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

Stock Compensation Plans

Notes to Consolidated Financial Statements Yellow Corporation and Subsidiaries Stock Compensation Plans The company has reserved 4.8 million shares of its common stock for issuance to key management personnel of the company and its operating subsidiaries under five stock option plans. The plans generally permit grants of nonqualified stock options and grants of stock options coupled with a grant of stock appreciation rights (SARs). In addition, the company has reserved 200,000 shares of its common stock for issuance to its Board of Directors. Under the plans, the exercise price of each option equals the closing market price of the company's common stock on the date of grant. The options vest ratably, generally over a period of four years, and expire ten years from the date of the grant. The 1992 plan also permits the issuance of restricted stock. In 2002, Yellow issued 56,300 shares of restricted stock from the 1992 plan at $25.90 per share that clif vest over three years. The company implemented a new stock option plan in 2002 which reserves 1.0 million of the 4.8 million shares discussed above. This plan permits the issuance of restricted stock and restricted stock units, as well as options, SARs, and performance stock and performance stock unit awards. The maximum cumulative number of shares that can be awarded in any form other than options or SARs is 200,000 shares. Yellow did not issue any restricted stock or SARs from this plan during 2002. The outstanding stock options of Yellow were adjusted to reflect the impact of the spin-off. For employees who continued employment with Yellow, the option remained an option for Yellow common stock with the number of shares covered by the option and related exercise price adjusted to preserve the intrinsic value. For employees who worked for SCST after the spin-off, the Yellow options were cancelled and SCST issued options to purchase SCST common stock with the number of shares of SCST common stock and exercise price set to preserve the intrinsic value. As of December 31, 2002, 2001, and 2000, options on approximately 736,000 shares, 1,054,000 shares, and 1,421,000 shares, respectively, were exercisable at weighted average exercise prices of $17.77 per share, $20.62 per share, and $18.12 per share, respectively. The weighted average remaining contract life on outstanding options at December 31, 2002, 2001, and 2000 was 7.4 years, 7.3 years, and 7.9 years, respectively. A summary of activity in the company's stock option plans is presented in the following table. Exercise Price Shares (in thousands) Weighted Average Range Outstanding at December 31, 1999 3,134         $ 17.44         $ 11.50 - 27.00     Granted 1,170   16.63   14.56 - 18.75   Exercised (517 )  13.54   11.50 - 18.13   Forfeited / expired (412 )  19.13   11.50 - 27.00   Outstanding at December 31, 2000 3,375   $ 17.55   $ 11.50 - 27.00   Granted 42   20.30   18.25 - 21.87   Exercised (1,063 )  15.64   11.50 - 24.05   Forfeited / expired (83 )  18.57   12.25 - 24.05   Outstanding at December 31, 2001 2,271   $ 18.46   $ 11.50 - 27.00   Granted 900   26.81   22.42 - 29.67   Exercised (737 )  17.76   10.56 - 24.79   SCST spin-off adjustment (352 )  -   -   Forfeited / expired (86 )  17.83   10.56 - 24.05   Outstanding at December 31, 2002 1,996   $ 21.27   $ 10.56 - 29.67   The following table summarizes information about stock options outstanding as of December 31, 2002: Options Outstanding Options Exercisable Range of exercise prices Shares   (in thousands) Weighted-Average Remaining Contractual Years Weighted-Average Exercise Price Shares   (in thousands) Weighted-Average Exercise Price $10.56 - 15.61   558       7.1         $ 14.36         246           $ 14.30     $15.62 - 22.80   785     5.7       $ 19.26       480         $ 19.41 $22.81 - 29.67   653     9.7       $ 29.58       10         $ 23.93 As discussed in the Summary of Accounting Policies note, the company applies APB 25 in accounting for stock options. Please refer to that note for pro forma effects had the company applied Statement No. 123.

Stock Compensation Plans