SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [x]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2)).
[x] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Rule 14a-12
Yellow Corporation
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[x] No fee required.
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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[YELLOW CORPORATION LOGO]
YELLOW CORPORATION
10990 Roe Avenue
Overland Park, Kansas 66211
------------------------------
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 17, 2003
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Yellow
Corporation (the "Company") will be held at the Company's General Office, 10990
Roe Avenue, Overland Park, Kansas, on Thursday, April 17, 2003 at 9:30 a.m.,
Central Daylight Time, to consider the following matters:
I. The election of seven directors;
II. The approval of the appointment of KPMG LLP as independent
public accountants of the Company for 2003; and
III. The transaction of such other business as may properly come
before such meeting or any reconvened meeting after an
adjournment.
The accompanying Proxy Statement contains information regarding the matters
that you will be asked to consider and vote on at the Annual Meeting.
The Board of Directors has fixed the close of business on February 17, 2003
as the record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting or any reconvened meeting after any
adjournment thereof.
WHETHER YOU EXPECT TO ATTEND THE MEETING OR NOT, PLEASE COMPLETE, SIGN AND
RETURN THE ACCOMPANYING PROXY SO THAT YOUR SHARES WILL BE REPRESENTED AT THE
MEETING. Return it as promptly as possible in the enclosed envelope. No postage
is required if mailed in the United States. You may revoke your proxy any time
prior to its exercise, and you may attend the meeting and vote in person, even
if you have previously returned your proxy. If you receive more than one proxy
because your shares are held in various names or accounts, each proxy should be
completed and returned. In some cases, you may be able to exercise your proxy by
telephone or by the internet. Please refer to the Proxy Statement for further
information on telephone and internet voting.
By Order of the Board of Directors:
/s/ DANIEL J. CHURAY
Overland Park, Kansas
March 6, 2003 DANIEL J. CHURAY, Secretary
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
YELLOW CORPORATION
10990 Roe Avenue
Overland Park, Kansas 66211
INTRODUCTION
We are furnishing this Proxy Statement to you in connection with the
solicitation by the Board of Directors of Yellow Corporation (the "Company"), a
Delaware corporation, of proxies for use at our 2003 Annual Meeting of
Stockholders, to be held at the Company's General Office, 10990 Roe Avenue,
Overland Park, Kansas (the Company's telephone is 913/696-6100; mailing address
10990 Roe Avenue, Overland Park, Kansas 66211), at 9:30 a.m., Overland Park,
Kansas time, on April 17, 2003, and at any and all reconvened meetings after any
adjournments of the meeting. Our Annual Report (including audited financial
statements) for the year ended December 31, 2002 accompanies this Proxy
Statement, Notice of Annual Meeting of Stockholders and form of proxy, which
will be mailed to stockholders on or about March 6, 2003. The Annual Report is
not part of this proxy soliciting material except to the extent specifically
incorporated herein by reference. A copy of our annual report to the Securities
and Exchange Commission ("SEC") on Form 10-K and the quarterly reports on Form
10-Q may be obtained without charge by writing the Manager, Investor Relations
of the Company at the mailing address above. You may read and copy these reports
or any other document we file with the SEC at the SEC's Public Reference Room at
450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information regarding the Public Reference Room. The
SEC also maintains a website that contains reports, proxy and information
statements, and other information that we have filed electronically. The SEC's
website is located at http://www.sec.gov.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING OF THE COMPANY
At the Annual Meeting, you will consider and vote upon:
1. the election of seven directors;
2. the approval of the appointment of KPMG LLP as independent public
accountants of the Company for 2003; and
3. such other business as may properly come before the meeting.
QUESTIONS AND ANSWERS
WHO IS ENTITLED TO VOTE AT THE MEETING?
Stockholders of record as of the close of business on February 17, 2003
will be entitled to notice of and to vote at our Annual Meeting of Stockholders
or any reconvened meetings after any adjournments of the meeting.
HOW MANY SHARES CAN VOTE?
On the record date, we had outstanding 29,581,353 shares of common stock
("Common Stock"), which constitute our only outstanding voting securities. Each
stockholder is entitled to one vote for each share of Common Stock held as of
the record date.
-1-
WHAT MATTERS AM I VOTING ON?
You are being asked to vote on the following matters:
- The election of seven directors; and
- The approval of the appointment of KPMG LLP as our independent public
accountants for 2003.
HOW DOES THE BOARD RECOMMEND I VOTE ON THE PROPOSALS?
The Board recommends that you vote "FOR" the proposed slate of directors
and "FOR" the appointment of KPMG LLP.
HOW DO I CAST MY VOTE?
If you hold your shares as a stockholder of record, you may vote by mail by
signing and returning the enclosed proxy card, or you may vote in person at the
Annual Meeting by delivering your proxy card in person or by filling out and
returning a ballot that will be supplied to you at the meeting. If you are a
street-name stockholder, you will receive instructions from your bank, broker or
other nominee describing how to vote your shares.
A number of banks and brokerage firms participate in a program that also
permits stockholders to direct their vote by the internet or telephone. This
option, if available, will be reflected on the voting form from a bank or
brokerage firm that accompanies this Proxy Statement. If your shares are held in
an account at a bank or brokerage firm that participates in such a program, you
may direct the vote of these shares by the internet or telephone by following
the instructions on the voting form enclosed with the proxy from the bank or
brokerage firm. Votes directed by the internet or telephone through such a
program must be received by 11:00 p.m. Eastern time (or 10:00 p.m. Overland
Park, Kansas time) on April 16, 2003. Directing the voting of your shares will
not affect your right to vote in person if you decide to attend the meeting;
however, you must first request a proxy either on the internet or the voting
form that accompanies this Proxy Statement. Requesting a proxy prior to the
deadlines described above will automatically cancel any voting directions you
have previously given by the internet or by telephone with respect to your
shares. The internet and telephone proxy procedures are designed to authenticate
stockholders' identities, to allow stockholders to give their proxy instructions
and to confirm that those instructions have been properly recorded.
The enclosed proxy card contains instructions for voting by mail. Please
follow these instructions carefully. The proxies identified on the back of the
proxy card will vote the shares of which you are stockholder of record in
accordance with your instructions. If you sign and return your proxy card
without giving specific voting instructions, the proxies will vote your shares
"FOR" the proposals.
HOW WILL THE PROXIES VOTE ON ANY OTHER BUSINESS BROUGHT UP AT THE MEETING?
By submitting your proxy card, you authorize the proxies to use their
judgment to determine how to vote on any other matter properly brought before
the meeting. The proxies identified on the back of the proxy will vote your
shares in accordance with your instructions. If you sign and return your proxy
card without giving specific voting instructions, the proxies will vote your
shares "FOR" the proposals. The Board of Directors does not intend to bring any
other business before the meeting, and it is not aware that anyone else intends
to do so. If any other business comes before the meeting, it is the intention of
the persons named in the enclosed form of proxy to vote as proxies in accordance
with their best judgment.
CAN I REVOKE MY PROXY?
Yes. You can revoke your proxy before it is voted at the meeting by:
- Submitting a new proxy card bearing a later date;
- Requesting a proxy either on the internet or the voting form that
accompanies this Proxy Statement (for telephone or internet voting only);
-2-
- Giving written notice before the meeting to our Secretary at the address
set forth on the cover of this Proxy Statement stating that you are
revoking your proxy; or
- Attending the meeting and voting your shares in person. Please note that
your attendance at the meeting will not alone serve to revoke your proxy.
WHAT IS A QUORUM?
A quorum is the number of shares that must be present to hold the meeting.
The quorum requirement for the meeting is a majority of the outstanding shares
as of the record date, present in person or represented by proxy. A proxy
submitted by a stockholder may indicate that all or a portion of the shares
represented by the proxy are not being voted ("stockholder withholding") with
respect to a particular matter. Proxies that are marked "abstain", proxies
relating to "street name" shares that are returned to the Company but marked by
brokers as "not voted" ("broker non-votes") and proxies reflecting shares
subject to stockholder withholding will be treated as shares present for
purposes of determining the presence of a quorum on all matters unless authority
to vote is completely withheld on the proxy.
WHAT IS A BROKER NON-VOTE?
A "broker non-vote" occurs when a broker submits a proxy that states that
the broker does not vote for some or all of the proposals, because the broker
has not received instructions from the beneficial owners on how to vote on such
proposals and does not have discretionary authority to vote in the absence of
instructions.
WILL BROKER NON-VOTES OR ABSTENTIONS AFFECT THE RESULTS?
