FORM 8-K

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): August 4, 2003

 

Yellow Corporation

(Exact name of registrant as specified in its charter)

 

Delaware

(State or other jurisdiction

of incorporation)

 

000-12255

(Commission File Number)

 

48-0948788

(IRS Employer Identification No.)

10990 Roe Avenue

Overland Park, Kansas

(Address of principal executive offices)

 

66211

(Zip Code)

 

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

 



Item 7.    Financial Statements, Pro Forma Financial Information and Exhibits

 

(a)    Financial statements of businesses acquired.

 

Not applicable.

 

(b)    Pro forma financial information.

 

Not applicable.

 

(c)    Exhibits.

 

99.1 Press Release of Yellow Corporation dated August 4, 2003.

 

Item 9.    Regulation FD Disclosure

 

Yellow Corporation announced that it increased its private offering of contingent convertible senior notes (the “notes”) from $150 million to $200 million. An additional $50 million may be raised if the initial purchasers exercise their right to acquire additional notes in connection with the offering. The notes have an annual interest rate of 5.0% and are convertible into shares of Yellow common stock at a conversion price of $39.24 per share upon the occurrence of certain events.

 

The foregoing is qualified by reference to Exhibit 99.1 to this Current Report on Form 8-K, which is incorporated herein by reference.

 

On July 8, 2003, Yellow Corporation and Roadway Corporation agreed to the acquisition of Roadway Corporation by Yankee LLC, a newly formed Delaware limited liability company and a wholly owned subsidiary of Yellow Corporation, under the terms of the Agreement and Plan of Merger filed as Exhibit 2.1 to the Current Report on Form 8-K filed on July 8, 2003, as amended. Certain information related to the merger and currently contemplated related financings (including the increased offering of the notes) is included in Appendix A to this Current Report on Form 8-K and incorporated herein by reference.

 


 

The information presented in this Current Report on Form 8-K may contain forward-looking statements and certain assumptions upon which such forward-looking statements are in part based. Numerous important factors, including those factors identified in Yellow’s Current Report on Form 8-K filed on August 4, 2003, Yellow’s Annual Report on Form 10-K and other of the Company’s filings with the Securities and Exchange Commission, and the fact that the assumptions set forth in this Current Report on Form 8-K could prove incorrect, could cause actual results to differ materially from those contained in such forward-looking statements.

 

2


SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: August 5, 2003

 

YELLOW CORPORATION

By:

 

/s/    Daniel J. Churay        


    Senior Vice President, General Counsel and Secretary

 

3


APPENDIX A

 

As used in this Appendix A, references to “Yellow”, the “company”, “we”, “our” and “us” refer to Yellow Corporation and its subsidiaries, unless the context otherwise requires. The term “Roadway” refers to Roadway Corporation and its subsidiaries, unless the context otherwise requires. The term “proposed offering” refers to the proposed offering of Yellow’s contingent convertible senior notes due 2023. The term “merger” refers to the merger of Roadway Corporation with and into Yankee LLC, a newly formed Delaware limited liability company and a wholly owned subsidiary of Yellow, pursuant to the Agreement and Plan of Merger dated as of July 8, 2003, among Yellow, Yankee LLC and Roadway.

 

The information in this Current Report on Form 8-K does not take into account the possible exercise by the initial purchasers of their right to acquire an additional $50 million principal amount of notes.

 

Proposed Financings

 

We expect that approximately $483 million will be required to finance the cash portion of the merger consideration. Yellow has commitment letters from certain affiliates of Deutsche Bank Securities, Inc. that provide, subject to the satisfaction of certain conditions and completion of definitive documentation, for financing in an amount necessary to finance the cash portion of the merger consideration, to refinance certain existing indebtedness of Yellow and Roadway and to pay related costs. We have agreed to use our commercially reasonable efforts to obtain the financing contemplated by these commitment letters or financing from other sources reasonably acceptable to us to consummate the merger. The proposed senior secured financing is expected to consist of a term loan facility, a pre-funded letter of credit facility and a revolving loan facility. Certain amounts under the commitment letters will be reduced by the amount of gross proceeds received by Yellow from the proposed offering. If the merger occurs, it is contemplated that at the effective time of the merger the cash portion of the merger consideration and the combined company’s (“Yellow-Roadway”) capital and liquidity needs (including refinancing of certain existing indebtedness of Yellow and Roadway) will be financed with a combination of proceeds from the proposed offering, proceeds from the sale of senior debt securities, senior secured bank financing, other debt financings and cash on hand.

