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Con-Way Reports First-Quarter 2008 Results

April 20, 2008

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Con-way Inc. reported net income from continuing operations for the first quarter of 2008 of $22.5million (after preferred stock dividends), or 47 cents per diluted share.
The results compared to first-quarter 2007 net income from continuing operations (after preferred stock dividends) of $24.9 million, or 51 cents per diluted share.

Revenue was $1.20 billion, an increase of 19.9 percent from last year's revenue of $1.00 billion, reflecting acquisitions completed during 2007. Operating income in the 2008 first quarter was $54.0 million, an increase of 10.0 percent compared to $49.1 million earned in the first quarter a year ago.

Net income to common shareholders in the 2008 first quarter was $22.5million, or 47 cents per diluted share, which included expenses of $5.2 million, or 7 cents per diluted share, associated with completion of organizational transformation initiatives at Con-way Freight. This compares
to previous-year net income of $27.8 million, or 57 cents per diluted share. The 2007 first quarter included discontinued operations which had a net gain of $2.9 million, or 6 cents per diluted share.

First quarter results in both 2008 and 2007 also were affected by worse-than-expected winter weather conditions. These weather-related effects reduced first-quarter diluted earnings per share in both years by an estimated 4 cents.

Excluding the Con-way Freight organizational transformation costs in 2008, the company's first-quarter diluted earnings per share were 54 cents in 2008, compared to 51 cents in 2007.

Describing the business climate as "lackluster at best," Douglas W. Stotlar, Con-way's president and CEO, said, "We're operating in a challenging and uncertain economic environment, which continues to restrain demand and place pressure on pricing and margins. Based on current economic data and feedback from our customers, there appear to be few catalysts to accelerate demand in the freight markets, at least in the short term," he said.

"The current economy notwithstanding, I was encouraged by modest growth at Con-way Freight in the quarter as targeted, customer-specific sales initiatives produced results and increased market share," Stotlar added. "We also began to see some early results from our synergy nitiatives as Con-way Truckload was able to leverage business opportunities with Menlo and Con-way Freight to improve asset utilization and reduce empty miles."

Commenting on Menlo Worldwide Logistics, Stotlar noted that trends toward outsourcing of logistics operations, both geographically and functionally across the supply chain, continued to benefit Menlo. "Menlo has a solid pipeline across all of its principal industry groups," said Stotlar. "Our pace of new business wins is tracking with expectations, particularly in Europe and Asia. The challenge for Menlo will be margin improvement and cost management as new business wins are implemented."

The effective tax rate for the 2008 first quarter was 39.4 percent compared to 41.8 percent in the same period of 2007. Both the 2008 and 2007 tax rates were affected by discrete tax adjustments which increased the effective tax rate.

FREIGHT

For the 2008 first quarter, Con-way Freight, the company's regional less-than-truckload operations, reported:

• Operating income of $36.1 million, a decrease of 24.3 percent from the $47.7 million earned in the year-ago period. The decrease reflected the effect of unprecedented fuel costs, the influence of pricing pressures on cost recovery, and higher operating expense. The 2008 first-quarter income also was lower in part due to $5.2 million in expenses for completion of Con-way Freight's business transformation.

• Revenues of $743.3 million, a 9.4 percent increase over last year's first-quarter revenues of $679.7 million.

• Tonnage per day handled by Con-way Freight increased 3.1 percent over the previous-year first quarter.

• Yield for Con-way Freight improved 7.8 percent from the previous-year first quarter. Excluding the fuel surcharge, yield improved 2.1 percent.

• Con-way Freight recorded an operating ratio of 95.2 in the 2008 first quarter compared to 93.2 in first-quarter 2007, reflecting the earlier-mentioned extraordinary fuel escalation, pricing pressures and higher operating costs. Excluding the previously noted business transformation costs, the 2008 first-quarter operating ratio was 94.4.

The 2008 first quarter had rebranding expense of $3.7 million compared to $2.8 million in 2007. The company expects Con-way Freight's rebranding and the associated expense to be completed in the second quarter.

On January 28, 2008, Con-way Freight implemented a general rate increase of 5.5 percent.

LOGISTICS

For the first quarter of 2008, Menlo Worldwide Logistics, the company's global logistics and supply chain management operations, reported:

• Operating income of $6.3 million, a 4.2 percent decrease from $6.5 million in the first quarter of 2007. Income decreased due to integration and weather-related costs from Asian operations, and business closings for the Chinese New Year, which reduced volumes from China operations.

• Revenue of $341.5 million, up 6.5 percent from the previous-year first-quarter revenue of $320.5 million.

• Net revenue of $126.0 million, an increase of 21.0 percent compared to $104.1 million in the previous-year first quarter, reflecting revenues gained from Menlo's acquisitions in Asia, which were completed last year.

While Menlo achieved growth in net revenues, operating income declined due to the previously noted integration and weather-related costs from Asian operations, and the effects of the Chinese New Year holiday.

At the end of the first quarter of 2008, Menlo successfully launched the operating and management platform for the Defense Transportation Coordination Initiative (DTCI), bringing on-line the program's first Defense Distribution Center (DDC) in Puget Sound, Washington. With mplementation under way, the company expects to begin recognizing revenue from DTCI in the 2008 second quarter. Additional DDCs will go live in a phased roll-out throughout 2008 and into 2009. DTCI operations had an immaterial effect on first quarter results.

In the 2007 first quarter, the company recorded a charge of $2.7 million for the post-closing settlement of outstanding items related to the sale of Menlo's interest in Vector SCM, LLC to General Motors Corp.

TRUCKLOAD

Results for the Truckload segment reflect the combined operations of Con-way's former truckload division and Contract Freighters Inc., which Con-way acquired in August 2007, and enamed Con-way Truckload in January 2008. For the first quarter of 2008, the company's full-truckload transportation operations reported:

• Operating income of $10.3 million.

• Revenue of $116.0 million, after the elimination of inter-company
revenues.

• Operating ratio on total revenues (before inter-company eliminations and
exclusive of fuel surcharges) of 91.4.

CON-WAY OTHER

Con-way Other includes the company's Road Systems, Inc. trailer manufacturing unit as well as other corporate activities. These activities produced a profit of $1.4 million during the 2008 first quarter, compared to a loss of $1.7 million in the year-ago period.

2008 OUTLOOK

Con-way is revising its outlook for 2008 full-year earnings and now expects diluted earnings per share from continuing operations to be between $3.00 and $3.40 based on an assumed number of diluted shares outstanding of 48.1 million. The company's previous 2008 annual guidance was for diluted earnings per share from continuing operations to be between $3.40 and $3.80.

"Given the weak demand environment and the inflationary effect of unprecedented energy costs, we believe pricing will remain under pressure for some time. Until such time as we have tangible evidence of improving economic conditions we believe a cautious, measured approach

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