YELLOW CORP, 10-K, 1998-03-31

YELLOW CORP
10-K, 1998-03-31
TRUCKING (NO LOCAL)

Previous: MUNICIPAL FUND FOR NEW YORK INVESTORS INC, 40-17F2, 1998-03-31

Next: UNOCAL CORP, 10-K405, 1998-03-31

<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended December 31, 1997
-----------------

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from ____________________ to _______________________

Commission file number 0-12255
-------

YELLOW CORPORATION
------------------
(Exact name of registrant as specified in its charter)

Delaware 48-0948788
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

10990 Roe Avenue, P.O. Box 7563, Overland Park, Kansas 66207
- -------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (913) 696-6100
--------------

Securities registered pursuant to Section 12(b) of the Act:

NONE

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $1 Par Value
Preferred Stock Purchase Rights
-------------------------------
(Title of class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. Yes No
--- ---

The aggregate market value of the voting stock held by nonaffiliates of the
registrant at March 13, 1998 was $575,347,817.

Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.

Class Outstanding at March 13, 1998
----- -----------------------------
Common Stock, $1 Par Value 27,685,910 shares

DOCUMENTS INCORPORATED BY REFERENCE

The following documents are incorporated by reference into the Form 10-K:
1) 1997 Annual Report to Shareholders - Parts I, II and IV
2) Proxy Statement dated March 6,1998 - Part III

<PAGE> 2

Yellow Corporation
Form 10-K
Year Ended December 31, 1997

Index
<TABLE>
<CAPTION>
Item Page
- ---- ----
<S> <C>
PART I
------

1. Business 3
2. Properties 9
3. Legal Proceedings 9
4. Submission of Matters to a Vote of Security Holders 9
Executive Officers of the Registrant (Unnumbered Item) 10

PART II
-------

5. Market for the Registrant's Common Stock and Related
Stockholder Matters 11
6. Selected Financial Data 11
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
8. Financial Statements and Supplementary Data 11
9. Disagreements on Accounting and Financial Disclosure 11

PART III
--------

10. Directors and Executive Officers of the Registrant 12
11. Executive Compensation 12
12. Security Ownership of Certain Beneficial Owners and
Management 12
13. Certain Relationships and Related Transactions 12

PART IV
-------

14. Exhibits, Financial Statement Schedule and Reports
on Form 8-K 13

Report of Independent Public Accountants on Financial
Statement Schedule 14

Financial Statement Schedule 15

Signatures 16

1997 Annual Report to Shareholders Exhibit (13)

Consent of Independent Public Accountants Exhibit (24)
</TABLE>

<PAGE> 3

PART I

Item 1. Business.

(a) Yellow Corporation and its wholly-owned subsidiaries are collectively
referred to as "the company". The company provides transportation
services primarily to the less-than-truckload (LTL) market throughout
North America and, through partnership alliances, other international
markets. During 1997, the company's subsidiaries concentrated on cost
reduction and productivity strategies as described below.

(b) The company provides interstate transportation of general commodity
freight, primarily LTL, primarily by motor vehicle. The operation of
the company is conducted among three primary business segments.
Financial disclosures for these segments are presented in the Business
Segments footnote on page 44 of the 1997 Annual Report to Shareholders
which is incorporated herein by reference.

(c) Yellow Corporation is a holding company providing freight
transportation services through its subsidiaries, Yellow Freight System,
Inc. (Yellow Freight), Saia Motor Freight Line, Inc. (Saia), Preston
Trucking Company, Inc. (Preston Trucking), and WestEx, Inc. (WestEx).
Yellow Services, Inc. (Yellow Services) is a subsidiary that provides
information technology and other services to the company and its
subsidiaries. The company employed an average of 34,400 persons in 1997.

Yellow Freight, the company's principal subsidiary, had operating revenue
of $2.54 billion in 1997 (76% of the company's total revenue) and is
based in Overland Park, Kansas. It is one of the nation's largest
providers of LTL transportation services. It provides comprehensive
national LTL service as well as international service to Mexico, Canada
and, via alliances, Europe, the Asia/Pacific region, South America and
Central America.

Saia is a regional LTL carrier that provides overnight and second-day
service in eleven southeastern states and Puerto Rico. It had operating
revenue of $311 million in 1997 (9% of the company's total revenue) and
is headquartered in a suburb of Atlanta, Georgia.

Preston Trucking is primarily a regional LTL carrier providing overnight
and two-day delivery in 22 northeastern and upper midwestern states,
Puerto Rico, Ontario and Quebec. Preston Trucking had operating revenue
of $451 million in 1997 (14% of the company's total revenue) and is
headquartered in Preston, Maryland.

WestEx provides one and two-day service in Arizona, California, Colorado,
Nevada, New Mexico, and Texas. WestEx had operating revenue of $49
million in 1997 and is headquartered in Phoenix, Arizona.

Yellow Services supports the company's subsidiaries - primarily Yellow
Freight - with information technology and other services. Its headquarters
is in Overland Park, Kansas.

<PAGE> 4

Item 1. Business. (cont.)

The operations of the freight transportation companies are partially
regulated by the United States Department of Transportation and state
regulatory bodies. The company's competition includes contract motor
carriers, private fleets, railroads, other motor carriers and small shipment
carriers. No single carrier has a dominant share of the motor freight
market.

The company operates in a highly price-sensitive and competitive industry,
making pricing, customer service and cost control major competitive factors.

Improved profitability resulted primarily from pricing strength, volume
increases, and aggressive cost reduction and productivity strategies.

Yellow Freight achieved $145 million in cost savings in 1997 from programs
implemented in 1996 and 1997, which are targeted to grow in 1998 to a $180
million run-rate benefit. In 1998, another $50 million in savings from new cost
reduction and efficiency programs will extend beyond Yellow Freight and include
all the operating subsidiaries.

At Yellow Freight, 1997 operating income rose to $82.7 million, more than
double the 1996 operating income of $36.1 million, before the special charge.
Revenue for 1997 was $2.54 billion, up 7.7 percent from $2.36 billion in 1996.
The 1997 operating ratio for Yellow Freight was 96.7 compared with 98.5 in
1996, excluding the special charge.

Yellow Freight tonnage and shipments per day during 1997 were up 4.3 percent
and 9.7 percent respectively. During the third quarter revenue benefited from a
two-week Teamsters strike against UPS which caused a surge in high-cost,
smaller shipments. During the fourth quarter, revenue weakened somewhat, due in
large part to freight diversion resulting from concerns of some shippers over
Yellow Freight's ongoing contract talks with the Teamsters, and the possibility
of a strike at contract expiration, March 31, 1998. Yellow Freight reached
tentative agreement on a five-year contract in February 1998.

During 1997, Yellow Freight revenue per ton was up 4.2 percent due to an
improved pricing environment. Cost per ton was up only 2.1 percent as cost
reduction, productivity and asset utilization strategies were material factors
in offsetting a 3.8 percent (approximately $44 million) increase in Teamster
wages and benefits effective April 1, 1997.

<PAGE> 5

Item 1. Business. (cont.)

The 4.2 percent increase in revenue per ton resulted from individually
negotiated price increases with contractual customers as well as general rate
increases, which apply to customers without contracts. The general rate
increases averaged 5.2 percent in January 1997 and 4.9 percent in October 1997.
In addition, Yellow Freight maintained a separate fuel surcharge program.

Yellow Freight's cost savings in 1997 of $145 million compared to cost savings
in 1996 of $75 million. The savings resulted from continuation of programs
implemented in 1996, a 1997 change of operations and other 1997 programs. The
programs achieved productivity and efficiency gains through best practices and
increased use of technology, lower personnel complement, centralized purchasing
benefits and other items.

The change of operations in April 1997 enabled an increase in the use of rail
transportation from 18 percent to approximately 28 percent of over-the-road
miles. The increased use of rail lowered operating expenses and improved the
company's asset utilization and return on capital. The company is now able to
operate with fewer linehaul tractors. Operating results include $5.6 million of
costs to implement the change in operations.

Yellow Freight salary, wages and employee benefits improved as a percentage of
revenue, despite the scheduled union wage increase. The improvement resulted
from cost reduction initiatives and increased use of rail transportation.
Increased use of rail drove the increase in purchased transportation and
contributed to the decline in depreciation and other expenses between years.
The average age of owned linehaul units slightly decreased, but the average age
of city units slightly increased. Favorable accident experience contributed to
the decline in claims and insurance. A rise in cargo loss and damage somewhat
offset the favorable impact. Fuel prices generally declined as did fuel
surcharge revenue.

Saia continued its strong growth with 1997 operating income of $19.6 million,
up from $10.8 million in 1996. Saia continued to build lane density in 1997.
Revenue for 1997 was $311.2 million, up 17.7 percent from $264.3 million in
1996. Total tonnage increased 10.6 percent, while revenue per ton improved 6.5
percent.

Saia's operating ratio for 1997 was 93.7 compared with 95.9 in 1996. Despite
the 10.6 percent increase in tonnage, cost per ton increased only 4.0 percent.
Saia achieved a nine percent improvement in pick-up and delivery productivity
that helped offset higher wage rates. An improved safety program, better
accident record and cargo claims prevention program held claims and insurance
costs down. Purchased transportation and rentals provided additional capacity
to manage business volume surges.

Preston Trucking reported 1997 operating income of $0.1 million, compared with
a $5.8 million operating loss in 1996. Revenue for 1997 was $450.5 million, up
7.9 percent from $417.6 million in 1996. Preston Trucking focused on pricing
discipline, improved marketing and improvements in labor productivity in 1997.
Tonnage per day increased 4.5 percent in

<PAGE> 6

Item 1. Business. (cont.)

1997. Revenue per ton improved 3.9 percent over 1996, while cost per ton
increased 2.2 percent over 1996. Results in 1996 were adversely impacted by
severe winter weather in the Northeast and upper Midwest and shipper
uncertainty regarding a union vote on a company proposal to freeze wages.

While operating profit in 1997 was small, it represents the first such profit
for Preston Trucking since 1990 and a major improvement over 1996. The success
of a recently implemented network reengineering plan and the 1998 Teamster
contract renewal negotiations will be key to improving profitability to
meaningful and necessary levels.

As part of its December 1997 change of operations, Preston Trucking reduced the
number of terminals from 69 to 62.

The linehaul network redesign was engineered to reduce handlings and achieve
other cost reductions and productivity gains. Preston Trucking hopes to achieve
net savings of $15 million. Implementation costs were not significant in 1997.
Implementation costs, primarily relocation and operating lease payments, are
expected to total $1- $2 million in 1998 and be partially offset by gains on
excess real estate.

Under the wage freeze plan approved by its union employees in 1996, Preston
Trucking did not raise union wages on April 1, 1997. Preston Trucking wages are
8.9 percent below full-scale pay levels. Health, welfare and pension benefit
costs, however, increased by 8.2 percent on April 1, 1997. Preston Trucking's
labor agreement extends until March 31, 1998.

WestEx continued its rapid growth during 1997, reporting revenue of $49.0
million, up 48.6 percent from $33.0 million in 1996. WestEx reported a small
operating loss for the year and is expected to turn profitable in 1998 as it
continues to grow.

Corporate earnings also benefited from lower nonoperating expenses. Long-term
debt at year-end 1997 was $163.1 million, a reduction from $192.5 million at
year-end 1996 and $341.6 million at year-end 1995. Debt reduction programs
since year-end 1995 resulted in a reduction in interest expense of $7.5 million
between 1996 and 1997. Additionally, other nonoperating items, primarily gains
on sales of real estate, contributed to favorable variances of $3.0 million in
the fourth quarter and $3.7 million year-to-date.

Future Outlook

While the company has realized large benefits from cost reduction programs in
1996 and 1997, management believes cost reduction programs represent a
continuous opportunity for improvement in the future. In 1998 and future years,
management plans to extend the programs which have been successful at Yellow
Freight to the other operating companies while

<PAGE> 7

Item 1. Business. (cont.)

pursuing new initiatives at Yellow Freight. The 1998 cost reduction initiatives
primarily pertain to increased labor productivity at Yellow Freight and Saia,
as well as the change of operations at Preston Trucking.

Management believes that future earnings growth not only requires cost
management programs but also improved revenue. Thus, marketing is a priority at
all the subsidiaries. All subsidiaries must be focused on providing high
service and value added solutions for customers. Subsidiaries must be focused
on targeting profitable growth segments.

Yellow Freight, as a member of a group representing a number of major motor
carriers in labor contract negotiations, reached a five-year agreement with the
Teamsters in February 1998, subject to ratification. Preston Trucking bargains
independently. Preston Trucking currently operates under a wage concession
agreement with the Teamsters which expires March 31, 1998, and currently
provides for an 8.9% reduction from full scale wages. Preston requires a
continued substantial reduction in order to effectively compete, the specific
terms of which will be subject to separate negotiation and ratification.

The success of a recently implemented network reengineering plan and the
Teamster contract renewal negotiations will be key to improving Preston
Trucking's profitability to meaningful and necessary levels.

Saia plans continued revenue growth and margin improvement. Saia will continue
to focus on yield management and building density in key markets while
implementing cost improvement programs.

Debt reduction was a priority at the company beginning in 1996. Management
committed to achieving debt reductions of at least $100 million by year-end
1996. Historically, the company has generated strong cash flows from operating
activities. The 1996 decrease in capital spending described above provided the
largest source of funding for debt paydown in 1996. A portion of the reduction
was also achieved through the 1996 sale of $45 million under the ABS agreement.
Additionally, in 1996 the company received a federal income tax refund totaling
$45 million and repatriated approximately $23 million from a Canadian
subsidiary.