 

A-1


CAPITALIZATION

 

The following table sets forth our consolidated cash and cash equivalents and capitalization as of June 30, 2003 on a historical basis and on a pro forma basis. The pro forma presentations give effect to the proposed offering as if it had occurred on June 30, 2003 and gives further effect to the Roadway acquisition and related financings as if they had occurred on June 30, 2003. See “Unaudited Condensed Combined Pro Forma Financial Data”.

 

     At June 30, 2003

 
     Actual

    Pro Forma
for the
proposed
Offering


    Pro Forma
for the
proposed
Offering, the
Roadway
Acquisition
and Related
Financings


 
     (in thousands)  

Cash and cash equivalents

   $ 49,811     $ 249,811     $ 10,513  
    


 


 


Unsecured medium-term notes

     55,250       55,250        

Industrial development bonds

     18,900       18,900       18,900  

Capital leases and other

     92       92       92  

ABS borrowings

     50,000       50,000       100,000  

Secured term loan borrowings

                 175,000  

5.0% contingent convertible senior notes due 2023

           200,000       200,000  

Senior unsecured debt securities

                 200,000  

Secured Roadway senior notes

                 251,590 (1)
    


 


 


Total debt

     124,242       324,242       945,582  
    


 


 


Shareholders’ equity:

                        

Common stock, par value

     31,910       31,910       51,269  

Capital surplus

     82,104       82,104       545,745  

Retained earnings

     349,460       349,460       345,071  

Accumulated other comprehensive loss

     (33,575 )     (33,575 )     (33,575 )

Unamortized restricted stock awards

     (810 )     (810 )     (810 )

Treasury stock, at cost

     (44,223 )     (44,223 )     (44,223 )
    


 


 


Total shareholders’ equity

     384,866       384,866       863,477  
    


 


 


Total capitalization

   $ 509,108     $ 709,108     $ 1,809,059  
    


 


 


 

Notes:

 

The capitalization table shown above does not include anticipated cash flows generated by Yellow and Roadway during the period of time between the filing of this document and the closing.

 

The above capitalization table reflects currently contemplated financing transactions, including proceeds from the proposed offering, related to the Roadway acquisition. These amounts are subject to change as our new capital structure is finalized.

 

(1)    The principal balance of the secured Roadway senior notes is $225,000,000. In accordance with purchase accounting guidelines, these notes will be recorded at fair value as of the date of the acquisition. The $251,590,000 shown above represents the fair value of such notes based on current market prices, as described in Note 14 to the Unaudited Condensed Combined Pro Forma Financial Data.

 

 

A-2


UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL DATA

 

The following unaudited condensed combined pro forma financial statements and explanatory notes have been prepared to give effect to our proposed acquisition of Roadway, the proceeds of the proposed offering and the consummation of other currently contemplated financing transactions related to the Roadway acquisition. At the time of the closing of the acquisition of Roadway, Roadway will be merged with and into a wholly owned acquisition subsidiary of Yellow. The transaction is being accounted for as a purchase business combination.

 

In general, upon the closing of the acquisition, each share of Roadway stock (except those shares owned directly or indirectly by Roadway or Yellow and those shares held by dissenting stockholders) will be converted into 1.924 shares of Yellow common stock. However, a Roadway stockholder may elect to receive $48 in cash in lieu of Yellow stock for each share of the stockholder’s Roadway stock. Notwithstanding the individual elections of the Roadway stockholders, no more than 50% of the Roadway shares may be converted into cash and certain adjustments will be made so that the aggregate consideration in the acquisition will consist of approximately 50% cash and 50% Yellow common stock.

 

The exchange ratio of 1.924 shares will be subject to further adjustment based upon the 20-trading day average of the per share closing price of Yellow common stock as of the date five trading days before closing. If the average price is less than $21.21, the exchange ratio shall be the quotient of $40.81 and the average price, or if the average price is greater than $28.69, then the exchange ratio shall be the quotient of $55.20 and the average price. If the average price of Yellow common stock is less than $16.63, Yellow may elect not to consummate the acquisition.

