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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

(Mark One)
[ü]		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

[   ]		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Commission file number 000-32821

ROADWAY CORPORATION

Delaware		34-1956254
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No)

1077 Gorge Boulevard, Akron, OH			44310
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code (330) 384-1717

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ü   No        .

Indicate by check mark whether the registrant is an accelerated filer (as defined in rule 12b-2 of the Exchange Act).
Yes ü   No        .

The number of shares of common stock ($.01 par value) outstanding as of June 21, 2003 was 19,898,002.

 

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PART I — FINANCIAL INFORMATION
	Item 1. Financial Statements
		Roadway Corporation and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited)
		Roadway Corporation and Subsidiaries Condensed Statements of Consolidated Income (Unaudited)
		Roadway Corporation and Subsidiaries Condensed Statements of Consolidated Income (Unaudited)
		Roadway Corporation and Subsidiaries Condensed Statements of Consolidated Cash Flows (Unaudited)
		Roadway Corporation and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited)
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures about Market Risk
	Item 4. Disclosure Controls and Procedures
PART II — OTHER INFORMATION
	Item 2. Changes in securities and use of proceeds
	Item 5. Other information
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
Exhibit 10.20
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
Exhibit 99.1
Exhibit 99.2

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Roadway Corporation and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)

				June 21, 2003				December 31, 2002
				(in thousands, except share data)
Assets
Current assets:
	Cash and cash equivalents			$	125,692			$	106,929
	Accounts receivable, including retained interest in securitized receivables, net				215,055				230,216
	Assets of discontinued operations				—				87,431
	Other current assets				49,541				38,496
Total current assets					390,288				463,072
Carrier operating property, at cost					1,511,699				1,515,648
Less allowance for depreciation					1,015,682				1,006,465
Net carrier operating property					496,017				509,183
Goodwill, net					286,181				283,910
Other assets					91,093				79,708
Total assets				$	1,263,579			$	1,335,873
Liabilities and shareholders’ equity
Current liabilities:
	Accounts payable			$	164,806			$	193,501
	Salaries and wages				125,162				151,464
	Liabilities of discontinued operations				—				32,407
	Other current liabilities				61,889				83,518
Total current liabilities					351,857				460,890
Long-term liabilities:
	Casualty claims and other				75,505				78,548
	Accrued pension and retiree medical				147,800				135,053
	Long-term debt				270,279				273,513
Total long-term liabilities					493,584				487,114
Shareholders’ equity:
	Common Stock - $.01 par value
		Authorized - 100,000,000 shares
		Issued - 20,556,714 shares			206				206
		Outstanding – 19,898,002 in 2003 and 19,368,590 in 2002
	Other shareholders’ equity				417,932				387,663
Total shareholders’ equity					418,138				387,869
Total liabilities and shareholders’ equity				$	1,263,579			$	1,335,873

Note: The balance sheet at December 31, 2002 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See notes to condensed consolidated financial statements.

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Roadway Corporation and Subsidiaries
Condensed Statements of Consolidated Income (Unaudited)

			Twelve Weeks Ended
			(Second Quarter)
			June 21, 2003				June 15, 2002
			(in thousands, except per share data)
Revenue			$	741,528			$	656,003
Operating expenses:
	Salaries, wages and benefits			468,223				427,273
	Operating supplies and expenses			130,022				107,104
	Purchased transportation			75,725				57,775
	Operating taxes and licenses			18,688				17,481
	Insurance and claims expense			14,529				13,129
	Provision for depreciation			16,870				18,152
	Net loss on disposal of operating property			30				283
Total operating expenses				724,087				641,197
Operating income from continuing operations				17,441				14,806
Other (expense), net				(6,044	)			(6,823	)
Income from continuing operations before income taxes				11,397				7,983
Provision for income taxes				4,787				3,347
Income from continuing operations				6,610				4,636
(Loss) income from discontinued operations				(302	)			1,038
Net income			$	6,308			$	5,674
Earnings (loss) per share – basic:
	Continuing operations		$	0.35			$	0.25
	Discontinued operations			(0.02	)			0.05
Total earnings per share – basic			$	0.33			$	0.30
Earnings (loss) per share – diluted:
	Continuing operations		$	0.35			$	0.25
	Discontinued operations			(0.02	)			0.05
Total earnings per share – diluted			$	0.33			$	0.30
Average shares outstanding – basic				18,955				18,474
Average shares outstanding – diluted				19,336				18,888
Dividends declared per share			$	0.05			$	0.05

See notes to condensed consolidated financial statements.