Management believes its current financial condition and access to liquidity is
adequate for current operations. Additionally, given the debt reductions and
the company's access to new sources of capital, management believes the company
has increased flexibility to respond to future growth opportunities, possibly
including acquisitions.

<PAGE> 8

Item 1. Business. (cont.)

Statements contained herein, that are not purely historical, are forward
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995, including statements regarding the company's expectations,
hopes, beliefs and intentions on strategies regarding the future. It is
important to note that the company's actual future results could differ
materially from those projected in such forward-looking statements because of a
number of factors, including but not limited to inflation, volatility of
expenses, inclement weather, the results of Teamster contract negotiations,
competitor pricing activity and a downturn in general economic activity.

<PAGE> 9

Item 2. Properties.

The company's operating subsidiaries each provide their transportation services
through separate networks, principally consisting of a fleet of tractors and
trailers and real estate terminal facilities.

At December 31, 1997, the company operated a total of 546 freight terminals
located in 50 states, Puerto Rico, parts of Canada and Mexico. Of this total,
271 were owned terminals and 275 were leased, generally for terms of three
years or less. The number of vehicle back-in doors totaled 18,150, of which
13,671 were at owned terminals and 4,479 were at leased terminals. The freight
terminals vary in size ranging from one to three doors at small local
terminals, to over 300 doors at Yellow Freight's largest consolidation and
distribution terminal. Substantially all of the larger terminals, containing
the greatest number of doors, are owned. In addition, the company and most of
its subsidiaries own and occupy general office buildings in their headquarters
city.

At December 31, 1997, the company's subsidiaries operated the following number
of linehaul units: tractors - 5,402, 27' and 28' trailers - 34,373 and 45' and
48' trailers - 6,667. The company operated the following number of city units:
trucks and tractors - 7,838 and trailers - 6,448.

The company's facilitates and equipment are adequate to meet current business
requirements. The company expects moderate growth in 1997 and has projected no
significant changes to its operational capacity. Projected net capital
expenditures for 1998 are $164 million, an increase over $88 million in 1997
net capital expenditures. Net capital for both periods pertain primarily to
replacement of revenue equipment at all subsidiaries, growth capital at Saia
and WestEx, and additional investments in information technology.

Item 3. Legal Proceedings.

The information set forth under the caption "Commitments and Contingencies" in
the Notes to Consolidated Financial Statements on page 45 of the registrant's
Annual Report to Shareholders for the year ended December 31, 1997, is
incorporated by reference under Item 14 herein.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

<PAGE> 10

Executive Officers of the Registrant

The names, ages and positions of the executive officers of the company as of
March 13, 1998 are listed below. Officers are appointed annually by the Board
of Directors at their meeting that immediately follows the annual meeting of
shareholders.

<TABLE>
<CAPTION>
Name Age Position(s) Held
---- --- ----------------
<S> <C> <C>
A. Maurice Myers 57 President and Chief Executive Officer of the
company (since March 1996); President and Chief
Operating Officer of America West Airlines, Inc.
(January 1994 - December 1995); President and
Chief Executive Officer of Aloha Air Group, Inc.
(prior to January 1994)

William F. Martin, Jr. 50 Senior Vice President - Legal/Corporate Secretary
of the company (since December 1993); Vice
President and Secretary of the company (prior to
December 1993); Vice President and Secretary of
Yellow Freight (prior to May 1992)

H. A. Trucksess, III 48 Senior Vice President - Finance and Chief
Financial Officer of the company (since June
1994) and Treasurer of the company (since
December 1995); Vice President and Chief Financial
Officer of Preston Corporation (prior to June
1994)

Samuel A. Woodward 48 Senior Vice President - Operations and Planning of
the company (since July 1996); Senior Vice
President and Managing Officer of SH&E, a
management consulting business (prior to July
1996)
</TABLE>

The terms of each officer of the company designated above are scheduled to
expire April 16, 1998. The terms of each officer of the subsidiary companies
are scheduled to expire on the date of the next annual meeting of shareholders
of that company. No family relationships exist between any of the executive
officers named above.

<PAGE> 11

PART II

Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters.

The information set forth under the caption "Common Stock" on page 46 of the
registrant's Annual Report to Shareholders for the year ended December 31,
1997, is incorporated by reference under Item 14 herein.

Item 6. Selected Financial Data.

The information set forth under the caption "Financial Summary" on pages 28 and
29 of the registrant's Annual Report to Shareholders for the year ended
December 31, 1997, is incorporated by reference under Item 14 herein.

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.

"Management's Discussion and Analysis of Financial Condition and Results of
Operations," appearing on pages 20 through 27 of the registrant's Annual Report
to Shareholders for the year ended December 31, 1997, is incorporated by
reference under Item 14 herein.

Item 8. Financial Statements and Supplementary Data.

The financial statements and supplementary information, appearing on pages 30
through 46 of the registrant's Annual Report to Shareholders for the year ended
December 31, 1997, are incorporated by reference under Item 14 herein.

Item 9. Disagreements on Accounting and Financial Disclosure.

None.

<PAGE> 12

PART III

Item 10. Directors and Executive Officers of the Registrant.

The information regarding Directors of the registrant has previously been
reported in the registrant's definitive proxy statement, filed pursuant to
Regulation 14A, and is incorporated by reference. For information with respect
to the executive officers of the registrant, see "Executive Officers of the
Registrant" at the end of Part I of this report.

Item 11. Executive Compensation.

This information has previously been reported in the registrant's definitive
proxy statement, filed pursuant to Regulation 14A, and is incorporated by
reference. The Employment Agreement between A. Maurice Myers, President and
Chief Executive Officer, and the company, has previously been filed and is
incorporated by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

This information has previously been reported in the registrant's definitive
proxy statement, filed pursuant to Regulation 14A, and is incorporated by
reference.

Item 13. Certain Relationships and Related Transactions.

This information has previously been reported in the registrant's definitive
proxy statement, filed pursuant to Regulation 14A, and is incorporated by
reference.

<PAGE> 13

PART IV

Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K.

(a) (1) Financial Statements

The following information appearing in the 1997 Annual Report to
Shareholders is incorporated by reference in this Form 10-K Annual Report
as Exhibit (13):

<TABLE>
<CAPTION>
Page
----
<S> <C>
Management's Discussion and Analysis of
Financial Condition and Results of Operations 20-27
Financial Summary 28-29
Consolidated Financial Statements 30-45
Report of Independent Public Accountants 45
Quarterly Financial Information 46
Common Stock 46
</TABLE>

With the exception of the aforementioned information, the 1997 Annual
Report to Shareholders is not deemed filed as part of this report.
Financial statements other than those listed are omitted for the reason
that they are not required or are not applicable. The following additional
financial data should be read in conjunction with the consolidated
financial statements in such 1997 Annual Report to Shareholders.

(a) (2) Financial Statement Schedule

<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants on
Financial Statement Schedule 14

For the years ended December 31, 1997, 1996 and 1995:
Schedule II - Valuation and Qualifying Accounts 15
</TABLE>

Schedules other than those listed are omitted for the reason that they are
not required or are not applicable, or the required information is shown in
the financial statements or notes thereto.

(a) (3) Exhibits

(13) - 1997 Annual Report to Shareholders.
(24) - Consent of Independent Public Accountants.
(27) - Financial Data Schedule (for SEC use only).

The remaining exhibits required by Item 7 of Regulation S-K are omitted for
the reason that they are not applicable or have previously been filed.

(b) Reports on Form 8-K

The company announced December 16, 1997, that its Board of Directors
authorized the repurchase of shares of shares of the company's outstanding
common stock with an aggregate purchase price of up to $25 million.

<PAGE> 14

Report of Independent Public
Accountants on Financial Statement Schedule

To the Shareholders of Yellow Corporation:

We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in Yellow Corporation and
Subsidiaries' annual report to shareholders incorporated by reference in this
Form 10-K, and have issued our report thereon dated January 28, 1998. Our
audit was made for the purpose of forming an opinion on those statements taken
as a whole. The Schedule of Valuation and Qualifying Accounts (Schedule II)
is the responsibility of the company's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules and
is not part of the basic consolidated financial statements. This schedule has
been subjected to the auditing procedures applied in the audit of the basic
consolidated financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Kansas City, Missouri,
January 28, 1998

<PAGE> 15

Schedule II

Yellow Corporation and Subsidiaries
Valuation and Qualifying Accounts
For the Years Ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- -------------------------------------------------------------------------------------------------
Additions
--------------------
Balance, -1- -2- Deductions- Balance,
Description Beginning Charged Charged Describe End Of
Of Period To Costs To Other (1) Period
And Accounts-
Expenses Describe
- -------------------------------------------------------------------------------------------------

(In Thousands)
<S> <C> <C> <C> <C> <C>

Year ended December 31, 1997:
- -----------------------------
Deducted from asset account -
Allowance for uncollectible
accounts $13,819 $15,283 $ - $13,302 $15,800
======= ======= ======= ======= =======

Year ended December 31, 1996:
- -----------------------------
Deducted from asset account -
Allowance for uncollectible
accounts $16,781 $19,287 $ - $22,249 $13,819
======= ======= ======= ======= =======

Year ended December 31, 1995:
- -----------------------------
Deducted from asset account -
Allowance for uncollectible
accounts $13,082 $13,855 $ - $10,156 $16,781
======= ======= ======= ======= =======
</TABLE>

(1) Primarily uncollectible accounts written off - net of recoveries. Also
includes $3.5 million net deductions in 1996 for net fundings under the
asset-backed securitization agreement and $2.5 million net additions in
1997 for net reductions in fundings under the asset-backed securitization
agreement.

<PAGE> 16

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Yellow Corporation

BY: /s/ A. Maurice Myers
--------------------------------------
A. Maurice Myers
President, Chief Executive Officer and
March 24, 1998 Chairman of the Board of Directors

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

/s/ H. A. Trucksess, III Senior Vice President - March 24, 1998
- ---------------------------- Finance/Chief Financial
H. A. Trucksess, III Officer and Treasurer

/s/ Howard M. Dean Director March 24, 1998
- ----------------------------
Howard M. Dean

/s/ David H. Hughes Director March 24, 1998
- ----------------------------
David H. Hughes

/s/ Cassandra C. Carr Director March 24, 1998
- ----------------------------
Cassandra C. Carr

/s/ Carl W. Vogt Director March 24, 1998
- ----------------------------
Carl W. Vogt

<PAGE> 1

Exhibit (13)

Yellow Corporation
------------------

1997 Annual Report
------------------

to Shareholders
---------------

<PAGE> 2
1997 Yellow Corporation Annual Report

[COVER PICTURE OF CUSTOMER SERVICE REPRESENTATIVE, TRACTOR-TRAILERS, MOBILE
DATA TERMINALS, COMPUTERS, WHEEL, LOGO, GLOBE, ETC.]
<PAGE> 3
FORTUNE recognizes success. The magazine's new list of America's Most
Admired Companies describes Yellow as "this year's biggest gainer," posting a
31 percent jump in its image score.

Innovation. Service. Quality. And Value. Virtues of the admired, and
pillars of Yellow.

<PAGE> 4
[FULL PAGE PICTURE OF U-TURN SIGN]

THE EARNINGS-PER-SHARE U-TURN

<PAGE> 5
Yellow Corporation
1997 Revenue Contribution

76% - Yellow Freight System, Inc.
14% - Preston Trucking Company, Inc.
9% - Saia Motor Freight Line, Inc.
1% - WestEx, Inc.

Family of Operating Companies

<PAGE> 6

<TABLE>
<S> <C>
SERVICES: PROFILE:

YELLOW FREIGHT SYSTEM, INC.
National LTL 24,000 employees
International LCL / FCL 381 terminals
Express LTL 300,000 customers
Rail intermodal 8,800 tractors / 35,000 trailers
Heavy load / truckload Delivered 8.6 million tons of freight in 1997
Chemical LTL Web address: http://www.yellowfreight.com
Trade shows & exhibits
Integrated logistics
Information technology services

PRESTON TRUCKING COMPANY, INC.
Regional LTL - Northeast and Upper Midwest 5,700 employees
Overnight & second-day delivery 62 terminals
Guaranteed expedited service 190,000 customers
Canadian service 2,200 tractors / 6,300 trailers
Delivered 2.4 million tons of freight in 1997
Web address: http://www.yellowcorp.com/preston/
SAIA MOTOR FREIGHT LINE, INC.
Regional LTL - Southeast Overnight 4,300 employees
& second-day delivery 72 terminals
Guaranteed expedited service 90,000 customers
Truckload service 1,900 tractors / 4,700 trailers
Caribbean service Delivered 2.2 million tons of freight in 1997
Web address: http://www.saia.com
WESTEX, INC.
Regional LTL - Southwest 960 employees
and California 31 terminals
Overnight & second-day delivery 6,000 customers
interstate and intrastate 420 tractors / 1,100 trailers
Guaranteed expedited service Delivered 304,000 tons of freight in 1997
Maquiladora service from Web address: http://www.westex-inc.com
Tijuana to Juarez, Mexico
LTL service to Mexico interior
Marketing partnerships with third
party logistics companies
</TABLE>

[PICTURES OF TRACTOR-TRAILERS]

-3-

<PAGE> 7
TABLE OF CONTENTS

3
Subsidiary Profiles
A snapshot of who we are and what we do.

12
Letter to Shareholders
Chairman and President A. Maurice Myers reviews 1997 and reports on the future.

20
Management's Discussion and Analysis
An in-depth look at comparative year-to-year financial and operating
performance.