 

In accordance with Article 11 of Regulation S-X under the Securities Act, an unaudited condensed combined pro forma balance sheet as of June 30, 2003 and unaudited condensed combined pro forma statements of operations for the six months ended June 30, 2003 and the year ended December 31, 2002, have been prepared to reflect our proposed acquisition of Roadway, the proceeds of the proposed offering and the consummation of other currently contemplated financing transactions related to the Roadway acquisition. The following unaudited condensed combined pro forma financial statements have been prepared based upon historical financial statements of Yellow and Roadway. We operate on a calendar quarter reporting basis. Roadway operates on 13 four-week accounting periods with 12 weeks in each of the first three quarters and 16 weeks in the fourth quarter. Additionally, the unaudited condensed combined pro forma financial statements reflect certain balance sheet and statement of operations reclassifications made to conform Roadway’s presentations to our presentations. The unaudited condensed combined pro forma financial statements should be read in conjunction with:

 

    our historical audited consolidated financial statements for the year ended December 31, 2002, and our unaudited condensed consolidated financial statements as of June 30, 2003 and for the six months ended June 30, 2003, and

 

    the historical audited consolidated financial statements of Roadway for the year ended December 31, 2002, and their unaudited condensed consolidated financial statements as of June 21, 2003 and for the twenty-four week period (two quarters) ended June 21, 2003.

 

The unaudited condensed combined pro forma balance sheet was prepared by combining our historical unaudited consolidated balance sheet as of June 30, 2003 and the historical unaudited consolidated balance sheet as of June 21, 2003 for Roadway, adjusted to reflect our proposed acquisition of Roadway, the proceeds of the proposed offering and the consummation of other currently contemplated financing transactions as if each had occurred at June 30, 2003.

 

A-3


The unaudited condensed combined pro forma statements of operations were prepared using the historical consolidated statements of operations for both us and Roadway assuming the acquisition and related transactions had each occurred on January 1, 2002. The unaudited condensed combined pro forma statement of operations for the year ended December 31, 2002 was prepared by combining the historical audited consolidated statement of operations of us and the historical audited consolidated statement of income of Roadway for the year ended December 31, 2002. The unaudited condensed combined pro forma statement of operations for the six months ended June 30, 2003 was prepared by combining the historical unaudited consolidated statement of operations of us for the six month period ended June 30, 2003 and the historical unaudited consolidated statement of income of Roadway for the twenty-four week period (two quarters) ended June 21, 2003. The unaudited condensed combined pro forma statements of operations give effect to the cost associated with financing the acquisition, including interest expense and amortization of deferred financing costs associated with our currently contemplated financing transactions related to the Roadway acquisition, and the impact of other purchase accounting adjustments.

 

The unaudited condensed combined pro forma financial statements are prepared for illustrative purposes only, and are not necessarily indicative of the operating results or financial position that would have occurred if the acquisition transaction described above had been consummated at the beginning of the periods or the dates indicated, nor are they necessarily indicative of any future operating results or financial position. The unaudited condensed combined pro forma financial statements do not include any adjustments related to any restructuring charges, profit improvements, potential cost savings or one-time charges which may result from the proposed acquisition of Roadway or the result of final valuations of tangible and intangible assets and liabilities.

 

Because of the proximity of this Current Report on Form 8-K to the date of the announcement of our proposed acquisition of Roadway, the process of valuing Roadway’s tangible and intangible assets and liabilities as well as evaluating accounting policies for conformity is still in the very preliminary stages. Material revisions to our current estimates could be necessary as the valuation process and accounting policy review are finalized. Following closing of the acquisition, we will finalize the process of determining the fair value at the date of acquisition of the tangible and intangible assets and liabilities of Roadway. As a result of this process, we anticipate that a portion of the amount classified as goodwill in the pro forma financial statements, which in accordance with Statement of Financial Accounting Standards No. 142 will not be amortized, will be reclassified to the tangible and identified intangible assets and liabilities acquired, based on their estimated fair values at the date of acquisition. These tangible and identified intangible assets will be depreciated and amortized over their estimated useful lives. As a result, the actual amount of depreciation and amortization expense may be materially different from that presented in the unaudited condensed combined pro forma statements of operations and the effects cannot be quantified at this time.

 

The acquisition had not been consummated as of the preparation of these unaudited condensed combined pro forma financial statements.

