Introduction Home Yellow is Number One Three components. One company. One-Stop Shopping Shareholders' Letter Management's Discussion and Analysis 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   Description of Business   Principles of Consolidation...     Cash and Cash Equivalents     Concentration of Credit Risks     Revenue Recognition     Financial Instruments     Unusual Items     Claims and Insurance Accruals     Stock-Based Compensation     Impairment of Long-Lived Assets     Reclassifications   Preferred Stock   Supplemental Cash Flow Information   Discontinued Operations   Prepaid Expenses and Other   Goodwill and Other Assets   Property and Equipment   Accounts Payable   Other Current and Accrued Liabilities   Claims and Other Liabilities   Debt and Financing     Variable-Rate Debt     Fixed-Rate Debt     Other Debt   Employee Benefits     Retirement Plans     Multi-Employer Plans     401(k) Savings Plans     Performance Incentive Awards     Executive Performance Plan   Stock Compensation Plans   Goodwill and Intangibles   Acquisitions   Income Taxes   Commitments, Contingencies...     Labor Negotiations   Business Segments   Earnings Per Common Share Independent Auditors' Report Supplementary Information Glossary Officers Corporate Information Board of Directors Back Cover

Discontinued Operations

Notes to Consolidated Financial Statements Yellow Corporation and Subsidiaries Discontinued Operations As required under Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the company evaluated the carrying value of SCST against the fair value, as determined by the market capitalization of SCST at the spin-off date. The following table presents the net assets (carrying value) of SCST at the spin-off date compared to the fair value as determined by the market capitalization: (in thousands) September 30, 2002   Cash $ 2,383   Accounts receivable   99,233   Other current assets   18,158   Net property, plant and equipment and other assets   314,610   Accounts payable and accrued expenses   (64,275 ) Long-term debt   (130,000 ) Other liabilities   (69,342 ) Total net assets (carrying value) $ 170,767   Fair value at spin-off   (118,120 ) Non-cash loss on disposal of SCST         $ (52,647 )   Summarized results of operations related to SCST (as reported in discontinued operations) are as follows for the nine months ended September 30, 2002 and the years ended December 31, 2001 and 2000: (in thousands except per share data)   2002     2001     2000   Operating revenue $ 581,181   $ 771,581   $ 789,009   Operating expenses   559,751     752,423     763,227   Operating income   21,430     19,158     25,782   Nonoperating expenses, net   4,735     7,992     9,221   Income before income taxes   16,695     11,166     16,561   Provision for income taxes   6,748     6,454     8,864   Income from continuing operations   9,947     4,712     7,697   Loss on disposal of SCST   (52,647 )   -     -   Cumulative effect of change in   accounting for goodwill   (75,175 )   -     -   Income (loss) from discontinued operations $ (117,875 ) $ 4,712   $ 7,697   Discontinued operations basic   earnings (loss) per share: Income from continuing operations $ 0.35   $ 0.19   $ 0.31   Loss on disposal of SCST   (1.88 )   -     -   Cumulative effect of change in   accounting for goodwill   (2.68 )   -     -   Income (loss) from discontinued operations $ (4.21 ) $ 0.19   $ 0.31   Discontinued operations diluted   earnings (loss) per share: Income from continuing operations $ 0.35   $ 0.19   $ 0.31   Loss on disposal of SCST   (1.85 )   -     -   Cumulative effect of change in   accounting for goodwill   (2.65 )   -     -   Income (loss) from discontinued operations     $ (4.15 )       $ 0.19         $ 0.31     The company did not charge to discontinued operations the management fees and other corporate services that it previously allocated to SCST, as the company continues to incur a majority of the expense. The company allocated interest expense to discontinued operations based on the overall effective borrowing rate of Yellow applied to the debt reduction realized by Yellow from the spinoff. Interest expense included in discontinued operations was $4.6 million for the nine months ended September 30, 2002, and $8.0 million and $9.4 million for the years ended December 31, 2001 and 2000, respectively. Goodwill amortization expense included in discontinued operations was zero for 2002, and $3.0 million and $2.6 million for 2001 and 2000, respectively. In July 1999, Preston Trucking Company (a former segment of the company sold in 1998) ceased operations and commenced a liquidation of its assets under federal bankruptcy regulations. The company recorded a charge to discontinued operations of $1.3 million net of tax benefit of $0.7 million in 2000 to settle pending liabilities associated with the bankruptcy. Income from discontinued operations, as shown on the Statements of Consolidated Operations, in 2000 consists of $7.7 million in income related to SCST and $1.3 million in losses related to Preston Trucking Company. Yellow does not anticipate any material change in the loss from disposition of the discontinued operations.

Discontinued Operations