No, broker non-votes and abstentions will not count as votes "FOR" or
"AGAINST" any director or proposal being voted on.
WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD?
Your shares are probably registered in more than one account. You should
vote each proxy card you receive.
HOW MANY VOTES ARE NEEDED FOR APPROVAL OF EACH PROPOSAL?
- The election of directors requires a plurality vote of the votes cast at
the meeting. "Plurality" means that the seven individuals receiving the
highest number of "FOR" votes will be elected to the Board of Directors.
Consequently, any shares not voted "FOR" a particular nominee (whether as
a result of a direction of the stockholder to withhold authority,
abstentions or a broker non-vote) will not be counted in that nominee's
favor.
- The ratification of the appointment of KPMG LLP requires the affirmative
"FOR" vote of a majority of the votes cast at the meeting. Abstentions
from voting and shares that are subject to stockholder withholding or
broker non-vote are not counted as "votes cast" with respect to that
proposal and therefore will have no effect on that vote.
WHERE CAN I FIND THE VOTING RESULTS OF THE MEETING?
The preliminary voting results will be announced at the meeting. The final
results will be published in our quarterly report on Form 10-Q for the first
quarter of 2003.
HOW WILL PROXIES BE SOLICITED? WHO WILL BEAR THE COST?
We will bear the cost of the solicitation. In addition to the use of the
mails, our directors, officers and employees, without additional compensation,
may solicit proxies by personal interview, telephone, telegram or otherwise. We
may also make arrangements with brokerage firms and other custodians, nominees
and fiduciaries for the forwarding of soliciting material to the beneficial
owners of Common Stock held of record
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by those owners. We will reimburse those brokers, custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses incurred in connection
with that service.
Stockholders authorizing proxies or directing the voting of shares by the
internet should understand that there may be costs associated with electronic
access, such as usage charges from internet access providers and telephone
companies, and those costs must be borne by the stockholder.
SUBMISSION OF PROPOSALS BY STOCKHOLDERS
We must receive stockholders' proposals intended to be presented at the
2004 Annual Meeting by November 7, 2003 to be eligible for inclusion in the
proxy materials relating to that meeting. Stockholder proposals as to which we
receive notice that are proposed to be brought before the 2004 Annual Meeting
(outside the process of the SEC's rule on stockholder proposals described in the
preceding sentence) will be considered not properly brought before that meeting,
and will be out of order, unless we receive the notice as to that matter not
less than 60 days nor more than 90 days prior to the date of the 2004 Annual
Meeting, in accordance with our Bylaws. If, however, we give less than 70 days
notice of the date of the 2004 Annual Meeting, then, to be timely, we must
receive notice of a stockholder proposal by the 10th day following the day that
we mail notice of, or publicly disclose, the date of the 2004 Annual Meeting. We
may use our discretionary authority to preclude any stockholder proposal
received after that time from presentment at the 2004 Annual Meeting.
Stockholders who wish to suggest qualified candidates to stand for election
to our Board of Directors may write to the Secretary, Yellow Corporation, 10990
Roe Avenue, Overland Park, Kansas 66211, stating in detail and in accordance
with our Bylaws the qualifications of the persons they recommend. To be
considered at the 2004 Annual Meeting, you must mail or deliver a recommendation
to us not less than 14 days nor more than 50 days prior to the date of the 2004
Annual Meeting. If, however, we give less than 21 days notice of the date of the
2004 Annual Meeting, you must mail or deliver a recommendation by the seventh
day following the day that we mail notice of the date of the 2004 Annual
Meeting. The Governance Committee of the Board of Directors will consider such
suggestions.
-4-
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
Share ownership of Directors and Executive Officers is as of January 31,
2003, and includes:
- shares in which they may be deemed to have a beneficial interest;
- shares credited to individual accounts in the Stock Sharing Plan, a
qualified savings and defined contribution plan;
- shares subject to options that are exercisable on or prior to April 1,
2003, pursuant to the 1992, 1996, 1997 and 1999 Stock Option Plans and
the 2002 Stock Option and Share Award Plan; and
- in the case of outside Directors, options that are exercisable on or
prior to April 1, 2003, pursuant to the Directors' Stock Compensation
Plan.
SHARES SUBJECT TO
OPTIONS THAT ARE
SHARES OWNED OR WILL BECOME
AS OF EXERCISABLE PRIOR TOTAL BENEFICIAL PERCENT OF
NAME 1/31/03(1) TO 4/1/03 OWNERSHIP(1) CLASS
---- ------------ ----------------- ---------------- ----------
Cassandra C. Carr.................... 7,582(2) 8,712 16,294(2) *
Howard M. Dean....................... 8,730 8,712 17,442 *
Dennis E. Foster..................... 3,152 4,356 7,508 *
Richard C. Green, Jr.(3)............. 2,195 2,178 4,373 *
John C. McKelvey..................... 5,178 8,712 13,890 *
William L. Trubeck................... 8,587 8,712 17,299 *
Carl W. Vogt......................... 9,151 8,712 17,863 *
William D. Zollars................... 29,891(4) 290,405 320,296(4) 1.1%
Donald G. Barger, Jr................. 8,593(5) 13,616 22,209(5) *
Gregory A. Reid...................... 4,598(4) 7,339 11,937(4) *
James D. Ritchie..................... 5,748(4) 0 5,748(4) *
James L. Welch....................... 8,682(6) 0 8,682(6) *
All Directors and Executive Officers
as a Group (15 persons)............ 104,961 388,962 493,923 1.7%
* Indicates less than 1% ownership.
(1) Direct ownership unless indicated otherwise.
(2) Ms. Carr has deferred 6,085 shares pursuant to the Yellow Corporation
Amended Directors' Stock Compensation Plan until she ceases to be a Director of
the Company.
(3) Mr. Green has chosen not to stand for re-election at the 2003 Annual
Meeting of Stockholders due to time commitments.
(4) Restricted stock pursuant to a Restricted Stock Award Agreement
pursuant to the 1992 Stock Option Plan with Non-Compete Covenant, the
restrictions of which lapse on March 4, 2005.
(5) Includes 6,093 shares of restricted stock pursuant to a Restricted
Stock Award Agreement pursuant to the 1992 Stock Option Plan with Non-Compete
Covenant, the restrictions of which lapse on March 4, 2005.
(6) Includes 8,047 shares of restricted stock pursuant to a Restricted
Stock Award Agreement pursuant to the 1992 Stock Option Plan with Non-Compete
Covenant, the restrictions of which lapse on March 4, 2005 and 635.486 shares
held in the Company's savings plan.
-5-
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on our review of copies of reports furnished to us by persons
required to file reports under Section 16(a) of the Exchange Act, we believe
that all filings required to be made by reporting persons with respect to the
Company were timely made in accordance with the requirements of the Exchange
Act, with the exception of Gregory A. Reid, who filed a Form 4 twelve business
days late due to the Company's administrative error in assisting his preparation
of the form while perfecting the Company's processes in response to the SEC's
newly adopted shortened filing periods.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AS OF JANUARY 31, 2003
As of January 31, 2003, the persons known to us to be beneficial owners of
more than five percent of the Company's outstanding shares of Common Stock, the
number of shares beneficially owned by them, and the percent of outstanding
Common Stock so owned were:
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
------------------- ----------------- --------
Wellington Management Company, LLP......................... 3,466,150(1) 11.72
75 State Street
Boston, MA 02109
Dimensional Fund Advisors, Inc............................. 1,529,933(2) 5.17
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
(1) According to information provided to the Company in a Schedule 13G/A,
Wellington Management Company, LLP had the following voting and dispositive
powers with respect to those shares: (a) sole voting power, no shares; (b)
shared voting power, 2,929,140 shares; (c) sole dispositive power, no shares and
(d) shared dispositive power, 3,466,150 shares.
(2) According to information provided to the Company in a Schedule 13G/A,
Dimensional Fund Advisors, Inc. had the following voting and dispositive powers
with respect to those shares: (a) sole voting power, 1,529,933 shares; (b)
shared voting power, no shares; (c) sole dispositive power, 1,529,933 shares;
and (d) shared dispositive power, no shares.
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I. ELECTION OF DIRECTORS
At the meeting, our stockholders will elect seven directors to hold office
until the 2004 Annual Meeting or until their successors are elected and have
qualified. If any nominee should be unable to stand for election as a director,
it is intended that the shares represented by proxies will be voted for the
election of a substitute that management may nominate.
The following table sets forth information with respect to each nominee for
election as a director of the Company. No nominee has any family relationship
with any other director or executive officer of the Company.