28
Financial Summary
Selected financial data is reported on a five-year comparative basis.

30
Consolidated Financial Statements and Notes
Financial results and notes on significant accounting policies and
issues affecting financial results.

-4-
<PAGE> 8

45
Report of Independent Public Accountants
A report by Arthur Andersen LLP.

46
Supplementary Information
Additional information of interest.

48
Officers
A roster of senior officers.

49
Directors
A portrait and listing of the board of directors.

-5-
<PAGE> 9
BALANCE SHEET STRENGTH

[PICTURE OF WORKER WITH TRACTOR-TRAILER]

"We finished the year with $166 million in total debt outstanding. This comes
after reducing total debt in 1996 to $196 million from $354 million at year-end
1995."
- -Maury Myers

DIVERSITY IS POSSIBLE WITH LOWERED DEBT

Flexibility is mandatory. With nearly $190 million of debt slashed over
the past two years, our balance sheet is strong. Growth opportunities are again
viable.

-6-

<PAGE> 10

Total Debt / Debt to Capital

<TABLE>
<S> <C> <C> <C>
1995 1996 1997
Debt to capital ratio 46 33 27
Total debt $354 million $196 million $166 million
</TABLE>

[PICTURES OF CONFERENCE SHOTS AND PLANNERS]
[PICTURE OF SERVICE REPRESENTATIVE, INTERNET PAGE COMPUTER, MOBILE DATA
TERMINAL]

-7-

<PAGE> 11
[PICTURE OF EMPLOYEE WITH FORKLIFT AND PRODUCTS ON PALLET]

COST REDUCTIONS AND PRODUCTIVITY

"Cost efficiency and service efficiency go hand in hand. We will not implement
cost cutting programs that diminish our service standards. We are proving that
we can do both."
- -Maury Myers

PEOPLE USING TECHNOLOGY SERVE BETTER

We're working smarter and using assets more productively. Technology is
aiding our efficiencies. Costs have decreased. Customer satisfaction is on the
rise.

-8-
<PAGE> 12
Cost Reductions
<TABLE>
<S> <C> <C> <C>

1996 Impact 1997 Impact 1998 Impact

1998 program $50 million

1997 program $55 million $90 million

1996 program $75 million $90 million $90 million

Total $75 million $145 million $230 million
</TABLE>

[PICTURE OF TRAILER ON INTERMODAL LIFT, DOCK WORKER WITH SCANNER, COMPUTER
SCREEN, INTERMODAL RAIL YARD, INTERNET PAGE, PLANNING GROUP ETC.]

-9-
<PAGE> 13

REVENUE GROWTH

[PICTURE OF EMPLOYEE WITH BARREL]

"Productivity improvements and cost reductions will not come at the expense of
revenue growth and profitability. We will intensify our focus on new growth
opportunities."
- -Maury Myers

REVENUE GROWS WHERE KNOWLEDGE IS PLANTED

Market knowledge and sensible industry capacity have stabilized prices. Costs
are being managed. Revenue will grow as our capabilities expand.

-10-
<PAGE> 14
Revenue Growth

<TABLE>
<S> <C> <C> <C>
1995 1996 1997
Revenues $3.06 billion 3.07 billion 3.35 billion

Revenue Growth .05% 9%

</TABLE>

[PICTURE OF TRACTOR-TRAILER, GLOBE, CARGO SHIP, CUSTOMER SERVICE REPRESENTATIVE,
ETC.]

-11-
<PAGE> 15

Chairman's Letter to Shareholders

Dear Shareholder,

In 1996, we made an important commitment. We told you we were beginning
to rebuild the foundation necessary to restore shareholder value. We are now
delivering on that commitment.

1997 was a year of real progress. We achieved a breakthrough financial
performance, even though we're still not where we want to be. Profitability
was up almost 50 fold. The results were built on aggressive cost reductions,
pricing leadership, business growth and the tailwind of a strong economy.
Yellow Corporation share prices responded to the improved earnings performance.

Shareholder Value Built on Cost Management, Growth and a High-Performance
Culture.

Cost reductions remain at the core of our strategy for returning to acceptable
profitability. We're driving down costs through process improvements and more
effective use of assets. We are achieving industry best-in-class performance
in many key areas.

Among its peer group of companies, Yellow Freight now operates with the lowest
cost per ton. The carrier has implemented cost reductions totalling $180
million that will benefit Yellow Freight in 1998. Lower costs have been aided
by technology and reengineered processes. Cost reduction programs are now
being implemented at all operating companies and are scheduled to result in
another $50 million in cost savings in 1998. The target for all Yellow
Corporation companies is to be the low-cost carrier relative to competition.

We benefited from increased volume at all of our operating companies throughout
much of 1997. Business grew because of renewed emphasis on marketing
strategies. Our focus is to better identify customer needs in profitable
market segments, then develop services that establish a unique point of
competitive advantage.

In terms of revenue, each of our carriers grew in 1997 -- Yellow Freight by 7.7
_______________________________________________________________________________

We achieved a breakthrough financial performance... Profitability was up almost
50 fold... Cost reductions remain at the core of our strategy... Business grew
because of renewed emphasis on marketing strategies.

-12-

<PAGE> 16
percent, Preston Trucking by 7.9 percent, Saia by 17.7 percent and WestEx by
48.6 percent.

In our effort to create a high-performance culture, pay for performance was a
key. It represented a whole new way of thinking about compensation. The
strategy focused on our noncontract employees in high-impact areas of sales and
operations. Our total 1997 performance compensation at Yellow companies was
$25.9 million. Going forward, pay for performance will continue to create
powerful incentives to do whatever it takes to build a stronger company.

There is no doubt that pay for performance was a key factor in producing the
financial and operational results we achieved.

Financial Performance Reflects Confidence and Strength.

We reported 1997 net income of $52.4 million, or $1.86 basic earnings per
share. This is compared to 1996 net income of $1.1 million, excluding a $28.3
million (after tax) nonrecurring special charge taken in the 1996 fourth
quarter. Consolidated operating revenue for 1997 was $3.35 billion, up 9.0
percent from $3.07 billion in 1996.

Three important factors produced these results: (1) cost reductions; (2)
pricing leadership, and; (3) increased business volume.

We continued to strengthen our balance sheet, trimming a total of $30.4 million
in debt during 1997. As a result, interest expense was reduced $7.5 million
from 1996. We finished the year with $166 million in total debt outstanding.
This comes after reducing total debt in 1996 to $196 million from $354 million
at year-end 1995. Our strong balance sheet gives us improved flexibility to
respond quickly to expansion and growth opportunities as conditions warrant.

Our net capital expenditures totaled $88 million in 1997. We expect 1998
capital expenditures to total $164 million and be focused mainly on trucks and
trailers and on information technology systems that help us communicate better
with our customers. We will also be acquiring and expanding terminal
facilities at our Saia subsidiary, consistent with its rapid growth.
_______________________________________________________________________________

In our effort to create a high-performance culture, pay for performance was a
key... We reported 1997 net income of $52.4 million, or $1.86 basic earnings
per share... Our strong balance sheet gives us improved flexibility.

-13-
<PAGE> 17
Yellow Freight System Leads the Way.

In 1997, Yellow Freight reasserted its position as the preeminent national
less-than-truckload (LTL) carrier in North America. It was an impressive
performance in terms of both improved revenue per ton -- up 4.2 percent -- and
cost per ton that rose only 2.1 percent. The cost reduction and efficiency
programs offset a 3.8 percent increase in Teamster wages and benefits that went
into effect on April 1, 1997. Operating revenue for 1997 was $2.54 billion, up
7.7 percent from $2.36 billion in 1996. The operating ratio for the year was
96.7, versus 98.5 before a fourth quarter 1996 special charge.

Yellow Freight demonstrated that excellent results can be achieved when it
fully leverages its enormous operating capacity. With 381 terminals throughout
all 50 states, Canada and Mexico, we are positioned well in balancing freight
hauling and handling capacity against demands of the marketplace.

Reaching a 5-year agreement with the International Brotherhood of Teamsters in
February, a full seven weeks ahead of contract expiration, comforted shippers
and solidified the relationship between carrier and union employees. The
contract gives employees the job security they sought in negotiations and a
satisfactory increase in income and benefits. While wages and benefits are
substantially higher than at nonunion competition, Yellow Freight believes it
can compete effectively with superior efficiency.

Productivity and asset utilization improved through programs that implement and
sustain best practices in dock and pickup and delivery operations. Improved
service to customers is the result. Cost reductions are important but improved
service is equally important. There are no trade offs. Cost efficiency and
service efficiency go hand in hand. We will not implement cost cutting
programs that diminish our service standards. We are proving that we can do
both. The effort continues in 1998 and will expand into other processes.
Employees are making it happen by accepting new accountabilities for their
work.

Early in 1997, we implemented a massive change of operations that allowed us
to double our sleeper team operations and utilize the railroads for a greater
______________________________________________________________________________

The cost reduction and efficiency programs offset a 3.8 percent increase in
Teamster wages and benefits... Productivity and asset utilization improved
through programs that implement and sustain best practices.

-14-
<PAGE> 18
percentage of our shipments. By year-end, we were placing approximately 28
percent of our total over-the-road mileage on the rail, up from about 18
percent before the change. Using sleeper teams and intermodal rail created a
more cost effective way to move our customers' products. As the railroads
correct their highly publicized service problems, intermodal will become an
even more important advantage.

The focus on cost is balanced by a concerted effort to price our service more
astutely. We are increasingly successful in realizing appropriate value for
our services. Yellow Freight was the first major carrier to announce a pricing
increase in 1997. The October 15 implementation broke with past tradition of
year-end increases in an effort to establish a more beneficial pricing cycle
for both shippers and carriers. After an extended period in which the market
undervalued LTL transportation services, pricing is now moving toward more
rational levels.

Another significant part of the story at Yellow Freight is the smart use of
information technology -- computers and sophisticated communications systems.
Technology differentiates us from the competition. Major shippers are seeking
transportation partners who can meet their demands for time definite
appointments, responsive shipment tracking, accurate invoicing and highly
flexible service. Technology innovation puts Yellow Freight in a position to
earn a larger share of their business.

Much of the technology investment to date at Yellow Freight has been centered
around our Customer Satisfaction Centers. We now have nearly 400 highly
trained customer satisfaction representatives backed by communications systems
that allow them to take most of our calls for shipment pickups in addition to a
number of other critical service functions. The Customer Satisfaction Centers
are proving to be valuable sales and service facilities.

Global focus is another point of competitive difference for Yellow Freight.
Today's emphasis on international partnerships is putting a premium on
transportation services that span oceans and borders. While international
business contributed about $100 million in 1997 revenues, that amount is
projected to grow to $200 million by the year 2000.
_______________________________________________________________________________

Using sleeper teams and intermodal rail created a cost-effective way to move
our customers' products... We are increasingly successful in realizing
appropriate value for our services... Technology differentiates us from the
competition.

-15-
<PAGE> 19
Regional Portfolio Meets Growing Market Demand.

A key strategic objective for Yellow Corporation is to maintain a diverse
portfolio of transportation service companies, each with competitive advantages
in their respective market niches. Our regional operating companies -- Preston
Trucking Company, Saia Motor Freight Line and WestEx -- are helping us fulfill
that strategic objective through their focus on overnight and second-day
service.

Regional LTL transportation service will remain a high-growth market for the
foreseeable future due to a continuing shift in the way products are
distributed and manufactured. Our regional carriers are positioned to profit
from this trend.

Saia is now one of the country's top regional carriers, posting 16 to 18
percent average annual growth rates in recent years. Saia finished 1997 with
revenue of $311.2 million, up nearly 18 percent from 1996 revenue of $264.3
million. The operating ratio was 93.7, a significant improvement from the 1996
ratio of 95.9.

As the top line has grown at Saia, our focus has shifted to the bottom line.
We are pleased with the margin improvements at Saia and expect further progress
in 1998 thanks to implementation of productivity initiatives that have proven
successful at Yellow Freight.

Productivity Initiatives Also are Being Implemented at Preston Trucking
and WestEx.

In 1997, Preston Trucking experienced its first profitable year since 1990.
Operating income during 1997 was $0.1 million, compared with a $5.8 million
operating loss in 1996. Revenue was $450.5 million, compared with $417.6
million in 1996. In 1998, Preston Trucking will continue to focus on
productivity and better utilization of assets in its drive for meaningful and
necessary profitability.

WestEx is one of the country's fastest growing regional carriers, recording
revenue of $49.0 million, up from $33.0 million in 1996. Operating income was
essentially break-even. WestEx has expanded rapidly in California, Colorado
and the
_______________________________________________________________________________

A key strategic objective for Yellow Corporation is to maintain a diverse
portfolio of transportation service companies... Regional LTL transportation
services will remain a high-growth market for the foreseeable future... We are
pleased with the margin growth at Saia and expect further progress in 1998.

-16-

<PAGE> 20

Southwest since it was acquired in 1994. While the expansion will
continue, the focus will now expand to include margin improvement and service
enhancements through partnerships and alliances with other carriers.

Market Focus Sets New Performance Expectations.

