<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, 1998
                          -----------------

                                       OR

[  ] 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 
                                      -----    -----

The aggregate market value of the voting stock held by nonaffiliates of the
registrant at March 12, 1999 was $459,478,279.

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 12, 1999
               -----                      -----------------------------
     Common Stock, $1 Par Value                 25,176,892 shares

                       DOCUMENTS INCORPORATED BY REFERENCE

     The following documents are incorporated by reference into the Form 10-K:
         1) 1998 Annual Report to Shareholders - Parts I, II and IV
         2) Proxy Statement dated March 5, 1999 - Part III





<PAGE>   2

                               Yellow Corporation
                                    Form 10-K
                          Year Ended December 31, 1998


                                      Index

Item                                                                      Page
- ----                                                                      ----

                                     PART I
                                     ------

 1.   Business                                                               3
 2.   Properties                                                             7
 3.   Legal Proceedings                                                      7
 4.   Submission of Matters to a Vote of Security Holders                    7
      Executive Officers of the Registrant (Unnumbered Item)                 8

                                     PART II
                                     -------

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

                                    PART III
                                    --------

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

                                     PART IV
                                     -------

14.   Exhibits, Financial Statement Schedule and Reports
         on Form 8-K                                                         11


Report of Independent Public Accountants on Financial
  Statement Schedule                                                         12

Financial Statement Schedule II                                              13

Signatures                                                                   14

1998 Annual Report to Shareholders                                 Exhibit (13)

Consent of Independent Public Accountants                          Exhibit (23)







                                        2



<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
     1998, the company concentrated on improving future earnings growth through
     the negotiation of a new five-year National Master Freight Agreement (NMFA)
     at its Yellow Freight subsidiary, divesting of its under performing Preston
     Trucking subsidiary and the acquisition of Action Express, Inc., a Pacific
     Northwest regional LTL transportation company, as well as reducing
     outstanding shares of common stock through stock buyback programs.

(b)  The company provides interstate transportation of general commodity
     freight, primarily LTL, primarily by motor vehicle. The operation of the
     company is conducted among two primary business segments. Financial
     disclosures for these segments are presented in the Business Segments
     footnote on page 43 of the 1998 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), WestEx, Inc. (WestEx), and
     Action Express, Inc. (Action). Yellow Services, Inc. (Yellow Services) is a
     subsidiary that provides information technology services to the company and
     its subsidiaries. The company employed an average of 29,700 persons in
     1998.

     Yellow Freight, the company's principal subsidiary based in Overland Park,
     Kansas, accounted for 86% of total company revenue from continuing
     operations in 1998, 88% in 1997 and 89% in 1996. 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 headquartered in a suburb of Atlanta,
     Georgia provides overnight and second-day service in eleven southeastern
     states and Puerto Rico. Saia accounted for 12% of total company revenue
     from continuing operations in 1998, 11% in 1997 and 10% in 1996.

     WestEx provides one and two-day service in Arizona, California, Nevada, New
     Mexico, and Texas. WestEx had operating revenue of $65 million in 1998 and
     is headquartered in Phoenix, Arizona.


     Action provides one and two day service to the Pacific Northwest and Rocky
     Mountain states. Action was acquired on December 1, 1998 and is
     headquartered in Boise, Idaho. Only revenue since its acquisition date is
     included in the results of operations and was not material to the 1998
     consolidated financial results of the company.

                                        3



<PAGE>   4


I
tem 1. Business. (cont.)

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

     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, effective asset utilization, and cost
     control major competitive factors. No single customer accounts for more
     than 10% of the company's total revenue. The company's revenue is subject
     to seasonal variations throughout the year. The first quarter is generally
     the weakest while the third is the strongest.

     Operating revenue for Yellow Corporation (the company) totaled $2.9 billion
     in 1998, relatively unchanged from 1997. Operating income for the year was
     $83.4 million, down from $98.7 million in 1997. Income from continuing
     operations was $40.1 million or $1.49 per share (diluted) in 1998, compared
     to $52.7 million or $1.84 per share (diluted) in 1997.

     Yellow Freight's 1998 operating income of $66.9 million was lower than 1997
     operating income of $82.7 million. Operating revenue was $2.49 billion for
     1998, down 1.8 percent from $2.54 billion for 1997. The 1998 operating
     ratio was 97.3 compare with 96.7 in 1997.

     Saia continued its growth with 1998 operating income of $24.7 million, up
     from $19.6 million in 1997. Saia's 1998 operating ratio was 92.7 compared
     with 93.7 in 1997.

     WestEx continued its rapid growth in 1998, reporting revenue of 64.9
     million, up 32.4 percent from 49.0 million in 1997.

     The company's operations are further described in Management's Discussion
     and Analysis on page 17 of the 1998 Annual Report to Shareholders, which is
     incorporated herein by reference.

     Discontinued Operations

     In the second quarter of 1998, the company sold Preston Trucking Company,
     Inc. (Preston Trucking) its northeast regional LTL segment to a management
     group of three senior officers of Preston Trucking. The sale resulted in a
     charge of $63.6 million net of anticipated tax benefits of approximately
     $28.0 million, which has been reflected as discontinued operations in the
     consolidated statement of operations.

     After giving effect to the discontinued operations, the company recorded a
     net loss for 1998 of $28.7 million or $1.06 per share (diluted), versus net
     income of $52.4 million, or $1.83 per share (diluted) in 1997. 



                                       4



<PAGE>   5





Item 1. Business. (cont.)

     The company's liquidity needs arise primarily from capital investment in
     new equipment, land and structures and information technology, as well as
     funding working capital requirements. Working capital decreased from a
     negative $22 million at year-end 1997 to a negative $42 million at year-end
     1998. The company can operate with negative working capital because of the
     quick turnover of its account receivables and its ready access to sources
     of short-term liquidity.

     Future Outlook

     The company operates in a highly competitive and changing transportation
     business. The 1998 five-year NMFA labor agreement provides stability to the
     customers of its largest subsidiary, Yellow Freight with reasonable
     economic terms for its largest expense item.

     All of the company's subsidiaries can now focus on achieving profitable
     revenue growth. This starts with continuous improvement focus on offering
     best in class customer satisfaction for core services. It also means
     reinventing the business with more customer solutions involving new and
     enhanced services, not limited to just LTL. An example of this is Yellow
     Freight's introduction in July of Exact Express, a time-definite, expedited
     air and ground delivery service.

     The company's subsidiaries are also working to continuously improve their
     productivity and cost efficiency to best in class levels. This not only
     reduces costs, but it also supports improved customer service capabilities.

     The company believes its ability to achieve profitable revenue growth and
     cost efficiency is enhanced by its technology investments, its
     comprehensive physical assets as well as the quality and low turnover of
     its experienced work force. Because employees are the company's greatest
     asset, the subsidiaries are focused on achieving best in class safety
     performance.

     In addition to current subsidiaries and businesses, the company will also
     evaluate opportunities to grow earnings through acquisitions. Management
     believes the company's balance sheet and access to capital provide
     flexibility to reinvest in existing businesses as well as new opportunities
     with attractive growth prospects.

     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, labor relations, inclement weather, competitor pricing activity,
     year 2000 issues, expense volatility and a downturn in general economic
     activity.



                                        5



<PAGE>   6


Item 1. Business. (cont.)

(d)  Revenue from foreign sources is discussed in the Business Segments footnote
     on page 44 of the 1998 Annual Report to Shareholders, which is incorporated
     herein by reference. Foreign source revenue was not material to
     consolidated financial results in 1998, 1997 and 1996.









                                        6



<PAGE>   7






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, 1998, the company operated a total of 505 freight terminals
located in 50 states, Puerto Rico, parts of Canada and Mexico. Of this total,
238 were owned terminals and 267 were leased, generally for terms of three years
or less. The number of vehicle back-in doors totaled 15,997, of which 12,111
were at owned terminals and 3,886 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, 1998, the company's subsidiaries operated the following number
of linehaul units: tractors - 4,201, and trailers - 36,459. The company operated
the following number of city units: trucks and tractors - 6,738 and trailers -
6,621.

The company's facilitates and equipment are adequate to meet current business
requirements. The company expects moderate growth in 1999 and has projected only
modest increases in its operational capacity. Projected net capital expenditures
for 1999 are $147 million, an increase over $96 million in 1998 net capital
expenditures. Net capital for both periods pertain primarily to replacement of
revenue equipment at all subsidiaries, growth capital at Saia, WestEx and
Action, 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, 1998, is
incorporated by reference under Item 14 herein.


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

None.





                                        7





<PAGE>   8


Executive Officers of the Registrant

The names, ages and positions of the executive officers of the company as of
March 23, 1999 are listed below. Officers are appointed annually by the Board of
Directors at their meeting that immediately follows the annual meeting of
shareholders.


          Name             Age                  Position(s) Held
          ----             ---                  ----------------

A. Maurice Myers           58        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.     51        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       49        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         49        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)


The terms of each officer of the company designated above are scheduled to
expire April 22, 1999. 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.





                                        8



<PAGE>   9



                                     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, 1998,
is incorporated by reference under Item 14 herein.


Item 6. Selected Financial Data.

The information set forth under the caption "Financial Summary" on pages 26 and
27 of the registrant's Annual Report to Shareholders for the year ended December
31, 1998, 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 17 through 25 of the registrant's Annual Report
to Shareholders for the year ended December 31, 1998, is incorporated by
reference under Item 14 herein.


Item 8. Financial Statements and Supplementary Data.

The financial statements and supplementary information, appearing on pages 28
through 46 of the registrant's Annual Report to Shareholders for the year ended
December 31, 1998, are incorporated by reference under Item 14 herein.


Item 9. Disagreements on Accounting and Financial Disclosure.

None.



                                        9



<PAGE>   10



                                    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.





                                       10





<PAGE>   11



                                     PART IV



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

(a) (1) Financial Statements

    The following information appearing in the 1998 Annual Report to
    Shareholders is incorporated by reference in this Form 10-K Annual Report
    as Exhibit (13):

                                                                          Page
                                                                          ----

    Management's Discussion and Analysis of
        Financial Condition and Results of Operations                    17-25
    Financial Summary                                                    26-27
    Consolidated Financial Statements                                    28-45
    Report of Independent Public Accountants                                45
    Quarterly Financial Information                                         46
    Common Stock                                                            46


    With the exception of the aforementioned information, the 1998 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 1998 Annual Report to Shareholders.

(a) (2) Financial Statement Schedule

                                                                          Page
                                                                          ----

    Report of Independent Public Accountants on
        Financial Statement Schedule                                        12

    For the years ended December 31, 1998, 1997 and 1996:
        Schedule II - Valuation and Qualifying Accounts                     13

    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) - 1998 Annual Report to Shareholders.
    (23) - 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

     None




                                       11




<PAGE>   12




                          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, 1999. 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, 1999







                                       12



<PAGE>   13

                                                                  Schedule II



                       Yellow Corporation and Subsidiaries
                        Valuation and Qualifying Accounts
              For the Years Ended December 31, 1998, 1997 and 1996


- -------------------------------------------------------------------------------
        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)

Year ended December 31, 1998:
- -----------------------------
Deducted from asset account -
 Allowance for uncollectible
 accounts                       $12,264   $14,779   $    -   $12,881   $14,162
                                =======   =======   ======   =======   =======


Year ended December 31, 1997:
- -----------------------------
Deducted from asset account -
 Allowance for uncollectible
 accounts                       $10,610   $13,272   $    -   $11,618   $12,264
                                =======   =======   ======   =======   =======




Year ended December 31, 1996:
Deducted from asset account -
 Allowance for uncollectible
 accounts                       $14,094   $16,727   $    -   $20,211   $10,610
                                =======   =======   ======   =======   =======


(1) Primarily uncollectible accounts written off - net of recoveries.





                                       13





<PAGE>   14





                                   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 Chairman of the 
March 23, 1999                                   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 23, 1999
- -------------------------------   Finance/Chief Financial
H. A. Trucksess, III              Officer and Treasurer


  /s/ Howard M. Dean              Director                     March 23, 1999
- -------------------------------
    Howard M. Dean


 /s/ David H. Hughes              Director                     March 23, 1999
- -------------------------------
    David H. Hughes


  /s/ Cassandra C. Carr           Director                     March 23, 1999
- -------------------------------
    Cassandra C. Carr


  /s/ Carl W. Vogt                Director                     March 23, 199
- -------------------------------
    Carl W. Vogt


  /s/ Klaus E. Agthe              Director                     March 23, 1999
- -------------------------------
    Klaus E. Agthe


  /s/ Ronald T. LeMay             Director                     March 23, 1999
- -------------------------------
    Ronald T. LeMay


  /s/ John C. McKelvey            Director                     March 23, 1999
- -------------------------------
    John C. McKelvey


  /s/ William L. Trubeck          Director                     March 23, 1999
- -------------------------------
    William L. Trubeck

                                       14







<PAGE>   1

                                                                 Exhibit (13)






                               Yellow Corporation


                               1998 Annual Report


                                 to Shareholders





<PAGE>   2











1998                                 [GRAPHIC OF EXACT EXPRESS DELIVERY DRIVER]
ANNUAL REPORT

                                     [YELLOW CORPORATION LOGO]









<PAGE>   3

                                                                   

Celebrating 75 Years of Transportation Leadership

History teaches important lessons. The most

important for us is that quality service has been our

legacy for 75 years. That's where our focus will always

be. It's the best way to ensure consistent earnings

growth and shareholder value.