PRINCIPAL OCCUPATION;
NAME; PAST SERVICE DIRECTORSHIPS; AGE
------------------------------------- -----------------------------------------------------------
NOMINEES FOR ELECTION AS DIRECTORS
Cassandra C. Carr.................... Senior Advisor, Public Strategies, Inc. (since 2002);
Director since 1997 Senior Executive Vice President, External Affairs, SBC
Communications, Inc., San Antonio, TX (telecommunications)
(1998-2002). Formerly Senior Vice President, Human
Resources (1994-1998); 58
Howard M. Dean....................... Retired Chairman of the Board of Dean Foods Company,
Director since 1987 Franklin Park, IL (processor and distributor of food
products); Director of Ball Corporation; 65
Dennis E. Foster..................... Formerly Vice Chairman of Alltel Corporation, Little Rock,
Director since 2000 AR (telecommunications) (1998-2000); Chief Executive
Officer of 360 Communications, Inc., (1993-1998); Director
of Alltel Corporation and NiSource Corporation; 62
John C. McKelvey..................... President and Chief Executive Officer, Menninger Foundation
Director since 1977 and Menninger Psychiatric Clinic, Topeka, KS (psychiatric
treatment and research) since November, 2001, and President
Emeritus of Midwest Research Institute, Kansas City, MO
(scientific and technical research) since January 2000.
Formerly President and Chief Executive Officer of Midwest
Research Institute, Kansas City, MO (1975-1999); 68
William L. Trubeck................... Executive Vice President, Chief Administrative Officer and
Director since 1994 Chief Financial Officer (since 2002) and Senior Vice
President and Chief Financial Officer (2000 -- 2002) of
Waste Management, Inc., Houston, TX (waste disposal and
environmental services); Formerly Senior Vice
President-Finance and Chief Financial Officer, President,
Latin American Operations, International MultiFoods, Inc.,
Minneapolis, MN (1997-2000); 56
Carl W. Vogt......................... Of Counsel (formerly a Partner and Senior Partner since
Director since 1996 1974) to Fulbright & Jaworski LLP, Washington, DC (since
2002). President Emeritus of Williams College,
Williamstown, MA (President, interim, 1999-2000); Chairman,
National Transportation Safety Board, Washington, DC
(1992-1994); Director of Scudder Funds (mutual funds),
International Strategy and Investment (mutual funds),
American Science & Engineering and Waste Management, Inc.;
66
William D. Zollars................... Chairman, President and Chief Executive Officer of the
Director since 1999 Company (since November 1999). Formerly President of Yellow
Transportation, Inc., the Company's principal operating
subsidiary (1996-2000); Director of Butler Manufacturing
Co. and ProLogis Trust; 55
-7-
STRUCTURE AND FUNCTIONING OF THE BOARD OF DIRECTORS
The Board of Directors held five regularly scheduled meetings and one
special meeting during 2002.
Audit/Ethics Committee. The Audit/Ethics Committee met four times during
2002. The Audit/Ethics Committee consisted of John McKelvey (Chairman), Carl
Vogt and Dennis Foster. The Committee's functions are described in detail in the
Audit/Ethics Committee Charter, which was amended and restated in 2002 and is
attached to this Proxy Statement as Annex A.
Compensation Committee. The Compensation Committee met four times during
2002. The Compensation Committee consisted of William Trubeck (Chairman),
Richard Green and Howard Dean. The Committee's functions include:
- making recommendations to the Board of Directors regarding compensation
of officers and approving compensation strategies for executive officers;
- reviewing actions relating to officer compensation; and
- setting policy for the Company's pension and profit sharing plans.
Governance Committee. The Governance Committee met once during 2002. The
Governance Committee consisted of Dennis Foster (Chairman), Cassandra Carr and
Carl Vogt. The Committee's functions include:
- the organization, structure and responsibility of the Board and its
Committees;
- evaluation of the effectiveness of the Board and each Committee in the
Company's corporate governance process;
- review of the qualifications of prospective directors and the nomination
of director candidates;
- review of the appropriate level of outside directors' fees and retainers;
and
- determination of the appropriate ratio of inside and outside directors.
DIRECTORS' COMPENSATION
We pay directors who are not full time employees of the Company:
- an annual retainer for Board service of $23,000;
- an annual retainer for Committee service of $1,200 for each Committee on
which a Director serves;
- an attendance fee of $1,300 for each Board meeting and $1,100 for each
Committee meeting attended; and
- we reimbursed them or otherwise make them whole for all costs or expenses
of any kind incurred by them relating to Board or Committee meetings.
Committee chairmen receive an attendance fee of $2,100 for each committee
meeting attended. Directors may elect to defer receipt of the retainer and
attendance fees. Under the terms of the Directors Stock Compensation Plan, a
minimum of 50% of the Board and Committee retainers is paid in the form of
Company common stock, with the stock award determined annually on the date of
the Company's Annual Meeting of Stockholders based on the closing price of the
Company's common stock on that date and the then applicable level of Board and
Committee retainers. The directors annually have the option of taking up to 100%
of the Board and Committee retainers in Company common stock rather than cash.
Also under the Directors Stock Compensation Plan, commencing on April 24, 1997
and annually on the first business day of each calendar year thereafter, the
Directors receive option grants of 2,000 shares of the Company's common stock,
with the options vesting after six months and exercisable for five years. A
total of 200,000 shares are reserved for award under the Directors Stock
Compensation Plan. We do not pay Directors who are full time
-8-
employees of the Company or any subsidiary any retainer or attendance fees for
services as members of the Board or any of its Committees.
During 2002, no incumbent Director attended fewer than 75% of the aggregate
of the total number of meetings of the Board held during the period the
incumbent was a Director and of Committees of the Board on which the incumbent
served during the period that the incumbent was a Director, except that Richard
Green attended four out of six meetings of the Board.
-9-
AUDIT/ETHICS COMMITTEE REPORT
The Audit/Ethics Committee of the Board of Directors provides assistance to
the Board of Directors in, among other matters, fulfilling its responsibility in
matters relating to the accounting and reporting practices of the Company, the
adequacy of the Company's financial controls and the quality and integrity of
the financial statements of the Company. The Audit/Ethics Committee also
oversees the Company's compliance programs.
The Audit/Ethics Committee has reviewed and discussed with management the
Company's audited financial statements as of and for the year ended December 31,
2002.
The Audit/Ethics Committee has discussed with the independent auditors the
matters required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit/Ethics Committees, as amended, by the Auditing
Standards Board of the American Institute of Certified Public Accountants.
The Audit/Ethics Committee has received and reviewed the written
disclosures and the letter from the independent auditors required by
Independence Standard No. 1, Independence Discussions with Audit/Ethics
Committees, as amended, by the Independence Standards Board, and has discussed
with the auditors the auditors' independence.
Based on the reviews and discussions referred to above, and such other
matters deemed relevant and appropriate by the Audit/Ethics Committee, the
Audit/Ethics Committee recommended to the Board of Directors that the financial
statements referred to above be included in the Company's Annual Report on Form
10-K for the year ended December 31, 2002.
The Board of Directors has determined that the members of the Audit/Ethics
Committee are independent. The Audit/Ethics Committee has adopted a written
charter, which was amended and restated in 2002 and is attached to this Proxy
Statement as Annex A. The Audit/Ethics Committee conducts annual reviews of its
charter to assess its adequacy. In 2002, the Audit/Ethics Committee made a
number of changes to further align the charter's provisions with newly adopted
and proposed SEC regulations and NASDAQ Stock Market rules. Generally, these
changes reflected increased specificity in the charter rather than changes in
the Committee's practices.
The Audit/Ethics Committee presents the following summary of all fees paid
to Arthur Andersen LLP ("Arthur Andersen") and KPMG LLP ("KPMG"), the Company's
auditors, during calendar year 2002:
AUDITOR AUDIT FEES AUDIT RELATED FEES TAX FEES ALL OTHER FEES
------- ---------- ------------------ -------- --------------
Arthur Andersen LLP $182,000 $ 30,550 $307,500 $39,865
KPMG LLP $962,900 $132,115 $ 7,500 $ -0-
KPMG replaced Arthur Andersen as the Company's auditors in May 2002.
The Audit/Ethics Committee has considered and determined that the level of
KPMG's fees for provision of services other than the audit and the quarterly
review services is compatible with maintaining the auditor's independence.
