Yellow Roadway Corporation

1. Yellow Roadway Corporation 2004 Case Study

2. Overview • Possible alternative strategies • Our Recommendation • Strategies • Long range objectives • EPS/EBIT • Implementation Issues • Proposed annual objectives (goal) and policies • Proposed procedures for evaluation • Epilogue • Resources Utilized • Questions • Overview of the Trucking Industry • A brief history of Yellow Roadway Corporation • EOY 2006 • Mission, Vision, Objectives, Strategies • 2007 • New Vision and Mission • External Analysis • Opportunities & Threats • CPM • EFE • Internal Analysis • Financial Data • Strengths and weaknesses • IFE • Financial ratios • Financial trending • Strategic Analysis • SWOT Matrix • SPACE • BCG • IE matrix • Grand Strategy Matrix • Matrix Analysis • QSPM

3. 1911-1912 - Trucks first travel coast to coast. The trip takes 46 days 1921 - The Federal Aid Highway Program requires state highway departments to identify a system of connecting rural roads. 1930s - U.S. Route 66, the first true highway, is built 1933 - The American Trucking Association is created 1950s - General Motors, Ford, and Dodge introduce diesel trucks 1956 - Federal legislation calls for creation of 41,000 miles of improved interstate highways. 1970 - Hollywood and songwriters focus on truckers with box office successes such as Smokey and the Bandit, Every Which Way but Loose, and White Line Fever 1980 - The Motor Carrier Act deregulates the industry 1982 - The Surface Transportation Act allows for longer combination vehicles and uniform weights Brief History of the Trucking Industry

4. 1924: A.J. Harrell founded Yellow Cab and Transit Co. in Oklahoma City, primarily as a bus and taxi company serving central Oklahoma. The company added intrastate shipping to its services in 1926 and shortened its name to Yellow Transit Co. 1944: Harrell sold the shipping operations to a New York-based investment group headed by New York financier Arlington W. Porter. Yellow changed its name to Yellow Transit Freight Lines, Inc. 1952: George E. Powell, Sr., of Kansas City and an ownership group that included Powell's son, George E. Powell, Jr., and Roy Freuhauf, owner of the Freuhauf Trailer Co., acquired the company. In one year, the Powell family brought the company from near-bankruptcy to profitable growth. 1965: Yellow acquired Watson-Wilson Transportation System, making the company a transcontinental carrier with routes extending from the Midwest to the Atlantic and Pacific coasts. The acquisition allowed Yellow to add more than 21,000 miles of authorized routes and begin serving 10 more states. 1968: Watson-Wilson merged into Yellow, and Yellow's name changed to Yellow Freight System, Inc. History of Yellow Roadway Corp. (Yellow)

5. History of Yellow Roadway Corp. (Yellow) 1972: Yellow acquired Adley Corp. and principal subsidiary Adley Express Co., providing operating rights along the Eastern Seaboard north to Quebec and south to Georgia. The acquisition allowed Yellow to extend service into five states. 1975: Yellow bought all Republic Freight System, Inc., outstanding stock. The rights Yellow acquired from Republic allowed Yellow to expand into the Northwest, giving Yellow true service coverage throughout the 48 contiguous states. 1977: Yellow and Braswell Motor Freight Lines company owners agreed to allow Yellow to buy all Braswell capital stock. This acquisition gave Yellow additional coverage throughout the sunbelt states from Georgia to California. 1980: Congress passed the Motor Carrier Act, deregulating the interstate trucking industry. Yellow opened 13 general shipping service centers, bringing the total to 248. 1981: Yellow opened 88 new service centers, converting its operations to an all-new, hub-and-spoke shipment-flow system with each of the 17 hubs being a consolidation and distribution point for a specific territory. 5

6. History of Yellow Roadway Corp. (Yellow) 1982: The hub-and-spoke system provided the base for a rapid increase in the service center network. At the end of the year, Yellow had 377 service centers, providing direct service to 48 of the 50 states. 1984: Yellow opened 71 service centers, bringing the number of centers to 508. 1985: Yellow acquired RBS Enterprises, Inc., to expand service between the United States and  Ontario, Canada. RBS and its subsidiaries included International Carriers, Inc., which had operations in the United States and Canada. The acquisition significantly increased the presence of Yellow in Ontario and Quebec. 1986: Yellow acquired Custom Courier Services, Ltd., which it renamed Yellow Freight System of British Columbia, Inc., to expand service into British Columbia. At year-end 1986, Yellow served more than 650 points in Canada and had 599 service centers. 1992: Yellow launched less-than-container-load service to Europe. 1994: The effects of federal and state deregulation, combined with industry overcapacity and intense price competition began to send Yellow's profitability on a slow, downward spiral. 