 

A-4


Unaudited Condensed Combined Pro Forma Balance Sheet

At June 30, 2003

 

    Historical

    Pro Forma

 
    Yellow

   

Roadway

(at June 21,
2003)


    Adjustments

    Combined

 
    (in thousands)  
ASSETS                                      

Current assets:

                                     

Cash and cash equivalents

  $ 49,811     $ 125,692     $ (483,000 )   (1 )   $ 10,513  
                      200,000     (2 )        
                      375,000     (3 )        
                      50,000     (4 )        
                      (100,000 )   (5 )        
                      (95,950 )   (6 )        
                      (111,040 )   (7 )        

Accounts receivable, net

    334,360       215,055       25,400     (8 )     674,815  
                      100,000     (5 )        

Prepaid expenses and other

    31,765       49,541       (16,795 )   (9 )     64,511  
   


 


 


       


Total current assets

    415,936       390,288       (56,385 )           749,839  
   


 


 


       


Property and equipment, at cost

    1,698,586       1,511,699       225,000     (10 )     2,419,603  
                      (1,015,682 )   (11 )        

Less: accumulated depreciation

    (1,127,405 )     (1,015,682 )     1,015,682     (11 )     (1,127,405 )
   


 


 


       


Net property and equipment

    571,181       496,017       225,000             1,292,198  
   


 


 


       


Goodwill

    20,469       286,181       820,272     (1 )     840,741  
                      (286,181 )   (12 )        

Deferred income taxes

          44,598       (44,598 )   (9 )      

Other assets

    33,095       46,495       24,900     (6 )     98,773  
                      (5,717 )   (7 )        
   


 


 


       


Total Assets

  $ 1,040,681     $ 1,263,579     $ 677,291           $ 2,981,551  
   


 


 


       


LIABILITIES AND SHAREHOLDERS’ EQUITY

                             

Current liabilities:

                                     

Accounts payable

  $ 71,283     $ 164,806     $ (57,526 )   (13 )   $ 178,563  

Wages, vacations and employees’ benefits

    166,369       125,162                     291,531  

Other current and accrued liabilities

    113,572       51,378       (16,795 )   (9 )     200,994  
                      (4,687 )   (9 )        
                      57,526     (13 )        

ABS borrowings

    50,000             50,000     (4 )     100,000  

Current maturities of long-term debt

    40,259       10,511       (45,761 )   (7 )     5,009  
   


 


 


       


Total current liabilities

    441,483       351,857       (17,243 )           776,097  
   


 


 


       


Long-term liabilities:

                                     

Long-term debt, less current portion

    33,983       270,279       200,000     (2 )     840,573  
                      375,000     (3 )        
                      (65,279 )   (7 )        
                      26,590     (14 )        

Claims and other liabilities

    76,967       65,029       37,900     (15 )     179,896  

Accrued pension and postretirement health care

    76,293       147,800       50,800     (16 )     274,893  

Deferred income taxes

    27,089       10,476       9,050     (9 )     46,615  
   


 


 


       


Total long-term liabilities

    214,332       493,584       634,061             1,341,977  
   


 


 


       


Total shareholders’ equity

    384,866       418,138       483,000     (1 )     863,477  
                      (418,138 )   (17 )        
                      (4,389 )   (18 )        
   


 


 


       


Total Liabilities and Shareholders’ Equity

  $ 1,040,681     $ 1,263,579     $ 677,291           $ 2,981,551  
   


 


 


       


 

A-5


Unaudited Condensed Combined Pro Forma Statement of Operations

For the Year Ended December 31, 2002

 

     Historical

     Pro Forma

 
     Yellow

     Roadway

     Adjustments

          Combined

 
     (in thousands, except per share data)  

Revenue

   $ 2,624,148      $ 3,010,776      $ 3,000     (8 )   $ 5,637,924  
    


  


  


       


Operating expenses:

                                        

Salaries, wages and employees’ benefits

     1,717,382        1,934,482                      3,651,864  

Operating expenses and supplies

     385,522        479,415        (2,154 )   (13 )     862,783  

Operating taxes and licenses

     75,737        76,662                      152,399  

Claims and insurance

     57,197        63,621                      120,818  

Depreciation and amortization

     79,334        75,786        2,154     (13 )     157,174  
                         (100 )   (19 )        

Purchased transportation

     253,677        289,612                      543,289  

(Gains) losses on property disposals, net

     425        (650 )                    (225 )

Spin-off and reorganization charges

     8,010                             8,010  
    


  


