UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
X ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES AND EXCHANGE ACT
--- OF 1934
For the fiscal year ended December 31, 2007
OR
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
--- 1934
For the transition period from N/A to N/A
COMMISSION FILE NUMBER 1-5046
CON-WAY RETIREMENT SAVINGS PLAN
Con-way Inc.
Incorporated in the State of Delaware
I.R.S. Employer Identification No. 94-1444798
2855 Campus Drive, Suite 300, San Mateo, California 94403
Telephone Number (650) 378-5200
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons administering the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
Con-way Retirement Savings Plan
June 27, 2008
/s/ Mark C. Thickpenny
------------------------
Mark C. Thickpenny
Chairman, Con-way Inc.
Administrative Committee
CON-WAY RETIREMENT SAVINGS PLAN
Financial Statements and Supplemental Schedule
December 31, 2007 and 2006
(With Report of Independent Registered Public Accounting Firm)
CON-WAY RETIREMENT SAVINGS PLAN
Index
Page
Report of Independent Registered Public Accounting Firm 1
Financial Statements:
Statements of Net Assets Available for Benefits - December 31,
2007 and 2006 2
Statement of Changes in Net Assets Available for Benefits - Year
ended December 31, 2007 3
Notes to Financial Statements 4
Supplemental Schedule
Schedule H, Line 4i - Schedule of Assets (Held at End of Year) as
of December 31, 2007 13
Report of Independent Registered Public Accounting Firm
The Board of Directors
Con-way Inc.:
We have audited the accompanying statements of net assets available for
benefits of the Con-way Retirement Savings Plan as of December 31, 2007 and
2006, and the related statement of changes in net assets available for
benefits for the year ended December 31, 2007. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as
of December 31, 2007 and 2006, and the changes in its net assets available
for benefits for the year ended December 31, 2007, in conformity with U.S.
generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of Schedule
H, line 4i, schedule of assets (held at end of year) as of December 31, 2007
is presented for purposes of additional analysis and is not a required part
of the basic financial statements but is supplementary information required
by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. The
supplemental schedule is the responsibility of the Plan's management. The
supplemental schedule has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/ KPMG LLP
Portland, Oregon
June 27, 2008
CON-WAY RETIREMENT SAVINGS PLAN
Statements of Net Assets Available for Benefits
December 31, 2007 and 2006
2007 2006
------------------------------------------------ -----------------------------------------------
Invested Unallocated Total Invested Unallocated Total
-------------- -------------- -------------- -------------- -------------- --------------
Assets:
Investments, at fair value:
Shares in registered
investment companies $ 626,715,929 $ - $ 626,715,929 $ 522,251,988 $ - $ 522,251,988
Common trust funds 212,461,971 - 212,461,971 184,357,490 - 184,357,490
Con-way Common Stock 112,247,601 - 112,247,601 109,977,740 - 109,977,740
Con-way Preferred Stock 87,843,209 36,104,745 123,947,954 86,702,686 52,751,639 139,454,325
Investments, at cost:
Participant loans 50,353,892 - 50,353,892 54,738,168 - 54,738,168
-------------- -------------- -------------- -------------- -------------- --------------
Total investments 1,089,622,602 36,104,745 1,125,727,347 958,028,072 52,751,639 1,010,779,711
-------------- -------------- -------------- -------------- -------------- --------------
Net assets held in 401(h)
account (notes 3 and 8) 33,782,942 - 33,782,942 22,905,747 - 22,905,747
-------------- -------------- -------------- -------------- -------------- --------------
Contributions receivable:
Participants 1,723,689 - 1,723,689 2,371,244 - 2,371,244
Con-way 21,721,137 - 21,721,137 2,800,627 - 2,800,627