7. History of Yellow Roadway Corp. (Yellow) 1995: Continuing to expand, Yellow entered the Asia/Pacific market with services to and from Hong Kong, Singapore and Thailand. 1996: The Yellow board hired A. Maurice Myers as Yellow Corp. president, chairman and chief executive officer  in April. In September, Yellow hired William Zollars as Yellow Freight System president. Together, Myers and Zollars began improving the company's performance almost immediately. 1997: Yellow had an operating ratio of 96.5. Yellow realigned its organization into five, regionally-based business units to enhance operating flexibility and provide customized services. The company created more than 400 new driver-sleeper teams and expanded service into South and Central America. 1998: Yellow and the Teamsters reached agreement on a new, 5-year contract 7 weeks before the 1994 National Master Freight Agreement expired. The first, 5-year contract in industry history was ratified by 70 percent of Teamsters in April. Midyear, Yellow introduced an integrated ground and air transportation service, Exact Express®, to broaden its services. 1999: Yellow celebrated 75 years of service on New Year's Eve with Yellow expecting to be a new company for a new century. Before the year was over Bill Zollars was named Chairman, President and CEO of Yellow Corp. 7

8. History of Yellow Roadway Corp. (Yellow) 2000: James Welch became the new president and chief operating officer of Yellow. The company celebrated one of its strongest performances in its 76-year history, boasting operating revenue at a record $2.8 billion. 2001: Yellow received ISO 9000:2001 certification, becoming the first transportation services provider to receive the new classification under the International Organization for Standardization for continuous quality improvement. Yellow expanded Standard Ground Regional Advantage—the company's best-in-class, 2- and 3-day regional service. Almost 70 percent of all shipments would now deliver in 3 days or less, a 12 percent improvement over the previous 2 years. 2002: Yellow Freight System, Inc., changed its name to Yellow Transportation, Inc., to reflect the company's transformation to a full-service global transportation provider. The company reorganized into 15 areas to move decision-makers closer to customers. Yellow international operations announced an alliance with 12 European transportation providers. 2003: Yellow acquired Roadway Corp. to become Yellow Roadway Corp. 8

9. Roadway Express - provides seamless transportation throughout Canada, Mexico, and the U.S., and services for markets worldwide. A leading transporter of industrial, commercial, and retail goods, Roadway adds value to global supply chains through innovative combinations of network resources, capabilities, and technologies to customize services. Reimer Express - is a leading Canadian provider of industrial, retail, and commercial transportation services. Through integration of network and information systems with Roadway, Reimer Express provides seamless service between Canada, Mexico, the U.S., and global markets. YRC Regional Transportation – is comprised of USF and New Penn Motor Express and delivers nationwide service in the next-day , second-day, and time-sensitive markets, which are among the fastest-growing transportation segments. New Penn Motor Express - is a YRC Regional Transportation company providing superior regional, next-day ground services through a network spanning the Northeastern United States, Quebec, Canada and Puerto Rico. New Penn is considered an industry leader in tracking technologies and Internet-based shipping services. USF Holland - is a YRC Regional Transportation company offering services throughout the Central and Midwestern United States and Eastern Canada. USF Holland makes claim-free deliveries a top priority, and its on-time performance has long been considered an industry standard. Yellow’s Subsidiaries

10. International Presence

11. Logistics Centers To manage your existing international shipments, please contact the YRC Logistics Global Logistics Center in your region.

12. Yellow’s Subsidiaries USF Reddaway - is a YRC Regional Transportation company operating a network across the Western United States and Canada. The company provides guaranteed delivery of time-sensitive shipments, a user-friendly Internet-based transportation management system, and streamlined customs procedures. USF Bestway – moves goods in a 5-state area of the Pacific Southwest and serves all major getaways to Mexico USF Glen Moore - is one of the fastest-growing providers of customized truckload van services in North America, offering a full range of transportation services. Meridian IQ – plans and coordinates the movement of goods throughout the world by offering flexible logistics solutions supported by technology and management. YRC Enterprise Services and Yellow Roadway Technologies - global logistics management company, coordinates the movement of goods worldwide across multiple modes of the global supply chain. YRC Logistics helps businesses automate and improve shipment planning, optimization, administration, and overall supply-chain processes while connecting more efficiently with clients, their suppliers and the final consumer. 12

13. Yellow’s Vision Yellow will be the leading provider of guaranteed, time-definite, defect-free, hassle-free transportation for business consumers worldwide. 13

14. Making global commerce work by connecting people, places, and information . 2004 Core Purpose

15. Exceed customer expectations • Value our people • Work safely • Demonstrate good citizenship • Act with integrity • Embrace teamwork 2004 Core Values

16. Concentrate on gaining cost and purchasing synergies from its recent mergers before embarking on something new • “Making global commerce work” • Focus on overnight and next day markets • Become a stronger competitor to integrated transportation providers such as UPS and FedEx • Acquire Overnight Transportation (9th largest) for $1.25 billion in the summer of 2005 • Offer overnight service 2004 Strategies

17. 2004 Objectives • Reduce cost base by 100 million run rate • Pay down debt and strengthen financial position • Grow all of our brands following the acquisition of Roadway • Continue to look for acquisitions that complement our strategy, contribute to our financial performance, and help us tap opportunities for employees, customers and investors.