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Roadway Corporation and Subsidiaries
Condensed Statements of Consolidated Income (Unaudited)

			Twenty-four Weeks Ended
			(Two Quarters)
			June 21, 2003				June 15, 2002
			(in thousands, except per share data)
Revenue			$	1,495,598			$	1,254,970
Operating expenses:
	Salaries, wages and benefits			943,658				826,437
	Operating supplies and expenses			260,434				206,313
	Purchased transportation			150,509				109,284
	Operating taxes and licenses			38,554				33,045
	Insurance and claims expense			29,641				24,560
	Provision for depreciation			34,169				36,240
	Net loss on disposal of operating property			841				578
Total operating expenses				1,457,806				1,236,457
Operating income from continuing operations				37,792				18,513
Other (expense), net				(12,838	)			(13,647	)
Income from continuing operations before income taxes				24,954				4,866
Provision for income taxes				10,481				2,103
Income from continuing operations				14,473				2,763
(Loss) income from discontinued operations				(155	)			1,162
Net income			$	14,318			$	3,925
Earnings (loss) per share – basic:
	Continuing operations		$	0.77			$	0.15
	Discontinued operations			(0.01	)			0.06
Total earnings per share – basic			$	0.76			$	0.21
Earnings (loss) per share – diluted:
	Continuing operations		$	0.76			$	0.15
	Discontinued operations			(0.01	)			0.06
Total earnings per share – diluted			$	0.75			$	0.21
Average shares outstanding – basic				18,802				18,514
Average shares outstanding – diluted				19,177				18,968
Dividends declared per share			$	0.10			$	0.10

See notes to condensed consolidated financial statements.

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Roadway Corporation and Subsidiaries
Condensed Statements of Consolidated Cash Flows (Unaudited)

		Twenty-four Weeks Ended
		(Two Quarters)
		June 21, 2003				June 15, 2002
		(in thousands)
Cash flows from operating activities
Income from continuing operations		$	14,473			$	2,763
Depreciation and amortization			35,849				37,175
Other operating adjustments			(31,928	)			(45,756	)
Net cash provided (used) by operating activities			18,394				(5,818	)
Cash flows from investing activities
Purchases of carrier operating property			(22,448	)			(24,313	)
Sales of carrier operating property			1,721				1,869
Business disposal			47,430				—
Net cash provided (used) by investing activities			26,703				(22,444	)
Cash flows from financing activities
Dividends paid			(1,931	)			(1,940	)
Treasury stock activity, net			1,713				(1,383	)
Transfer from discontinued operation			—				2,500
Long-term (repayments) borrowings			(26,426	)			(2,500	)
Net cash (used) by financing activities			(26,644	)			(3,323	)
Effect of exchange rate changes on cash			348				(90	)
Net increase (decrease) in cash and cash equivalents from continuing operations			18,801				(31,675	)
Net (decrease) in cash and cash equivalents from discontinued operations			(38	)			(5,163	)
Cash and cash equivalents at beginning of period			106,929				110,432
Cash and cash equivalents at end of period		$	125,692			$	73,594

See notes to condensed consolidated financial statements.

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Roadway Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1—Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the twelve and twenty-four weeks ended June 21, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003. For further information, refer to the consolidated financial statements and footnotes thereto included in the Roadway Corporation Annual Report on Form 10-K for the year ended December 31, 2002.

The Company completed the required goodwill impairment test under SFAS No. 142 for all reporting units effective June 21, 2003 which did not indicate any impairment. The Company expects to perform the required annual goodwill impairment assessment on a recurring basis at the end of the second quarter each year, or more frequently should any indicators of possible impairment be identified.

Note 2—Accounting Period

Roadway Corporation (the registrant or Company) operates on 13 four-week accounting periods with 12 weeks in each of the first three quarters and 16 weeks in the fourth quarter.

Note 3—Discontinued operations

On December 26, 2002, the Company entered into an agreement to sell Arnold Transportation Services (ATS) to a management group led by the unit’s president and a private equity firm, for approximately $55,000,000. The ATS business segment was acquired as part of the Company’s purchase of Arnold Industries, Inc. (subsequently renamed Roadway Next Day Corporation) in November 2001, but did not fit the Company’s strategic focus of being a LTL carrier. The transaction was completed on January 23, 2003. The Company did not recognize a significant gain or loss as a result of this transaction.