All the operating companies are developing services that help our customers
satisfy their customers. Flawless execution and exceptional service are the
order of business today. Timely pickups and deliveries, customized and highly
flexible service and accurate documentation are only a few of the demands we
must meet. There are plenty of options available to our customers if we don't
execute the way they expect.

Yellow Freight is introducing new value-added services. Innovations such as
freight protection services, credit card payment and service guarantees will
set new performance expectations in our industry. At Preston Trucking, a new
program called Preston Plus gives frequent shippers a premium service package
that includes incentives for greater business volume. Saia is unveiling
similar marketing concepts including customized, expedited service tailored to
customers in specific industries.

Our technology investment is making us better. It is giving us information
that allows us to deploy new market intelligence systems and target more
profitable market segments.

And finally, we are rolling out aggressive new incentive compensation plans
that reward increased profitable sales at each of our companies.

The Outlook is Bright.

We are creating a high-performance culture at all the Yellow Corporation
companies. It is characterized by compensation and other reward systems that
direct our attention to the customer and his or her needs. We proved in 1997
that pay for performance works. That philosophy will expand further in 1998
with programs that
_______________________________________________________________________________

All the operating companies are developing services that help our customers
satisfy their customers... Innovations such as freight protection services,
credit card payment and service guarantees will set new performance
expectations in our industry.

-17-
<PAGE> 21
nurture an entrepreneurial environment and focus our employees on satisfying
customer needs and improving returns for our shareholders.

We will continue to hold the line on our cost structure in the belief that it
is an important competitive advantage. We hope to widen further the low cost
advantage enjoyed by Yellow Freight among its peer group companies.

Productivity improvements and cost reductions will not come at the expense of
revenue growth and profitability. We will concentrate efforts on new growth
opportunities. We will also consider growth through acquisition. Our improved
balance sheet increases our flexibility to be opportunistic.

As shareholders, you should know that your workforce is proud and determined --
dedicated to making the extraordinary seem ordinary. They accomplished much in
the past year and even better things lie ahead.

Last year, we noted that the rigors of competition and the marketplace were
redefining our industry. Today, that picture is well defined. We know what it
takes to thrive and prosper. It takes a portfolio of companies with sharp
market focus. It takes revenue and profit growth. It takes services that
create competitive advantage. And it takes a high-performance culture that
rewards team and individual contributions. All these factors create
shareholder value. And that remains our top priority for 1998 and beyond.

Sincerely,

A. Maurice Myers
Chairman of the Board
President and Chief Executive Officer
Yellow Corporation

[PICTURE OF A. MAURICE MYERS]

-18-

<PAGE> 22
TABLE OF CONTENTS

20
Management's Discussion and Analysis
An in-depth look at comparative year-to-year financial and operating
performance.

28
Financial Summary
Selected financial data is reported on a five-year comparative basis.

30
Consolidated Financial Statements and Notes
Financial results and notes on significant accounting policies and issues
affecting financial results.

45
Report of Independent Public Accountants
A report by Arthur Andersen LLP.

48
Officers
A roster of senior officers.

46
Supplementary Information
Additional information of interest.

49
Directors
A portrait and listing of the board of directors.

-19-
<PAGE> 23

Management's Discussion and
Analysis of Financial Condition
and Results of Operations

Results of Operations

1997 vs. 1996

Operating revenue for Yellow Corporation (the company) totaled $3.35
billion in 1997, up 9.0 percent from $3.07 billion in 1996. Operating income
for the year was $98.7 million, more than triple the $32.6 million recorded in
1996, excluding a special charge. The fourth quarter 1996 special charge
pertained to restructuring of Yellow Freight System, Inc. (Yellow Freight) and
was $46.1 million before income taxes ($28.3 million after income taxes). Net
income for 1997 was $52.4 million, or $1.86 basic earnings per share ($1.83
diluted), versus 1996 net income of $1.1 million excluding the special charge.
Including the fourth quarter special charge, Yellow Corporation recorded a 1996
net loss of $27.2 million, or $.97 per share. The fourth quarter special
charge is discussed further in the notes to the consolidated financial
statements.
Improved profitability resulted primarily from pricing strength, volume
increases, and aggressive cost reduction and productivity strategies.
Yellow Freight achieved $145 million in cost savings in 1997 from programs
implemented in 1996 and 1997, which are targeted to grow in 1998 to a $180
million run-rate benefit. In 1998, another $50 million in savings from new cost
reduction and efficiency programs will extend beyond Yellow Freight and include
all the operating subsidiaries.
At Yellow Freight, 1997 operating income rose to $82.7 million, more than
double the 1996 operating income of $36.1 million, before the special charge.
Revenue for 1997 was $2.54 billion, up 7.7 percent from $2.36 billion in 1996.
The 1997 operating ratio for Yellow Freight was 96.7 compared with 98.5 in
1996, excluding the special charge.
Yellow Freight tonnage and shipments per day during 1997 were up 4.3
percent and 9.7 percent respectively. During the third quarter revenue
benefited from a two-week Teamsters strike against UPS which caused a surge in
high-cost, smaller shipments. During the fourth quarter, revenue weakened
somewhat, due in large part to freight diversion resulting from concerns of
some shippers over Yellow Freight's ongoing contract talks with the Teamsters,
and the possibility of a strike at contract expiration, March 31, 1998. Yellow
Freight reached tentative agreement on a five-year contract in February 1998.
During 1997, Yellow Freight revenue per ton was up 4.2 percent due to an
improved pricing environment. Cost per ton was up only 2.1 percent as cost
reduction, productivity and asset utilization strategies were material factors
in offsetting a 3.8 percent (approximately $44 million) increase in Teamster
wages and benefits effective April 1, 1997.
The 4.2 percent increase in revenue per ton resulted from individually
negotiated price increases with contractual customers as well as general rate
increases, which apply to customers without contracts. The general rate
increases averaged 5.2 percent in January 1997 and 4.9 percent in October 1997.
In addition, Yellow Freight maintained a separate fuel surcharge program.
Yellow Freight's cost savings in 1997 of $145 million compared to cost
savings in 1996 of $75 million. The savings resulted from continuation of
programs implemented in 1996, a 1997 change of operations and other 1997
programs. The programs achieved productivity and efficiency gains through best
practices and increased use of technology, lower personnel complement,
centralized purchasing benefits and other items.
The change of operations in April 1997, enabled an increase in the use of
rail transportation from 18 percent to approximately 28 percent of
over-the-road miles. The increased use of rail lowered operating expenses and
improved the company's asset utilization and return on capital. The company is
now able to operate with fewer linehaul tractors. Operating results include
$5.6 million of costs to implement the change in operations.
Yellow Freight salary, wages and employee benefits improved as a
percentage of revenue, despite the

-20-
<PAGE> 24
scheduled union wage increase. The improvement resulted from cost
reduction initiatives and increased use of rail transportation. Increased use
of rail drove the increase in purchased transportation and contributed to the
decline in depreciation and other expenses between years. The average age of
owned linehaul units slightly decreased, but the average age of city units
slightly increased. Favorable accident experience contributed to the decline in
claims and insurance. A rise in cargo loss and damage somewhat offset the
favorable impact. Fuel prices generally declined as did fuel surcharge revenue.
Saia Motor Freight Line, Inc. (Saia) continued its strong growth with 1997
operating income of $19.6 million, up from $10.8 million in 1996. Saia
continued to build lane density in 1997. Revenue for 1997 was $311.2 million,
up 17.7 percent from $264.3 million in 1996. Total tonnage increased 10.6
percent, while revenue per ton improved 6.5 percent.
Saia's operating ratio for 1997 was 93.7 compared with 95.9 in 1996.
Despite the 10.6 percent increase in tonnage, cost per ton increased only 4.0
percent. Saia achieved a nine percent improvement in pick-up and delivery
productivity that helped offset higher wage rates. An improved safety program,
better accident record and cargo claims prevention program held claims and
insurance costs down. Purchased transportation and rentals provided additional
capacity to manage business volume surges.
Preston Trucking Company, Inc. (Preston Trucking) reported 1997 operating
income of $0.1 million, compared with a $5.8 million operating loss in 1996.
Revenue for 1997 was $450.5 million, up 7.9 percent from $417.6 million in
1996. Preston Trucking focused on pricing discipline, improved marketing and
improvements in labor productivity in 1997. Tonnage per day increased 4.5
percent in 1997. Revenue per ton improved 3.9 percent over 1996, while cost per
ton increased 2.2 percent over 1996. Results in 1996 were adversely impacted by
severe winter weather in the Northeast and upper Midwest and shipper
uncertainty regarding a union vote on a company proposal to freeze wages.
While operating profit in 1997 was small, it represents the first such
profit for Preston Trucking since 1990 and a major improvement over 1996. The
success of a recently implemented network reengineering plan and the 1998
Teamster contract renewal negotiations will be key to improving profitability
to meaningful and necessary levels.
As part of its December 1997 change of operations, Preston Trucking
reduced the number of terminals from 69 to 62.
The linehaul network redesign was engineered to reduce handlings and
achieve other cost reductions and productivity gains. Preston Trucking hopes to
achieve net savings of $15 million. Implementation costs were not significant
in 1997. Implementation costs, primarily relocation and operating lease
payments, are expected to total $1- $2 million in 1998 and be partially offset
by gains on excess real estate.
Under the wage freeze plan approved by its union employees in 1996,
Preston Trucking did not raise union wages on April 1, 1997. Preston Trucking
wages are 8.9 percent below full-scale pay levels. Health, welfare and pension
benefit costs, however, increased by 8.2 percent on April 1, 1997. Preston
Trucking's labor agreement extends until March 31, 1998.
WestEx, Inc. (WestEx) continued its rapid growth during 1997, reporting
revenue of $49.0 million, up 48.6 percent from $33.0 million in 1996. WestEx
reported a small operating loss for the year and is expected to turn profitable
in 1998 as it continues to grow.
Corporate earnings also benefited from lower nonoperating expenses.
Long-term debt at year-end 1997 was $163.1 million, a reduction from $192.5
million at year-end 1996 and $341.6 million at year-end 1995. Debt reduction
programs since year-end 1995 resulted in a reduction in interest expense of
$7.5 million between 1996 and 1997. Additionally,

-21-
<PAGE> 25
other nonoperating items, primarily gains on sales of real estate,
contributed to favorable variances of $3.0 million in the fourth quarter and
$3.7 million year-to-date.

1996 vs. 1995

Operating revenue in 1996 totaled $3.07 billion for the company,
essentially unchanged from the $3.06 billion in 1995. The company recorded a
net loss of $27.2 million, or $.97 per share, which included a $46.1 million
special charge ($28.3 million after taxes) incurred by Yellow Freight, the
company's largest subsidiary. The charge included the write down of certain
nonoperating real estate and computer software assets, an early retirement
program, the reduction of a company car program and other organizational design
impacts, primarily severance. Excluding the special charge, the company had
1996 net income of $1.1 million compared to a net loss of $30.1 million in
1995.
Management and organizational changes designed to sharpen customer focus
and improve profitability at Yellow Freight preceded the special charge. Over a
four-month period nearly every facet of the organization was thoroughly
examined. In early December 1996 Yellow Freight announced it was restructuring.
Overall the organizational design changes established the foundation for
additional service improvements and cost reductions in all phases of Yellow
Freight's future performance. The notes to the consolidated financial
statements describe the charge further.
Yellow Freight's revenue was $2.36 billion, down 0.3 percent from 1995.
The operating ratio, before the special charge impact, improved from 100.1 in
1995 to 98.5. Including the special charge, the operating ratio was 100.4.
Tonnage declined by 2.8 percent while revenue per ton increased by 2.4 percent.
The tonnage decline was due to market forces and Yellow Freight's efforts to
improve pricing stability. In January 1996, Yellow Freight implemented a
general rate increase averaging 5.8 percent which applied to its customers who
do not have term contracts. The 1996 revenue per ton improvement would have
been greater but the intense price discounting experienced in the second half
of 1995 resulted in the January 1996 rate increase being calculated on a
depressed rate base. Revenue at Yellow Freight also increased from a fuel
surcharge program implemented in September 1996 to offset higher fuel costs.
Yellow Freight's less-than-truckload (LTL) revenue per hundredweight in the
fourth quarter of 1996 was 4.7 percent higher than the fourth quarter of 1995.
Benefiting from aggressive cost reduction programs, operating expenses for
Yellow Freight on a per ton basis were up only 0.6 percent in 1996. This was in
spite of higher fuel costs throughout the year, severe winter weather
experienced in the first quarter and a 3.8 percent increase on April 1 in union
wages and benefits. Higher productivity, including an improvement in load
average, helped moderate other increases in operating costs. The improvement in
load average was especially evident when compared to the last half of 1995.
Load average trended down significantly in that period due to the transit time
improvement program implemented in the third quarter of 1995. As this program
was adjusted, the downtrend in load average was reversed and by the end of the
second quarter of 1996 had substantially improved to levels being achieved
prior to the program.
A series of focused cost reduction initiatives were begun at the end of
1995 which included employee reductions, general and administrative expense
cutbacks, the implementation of a "best practices" program and a variety of
other initiatives. The best practices program involves the use of those
procedures being practiced at the most successful terminals throughout the
network. During 1996 these programs achieved a targeted $75 million in cost
reductions and benefited future years by a greater amount.