John C. McKelvey, Chairman
Carl W. Vogt
Dennis E. Foster
]
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EXECUTIVE COMPENSATION
The table below shows information concerning the annual and long-term
compensation for services in all capacities to the Company for the fiscal years
ended December 31, 2002, 2001 and 2000 of those persons who were, as of December
31, 2002, the executive officers of the Company.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
-------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------------- ------------------------ -----------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
(1)OTHER RESTRICTED (2)ALL
NAME AND PRINCIPAL ANNUAL STOCK OPTIONS/ LTIP OTHER
POSITION YEAR SALARY ($) BONUS ($) COMP. ($) AWARD(S) ($) SARS (#) PAYOUTS ($) COMP ($)
------------------ ---- ---------- --------- --------- ------------ -------- ----------- --------
William D. Zollars 2002 $770,000 $134,288 $0 $673,400 0/0 (4) $2,500
Chairman of the Board, 2001 $700,000 $ 0 $0 $ 0 0/0 0 $2,125
President and Chief 2000 $550,000 $377,603 $0 $ 0 200,000/0 0 $2,125
Executive Officer
Donald G. Barger, Jr. 2002 $356,250 $ 40,833 $0 $137,270 0/0 (4) $3,000
Senior Vice President 2001 $335,000 $ 0 $0 $ 0 0/0 0 $1,725
and Chief Financial Officer 2000 $138,541 $ 6,818 $0 $ 0 25,000/0 0 $ 0
Gregory A. Reid(3) 2002 $237,500 $ 25,888 $0 $103,600 (4) $ 0
Senior Vice President 2001 $226,375 $ 0 $0 $ 0 0/0 0 $ 0
and Chief Marketing Officer 2000 $205,322 $150,006 $0 $ 0 20,000/0 0 $ 0
James D. Ritchie 2002 $309,125 $130,000(5) $0 $129,500 40,000/0 (4) $9,000
President, Meridian IQ 2001 $255,633 $ 71,287 $0 $ 0 0/0 0 $2,625
2000 $216,021 $125,000(5) $0 $ 0 25,000/0 0 $ 0
James L. Welch 2002 $368,750 $ 67,536 $0 $181,300 0/0 (4) $3,000
President, Yellow 2001 $356,023 $ 0 $0 $ 0 0/0 0 $2,125
Transportation 2000 $259,989 $208,079 $0 $ 0 75,000/0 0 $2,125
-------------------------
(1) While the five named executive officers receive some perquisites from
the Company, those perquisites did not reach in any of the reported years the
threshold for reporting of $50,000 or ten percent of salary and bonus set forth
in the applicable rules of the SEC.
(2) The compensation reported for 2002 includes the Company's matching
contribution under the 401(k) portions of its defined contribution plan.
(3) Amounts indicated include compensation received by Mr. Reid in his
former capacity of Senior Vice President of Yellow Transportation, Inc. through
October 26, 2000.
(4) Each of the named officers in the Summary Compensation Table
participated during 2002 in the Company's Executive Performance Plan. See the
Compensation Committee Report contained in this Proxy Statement under the
caption "Long-Term Incentives" for a full description of this plan. Payouts
under this Plan are based 70% on the Company's return on capital and 30% on net
operating profit after taxes, in each case, as compared to the same measures of
companies included in the S&P Small Cap Index, which is comprised of
approximately 600 companies. The data to make this comparison is not yet
available for many of these companies; therefore, the payouts cannot yet be
computed. Fifty percent of the payout will be made in cash; and 50% of the
payout will be made in shares of the Company's common stock. The Compensation
Committee of the Board of Directors of the Company may also reduce payouts
pursuant to the plan. The
-11-
following table sets forth the value of the total potential payout for 2002 at
threshold, target and maximum levels for each of the named officers in the
Summary Compensation Table:
VALUE OF TOTAL POTENTIAL PAYOUT FOR 2002
-----------------------------------------
NAME THRESHOLD TARGET MAXIMUM
---- --------- ------ -------
William D. Zollars $301,570 $603,141 $1,206,282
Donald G. Barger, Jr. $ 71,250 $142,500 $ 285,000
Gregory A. Reid $ 45,517 $ 91,034 $ 182,068
James D. Ritchie $ 60,000 $120,000 $ 240,000
James L. Welch $ 92,187 $184,375 $ 368,750
(5) In 2000, Mr. Ritchie received a signing bonus when he joined
Transportation.com, the Company's internet joint venture based in California. In
2002, Mr. Ritchie received a signing bonus to become President of Meridian IQ,
based in Overland Park, Kansas.
OPTIONS AND STOCK APPRECIATION RIGHTS
The following tables summarize the option exercises by the executive
officers named in the Summary Compensation Table above during 2002; and the
year-end value of their options. One executive officer received an option grant
during 2002.
OPTION AND SAR GRANTS IN FISCAL YEAR 2002
POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SAR'S PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS/SAR EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE 5% 10%
---- ----------- ------------- ----------- ---------- -- ---
William D. Zollars 0
Donald G. Barger, Jr. 0
Gregory A. Reid 0
James D. Ritchie 40,000(1) 6.20% $29.67 10/24/12 $746,400 $1,891,600
James L. Welch 0
(1) Mr. Ritchie received a grant of options in 2002, along with other
former employees of Transportation.com, in exchange for the extinguishment of
their options in Transportation.com. These options essentially replaced their
options in this company for which there is no market for its equity after the
Company acquired 100% of Transportation.com.
-12-
OPTION AND SAR EXERCISES AND YEAR END VALUE TABLE(1)
VALUE OF VALUE OF
NUMBER OF NUMBER OF UNEXERCISED UNEXERCISED
UNEXERCISED UNEXERCISED IN-THE-MONEY IN-THE-MONEY
OPTIONS AT SARS AT OPTIONS AT SARS AT
SHARES FY-END(#) FY-END(#) FY-END($) FY-END(#)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/ EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE UNEXERCISABLE UNEXERCISABLE
---- ----------- ----------- ------------- ------------- ------------- -------------
William D. Zollars 75,000 $940,346 290,405/177,012 0 $2,348,279/$1,635,864 0
Donald G. Barger, Jr. 0 $ 0 13,616/13,616 0 $ 144,602/$144,602 0
Gregory A. Reid 17,714 $166,051 7,339/11,437 0 $ 22,824/$121,461 0
James D. Ritchie 6,808 $ 96,784 0/53,616 0 $ 0/$134,390 0
James L. Welch 32,678 $322,381 0/42,755 0 $ 0/$390,742 0
(1) All options become exercisable in four equal annual installments. All
options were granted with an exercise price equal to the closing price of the
Company's common stock as reported by NASDAQ on the date of each grant. The time
at which options become exercisable is accelerated upon the occurrence of
certain events, including total permanent disability or death of the executive
officer while in the employ of the Company, if the Company is wholly or
partially liquidated, or is a party to a merger, consolidation or reorganization
in which it or an entity controlled by it is not the surviving entity. Options
exercised may be paid for in cash or by delivery of shares owned by the grantee.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information as of December 31, 2002, with
respect to our compensation plans under which equity securities are authorized
for issuance:
NUMBER OF SECURITIES
NUMBER OF SECURITIES REMAINING AVAILABLE FOR
TO BE ISSUED WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER
UPON EXERCISE OF EXERCISE PRICE OF EQUITY COMPENSATION PLANS
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN(A))
------------- -------------------- -------------------- -------------------------
Equity compensation plans
approved by security holders 1,941,608 $ 21.34 803,358
Equity compensation plans not
approved by security holders -0- -0- -0-
-------- -------- --------
Total 1,941,608 $ 21.34 803,358
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EMPLOYMENT CONTRACTS, CHANGE OF CONTROL AGREEMENTS AND
TERMINATION OF EMPLOYMENT AGREEMENTS
The Company entered into an Employment Agreement on December 15, 1999 with
its Chairman, President and Chief Executive Officer William D. Zollars that
contains the following essential terms and conditions:
- a base salary that is reviewed annually in accordance with the Company's
normal salary policy for executive officers (with his salary having been
set in 2002 at $770,000);
- an annual bonus pursuant to which a threshold, target and maximum award
as a percentage of Mr. Zollars' base salary shall be established for each
year (with these percentages for 2002 having been established at 20%, 80%
and 160%, respectively), with the criteria for establishment of the
target and parameters for payment to be determined annually by the
Compensation Committee, at least 80% of the criteria established by the
Committee being based on specific measurements of financial performance
of the Company during the applicable year and the remaining percentage
being based on non-financial criteria;
- a stock option award on December 15, 1999 based on the closing price of
the Company's common stock on the NASDAQ exchange on that date in the
amount of 200,000 shares, with the award vesting 25% on each anniversary
of the award;
- a supplemental retirement benefit providing Mr. Zollars with the
difference between the benefits that he would have received under the
Company's pension plan if the service credited for benefit accrual
purposes under the plan were 20 years plus his actual such service, if
any, after his normal retirement date and the benefits actually payable
to Mr. Zollars under the pension plan, said supplemental retirement
benefit vesting at the rate of 20% per year measured from September 6,
1996, the commencement date of Mr. Zollars' prior employment as President
of Yellow Transportation, Inc., the Company's principal operating
subsidiary, with Mr. Zollars becoming 100% vested on September 6, 2001;
and
- payments in the event of Mr. Zollars' termination "without cause," or
resignation for "good reason" or following a "change of control", as
those terms are defined in the Agreement ("Change of Control" having the
same definition as set forth in the Company's Executive Severance
Agreements, described below) in the amount of twice Mr. Zollars' annual
rate of compensation, including target bonus, at the time of termination
or resignation, plus target bonus for the year of termination, and
immediate vesting in all outstanding stock options and any incentive and
benefit plans applicable at the time of termination or resignation.