Maury Myers, Chairman, President and CEO - Yellow Corporation

In 1999, both our Yellow Freight System and Saia subsidiaries celebrate 75 years
in business. Yellow Transit Co., the predecessor of Yellow Freight System, was
founded by Oklahoma entrepreneur A.J. Harrell in the mid-1920s when he bought
two trucks to haul freight between the booming oil towns of Oklahoma City and
Tulsa. Also at that time, Saia Motor Freight Line founder Louis P. Saia, Sr.,
and his wife and children launched a general freight hauling business in and
around Houma, Louisiana. From these humble beginnings, the Yellow and Saia
brands have grown to be recognized throughout the world as leaders in
transportation services.

- --------------------------------------------------------------------------------
                            [75TH ANNIVERSARY LOGO]

<PAGE>   4

                                   FAMILY OF
          
                                   OPERATING
- --------------------------------------------------------------------------------
                                   COMPANIES
- --------------------------------------------------------------------------------



<TABLE>

<CAPTION>
- --------------------------------------------------------------------------------
            [YELLOW LOGO]                             [SAIA LOGO]               
- --------------------------------------------------------------------------------

              SERVICES:                                SERVICES:                
      <S>                                 <C>
           North America LTL                         Regional LTL -             
                                                 12 Southeastern states         
        Guaranteed time-definite,           Overnight & second-day delivery    
           expedited service                  Guaranteed expedited service      
         International LCL/FCL                     Truckload service            
            Rail intermodal                        Caribbean service            
         Heavyload / truckload               LTL service to Mexico interior     
           Chemical services                  Inter-regional service with       
            Exhibit services                        WestEx & Action             
           Integrated logistics                                         
      Electronic commerce services


                PROFILE:                                PROFILE:                  
                                                                         
            23,200 employees                        4,700 employees              
             385 terminals                            72 terminals               
           300,000 customers                        93,000 customers              
             8,400 tractors                          2,000 tractors              
            35,900 trailers                          5,400 trailers              
      8.3 million tons of freight             2.3 million tons of freight      
           delivered in 1998                       delivered in 1998            

              Web address:                            Web address:                
      http://www.yellowfreight.com                http://www.saia.com            


<CAPTION>
- --------------------------------------------------------------------------------
            [WESTEX LOGO]                         [ACTION EXPRESS LOGO]          
- --------------------------------------------------------------------------------
              SERVICES:                                 SERVICES:                
<S>                                       <C>                               
        Regional LTL - California           Regional LTL - Pacific Northwest
               & Southwest                      & Rocky Mountain states      
     Overnight & second-day delivery        Overnight & second-day delivery 
       Guaranteed expedited service           Inter-regional service with  
 Maquiladora service - Tijuana to Juarez             Saia & WestEx      
      LTL service to Mexico interior                                             
       Marketing partnerships with                                               
      3rd party logistics companies                                              
       Inter-regional service with                                               
              Saia & Action                                                      


                PROFILE:                                PROFILE:                  
                                                                         
            1,100 employees                           400 employees              
              32 terminals                            16 terminals               
             7,200 customers                        4,000 customers              
               400 tractors                           200 tractors              
             1,300 trailers                           450 trailers              
        380,000 tons of freight                 236,000 tons of freight      
           delivered in 1998                       delivered in 1998            

              Web address:                            Web address:                
       http://www.westex-inc.com            http://www.actionexpressinc.com
</TABLE>


2

<PAGE>   5

                                    CONTENTS



<TABLE>
<CAPTION>


<S>                                                                                     <C>
SUBSIDIARY PROFILES ...                                                                 2
A snapshot of who we are and what we do.

LETTER TO SHAREHOLDERS ...                                                              10
Chairman and President A. Maurice Myers reviews 1998 and reports on the future.

MANAGEMENT'S DISCUSSION AND ANALYSIS ...                                                17
An in-depth look at comparative year-to-year financial and operating performance.

FINANCIAL SUMMARY ...                                                                   26
Selected financial data is reported on a five-year comparative basis.

CONSOLIDATED FINANCIAL STATEMENTS AND NOTES ...                                         28
Financial results and notes on significant accounting policies and issues
affecting financial results.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ...                                            45
A report by Arthur Andersen LLP.

SUPPLEMENTARY INFORMATION ...                                                           46
Additional information of interest.

OFFICERS ...                                                                            47
A roster of senior officers. 

DIRECTORS ...                                                                           48
A portrait and listing of the board of directors.
</TABLE>


                                                                               3

<PAGE>   6

A banner year for technology

Today's economy moves on information. Yellow 

Companies are using our substantial information 

technology resources to create competitive advantage. 

Tom Smith, President - Yellow Services

[GRAPHIC-HISTORICAL PICTURE OF DISPATCHER]>FAST
     

[information] Yellow is using information to change the definition of
"transportation services company." State-of-the-art information technology has
become as important as our tractors, trailers, forklifts and dock space. MARKET
OPPORTUNITIES, not operational limitations, must drive business decisions.
Technology is greatly expanding our capacity to respond to those opportunities.
THE INTERNET, EDI and other channels of electronic commerce are vitally
important ways in which we reach customers and solve their transportation
challenges. Through the internet, Yellow does everything from processing credit
approvals to shipment pickup orders.


                                             ON THE                         
                                             WORLD WIDE WEB                 
                                             As new internet-based markets
                                             emerge for our customers,
[GRAPHIC-CUSTOMER SERVICE REPRESENTATIVE     Yellow is keeping pace. We are
 AND COMPUTER MONITOR]                       helping customers use the
                                             world wide web for everything
                                             from obtaining ready-to-use
                                             shipping documents to e-mailing
                                             a pickup request.
                                                                       
                                                                       
                                        
- --------------------------------------------------------------------------------
4

<PAGE>   7

    [GRAPHIC-EMPLOYEE IN FOREGROUND & THREE COMPUTERS WITH INTERNET SCREENS]

                                    FORWARD
 

THEN: In the 1940s, Yellow was one of the first companies to

establish a teletype system for transmitting information over the

trucking routes, improving operational efficiencies.

NOW: Technology is freeing our 450 Yellow Freight Customer

Service Representatives to spend more time answering questions,

solving problems and recommending transportation solutions.

- --------------------------------------------------------------------------------
                                                                               5

<PAGE>   8
 
Continuous Service Improvement

Customers no longer have to ask,"What

can you do?" They just tell us when they need

their products delivered - to the hour, if necessary.

And Yellow can do it.

Bill Zollars, President - Yellow Freight System

[GRAPHIC-HISTORICAL PHOTO OF DELIVERY DRIVER AND CUSTOMER WITH
TRUCK IN BACKGROUND] PAST+

[fundamentals]YELLOW is continuously improving its performance in all
fundamental areas - on the dock, on the highways and on city streets. PAYING
ATTENTION to the fundamentals is the way to earn repeat business. EXACT EXPRESS
is another way we're improving our performance. It has created a new standard of
service precision since its introduction in July 1998. It is raising customer
expectations to levels never before seen in our industry. Unique customer
satisfaction guarantees backed by revolutionary service recovery processes are
helping us get there. WE'RE NOT SATISFIED with the status quo. Our goal is
excellence in executing the fundamentals. We will accept nothing less.

- --------------------------------------------------------------------------------

[GRAPHIC-TV WITH 1-800-GO-YELLOW ADVERTISEMENT]  SPREADING THE WORD

           Change can be a catalyst for creativity. Advertising messages and
           new media in 1998 set Yellow Freight apart in its quest for customer
           GRAPHIC-attention:

           - First-time-ever TV ads promoted a new, innovative service - Exact
             Express

           - NASCAR sponsorship - a racecar and racing truck ran in two of
             NASCAR's top racing venues - Winston Cup and Craftsman Truck Series

           - Logo merchandise - after Yellow introduced a new company
             store, employees, families and customers bought $1 million worth of
             merchandise

           - Hot air balloons carried the Yellow logo to thousands of sports
             spectators across North America

6

<PAGE>   9

                    [GRAPHIC-EXACT EXPRESS DELIVERY DRIVER]

                                    PRESENT

THEN: Between 1932-36, founder A.J. Harrell designed an inter-

state delivery system that accommodated disparate state weight

regulations and still produced a cost-efficient transfer operation.

NOW: Exact Express, our new time-definite, expedited air and ground

delivery service, is forcing competitors to try to meet our standards.

It is currently delivering on time with 99 percent efficiency, throughout

North America, exactly when customers need it.

                                                                               7

<PAGE>   10
 
Service Means Solutions

Yellow sells transportation solutions, not space

on trailers. Selling space is selling a commodity.

Selling solutions creates value for the customer.

That's what customers increasingly demand.

And that's what we provide.

Maury Myers, Chairman, President and CEO - Yellow Corporation

[GRAPHIC-HISTORICAL PICTURE OF DOCKWORKERS] THEN

[portfolio] Because each customer has unique transportation needs, Yellow is
building a portfolio of transportation services companies. OUR REGIONAL CARRIERS
meet the demand for fast, on-time delivery to destinations generally overnight
and less than 1,000 miles away. OUR NATIONAL CARRIER increasingly meets demand
for a broad range of supply chain management services including
coast-to-coast and international delivery. EACH COMPANY is broadening its
portfolio of services to meet the needs of individual customers and customer
segments.

- --------------------------------------------------------------------------------

                                SAIA PERFORMANCE

<TABLE>
<CAPTION>
                              1995      1996      1997      1998
<S>                          <C>       <C>       <C>       <C>   
REVENUE                      $209.6    $264.3    $311.2    $340.1
OPERATING RATIO                96.3      95.9      93.7      92.7
</TABLE>

                      [GRAPHIC-BOX] = REVENUE IN MILLIONS

8

<PAGE>   11
 
                      [GRAPHIC-PICTURE OF SAIA DOCKWORKER]

                                     + NOW

THEN: Throughout the 1950s, 60s and 70s, Yellow built its coverage

network through a series of acquisitions primarily aimed at obtaining

federally controlled operating authorities in strategic regions of the country.

NOW: Yellow is building a regional carrier group to meet demand

in one of the fastest growing segments of the transportation services

market. The December 1998 acquisition of Action Express was an

important step forward. Saia, our flagship regional carrier, and

WestEx have coverage networks that dovetail with Action Express.

                                                                               9

<PAGE>   12
 
Last year, we told you that the key to building

shareholder value was to listen to our customers.

We are now taking that principle one step further.

We are acting on what they have told us.

Maury Myers, President and CEO - Yellow Corporation

[GRAPHIC-HISTORICAL PICTURE OF YELLOW FREIGHT TRUCK]
DEAR SHAREHOLDER

- --------------------------------------------------------------------------------

1998 may prove to be one of the most significant years in our history. We took
several important steps that will put Yellow in better position to deliver
consistent shareholder value over future business and economic cycles.

We overcame a slow start and were solidly profitable for the year. Yet, we were
not completely satisfied with our overall financial performance. Our results 
were down from the previous year. While those trends were consistent with our
peers, we do not want to be just "one of the group."

Yellow aims to create an entirely new category of transportation services
provider. We are making the transition from providing one-size-fits-all,
less-than-truck-load (LTL) freight hauling to a company that offers flexible,
logistics-driven transportation solutions that fit the needs of individual
customers. That's the path to consistent profitability. And that's the real
significance of what we accomplished in 1998. We made many of the necessary
moves that will take us further toward our goals.

STRATEGY REVIEW

Shortly after I joined Yellow


10

<PAGE>   13

[GRAPHIC-PICTURE OF A. MAURICE MYERS, CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF
EXECUTIVE OFFICER.]

Corporation in 1996, we developed seven important strategies that continue to
guide us. Those are:

- - Develop an array of complementary transportation services that meet customer 
  needs.

- - Grow revenue and improve profitability to produce adequate return on capital 
  employed.

- - Align and leverage the company's portfolio of assets to gain competitive 
  advantage and increase shareholder value.

- - Create and maintain a high performance, customer-focused culture. 

- - Expand the use of technology to create competitive advantage.

- - Work smarter to achieve industry peer group efficiency leadership.

- - Maintain a best practices safety program to protect and motivate employees.

We moved closer to reaching our ultimate goals in each of those seven areas
during 1998.

FINANCIAL REVIEW 

We reported 1998 income from continuing operations of $40.1 million, or $1.49
per share. In 1997, we reported income from continuing operations of $52.7
million, or $1.84 per share. Revenue from continuing operations was $2.9 billion
in both 1998 and 1997.