-------------- -------------- -------------- -------------- -------------- --------------
Total contributions
receivable 23,444,826 - 23,444,826 5,171,871 - 5,171,871
-------------- -------------- -------------- -------------- -------------- --------------
Due from Con-way Preferred
Stock Fund - Unallocated 5,671,005 - 5,671,005 5,398,334 - 5,398,334
Dividend receivable - 3,747,495 3,747,495 - 4,027,226 4,027,226
Cash 82,776 - 82,776 328,540 - 328,540
-------------- -------------- -------------- -------------- -------------- --------------
Total assets 1,152,604,151 39,852,240 1,192,456,391 991,832,564 56,778,865 1,048,611,429
-------------- -------------- -------------- -------------- -------------- --------------
Liabilities:
Notes payable (note 5) - (43,400,000) (43,400,000) - (62,000,000) (62,000,000)
Accrued interest payable - (1,853,705) (1,853,705) - (2,648,150) (2,648,150)
Due to Con-way (note 1) - (1,893,790) (1,893,790) - (1,379,076) (1,379,076)
Due to Con-way Preferred Stock
Fund - Allocated - (5,671,005) (5,671,005) - (5,398,334) (5,398,334)
Amounts related to
obligation of 401(h)
account (notes 3 and 8) (33,782,942) - (33,782,942) (22,905,747) - (22,905,747)
-------------- -------------- -------------- -------------- -------------- --------------
Total liabilities (33,782,942) (52,818,500) (86,601,442) (22,905,747) (71,425,560) (94,331,307)
-------------- -------------- -------------- -------------- -------------- --------------
Net assets available for
benefits $1,118,821,209 $ (12,966,260) $1,105,854,949 $ 968,926,817 $ (14,646,695) $ 954,280,122
============== ============== ============== ============== ============== ==============
See accompanying notes to financial statements.
CON-WAY RETIREMENT SAVINGS PLAN
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 2007
Invested Unallocated Total
-------------- -------------- --------------
Additions:
Participant contributions $ 87,816,387 $ - $ 87,816,387
Con-way contributions (note 1) 79,090,335 14,656,243 93,746,578
Rollover contributions 2,879,706 - 2,879,706
Allocation of preferred shares
to RSP participants 15,231,474 - 15,231,474
Dividend and interest income 9,509,948 7,651,167 17,161,115
Net appreciation (depreciation) in fair
value of investments (Note 4) 35,985,017 (1,609,922) 34,375,095
-------------- -------------- --------------
Total additions 230,512,867 20,697,488 251,210,355
-------------- -------------- --------------
Deductions:
Distributions to participants (79,185,642) - (79,185,642)
Transfer to Con-way 401(k) Plan (1,432,833) - (1,432,833)
Allocation of preferred shares
to RSP participants - (15,231,474) (15,231,474)
Allocation of preferred shares
to Con-way 401(k) Plan participants - (78,169) (78,169)
Interest expense - (3,707,410) (3,707,410)
-------------- -------------- --------------
Total deductions (80,618,475) (19,017,053) (99,635,528)
-------------- -------------- --------------
Net increase 149,894,392 1,680,435 151,574,827
Net assets available for
benefits, December 31, 2006 968,926,817 (14,646,695) 954,280,122
-------------- -------------- --------------
Net assets available for
benefits, December 31, 2007 $1,118,821,209 $ (12,966,260) $1,105,854,949
============== ============== ==============
See accompanying notes to financial statements.
CON-WAY RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2007 and 2006
(1) Description of Plan
The following description of the Con-way Retirement Savings Plan (the
Plan or RSP) is provided for general information purposes only.
Participants should refer to the Con-way Employee Benefits Handbook or
the Plan document for more complete information. The term "Con-way" or
"Company" refers to Con-way Inc. and subsidiaries.
(a) General
The Con-way sponsored Plan provides eligible employees the opportunity
to save for their retirement through the Plan's profit-sharing,
salary-deferral and stock-ownership features. The plan also provides
medical benefits for retired participants, as described below.