The Company has reported the ATS results as a discontinued operation in the accompanying financial statements and, unless otherwise stated, the notes to the financial statements for all periods presented exclude the amounts related to this discontinued operation.

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Note 4—Earnings per Share

The following table sets forth the computation of basic and diluted earnings per share:

			Twelve Weeks Ended								Twenty-four Weeks Ended
			(Second Quarter)								(Two Quarters)
			June 21, 2003				June 15, 2002				June 21, 2003				June 15, 2002
						(in thousands, except per share data)
Income (loss) from:
	Continuing operations		$	6,610			$	4,636			$	14,473			$	2,763
	Discontinued operations			(302	)			1,038				(155	)			1,162
Net income			$	6,308			$	5,674			$	14,318			$	3,925
Weighted-average shares for basic earnings per share				18,955				18,474				18,802				18,514
Management incentive stock plans				381				414				375				454
Weighted-average shares for diluted earnings per share				19,336				18,888				19,177				18,968
Basic earnings (loss) per share from:
	Continuing operations		$	0.35			$	0.25			$	0.77			$	0.15
	Discontinued operations			(0.02	)			0.05				(0.01	)			0.06
Basic earnings per share			$	0.33			$	0.30			$	0.76			$	0.21
Diluted earnings (loss) per share from:
	Continuing operations		$	0.35			$	0.25			$	0.76			$	0.15
	Discontinued operations			(0.02	)			0.05				(0.01	)			0.06
Diluted earnings per share			$	0.33			$	0.30			$	0.75			$	0.21

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Note 5—Segment information

The Company provides freight services in two business segments: Roadway Express (Roadway) and New Penn Motor Express (New Penn). The Roadway segment provides long haul, expedited, and regional LTL freight services in North America and offers services to over 100 countries worldwide. The New Penn segment provides regional, next-day LTL freight services primarily in the northeast region of the United States.

The Company’s reportable segments are identified based on differences in products, services, and management structure. The measurement basis of segment profit or loss is operating income. Business segment assets consist primarily of customer receivables, net carrier operating property, and goodwill.

			Twelve weeks ended June 21, 2003
			(Second Quarter)
			Roadway Express				New Penn				Total
			(in thousands)
Revenue			$	691,156			$	50,372			$	741,528
Operating expense:
	Salaries, wages & benefits			433,101				32,657				465,758
	Operating supplies			125,734				7,244				132,978
	Purchased transportation			75,276				449				75,725
	Operating license and tax			17,182				1,427				18,609
	Insurance and claims			13,599				684				14,283
	Depreciation			14,472				2,232				16,704
	Net loss (gain) on sale of operating property			(21	)			51				30
Total operating expense				679,343				44,744				724,087
Operating income			$	11,813			$	5,628			$	17,441
Operating ratio				98.3	%			88.8	%			97.6	%
Total assets			$	761,817			$	405,914			$	1,167,731

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Note 5—Segment information (continued)

			Twelve weeks ended June 15, 2002
			(Second Quarter)
			Roadway Express				New Penn				Total
			(in thousands)
Revenue			$	606,409			$	49,594			$	656,003
Operating expense:
	Salaries, wages & benefits			392,635				32,722				425,357
	Operating supplies			103,488				5,937				109,425
	Purchased transportation			57,317				458				57,775
	Operating license and tax			16,043				1,383				17,426
	Insurance and claims			11,964				947				12,911
	Depreciation			15,416				2,615				18,031
	Net loss (gain) on sale of operating property			303				(20	)			283
Total operating expense				597,166				44,042				641,208
Operating income			$	9,243			$	5,552			$	14,795
Operating ratio				98.5	%			88.8	%			97.7	%
Total assets			$	713,832			$	336,587			$	1,050,419