  


       


Total operating expenses

     2,577,284        2,918,928        (100 )           5,496,112  
    


  


  


       


Operating income

     46,864        91,848        3,100             141,812  
    


  


  


       


                                          

Interest expense

     7,211        23,268        3,249     (13     61,242  
                         27,514     (20 )        

ABS facility charges

     2,576        3,688        (6,264 )   (20 )      

Other, net

     (509 )      2,855        (3,249 )   (13 )     (903 )
    


  


  


       


Nonoperating expenses, net

     9,278        29,811        21,250             60,339  
    


  


  


       


Income from continuing operations before income taxes

     37,586        62,037        (18,150 )           81,473  

Income tax provision

     13,613        26,895        (7,260 )   (21 )     33,248  
    


  


  


       


Income from continuing operations

   $ 23,973      $ 35,142      $ (10,890 )         $ 48,225  
    


  


  


       


                                          

Earnings per share from continuing operations:

                                        

Basic

     $0.86        $1.90                      $1.02  

Diluted

     0.84        1.85                      1.01  

Average common shares outstanding:

                                        

Basic

     28,004        18,507                      47,363  

Diluted

     28,371        18,999                      47,730  

 

A-6


Unaudited Condensed Combined Pro Forma Statement of Operations

For the Six Months Ended June 30, 2003

 

     Historical

   Pro Forma

 
     Yellow

   

Roadway

(for the two

quarters ended
June 21, 2003)


   Adjustments

          Combined

 
     (in thousands, except per share data)  

Revenue

   $ 1,394,546     $ 1,495,598    $ 7,300     (8 )   $ 2,897,444  
    


 

  


       


Operating expenses:

                                     

Salaries, wages and employees’ benefits

     896,784       943,658                    1,840,442  

Operating expenses and supplies

     213,851       260,434      (302 )   (13 )     473,983  

Operating taxes and licenses

     39,259       38,554                    77,813  

Claims and insurance

     23,454       29,641                    53,095  

Depreciation and amortization

     41,086       34,169      302     (13 )     75,507  
                      (50 )   (19 )        

Purchased transportation

     135,979       150,509                    286,488  

Losses on property disposals, net

     41       841                    882  

Spin-off and reorganization charges

                               
    


 

  


       


Total operating expenses

     1,350,454       1,457,806      (50 )           2,808,210  
    


 

  


       


Operating income

     44,092       37,792      7,350             89,234  
    


 

  


       


                                       

Interest expense

     5,271       9,881      2,223     (13 )     30,145  
                      12,770     (20 )        

ABS facility charges

           1,813      (1,813 )   (20 )      

Other, net

     (436 )     1,144      (2,223 )   (13 )     (1,515 )
    


 

  


       


Nonoperating expenses, net

     4,835       12,838      10,957             28,630  
    


 

  


       


Income from continuing operations before income taxes

     39,257       24,954      (3,607 )           60,604  

Income tax provision

     15,271       10,481      (1,443 )   (21 )     24,309  
    


 

  


       


Income from continuing operations

   $ 23,986     $ 14,473    $ (2,164 )         $ 36,295  
    


 

  


       


                                       

Earnings per share from continuing operations:

                                     

Basic

     $0.81       $0.77                    $0.74  

Diluted

     0.80       0.76                    0.74  

Average common shares outstanding:

                                     

Basic

     29,585       18,802                    48,944  

Diluted

     29,826       19,177                    49,185  

 

A-7


NOTES TO UNAUDITED CONDENSED COMBINED PRO FORMA

FINANCIAL STATEMENTS

 

(1)   Because of the proximity of this Current Report on Form 8-K to the date of the announcement of our proposed acquisition of Roadway, the process of valuing Roadway’s tangible and intangible assets and liabilities as well as evaluating accounting policies for conformity is still in the very preliminary stages. Material revisions to our current estimates could be necessary as the valuation process and accounting policy review are finalized. These unaudited condensed combined pro forma financial statements are not necessarily indicative of the operating results or financial position that would have occurred had the acquisition been consummated at the dates indicated, nor necessarily indicative of future operating results.