-22-
<PAGE> 26
During 1996 price increases in fuel cost Yellow Freight about $15 million.
A fuel hedging program and the fuel surcharge offset these additional costs.
Preston Trucking had operating revenue of $418 million in 1996, a 1.5
percent increase over the $411 million recorded in 1995. The operating ratio
for Preston Trucking in 1996 was 101.4, the same as in the prior year. Preston
Trucking was adversely impacted by the severe winter weather in the first
quarter of 1996 because of the concentration of its business in the Northeast
and upper Midwest. In addition, first quarter results suffered from shipper
uncertainty regarding a union vote on a company proposal to freeze wages, which
at that time were already 5.0 percent below full contract rates. In February,
union members approved the wage proposal enabling Preston Trucking to avoid a
1.8 percent wage increase scheduled to be effective April 1, 1996, thus
increasing the discount from full rates to 6.8 percent. Health, welfare and
pension costs for union employees were not frozen and increased 9.0 percent on
April 1, 1996.
In the second quarter, a new management team took over at Preston
Trucking. As the year progressed Preston Trucking's results improved and were
stronger than comparable 1995 periods. Preston Trucking recorded an operating
ratio of 99.4 in the second half of the year, a 3.7 point improvement over the
ratio in the last half of 1995. Nonunion employee turnover, which had been a
significant problem, also improved dramatically to more reasonable levels.
Preston Trucking's revenue per ton improved 3.0 percent in 1996 over 1995.
The improvement largely occurred in the second half of the year due to specific
rate actions and programs to improve revenue quality. Preston Trucking
implemented a fuel surcharge in June and a general rate increase that averaged
5.2 percent in late November. LTL revenue per ton was up 6.6 percent in the
fourth quarter of 1996 compared to the fourth quarter of 1995. Preston Trucking
was also able to offset higher fuel costs through a combination of a fuel
hedging program and the fuel surcharge.
Saia grew at double-digit rates in 1996 recording revenue of $264 million
compared to 1995 revenue of $210 million, an increase of 26.1 percent. Total
tonnage increased by 17.4 percent with LTL tonnage up 24.6 percent and
truckload tonnage up 1.9 percent. The higher revenue and tonnage resulted from
the full year impact of Saia's significant growth in geographical coverage
during 1994 and 1995 as well as an overall improvement in lane density. Saia
also benefited from a 7.4 percent improvement in revenue per ton partially due
to a 2.4 percent increase in LTL revenue per hundredweight as well as a higher
concentration of LTL freight in the freight mix.
Saia's operating ratio improved to 95.9 compared to 96.3 in 1995. The
improved yield was partially offset by higher salaries and wages that went from
58.8 percent of revenue to 59.8 percent of revenue in 1996 due to wage
increases and a higher mix of LTL freight. Higher fuel cost and increases in
claims and insurance expense were offset by lower purchased transportation
expense that declined due to the purchase of additional equipment and better
asset utilization.
WestEx the company's only other operating subsidiary, continued to enjoy
rapid growth, almost doubling its annual revenue to $33 million in 1996.
Corporate interest expense declined from $23.4 million to $21.0 million
primarily due to lower borrowing levels.

1995 vs. 1994

Operating revenue for Yellow Corporation totaled $3.06 billion in 1995, up
6.6 percent from $2.87 billion in 1994. The increase in revenue primarily
resulted from the recovery of lost revenue due to the 24-day labor strike in
1994 by the International Brotherhood of Teamsters (Teamsters) against Yellow
Freight. Excluding the impact of the strike, operating revenue increased only
nominally due to other volume gains being substantially offset by lower prices.
The

-23-

<PAGE> 27
lower prices resulted from competitive discounting and industry
overcapacity.
The company had a net loss of $30.1 million, or $1.07 per share in 1995,
compared to the strike-induced net loss of $7.9 million, or $.28 per share, in
1994. The 1995 loss resulted from the deterioration in prices and a variety of
cost increases. The cost increases in general involved the following areas:
annual labor cost increases; increased expenses resulting from service
enhancements; corporate development costs including business expansions at Saia
and WestEx; and certain nonrecurring costs.
Yellow Freight's revenue was $2.36 billion in 1995, an increase of 6.4
percent over 1994. Yellow Freight experienced deterioration in its operating
ratio from 99.2 in 1994 to 100.1 in 1995. Tonnage increased 7.7 percent,
demonstrating the recovery of business from the strike-impacted 1994 levels,
although rate increases were more than offset by price discounting with LTL
revenue per hundredweight declining by 1.5% in 1995.
On April 1, 1995, union wages and benefits increased approximately 3.2
percent. In addition, Yellow Freight incurred higher expenses in the third and
fourth quarters when it implemented a transit time improvement program. For
1995 compared to 1994, transit times improved by approximately one day,
resulting in higher costs associated with a 5.7 percent lower load average and
a 14.0 percent increase in total linehaul miles. Some cost savings were
obtained by an increase in direct loadings that reduced rehandlings by 8.7
percent. Additional savings were achieved through an increased use of rail
transportation from 13.1 percent of total miles in 1994 to 17.5 percent in
1995, and the elimination of forced overtime for dockworkers, both provisions
of the 1994 labor contract. Through reengineering and the use of new
technology, Yellow Freight began achieving administrative cost reductions in
1995 by consolidating customer service and cashiering functions from its
individual terminals into two centralized locations.
Preston Trucking had revenue of $411 million, a decrease of 1.3 percent
from 1994. Preston Trucking's operating ratio in 1995 was 101.4 compared to
101.3 in 1994. The 1994 performance was subject to severe winter weather,
impacts from the second quarter strike, including benefits from an early return
to work, and shipper uncertainty concerning a wage reduction process, all of
which did not recur in 1995. However, 1995 was subject to severe industry-wide
price discounting as well as a relatively greater labor cost increase. Improved
productivity, positive cargo claims experience and reductions in purchased
transportation expense contributed to offsetting the higher wage and benefit
costs.
Saia revenue grew 17.7 percent to $210 million due to geographical
expansions in several states in 1994 and 1995. Saia's operating ratio increased
to 96.3 in 1995 from 93.5 in 1994. Saia was impacted by industry price
discounting, but increased wages and the impacts of the expansions primarily
caused the margin deterioration. The deregulation of intrastate markets in
January 1995 also increased competition in Louisiana and Texas, where Saia held
operating rights advantages. This was partially offset by new access for Saia
in various other states' intrastate markets.
The remaining operating entities of the company comprised less than 3
percent of consolidated 1995 revenue and include Yellow Logistics Services,
Inc. (Yellow Logistics), CSI/ Reeves, Inc. (CSI), WestEx and the Yellow
Corporation holding company. During 1995, Yellow Logistics was realigned and
CSI was sold. WestEx expanded from its traditional Arizona and New Mexico
market into California.
Corporate interest expense increased from $18.4 million in 1994 to $23.4
million in 1995 due to increased debt levels, primarily resulting from lower
net income, increased working capital requirements, and capital expenditures.
Accounts receivable days outstanding increased at Yellow Freight due to both

-24-
<PAGE> 28
market forces and transition implementation issues related to a new system for
customer billing and stating.
The fourth quarter 1995 results included a nonrecurring charge of $6.6
million after taxes, or $.23 per share, pertaining to implementation of cost
reduction programs, the realignment of Yellow Logistics and other expenses
primarily related to severance costs.

FINANCIAL CONDITION

The company's liquidity needs arise primarily from capital investment in
new equipment and information technology, and funding working capital
requirements.
Working capital increased from a negative $34 million at year-end 1996 to
a negative $22 million at year-end 1997. The company can operate with negative
working capital because of the quick turnover of its accounts receivable and
its ready access to sources of short-term liquidity.
To ensure short-term liquidity, the company maintains capacity under a
bank credit agreement and an asset-backed securitization (ABS) agreement
involving Yellow Freight's accounts receivable. The $300 million bank credit
agreement expires in September 2001. This facility is also used to provide
letters of credit. Approximately $227 million remained available under the
facility at year-end 1997 versus $145 million available under the predecessor
$200 million facility at year-end 1996. Capacity of $132 million remained
available under the ABS agreement at year-end 1997 versus $105 million
available at year-end 1996. Access to the ABS agreement, however, is dependent
on the company having adequate eligible receivables, as defined under the
agreement, available for sale. The agreement permits the sale of accounts
receivable to a wholly owned special purpose corporation, which in turn, sells
an undivided interest to a third party affiliate of the bank. Funds raised by
this method are less expensive to the company than issuing commercial paper.
Finally, the company also expects to continue to have access to the commercial
paper market and to short-term unsecured bank credit lines.
Projected net capital expenditures for 1998 are $164 million, an increase
over $88 million in 1997 net capital expenditures. Net capital for both periods
pertain primarily to replacement of revenue equipment at all subsidiaries,
growth capital at Saia and WestEx, and additional investments in information
technology. Net capital expenditures in 1996 totaled only $46 million, down
from $140 million in 1995. Actual and projected net capital expenditures are
summarized below (in millions):

Actual Actual Actual
Projected
1998 1997 1996 1995
<S> <C> <C> <C> <C>
Land and structures:
Additions $22 $12 $11 $13
Sales (15) (26) (10) (16)
Revenue equipment 105 81 26 74
Technology and other 52 21 19 69
Total $164 $88 $46 $140
</TABLE>

-25-

<PAGE> 29

During 1997 the company trimmed $30.4 million in debt. At year-end 1997
total debt was $166 million. This reduction followed a decline in total debt
from $354 million at year-end 1995 to $196 million at year-end 1996. Strong
operating cash flows, even after a $27 million reduction in amounts under the
ABS agreement, and proceeds from the disposal of excess real estate, were
sufficient to fund capital additions and the debt reduction.
Debt reduction was a priority at the company beginning in 1996. Management
committed to achieving debt reductions of at least $100 million by year-end
1996. Historically, the company has generated strong cash flows from operating
activities. The 1996 decrease in capital spending described above provided the
largest source of funding for debt paydown in 1996. A portion of the reduction
was also achieved through the 1996 sale of $45 million under the ABS agreement.
Additionally, in 1996 the company received a federal income tax refund totaling
$45 million and repatriated approximately $23 million from a Canadian
subsidiary.
Management believes its current financial condition and access to
liquidity is adequate for current operations. Additionally, given the debt
reductions and the company's access to new sources of capital, management
believes the company has increased flexibility to respond to future growth
opportunities, possibly including acquisitions.

OTHER

The company has developed a plan to ensure its information systems are
compliant with the requirements to process transactions in the year 2000. The
company is also communicating with customers, suppliers and others to
coordinate year 2000 conversion. The majority of the Company's internal systems
have been, or are in the process of being, replaced or modified to be fully
compliant. Currently, management believes the modifications of existing
systems, and the replacement of other systems, will be largely complete by the
end of 1998. The remaining costs of modifications expected to be expensed are
currently estimated at $8 - $10 million.
The company periodically uses heating oil instruments, currently swaps and
option agreements, to manage a portion of its exposure to fluctuations in
diesel prices. These programs are discussed further in the notes to
consolidated financial statements. Since September 1996, the company has
reduced its reliance on these programs due to implementation of a fuel
surcharge program that adjusts revenue for increases above a defined market
benchmark.
The company initiated a "pay for performance" incentive compensation plan
that rewards employees based on operating income and return on capital goals.
Consolidated results include pay for performance accruals for nonunion
employees of $25.9 million of which approximately $18.6 million pertains to
Yellow Freight. Comparable performance incentive accruals for the 1996 period
were $2.2 million.
In 1997, the company granted options on 1.4 million shares, after an
initial grant of 1.5 million shares in 1996 under a newly adopted stock option
program. As of December 31, 1997, approximately 170 key management personnel
hold options on shares. Management believes the program better aligns
compensation to shareholder performance. As summarized in the notes to the
consolidated financial statements, currently options are outstanding on
approximately 2.4 million shares at an average exercise price of $17.75 per
share.
Yellow Corporation announced December 16, 1997, that its Board of
Directors authorized the repurchase of shares of the Company's outstanding
common stock with an aggregate purchase price of up to $25 million. Through
January 31, 1998, 520,500 shares had been repurchased for $11.8 million at an
average price of $22.75 per share.

-26-

<PAGE> 30
The effective income tax rate was 41.2 percent in 1997, (20.8) percent in
1996 and (33.1) percent in 1995. The notes to consolidated financial statements
contain an analysis of the income tax provision and the effective tax rate. The
1996 income tax benefit was offset by a $3.1 million charge resulting from a
$23 million cash dividend from Canadian operations used to pay down debt.

OUTLOOK

The LTL trucking industry remains highly competitive and the company
intends to continue to improve its shareholder returns through aggressive cost
management, improved asset utilization and an increased focus on marketing and
customer service.
While the company has realized large benefits from cost reduction programs
in 1996 and 1997, management believes cost reduction programs represent a
continuous opportunity for improvement in the future. In 1998 and future years,
management plans to extend the programs which have been successful at Yellow
Freight to the other operating companies while pursuing new initiatives at
Yellow Freight. The 1998 cost reduction initiatives primarily pertain to
increased labor productivity at Yellow Freight and Saia, as well as the change
of operations at Preston Trucking.
Management believes that future earnings growth not only requires cost
management programs but also improved revenue. Thus, marketing is a priority at
all the subsidiaries. All subsidiaries must be focused on providing high
service and value added solutions for customers. Subsidiaries must be focused
on targeting profitable growth segments.
Yellow Freight, as a member of a group representing a number of major
motor carriers in labor contract negotiations, reached a five-year agreement
with the Teamsters in February 1998, subject to ratification. Preston Trucking
bargains independently. Preston Trucking currently operates under a wage
concession agreement with the Teamsters which expires March 31, 1998, and
currently provides for an 8.9% reduction from full scale wages. Preston
requires a continued substantial reduction in order to effectively compete, the
specific terms of which will be subject to separate negotiation and
ratification.
The success of a recently implemented network reengineering plan and the
Teamster contract renewal negotiations will be key to improving Preston
Trucking's profitability to meaningful and necessary levels.
Saia plans continued revenue growth and margin improvement. Saia will
continue to focus on yield management and building density in key markets while
implementing cost improvement programs.