			Twenty-four weeks ended June 21, 2003
			(Two Quarters)
			Roadway Express				New Penn				Total
			(in thousands)
Revenue			$	1,396,400			$	99,198			$	1,495,598
Operating expense:
	Salaries, wages & benefits			872,539				66,100				938,639
	Operating supplies			251,560				14,911				266,471
	Purchased transportation			149,518				991				150,509
	Operating license and tax			35,561				2,816				38,377
	Insurance and claims			27,494				1,638				29,132
	Depreciation			29,396				4,441				33,837
	Net loss (gain) on sale of operating property			781				60				841
Total operating expense				1,366,849				90,957				1,457,806
Operating income			$	29,551			$	8,241			$	37,792
Operating ratio				97.9	%			91.7	%			97.5	%

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Note 5—Segment information (continued)

			Twenty-four weeks ended June 15, 2002
			(Two Quarters)
			Roadway Express				New Penn				Total
			(in thousands)
Revenue			$	1,159,967			$	95,003			$	1,254,970
Operating expense:
	Salaries, wages & benefits			758,970				63,431				822,401
	Operating supplies			198,987				12,051				211,038
	Purchased transportation			108,443				841				109,284
	Operating license and tax			30,231				2,742				32,973
	Insurance and claims			22,352				1,841				24,193
	Depreciation			30,685				5,305				35,990
	Net loss (gain) on sale of operating property			649				(71	)			578
Total operating expense				1,150,317				86,140				1,236,457
Operating income			$	9,650			$	8,863			$	18,513
Operating ratio				99.2	%			90.7	%			98.5	%

Reconciliation of segment operating income to consolidated operating income from continuing operations before taxes:

		Twelve Weeks Ended								Twenty-four weeks ended
		(Second Quarter)								(Two quarters)
		June 21, 2003				June 15, 2002				June 21, 2003				June 15, 2002
						(in thousands)
Segment operating income from continuing operations		$	17,441			$	14,795			$	37,792			$	18,513
Unallocated corporate income			—				11				—				—
Interest (expense)			(4,779	)			(5,473	)			(9,881	)			(10,937	)
Other (expense), net			(1,265	)			(1,350	)			(2,957	)			(2,710	)
Consolidated income from continuing operations before taxes		$	11,397			$	7,983			$	24,954			$	4,866

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Note 5—Segment information (continued)

Reconciliation of total segment assets to total consolidated assets:

		June 21, 2003				December 31, 2002
		(in thousands)
Total segment assets		$	1,167,731			$	1,211,584
Unallocated corporate assets			103,142				41,351
Assets of discontinued operations			—				87,431
Elimination of intercompany balances			(7,294	)			(4,493	)
Consolidated assets		$	1,263,579			$	1,335,873

Note 6—Comprehensive Income

Comprehensive income differs from net income due to foreign currency translation adjustments and derivative fair value adjustments as shown below:

		Twelve weeks Ended								Twenty-four weeks ended
		(Second Quarter)								(Two quarters)
		June 21, 2003				June 15, 2002				June 21, 2003				June 15, 2002
						(in thousands)
Net income		$	6,308			$	5,674			$	14,318			$	3,925
Foreign currency translation adjustments			3,089				1,122				5,776				(56	)
Derivative fair value adjustment			50				—				126				—
Comprehensive income		$	9,447			$	6,796			$	20,220			$	3,869

Note 7—Contingent Matter

The Company’s former parent is currently under examination by the Internal Revenue Service for tax years 1994 and 1995, years prior to the spin-off of the Company. The IRS has proposed substantial adjustments for these tax years for multi-employer pension plan deductions. The IRS is challenging the timing, not the validity of these deductions. The Company is unable to predict the ultimate outcome of this matter; however, its former parent intends to vigorously contest these proposed adjustments.

Under a tax sharing agreement entered into by the Company and its former parent at the time of the spin-off, the Company is obligated to reimburse the former parent for any additional taxes and interest that relate to the Company’s business prior to the spin-off. The amount and timing of such payments is dependent on the ultimate resolution of the former parent’s disputes with the IRS and the determination of the nature and extent of the obligations under the tax sharing agreement. On January 16, 2003, the Company made a $14,000,000 payment to its former parent under the tax sharing agreement for taxes and interest related to certain of the proposed adjustments for tax years 1994 and 1995.

We estimate the range of the remaining payments that may be due to the former parent to be $0 to $16,000,000 in additional taxes and $0 to $10,000,000 in related interest, net of tax benefit. The Company has established certain reserves with respect to these proposed adjustments. There can be no assurance, however, that the amount or timing of any liability of the Company to the former parent will not have a material adverse effect on the Company’s results of operations and financial position.