In addition to continuing operations, consolidated results for 1998 also reflect
a $68.7 million loss from discontinued operations for the divestiture of Preston
Trucking Company, a regional carrier that had not performed satisfactorily in
the five years it was owned by Yellow. The sale to a group of Preston senior
executives generated approximately $20 million in positive cash flow, primarily
from income tax benefits realized during 1998. Including the discontinued
operation and divestment charge, the net loss for 1998 was $28.7 million, or
$1.06 per share.

In 1998, it became apparent that the repurchase of our own stock

                                                                              11

<PAGE>   14
 
was one of the best corporate investments we could make. We felt it was
undervalued, and it remained that way throughout 1998. From December 1997 to
year-end 1998, we bought back 2.9 million shares, or more than 10 percent of the
total outstanding. This investment

[GRAPHIC-YELLOW FREIGHT DRIVER]

has directly benefited 1998 earnings per share and positions us for additional
benefits in future years.

We finished the year with a strong balance sheet, putting us in excellent
position to reinvest in our existing service capacity as well as in new services
and acquisitions.

Our net capital expenditures totaled $96 million in 1998. We expect 1999 capital
expenditures to total $147 million. In addition to expenditures for necessary
replacements, our 1999 focus will be on opportunities that create competitive
advantage and attractive earnings growth prospects.

EVENTFUL YEAR AT YELLOW FREIGHT SYSTEM

Our largest operating subsidiary generated 1998 revenue of $2.49 billion, nearly
matching the $2.54 billion in revenue achieved in 1997. Operating income was
$66.9 million - a 97.3 operating ratio - compared with 1997 operating income of
$82.7 million, or a 96.7 operating ratio.

Operating results were hurt by business losses resulting from customer concern
over the possibility of a work stoppage associated with the negotiation of a new
contract with the International Brotherhood of Teamsters. We reached tentative
agreement February 9, 1998 on an unprecedented five-year deal. But we lost
business that particularly hurt our first and second quarters. Results improved
in the second half and we finished with a respectable fourth quarter. We are
entering 1999 in much better position than we were a year ago.

Our new labor agreement sets reasonable economic terms while providing stability
for customers and employees. Included in the new contract is a commitment to
keep lines of communications open and to work together on improving the future
of our business.

Like the rest of Yellow Corporation, Yellow Freight System made several
significant moves during 1998 that position it for long-term business growth and
service improvements. Yellow Freight is "reinventing" itself to provide
flexible, logistics-driven transportation solutions that fit the needs of
individual customers.

The July launch of Exact Express was a key move in that direction. This new
time-definite, expedited transportation service includes one of the most
aggressive customer satisfaction guarantees in the industry. Exact Express is a
revolutionary change in the way customers may use transportation services.
Rather than providing service based on standard industry delivery criteria -
which sometimes are extremely limiting

12

<PAGE>   15
 
- --------------------------------------------------------------------------------
                          COST EFFICIENCY (AND) SAFETY
- --------------------------------------------------------------------------------
                                 CONTINUE TO BE
- --------------------------------------------------------------------------------
                                HIGH PRIORITIES
- --------------------------------------------------------------------------------
                                   AT YELLOW
- --------------------------------------------------------------------------------

- - Exact Express provides variable-speed air and ground delivery options.
Same-day, next-day and even by-the-hour service is available, whenever and
wherever the customer needs it. Air partners integrated through our
state-of-the-art ExacTrac information technology system enable Exact Express to
provide best-in-class service.

New service options like Exact Express require a highly engineered network. Our
Gold Certification Process implements best practices and focuses on short
interval scheduling. By engineering highly efficient processes in areas like
city, dock and linehaul operations, we are improving our service capabilities
while concurrently reducing costs. Proprietary technology and an experienced,
highly skilled workforce are helping us achieve success.

Because people are our most valued asset, our aggressive safety program aims to
materially reduce the frequency of lost-time injuries and significantly improve
the linehaul miles and city hours driven between vehicular accidents. While
Yellow has been a longtime leader in workplace and highway safety, this
extremely robust effort will take us even further, protecting our people and
improving efficiencies.

We also adjusted our pay for performance program. New incentives for sales
executives were designed to reward success in growing profitable revenue. Other
compensation incentives for operations employees reward specific process
improvements that enhance service performance while reducing costs. We are more
convinced than ever that pay for performance offers an excellent return on
investment and creates the high performance culture that we must have to remain
the leader in our industry.

Another key to the ongoing success at Yellow Freight System is the continued
expansion of centralized customer service capabilities. Introduced in 1995, the
Customer Service Centers are the cornerstone of a $120 million capital
investment in technology. They deliver internal operating efficiencies and
greatly expand our overall customer service capabilities.

REGIONAL REPOSITIONING STRATEGY

While our regional portfolio is now smaller than it was a year ago, it is more
profitable and has better growth potential. The mid-year divestment of Preston
Trucking Company has allowed us to reposition and implement a regional strategy
focused

                                                                              13

<PAGE>   16
                                        
                                   INNOVATIVE
- --------------------------------------------------------------------------------
                                   TECHNOLOGY
- --------------------------------------------------------------------------------
                              AND FLEXIBLE SERVICE
- --------------------------------------------------------------------------------
                                  ARE CRUCIAL
- --------------------------------------------------------------------------------

specifically on earnings growth. We will expand into new geographical markets
that create the potential to grow the bottom line, not just top line revenue.

An important first step was the acquisition of Action Express, a profitable
non-union regional carrier based in Boise, Idaho. Action Express primarily
serves the Pacific Northwest and Rocky Mountain states.

Saia Motor Freight Line and WestEx, our non-union carriers serving the Southeast
and Southwest respectively, have coverage networks that dovetail with Action.

Saia is the flagship of our regional operations. Acquired in 1993 as part of the
purchase of Preston Corporation, Saia has achieved above-average revenue growth
while producing an operating ratio in the low to mid 90s. We have invested
heavily in Saia, both through capital investment and through expansion of its
market territory. Today, Saia is the most profitable Yellow Corporation
subsidiary and is the model for future regional investments.

In 1998, Saia operating revenue was $340 million, up from $311.2 million the
year before. The operating ratio was 92.7, improved from 93.7 in 1997.

As Saia celebrates its 75th year in business during 1999, growth will continue
to be the focus. New service will be introduced in Virginia, the 12th state in
its coverage network. Also in 1999, Saia's core one- and two-day service will be
further bolstered by new target lane service offerings with sister carriers and
an expanded on-time guarantee.

Growth also continues to be the headline at WestEx, which reported revenue of
$64.9 million, up 32 percent over 1997 revenue of $49 million. WestEx recorded a
$1.2 million operating loss for the year but became profitable in both of the
second half quarters of 1998. With excellent coverage in California and the
Southwest, WestEx has essentially transitioned through its startup period. We
expect increasing profitability as WestEx now builds density and improves its
network efficiencies.

Regional service is a high-growth opportunity which we are pursuing
aggressively. As with our national company, we are creating advantages for each
regional company by continuously improving our service offerings and
implementing operating best practices as we expand.
 
14

<PAGE>   17
 
MARKETING AND ELECTRONIC
COMMERCE

Yellow Corporation is becoming a different type of transportation services
company. Customers are at the center of everything we do. We recognize that
customers don't care whether their goods move on trucks, trains, planes or
ships. They just want their shipments delivered to their destination on time,
intact and damage-free. Combining these features with a hassle-free transaction
produces the customer-focused service package necessary to compete successfully
in today's marketplace.

Innovative technology and flexible service are crucial if Yellow is to meet
these new and higher expectations. That's why our investments in the future will
increasingly be centered around two objectives:

- - Providing world-class customer service.

- - Providing more transportation solutions and options.

Market opportunities, not operational limitations, increasingly drive business
decisions. Our Yellow Freight System subsidiary intends to be the leading
provider of guaranteed, time-definite, defect-free, hassle-free transportation
and related services in North America for shipments over 70 lbs. Our regional
subsidiaries also are focused on marketplace realities. All of our subsidiaries
must be well positioned to serve customers who need fast, flexible, highly
reliable service in today's Just-In-Time manufacturing and lean-inventory
business environment.

The ability to deliver accurate information in real time is essential to meeting
these new demands. Everyone from Fortune 500 companies to small and medium-sized
manufacturers and distributors is demanding information from their carriers via
the internet, electronic data interchange (EDI) or other automated means.
Electronic commerce is increasingly how the Yellow Corporation companies will do
business.

Supply chain management strategies are built around information flow. Yellow is
helping customers use the internet to process everything from credit approvals
and pickup orders to tracking shipments and obtaining documents. Through the
internet, Yellow is creating a virtual Customer Service Center. And very soon,
the internet will be an important link with specific customers and customer
groups 

[GRAPHIC-SAIA TERMINAL DOCK]

as we build proprietary, customized web pages designed to help them
execute complex product distribution and supply chain management strategies.

THE OUTLOOK

A strong balance sheet, tight control on operating costs, better utilization of
technology and introduction of new service capabilities have Yellow positioned
for profitable growth in 1999 and beyond.

Earnings growth is essential. It is the surest way to deliver

                                                                              15

<PAGE>   18
shareholder value through future economic and business cycles. While we will
always remain sensitive to natural cycles of the economy, we are building a
company that can operate profitably through economic ups and downs.

Our growth will come from both building our portfolio of companies and
continuing to expand our service offerings. Our vision for the future is to
continuously improve our service capabilities and create additional value for
customers.

The ability to deliver quality transportation service begins with the quality of
our work-force. As shareholders, you should know that the best and most
talented professionals in the transportation industry work at the Yellow
Corporation family of companies. This is a core strength that we will continue
to build.

During 1999, Yellow Freight and Saia celebrate the 75th anniversaries of their
founding. Both have survived the Great Depression, numerous recessions, a world
war, deregulation and more. Through it all, they have remained leaders in
providing customers with the quality service they wanted. That's the most
important lesson from our past. No matter what changes come our way, we are
committed to being the industry's undisputed service leader.

In closing this year's letter, I want to take a moment to salute David Hughes
for his long and valued service as a member of our board of directors. A retired
Vice Chairman of Hallmark Cards, Inc., Dave has served on the Yellow Corporation
board since 1973. He retires from our board at our annual shareholders' meeting
this year, taking with him our best wishes and heartfelt thanks for his valuable
contributions.

Last year, we told you that the key to building shareholder value was to listen
to our customers. We are now taking that principle one step further. We are
acting on what they have told us.

We know they want a broader portfolio of services and supporting information
technology. We know they want to work with people who are responsive and
service-oriented. And above all, we know they want value for their
transportation dollar, just as you demand value from your investment dollar.

We have listened and we have heard. Delivering value is what Yellow is all
about.

Sincerely,

A. Maurice Myers

Chairman of the Board,

President and

Chief Executive Officer

Yellow Corporation

16

<PAGE>   19
 
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results Of Operations
================================================================================

1998 vs. 1997

  Operating revenue for Yellow Corporation (the company) totaled $2.9 billion in
1998, relatively unchanged from 1997. Operating income for the year was $83.4
million, down from $98.7 million in 1997. Income from continuing operations was
$40.1 million or $1.49 per share (diluted) in 1998, compared to $52.7 million or
$1.84 per share (diluted) in 1997.

  Yellow Freight's 1998 operating income of $66.9 million was lower than 1997
operating income of $82.7 million. Operating revenue was $2.49 billion for 1998,
down 1.8 percent from $2.54 billion for 1997. The 1998 operating ratio was 97.3
compared with 96.7 in 1997. Performance during 1998 was adversely impacted by
the loss of business in late 1997 and early 1998 due to customer concerns over
the possibility of a work stoppage in connection with negotiations on a new
National Master Freight Agreement (NMFA) with the International Brotherhood of
Teamsters (IBT). The NMFA negotiation resulted in a tentative contract with the
IBT in February which was then ratified on April 7, 1998. The new five-year
agreement greatly minimized customer concerns over job actions and provides the
company reasonable economic terms over this period.

  The decrease in revenue resulted from tonnage declines of 3.6 percent
partially offset by a 1.7 percent increase in revenue per ton. The tonnage
decline resulted from the freight diversion associated with the IBT labor
negotiations. Following the first quarter declines and adjusted for individual
customer mix issues, tonnage generally improved in the second through fourth
quarters. The increase in revenue per ton was the net result of higher prices,
mix changes and partially offset by a decline in fuel surcharge revenue. On
October 1, 1998 Yellow Freight implemented increases averaging 5.5 percent for
those customers that do not have annual contracts. In addition, price increases
were negotiated during the year with contractual customers. Fuel surcharge
revenue was immaterial in 1998 as fuel prices decreased below the surcharge
index levels.

  Yellow Freight's cost per ton increased 2.7 percent due to cost increases and
unfavorable economies of scale resulting from the tonnage declines. Given the
volume declines, management believes costs per ton would have increased by an
even greater percentage but for cost efficiency and productivity improvements
from both new initiatives as well as run rate benefits from prior year programs.

