or market	23,180			22,822
Prepaid expenses	49,681			48,369
Deferred income taxes	34,520			46,563
Total Current Assets	1,151,374			1,190,390
Property, Plant and Equipment
Land	195,737			194,078
Buildings and leasehold improvements	840,966			827,910
Revenue equipment	1,746,816			1,613,806
Other equipment	329,730			318,313
	3,113,249			2,954,107
Accumulated depreciation	(1,526,648		)	(1,458,074		)
Net Property, Plant and Equipment	1,586,601			1,496,033
Other Assets
Deferred charges and other assets	33,963			36,743
Capitalized software, net	20,365			19,829
Marketable securities	—			5,354
Intangible assets, net	10,997			13,951
Goodwill	338,164			337,716
	403,489			413,593
Total Assets	$	3,141,464		$	3,100,016

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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Con-way Inc.

Consolidated Balance Sheets

(Dollars in thousands, except per share data)	December 31,
	2012			2011
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable	$	330,665		$	345,489
Accrued liabilities	253,209			235,146
Self-insurance accruals	100,828			104,328
Short-term borrowings	6,982			14,481
Current maturities of long-term debt and capital leases	16,008			24,026
Total Current Liabilities	707,692			723,470
Long-Term Liabilities
Long-term debt	719,016			718,336
Long-term obligations under capital leases	30,355			51,902
Self-insurance accruals	143,735			158,889
Employee benefits	592,668			610,850
Other liabilities and deferred credits	32,201			39,120
Deferred income taxes	77,412			38,195
Total Liabilities	2,303,079			2,340,762
Commitments and Contingencies (Notes 6, 7, 8 and 12)
Shareholders' Equity
Common stock, $0.625 par value; authorized 100,000,000 shares; issued
63,565,453 and 63,065,931 shares, respectively	39,701			39,394
Additional paid-in capital, common stock	614,334			595,992
Retained earnings	966,939			884,758
Cost of repurchased common stock (7,583,471 and 7,468,869 shares,
respectively)	(326,128		)	(322,454		)
Accumulated Other Comprehensive Loss	(456,461		)	(438,436		)
Total Shareholders' Equity	838,385			759,254
Total Liabilities and Shareholders' Equity	$	3,141,464		$	3,100,016

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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Con-way Inc.

Statements of Consolidated Income

(Dollars in thousands, except per share data)	Years ended December 31,
	2012			2011			2010
Revenues	$	5,580,247		$	5,289,953		$	4,952,000
Costs and Expenses
Salaries, wages and employee benefits	2,125,104			2,026,739			2,024,606
Purchased transportation	1,531,319			1,381,267			1,265,848
Other operating expenses	567,810			552,842			547,095
Fuel and fuel-related taxes	553,301			566,026			464,997
Depreciation and amortization	216,215			202,647			192,502
Maintenance	128,084			130,179			123,864
Rents and leases	115,954			116,415			117,312
Purchased labor	113,619			113,929			113,435
Loss (Gain) from asset impairments and purchase-price adjustment	—			(10,000		)	19,181
Restructuring charges	—			1,981			4,990
	5,351,406			5,082,025			4,873,830
Operating Income	228,841			207,928			78,170
Other Income (Expense)
Investment income	831			920			1,327
Interest expense	(54,777		)	(55,589		)	(59,015		)
Miscellaneous, net	(3,941		)	(5,187		)	(3,925		)
	(57,887		)	(59,856		)	(61,613		)
Income before Income Tax Provision	170,954			148,072			16,557
Income Tax Provision	66,408			59,629			12,572
Net Income	$	104,546		$	88,443		$	3,985
Weighted-Average Common Shares Outstanding
Basic	55,837,574			55,388,297			52,507,320
Diluted	56,485,987			56,101,903			53,169,299
Earnings per Common Share
Basic	$	1.87		$	1.60		$	0.08
Diluted	$	1.85		$	1.58		$	0.07