The Plan is intended to qualify as a profit-sharing plan
under Section 401(a) of the Internal Revenue Code (the Code), with a
salary-deferral feature qualified under Section 401(k) of the Code and
is subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended (ERISA). The Plan also operates, in
relevant part, as a leveraged employee stock ownership plan (ESOP),
and is designed to comply with Section 4975(e)(7) of the Code. Overall
responsibility for administering the Plan rests with the Con-way Inc.
Administrative Committee (the Committee), which is appointed by the
Chief Executive Officer of Con-way. The Plan's trustee, T. Rowe Price
(the Trustee), is responsible for the management and control of the
Plan's assets, which are held in individual participant investment
accounts (collectively known as the Trust).
Con-way has designated a portion of the ESOP feature of the Plan to be
a money purchase pension plan and added medical benefits for retired
participants, as described in note 3, Retiree Health Savings Account.
As of January 1, 2007, drivers of Con-way Truckload ceased
participation in the Plan and became eligible to participate in the
Con-way 401(k) Plan. As a result, $1,432,833 of the drivers' account
balances were transferred from the RSP to the Con-way 401(k) Plan.
(b) Amendments
In October 2006, Con-way's Board of Directors approved changes to the
Plan, which expand benefits earned starting January 1, 2007, and are
described more fully under "Contributions."
(c) Eligibility
An employee is eligible to participate in the Plan if the employee is
not covered by a collective bargaining agreement, is not a leased
employee or is not a nonresident alien. There are no age or service
requirements for eligibility except that a supplemental employee must
complete one year of service during which the employee works 1,000
hours.
(d) Contributions
Participants may contribute up to 50% of their eligible compensation
subject to certain limitations. Effective January 1, 2007, amendments
to the Plan increased the contributions made by Con-way to
participants' accounts. Con-way increased its discretionary matching
contributions under the Plan to 50% of the first six percent of
participants' eligible compensation (from 50% of the first three
percent of eligible compensation) and now makes additional
contributions to participants' accounts based on years of service.
Effective January 1, 2007, participants with at least six months of
service receive a company-paid Basic contribution of 3%, 4%, or 5% of
eligible compensation depending on years of service. In addition,
qualifying participants receive a company-paid Transition contribution
of 1%, 2%, or 3% of the participants' eligible compensation, depending
on the participants' combined age and years of service as of December
31, 2006.
Con-way matching contributions are in the form of allocations of
Preferred Stock and open-market purchases of Con-way Common Stock
(Common Stock) from cash contributions by Con-way. The Basic and
Transition contributions are calculated quarterly and are invested in
the same investment funds that the participant has chosen for their
employee contributions.
Cash dividends on the Preferred Stock are used for debt service on the
notes payable, as more fully discussed in note 5, Notes Payable.
Participants are allocated additional Preferred Stock as a substitute
for the cash dividends used for debt service. For the year ended
December 31, 2007, annual interest requirements were less than annual
Preferred Stock cash dividends received by the Plan.
As reported in the Statement of Changes in Net Assets Available for
Benefits, Preferred Stock was allocated to RSP participants at a fair
value of $15,231,474. Participants of the Con-way 401(k) Plan who
formerly participated in the RSP were awarded Con-way preferred stock
with a fair value of $78,169, as shown on the Statement of Changes in
Net Assets Available for Benefits.
In 2007, the total allocation of Con-way Preferred Stock to the RSP
and Con-way 401(k) Plan participants consisted of the following:
Con-way match of Preferred Stock $ 7,743,946
Additional Preferred Stock allocated to participants
as a substitute for cash dividends used for
debt service 7,565,697
-----------
Total allocations to participants $ 15,309,643
===========
In addition, Con-way made contributions to the Plan for repayment of
the notes payable described in note 5. In 2007, principal payments
consisted of the following:
Con-way cash contributions $ 14,656,243
Con-way Preferred Stock cash dividends in excess of
interest on the notes payable 3,943,757
-----------
Total principal payments $ 18,600,000
===========
At December 31, 2007 and 2006, the Preferred Stock dividend receivable
in excess of the interest payable on the RSP notes is reported in the
Statements of Net Assets Available for Benefits as amounts Due to
Con-way of $1,893,790 and $1,379,076, respectively.