  Yellow Freight salary, wages and employee benefits as a percentage of revenue
declined slightly in 1998 due to volume declines and wage and benefit increases.
Increased use of rail transportation from 26.9 percent to 27.3 percent
contributed to an increase in purchased transportation expense as well as
decreases in depreciation and other expenses between years. Despite an
improvement in overall accident frequency, 1998 insurance and claim expenses
increased due to a higher number of severe losses in the third quarter. While
fuel prices were lower for most of 1998 compared to the prior year, Yellow
Freight's fuel-hedging program partially offset the product cost savings as fuel
prices reached unprecedented lows.

  Saia Motor Freight Line, Inc. (Saia) continued its growth with 1998 operating
income of $24.7 million, up from $19.6 million in 1997. This was accomplished
with a combination of strong revenue growth and progress on cost control. Saia's
1998 operating ratio was 92.7 compared to 93.7 in 1997. Tonnage increased 5.7
percent and revenue per ton increased 3.3 percent, while cost per ton was up
only 2.3 percent. Revenue for 1998 was $340.1 million up 9.3 percent from $311.2
million in 1997. Business levels were up as Saia was successful in building
density in the 11-state coverage area provided to its customers.

  Throughout 1998, Saia focused on yield improvement and the continued shift to
higher yielding less than truckload (LTL) business. Saia initiated a 5.7 percent
general rate increase in September 1998 and also raised prices on contractual
customers in varying amounts during the

================================================================================
                                                                              17

<PAGE>   20
 

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                                ...CONTINUED...
================================================================================

year. Fuel surcharge revenue declined in 1998. Salary, wages and benefits were
up over 1997 due to an increase of approximately 350 employees resulting from
higher tonnage and approximately 3.5 percent increase in wage rates. Operating
expense increases were consistent with tonnage increases in 1998. While fuel
prices decreased in 1998, Saia's fuel-hedge program partially offset these
favorable prices in 1998. Depreciation increased due to the addition of revenue
equipment placed in service in late 1997 and approximately 340 tractors and 900
trailers placed in service in 1998. Increased purchased transportation and
rentals during 1998 allowed Saia to manage temporary surges in business.

  WestEx, Inc. (WestEx) continued its rapid growth in 1998, reporting revenue of
$64.9 million, up 32.4 percent from $49.0 million in 1997. WestEx reported an
operating loss of $1.2 million for 1998 compared to $0.8 million operating loss
in 1997. Tonnage increased 25.2 percent and revenue per ton increased 5.3
percent in 1998. A general rate increase of 5.2 percent and a yield improvement
program significantly impacted revenues. Salaries, wages and employee benefit
increases in excess of tonnage increases burdened operating expenses in 1998.
Purchased transportation increases in 1998 were offset by reductions in other
operating expenses. WestEx reported positive operating income for the second
half of 1998 and is expected to remain profitable in 1999.

  Action Express, Inc. (Action) will operate as a separate Pacific Northwest and
Rocky Mountain subsidiary. The company's consolidated financial statements
include Action's results after its December 1, 1998 acquisition date, which are
not material.

     Corporate expenses included a $2.3 million fourth quarter non-recurring
expense for an acquisition evaluation that was terminated. Corporate earnings
benefited from a 13.7 percent reduction in interest expense to $11.7 million in
1998, down from $13.5 million in 1997. Other nonoperating expense increased in
1998 versus 1997 due primarily to gains on the sale of real estate recorded in
1997. Earnings per share from continuing operations benefited from the company's
stock buy back programs which reduced total shares outstanding at December 31,
1998 by approximately 10 percent or 2.9 million shares.

Discontinued Operations

  In the second quarter 1998, the company sold Preston Trucking Company, Inc.
(Preston Trucking) its northeast regional LTL segment to a management group of
three senior officers of Preston Trucking. The sale resulted in a charge of
$63.6 million net of anticipated tax benefits of approximately $28.0 million,
which has been disclosed as discontinued operations in the consolidated
statement of operations. No interest charges have been allocated to discontinued
operations and the company does not anticipate any material change in the loss
on disposal of the discontinued operations. The consolidated financial
statements have been restated to remove Preston Trucking from continuing
operations and to disclose these amounts as discontinued operations in
accordance with APB No. 30. The loss from operation of Preston Trucking in 1998
(prior to divestment) was $5.1 million net of tax benefits of $2.8 million. The
loss from operation of Preston Trucking in 1997 was $.3 million, net of tax
expense of $.6 million.

  After giving effect to discontinued operations, the company recorded a net
loss for 1998 of $28.7 million or $1.06 per share (diluted), versus net income
of $52.4 million, or $1.83 per share (diluted) in 1997.

1997 vs. 1996

  Operating revenue for the company totaled $2.9 billion in 1997, up 9.0 percent
from $2.65 billion in 1996. Income from continuing operations for the year was
$52.7 million in 1997, compared to 1996 income from continuing operation of $5.1
million excluding a special charge. The fourth quarter 1996 special charge
pertained to restructuring of the company's Yellow Freight subsidiary and was
$46.1 million

================================================================================
18

<PAGE>   21
 
================================================================================

before income taxes ($28.3 million after income taxes). The special charge is
discussed further in the notes to the consolidated financial statements. Net
income for 1997 was $52.4 million, or $1.83 earnings per share (diluted), versus
1996 net loss of $27.2 million or $.97 per share (diluted).

  Improved profitability resulted primarily from improved pricing, stronger
volumes and aggressive cost reduction and productivity strategies, primarily at
Yellow Freight. Yellow Freight achieved $145 million in cost savings in 1997
from programs implemented in 1996 and 1997.

  Yellow Freight's 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 when the contract was scheduled to expire, March 31, 1998. The Teamsters
ratified a five year contract in April 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 from individually negotiated price
increases with contractual customers as well as by general rate increases, which
apply to customers without contracts, averaging 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 achieved $145 million in net savings in 1997 from programs
implemented in 1996 and 1997, compared to reductions of $75 million achieved in
1996. These reductions resulted from continuation of programs implemented in
1996 that included productivity and efficiency gains through best practices and
increased use of technology, lower personnel complement, centralized purchasing
benefits and other programs. In addition Yellow Freight implemented a change of
operations in April 1997, which enabled an increase in the use of rail
transportation from 18 percent to 27 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 in 1997 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, as a result of 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. Tonnage
increased

================================================================================
                                                                              19

<PAGE>   22
 
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                                ...CONTINUED...
================================================================================

10.6 percent and cost per ton increased 4.0 percent. Saia achieved a 9 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.

  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.

  Corporate earnings also benefited from lower non-operating 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 non-operating 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.

Discontinued Operations

  Preston Trucking reported 1997 operating income of $0.1 million, compared with
a $5.8 million operating loss in 1996. Net loss from discontinued operations was
$0.3 million or $.01 loss per share (diluted) in 1997 compared to a net loss
from discontinued operations of $3.9 million or $.14 loss per share (diluted) in
1996.

1996 vs. 1995

  Operating revenue in 1996 totaled $2.65 billion for the company, unchanged
from 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 charge included the write down of certain
non-operating 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
income from continuing operations of $5.1 million compared to a loss from
continuing operations of $26.5 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 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,

================================================================================
20

<PAGE>   23
 
================================================================================

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.

  During 1996 price increases in fuel cost Yellow Freight about $15 million. A
fuel hedging program and the fuel surcharge offset these additional costs.

  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 claims and insurance
expense increases were offset by lower purchased transportation expense that
declined due to the purchase of additional equipment and better asset
utilization. 

  WestEx 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.

Discontinued Operations

  The operating ratio for Preston Trucking in 1996 was 101.4, the same as in the
prior year. Net loss from discontinued operations was $3.9 million or $.14 loss
per share (diluted) in 1996, compared to a net loss of $3.6 million or $.13 loss
per share (diluted) in 1995.

Financial Condition

  The company's liquidity needs arise primarily from capital investment in new
equipment, land and structures and information technology, as well as funding
working capital requirements.

  Working capital decreased from a negative $22 million at year-end 1997 to a
negative $42 million at year-end 1998. The company can operate with negative
working capital because of the quick turnover of its account receivables 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 $251 million remained available under the agreement at
year-end 1998 versus $227 million available at year-end 1997. Capacity of $107
million remained available under the ABS agreement at year-end 1998 versus $132
million available at year-end 1997. Access to the ABS facility, however, is
dependent on the company having adequate eligible receivables, as defined
under the agreement, available

================================================================================
21

<PAGE>   24
 
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                                ...CONTINUED...
================================================================================

for sale subject to a maximum facility limit of $150 million. 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 a 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 1999 are $147 million, an increase over
1998 capital expenditures of $96 million. Net capital for both periods pertain
primarily to replacement of revenue equipment at all subsidiaries, growth at
Saia, WestEx, and Action Express and additional investments in information
technology. In 1999, additional capital expenditures are planned for land and
structures and funding of a recent acquisition. Net capital expenditures in 1997
totaled $80 million an increase from $43 million in 1996. The following actual
and projected net capital expenditures are summarized below (in millions):


<TABLE>
<CAPTION>
                                                               Actual
                                     ---------------------------------------------------------
                            Projected
                                 1999               1998             1997                 1996
- ----------------------------------------------------------------------------------------------
<S>                             <C>                <C>               <C>                <C>         
Land and structures:
  Additions                     $  39              $  10             $  11              $   10
  Sales                            (5)                (9)              (25)                (10)
Revenue equipment                  68                 60                75                  25
Technology and other               45                 35                19                  18
- ----------------------------------------------------------------------------------------------
Total                           $ 147              $  96             $  80              $   43
- ----------------------------------------------------------------------------------------------
</TABLE>


  In December 1998, the Company acquired Action Express, a regional LTL company
that operates primarily in the Northwest. The consolidated financial statements
include the results of operations from the acquisition date. Neither the
acquisition nor the results of operations were material to the consolidated
financial statements.

  During 1998 the company trimmed $9 million in debt. At year-end 1998 total
debt was $157 million. This reduction followed a decline in total debt from $196
million at year-end 1996 to $166 million at year-end 1997.

  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, including
acquisitions.

Other

  The company provides 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 $8.8 million, $25.9 million and $2.2 million in 1998, 1997 and 1996
respectively.

  Another component of pay for performance is the company's stock option
programs which are discussed on page 38 of the notes to the consolidated
financial statements.

  Yellow Corporation Board of Directors have authorized three programs to
repurchase shares of the Company's outstanding common stock with an aggregate
purchase price of up to $25 million for each program resulting in total
purchases of $55.5 million through December 31,

================================================================================
22

<PAGE>   25
================================================================================

1998. Through December 31, 1998, approximately 2.9 million shares had been
repurchased at an average price of $18.97 per share.

  The effective income tax rate was 42.4 percent in 1998, 40.7 percent in 1997
and (19.2) percent in 1996. 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.

Year 2000

  The company's Year 2000 project is intended to minimize the business impact of
Year 2000 failures. Work efforts both to remediate and replace mainframe and
client/server business applications are on schedule to be ready for the
millennium change. The project will enter a phase of final verification testing
at the end of the first quarter of 1999 to revalidate Year 2000 readiness.

  The company's Year 2000 strategy includes mainframe, mid-range, and client
server applications, PCs, workstations, end-user computing, vendor software,
equipment, environmental operations in terminals and offices, suppliers and
customers. Inventory and assessment of all areas have been completed. The
company has inspected, remediated, tested and reinstalled the majority of its
code. Non-compliant vendor software and equipment determined to be critical to
the business is being repaired or replaced. PC hardware is currently being
replaced as needed through a systematic schedule of upgrades.

  The company's strategy also includes developing relationships with vendors who
are working toward compliance. The company has material vendor relationships
with financial institutions, utilities and telecommunication companies. These
vendors indicate that they expect to achieve compliance and do not anticipate
business interruptions as the century changes. The company is developing
contingency plans to address Year 2000 issues that may arise with these key
vendors. Steps are being taken to address the potential scenarios that may occur
with key vendors and customers.

  The company began its Year 2000 project in 1995 and has estimated total
project costs to be $17-18 million. Through December 31, 1998 the company has
incurred approximately $13.7 million which represents approximately 7.2% of its
information technology budget over the project period. The company expensed $5.9
million of modification costs in the year ended December 31, 1998.

Market Risk

  The company is exposed to a variety of market risks, including the effects of
interest rates, fuel prices and foreign currency exchange rates. To ensure
adequate funding through seasonal business cycles and minimize overall borrowing
costs, the company utilizes a variety of both fixed rate and variable rate
financial instruments with varying maturities. The company's long-term financing
is generally at fixed rates. The detail of the company's debt structure,
including off balance sheet financial instruments is more fully described on
page 35 of the notes to financial statements.