The Company has entered into Executive Severance Agreements (the
"Agreements") with all the executive officers named in the Summary Compensation
Table, as designated by the Board of Directors. (In the case of William D.
Zollars, payments are only to the extent that they would exceed payments under
the "change of control" provisions of his Employment Agreement).
In the event of a "Change in Control" of the Company followed within two
years by (1) the termination of the executive's employment for any reason other
than death, disability, retirement or "cause" or (2) the resignation of the
executive due to an adverse change in title, authority or duties, a transfer to
a new location, a reduction in salary, or a reduction in fringe benefits or
annual bonus below a level consistent with the Company's practice prior to the
Change of Control, the Agreements provide that the executive shall be paid a
lump sum cash amount equal to the sum of (a) two times the executive's highest
compensation (salary plus bonus) for any consecutive 12-month period within the
previous three years. If the executive is within 10 years of his normal
retirement age (65), then the executive would be paid three times such highest
compensation. The above-described payments are also subject to a gross-up
provision in the event that it is determined that the benefits provided by the
Agreements are subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended.
-14-
The executive would further be entitled to receive in exchange for his
non-qualified stock options granted by the Company which are outstanding on the
date of the Change of Control, common stock of the Company (or, if the Company
or its successor becomes a subsidiary of another company, common stock of such
other company) having a fair market value equal to the fair market value of such
stock options on the Effective Date of the Change of Control.
A termination is for "cause" if it is the result of a conviction of a
felony involving moral turpitude by a court of competent jurisdiction, which is
no longer subject to direct appeal, or an adjudication by a court of competent
jurisdiction, which is no longer subject to direct appeal, that the executive is
mentally incompetent or that he is liable for willful misconduct in the
performance of his duty to the Company which is demonstrably and materially
injurious to the Company.
"Change of Control" for the purpose of the Agreements shall be deemed to
have taken place if: (i) A third person, including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, purchases
or otherwise acquires shares of the Company and as a result thereof becomes the
beneficial owner of shares of the Company having 20% or more of the total number
of votes that may be cast for the election of directors of the Company; or (ii)
as the result of, or in connection with any cash tender or exchange offer,
merger or other business combination, or contested election, or any combination
of the foregoing transactions, the continuing directors shall cease to
constitute a majority of the Board of Directors of the Company or any successor
to the Company.
DEFINED BENEFIT PENSION PLAN
The Company and certain of its subsidiaries' officers participate in a
noncontributory, defined benefit pension plan. This plan covers all regular
full-time and regular part-time office, clerical, sales, supervisory and
executive personnel of the Company and participating subsidiaries (excluding
directors who are not salaried employees) who are at least age 21, are employed
in the United States and are not otherwise covered by a pension plan under a
collective bargaining agreement. Pension plan benefits are calculated solely on
salaries and cash bonuses. Compensation reported in the Summary Compensation
Table includes amounts that are not covered compensation under the pension plan.
Participants are vested after five years of service.
A participant retiring at age 65 will receive an annual pension benefit
(single life basis) amounting to 1 2/3% of his final average annual compensation
paid in the five highest consecutive years of the participant's last ten
consecutive years of participation, multiplied by his total years of
participation, the sum of which is reduced by 50% of the amount of his primary
social security entitlement at retirement (prorated if participation is less
than 30 years). The pension of the highest-paid executive officers will probably
be reduced from the above formula because of limitations under the Employment
Retirement Income Security Act of 1974, as amended ("ERISA").
The following table sets forth the gross annual benefits (single life at
age 65), before deduction of the applicable primary social security offset
amount (a maximum of 50% of the participant's primary social security benefits
at 30 years of participation), payable upon retirement under the defined benefit
pension plan
-15-
for specified remuneration and years of service classifications, part of which
may be paid pursuant to the supplemental retirement income agreements discussed
below:
PENSION VALUE TABLE
YEARS OF SERVICE
---------------------------------------------------
ELIGIBLE REMUNERATION(1) 15 20 25 30 35
------------------------ ------- ------- ------- ------- -------
200,000 50,000 66,650 83,350 100,000 116,650
225,000 56,250 75,000 93,750 112,500 131,250
250,000 62,500 83,350 104,150 125,000 145,850
300,000 75,000 100,000 125,000 150,000 175,000
350,000 87,500 116,650 145,850 175,000 204,150
400,000 100,000 133,350 166,650 200,000 233,350
450,000 112,500 150,000 187,500 225,000 262,500
500,000 125,000 166,650 208,350 250,000 291,650
550,000 137,500 183,350 229,150 275,000 320,850
600,000 150,000 200,000 250,000 300,000 350,000
650,000 162,500 216,650 270,850 325,000 379,150
700,000 175,000 233,350 291,650 350,000 408,350
750,000 187,500 250,000 312,500 375,000 437,500
800,000 200,000 266,650 333,350 400,000 466,650
850,000 212,500 283,350 354,150 425,000 495,850
(1) Eligible Remuneration as used in this table is defined as final average
covered compensation (salary and annual bonus) for the five highest consecutive
years of the participant's last ten consecutive years of participation preceding
termination of employment under the plan.
ERISA, as amended by subsequent legislation, limits covered compensation
under the pension plan to $200,000 in 2002 and imposes maximum annual benefit
limitations, which may cause a reduction in the pension payable under the
pension plan. The Company enters into nonqualified, unfunded supplemental
retirement income agreements with affected participants which are designed to
provide those benefits intended by the pension plan before application of the
legislative limitations.
The named executive officers have credited years of service in the plan as
follows: Mr. Zollars, 6 years; Mr. Barger, 1 year; Mr. Reid, 5 years; and Mr.
Welch, 23 years. Because Meridian IQ is not a participating employer under the
pension plan, Mr. Ritchie, the President of Meridian IQ, is not a participant in
either the qualified or nonqualified plans. Under a separate supplemental
retirement income agreement, Mr. Barger is credited with participation in the
pension plan for the number of years since his date of employment or 20 years,
whichever is greater; however, the 20 year provision only applies if Mr. Barger
works for the Company until he is age 65.
COMPENSATION COMMITTEE REPORT
The Compensation Committee (the "Committee") of the Board of Directors of
Yellow Corporation (the "Company") is providing this report to its stockholders
in accordance with Securities and Exchange Commission ("SEC") rules, to inform
you of the Compensation Committee's compensation policies for executive officers
and the rationale for compensation the Company pays to the Chief Executive
Officer of the Company. To preserve objectivity in the achievement of the
Company's goals, the Committee consists of three independent, non-employee
directors who have no "interlocking" relationships as the SEC defines those
relationships. It is the Committee's overall goal to develop executive
compensation policies that are consistent with and linked to strategic business
objectives and Company values along with competitive practices in the employment
market.
-16-
The Compensation Committee approves the design of, assesses the
effectiveness of and administers executive compensation programs in support of
Company compensation policies. The Compensation Committee also reviews and
approves all salary arrangements and other remuneration for executives,
evaluates executive performance and considers related matters.