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Note 8—Subsequent event

On July 8, 2003, the Company announced the signing of a definitive agreement under which Yellow Corporation would acquire Roadway for approximately $966 million, or $48 per share. See the Company’s 8-K filed on July 8, 2003 for further information and details.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Consolidated results of operations for the second quarter ended June 21, 2003 compared to the second quarter ended June 21, 2002

Consolidated revenue was $742 million in the current quarter, a 13% increase from second quarter 2002. This increase was primarily due to increased revenue at Roadway Express following the shutdown in September 2002 of Consolidated Freightways, a major competitor. Operating expenses grew by nearly the same amount, and the operating ratio (operating expenses as a percentage of revenue) improved by 0.1 points to 97.6%, compared to last year’s 97.7%. The Company’s consolidated operating income was $17.4 million compared to $14.8 million in the second quarter of 2002. This increase in operating income is solely attributable to the improved performance of Roadway Express. The net other expense of $6.0 million is primarily composed of interest and amortization of financing costs associated with the acquisition of Roadway Next Day in 2001. The Company had net income of $6.3 million or $0.33 per share (diluted), for the current quarter, compared to a net income of $5.7 million, or $0.30 per share (diluted) in the same quarter last year.

The effective tax rate for the second quarter of 2003 was 42.0%, compared to 41.9% in the second quarter of 2002. This tax rate differs from the Federal statutory rate due to the impact of state taxes, taxes on foreign operations, and non-deductible operating expenses.

Consolidated results of operations for the two quarters ended June 21, 2003 compared to the two quarters ended June 15, 2002

Consolidated revenue was $1,496 million in the first two quarters, a 19% increase from the first two quarters of 2002. This increase was primarily due to increased revenue at Roadway Express following the shutdown in September 2002 of Consolidated Freightways, a major competitor. In addition, Roadway’s first two quarters this year contained 121 working days compared to 117 working days in last year’s first two quarters. Operating expenses grew by 17.9%, and the operating ratio (operating expenses as a percentage of revenue) improved by 1.0 points to 97.5%, compared to last year’s 98.5%. The Company’s consolidated operating income was $37.8 million compared to $18.5 million in 2002. This increase in operating income is solely attributable to the improved performance of Roadway Express. The net other expense of $12.8 million is primarily composed of interest and amortization of financing costs. The Company had net income of $14.3 million or $0.75 per share (diluted), for the first two quarters of 2003, compared to a net income of $3.9 million, or $0.21 per share (diluted) in the prior year.

In January 2003, we sold ATS, the truckload subsidiary of Roadway Next Day Corporation, for $55 million. ATS has been accounted for as a discontinued operation for all periods presented.

Contract negotiations with the Teamsters were successfully concluded in early February 2003, well in advance of the March 31, 2003 expiration date. The Teamsters ratified this new five-year contract on March 28, 2003.

The effective tax rate for the first two quarters of 2003 was 42.0%, compared to 43.2% in the first two quarters of 2002. This tax rate differs from the Federal statutory rate due to the impact of state taxes, taxes on foreign operations, and non-deductible operating expenses.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Roadway Express, Inc.

Results of operations for the second quarter ended June 21, 2003 compared to the second quarter ended June 15, 2002

Roadway delivered 1.8 million tons of freight in the current quarter, an increase of 11.2% compared to the prior year’s second quarter. This improvement is primarily due to the shutdown of Consolidated Freightways, and we expect that positive tonnage comparisons will continue through the third quarter of 2003. Less-than-truckload (LTL) tons were up 11.8% while truckload tons were up 8.4%. Net revenue per ton was $388.18, up 2.5% compared to the same quarter last year, with LTL up 1.9% and truckload up 5.6%. Without the revenue increase relating to the fuel surcharge, freight rates were up 1.2% compared to the second quarter of 2002. During the second quarter, Roadway began to experience a shift in its freight mix, where the company saw some loss of higher-yielding time-critical freight. In addition, an increase in the average shipment size and a decrease in the average length-of-haul both contributed to lower revenue rates. To offset this revenue yield decline, Roadway announced a rate increase of 5.9% effective July 13, 2003. The continued economic sluggishness has lead to increased pricing pressures, especially in the regional markets. A variable rate fuel surcharge averaged 3.1% of revenue in the current quarter compared to 1.8% of revenue in the prior-year quarter. Total operating expenses increased by 13.8%, while revenue increased 14.0%, leading to an improvement in the operating ratio to 98.3%, compared to a 98.5% in the same quarter last year.