  The company uses swaps and options as hedges in order to manage a portion of
its exposure to variable diesel prices. These agreements provide protection from
rising fuel prices, but limit the ability to benefit from price decreases below
the purchase price of the agreement. The swap transactions are generally based
on the price of heating oil. Based on historical information, the company
believes the correlation between the market prices of diesel fuel and heating
oil is highly effective. The company's fuel hedges are discussed in more detail
on page 33 of the notes to the financial statements.

  The company's revenues and operating expenses, assets and liabilities of its
Canadian and Mexican subsidiaries are denominated in foreign currencies, thereby
creating exposures to changes in exchange rates, however the risks related to
foreign currency exchange rates are not material to the company's consolidated
financial position or results of operations.
- --------------------------------------------------------------------------------
                                                                              23

<PAGE>   26
 
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                                 ..CONTINUED...
================================================================================

  The table below provides information about the company's fixed rate financial
instruments as of December 31, 1998. The table presents principal cash flows
(in millions) and related weighted average interest rates by contractual
maturity dates.


<TABLE>
<CAPTION>                                         Expected Maturity Date


                                   ----------------------------------------------------------------------------------
                                                           
                                     1999      2000      2001      2002    2003  Thereafter       Total    Fair Value
- ---------------------------------------------------------------------------------------------------------------------
<S>                                <C>      <C>       <C>       <C>       <C>      <C>            <C>      <C>    
Fixed Rate Debt                     $   -   $ 30.6   $  8.5   $  23.5    $ 20.7    $  58.4       $ 141.7   $ 151.6
Average Interest Rate                   -     6.84%    8.09%     7.33%     6.33%      6.78%
Variable Rate Debt                  $   -   $   -    $   -    $    -     $  5.0    $  10.4       $  15.4   $  15.4
Average Interest Rate                   -       -        -         -       4.23%      5.14%
Off Balance Sheet -
 Asset Backed Securitization        $ 43.0                                                       $  43.0   $  43.0
 Effective Interest Rate              5.50%

</TABLE>


  The following table provides information about the company's diesel fuel
hedging instruments that are sensitive to changes in commodity prices. The table
presents notional amounts in gallons and the weighted average contract price by
contractual maturity date as of December 31, 1998. The company maintained fuel
inventories for use in normal operations at December 31, 1998, which were not
material to the company's financial position and represented no significant
market exposure.


<TABLE>
<CAPTION>
                                                             Expected Maturity Date
                                            -----------------------------------------------------------
                                                  1999            2000        Total         Fair Value
- -------------------------------------------------------------------------------------------------------
<S>                                            <C>               <C>          <C>           <C>        
Heating Oil Swaps:
Gallons (in millions)                          116,950           41,850       158,800       $  (13,505)
Weighted Average Price per Gallon            $   .4659        $   .4622     $   .4649

Diesel Fuel Fixed Purchase Contracts:
Gallons (in millions)                            5,040                -         5,040       $     (558)
Weighted Average Price per Gallon            $   .5170        $       -     $   .5170
</TABLE>
 

================================================================================
24

<PAGE>   27

================================================================================

Outlook

  The company operates in a highly competitive and changing transportation
business. The 1998 five-year NMFA labor agreement provides stability to the
customers of its largest subsidiary, Yellow Freight. It also provides Yellow
Freight with reasonable economic terms for its largest expense item.

  All of the company's subsidiaries can now focus on achieving profitable
revenue growth. This starts with a continuous improvement focus on offering best
in class customer satisfaction for core services. It also means reinventing the
business with more customer solutions involving new and enhanced services, not
limited to just LTL. An example of this is Yellow Freight's introduction in July
of Exact Express, a time-definite, expedited air and ground delivery service.

  The company's subsidiaries are also working hard to continuously improve their
productivity and cost efficiency to best in class levels. This not only reduces
costs, but it also supports improved customer service capabilities.

  The company believes its ability to achieve profitable revenue growth and cost
efficiency is enhanced by its technology investments, its comprehensive physical
assets as well as the quality and low turnover of its experienced work force.
Because employees are the company's greatest asset, the subsidiaries are also
focused on achieving best in class safety performance.

  In addition to current subsidiaries and businesses, the company will also
evaluate opportunities to grow earnings through acquisitions. Management
believes the company's balance sheet and access to capital provide flexibility
to reinvest in existing businesses as well as new opportunities with attractive
growth prospects.

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, labor relations, inclement weather, competitor pricing
activity, year 2000 issues, expense volatility and a downturn in general
economic activity.

================================================================================
                                                                              25

<PAGE>   28
                                FINANCIAL SUMMARY
                       Yellow Corporation and Subsidiaries

                  (amounts in thousands except per share data)
================================================================================



<TABLE>
<CAPTION>

                                                           1998           1997            1996            1995            1994 
FOR THE YEAR:                                                 (a)                              (b)                             (c) 
<S>                                                   <C>             <C>             <C>             <C>             <C>        
Operating revenue                                     $ 2,900,577     $ 2,898,414     $ 2,654,991     $ 2,645,184     $ 2,450,722
Income (loss) from operations                              83,396          98,677          (7,749)        (15,710)         16,478
Depreciation                                              103,856         108,225         118,749         123,636         123,927
Interest expense                                           11,685          13,546          21,036          23,395          18,433
Income (loss) from continuing operations                   40,077          52,740         (23,240)        (26,538)            (42)
Net income (loss) including discontinued operations       (28,669)         52,435         (27,180)        (30,122)         (7,906)
Net cash from operating activities                        154,575         119,984         190,652          41,771         144,244
Capital expenditures, net                                  95,633          79,566          43,165         120,609         140,856

AT YEAR END:
Net property and equipment                                702,802         692,159         715,769         815,617         820,582
Total assets                                            1,105,685       1,270,812       1,227,807       1,434,897       1,307,221
Total debt                                                157,065         165,705         196,153         353,573         247,760
Treasury stock                                            (73,151)        (27,006)        (17,620)        (17,620)        (17,619)
Shareholders' equity                                      371,252         445,851         395,700         422,677         460,843

MEASUREMENTS:
Diluted per share data:
Income (loss) from continuing operations                     1.49            1.84            (.83)           (.94)              -
Net income (loss) including discontinued operations         (1.06)           1.83            (.97)          (1.07)           (.28)

Cash dividends per share                                        -               -               -             .47             .94

Shareholders' equity per share                              13.90           15.77           14.08           15.04           16.40

Debt to capital ratio                                          30              27              33              46              35

Return on average shareholders' equity
  - continuing operations                                     9.8%           12.5%           (5.7)%          (6.0)%             -

Market price range:
High                                                       29 7/8          34 1/8          16 3/8          24 3/8          30 1/4
Low                                                       9 11/16          14 1/8          10 1/4          11 7/8          16 3/4

Average number of employees                                29,700          29,000          29,000          28,900          27,700
</TABLE>



(a)  In 1998, the company sold Preston Trucking Company, Inc. All selected
     financial data have been restated to disclose Preston Trucking as
     discontinued operations.
(b)  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.
(c)  1994 results include the effect of a 24-day Teamster strike at Yellow
     Freight System. Income from continuing operations excludes $3.7 million
     extraordinary item resulting from the write off of operating rights.

================================================================================
26




<PAGE>   29

                         CONSOLIDATED BALANCE SHEETS
        Yellow Corporation and Subsidiaries December 31, 1998 and 1997

                  (amounts in thousands except per share data)
================================================================================


<TABLE>
<CAPTION>

ASSETS                                               1998            1997
<S>                                               <C>                <C>       
CURRENT ASSETS:
Cash                                              $   25,522         $   17,703
Accounts receivable, less allowances
  of $14,162  and $12,264                            272,436            293,300
Fuel and operating supplies                            8,966             13,369
Refundable income taxes                                    -              6,409
Prepaid expenses                                      67,691             61,392
Current assets of discontinued operations                  -             66,588
- -------------------------------------------------------------------------------
Total current assets                                 374,615            458,761
- -------------------------------------------------------------------------------

PROPERTY AND EQUIPMENT:
Land                                                 103,720            103,308
Structures                                           541,777            542,591
Revenue equipment                                    949,695            912,850
Technology equipment and software                    171,142            137,405
Other                                                130,695            137,452
- -------------------------------------------------------------------------------
                                                   1,897,029          1,833,606
Less - Accumulated depreciation                    1,194,227          1,141,447
- -------------------------------------------------------------------------------
Net property and equipment                           702,802            692,159
- -------------------------------------------------------------------------------

Other Assets                                          28,268             25,540
Noncurrent assets of
  discontinued operations                                  -             94,352
- -------------------------------------------------------------------------------
Total assets                                      $1,105,685         $1,270,812
- -------------------------------------------------------------------------------
</TABLE>



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

================================================================================
27

<PAGE>   30

================================================================================

<TABLE>
<CAPTION>

LIABILITIES AND
SHAREHOLDERS' EQUITY                                           1998                    1997
CURRENT LIABILITIES:
<S>                                                     <C>                <C>              
Checks outstanding                                      $    79,603        $         80,852
Accounts payable                                             68,041                  67,580
Wages, vacations, and employees' benefits                   119,347                 153,073
Deferred income taxes                                        36,759                  26,752
Claims and insurance accruals                                69,016                  69,976
Other current and accrued liabilities                        43,352                  34,619
Current maturities of long-term debt                             77                   2,625
Current liabilities of discontinued operations                    -                  45,358
- -------------------------------------------------------------------------------------------
Total current liabilities                                   416,195                 480,835
- -------------------------------------------------------------------------------------------

OTHER LIABILITIES:
Long-term debt                                              156,988                 163,080
Deferred income taxes                                        18,433                  21,429
Claims, insurance and other                                 142,817                 136,840
Noncurrent liabilities of discontinued operations                 -                  22,777
- -------------------------------------------------------------------------------------------
Total other liabilities                                     318,238                 344,126
- -------------------------------------------------------------------------------------------

Commitments and contingencies

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 29,356 and 29,289 shares            29,356                  29,289
Capital surplus                                              14,948                  13,868
Retained earnings                                           403,262                 431,931
Accumulated other comprehensive income                       (3,163)                 (2,231)
Treasury stock, at cost (3,678 and 1,172 shares)            (73,151)                (27,006)
- -------------------------------------------------------------------------------------------
Total shareholders' equity                                  371,252                 445,851
- -------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity              $ 1,105,685        $      1,270,812
- -------------------------------------------------------------------------------------------
</TABLE>

================================================================================
                                                                              28

<PAGE>   31

                     STATEMENTS OF CONSOLIDATED OPERATIONS
       Yellow Corporation and Subsidiaries for the years ended December 31

                  (amounts in thousands except per share data)
================================================================================

<TABLE>
<CAPTION>
                                                        1998                 1997                  1996

<S>                                                <C>                  <C>                    <C>        
OPERATING REVENUE                                  $ 2,900,577          $  2,898,414           $ 2,654,991
- ----------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Salaries, wages and employees' benefits              1,848,548             1,844,664             1,746,292
Operating expenses and supplies                        446,872               459,404               440,463
Operating taxes and licenses                            94,082                96,097                97,514
Claims and insurance                                    71,964                64,241                65,792
Depreciation                                           103,856               108,225               118,749
Purchased transportation                               251,859               227,106               147,792
Special charge                                               -                     -                46,138
- ----------------------------------------------------------------------------------------------------------
Total operating expenses                             2,817,181             2,799,737             2,662,740
- ----------------------------------------------------------------------------------------------------------

INCOME (LOSS) FROM OPERATIONS                           83,396                98,677                (7,749)
- -----------------------------------------------------------------------------------------------------------

NONOPERATING (INCOME) EXPENSES:
Interest expense                                        11,685                13,546                21,036
Interest income                                         (1,123)               (1,057)               (2,189)
Other, net                                               3,285                (2,694)                2,178
- ----------------------------------------------------------------------------------------------------------
Nonoperating expenses, net                              13,847                 9,795                21,025
- ----------------------------------------------------------------------------------------------------------

INCOME (LOSS) FROM CONTINUING OPERATIONS
  BEFORE INCOME TAXES                                   69,549                88,882               (28,774)
INCOME TAX PROVISION (BENEFIT)                          29,472                36,142                (5,534)
- -----------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM CONTINUING OPERATIONS                40,077                52,740               (23,240)
- -----------------------------------------------------------------------------------------------------------


Loss from discontinued operations, net                 (68,746)                 (305)               (3,940)
- -----------------------------------------------------------------------------------------------------------
NET INCOME (LOSS)                                  $   (28,669)          $    52,435           $   (27,180)
- -----------------------------------------------------------------------------------------------------------


AVERAGE COMMON SHARES OUTSTANDING-BASIC                 26,709                28,267                28,110
- ----------------------------------------------------------------------------------------------------------
AVERAGE COMMON SHARES OUTSTANDING-DILUTED               26,920                28,695                28,144
- ----------------------------------------------------------------------------------------------------------

BASIC EARNINGS (LOSS) PER SHARE:
Income (loss) from continuing operations           $      1.50           $      1.87           $      (.83)
Loss from discontinued operations                        (2.57)                 (.01)                 (.14)
- -----------------------------------------------------------------------------------------------------------
Net income (loss)                                  $     (1.07)          $      1.86           $      (.97)
- -----------------------------------------------------------------------------------------------------------