18. Rising fuel costs Driver turnover and shortages Decreasing manufacturing activity in the United States Decreasing customer spending Increases in contractual wages and benefits and purchased transportation rates 2004 Issues

19. Yellow’s Vision Yellow will be the leading provider of guaranteed, time-definite, defect-free, hassle-free transportation for consumers worldwide. 19

20. Yellow’s mission is to provide international transportation for express and standard deliveries for businesses and customers of all sizes. (1,2,3,7) We are willing to meet a variety of needs that may be specified by our customers. (1,7) We pride ourselves in our innovative logistics program which makes sure that the most knowledgeable employee for each individual industry is assigned to the appropriate transactions. (2,4,7) Yellow is constantly looking to expand in any and all profitable areas of the industry internationally to benefit our shareholders. (3,5) We provide our employees with exceptional benefits to show our appreciation of their hard work and dedication. (9) We aim to exceed customer expectations, value our people, work safely, demonstrate good citizenship, act with integrity, and embrace teamwork (6,8,9) A New Mission

21. The new mission answers the following questions • Customers: Who are the firm’s customers? • Products or services: What are the firm’s major products? • Markets: Geographically, where does the firm compete? • Technology: Is the firm technologically current? • Concern for survival, growth, and profitability: Is the firm committed to growth and financial soundness? • Philosophy: What are the basic beliefs, values, aspirations, and ethical priorities of the firm? • Self-concept: What is the firm’s distinctive competence or major competitive advantage? • Concern for public image: Is the firm responsive to social, community, and environmental concerns? • Concern for employees: Are employees a valuable asset of the firm? A New Mission

22. Trucking industry expected to grow significantly Acquire FedEx/UPS/DHL market share Global market Position to be a regional carrier by the Roadway merger Increase in rail/intermodel and air transport tonnages External Audit: Opportunities

23. Alternate forms of transportation/shipping Shortage of long haul drivers High fuel prices Increased regulation of working hours for truck drivers Increase in the number of toll road and rates on existing ones Competition Antitrust External Audit: Threats

24. Competitive Profile Matrix

25. External Factor Evaluation Matrix

26. Net Worth (December 31, 2004, in Thousands of Dollars Except Per Share) *Stock price is based on a closing price at 12/31/2004 from finance.yahoo.com

27. Consolidated Balance Sheet

28. Consolidated Balance Sheet

29. Consolidated Statement of Operations

30. Consolidated Statement of Operations

31. Large scale of operation Operating leverage #3 ground transport provider #1 single LTL (less-than-truckload) provider Wide range of assets and non assets Ranked #1 “America’s Most Admired Companies” by Fortune for 3 consecutive years in early 2000s Joint venture with China’s conglomerate (Jin Jiang) Cost and purchasing synergies by merger Internal Audit: Strengths

32. High driver turnover and driver shortages Various brand names resulting in decreased name recognition Low operating margin High wages paid to Teamster drivers $12 million increase in claims and insurance accruals Increase in multi-employer health, welfare and pension plans Lost productivity from unused capital (underutilized trucks) 15 % overlap of customers by the Yellow-Roadway merger Internal Audit: Weaknesses

33. Internal Factor Evaluation Matrix

34. Financial Ratios: Time Comparison

35. Financial Ratios: Competitor Comparison

36. Financial Ratios: Industry Comparison

37. Financial Trends(December 1998 - December 2004)

38. Yellow Stock Performance Source: moneycentral.msn.com Dividends ( )

39. SWOT Matrix

40. Space Matrix

41. Space Matrix Yellow has achieved moderate competitive advantages and financial strength in a growing and stable industry.

42. BCG

43. BCG

44. Quadrant I Market development Market penetration Product development Forward integration Backward integration Horizontal integration Related diversification Grand Strategy Matrix

45. IE Matrix

46. IE Matrix

47. Matrix Analysis

48. QSPM

49. QSPM

50. Market Development: We can look to increase more hauls over North America increasing the amount of deliveries that will be made. Market Penetration: Go after UPS, Fed Ex market share Product Development: If the logging goes through than we can look to buy chip trailers to haul wood chips. Possible alternative Strategies