 

The purchase price is estimated as follows (in thousands, except per share data):

 

Merger consideration of approximately $966 million, or $48 per Roadway share (based on a fixed exchange ratio and an average price per share of $24.95 for Yellow common stock, in a half cash, half stock transaction)         

Cash

   $ 483,000  

Common stock (19.4 million Yellow shares)

     483,000  
    


Total merger consideration

     966,000  

Acquisition and change of control costs

     52,150  
    


Total purchase price

     1,018,150  

Net tangible assets acquired at fair value

     197,878  
    


Costs in excess of net tangible assets of the acquired company (Goodwill)

   $ 820,272 *
    


 
  *   Goodwill reflects the preliminary estimated adjustment for the costs in excess of net tangible assets of Roadway at estimated fair value. Subsequent to closing, Yellow will be completing a study to determine the allocation of the total purchase price to the various tangible and intangible assets acquired and the liabilities assumed in order to allocate the purchase price. Management believes, on a preliminary basis, there may be intangible assets which will be evaluated. The sensitivity of the valuations regarding the above can be significant. Accordingly, as Yellow concludes its evaluation of the assets acquired and liabilities assumed upon closing the acquisition, allocation of the purchase price among the tangible and intangible assets will be subject to change. Any such change may also impact results of operations.

 

(2)   Reflects gross proceeds of the proposed offering.

 

(3)   Reflects gross proceeds of other currently contemplated financing transactions related to the proposed Roadway acquisition, comprised of $175.0 million of secured term loan borrowings and $200.0 million of senior unsecured debt securities.

 

(4)   Reflects additional borrowings under Yellow’s asset backed securitization (ABS) facility.

 

(5)   Reflects the elimination of Roadway’s ABS facility as a component of the currently contemplated financing transactions. As Roadway’s ABS facility receives sales treatment for financial reporting purposes and is therefore not reflected on its balance sheets, elimination of that facility effectively brings accounts receivable back onto the balance sheet.

 

(6)   Represents costs associated with completing the acquisition and the currently contemplated financing transactions, including the proposed offering, as follows (in thousands):

 

Direct transaction costs, including investment banking, legal, accounting and other fees:

      

Yellow

   $ 12,650

Roadway

     11,900

Deferred debt issuance costs

     24,900

Bridge financing costs

     4,500

Debt prepayment penalties

     2,500

Change of control costs

     39,500
    

Total

   $ 95,950
    

 

A-8


The change of control costs represent the estimated maximum cost of various change of control provisions for key Roadway executives.

 

(7)   Reflects the payoff of certain existing indebtedness in conjunction with the currently contemplated financing transactions and the write-off of deferred financing costs.

 

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

 

(9)   Represents the impact on currently payable and deferred income taxes of the pro forma adjustments presented.

 

(10)   Represents the net adjustment to Roadway’s property and equipment based on initially estimated fair values.

 

(11)   Represents the elimination of Roadway’s historical accumulated depreciation.

 

(12)   Represents the elimination of the historical goodwill of Roadway.

 

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

 

(14)   Represents an increase in the fair value of Roadway’s senior notes based on current market prices.

 

(15)   Represents the estimated adjustment necessary to conform Roadway’s workers’ compensation accrual policy to the policy used by Yellow.

 

(16)   Represents the estimated adjustment necessary to eliminate previously unrecognized gains or losses, prior service cost, and transition assets or obligations related to Roadway’s defined benefit pension and postretirement health care benefit plans for employees not covered by collective bargaining agreements.

 

(17)   Represents the elimination of Roadway’s historical shareholders’ equity balances.

 

(18)   Represents the after-tax impact of bridge financing costs, debt prepayment penalties, and the write-off of Yellow’s deferred financing costs associated with completing the currently contemplated financing transactions.

 

(19)   Adjustment to record lower depreciation expense on the new basis of Roadway’s property and equipment. The fair value of longer-lived assets increased while the fair value of shorter-lived assets decreased.

 

(20)   Adjustment to record additional interest expense and amortization of deferred financing costs on borrowings related to the proposed offering and other currently contemplated financing transactions related to the proposed Roadway acquisition. The estimated weighted average annual interest rate of the currently contemplated debt structure is 6.2%. A  1/8th% change in the variable interest rates associated with these borrowings would have a $0.3 million effect on annual interest expense. A $10 million change in the amount of borrowings necessary to finance the proposed acquisition would have a $0.6 million effect on annual interest expense.

 

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

 

A-9


Index to Exhibits

 

Exhibit
Number


  

Description


99.1   

Press Release of Yellow Corporation dated August 4, 2003.