DILUTED EARNINGS (LOSS) PER SHARE:
Income (loss) from continuing operations           $      1.49           $      1.84           $      (.83)
Loss from discontinued operations                        (2.55)                 (.01)                 (.14)
- -----------------------------------------------------------------------------------------------------------
Net income (loss)                                  $     (1.06)          $      1.83           $      (.97)
- -----------------------------------------------------------------------------------------------------------
</TABLE>



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

29

<PAGE>   32

                    STATEMENTS OF CONSOLIDATED CASH FLOWS
     Yellow Corporation and Subsidiaries for the years ended December 31

                             (amounts in thousands)
================================================================================


<TABLE>
<CAPTION>

                                                                 1998                1997               1996
OPERATING ACTIVITIES:
<S>                                                          <C>                 <C>                 <C>       
Net income (loss)                                            $ (28,669)          $  52,435           $ (27,180)
Noncash items included in net income (loss):
 Depreciation                                                  103,856             108,225             118,749
 Loss on discontinued operations                                68,746                 305               3,940
 Special charge                                                      -                   -              46,138
 Deferred income tax provision (benefit)                         5,638               5,496             (31,810)
Changes in assets and liabilities, net:
 Accounts receivable                                            (1,669)            (30,981)              4,031
 Accounts receivable securitizations, net                       25,000             (27,000)             45,000
 Accounts payable and checks outstanding                        (1,803)             13,478              (2,612)
 Other working capital items                                   (22,112)             34,429              25,007
 Claims, insurance and other                                     4,014             (31,737)              5,873
 Other, net                                                      1,574              (4,666)              3,516
- - -------------------------------------------------------------------------------------------------------------
Net cash from operating activities                             154,575             119,984             190,652
- ---------------------------------------------------------------------------------------------------------------

INVESTING ACTIVITIES:
Acquisition of property and equipment                         (111,466)           (109,027)            (54,949)
Proceeds from disposal of property and equipment                15,833              29,461              11,784
Purchases of short-term investments                                  -                   -              (1,684)
Proceeds from maturities of short-term investments                   -                   -               7,098
Net capital expenditures of discontinued operations              2,203             (11,426)              3,087
- ---------------------------------------------------------------------------------------------------------------
Net cash used in investing activities                          (93,430)            (90,992)            (34,664)
- ---------------------------------------------------------------------------------------------------------------

FINANCING ACTIVITIES:
Unsecured bank credit lines, net                                     -                   -              (9,000)
Commercial paper, net                                                -             (11,832)           (116,627)
Repayment of long-term debt                                     (7,575)            (18,644)            (32,011)
Proceeds from exercise of stock options, net                     1,085               4,983                   -
Treasury stock purchases                                       (46,836)             (8,695)                  -
- ---------------------------------------------------------------------------------------------------------------
Net cash used in financing activities                          (53,326)            (34,188)           (157,638)
- ---------------------------------------------------------------------------------------------------------------

NET INCREASE (DECREASE) IN CASH                                  7,819              (5,196)             (1,650)
CASH, BEGINNING OF YEAR                                         17,703              22,899              24,549
- ---------------------------------------------------------------------------------------------------------------
CASH, END OF YEAR                                            $  25,522           $  17,703           $  22,899
- ---------------------------------------------------------------------------------------------------------------

SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid (received), net                            $ (11,337)          $  30,299           $ (23,556)
- ---------------------------------------------------------------------------------------------------------------
Interest paid                                                $  11,410           $  12,274           $  20,642
- ---------------------------------------------------------------------------------------------------------------
</TABLE>



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

                                                                              30

<PAGE>   33


                STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
                      Yellow Corporation and Subsidiaries

                             (amounts in thousands)
================================================================================

<TABLE>
<CAPTION>
                                                                                               Other Accumulated    
                                                       Common         Capital        Retained      Comprehensive       Treasury
                                      Total             Stock         Surplus        Earnings             Income          Stock
                                                                                                 
<S>                                <C>              <C>             <C>             <C>                <C>            <C>       
BALANCE, DECEMBER 31,1995          $ 422,677        $  28,858       $   6,678       $ 406,676          $  (1,915)     $ (17,620)
                                                                                                 
Net loss                             (27,180)               -               -         (27,180)                 -              -
Foreign currency translation                                                                     
  adjustments                            131                -               -               -                131              -
                                   ---------                                        ---------          ---------                   
Total comprehensive loss             (27,049)               -               -         (27,180)               131              -

                                                                                                 
Other                                     72                5              67               -                  -              -
- --------------------------------------------------------------------------------------------------------------------------------   
BALANCE, DECEMBER 31,1996            395,700           28,863           6,745         379,496             (1,784)       (17,620)
                                                                                                 
Net income                            52,435                -               -          52,435                  -              -
Foreign currency translation                                                                     
  adjustments                           (447)               -               -               -               (447)             -
                                   ---------                                        ---------          ---------                   
Total comprehensive income            51,988                -               -          52,435               (447)             -
                                                                                                 
Exercise of stock options,                                                                       
  including tax benefits               7,452              421           7,031               -                  -              -
Treasury stock purchases              (9,386)               -               -               -                  -         (9,386)
Other                                     97                5              92               -                  -              -
- --------------------------------------------------------------------------------------------------------------------------------
                                                                                                 
BALANCE, DECEMBER 31,1997            445,851           29,289          13,868         431,931             (2,231)       (27,006)
                                                                                                 
Net loss                             (28,669)               -               -         (28,669)                 -              -
Foreign currency translation                                                                     
  adjustments                           (932)               -               -               -               (932)             -
                                   ---------                                        ---------          ---------                   
Total comprehensive loss             (29,601)               -               -         (28,669)              (932)             -
                                                                                                 
Exercise of stock options,                                                                       
  including tax benefits               1,005               60             945               -                  -              -
Treasury stock purchases             (46,145)               -               -               -                  -        (46,145)
Other                                    142                7             135               -                  -              -
- -------------------------------------------------------------------------------------------------------------------------------
                                                                                                 
BALANCE, DECEMBER 31,1998          $ 371,252        $  29,356       $  14,948       $ 403,262          $  (3,163)     $ (73,151)
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
  




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

31


<PAGE>   34

                   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), Saia Motor
Freight Line, Inc. (Saia), WestEx, Inc. (WestEx), and Action Express, Inc.
(Action).

     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 primarily uses heating oil
financial instruments to manage a portion of its exposure to fluctuating diesel
prices. Under the 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 agreements. At
December 31, 1998, the company had agreements for 163.8 million gallons at a
cost averaging $.47 per gallon over the next 20 months, representing 75% of
total anticipated fuel usage over the contract period. At December 31, 1997, the
company had agreements on 45.8 million gallons at a cost averaging $.59 per
gallon over the next 12 months, representing 29% of total anticipated annual
fuel usage. Based on quoted market prices, the fair value of the swaps and fixed
purchase contracts at December 31, 1998 and 1997, was $14.1 million and $0.4
million below 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.

     -The Financial Accounting Standards Board issued Statement No. 133,
Accounting For Derivative Instruments and Hedging Activities that will be
effective for the company's fiscal year ended December 31, 2000. This statement
establishes accounting and reporting standards requiring all derivative
instruments to be recorded in the balance sheet at their fair value. The
statement requires changes in a derivatives fair value to be recognized
currently in earnings, except for special qualifying hedges for which gains and
losses may offset the hedged item in the income statement. The company has not
yet determined the impact of adoption of statement No. 133.

     -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 - 14              
  Technology equipment and software        3 - 6             
  Other                                    3 - 10               
</TABLE>


================================================================================

                                                                              32


<PAGE>   35
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       Yellow Corporation and Subsidiaries


                                 ...CONTINUED...
================================================================================
Principles of Consolidation and Summary of Accounting Policies (Continued)

     -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 operating expenses and supplies. Net gains
from operating property dispositions totaled $5.0 million in 1998 and $1.1
million in 1997.

     -Included in other assets are intangible assets of approximately $19.2
million at December 31, 1998 and $13.3 million at December 31, 1997, net of
accumulated amortization which are being amortized over 7-40 years.

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

     -Effective January 1, 1998, the company prospectively adopted Statement of
Position 98-1, Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use (the SOP). The statement requires capitalization of
certain costs associated with developing or obtaining internal-use software,
once the capitalization criteria of the SOP has been met.

     Capitalizable costs include external direct costs of materials and services
utilized in developing or obtaining the software and, payroll and
payroll-related costs for employees directly associated with the project. Prior
to adoption of the standard, the company had capitalized only the external
direct costs associated with internal-use software. In the year ended December
31, 1998, the company capitalized $5.1 million, primarily payroll-related costs
incurred since January 1, 1998, on eligible projects.

     -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 and bodily injury and property damage
are primarily 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 costs
is implicitly considered in the actuarial analyses. Adjustments to previously
established reserves are included in operating results.

     At December 31, 1998 and 1997, estimated future payments for workers'
compensation claims aggregated $116.5 million and $124.9 million. The present
value of these estimated future payments was $99.7 million at December 31, 1998,
and $107.7 million at December 31, 1997.

     -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.


================================================================================
33

<PAGE>   36

================================================================================
Debt and Financing
  At December 31, debt consisted of the following (in thousands):
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                      1998                  1997
<S>                                        <C>                   <C>            
Medium term notes                          $       114,000       $       114,000
Industrial development bonds                        20,550                23,850
Capital leases and other                               815                 3,946
Subordinated debentures                             21,700                23,909
- --------------------------------------------------------------------------------
Total debt                                         157,065               165,705
Current maturities                                      77                 2,625
- --------------------------------------------------------------------------------
Long-term debt                             $       156,988       $       163,080
- --------------------------------------------------------------------------------
</TABLE>



     The company has a $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, 1998 and 1997, the company was in compliance with all terms of this
credit agreement. At December 31, 1998, there were no borrowings outstanding,
but $49 million of letters of credit had been issued under the agreement. There
were no borrowings at December 31, 1997, but $73 million of letters of credit
had been issued under the agreement.

     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, 1998 and 1997, are net of
$43.0 million and $18.0 million of receivables sold. Other, net nonoperating
expense includes $2.9 million and $2.5 million of costs associated with this
agreement in 1998 and 1997.

     The company maintains financing flexibility under the credit agreement and
the accounts receivable sales agreement. Medium term notes maturing within one
year, and intended to be refinanced, are classified as long-term. 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 3.9% to 6.1%,
with principal payments due through 2014.

     The subordinated debentures have an interest rate of 7.0% and are due in
installments from 1999 to 2011.

     The principal maturities of long-term debt for the next five years follow:
1999 - $77,000, 2000 - $30,580,000, 2001 - $8,483,000, 2002 - $23,478,000, 2003
- - $25,688,000, thereafter $68,759,000.


================================================================================

                                                                              34


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


                                ...CONTINUED...
================================================================================
Debt and Financing (Continued)

     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, 1998 and 1997, was approximately $167 million and $169 million.

Employee Benefits

     Certain subsidiaries provide defined benefit pension plans for employees
not covered by collective bargaining agreements (approximately 14 percent 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. Approximately 90
percent of the plans' assets consist of U.S. Government and corporate fixed
income securities and U.S. equities. Approximately 10 percent is invested in
international equities.

     The company adopted Financial Accounting Standards Board Statement No. 132
Employer's Disclosure About Pensions and Other Post Retirement Benefits in 1998.
The statement standardizes the disclosure requirements for pensions and other
post retirement benefits.