(e) Participant Accounts
The Plan allows participants to select any one or more of the
investment funds established under the Plan in which contributions can
be invested. Con-way's matching contributions are deposited into the
Con-way Preferred Stock Fund - Allocated and the Con-way Common Stock
Fund. As with balances in other invested funds, participants may
transfer Con-way's matching contributions to investments other than
Con-way equity. Basic and Transition contributions are invested in
the same investment funds that the participant has chosen for their
own employee contributions to the Plan.
Allocations of Con-way's matching contributions are based upon a
percentage of participant contributions, as described above.
Allocations of net Plan earnings are based upon participant account
balances, as defined. Participants are only entitled to the vested
benefits.
(f) Vesting
Participants' contributions plus earnings thereon vest immediately.
Con-way's matching contributions vest after two years of service with
Con-way. If the employee is terminated prior to two years of service,
the matching contributions are forfeited. Forfeited shares of Common
and Preferred Stock are used to reduce future Con-way contributions.
At December 31, 2007 and 2006, forfeitures totaling $199,662 and
$213,224, respectively, were available to reduce future contributions.
The Basic and Transition contributions vest immediately.
(g) Participant Loans
The Plan has a loan provision allowing participants access to funds.
Loans can be no less than $1,000 and cannot exceed the lesser of
$50,000 or 50% of a participant's vested account balance (subject to
administrative adjustment to assure compliance with the 50% limit).
Loans can be made for a term not to exceed 4-1/2 years. Loans
outstanding at December 31, 2007 bear interest at rates ranging from
5.00% to 10.50%. Principal and interest are paid ratably through
payroll deductions. Starting July 1, 2007, participants may have a
maximum of one loan outstanding.
(h) Payments and Benefits
Participants can receive a total distribution from their accounts upon
death or termination of employment. Disabled participants can receive
a partial distribution of their accounts, excluding matching
contributions received after January 1, 2002, provided they qualify
for benefits under Con-way's long-term disability coverage. Other
types of withdrawals are permitted by the Plan in limited situations.
Participants can elect to have their accounts distributed in a single
lump sum or in a series of substantially equal annual installments, as
defined by the Plan. Distributions will be made in cash except that
(1) participant accounts invested in Common Stock can, at the
direction of the participant, be paid in shares and (2) participant
allocations of Preferred Stock will be converted into shares of Common
Stock and can, at the direction of the participant, then be paid in
common shares or in cash.
(i) Plan Termination
Although Con-way has no current intention to terminate the Plan, it
may do so at any time by resolution of the Board of Directors. In the
event that the Plan is terminated, the net assets of the Plan shall be
distributed to participants in the amount credited to their accounts.
(2) Summary of Significant Accounting Policies
(a) Basis of Accounting
The accompanying financial statements have been prepared using the
accrual method of accounting.
(b) Financial Instruments
Investments in shares of registered investment companies are stated at
fair value, based on the net asset value of the underlying investments
and are valued daily. Investments in common and collective trusts are
stated at fair value based on the value of the underlying investments
and are expressed in units. The Plan's investments in common and
collective trusts are valued using the audited financial statements of
the collective trusts at year end. The Con-way Common Stock is stated
at fair value based on the quoted market price. The Con-way Preferred
Stock is stated at fair value determined by an annual independent
appraisal. Participant loans are recorded at cost, which approximates
fair value.
The notes payable of $43,400,000 and $62,000,000 at December 31, 2007
and 2006, respectively, in the accompanying financial statements are
stated at their carrying value. The fair value of the notes payable as
of December 31, 2007 and 2006 was approximately $45,000,000 and
$66,000,000 respectively. Fair value was estimated based on the
expected future payments discounted at market rates.