FORWARD LOOKING STATEMENTS

Statements contained in and preceding management's discussion and
analysis, that are not purely historical, are forward looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995, including
statements regarding the company's expectations, hopes, beliefs and intentions
on strategies regarding the future. It is important to note that the company's
actual future results could differ materially from those projected in such
forward-looking statements because of a number of factors, including but not
limited to inflation, volatility of expenses, inclement weather, the results of
Teamster contract negotiations, competitor pricing activity and a downturn in
general economic activity.

-27-
<PAGE> 31
FINANCIAL SUMMARY
Yellow Corporation and Subsidiaries
(amounts in thousands except per share data)

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
For the Year: (a) (b) (c)
<S> <C> <C> <C> <C> <C>
Operating revenue $3,348,868 $3,072,550 $3,056,640 $2,867,492 $2,856,505
Income (loss) from operations 98,731 (13,515) (21,588) 11,011 53,893
Depreciation 119,018 130,098 135,265 133,970 132,371
Interest expense 13,546 21,036 23,395 18,433 17,668
Income (loss) before income taxes 89,165 (34,301) (45,021) (3,375) 35,358
Income (loss) before extraordinary item 52,435 (27,180) (30,122) (3,848) 18,801
Net income (loss) 52,435 (27,180) (30,122) (7,906) 18,801
Net cash from operating activities 116,686 197,521 44,166 157,448 138,802
Capital expenditures, net 87,505 46,358 140,254 150,940 66,786
at year-end:
Net property and equipment 786,309 812,690 921,848 918,101 892,600
Total assets 1,270,812 1,227,807 1,434,897 1,307,221 1,265,654
Long-term debt 163,080 192,492 341,648 240,019 214,176
Total debt 165,705 196,153 353,573 247,760 226,503
Shareholders' equity 445,851 395,700 422,677 460,843 486,453

Measurements:
Basic per share data:
Income (loss) before extraordinary item 1.86 (.97) (1.07) (.14) .67
Net income (loss) 1.86 (.97) (1.07) (.28) .67

Cash dividends per share - - .47 .94 .94

Shareholders' equity per share 15.86 14.08 15.04 16.40 17.31

Debt to capital ratio 27 33 46 35 32

Return on average shareholders' equity 12.5% (6.6)% (6.8)% (1.7)% 3.9%

Market price range:
High 34 1/8 16 3/8 24 3/8 30 1/4 29 7/8
Low 14 1/8 10 1/4 11 7/8 16 3/4 16 7/8

Average number of employees 34,400 34,100 34,700 33,400 35,000
</TABLE>

(a) 1996 results include a special charge of $28.3 million after taxes
resulting from the write down of certain nonoperating real estate and computer
software assets, an early retirement program, the reduction of a company car
program and other organizational design impacts, primarily severance.
(b) 1994 results include the effect of a 24-day Teamster strike at Yellow
Freight System.
(c) 1993 amounts include the operating results of Preston Corporation effective
March 1, 1993. The 1993 results also include a network development charge of
$11.2 million after taxes and a charge of $1.6 million to reflect the impact of
a higher tax rate on the company's deferred tax liabilities.

-28 and 29-

<PAGE> 32

CONSOLIDATED BALANCE SHEETS
Yellow Corporation and Subsidiaries
December 31, 1997 and 1996 (amounts in thousands except per share data)

<TABLE>
<CAPTION>
Assets 1997 1996
<S> <C> <C>
CURRENT ASSETS:
Cash $19,793 $24,800
Accounts receivable, less allowances
of $15,800 and $13,819 349,999 280,758
Fuel and operating supplies 16,528 15,426
Refundable income taxes 9,569 6,150
Prepaid expenses 62,872 62,874
Total current assets 458,761 390,008

PROPERTY AND EQUIPMENT:
Land 120,713 120,172
Structures 576,636 607,104
Revenue equipment 991,439 963,442
Technology equipment and software 154,084 141,165
Other 137,452 133,915
1,980,324 1,965,798
Less - Accumulated depreciation 1,194,015 1,153,108
Net property and equipment 786,309 812,690

OTHER ASSETS 25,742 25,109
$1,270,812 $1,227,807

</TABLE>

The notes to consolidated financial statements are an integral part of
these balance sheets.

-30-

<PAGE> 33
<TABLE>
<CAPTION>
Liabilities and
Shareholders' Equity 1997 1996
<S> <C> <C>
CURRENT LIABILITIES:
Checks outstanding $80,852 $75,250
Accounts payable 85,601 76,288
Wages, vacations, and employees' benefits 164,982 132,255
Deferred income taxes 25,745 17,658
Claims and insurance accruals 82,532 79,541
Other current and accrued liabilities 38,498 39,052
Current maturities of long-term debt 2,625 3,661
Total current liabilities 480,835 423,705

OTHER LIABILITIES:
Long-term debt 163,080 192,492
Deferred income taxes 30,341 31,555
Claims, insurance and other 150,705 184,355
Total other liabilities 344,126 408,402

SHAREHOLDERS' EQUITY:
Series A $10 Preferred stock, $1 par value-
authorized 750 shares - -
Preferred stock, $1 par value-
authorized 4,250 shares - -
Common stock, $1 par value-authorized
120,000 shares, issued 29,289 and 28,863 shares 29,289 28,863
Capital surplus 13,868 6,745
Retained earnings 429,700 377,712
Treasury stock, at cost (1,172 and 752 shares) (27,006) (17,620)
Total shareholders' equity 445,851 395,700
$1,270,812 $1,227,807

</TABLE>

-31-
<PAGE> 34
STATEMENTS OF CONSOLIDATED OPERATIONS
Yellow Corporation and Subsidiaries
for the years ended December 31
(amounts in thousands except per share data)

<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
OPERATING REVENUE $3,348,868 $3,072,550 $3,056,640

OPERATING EXPENSES:
Salaries, wages and employees' benefits 2,160,654 2,040,950 2,051,277
Operating expenses and supplies 493,465 472,413 473,356
Operating taxes and licenses 113,022 113,942 115,120
Claims and insurance 74,118 74,931 70,376
Communications and utilities 42,019 42,740 44,412
Depreciation 119,018 130,098 135,265
Purchased transportation 247,841 164,853 188,422
Special charge - 46,138 -
Total operating expenses 3,250,137 3,086,065 3,078,228

INCOME (LOSS) FROM OPERATIONS 98,731 (13,515) (21,588)

NONOPERATING
(INCOME) EXPENSES:
Interest expense 13,546 21,036 23,395
Interest income (1,217) (2,287) (2,100)
Other, net (2,763) 2,037 2,138
Nonoperating expenses, net 9,566 20,786 23,433

INCOME (LOSS)
BEFORE INCOME TAXES 89,165 (34,301) (45,021)
INCOME TAX PROVISION (BENEFIT) 36,730 (7,121) (14,899)
NET INCOME (LOSS) $52,435 $(27,180) $(30,122)

AVERAGE COMMON SHARES
OUTSTANDING 28,267 28,110 28,106

BASIC EARNINGS (LOSS)
PER COMMON SHARE $1.86 $(.97) $(1.07)
DILUTED EARNINGS (LOSS)
PER COMMON SHARE $1.83 $(.97) $(1.07)

</TABLE>
The notes to consolidated financial statements are an integral part of these
statements.

-32-
<PAGE> 35
STATEMENTS OF CONSOLIDATED CASH FLOWS
Yellow Corporation and Subsidiaries
for the years ended December 31
(amounts in thousands)

<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $52,435 $(27,180) $(30,122)
Noncash items included in net income (loss):
Depreciation 119,018 130,098 135,265
Special charge - 46,138 -
Deferred income tax provision (benefit) 7,509 (26,481) 29,641
Changes in assets and liabilities, net:

Accounts receivable (42,241) (1,944) (34,064)
Accounts receivable securitizations, net (27,000) 45,000 -
Accounts payable and checks outstanding 14,915 (3,115) 40,273
Other working capital items 30,647 30,661 (82,593)
Claims, insurance and other (33,650) (245) (3,437)
Other, net (4,947) 4,589 (10,797)
Net cash from operating activities 116,686 197,521 44,166

INVESTING ACTIVITIES:
Acquisition of property and equipment (118,189) (58,384) (163,426)
Proceeds from disposal of property and equipment 30,684 12,026 23,172
Purchases of short-term investments - (1,684) (7,759)
Proceeds from maturities of short-term investments - 7,098 9,650
Other, net - - 5,106
Net cash used in investing activities (87,505) (40,944) (133,257)

FINANCING ACTIVITIES:
Unsecured bank credit lines, net - (9,000) 9,000
Commercial paper, net (11,832) (116,627) 69,510
Proceeds from issuance of long-term debt - - 56,497
Repayment of long-term debt (18,644) (32,011) (24,457)
Proceeds from exercise of stock options, net 4,983 - -
Treasury stock purchases (8,695) - (1)
Cash dividends - - (13,210)
Net cash from (used in) financing activities (34,188) (157,638) 97,339

NET INCREASE (DECREASE) IN CASH (5,007) (1,061) 8,248
CASH, BEGINNING OF YEAR 24,800 25,861 17,613
CASH, END OF YEAR $19,793 $24,800 $25,861

Supplemental cash flow information:
Income taxes paid (received), net $30,345 $(23,508) $10,793
Interest paid $12,274 $20,642 $21,018
</TABLE>

The notes to consolidated financial statements are an integral part of these
statements.

-33-
<PAGE> 36

STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
Yellow Corporation and Subsidiaries
(amounts in thousands except per share data)

Shares Held
Common Capital Retained by Stock Treasury
Stock Surplus Earnings Sharing Plan Stock
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994 $28,858 $6,678 $447,887 $(4,961) $(17,619)
Net loss - - (30,122) - -
Cash dividends, $.47 per share - - (13,210) - -
Reduction of Stock Sharing
Plan debt guarantee - - - 4,961 -
Other - - 206 - (1)

BALANCE, DECEMBER 31, 1995 28,858 6,678 404,761 - (17,620)
Net loss - - (27,180) - -
Other 5 67 131 - -

BALANCE, DECEMBER 31, 1996 28,863 6,745 377,712 - (17,620)
Net income - - 52,435 - -
Exercise of stock options,
including tax benefits 421 7,031 - - -
Treasury stock purchases - - - - (9,386)
Other 5 92 (447) - -

BALANCE, DECEMBER 31, 1997 $29,289 $13,868 $429,700 $- $(27,006)
</TABLE>

The notes to consolidated financial statements are an integral part of these
statements.

-34-

<PAGE> 37

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Yellow Corporation and Subsidiaries

PRINCIPLES OF CONSOLIDATION AND SUMMARY OF ACCOUNTING POLICIES

The accompanying consolidated financial statements include the accounts of
Yellow Corporation and its wholly-owned subsidiaries (the company). All
significant intercompany accounts and transactions have been eliminated in
consolidation. Management makes estimates and assumptions which affect the
amounts reported in the financial statements and footnotes. Actual results
could differ from those estimates.
The company provides transportation services primarily to the
less-than-truckload (LTL) market throughout North America. Principal operating
subsidiaries are Yellow Freight System, Inc. (Yellow Freight), Preston Trucking
Company, Inc. (Preston Trucking) and Saia Motor Freight Line, Inc. (Saia).
Major accounting policies and practices used in the preparation of the
accompanying financial statements not covered in other notes to consolidated
financial statements are as follows:

- - Cash includes demand deposits and highly liquid investments purchased with
original maturities of three months or less. All other investments, with
maturities less than one year, are classified as short-term investments and are
stated at cost which approximates market.

- - Fuel is carried at average cost. The company uses heating oil instruments to
manage a portion of its exposure to fluctuating diesel prices. Currently under
the heating oil swap and option agreements the company receives or makes
payments based on the difference between a fixed and a variable price for
heating oil. These agreements provide protection from rising fuel prices, but
limit the ability to benefit from price decreases below the purchase price of
the agreement. At December 31, 1997, the company had agreements on 45.8 million
gallons at a fixed cost averaging $.59 per gallon over the next 12 months,
representing 29% of total anticipated annual fuel usage. At December 31, 1996,
the company had agreements on 31.4 million gallons at a fixed cost averaging
$.54 per gallon over the next 11 months, representing 20% of total anticipated
annual fuel usage. Based on quoted market prices, the fair value of the hedge
position at December 31, 1997 and 1996, was $0.4 million below and $3.1 million
above its purchase price. Gains and losses on the agreements are recognized as
a component of fuel expense when the corresponding fuel is purchased. Hedge
instruments are recorded at cost in fuel and operating supplies. This
accounting is used for instruments designated as a hedge of anticipated fuel
transactions. The effectiveness of the hedge is periodically evaluated. If the
hedge is not highly effective or if the anticipated transaction is subsequently
determined unlikely to occur, the unrealized gains and or losses accumulated
are recognized immediately in earnings.