     The following tables set forth the plans' funded status and components of
net pension cost (in thousands):


<TABLE>
<CAPTION>
                                                                 1998                   1997
<S>                                                  <C>                    <C>             
Change in benefit obligation:
Benefit obligation at beginning of year              $        221,360       $        201,145
Service cost                                                    8,100                  7,415
Interest cost                                                  16,357                 15,171
Actuarial loss                                                 16,874                  5,553
Plan amendment                                                      -                    924
Benefits paid                                                 (9,248)                (8,848)
- --------------------------------------------------------------------------------------------
Benefit obligation at end of year                    $        253,443       $        221,360
- --------------------------------------------------------------------------------------------

Change in plan assets:
Fair value of plan assets at beginning of year       $        189,677       $        165,893
Actual return on plan assets                                   29,396                 32,338
Employer contributions                                         14,919                    294
Benefits paid                                                 (9,248)                (8,848)
- --------------------------------------------------------------------------------------------
Fair value of plan assets at end of year             $        224,744       $        189,677
- --------------------------------------------------------------------------------------------

Funded status                                        $       (28,699)       $       (31,683)
Unrecognized transition asset                                (10,895)               (13,283)
Unrecognized net actuarial gain                              (17,275)               (18,603)
Unrecognized prior service cost                                   779                    795
- --------------------------------------------------------------------------------------------
Prepaid (accrued) benefit cost                       $       (56,090)       $       (62,774)
- --------------------------------------------------------------------------------------------
</TABLE>




================================================================================

35

<PAGE>   38


================================================================================

<TABLE>
<CAPTION>
                                                                   1998                   1997                   1996
<S>                                                    <C>                    <C>                    <C>             
Net pension cost:
Service cost - benefits earned during the period       $          8,100       $          7,415       $          8,335
Interest cost on projected benefit obligation                    16,357                 15,171                 13,317
Actual return on plan assets                                   (29,396)               (32,338)               (20,331)
Amortization of unrecognized net assets                         (2,367)                (2,372)                (2,123)
Net deferral                                                     15,541                 19,930                  9,032
- ---------------------------------------------------------------------------------------------------------------------
Net pension cost                                       $          8,235       $          7,806       $          8,230
- ---------------------------------------------------------------------------------------------------------------------
Weighted average assumptions at December 31:
Discount rate                                                      6.8%                   7.3%                   7.5%
Rate of increase in compensation levels                            3.5%                   4.0%                   4.0%
Expected rate of return on assets                                  9.0%                   9.0%                   9.0%
</TABLE>


     The company contributes to multi-employer health, welfare and pension plans
for employees covered by collective bargaining agreements (approximately two
thirds 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>
                                    1998                  1997                  1996
<S>                      <C>                   <C>                   <C>            
Health and welfare       $       141,448       $       141,817       $       140,256
Pension                          142,733               143,529               128,007
- ------------------------------------------------------------------------------------
Total                    $       284,181       $       285,346       $       268,263
- ------------------------------------------------------------------------------------
</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 also 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 subsidiary has no intention of taking any action that would
subject the company to obligations under the legislation.

     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

================================================================================

                                                                              36


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



                                ...CONTINUED...
================================================================================
Employee Benefits (Continued)

each participating company. Contributions for each of the three years in the
period ended December 31, 1998, 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 1998, 1997 and 1996 include performance incentive accruals for
nonunion employees of $8.8 million, $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 two types of
awards: grants of nonqualified stock options and grants of stock options coupled
with a grant of stock appreciation rights. The 1992 plan also permits grants of
restricted stock awards.

     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.

     In addition, the company has reserved 100,000 shares of its common stock
for issuance to its Board of Directors.

     The company applies Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, in accounting for its plans. The table below
presents unaudited pro forma net income (loss) and earnings (loss) per share,
had compensation costs been recognized in accordance with Financial Accounting
Standards Board Statement No. 123, Accounting for Stock-Based Compensation. The
unaudited pro forma calculations, were estimated using the Black-Scholes
option-pricing model with the following weighted average assumptions.


<TABLE>
<CAPTION>
                                                                   1998                1997                1996
<S>                                                      <C>                  <C>                 <C>          
Dividend yield                                                       -%                  -%                  0.5%
Expected volatility                                               34.8%               36.6%                 31.9%
Risk-free interest rate                                            5.5%                6.1%                  6.3%
Expected option life (years)                                         3                   3                     5
Fair value per option                                    $        5.59        $       6.98        $         4.69

- ----------------------------------------------------------------------------------------------------------------
(In millions except per share data)

Net income (loss)                                        $       (28.7)       $       52.4        $        (27.2)
Pro forma compensation expense, net of tax benefit                 2.7                 2.0                   0.8
- ------------------------------------------------------------------------------------------ ---------------------
Pro forma net income (loss)                              $       (31.4)       $       50.4        $        (28.0)
- ------------------------------------------------------------------------------------------ ---------------------
Pro forma earnings (loss) per share - diluted            $       (1.17)       $       1.76        $         (.99)
- ----------------------------------------------------------------------------------------------------------------
</TABLE>


================================================================================


37


<PAGE>   40


     At December 31, 1998, and 1997 options on approximately 675,000 shares and
50,000 shares, respectively were exercisable. No options were exercisable at
December 31, 1996. The weighted average remaining contract life on outstanding
options at December 31, 1998, 1997 and 1996 was 8.4 years, 9.0 years and 9.5
years. A summary of activity in the company's stock option plans is presented
below.



<TABLE>
<CAPTION>
                                                             Exercise Price
- ----------------------------------------------------------------------------------
                                           Shares        Weighted
                                       (thousands)        Average            Range
<S>                                       <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
Granted                                        873          18.57     11.50 - 21.06
Exercised                                      (60)         14.11     12.25 - 17.00
Cancelled                                     (135)         16.84     12.25 - 27.00
- ----------------------------------------------------------------------------------
Outstanding at December 31, 1998             3,053     $    18.10   $ 11.50 - 27.00
- ----------------------------------------------------------------------------------
</TABLE>




Discontinued Operations

     On June 1, 1998 the company reached agreement in principal to sell Preston
Trucking Company, Inc. (Preston Trucking) its Northeast regional LTL segment to
a management group of three senior officers of Preston Trucking. Preston
Trucking is a regional carrier serving the Northeast, Mid Atlantic, and Central
States. Substantially all assets of Preston Trucking were sold and substantially
all liabilities were assumed by the management group. The sale resulted in a
noncash charge of $63.6 million net of anticipated tax benefits of approximately
$28.0 million which has been reflected as discontinued operations in the
consolidated statements of operation. No interest charges have been allocated to
discontinued operations and the company does not anticipate any material change
in the loss from disposition of the discontinued operations.

     The results of Preston Trucking have been classified as discontinued
operations in the consolidated financial statements. Revenue of Preston Trucking
for fiscal 1998 through the sale date was $211.5 million. Preston Trucking had
revenues of $450.5 million and $417.6 million in fiscal 1997 and 1996. Loss from
operation of discontinued operations was $5.1 million, $0.3 million, and $3.9
million for fiscal 1998, 1997, and 1996 and is net of income tax expense
(benefit) of $(2.8) million, $0.6 million and $(1.6) million for fiscal 1998,
1997 and 1996. Basic and diluted loss per share from operation of discontinued
operations was $.19 in 1998. Basic loss per share from disposal of discontinued
operations was $2.38 in 1998 and diluted loss per share was $2.36.


================================================================================
                                                                              38



<PAGE>   41
\

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      Yellow Corporation and Subsidiaries


                                ...CONTINUED...
================================================================================
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             Year Ended December 31, 1998
- -----------------------------------------------------------------------------------------------------------------------
                                       1996  Favorable     Paid or     Ending         Favorable     Paid or     Ending
                                     Charge  Revisions     Utilized    Balance        Revisions     Utilized    Balance

<S>                               <C>         <C>        <C>         <C>              <C>        <C>         <C>      
Write down nonoperating
 real estate                      $   16,548  $     960  $   10,348  $    5,240       $     700  $    4,040  $     500
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              -          184         -
- ------------------------------------------------------------------------------------------------------------------------
Total charge before taxes         $   46,138  $     960  $   39,754  $    5,424       $     700  $     4224    $   500
- ------------------------------------------------------------------------------------------------------------------------
</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.
Through December 31, 1998, 8 parcels written down in the charge to $11.4 million
were sold for $13.1 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.

================================================================================
39


<PAGE>   42


================================================================================
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>
- --------------------------------------------------------------------------------
                                                    1998                    1997

<S>                                    <C>                     <C>              
Depreciation                           $          93,146       $          75,538
Prepaids                                          13,340                  13,367
Employee benefits                                 34,965                  32,603
Revenue                                           22,078                  34,952
Other                                              1,977                   6,187
- --------------------------------------------------------------------------------
Gross tax liabilities                            165,506                 162,647
- --------------------------------------------------------------------------------
Claims and insurance                             (64,570)                (65,841)
Bad debts                                         (3,668)                 (4,195)
NOL and AMT credit carryforwards                  (2,265)                 (2,385)
Employee Benefits                                (18,540)                (16,434)
Revenue                                          (16,019)                (16,427)
Other                                             (5,252)                 (9,184)
- --------------------------------------------------------------------------------
Gross tax assets                                (110,314)               (114,466)
- --------------------------------------------------------------------------------
Net tax liability                      $          55,192       $          48,181
- --------------------------------------------------------------------------------
</TABLE>

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



<TABLE>
<CAPTION>
                                                              1998                 1997                   1996

<S>                                                 <C>                  <C>                  <C>             
Provision (benefit) at federal statutory rate       $       24,342       $       31,109       $        (10,071)
State income taxes, net                                      2,510                2,641                 (1,352)
Nondeductible business expenses                              2,130                2,152                  2,084
Foreign tax rate differential                                  332                  599                    688
Repatriation of Canadian earnings, net                           -                  400                  3,169
Other, net                                                     158                 (759)                   (52)
- --------------------------------------------------------------------------------------------------------------
Income tax provision (benefit)                      $       29,472       $       36,142       $         (5,534)
- --------------------------------------------------------------------------------------------------------------
Effective tax rate                                           42.4%                40.7%                  (19.2)%
- --------------------------------------------------------------------------------------------------------------
</TABLE>


================================================================================
                                                                              40

<PAGE>   43
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      Yellow Corporation and Subsidiaries


                                ...CONTINUED...
================================================================================
Income Taxes (Continued)

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


<TABLE>
<CAPTION>

                                                                      1998                  1997                   1996
<S>                                                        <C>                   <C>                   <C>             
Current:
 U.S. federal                                              $        18,539       $        23,257       $         15,709
 State                                                               4,180                 5,039                  7,434
 Foreign                                                             1,115                 2,350                  3,133
- -----------------------------------------------------------------------------------------------------------------------
Current income tax provision                                        23,834                30,646                 26,276
- -----------------------------------------------------------------------------------------------------------------------
Deferred:
 U.S. federal                                                        5,990                 6,472                (21,430)
 State                                                                (426)                 (976)               (10,282)
 Foreign                                                                74                     -                    (98)
- -----------------------------------------------------------------------------------------------------------------------
Deferred income tax provision (benefit)                              5,638                 5,496                (31,810)
- -----------------------------------------------------------------------------------------------------------------------
Income tax provision (benefit)                             $        29,472        $       36,142        $        (5,534)
- -----------------------------------------------------------------------------------------------------------------------
Based on the income (loss) before income taxes:
 Domestic                                                  $        67,100       $        83,879       $        (35,480)
 Foreign                                                             2,449                 5,003                  6,706
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes                          $        69,549       $        88,882       $        (28,774)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>



Earnings Per Common Share

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


<TABLE>
<CAPTION>

                                                  Continuing Operations                  Discontinued Operations
- -------------------------------------------------------------------------------------------------------------------
                                 Average                          Earnings                                 Earnings
                             Incremental          Earnings          (Loss)                 Earnings          (Loss)
                                  Shares            (Loss)       Per Share                   (Loss)       Per Share
1998
<S>                               <C>       <C>              <C>                     <C>              <C>           
Basic                             26,709    $      40,077    $        1.50           $     (68,746)   $       (2.57)
Effect of dilutive options           211                -             (.01)                      -              .02
- --------------------------------------------------------------------------------------------------------------------
Diluted                           26,920    $      40,077    $        1.49           $     (68,746)   $       (2.55)
- --------------------------------------------------------------------------------------------------------------------
1997
Basic                             28,267    $      52,740    $        1.87           $        (305)   $        (.01)
Effect of dilutive options           428                -             (.03)                      -                -
- --------------------------------------------------------------------------------------------------------------------
Diluted                           28,695    $      52,740    $        1.84           $        (305)   $        (.01)
- --------------------------------------------------------------------------------------------------------------------
1996
Basic                             28,110    $     (23,240)   $        (.83)          $      (3,940)   $        (.14)
Effect of dilutive options            34                -                -                       -                -
- --------------------------------------------------------------------------------------------------------------------
Diluted                           28,144    $     (23,240)   $        (.83)          $      (3,940)   $        (.14)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>


================================================================================
41


<PAGE>   44

================================================================================
  
     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>
                                                                   1998                  1997                 1996

<S>                                                       <C>                 <C>                   <C>
Weighted average shares outstanding  (in thousands)               1,204                   331                   76
Weighted average exercise price                           $          23       $        24 1/4       $       13 3/8
</TABLE>


Business Segments

     The company adopted FASB Statement No. 131, Disclosures about Segments of
an Enterprise and Related Information, in first quarter 1998. This statement
requires the company report financial and descriptive information about its
reportable operating segments, on a basis consistent with that used internally
for evaluating segment performance and allocating resources to segments.
     The company has two reportable segments that are strategic business units
offering different products and services. The National segment is comprised
primarily of the operations of Yellow Freight, a carrier that 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. The Southeast regional segment consists of the operations of
Saia, a regional LTL carrier that provides overnight and second-day service in
eleven southeastern states and Puerto Rico. 
     The segments are managed separately because each requires different
operating, technology and marketing strategies. The company evaluates
performance primarily on operating income and return on capital.
     The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The company also charges a
tradename fee to Yellow Freight (1% of revenue) for use of the company's
trademark. Interest and intersegment transactions are recorded at current market
rates. Management fees and other corporate services are charged to segments
based on direct benefit received or allocated based on revenues. Income taxes
are allocated in accordance with a tax sharing agreement in proportion to each
segment's contribution to the parent's consolidated tax status.
                                                     