(c) Investments
The Plan offers various investments in securities that are generally
exposed to various risks, such as interest-rate, credit and overall
market-volatility risks. Due to the risk associated with certain
investment securities, it is reasonably possible that the value of
investment securities will change and that such changes could
materially affect amounts reported in the Statements of Net Assets
Available for Benefits.
The Plan invests in securities with contractual cash flows, such as
asset backed securities, collateralized mortgage obligations and
commercial mortgage backed securities, including securities backed by
subprime mortgage loans. The value, liquidity and related income of
these securities are sensitive to changes in economic conditions,
including real estate value, delinquencies or defaults, or both, and
may be adversely affected by shifts in the market's perception of the
issuers and changes in interest rates.
(d) Income Recognition
The annual change in market value, including realized gains and
losses, is reported in net appreciation (depreciation) in fair value
of investments in the accompanying Statement of Changes in Net Assets
Available for Benefits.
Interest income is recorded on the accrual basis. Dividends are
recorded on the ex-dividend date. Purchases and sales of securities
are recorded on the trade-date basis.
(e) Operating Expenses
During 2007, all administrative expenses of the Plan were paid by
Con-way. The funds charge investment management fees in accordance
with each fund's prospectus, through a reduction in each fund's net
asset value.
(f) Payment of Benefits
Benefits paid to participants are recorded upon distribution.
(g) Estimates
Con-way makes estimates and assumptions when preparing the financial
statements in conformity with U.S. generally accepted accounting
principles. These estimates and assumptions affect the amounts
reported in the accompanying financial statements and notes. Actual
results could differ from those estimates.
(h) New Accounting Standards
In September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements, which defines fair value, establishes a framework for
measuring fair value, and expands disclosures about fair-value
measurements. SFAS 157 applies to other accounting pronouncements
that require or permit fair-value measurements and does not require
any new fair-value measurements. The effective date of SFAS 157 is the
first fiscal year beginning after November 15, 2007. In November 2007,
the FASB proposed a one-year deferral of SFAS 157's fair-value
measurement requirement for nonfinancial assets and liabilities,
except for items that are recognized or disclosed at fair value on a
recurring basis. Con-way does not expect the adoption of SFAS 157 to
have a material effect on the Plan's financial statements.
In February 2007, the FASB issued SFAS 159, The Fair Value Option for
Financial Assets and Financial Liabilities, which permits an entity to
choose to measure many financial instruments and certain other items
at fair value at specified election dates. Subsequent unrealized gains
and losses on items for which the fair-value option has been elected
will be reported in earnings. The effective date for SFAS 159 is the
first fiscal year beginning after November 15, 2007. Con-way does not
expect the adoption of SFAS 159 to have a material effect on the
Plan's financial statements.
(3) Retiree Health Savings Account
Effective January 1, 2002, the Plan was amended to include a medical
benefit that funds a portion of the postretirement obligation for
retirees and their beneficiaries in accordance with Section 401(h) of the
Code. A separate account has been established and maintained in the Plan
for the net assets related to the medical benefit (the 401(h) account).
In accordance with Code Section 401(h), the Plan's investments in the
401(h) account may not be used for, or diverted to, any other purpose
other than providing health benefits for retirees and their
beneficiaries. Plan participants do not contribute to the 401(h) account
and do not direct the investment choices. Employer contributions to the
401(h) account are determined annually at the discretion of Con-way and
are subject to certain limitations as defined by the Code.
