Introduction Home Yellow is Number One Three components. One company. One-Stop Shopping Shareholders' Letter Management's Discussion and Analysis   Overview     Forward-Looking Statements   2002 Highlights     Equity Offering     Meridian IQ Acquisitions     Continued Consolidation Within...     Spin-Off of SCS Transportation, Inc.     Stronger Financial Position   Results of Operations     Consolidated Results     Yellow Transportation Results     Meridian IQ Results   Financial Condition     Liquidity     Capital Expenditures     Contractual Obligations and Other...     Market Risk Position   Critical Accounting Policies     Revenue Reserves     Claims and Insurance     Pension Cost     Property and Equipment   New Accounting Pronouncements     SFAS No. 143     SFAS No. 146     SFAS No. 148   Outlook     Economic Forecast     Labor Negotiations     Regulatory Changes Financial Summary Consolidated Balance Sheets Statements of Consolidated Operations Statements of Consolidated Cash Flows Statements of Shareholders' Equity Statements of Comprehensive Income Notes to Financial Statements Independent Auditors' Report Supplementary Information Glossary Officers Corporate Information Board of Directors Back Cover

2002 Highlights

Management's Discussion and Analysis of Financial Condition and Results of Operations 2002 Highlights We initiated several strategic events that resulted in positive and significant changes in 2002. The following either supported our strategic initiatives to enhance our financial position, focused on our growth strategies or impacted the business environment in which we operate. Equity Offering In April, we completed an equity offering of 3.9 million shares at a price of $25.50 per share. We received $93.8 million of net proceeds from the offering. The net proceeds were used to repay debt in order to provide capacity for investments in our growth strategies. Meridian IQ Acquisitions In July,Meridian IQ announced that it had acquired selected assets, consisting primarily of customer contracts, of Clicklogistics, Inc. (Clicklogistics) for nominal cash consideration. Clicklogistics provides non-asset transportation and logistics management services. In August, Meridian IQ completed the acquisition of MegaSys, Inc. (MegaSys), a Greenwood, Indiana based provider of non-asset transportation and logistics management services, for approximately $17 million. The acquisition price primarily related to $9.3 million of goodwill and $7.1 million of identifiable intangible assets. As part of the acquisition, Meridian IQ negotiated an earnout arrangement, which provides for contingent consideration to be paid by Meridian IQ upon MegaSys generating cash flow levels in excess of an established rate of return through December 31, 2005. If reached, the earnout amount could increase the purchase price up to an additional $18 million.We believe the acquisition supports our plans to grow our non-asset-based business and be a single-source transportation provider. Continued Consolidation Within the Industry On September 3, the trend of consolidation within the less-than-truckload (LTL) industry continued when Consolidated Freightways, Inc. (CF) announced it was filing for Chapter 11 bankruptcy. CF was the third largest national LTL carrier with 2001 annual revenue of approximately $2 billion. Yellow Transportation followed a disciplined and proactive approach regarding the acquisition of the former CF business by evaluating each consumer relationship based on return on investment and available capacity. As a result of this strategic approach, Yellow Transportation had revenue growth on an annualized basis of approximately $300 million, with incremental margin increases on that revenue base of at least 20 percent, while maintaining its quality of service. Future revenue and margin results could vary depending on the economy and the retention of former CF customers. Spin-Off of SCS Transportation, Inc. On September 30, we successfully completed the 100 percent distribution (the spin-off ) of all of the shares of SCS Transportation, Inc. (SCST) to our shareholders. Shares were distributed on the basis of one share of SCST common stock for every two shares of Yellow common stock. As part of the spin-off agreement, SCST paid Yellow approximately $114 million in cash and assumed debt of $16 million for a total dividend of $130 million.We used the proceeds to reduce debt and pay fees associated with the spin-off. We do not anticipate future obligations or liabilities in addition to those already recorded in our financial statements related to the spin-off. As a result of the spin-off, our financial statements have been reclassified to reflect SCST as discontinued operations for all periods presented. Results of operations discussed below will focus on results from continuing operations unless otherwise stated. Stronger Financial Position We believe that each of the events above improved our financial strength and position in the market place.We reduced our total debt, including ABS borrowings, since December 31, 2001 by $237 million, resulting in a balance of $124 million at December 31, 2002. A leading financial indicator in our industry, debt to capitalization net of available cash, was a solid 21.0 percent as of December 31, 2002, an improvement over last year's 41.1 percent.We believe our strong financial position allows us to compete more effectively during economic downturns and invest in our strategic initiatives. Refer to the Financial Condition section for further details of our liquidity and capital expenditures.

2002 Highlights