================================================================================
                                                                             42


<PAGE>   45
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      Yellow Corporation and Subsidiaries
                                ...CONTINUED...
================================================================================

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

<TABLE>
<CAPTION>
                                                                                Corporate,                 
                                                                  SE             Other and                 
                                       National             Regional          Eliminations       Consolidated  
<S>                                  <C>                 <C>                <C>                 <C>        
1998                                                                                                        
Operating revenue                    $ 2,492,617         $   340,078        $    67,882         $ 2,900,577
Income (loss) from operations             66,883              24,724             (8,211)             83,396
Identifiable assets                      816,925             204,249             84,511           1,105,685
Capital expenditures, net                 36,431              42,089             17,113              95,633
Depreciation                              74,659              17,259             11,938             103,856
- -----------------------------------------------------------------------------------------------------------
1997 
Operating revenue                    $ 2,538,219         $   311,167        $    49,028         $ 2,898,414
Income (loss) from operations             82,728              19,600             (3,651)             98,677
Identifiable assets                      959,034             180,994            130,784           1,270,812
Capital expenditures, net                 38,942              26,742             13,882              79,566
Depreciation                              81,842              14,980             11,403             108,225
- -----------------------------------------------------------------------------------------------------------
1996 
Operating revenue                    $ 2,357,674         $   264,318        $    32,999         $ 2,654,991
Income (loss) from operations            (10,017)             10,830             (8,562)             (7,749)
Identifiable assets                      930,681             159,116            138,010           1,227,807
Capital expenditures, net                 15,859              21,953              5,353              43,165
Depreciation                              94,468              14,180             10,101             118,749
- -----------------------------------------------------------------------------------------------------------
</TABLE>


     Total revenue from foreign sources totaled $20.3 million, $23.7 million,
and $25.2 million in 1998, 1997 and 1996 respectively and are largely derived
from Canada and Mexico.
================================================================================
43


<PAGE>   46

================================================================================

Commitments,Contingencies
and Uncertainties

     The company leases certain terminals and equipment. At December 31, 1998,
the company was committed under noncancelable lease agreements requiring minimum
annual rentals payable as follows: 1999 - $24.3 million, 2000 - $14.5 million,
2001 - $8.4 million, 2002 - $5.1 million, 2003 - $3.2 million and thereafter,
$6.9 million.
     Projected 1999 net capital expenditures are $147 million, of which $32.4
million was committed at December 31, 1998.
     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 August 1998, 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, the third $25 million share repurchase authorized
since December 1997. As of December 31, 1998 the company repurchased 2.9 million
shares under these programs and had $19.5 million remaining in stock buy back
authorization.


 
                   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, 1998
and 1997, and the related consolidated statements of operations, cash flows
and shareholders' equity for each of the three years in the period ended
December 31, 1998. 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, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP
Kansas City, Missouri - January 28, 1999

================================================================================
                                                                              44


<PAGE>   47
                          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>      
1998
Operating revenue                               $ 692,460       $ 727,419       $ 744,873      $ 735,825
Income from operations                              8,909          25,184          26,440         22,863
Income from continuing operations                   3,763          12,279          13,545         10,490
Loss from discontinued operations                  (4,410)        (62,336)              -         (2,000)
Net income (loss)                                    (647)        (50,057)         13,545          8,490
Diluted earnings (loss) per share:
  From continuing operations                          .13             .45             .52            .41
  From discontinued operations                       (.15)          (2.27)            .00           (.08)

1997                                                   (a)
Operating revenue                               $ 681,656       $ 730,996       $ 761,351      $ 724,411
Income from operations                             18,063          26,676          35,025         18,913
Income from continuing operations                   8,331          13,865          19,118         11,426
Income (loss) from discontinued operations         (1,830)            110             940            475
Net income                                          6,501          13,975          20,058         11,901
Diluted earnings (loss) per share:
  From continuing operations                          .30             .48             .66            .39
  From discontinued operations                       (.07)            .01             .03            .02
</TABLE>


(a) Includes $5.6 million of before-tax costs to implement a change of
operations. 

Common Stock

     Yellow Corporation's stock is held by approximately 2,800 shareholders of
record. The company's only class of stock outstanding is common stock, traded in
over-the-counter markets. Trading activity averaged about 320,000 shares per day
during the year, up from 306,000 shares per day in 1997. Prices are quoted by
the National Association of Securities Dealers Automatic Quotation National
Market System (NASDAQ-NMS) under the symbol YELL.
                                                         
     The high and low prices at which Yellow Corporation common stock traded for
each calendar quarter in 1998 and 1997 follow:
                                                         

<TABLE>
<CAPTION>
                      High           Low     
   1998                                      
   -------------------------------------------
<S>                   <C>            <C>     
   March 31           29 7/8         17 7/16 
   June 30            20 5/8         17 1/8  
   September 30       18 13/16       11 1/4  
   December 31        19 5/8          9 11/16
                                             
                                             
   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      
</TABLE>

================================================================================
45


<PAGE>   48
================================================================================
                                             

                                     SENIOR
                                    OFFICERS

              YELLOW CORPORATION          YELLOW FREIGHT SYSTEM,INC.

              A.MAURICE MYERS             WILLIAM D.ZOLLARS
              Chairman of the Board,      President
              President and Chief
              Executive Officer           SAIA MOTOR FREIGHT LINE,INC.
                                    
                                          JIMMY D.CRISP
              WILLIAM F.MARTIN,JR.        President
              Senior Vice President
              Legal/Corporate Secretary   WESTEX,INC.

                                          FRANK E.MYERS
              H.A.TRUCKSESS,III           President
              Senior Vice President
              Finance/Chief Financial     ACTION EXPRESS,INC.
              Officer and Treasurer
                                          DANIEL C.FULKERSON
                                          President
              SAMUEL A.WOODWARD
              Senior Vice President       YELLOW SERVICES,INC.
              Operations and Planning
                                          THOMAS L.SMITH
                                          President
                                                                        
                                                                        

================================================================================
                                                                             46


<PAGE>   49
                   [GRAPHIC - PORTRAIT OF BOARD OF DIRECTORS]
================================================================================

                                    BOARD OF
                                    DIRECTORS


<TABLE>

<S>                                         <C>                                     <C>             
A.MAURICE MYERS                              DAVID H.HUGHES  2.                      CARL W.VOGT  1.,3.*      
Director since 1996                          Director since 1973                     Director since 1996          
Chairman of the Board,                       Retired Vice Chairman,                  Senior Partner, Fulbright    
President and Chief Executive                Hallmark Cards, Inc.                    & Jaworski, L.L.P.           
Officer of the Company                                                                                            
                                                                                                                  
KLAUS E.AGTHE  3.                            RONALD T.LEMAY  1.*                     WILLIAM F.MARTIN,JR.         
Director since 1984                          Director since 1994                     Secretary to the Board       
Retired Director and                         Vice Chairman, President and                                         
North American Liaison,                      Chief Operating Officer,                                             
the VIAG Group                               Sprint Corporation                      Left to right:David H.Hughes,
                                                                                     Klaus E.Agthe,Howard M.Dean,                  
                                                                                     A.Maurice Myers,Carl W.Vogt,
CASSANDRA C.CARR  2.*                        JOHN C.MCKELVEY  1.                     Cassandra C.Carr,William L.
Director since 1997                          Director since 1977                     Trubeck, John C.McKelvey,
Senior Executive Vice President              President and Chief Executive           Ronald T.LeMay
External Affairs,                            Officer, Midwest Research                                            
SBC Communications, Inc.                     Institute                                                            
                                                                                                                  
                                                                                                                  
HOWARD M.DEAN  3.                            WILLIAM L.TRUBECK  2.                                              
Director since 1987                          Director since 1994                     1. Audit Committee           
Chairman and Chief Executive                 Senior Vice President-Finance           2. Compensation Committee    
Officer, Dean Foods Company                  and Chief Financial Officer,            3. Governance Committee      
                                             International Multifoods, Inc.          *  Committee Chairman       
</TABLE>

================================================================================
47


<PAGE>   50
                                 INFORMATION
================================================================================
[YELLOW CORPORATION LOGO]


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  07606                                         
800-851-9677                                                      
http://www.chasemellon.com                                        
                                                                  
ANNUAL MEETING                                                    
April 22nd at 9:30 a.m.                                           
Doubletree Hotel                                                  
10100 College Boulevard                                           
Overland Park, KS  66210                                          
                                                                  
10-K REPORT                                                       
Please write to:Treasurer, Yellow Corporation or see our web site 




<PAGE>   51

================================================================================



             [GRAPHIC - CLOSE UP PICTURE OF EXACT EXPRESS PACKAGE]

www.yellowcorp.com                      P.O. BOX 7563
                                        OVERLAND PARK, KS
                                        66207
- --------------------------------------------------------------------------------
                           [YELLOW CORPORATION LOGO]
- --------------------------------------------------------------------------------
                          PRINTED IN THE U.S.A. #505



<PAGE>   1


                                                                  Exhibit (23)


                    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 23, 1999






<TABLE> <S> <C>

<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1996
<PERIOD-START>                             JAN-01-1996
<PERIOD-END>                               DEC-31-1996
<CASH>                                          22,899
<SECURITIES>                                         0
<RECEIVABLES>                                  228,745
<ALLOWANCES>                                    10,610
<INVENTORY>                                          0
<CURRENT-ASSETS>                               390,008
<PP&E>                                       1,826,925
<DEPRECIATION>                               1,111,156
<TOTAL-ASSETS>                               1,227,807
<CURRENT-LIABILITIES>                          399,664
<BONDS>                                        192,492
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                        28,863
<OTHER-SE>                                     366,837
<TOTAL-LIABILITY-AND-EQUITY>                 1,227,807
<SALES>                                              0
<TOTAL-REVENUES>                             2,654,991
<CGS>                                                0
<TOTAL-COSTS>                                2,662,740
<OTHER-EXPENSES>                                  (11)
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                              21,036
<INCOME-PRETAX>                               (28,774)
<INCOME-TAX>                                   (5,534)
<INCOME-CONTINUING>                           (23,240)
<DISCONTINUED>                                 (3,940)
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                  (27,180)
<EPS-PRIMARY>                                    (.97)
<EPS-DILUTED>                                    (.97)
        

</TABLE>






<TABLE> <S> <C>

<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1997
<PERIOD-START>                             JAN-01-1997
<PERIOD-END>                               DEC-31-1997
<CASH>                                          17,703
<SECURITIES>                                         0
<RECEIVABLES>                                  293,300
<ALLOWANCES>                                    12,264
<INVENTORY>                                          0
<CURRENT-ASSETS>                               458,761
<PP&E>                                       1,833,606
<DEPRECIATION>                               1,141,447
<TOTAL-ASSETS>                               1,270,812
<CURRENT-LIABILITIES>                          480,835
<BONDS>                                        163,080
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                        29,289
<OTHER-SE>                                     416,562
<TOTAL-LIABILITY-AND-EQUITY>                 1,270,812
<SALES>                                              0
<TOTAL-REVENUES>                             2,898,414
<CGS>                                                0
<TOTAL-COSTS>                                2,799,737
<OTHER-EXPENSES>                                (3,751)
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                              13,546
<INCOME-PRETAX>                                 88,882 
<INCOME-TAX>                                    36,142 
<INCOME-CONTINUING>                             52,740
<DISCONTINUED>                                   (305)
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    52,435
<EPS-PRIMARY>                                     1.86
<EPS-DILUTED>                                     1.83
        

</TABLE>






<TABLE> <S> <C>

<ARTICLE> 5
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1998
<PERIOD-START>                             JAN-01-1998
<PERIOD-END>                               DEC-31-1998
<CASH>                                          25,522
<SECURITIES>                                         0
<RECEIVABLES>                                  272,436
<ALLOWANCES>                                    14,162
<INVENTORY>                                          0
<CURRENT-ASSETS>                               374,615
<PP&E>                                       1,897,029
<DEPRECIATION>                               1,194,227
<TOTAL-ASSETS>                               1,105,685
<CURRENT-LIABILITIES>                          416,195
<BONDS>                                        156,988
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                        29,356
<OTHER-SE>                                     341,896
<TOTAL-LIABILITY-AND-EQUITY>                 1,105,685
<SALES>                                              0
<TOTAL-REVENUES>                             2,900,577
<CGS>                                                0
<TOTAL-COSTS>                                2,817,181
<OTHER-EXPENSES>                                 2,162
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                              11,685
<INCOME-PRETAX>                                 69,549
<INCOME-TAX>                                    29,472
<INCOME-CONTINUING>                             40,077
<DISCONTINUED>                                (68,746)
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                  (28,669)
<EPS-PRIMARY>                                   (1.07)
<EPS-DILUTED>                                   (1.06)
        

</TABLE>