COMPENSATION PHILOSOPHY
The compensation program for the Company's executive officers was
established to allow the Company to attract and retain the caliber of executive
whose leadership skills can enable the Company and its subsidiaries to
effectively compete in their market segments. Additionally, the program is
intended to act as an incentive for the executives to attain the highest level
of organizational performance and profitability by rewarding the executive for
increasing levels of profit and stockholder value. To achieve these goals, the
Committee has designed executive compensation to:
- Comprise a significant amount of pay for senior executives in the form of
long-term, at-risk compensation to focus management on the long-term
interests of stockholders and balance short-term and long-term business,
financial and strategic goals
- Emphasize variable, at-risk compensation that is dependent upon the level
of success in meeting specified corporate performance objectives
- Encourage a personal proprietary interest to provide executives with a
close identification with the Company and align executives' interests
with those of stockholders
- Target compensation levels at rates that are reflective of current market
practices to maintain a stable, successful management team
In conformance with this compensation philosophy, the total annual
compensation for all executive officers is determined by three elements:
- base salaries
- potential annual cash incentive compensation awards or bonuses
- an opportunity to receive long-term equity in the Company or cash
compensation tied to long-term Company performance
An independent consultant provides the Committee with competitive market
data on each of these elements, including current compensation trends and
movements in the competitive marketplace and the competitiveness of the
Company's salary levels, incentive compensation awards and various benefit
plans. The data provided compares the Company's compensation practices to a
group of comparative companies. The Company's market for compensation comparison
purposes consists of a group of companies that tend to have similar sales
volumes. The Committee reviews and approves the selection of companies used for
compensation comparison purposes. The companies chosen for the comparative group
used for compensation comparison purposes generally are not the same companies
that comprise the S&P Transportation Index in the Performance Graph included in
this Proxy Statement. The Committee believes that the Company's most direct
competitors for executive talent are not necessarily all of the companies that
would be included in a published industry index established for comparing
stockholder returns.
Section 162(m) of the Internal Revenue Code of 1986, as amended, places a
limit of $1,000,000 on the amount of compensation that the Company may deduct in
any year with respect to the Company's Chief Executive Officer and its four
other highest paid executive officers. Certain performance-based compensation
and certain other compensation that the Company's stockholders have approved are
not subject to the deduction limit. The Company has qualified certain
compensation paid to executive officers for deductibility under Section 162(m),
including compensation expense related to options or other awards that the
Company grants pursuant to the Company's 2002 Stock Option and Share Award Plan,
performance units that the Company grants pursuant to the Company's Executive
Performance Plan and compensation that the
-17-
Company pays pursuant to its Annual Cash Incentive Compensation or Bonus
Program. The Company may from time to time pay compensation to its executive
officers that may not be deductible.
BASE SALARIES
The Committee determines salary levels for the Company's executive officers
by analyzing the salary levels at companies with gross revenues comparable to
the Company, based upon survey data that an independent consultant produced for
the Committee, and an evaluation of the individual executive officer's
performance. The Committee considers these factors together but not pursuant to
a precise formula. The Company evaluates individual executive performance by
reference to specific performance targets or goals that it establishes each year
for each executive. While the Company has targeted the median of the range
established by the survey group of service industries with gross revenues
comparable to the Company, the actual 2002 salaries of executive officers are
generally below the median.
ANNUAL INCENTIVES
The Company's executive officers are also eligible for awards under the
Company's Annual Incentive Compensation Plan, which provides for the payment of
varying levels of incentive award as expressed as a percentage of annual base
compensation, with the percentage increasing the higher an executive officer's
position is within the Company. The stockholders approved the Annual Incentive
Compensation Plan at the 2002 annual stockholders meeting.
In 2002, the Committee established threshold, target and over achievement
financial objectives that tie each executive's annual incentive compensation
potential to the annual business plan of the overall Company for corporate
executive officers and to the business plan of the individual business units for
executive officers who are employees of Yellow Transportation, Yellow
Technologies and Meridian IQ. In 2002, these objectives were weighted 50% on
operating income of the Company or the applicable business units and 50% on
return on capital of the Company or the applicable business units, except that
the measurement of Meridian IQ was weighted 100% on Meridian IQ's operating
income. Meridian IQ was formed in 2002 and was expected to focus on its
profitability objectives as it began its operations. In addition to these
over-arching objectives, an individual executive officer's annual incentive
compensation may also be subject to the achievement of additional personal or
business unit objectives. Also, to promote the creation of overall shareholder
value, an individual executive officer may have his or personal performance tied
to the performance of other business units that the individual may impact.
LONG-TERM INCENTIVES
In 2001, the Committee elected to re-examine its practice of using stock
options as the exclusive vehicle for the delivery of long-term incentive
potential to the Company's executive officers, primarily because of the
Committee's belief that the Company's financial performance over the previous
several years had not been adequately reflected in the value of its stock. The
Company implemented in 2002 a new Executive Performance Plan that provides for
cash or stock based awards (or a combination of both) over performance periods
that the Committee designates. Under this Plan, the Committee intends to adopt
three-year performance cycles for annual awards. For transition purposes,
however, in 2002 there were three awards for each participant based on one-,
two- and three-year cycles, with the potential payments under the one- and
two-year cycles representing 1/3 and 2/3, respectively, of the potential
payments under the three-year cycle. Awards for the 2002 year are split 50% cash
and 50% performance share units. The performance share units vest ratably over
three years measured from the date of determination that performance criteria
have been achieved. Once vested, the Company delivers the shares to the
executive upon his or her termination of employment or retirement. In addition,
in certain instances upon the occurrence of a change of control of the Company,
all unvested performance units will vest and the shares will be delivered to the
applicable executives.
Payments under the Plan depend upon the Company attaining specific or
relative financial performance objectives as compared to a peer group of
companies or one or more broad market indexes. The 2002 measures and weighting
of those measures were 70% return on capital and 30% NOPAT (net operating profit
after taxes) as compared to the same measures of companies in the S&P Small Cap
Index. The Committee retains
-18-
discretion to reduce all or any awards to executive officers in consideration of
a number of factors, including performance versus a key group of competitors and
an individual executive's attainment of the annual performance goals described
above. The Executive Performance Plan targets varying levels of long-term
incentive potential as expressed as a percentage of annual base compensation
with the percentage increasing the higher an executive officer's position is
within the Company.
Because of the introduction of this new Plan, the Company did not grant
stock options to the Company's top seven executive officers during 2002.
Separately, Mr. Ritchie received a grant of options in 2002 along with other
former employees of Transportation.com in exchange for the extinguishment of
their options in Transportation.com. These options essentially replaced their
options in this company for which there is no market for its equity after the
Company acquired 100% of Transportation.com. The stockholders approved the
Executive Performance Plan at the 2002 annual stockholders meeting. Shares of
Common Stock that the Company issues under the performance units that an
executive receives pursuant to the Executive Performance Plan are issued
pursuant to the Company's 2002 Stock Option and Share Award Plan.
PRESIDENT AND CEO COMPENSATION
The compensation of President and Chief Executive Officer William D.
Zollars is the subject of an employment agreement dated December 15, 1999, the
essential elements of which are detailed in the section of the proxy statement
in which this report is included that is devoted to employment contracts. The
discussion of Mr. Zollars' employment agreement with the Company in the proxy is
hereby incorporated by reference into this report. Once a year in assessing the
Chief Executive Officer's performance and compensation, the Committee and the
Board of Directors meets in executive session without the Chief Executive
Officer. The Committee as well as the Board of Directors may also call such an
executive session at any other time as it so chooses.
Mr. Zollars base salary level was increased to $770,000 in 2002. This
salary was established comparing the compensation of chief executive officers in
a group of comparative companies. The Committee believes that this salary level
was consistent with the Company's goal of targeting the median of a survey group
of companies that the Committee's independent consultant produced.
Mr. Zollars is eligible for bonuses under the Company's Annual Incentive
Compensation Plan. His target bonus level remained at 80% of his base salary for
2002. This percentage has been established based on bonus practices and
opportunities within companies comparable to the Company's size. Under this
Plan, the Company paid Mr. Zollars a bonus of $134,288 for 2002, which was below
target.
Mr. Zollars is also eligible to participate in the Company's Executive
Performance Plan. Because of the level of his participation in this Plan, the
Committee did not grant Mr. Zollars any stock options during 2002. A description
of Mr. Zollars' potential payouts pursuant to this Plan is set forth in footnote
4 to the Summary Compensation Table in the proxy statement in which this report
is included. Fifty percent of any payout will be made in cash; and 50% of any
payout will be made in shares of the Company's common stock. These shares are
subject to the restrictions described above.
For the reasons outlined above in the general discussion of executive
compensation, Mr. Zollars received performance units in lieu of a stock option
award in 2002 and received annual cash incentive compensation as reflected in
the Summary Compensation Table.
SUMMARY
The Committee believes that the compensation program for the executives of
the Company is comparable with the compensation programs provided by comparable
companies and serves the best interests of the stockholders of the Company. The
Committee also believes that annual performance pay is appropriately linked to
individual performance, annual financial performance of the Company and
stockholder value.
