Yellow (YELLQ) 8-K Unaudited Pro Forma Condensed Combined Statement of Operations

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Year Ended December 31, 2003

	Historical						Pro Forma
	Yellow Roadway			Roadway (1/1 - 12/11)			Adjustments			Combined
	(in thousands, except per share data)
Revenue	$	3,068,616		$	3,052,119		$	100	(1)	$	6,120,835
Operating expenses:
Salaries, wages and employees’ benefits		1,970,440			1,946,709			1,908	(6)		3,919,057
Operating expenses and supplies		449,825			514,050			(1,153	)(2)		962,722
Operating taxes and licenses		83,548			77,057						160,605
Claims and insurance		67,670			60,080			636	(6)		128,386
Depreciation and amortization		87,398			69,782			1,153	(2)		171,613
								480	(3)
								12,800	(4)
Purchased transportation		318,176			314,435						632,611
(Gains) losses on property disposals, net		(167	)		(2,572	)					(2,739	)
Spin-off and reorganization charges		3,124			53,734			(56,858	)(5)		—
Total operating expenses		2,980,014			3,033,275			(41,034	)		5,972,255
Operating income		88,602			18,844			41,134			148,580
Interest expense		20,606			18,124			7,133	(2)		49,872
								4,009	(6)
ABS facility charges		—			3,145			(3,145	)(6)		—
Other, net		1,182			13,539			(9,005	)(2)		5,716
Nonoperating expenses, net		21,788			34,808			(1,008	)		55,588
Income from continuing operations before income taxes		66,814			(15,964	)		42,142			92,992
Income tax provision		26,131			12,626			16,108	(7)		54,865
Income from continuing operations	$	40,683		$	(28,590	)	$	26,034		$	38,127
Earnings per share from continuing operations:
Basic	$	1.34								$	0.80
Diluted	$	1.33								$	0.79
Average common shares outstanding:
Basic		30,370									47,723
Diluted		30,655									48,100

NOTES TO UNAUDITED CONDENSED COMBINED PRO FORMA

FINANCIAL STATEMENTS

These pro forma adjustments reflect the valuations of Roadway’s tangible and intangible assets and liabilities as well as conforming accounting policies recorded as of December 11, 2003 in conjunction with the acquisition. The allocation of the purchase price is preliminary and subject to adjustment, however, we do not expect material changes. These unaudited condensed combined pro forma financial statements are not necessarily indicative of the operating results or financial position that would have occurred had the acquisition been consummated at the dates indicated, nor necessarily indicative of future operating results.

(1) Represents the adjustment necessary to conform Roadway’s revenue recognition policy to the policy used by Yellow.

(2) Reflects certain statement of operations reclassifications made to conform Roadway’s presentation to the presentation used by Yellow.

(3) Adjustment to record additional depreciation expense on the new basis of Roadway’s property and equipment.

(4) Adjustment to record amortization expense on identifiable intangible assets.

(5) Adjustment to eliminate the expense related to the vesting of restricted stock awards, other compensation and transaction fees associated with the acquisition of Roadway by Yellow that were recognized on Roadway’s historical Statement of Consolidated Income for the period January 1, 2003 through December 11, 2003 and the Yellow Roadway Statement of Consolidated Operations for the year ended December 31, 2003.

(6) Adjustment to record additional interest expense, letter of credit fees and amortization of deferred financing costs on borrowings related to our offering of 3.375% contingent convertible senior notes due 2023, our offering of 5.0% contingent convertible senior notes due 2023 and other bank financing transactions related to the acquisition. The estimated weighted average annual interest rate of the completed and contemplated debt structure is 5.5%. A¹/8th% change in the variable interest rates associated with these borrowings would have a $0.3 million effect on annual interest expense. A $10.0 million change in the amount of borrowings necessary to finance the acquisition would have a $0.4 million effect on annual interest expense.

(7) Adjustment to record the income tax impact of the pro forma adjustments at an effective income tax rate of 40.0%.