Upon reaching age 45, completing five or more years of service and
completing 1,000 or more paid hours of service in the Plan year, each
noncontractual employee is eligible for a retiree medical allocation with
respect to that Plan year. Retiree medical allocations for each
401(h) Plan participant are equal, except for allocations to participants
retiring in the current plan year, for whom the allocation will be a
pro-rata portion of the amount allocated to other participants based on
the number of quarters employed in the year of retirement. Benefits to
individual participants are limited to the total accumulated retiree
medical allocation, plus interest credited at an annual rate equal to the
five-year Treasury Constant Maturity rate as published by the Federal
Reserve Board. In order to access their benefit balance during
retirement, a participant must be at least age 55 with at least 10 years
of service at retirement, or be at least age 65 at retirement. Any
remaining unclaimed benefit will be forfeited to the Plan upon a
participant's death or termination of employment prior to retirement
eligibility.
(4) Investments
The following investments represent 5% or more of the Plan's net assets.
December 31,
--------------------------
2007 2006
------------ -------------
Shares in registered investment companies:
T. Rowe Price Growth Stock Fund, 4,009,074
and 3,999,518 shares, respectively $ 134,945,423 $ 126,504,740
T. Rowe Price Equity Income Fund, 3,804,709
and 3,597,874 shares, respectively 106,912,324 106,317,172
T. Rowe Price Science and Technology Fund,
3,227,755 and 3,350,817 shares,respectively 75,690,848 70,233,128
Dodge & Cox International Stock Fund, 1,317,415
and 1,072,601 shares, respectively 60,627,420 46,829,760
Common trust funds:
T. Rowe Price U.S. Treasury Money Market Trust,
107,494,627 and 87,698,616 shares, respectively 107,494,627 87,698,616
T. Rowe Price Retirement Strategy Trust-Balanced,
1,722,873 and 1,675,288 shares, respectively 53,426,290 48,700,635
* Participant loans 50,353,892 54,738,168
Con-way equity:
Con-way Common Stock, 2,702,157 and 2,497,224
shares, respectively 112,247,601 109,977,740
Matching Con-way Preferred Stock, 394,818 and
373,059 shares, respectively 87,843,209 86,702,686
* Con-way Preferred Stock - Unallocated, 162,276
and 226,977 shares, respectively 36,104,745 52,751,639
* Nonparticipant-directed
During 2007, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) appreciated
(depreciated) in value as follows:
Shares in registered investment companies $ 40,152,630
Common trust funds 6,114,758
Con-way Common Stock (6,279,855)
Con-way Preferred Stock (5,612,438)
------------
$ 34,375,095
============
In May 1989, the Plan purchased 986,259 shares of Preferred Stock for
$150,009,863 using proceeds from the debt described in note 5, Notes
Payable. The Preferred Stock can only be issued to and held by the Plan
Trustee. The shares are held by the Trustee and allocated to participant
accounts. Upon allocation, the shares are first used to pay the Preferred
Stock cash dividend on shares previously allocated to the participant
accounts with the remainder used to satisfy a portion of Con-way's
matching contribution requirement. In connection with a participant's
account distribution, the Preferred Stock is converted into Common Stock
at a rate generally equal to that number of shares of Common Stock that
could be purchased for $152.10, but not less than the minimum conversion
rate of 4.708 shares of Common Stock for each share of Preferred Stock.
At December 31, 2007, outstanding Preferred Stock of 560,998 shares
consisted of 424,211 allocated shares and 136,787 unallocated shares.
Allocated shares at December 31, 2007 included 420,307 shares allocated
to RSP participant accounts and 3,904 shares allocated to Con-way
401(k) Plan participant accounts. At December 31, 2006, outstanding
Preferred Stock of 603,816 shares consisted of 400,067 allocated shares
and 203,749 unallocated shares. Allocated shares at December 31, 2006
included 396,287 shares allocated to RSP participant accounts and
3,780 shares allocated to Con-way 401(k) Plan participant accounts.
Unallocated shares at December 31, 2007 and 2006 were pledged as
collateral against the Plan Notes, as described below. Preferred Stock of
25,489 and 23,228 shares were allocated to participant accounts after
December 31, 2007 and 2006, respectively, but related to participant
activity for the years ended December 31, 2007 and 2006, respectively.
