CHAIRMAN'S LETTER

In the year 2000, we recorded the best financial performance in our 76-year history. These results were built on the very solid foundation that we began laying in 1996. What’s more, our prospects for the future have never been better.

It has always been our vision to transform Yellow from a one-dimensional less-than-truckload company into a multi-dimensional company that is able to meet any transportation service need. We are doing that by developing and deploying industry-leading technology and through rigorous quality process standards.

Our transformation in 2000 allowed us to:

• Achieve the best operating performance at Yellow Freight System since 1986;

• Move aggressively to integrate regional operating companies and position them for rapid growth and improved operating margins;

• Put our Internet-based global network logistics company, Transportation.com, on a fast track for growth and profitability.

As I have said in the past, our business really isn’t about moving "freight." It’s about earning the trust of the "consumers" of our services. They are asking Yellow to help them meet their needs for improved supply-chain efficiency and excellent inventory management based on accurate, real-time data and a commitment to flawless execution.

Our "consumer" reach is phenomenal. We do business with about 500,000 industrial, commercial and retail companies located primarily in North America. Yellow touches nearly every business that produces or distributes goods today.

We have adopted a Core Purpose statement that reflects our response to this new and much more demanding reality. We believe our Core Purpose is to: Make global commerce work by connecting people, places and information. The foundation we have built is part of the foundation of global commerce.

FINANCIAL HIGHLIGHTS

The top and bottom lines for Yellow Corporation in 2000 were the best in our history. We reported net income of $61.8 million, before unusual items, up 21 percent from 1999 net income. Including our unusual items – an assortment of one-time gains and charges – net income for 2000 was $68.0 million and earnings per share were $2.74, up 33 percent and 36 percent respectively.

Our revenue increased from $3.2 billion to $3.6 billion in 2000, thanks to another outstanding year at Yellow Freight and a full year of contributions from Jevic. Our operating income for 2000 was $152.5 million, up 42 percent from $107.5 million in 1999.

For most of the year, we considered our shares significantly undervalued and our response was to implement a $25 million stock buyback program in June 2000. By the time the program concluded in October, we had purchased 1.6 million shares at an average price of $15.34 per share. On December 31, 2000, our stock closed at $20.36, a 52-week high, and has since moved higher. At year-end, we had 23.8 million shares outstanding.

Our capital structure remains solid with total debt, including off-balance sheet debt, of $382 million at year-end, down $29 million from $411 million at year-end 1999. It is significant that we were able to pay down debt by $29 million, buy back $25 million in stock and strengthen our capital structure.

In November, we were pleased to welcome Donald Barger to our management team as our new Chief Financial Officer. Don brings tremendous experience, with over seven years in the CFO role, prior to joining Yellow.

NATIONAL OPERATIONS

Yellow Freight finished 2000 with one of its best overall operating and financial performances in its history. Revenue hit an all-time high of $2.8 billion, up from $2.6 billion in 1999. Operating income was $141.8 million, up 66 percent from 1999 operating income of $85.4 million. "Unusual items," primarily consisting of a $14.2 million pretax net gain from the second quarter sale of a terminal in New York City, accounted for only 16 percent of the year-over-year increase. Excluding unusual items, the 2000 operating ratio was 95.4, compared with 96.7 in 1999.

Earnings Per Share - Continuing Operations

Yellow Freight has the total service package. With our global coverage including regional, national, and international markets, combined with a broad portfolio of transportation services, we can simply do it all. The Yellow Freight vision is to provide guaranteed, time-definite, defect-free, hassle-free transportation and related services to businesses worldwide. We are achieving that vision with the best technology and most responsive customer service organization to be found anywhere, not just in our industry.

At mid-year, we named James Welch as President of Yellow Freight. In 1978, James began his career with Yellow Freight as a sales representative in Houston, Texas. Since then, he has done everything from managing operations to opening up new regions to leading a team that helped set the course for today’s technology strategy. James is a key player in the ongoing transformation of Yellow Freight and now leads one of the most talented executive management teams in our industry.

2000 was the Year of Quality at Yellow Freight and it paid off in a big way. A comprehensive quality process initiative called the "Consumer Centric Index," or CCI,

Return On Equity

helped us to become the first company in our industry sector to achieve company-wide ISO 9001 certification. This highly coveted designation gives us an important third-party endorsement of the progress we have made in creating a culture of quality at Yellow. It will help us open many more doors with businesses that demand ISO certification as a condition of earning their trust.

The quality effort, coupled with the continued aggressive rollout of industry-leading technology systems, has allowed us to introduce Standard Ground Regional Advantage, a best-in-class two- and three-day regional service offering to complement our core national service. Standard Ground Regional Advantage is one of the most significant things Yellow Freight has done since deregulation. Some markets have clearly shifted toward regionalized distribution favoring the transportation companies that provide direct, point-to-point coverage. The pace of this regional service rollout will accelerate in 2001 and when it is completed, we will have a commanding position in this high-growth, high-profit market.

We also continued to strengthen our position in the market for premium services. Exact Express, our time-definite, expedited air and ground service, had revenue growth of more than 40 percent in 2000. Exact Express was introduced in 1998 and has been a success since day one. It continues to grow because it is positioned to do more than just meet the need for emergency shipments. Many large commercial and industrial companies now regularly schedule movements of high-value goods that must be delivered under extremely precise time windows. Exact Express is meeting these customer needs in one of the fastest growing, and most profitable transportation segments. With its industry-leading technology and a knowledgeable, hands-on employee team, the potential for Exact Express is enormous.

