CNF Inc. Expects Lower Earnings for Third Quarter 2000; USPS Agrees to Pay Company Higher Provisional Rates for Priority Mail.

Business Editors

PALO ALTO, Calif.--(BUSINESS WIRE)--Sept. 19, 2000

CNF Inc. (NYSE:CNF) announced today that lower operating profits for its Emery Worldwide air freight unit would result in reduced earnings for the parent company in the third quarter ending Sept. 30.

CNF expects diluted earnings to be in a range of approximately 61 cents to 66 cents for the quarter, before a one-time charge against earnings of approximately 5 cents per diluted share related to the sale of certain assets of Con-Way Truckload Services and approximately 12 cents per diluted share for anticipated losses on terminated aircraft leases.

The company said that Emery Worldwide was expected to earn less than $10 million in the third quarter, before the one-time charge on terminated aircraft leases, compared with $22.6 million in the same quarter a year ago.

The company plans to announce its full financial results on Oct. 18.

Gregory L. Quesnel, president and chief executive officer, said that the lower than expected profits for Emery Worldwide were caused by a slowdown in the U.S. domestic demand for heavy weight air freight shipments. Emery has also been affected in the third quarter by higher than normal operating and maintenance costs for its North American aircraft fleet.

Quesnel said that Emery's international business was affected in the quarter by tight air haul capacity and higher fuel costs on international freight lanes, leading to lower margins.

The company also announced that as a result of an Aug. 25 decision in a lawsuit filed by Emery Worldwide Airlines against the U.S. Postal Service in the U.S. Court of Claims, the Postal Service will increase its provisional rate paid to EWA for transportation and sortation of Priority Mail for year 2000. The Postal Service has also increased the provisional rate paid to EWA for 1999. Based on these rate adjustments through Sept. 1, 2000, the company expects to receive a combined total of $102.1 million, significantly reducing the amount recognized by the company as unbilled revenue.

The company has been in a dispute with the Postal Service over pricing of its services under a contract awarded Emery Worldwide Airlines in 1997. Beginning in the third quarter of 1999, the company began being paid a provisional rate for its services that is below its cost of operating the contract. In accordance with generally accepted accounting principles, the company has recognized unbilled revenue sufficient to recover costs. No profit has been recognized since the second quarter of 1999. As of June 30, 2000, the company had recognized $173.4 million in unbilled revenue since the beginning of the contract. The company will continue to recognize unbilled revenue until such time as final rates have been determined.

The company continues to negotiate with the Postal Service for resolution of all contract issues in dispute. Additionally, the company plans vigorous pursuit of the full compensation it believes it is entitled to under the contract.

CNF Inc. is a $6-billion management company of global supply chain services with businesses in trucking, air freight, logistics, ocean services and customs brokerage.

This news release contains forward-looking statements, including statements regarding estimated earnings and other anticipated results of operations, which are subject to a number of risks and uncertainties. Forward-looking statements as predictions of future events should not be relied on. In addition to the factors discussed above, factors that could cause actual earnings, results of operations and other matters to differ materially from those discussed in such forward-looking statements include: changes in general business and economic conditions, increasing competition and pricing pressure, changes in fuel prices, uncertainties regarding Emery Worldwide Airline's Priority Mail contract with the United States Postal Service, labor matters, changes in governmental regulation, environmental and tax matters (including claims made by the Internal Revenue Service with respect to aircraft maintenance tax matters), the Department of Transportation investigation relating to Emery Worldwide's handling of hazardous materials, the February 2000 crash of an EWA aircraft, and matters relating to our 1996 spin-off of Consolidated Freightways Corporation. These and other risk factors are discussed in our 1999 Annual Report on Form 10-K or in other filings with the Securities and Exchange Commission. As a result, no assurance can be given as to future results of operations or financial condition.