Accordingly, the fair value of this Preferred Stock is accrued as Due
from (Due to) the Con-way Preferred Stock Fund - Unallocated (Con-way
Preferred Stock Fund - Allocated) to reflect the accrued allocation
between funds.
(5) Notes Payable
In July 1989, the Plan completed the sale of $150,000,000 in aggregate
principal amount of notes (the Plan Notes) to a group of institutional
investors. The proceeds from the sale of the original Plan Notes were
used to repay a $150,000,000 bridge loan from Con-way to the Plan that
had financed the purchase of the Preferred Stock.
Con-way guarantees the Plan Notes. As of December 31, 2007, there was
$43,400,000 aggregate principal amount of Series B Plan Notes outstanding,
bearing interest at an annual rate of 8.54% and maturing on
January 1, 2009.
Holders of the Series B Plan Notes have the right to require Con-way to
repurchase those notes if, among other things, both Moody's and Standard
& Poor's credit-rating agencies have publicly rated Con-way's long-term
senior debt at less than investment grade unless, within 45 days, Con-way
shall have obtained, through a guarantee, letter of credit or other
permitted credit enhancement or otherwise, a credit rating for such notes
of at least "A" from Moody's or Standard & Poor's (or another nationally
recognized rating agency selected by the holders of such notes) and shall
maintain a rating on such notes of "A" or better thereafter.
At December 31, 2007, Con-way's senior long-term debt was rated as
investment grade by both Moody's (Baa3) and Standard & Poor's (BBB).
The interest expense on the Plan Notes is payable semiannually on
January 1 and July 1 and is subject to adjustment in certain
circumstances, including some changes in applicable tax laws. For the
year ended December 31, 2007, the Plan made a principal payment of
$18,600,000 on the Series B Plan Notes.
Future maturities of the Series B Plan notes to be paid from excess
Preferred Stock cash dividends and/or additional cash contributions from
Con-way are $20,700,000 in 2008 and $22,700,000 in 2009.
(6) Income Tax Status
The Internal Revenue Service has determined and informed Con-way by a
letter dated August 20, 2003 that the Plan and related trust are designed
in accordance with applicable sections of the Code. The Plan has been
amended since receiving the determination letter. However, Con-way
believes that the Plan is designed and is currently being operated in
compliance with the applicable requirements of the Code. Therefore,
Con-way believes that the Plan was qualified and the related trust was
tax exempt as of the financial statement date.
(7) Related-Party Transactions
Certain Plan investments are shares in registered investment companies
and common trust funds managed by T. Rowe Price, the Plan trustee, as
defined. Therefore, these investments and investment transactions qualify
as party-in-interest transactions.
(8) Reconciliation to Form 5500
The following is a reconciliation of net assets available for plan
benefits.
December 31,
------------------------------
2007 2006
--------------- -------------
Net assets available for benefits -
financial statements $ 1,105,854,949 $ 954,280,122
Net assets held in 401(h) account included
as assets in Form 5500:
Employer contribution receivable 9,438,000 4,746,448
Shares in registered investment companies 24,344,942 18,159,299
--------------- -------------
Net assets available for
benefits - Form 5500 $ 1,139,637,891 $ 977,185,869
=============== =============
The assets in the 401(h) account included in Form 5500 are not available
to pay 401(k) benefits and can be used only to pay retiree health
benefits.