William L. Trubeck, Chairman
Howard M. Dean
Richard C. Green, Jr.
-19-
COMMON STOCK PERFORMANCE
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return of the Company's common stock against
the cumulative total return of the S&P Composite-500 Stock Index and the S&P
Transportation Composite Index for the period of five years commencing December
31, 1997 and ending December 31, 2002.
[PERFORMANCE GRAPH]
YELLOW CORPORATION S&P 500 INDEX S&P TRANSPORTATION
------------------ ------------- ------------------
Dec 97 100.00 100.00 100.00
76.12 113.95 109.74
73.88 117.71 101.60
53.73 106.00 86.34
Dec 98 76.12 128.58 98.06
69.15 134.98 103.03
70.65 144.50 109.22
65.92 135.48 87.79
Dec 99 66.92 155.63 88.57
73.38 159.20 86.07
58.71 154.97 84.18
60.20 153.47 89.07
Dec 00 81.03 141.46 104.97
68.16 124.69 105.23
75.54 131.99 107.93
80.96 112.62 86.86
Dec 01 99.90 124.65 104.76
105.03 124.99 116.75
128.96 108.25 106.30
117.44 89.55 87.95
Dec 02 114.85 97.10 91.18
II. PROPOSAL TO APPROVE APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed KPMG LLP as independent public
accountants of the Company for 2003. The appointment of independent public
accountants by the Board of Directors is submitted annually for approval by the
stockholders. Although stockholder approval is not required, if the stockholders
do not ratify the appointment, the Board of Directors will reconsider the
matter. A representative of KPMG LLP will be present at the Annual Meeting of
Stockholders to respond to appropriate questions, and he or she will have an
opportunity to make a statement if he or she desires to do so.
Effective May 17, 2002, the Audit Committee approved dismissal of Arthur
Andersen LLP as the Company's independent auditors and the appointment of KPMG
LLP to serve as the Company's independent auditors for the year ending December
31, 2002.
Arthur Andersen's reports on the Company's consolidated financial
statements for each of the years ended December 31, 2001 and 2000 did not
contain an adverse opinion or disclaimer of opinion, nor were such reports
qualified or modified as to uncertainty, audit scope or accounting principles.
During the years ended December 31, 2001 and 2000 and through May 17, 2002,
there were no disagreements with Arthur Andersen on any matter of accounting
principle or practice, financial statement disclosure, or auditing scope or
procedure which, if not resolved to Arthur Andersen's satisfaction would have
caused them to make reference to the subject matter of the disagreement in
connection with the audit reports on the Company's consolidated financial
statements for such years; and there were no reportable events as defined in
Item 304(a)(1)(v) of Regulation S-K.
-20-
The Company provided Arthur Andersen with a copy of the foregoing
disclosures. Attached as Exhibit 16 to the Company's Current Report on Form 8-K
dated May 17, 2002, is a copy of Arthur Andersen's letter, dated May 17, 2002,
stating its agreement with such statements.
During the years ended December 31, 2001 and 2000 and through May 17, 2002,
the Company did not consult KPMG LLP with respect to the application of
accounting principles to a specified transaction, either completed or proposed,
or the type of audit opinion that might be rendered on the Company's
consolidated financial statements, or any other matters or reportable events as
set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K.
III. OTHER MATTERS
The Board of Directors does not intend to bring any other business before
the meeting and it is not aware that anyone else intends to do so. If any other
business comes before the meeting, it is the intention of the persons named in
the enclosed form of proxy to vote as proxies in accordance with their best
judgment.
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ANNEX A
YELLOW CORPORATION
CHARTER-AUDIT/ETHICS COMMITTEE
(AS AMENDED AND RESTATED DECEMBER 19, 2002)
The Board of Directors (the "Board") of Yellow Corporation (the "Company")
has before this date established an Audit Committee (the "Committee"). By its
adoption of this Charter, the Board has renamed this Committee the "Audit/Ethics
Committee". It is intended that this Charter and the composition of this
Committee comply with applicable law and the rules of the NASDAQ National Stock
Market. This document replaces and supercedes in its entirety all previous
Charters of the Committee, including the Charter adopted on July 19, 2002.
PRINCIPAL RESPONSIBILITIES
The Committee's principal responsibilities are to act on behalf of the
Board to do the following:
(1) appoint, compensate and oversee the work of any public accounting firm
that the Company employs for the purpose of preparing or issuing an audit report
or related work;
(2) approve all auditing services and non-audit services that the Company's
auditors provide to the Company. In addition to the Committee, the chairman of
the Committee is expressly authorized to approve the provision of non-audit
services to the Company by the Company's auditors;
(3) resolve any disagreements between the Company's management and the
auditor regarding financial reporting;
(4) establish procedures for the receipt, retention and treatment of
complaints that the Company receives regarding accounting, internal accounting
controls or auditing matters and for the confidential, anonymous submission by
employees of the Company of concerns regarding questionable accounting or
auditing matters;
(5) assist Board oversight of the following:
(a) the integrity of the Company's financial statements;
(b) the Company's compliance with legal and regulatory requirements;
(c) the independent auditor's qualifications and independence, and
(d) the performance of the Company's internal and external audit
functions;
(6) oversee the Company's compliance programs, including the Company's Code
of Conduct;
(7) adopt, amend or modify the Company's Code of Conduct and a code of
ethics (which may or may not be contained in the Company's Code of Conduct) for
the Company's chief financial officer, controller, principal accounting officer
or persons serving in similar functions.
WITH REGARD TO THESE RESPONSIBILITIES, THE COMMITTEE SHOULD REVIEW/DISCUSS THE
FOLLOWING:
- Financial Information -- The annual audited financial statements and
quarterly financial statements with management and the independent
auditors, including the Company's disclosures under "Management's
Discussion and Analysis of Financial Condition and Results of
Operations."
- Press Releases -- The earnings press releases, as well as financial
information and earnings guidance provided to analysts and rating
agencies.
- Risk Management -- The Company's business risk management process,
including the adequacy of the Company's overall control environment and
controls in selected areas representing significant financial and
business risk.
A-1
- Internal Controls and Regulatory Compliance -- The Company's system of
internal controls for detecting accounting and reporting financial
errors, fraud and defalcations, legal violations and noncompliance with
the Company's Code of Conduct.
- Internal Audit Responsibilities -- The annual audit plan and the process
used to develop the plan. Status of activities, significant findings,
recommendations, and management's response.
- Correspondence -- With management and the external auditor, any
correspondence with regulators or government agencies and any employee
complaints or published reports that raise material issues regarding the
Company's financial statements or accounting policies.
- Regulatory and accounting requirements -- Review with management and the
external auditors the effect of regulatory changes, significant new or
proposed accounting guidelines and off-balance sheet structures on the
Company's financial statements.
- External Audit Responsibilities -- Auditor independence and the overall
scope and focus of the annual audit, including the scope and level of
involvement with unaudited quarterly or other interim-period information.
- Financial Reporting and Controls -- Key financial statement issues and
risks, their impact or potential effect on reported financial
information, the process used by management to address such matters,
related auditor views, and the basis for audit conclusions. Important
conclusions on interim or year-end audit work in advance of the public
release of financials.
- Auditor Recommendations -- Important internal and external auditor
recommendations on financial reporting, controls, other matters, and
management's response. The views of management and auditors on the
overall quality of annual and interim financial reporting.
THE COMMITTEE SHOULD ALSO REVIEW AND APPROVE:
- the Company's policy on retention of the external auditor for any
non-audit services and the fee for such service;
- the internal auditor charter; and
- changes in internal audit leadership.
The Committee shall also prepare a report as the rules of the Securities
and Exchange Commission require that is to be included in the Company's annual
proxy statement.
COMMITTEE COMPOSITION
The Committee shall consist of at least three and no more than five
directors who are independent (as defined by applicable law and the rules of the
NASDAQ Stock Market). Committee members shall have the following qualities:
- knowledge of the primary industries in which the Company operates;
- the ability to read and understand fundamental financial statements,
including a company's balance sheet, income statement, statement of cash
flow, and key performance indicators; and
- the ability to understand key business and financial risks and related
controls and control processes.
One member, preferably the chairperson, should have employment experience
in finance or accounting or other comparable experience. Desirable experience
includes being or having been a chief executive officer, chief financial officer
or other senior officer with financial oversight responsibilities. The full
Board shall approve Committee appointments and choice of the chairperson.