REGIONAL OPERATIONS

2000 was a year of transition for our regional companies. Early in the year, we named Bert Trucksess as President of the Regional Carrier Group in order to provide more management focus. Bert had served as Chief Financial Officer for Yellow Corporation since 1994 and he actually performed both his old and new jobs for a significant portion of the year.

Bert and his team have made aggressive moves during 2000 that have placed the regional group in a very solid competitive position to improve future profitability.

Early this year, we announced the integration of our western operations – WestEx and Action Express – with Saia, our largest regional company based in Atlanta.

With this move, our Regional Carrier Group is now comprised of two transportation services companies, Saia and Jevic, each focused on growth in distinct market segments. Saia is now a half-billion-dollar regional transportation services provider, specializing in overnight and second-day LTL service in 21 Southern and Western states. Unlike Saia’s traditional LTL network model, Jevic focuses on heavier weighted LTL and truckload segments with an operating model that allows shipment co-loading while minimizing freight rehandling. Jevic operates nine facilities in the Northeast, upper Midwest and South, but delivers in all the lower 48 states. Its services include regional and national LTL, heated LTL, heavyweight LTL, truckload and time-definite delivery services.

With the integration of our western operations, Saia is now positioned to pursue an aggressive growth strategy focused on overnight and second-day regional markets. The transition will be seamless to customers and completed in the second quarter of 2001.

During 2000, Saia focused on the basics of providing excellent service and improving operating efficiencies. A significant part of that effort involved giving customers information on critical performance indicators such as on-time pickup, claims-free delivery, invoicing accuracy and proof of delivery turnaround – all of which resulted in a 34 percent decrease in service defects during 2000. Named the "Customer Service Indicators," this effort has earned customer confidence and satisfaction and, in conjunction with the integration, positions Saia for stronger revenue growth. Saia also made great strides in 2000 in variable expense control efficiencies that offset increased wages and benefits, fuel and other operating expenses. For the full year, Saia had revenue of $367 million and operating income of $16.5 million, compared with 1999 revenue of $349 million and operating income of $16.8 million. The operating ratio for 2000 was 95.5, versus 95.2 in 1999.

In the first full year of operations since we acquired Jevic, we have demonstrated that there continues to be a high level of customer demand for this company’s unique and very high quality service offering. Jevic faced a challenging year with high fuel prices, intense competition and a weakening economy, but still pulled off a solid performance. Jevic reported 2000 revenue of $307 million, compared with $277 million for the full year in 1999. Operating income was $14.3 million, compared with $20.7 million in 1999. The 2000 operating ratio for Jevic was 95.3, compared with 92.5 the year before. Jevic was acquired in July 1999 and contributed revenue of $138 million and operating income of $10.1 million to 1999 Yellow Corporation results.

TECHNOLOGY AND E-COMMERCE

For the second year in a row, Yellow was named by CIO magazine to its prestigious CIO-100 list. This annual award recognizes 100 leading companies – including some of the most recognizable names in corporate America – for their use of technology to gain operational and strategic advantage.

The CIO-100 was awarded to the entire company but it rightfully belongs to Yellow Technologies (YT), our 440-person internal technology company. YT is a captive resource that does nothing but work on developing proprietary technology systems and applications that help Yellow manage operations more efficiently and provide new and better ways of connecting customers with the information they need. They are creating a sustainable competitive advantage for the corporation.

In our increasingly competitive sector, customers are looking for more than good service. They are looking for transportation partners that can provide real-time information about every aspect of their transaction, from rate quotes to tracking reports to online invoicing and electronic delivery receipts. Information drives our industry like never before and fewer and fewer transportation companies are getting over the bar. That trend will undoubtedly accelerate as the Internet becomes an even more important tool for managing transportation.

The potential of the Internet is nearly unlimited and Transportation.com, a jointly-owned company that we launched in the second quarter, is positioned to thrive in that new environment. Under the leadership of President and CEO Jim Ritchie, Transportation.com provides small- to medium-sized shippers and carriers an online marketplace for broad-based services that are critical to their operations. Transportation.com services include complete outsourced transportation management, spot shipment rating and load matching, equipment auctions and classifieds, and network consulting. These services are designed to fulfill the mission of Transportation.com, which is to: (1) help shippers move anything, anywhere, and; (2) help carriers improve efficiency and profitability. Our other investment partners in Transportation.com are TL Ventures, an institutional venture capital firm, and Enertech Capital Partners, a private equity firm.

The marketplace for online transportation service companies is quickly evolving with a number of players disappearing or combining with others. Most of these companies have failed to understand that success in the transportation industry always will be dictated by effective customer relationships. Transportation.com has developed into a non-asset-based company with great technology focused on supply chain management. Customer focus and a commitment to service are winning strategies, whether you are playing in the conventional asset-based world of transportation services or the new economy world of non-asset transportation services. Transportation.com has created a unique market position that will generate long-term success.

THE FUTURE

Yellow Corporation has completed its 76th year in a stronger position than ever before.

Our industry has often been held captive by the cycles of economic expansion and contraction. While we are not immune from economic downturns, we have improved our ability to weather them with a two-part strategy. Part one is to keep our focus where it belongs – on satisfying the customer.

We are doing that by delivering more service choices and better service performance. The second part is to turn the majority of our cost into variable cost that can be flexed up or down quickly, depending on business conditions. More than ever, effective cost management is a business fundamental.

Our company is unique. Our business model has made us the leading, one-stop transportation services provider, backed by the most innovative technology in our industry.

Yellow Corporation makes global commerce work by connecting people, places and information. That’s the reason we exist. There are no limits to where we can go and what we can do.

Sincerely,

William D. Zollars
Chairman of the Board,
President and Chief Executive Officer
Yellow Corporation

Bill Zollars
Chairman of the Board, President and Chief Executive Officer
Yellow Corporation