The following are reconciliations of certain changes in net assets
available for plan benefits:
Retiree
health
savings
account
Financial (401(h) Form
statements account) 5500
------------ ------------ ------------
Year ended December 31, 2007:
Net appreciation in fair value
of investments $ 34,375,095 $ 1,900,214 $ 36,275,309
Dividend and interest income 17,161,115 - 17,161,115
Con-way contributions 93,746,578 9,438,000 103,184,578
Distributions to participants (79,185,642) (461,019) (79,646,661)
Schedule I
CON-WAY RETIREMENT SAVINGS PLAN
EIN 94-1444798
Plan No. 003
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2007
Identity
of issuer
borrower, Description of investment
lessor including maturity date,
or similar rate of interest, collateral, Current
party par or maturity value Cost value
--------------- --------------------------------- ------------ ------------
Shares in registered
investment companies:
*T. Rowe Price Growth Stock Fund
(4,009,073.766 shares) $110,690,546 $134,945,423
*T. Rowe Price Equity Income Fund
(3,804,709.048 shares) 96,805,857 106,912,324
*T. Rowe Price Science and Technology Fund
(3,227,754.702 shares) 77,892,484 75,690,848
Dodge & Cox Dodge & Cox International Stock
Fund (1,317,414.592 shares) 55,364,290 60,627,420
*T. Rowe Price Small-Cap Stock Fund
(930,905.048 shares) 28,737,284 28,290,204
Allianz Global PIMCO Total Return Fund
Investors (3,613,789.310 shares) 38,218,892 38,631,408
J.P. Morgan Undiscovered Managers
Investment Small Cap Growth Fund
Management, Inc (551,499.084 shares) 5,348,387 4,935,917
*T. Rowe Price Retirement Income Fund
(245,980.556 shares) 3,187,047 3,271,541
*T. Rowe Price Retirement 2005 Fund
(167,845.381 shares) 1,917,687 1,978,897
*T. Rowe Price Retirement 2010 Fund
(1,339,341.435 shares) 20,841,130 21,710,725
*T. Rowe Price Retirement 2015 Fund
(2,363,623.044 shares) 28,690,477 29,899,832
*T. Rowe Price Retirement 2020 Fund
(2,412,025.240 shares) 40,894,685 42,789,328
*T. Rowe Price Retirement 2025 Fund
(1,963,173.310 shares) 25,146,705 25,874,624
*T. Rowe Price Retirement 2030 Fund
(1,329,795.795 shares) 24,686,196 25,332,610
*T. Rowe Price Retirement 2035 Fund
(752,810.346 shares) 10,021,402 10,170,468
*T. Rowe Price Retirement 2040 Fund
(495,257.060 shares) 9,287,661 9,508,936
*T. Rowe Price Retirement 2045 Fund
(404,987.566 shares) 5,185,447 5,155,492
*T. Rowe Price Retirement 2050 Fund
(51,594.589 shares) 552,908 540,711
*T. Rowe Price Retirement 2055 Fund
(42,864.553 shares) 460,561 449,221
Common trust funds:
*T. Rowe Price Equity Index Trust
(832,521.927 shares) 28,146,216 36,339,582
*T. Rowe Price Bond Index Trust
(606,845.178 shares) 12,938,688 15,201,472
*T. Rowe Price U.S. Treasury Money
Market Trust
(107,494,627.000 shares) 107,494,627 107,494,627
*T. Rowe Price Retirement Strategy
Trust-Balanced
(1,722,872.933 shares) 39,904,550 53,426,290
Common stock:
*Con-way Inc. Con-way Common Stock
(2,702,156.990 shares) 104,374,216 112,247,601
Preferred stock:
*Con-way Inc. Con-way Preferred
Stock - Allocated
(394,818.683 shares) 60,051,922 87,843,209
*Con-way Inc. Con-way Preferred
Stock - Unallocated
(162,275.808 shares) 24,682,151 36,104,745
Participant loans:
*Plan
Participants Participant loans with interest
from 5.00% to 10.50% and
maturity dates from 2008 to 2012 - 50,353,892
--------------
1,125,727,347
Investments held in 401(h) account:
Allianz Global PIMCO Total Return Fund
Investors (2,277,356.552 shares) 24,215,989 24,344,942
--------------
$1,150,072,289
==============
*Represents a party-in-interest as of December 31, 2007.
Note: Cost is calculated using the moving-average method.
See accompanying report of independent registered public accounting firm.