- - Property and equipment are carried at cost less accumulated depreciation.
Depreciation is computed using the straight-line method based on the following
service lives:

<TABLE>
<CAPTION>
Years
<S> <C>
Structures 10 - 40
Revenue equipment 3 - 13
Technology equipment and software 2 - 5
Other 3 - 10
</TABLE>

- - Maintenance and repairs are charged to operations currently; replacements and
improvements are capitalized. When revenue equipment is traded, the basis of
the new equipment is reduced when necessary, if the trade-in allowance exceeds
the basis of the old equipment. The gain or loss for all other dispositions is
reflected in other nonoperating (income) expense.

- - The company's investment in technology equipment and software consists
primarily of advanced customer service and freight management communications
equipment and related software.

-35-

<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Yellow Corporation and Subsidiaries
continued

Principles of Consolidation and Summary of Accounting Policies Continued

- - Claims and insurance accruals, both current and long-term, reflect the
estimated cost of claims for workers' compensation, cargo loss and damage, and
bodily injury and property damage not covered by insurance. These costs are
included in claims and insurance expense except for workers' compensation which
is included in employees' benefits expense.
Reserves for workers' compensation are based upon actuarial analyses
prepared by independent actuaries and are discounted to present value using a
risk-free rate. The risk-free rate is the U.S. Treasury rate for maturities
that match the expected pay-out of workers' compensation liabilities. The
process of determining reserve requirements utilizes historical trends and
involves an evaluation of claim frequency, severity and other factors. The
effect of future inflation for both medical costs and lost wages is implicitly
considered in the actuarial analyses. Adjustments to previously established
reserves are included in operating results.

At December 31, 1997 and 1996, estimated future payments for workers'
compensation claims aggregated $144.5 million and $156.5 million. The present
value of these estimated future payments was $124.5 million at December 31,
1997, and $130.0 million at December 31, 1996.

- - Revenue is recognized on a percentage completion basis while expenses are
recognized as incurred.

- - The exercise of stock options under the company's various stock option plans
gives rise to compensation included in the taxable income of the stock
recipient and deducted by the company for federal and state income tax
purposes. The compensation results from increases in the fair value of the
company's common stock after the date of grant. The compensation is not
recognized in expense in the accompanying financial statements. The related tax
benefits increase capital surplus.

- - Certain reclassifications have been made to the prior year consolidated
financial statements to conform with current presentation.

DEBT AND FINANCING

At December 31, debt consisted of the following
(in thousands):

1997 1996
<S> <C> <C>
Medium term notes $114,000 $125,000
Commercial paper - 11,832
Industrial development bonds 23,850 26,600
Capital leases and other 3,946 7,113
Subordinated debentures 23,909 25,608
Total debt 165,705 196,153
Current maturities 2,625 3,661
Long-term debt $163,080 $192,492
</TABLE>

-36-
<PAGE> 39

Debt and Financing Continued

The company has a four year $300 million unsecured credit agreement with a
group of banks which expires September 24, 2001. The agreement may be used for
short-term borrowings or for the issuance of standby letters of credit.
Interest on borrowings is based, at the company's option, at a fixed increment
over the London interbank offered rate or the agent bank's base rate. Under
the terms of the agreement the company must maintain a minimum consolidated
tangible net worth and total debt must be no greater than a specified ratio of
earnings before interest, income taxes, depreciation and amortization, as
defined. At December 31, 1997 and 1996, the company was in compliance with all
terms of this credit agreement and its predecessor. At December 31, 1997, there
were no borrowings outstanding, but $73 million of letters of credit had been
issued under the agreement. There were no borrowings under this credit
agreement or its predecessor in 1996.
In 1996, the company entered into a $150 million, three year accounts
receivable sales agreement with a major bank. The agreement involves the sale
of accounts receivable to a wholly owned, special purpose corporation (SPC).
The SPC in turn sells an undivided interest in a revolving pool of eligible
receivables as funding is required. Under terms of the agreement, the SPC's
assets are available to satisfy its obligations prior to any distribution to
its shareholders. The company maintains responsibility for processing and
collecting all receivables. Accounts receivable at December 31, 1997 and 1996,
are net of $18.0 million and $45.0 million of receivables sold. Other, net
nonoperating expense includes $2.5 million and $1.2 million of costs associated
with this agreement in 1997 and 1996.
The company maintains financing flexibility under the credit agreement and
the accounts receivable sales agreement. Medium term notes and commercial paper
maturing within one year, and intended to be refinanced, are classified as
long-term. At December 31, 1997, no commercial paper was outstanding. The
weighted average interest rate on commercial paper outstanding at December 31,
1996 was 6.0%. Medium term notes have scheduled maturities through 2008 with
interest rates ranging from 5.7% to 9.3%.
The company has loan guarantees, mortgages and lease contracts in
connection with the issuance of industrial development bonds used to acquire,
construct or expand terminal facilities. Interest rates on some issues are
variable. Rates on these bonds and other debt currently range from 4.0% to
10.2%, with principal payments due through 2014.
The subordinated debentures have an interest rate of 7.0% and are due in
installments from 1998 to 2011.
The principal maturities of long-term debt for the next five years follow:
1998 - $2,625,000, 1999 - $2,838,500, 2000 - $30,969,500, 2001 -$8,482,500,
2002 - $23,477,500.
Based on the borrowing rates currently available to the company for debt
with similar terms and remaining maturities, the fair value of total debt at
December 31, 1997 and 1996, was approximately $169 million and $193 million.

-37-
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Yellow Corporation and Subsidiaries
continued

EMPLOYEE BENEFITS

Certain subsidiaries provide defined benefit pension plans for employees
not covered by collective bargaining agreements (approximately 30% of total
employees). The benefits are based on years of service and the employees' final
average earnings. The company's funding policy is to contribute the minimum
required tax-deductible contribution for the year. The plans' assets consist
primarily of U.S. Government and corporate fixed income securities and U.S.
equities.
The pension benefit obligation increased by $12.9 million in 1996 as the
result of 130 employees electing an early retirement program described in the
Special Charge note. The following tables set forth the plans' funded status
and components of net pension cost (in thousands):

1997 1996
<S> <C> <C> <C>
Funded status at December 31:
Actuarial present value of benefits at current
salary levels and service rendered to date:
Vested benefits $199,307 $179,196
Non-vested benefits 1,059 1,178
Accumulated benefit obligation 200,366 180,374
Effect of anticipated future salary increases 25,821 24,127
Projected benefit obligation 226,187 204,501
Plan assets at fair value 194,464 169,188
Plan assets less than projected benefit obligation (31,723) (35,313)
Unrecognized net gain (17,992) (4,240)
Unrecognized initial net asset being
amortized over 17 years (13,283) (15,670)
Pension cost accrued, not funded $(62,998) $(55,223)

</TABLE>
<TABLE>
<CAPTION>

1997 1996 1995
<S> <C> <C> <C>
Net pension cost:
Service cost - benefits earned during the period $8,561 $9,469 $7,412
Interest cost on projected benefit obligation 15,413 13,478 12,429
Actual return on plan assets (33,092) (20,669) (27,205)
Amortization of unrecognized net assets (2,372) (1,965) (2,420)
Net deferral 20,387 9,188 16,550
Net pension cost $8,897 $9,501 $6,766

Assumptions used in the accounting at December 31:
Discount rate 7.3% 7.5% 7.5%
Rate of increase in compensation levels 4.0% 4.0% 5.0%
Expected rate of return on assets 9.0% 9.0% 9.0%
</TABLE>

-38-
<PAGE> 41

Employee Benefits Continued

The company contributes to multi-employer health, welfare and pension
plans for employees covered by collective bargaining agreements (approximately
70% of total employees). The health and welfare plans provide health care and
disability benefits to active employees and retirees. The pension plans provide
defined benefits to retired participants. The company charged to expense and
contributed the following amounts
to these plans (in thousands):

<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Health and welfare $169,665 $166,124 $160,512
Pension 171,518 152,440 142,906
Total $341,183 $318,564 $303,418
</TABLE>

Under current legislation regarding multi-employer pension plans, a
termination, withdrawal or partial withdrawal from any multi-employer plan that
is in an under-funded status would render the company liable for a
proportionate share of such multi-employer plans' unfunded vested liabilities.
This potential unfunded pension liability applies to the company's unionized
competitors who contribute to multi-employer plans. Based on the limited
information available from plan administrators, which the company cannot
independently validate, the company believes that its portion of the contingent
liability would be material to its financial condition and results of
operations. The company's unionized subsidiaries have no intention of taking
any action that would subject the company to obligations under the legislation.
The company had a Stock Sharing Plan for employees of participating
domestic affiliates not covered by collective bargaining agreements. In 1995
this plan merged into another company defined contribution plan.
Certain subsidiaries also sponsor defined contribution plans, primarily
for employees not covered by collective bargaining agreements. The plans
principally consist of noncontributory profit sharing plans and contributory
401(k) savings plans. Company contributions to the profit sharing plans are
discretionary and are determined annually by the Board of Directors of each
participating company. Contributions for each of the three years in the period
ended December 31, 1997, were not material to the operations of the company.
The company and its operating subsidiaries each provide annual performance
incentive awards to nonunion employees which are based primarily on actual
operating results achieved compared to targeted operating results. Operating
results in 1997 and 1996 include performance incentive accruals for nonunion
employees of $25.9 million and $2.2 million. Performance incentive awards for a
year are primarily paid in the first quarter of the following year.

STOCK OPTIONS

The company has reserved 3.6 million shares of its common stock for issuance to
key management personnel of the company and its operating subsidiaries under
three stock option plans. The plans permit three types of awards: grants of
nonqualified stock options, grants of stock options

-39-
<PAGE> 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Yellow Corporation and Subsidiaries
continued

Stock Options Continued

coupled with a grant of stock appreciation rights and grants of restricted
stock awards.
In addition, the company has reserved 100,000 shares of its common stock
for issuance to its Board of Directors. Under the plans, the exercise price of
each option equals the market price of the company's common stock on the date
of grant and the options expire ten years from the date of grant. The options
vest ratably, generally over a period of four years.
The company applies Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, in accounting for its plans. Had compensation
costs been recognized in accordance with Financial Accounting Standards Board
Statement No. 123, Accounting for Stock-Based Compensation, the company would
have reported (unaudited pro forma) a $50.4 million net income in 1997 and a
$28.0 million net loss in 1996. Basic earnings per share (unaudited pro forma)
would have been $1.78 and $1.00 in 1997 and 1996. The unaudited pro forma
calculations, were estimated using the Black-Scholes option-pricing model with
the following weighted average assumptions.

<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Dividend yield -% .5%
Expected volatility 36.6% 31.9%
Risk-free interest rate 6.1% 6.3%
Expected option life (years) 3 5
Fair value per option $6.98 $4.69
</TABLE>

At December 31, 1997 options on 49,760 shares were exercisable. No options
were exercisable at December 31, 1996. The weighted average remaining contract
life at December 31, 1997 and 1996 was 9.0 years and 9.5 years. There were no
options granted in 1995 and there were no options outstanding at December 31,
1995. A summary of activity in the company's stock option plans is presented
below.

Exercise Price
Shares Weighted
(thousands) Average Range
<S> <C> <C> <C> <C>
Outstanding at December 31, 1995 - $- $-
Granted 1,520 12.24 11.63- 14.00
Exercised - - -
Cancelled (10) 12.25 12.25- 12.25
Outstanding at December 31, 1996 1,510 12.24 11.63- 14.00
Granted 1,386 21.73 14.38- 27.00
Exercised (421) 12.10 11.63- 20.63
Cancelled (100) 13.56 12.25- 24.05
Outstanding at December 31, 1997 2,375 17.75 11.63- 27.00
</TABLE>

-40-

<PAGE> 43

SPECIAL CHARGE

In the fourth quarter of 1996, the company's Yellow Freight subsidiary
recorded a special charge of $46.1 million, or $28.3 million after taxes. The
charge was the result of management and organizational changes designed to
sharpen customer focus and improve profitability by reducing operating
expenses. As part of these changes Yellow Freight was restructured into five
geographic business units designed to decentralize responsibility for critical
business processes. A summary of the major components of the charge and
subsequent activity follows (amounts in thousands):

<TABLE>
<CAPTION>
Year Ended December 31, 1997
1996 Favorable Paid or Ending
Charge Revisions Utilized Balance
<S> <C> <C> <C> <C>
Write down nonoperating real estate $16,548 $960 $10,348 $5,240
Write off computer software 8,359 - 8,359 -
Early retirement program 13,731 - 13,731 -
Company car program reduction 3,600 - 3,600 -
Severance and organization design 3,900 - 3,716 184
Total charge before taxes $46,138 $960 $39,754 $5,424
</TABLE>

As part of the charge a total of 13 parcels of real estate were written
down to their estimated fair values, as determined by independent appraisal,
less selling costs. Marketing efforts continue on this nonoperating real
estate. During 1997 five parcels written down in the charge to $10.2 million
were sold for $11.2 million, utilizing a portion of the write down. The write
off of computer software related to a portion of the freight management project
that was determined to be impaired.
In 1996, an early retirement program was announced that offered unreduced
retirement benefits to employees over age 55 with at least 20 years of service.
The early retirement program charges primarily represent the $12.9 million
increase in the pension benefit obligation resulting when 130 employees elected
this program.
All company car reduction program costs were paid in cash in the first
quarter of 1997.
The severance and organization design costs related primarily to the
layoff of 70 managerial and general office employees. Severance payments are
expected to continue through the first quarter of 1998.
Revisions to estimates in 1997 were reflected in 1997 nonoperating income.