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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Con-way Inc.
Statements of Consolidated Comprehensive Income (Loss)
(Dollars in thousands)	Years ended December 31,
	2012			2011			2010
Net Income	$	104,546		$	88,443		$	3,985
Other Comprehensive Income (Loss):
Foreign currency translation adjustment	481			(1,331		)	(913		)
Unrealized gain (loss) on available-for-sale security, net of deferred tax of
$145, $4, and $19, respectively	226			(6		)	29
Employee benefit plans
Actuarial loss, net of deferred tax of $1,903, $104,425,
and $34,886, respectively	(2,977		)	(163,312		)	(48,685		)
Net loss included in net periodic benefit expense or
income, net of deferred tax of $7,969, $4,373, and $3,709, respectively	12,465			6,837			5,800
Prior-service credit, net of deferred tax of $17,577, $0, and $77,
respectively	(27,493		)	—			121
Amortization of prior service credit included in net periodic benefit
expense or income, net of deferred tax of $465, $468, and $464, respectively	(727		)	(730		)	(724		)
	(18,732		)	(157,205		)	(43,488		)
Total Other Comprehensive Loss	(18,025		)	(158,542		)	(44,372		)
Comprehensive Income (Loss)	$	86,521		$	(70,099	)	$	(40,387	)

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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Con-way Inc.

Statements of Consolidated Cash Flows

(Dollars in thousands)	Years ended December 31,
	2012			2011			2010
Cash and Cash Equivalents, Beginning of Period	$	438,010		$	421,420		$	476,575
Operating Activities
Net income	104,546			88,443			3,985
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization, net of accretion	215,202			201,638			189,517
Non-cash compensation and employee benefits	33,180			22,050			20,256
Increase in deferred income taxes	63,091			52,160			68,343
Provision for uncollectible accounts	6,358			6,761			7,319
Loss (Gain) from asset impairments and purchase-price adjustment	—			(10,000		)	19,181
Loss from restructuring activities	—			—			4,990
Loss (Gain) from sales of property, equipment and investment, net	(8,649		)	(7,120		)	1,243
Changes in assets and liabilities:
Receivables	7,076			(42,315		)	(61,264		)
Prepaid expenses	(1,312		)	(1,024		)	(4,542		)
Accounts payable	(14,824		)	41,313			31,891
Accrued variable compensation	1,201			22,439			8,268
Accrued liabilities, excluding accrued variable compensation and
employee benefits	1,988			3,808			(20,492		)
Self-insurance accruals	(18,654		)	(11,951		)	30,487
Accrued income taxes	(2,316		)	34,362			(39,583		)
Employee benefits	(67,291		)	(52,713		)	(67,629		)
Deferred charges and credits	(5,217		)	(952		)	(3,572		)
Other	(2,968		)	(2,189		)	(3,526		)
Net Cash Provided by Operating Activities	311,411			344,710			184,872
Investing Activities
Capital expenditures	(293,135		)	(288,994		)	(186,496		)
Software expenditures	(8,963		)	(8,667		)	(8,101		)
Proceeds from sales of property and equipment	20,840			13,213			12,403
Proceeds from sale-leaseback transactions	—			—			20,430
Proceeds from purchase-price adjustment	—			10,000			—
Purchases of marketable securities	(8,200		)	(13,480		)	(59,260		)
Proceeds from sales of marketable securities	23,613			900			59,960
Net Cash Used in Investing Activities	(265,845		)	(287,028		)	(161,064		)
Financing Activities
Repayment of long-term debt and capital leases	(29,015		)	(19,811		)	(211,124		)
Net proceeds from (repayments of) short-term borrowings	(7,621		)	(4,691		)	7,912
Payment of debt issuance costs	—			(661		)	(2,123		)
Net proceeds from issuance of common stock	—			—			143,325
Proceeds from exercise of stock options	3,560			5,532			3,459
Excess tax benefit from share-based compensation	1,641			716			433
Payments of common dividends	(22,357		)	(22,177		)	(20,845		)
Net Cash Used in Financing Activities	(53,792		)	(41,092		)	(78,963		)
Increase (Decrease) in Cash and Cash Equivalents	(8,226		)	16,590			(55,155		)
Cash and Cash Equivalents, End of Period	$	429,784		$	438,010		$	421,420
Supplemental Disclosure
Cash paid (refunded) for income taxes, net	$	6,163		$	(28,740	)	$	(10,354	)
Cash paid for interest, net of amounts capitalized	$	53,806		$	54,676		$	62,869

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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Con-way Inc.

Statements of Consolidated Shareholders' Equity

	Common Stock		Additional Paid-in Capital	Retained Earnings	Repurchased Common Stock	Accumulated Other Comprehensive Loss
(Dollars in thousands except per share data)	Number of Shares	Amount
Balance, December 31, 2009	62,512,456