A-2
COMMITTEE OPERATING PRINCIPLES
The Committee shall fulfill its responsibilities within the context of the
following overriding principles:
- Communications -- The chairperson and others on the Committee shall, to
the extent appropriate, have contact throughout the year with senior
management of the Company, other Board committee chairpersons, other
Board members and other key Committee advisors, external and internal
auditors and employees of the Company.
- Committee Education/Orientation -- The Committee, with management, shall
develop and participate in a process for review of important financial
and operating topics that present potential significant risk to the
Company.
- Meeting Agenda -- Committee meeting agendas shall be the responsibility
of the Committee chairperson, with input from committee members. It is
expected that the chairperson would also ask for management and key
Committee advisors, and perhaps others, to participate in this process.
- Committee Expectations and Information Needs -- The Committee shall
communicate Committee expectations and the nature, timing, and extent of
Committee information needs to management, internal audit and external
parties, including external auditors. Management, auditors and others
shall provide requested written materials, including key performance
indicators and measures related to key business and financial to the
Committee.
- External Resources -- The Committee shall have the power and will take
appropriate action to conduct or authorize investigations into matters
within the Committee's scope of responsibilities. The Committee shall
have unrestricted access to members of management and all information
relevant to its responsibilities. The Committee shall be empowered to
retain independent counsel, accountants, or others to assist it in the
conduct of their duties at the Company's expense.
- Committee Meeting Attendees -- The Committee shall request members of
management, counsel, internal audit and external auditors, as applicable,
to participate in Committee meetings, as necessary, to carry out the
Committee's responsibilities. Periodically and at least annually, the
Committee shall meet in private session with only the Committee members.
It shall be understood that either internal or external auditors, or
counsel, may, at any time, request a meeting with the Committee or
Committee chairperson with or without management attendance. In any case,
the Committee shall meet in executive session separately with internal
and external auditors and the Company's general counsel, at least
annually.
- Reporting to the Board of Directors -- The Committee, through the
Committee chairperson, shall report Committee actions and recommendations
to the full Board.
MEETING FREQUENCY
The Committee shall meet at least four times per year. Additional meetings
shall be scheduled as considered necessary by the Committee or chairperson.
COMMITTEE'S RELATIONSHIP WITH EXTERNAL AND INTERNAL AUDITORS
- The external auditors, in their capacity as independent public
accountants, shall be responsible to the Board and the Committee as
representatives of the shareholders.
- The Committee shall annually review the performance (effectiveness,
objectivity, and independence) of the external and internal auditors. The
Committee shall ensure receipt of a formal written statement from the
external auditors consistent with the standards set by the Independence
Standards Board. Additionally, the Committee shall discuss with the
auditor relationships or services that may affect auditor objectivity or
independence. If the Committee is not satisfied with the auditors'
assurances of
A-3
independence, it shall take or recommend to the full Board appropriate
action to ensure the independence of the external auditor.
- The internal audit function shall be responsible to the Board through the
Committee.
- If either the internal or the external auditors identify significant
issues relative to the overall Board responsibility that have been
communicated to management but, in their judgment, have not been
adequately addressed, the auditors should communicate these issues to the
Committee chairperson.
A-4
YELLOW CORPORATION
PROXY
ANNUAL MEETING OF STOCKHOLDERS, APRIL 17, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints WILLIAM D. ZOLLARS, DANIEL J. CHURAY, and
each of them, with full power of substitution, Proxies of the undersigned to
vote all shares of Common Stock of Yellow Corporation, standing in the name of
the undersigned or with respect to which the undersigned is entitled to vote, at
the Annual Meeting of Stockholders of Yellow Corporation, to be held at the
Company's General Office, 10990 Roe Avenue, Overland Park, Kansas on Thursday,
April 17, 2003, at 9:30 a.m., and at any reconvened meeting(s) after any
adjournment(s) thereof.
If more than one of the above named Proxies shall be present in person or by
substitution at such meeting or at any reconvened meeting(s) after any
adjournment(s) thereof, the majority of said Proxies so present and voting,
either in person or by substitution, shall exercise all of the powers hereby
given. The undersigned hereby revokes any proxy heretofore given to vote at such
meeting.
(CONTINUED AND TO BE SIGNED AND DATED ON THE REVERSE SIDE.)
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ADDRESS CHANGE/COMMENTS (MARK THE CORRESPONDING BOX ON THE REVERSE SIDE)
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YOU CAN NOW ACCESS YOUR YELLOW CORPORATION ACCOUNT ONLINE.
Access your Yellow Corporation shareholder account online via Investor
ServiceDirect(R)(ISD).
Mellon Investor Services LLC, agent for Yellow Corporation, now makes it easy
and convenient to get current information on your shareholder account. After a
simple, and secure process of establishing a Personal Identification Number
(PIN), you are ready to log in and access your account to:
- View account status - View payment history for dividends
- View certificate history - Make address changes
- View book-entry information - Obtain a duplicate 1099 tax form
- Establish/change your PIN
VISIT US ON THE WEB AT HTTP://WWW.MELLONINVESTOR.COM
AND FOLLOW THE INSTRUCTIONS SHOWN ON THIS PAGE.
STEP 1: FIRST TIME USERS - ESTABLISH A PIN STEP 2: LOG IN FOR ACCOUNT ACCESS STEP 3: ACCOUNT STATUS SCREEN
You must first establish a Personal Identification You are now ready to log in. To access You are now ready to access your
Number (PIN) online by following the directions your account please enter your: account information. Click on the
provided in the upper right portion of the web appropriate button to view or
screen as follows. You will also need your Social - SSN initiate transactions.
Security Number (SSN) available to establish a PIN. - PIN
- Then click on the SUBMIT button - Certificate History
INVESTOR SERVICEDIRECT(SM) IS CURRENTLY ONLY - Book-Entry Information
AVAILABLE FOR DOMESTIC INDIVIDUAL AND If you have more than one account, - Issue Certificate
JOINT ACCOUNTS. you will now be asked to select the - Payment History
appropriate account. - Address Change
- SSN - Duplicate 1099
- PIN
- Then click on the ESTABLISH PIN button
Please be sure to remember your PIN, or maintain
it in a secure place for future reference.
FOR TECHNICAL ASSISTANCE CALL 1-877-978-7778 BETWEEN
9AM-7PM MONDAY-FRIDAY EASTERN TIME
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL PROPOSALS Mark Here
for Address
Change or [X]
Comments
1. ELECTION OF DIRECTORS Nominees-- 01 Cassandra C. Carr, 02 Howard M. Dean,
03 Dennis E. Foster, 04 John C. McKelvey, 05 William L. Trubeck,
FOR all nominees WITHHOLD 06 Carl W. Vogt, 07 William D. Zollars
listed (except as AUTHORITY
marked to the to vote for all 2. PROPOSAL TO APPROVE THE APPOINTMENT of KPMG LLP as
contrary below). nominees. independent public accountants of the Corporation for
[ ] [ ] 2003. The Board of Directors recommends a vote FOR
proposal 2.
(To withhold authority to vote for any individual nominee,
write that nominee's name on the line provided below.) FOR AGAINST ABSTAIN
[ ] [ ] [ ]
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL DIRECTOR 3. OTHER BUSINESS: In their discretion the Proxies
NOMINEES LISTED. are authorized to vote upon such other matters as may
properly come before the meeting.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED POSTAGE-PAID ENVELOPE.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SIGNATURE______________________________________SIGNATURE_____________________________________________________DATE___________________
Please sign exactly as name appears to the left. When shares are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name
by President or other authorized officer. If a partnership, please sign in partnership name by authorized person.
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VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
INTERNET AND TELEPHONE VOTING IS AVAILABLE THROUGH 11PM EASTERN TIME
THE BUSINESS DAY PRIOR TO ANNUAL MEETING DAY.
YOUR INTERNET OR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES IN THE SAME MANNER
AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
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INTERNET TELEPHONE MAIL
HTTP://WWW.EPROXY.COM/YELL 1-800-435-6710
Use the Internet to vote your proxy. Use any touch-tone telephone to Mark, sign and date
Have your proxy card in hand when vote your proxy. Have your proxy your proxy card
you access the web site. You will be card in hand when you call. You will and
prompted to enter your control OR be prompted to enter your control OR return it in the
number, located in the box below, to number, located in the box below, enclosed postage-paid
create and submit an electronic and then follow the directions envelope
ballot. given.
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IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE,
YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.
YOU CAN VIEW THE ANNUAL REPORT AND PROXY STATEMENT
ON THE INTERNET AT WWW.YELLOWCORP.COM