-41-
<PAGE> 44

Income Taxes

The company accounts for income taxes in accordance with the liability
method. Deferred income taxes are determined based upon the difference between
the book and the tax basis of the company's assets and liabilities. Deferred
taxes are provided at the enacted tax rates expected to be in effect when these
differences reverse. Deferred tax liabilities (assets) are comprised of the
following at December 31 (in thousands):

<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Depreciation $92,542 $111,608
Prepaids 15,108 17,711
Employee benefits 38,201 32,842
Revenue 35,835 19,188
Other 6,924 9,511
Gross liabilities 188,610 190,860

Claims and insurance (74,751) (81,261)
Bad debts (5,504) (10,995)
NOL and AMT credit carryforwards (3,770) (9,492)
Employee Benefits (19,428) (20,341)
Revenue (17,617) (10,901)
Other (11,454) (8,657)
Gross assets (132,524) (141,647)

Net liability $56,086 $49,213
</TABLE>

A reconciliation between income taxes at the federal statutory rate (35%) and
the consolidated provision (benefit) follows:

<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Provision (benefit) at federal statutory rate $31,208 $(12,005) $(15,757)
State income taxes, net 2,751 (1,352) (1,592)
Nondeductible business expenses 2,594 2,431 3,103
Foreign tax rate differential 599 688 1,082
Repatriation of Canadian earnings, net 400 3,169 -
Other, net (822) (52) (1,735)
Income tax provision (benefit) $36,730 $(7,121) $(14,899)
Effective tax rate 41.2% (20.8)% (33.1)%

</TABLE>

-42-

<PAGE> 45
Income Taxes Continued

The income tax provision (benefit) consists of the following (in thousands):

<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Current:
U.S. federal $21,895 $8,639 $(40,370)
State 4,976 7,588 (7,094)
Foreign 2,350 3,133 2,924
Current income tax provision (benefit) 29,221 19,360 (44,540)
Deferred:
U.S. federal 8,253 (16,715) 24,703
State (744) (9,668) 4,645
Foreign - (98) 293
Deferred income tax provision (benefit) 7,509 (26,481) 29,641
Income tax provision (benefit) $36,730 $(7,121) $(14,899)
Based on the income (loss) before income taxes:
Domestic $84,162 $(41,007) $(51,120)
Foreign 5,003 6,706 6,099
Income (loss) before income taxes $89,165 $(34,301) $(45,021)
</TABLE>

EARNINGS PER COMMON SHARE

The following reconciles basic to diluted earnings per share (amounts in
thousands except per share data):

<TABLE>
<CAPTION>
Average Earnings
Earnings Incremental (Loss)
(Loss) Shares Per Share
<S> <C> <C> <C>
1997
Basic $52,435 28,267 $1.86
Effect of dilutive options - 428 (.03)
Diluted $52,435 28,695 $1.83
1996
Basic $(27,180) 28,110 $(.97)
Effect of dilutive options - 34 -
Diluted $(27,180) 28,144 $(.97)
</TABLE>

-43-
<PAGE> 46

Earnings Per Common Share Continued

There were no options outstanding in 1995. The impacts of certain options
were excluded from the calculation of diluted earnings per share because
average exercise prices were greater than the average market price of common
shares. Data regarding those options is summarized below:

<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Weighted average shares outstanding (in thousands) 331 76
Weighted average exercise price $24 1/4 $13 3/8
</TABLE>

BUSINESS SEGMENTS

The following table summarizes the company's operations by business segment (in
thousands):

<TABLE>
<CAPTION>
Corporate,
NE SE Other and
National Regional Regional Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
1997
Operating revenue $2,538,219 $450,454 $311,167 $49,028 $3,348,868
Income (loss) from operations 82,728 54 19,600 (3,651) 98,731
Identifiable assets 959,034 161,947 180,994 (31,163) 1,270,812
Capital expenditures, net 38,942 7,939 26,742 13,882 87,505
Depreciation 81,842 10,793 14,980 11,403 119,018

1996
Operating revenue $2,357,674 $417,558 $264,318 $33,000 $3,072,550
Income (loss) from operations (10,017) (5,766) 10,830 (8,562) (13,515)
Identifiable assets 930,681 155,351 159,116 (17,341) 1,227,807
Capital expenditures, net 15,859 3,193 21,953 5,353 46,358
Depreciation 94,468 11,349 14,180 10,101 130,098

1995
Operating revenue $2,363,583 $411,238 $209,623 $72,196 $3,056,640
Income (loss) from operations (1,729) (5,952) 7,805 (21,712) (21,588)
Identifiable assets 1,073,132 165,261 146,144 50,360 1,434,897
Capital expenditures, net 74,938 19,646 28,185 17,485 140,254
Depreciation 103,020 11,629 11,858 8,758 135,265
</TABLE>

-44-
<PAGE> 47

COMMITMENTS, CONTINGENCIES AND UNCERTAINTIES

The company leases certain terminals and equipment. At December 31, 1997,
the company was committed under noncancelable lease agreements requiring
minimum annual rentals payable as follows: 1998 - $27.3 million, 1999 - $20.1
million, 2000 - $9.8 million, 2001 - $3.8 million, 2002 - $2.7 million and
thereafter, $8.8 million.
Projected 1998 net capital expenditures are $164 million, of which $24
million was committed at December 31, 1997.
Various claims and legal actions are pending against the company. It is
the opinion of management that these matters will have no significant impact
upon the financial condition or results of operations of the company.
In December 1997, the company's Board of Directors authorized the
repurchase of shares of the company's outstanding common stock with an
aggregate purchase price of up to $25 million. During December 1997, the
company repurchased 420,500 shares for $9.4 million. Through January 31, 1998,
520,500 shares had been repurchased for $11.8 million at an average price of
$22.75 per share.
The current labor agreement with the Teamsters expires March 31, 1998.
Yellow Freight, as a member of a group representing a number of major motor
carriers in labor contract negotiations, reached a five-year agreement with the
Teamsters in February 1998, subject to ratification. Preston Trucking bargains
independently. Preston Trucking currently operates under a wage concession
agreement with the Teamsters which expires March 31, 1998, and currently
provides for an 8.9 percent reduction from full scale wages. Preston Trucking
requires a continued substantial reduction in order to effectively compete, the
specific terms of which will be subject to separate negotiation and
ratification.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of Yellow Corporation:

We have audited the accompanying consolidated balance sheets of Yellow
Corporation (a Delaware corporation) and Subsidiaries as of December 31, 1997
and 1996, and the related consolidated statements of operations, cash flows and
shareholders' equity for each of the three years in the period ended December
31, 1997. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Yellow Corporation and
Subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP
Kansas City, Missouri
January 28, 1998

-45-
<PAGE> 48
SUPPLEMENTARY INFORMATION
Yellow Corporation and Subsidiaries

QUARTERLY FINANCIAL
INFORMATION (UNAUDITED)
(Amounts in thousands except per share data)

<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>

1997 (a)
Operating revenue $785,144 $844,437 $882,187 $837,100
Income from operations 15,172 27,075 36,491 19,993
Net income 6,501 13,975 20,058 11,901
Basic earnings per share .23 .50 .71 .42
1996 (b) (c)
Operating revenue $741,678 $759,285 $790,444 $781,143
Income (loss) from operations (8,151) 8,414 24,095 (37,873)
Net income (loss) (14,251) 2,019 8,939 (23,887)
Basic earnings (loss) per share (.51) .07 .32 (.85)
</TABLE>

(a) Includes $5.6 million of before-tax costs to implement a change of
operations.
(b) Includes a nonrecurring charge to the income tax provision of $6.7 million
related to a dividend from Canadian operations. Also includes the effect of
unusually severe winter weather which caused business disruptions and higher
operating expenses.
(c) Includes a special charge of $28.3 million after taxes resulting from the
write down of certain nonoperating real estate and computer software assets, an
early retirement program, the reduction of a company car program and other
organizational design impacts, primarily severance. Also includes a $3.5
million foreign tax credit benefit.

COMMON STOCK

Yellow Corporation's stock is held by approximately 2,900 shareholders of
record. The company's only class of stock outstanding is common stock, traded
in over-the-counter markets. Trading activity averaged about 306,000 shares per
day during the year, up from 195,000 shares per day in 1996. Prices are quoted
by the National Association of Securities Dealers Automatic Quotation National
Market System (NASDAQ-NMS) under the symbol YELL.
The company's quarterly dividend was suspended on July 20, 1995 and has
not been reinstated as of December 31, 1997.
The high and low prices at which Yellow Corporation common stock traded
for each calendar quarter in 1997 and 1996 follow:

<TABLE>
<CAPTION>
High Low
<S> <C> <C>
1997
March 31 19 14 1/8
June 30 24 3/8 17 1/4
September 30 34 1/8 22
December 31 33 3/8 21

1996
March 31 13 5/8 10 1/4
June 30 13 3/4 10 3/4
September 30 14 1/8 12 1/8
December 31 16 3/8 11 5/8
</TABLE>

-46-
<PAGE> 49

The Future

Our focus is
on the possible.
On fanatical
service, on
cutting-edge
technology and
exemplary employee
efforts. These
are the ingredients
that strengthen an
image, build security
and deliver
shareholder value.

-47-
<PAGE> 50
[LOGO]

Senior officers

Yellow Corporation

A. Maurice Myers
Chairman of the Board,
President and
Chief Executive Officer

William F. Martin, Jr.
Senior Vice President
Legal/Corporate Secretary

H.A. Trucksess, III
Senior Vice President
Finance/Chief Financial
Officer and Treasurer

Samuel A. Woodward
Senior Vice President
Operations and Planning

Yellow Freight System, Inc.

William D. Zollars
President

Preston Trucking Company, Inc.

David J. Letke
President

Saia Motor Freight Line, Inc.

Jimmy D. Crisp
President

WestEx, Inc.

Frank E. Myers
President

Yellow Services, Inc.

Thomas L. Smith
President

-48-
<PAGE> 51

Board of Directors
Yellow Corporation

A. Maurice Myers
Director since 1996
Chairman of the Board
President and Chief Executive
Officer of the Company

Klaus E. Agthe
Director since 1984
Retired Director and
North American Liaison
of the VIAG Group

Cassandra C. Carr
Director since 1997
Senior Executive Vice President
of Human Resources of
SBC Communications, Inc.

Howard M. Dean*
Director since 1987
Chairman and Chief Executive
Officer of Dean Foods Company

David H. Hughes*
Director since 1973
Retired Vice Chairman
of Hallmark Cards, Inc.

Ronald T. Lemay
Director since 1994
Vice Chairman, President and
Chief Operating Officer of
Sprint Corporation

John C. McKelvey
Director since 1977
President and Chief Executive
Officer of Midwest Research Institute

William L. Trubeck*
Director since 1994
Senior Vice President-Finance
and Chief Financial Officer of
International MultiFoods, Inc.

Carl W. Vogt*
Director since 1996
Senior Partner of Fulbright &
Jaworski, L.L.P.

William F. Martin, Jr.
Secretary to the Board

*Member, Audit Committee

[PICTURE OF BOARD OF DIRECTORS]

Left to right: William L. Trubeck, John C. McKelvey, Ronald T. LeMay,
Cassandra C. Carr, Carl W. Vogt,
A. Maurice Myers, Howard M. Dean and Klaus E. Agthe.
Not pictured; David H. Hughes.

-49-
<PAGE> 52

Yellow Corporation
P.O. Box 7563
Overland Park, KS 66207
913.696.6100
http://www.yellowcorp.com

Independent Public Accountants
Arthur Andersen LLP
Kansas City, MO

Transfer Agent and Registrar
ChaseMellon Shareholder Services, L.L.C.
P.O. Box 3315
So. Hackensack, NJ 17606
800.851.9677
http://www.chasemellon.com

Annual Meeting
April 16 at 9:30 A.M.
Kansas City Marriott Downtown
200 West 12th Street
Kansas City, MO 64105

10-K Report
Please write to: Treasurer,
Yellow Corporation
or see our web site

-50-
<PAGE> 53
[LOGO]
P.O. Box 7563 o Overland Park, KS 66207 o http://www.yellowcorp.com
Printed in the U.S.A. #505

<PAGE> 1

Exhibit (24)

Consent of Independent Public Accountants

As independent public accountants, we hereby consent to the incorporation of
our reports included and incorporated by reference in this Form 10-K, into the
company's previously filed Form S-8 Registration Statements, File No. 33-47946
and 333-16697.

ARTHUR ANDERSEN LLP

Kansas City, Missouri,
March 24, 1998

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 19,793
<SECURITIES> 0
<RECEIVABLES> 349,999
<ALLOWANCES> 15,800
<INVENTORY> 0
<CURRENT-ASSETS> 458,761
<PP&E> 1,980,324
<DEPRECIATION> 1,194,015
<TOTAL-ASSETS> 1,270,812
<CURRENT-LIABILITIES> 480,835
<BONDS> 163,080
0
0
<COMMON> 29,289
<OTHER-SE> 416,562
<TOTAL-LIABILITY-AND-EQUITY> 1,270,812
<SALES> 0
<TOTAL-REVENUES> 3,348,868
<CGS> 0
<TOTAL-COSTS> 3,250,137
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,546
<INCOME-PRETAX> 89,165
<INCOME-TAX> 36,730
<INCOME-CONTINUING> 52,435
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,435
<EPS-PRIMARY> 1.86
<EPS-DILUTED> 1.83

</TABLE>