Salaries, wages, and benefits as a percentage of revenue decreased to 62.7% in the current quarter, from 64.8% in the second quarter of 2002. Both direct and indirect wages reflected this improvement, which was attributable to efficiencies realized because of the increase in freight volume. Included in the benefit expense was a $3.6 million increase in cost associated with the Company-sponsored pension plan, and a $2.7 million increase in variable pay related to performance. Operating supplies and expenses increased slightly to 18.2% of revenue, up from 17.1% in the prior year quarter, as favorable variances due to the growth in freight volume were more than offset by higher fuel prices and increases in terminal and administrative costs. The growth in purchased transportation as a percent of revenue was primarily due to the 24% increase of linehaul miles run on the railroads. We also saw expense increases related to air service provided. Depreciation expense declined as a percent of revenue because we were able to handle the significant growth in tonnage using existing capacity.

The following table is a comparison of operating statistics for the second quarter of 2003 and 2002:

		Twelve Weeks Ended
		(Second Quarter)								Percentage
		June 21, 2003				June 15, 2002				change
LTL tons			1,467,657				1,312,943				11.8	%
Truckload tons			312,853				288,494				8.4	%
Total tons			1,780,510				1,601,437				11.2	%
LTL shipments			3,095,453				2,770,619				11.7	%
Truckload shipments			38,315				34,799				10.1	%
Total shipments			3,133,768				2,805,418				11.7	%
Revenue per LTL ton		$	436.33			$	428.11				1.9	%
Revenue per truckload ton		$	162.27			$	153.63				5.6	%
Total revenue per ton		$	388.18			$	378.67				2.5	%

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Results of operations for the two quarters ended June 21, 2003 compared to the two quarters ended June 15, 2002

Roadway delivered 3.5 million tons of freight in the first two quarters, an increase of 15.0% compared to the prior year. This improvement is primarily due to the shutdown of Consolidated Freightways, as discussed above. Less-than-truckload (LTL) tons were up 16.2% while truckload tons were up 9.7%. There were four more working days in the first two quarters of 2003 compared to the same period last year. Net revenue per ton was $395.66, up 4.7% compared to the same two quarters last year, with LTL up 3.8% and truckload up 8.0%. Without the revenue increase relating to the fuel surcharge, freight rates were up 2.4% compared to the first two quarters of 2002. The variable rate fuel surcharge averaged 3.6% of revenue in the two quarters ended June 21, compared to 1.3% of revenue in the prior-year period. Total operating expenses increased by 18.8%, while revenue increased 20.4%, leading to an improvement in the operating ratio to 97.9%, compared to a 99.2% in the first two quarters last year.

The changes in operating expenses that are discussed above in the results of operations for the second quarter 2003 also apply to the two quarters ended June 21.

The following table is a comparison of operating statistics for the first two quarters of 2003 and 2002:

		Twenty-four Weeks Ended
		(Two Quarters)								Percentage
		June 21, 2003				June 15, 2002				change
LTL tons			2,925,884				2,518,808				16.2	%
Truckload tons			603,379				550,005				9.7	%
Total tons			3,529,263				3,068,813				15.0	%
LTL shipments			6,195,819				5,341,308				16.0	%
Truckload shipments			74,619				66,901				11.5	%
Total shipments			6,270,438				5,408,209				15.9	%
Revenue per LTL ton		$	443.12			$	427.06				3.8	%
Revenue per truckload ton		$	165.55			$	153.25				8.0	%
Total revenue per ton		$	395.66			$	377.99				4.7	%

New Penn Motor Express

Results of operations for the second quarter ended June 21, 2003 compared to the second quarter ended June 15, 2002

Revenue was $50 million for the second quarter of 2003, up 1.6% from second quarter of 2002, while tonnage was 1.2% lower. The slow economic recovery and the highly competitive Northeast market prevented New Penn from showing year-over-year tonnage improvements. The operating ratio for New Penn was 88.8% in the second quarter of 2003, unchanged from last year’s second quarter.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

The following table shows the operating statistics for the second quarter of 2003 and 2002:

		Twelve Weeks Ended
		(Second Quarter)								Percentage
		June 21, 2003				June 15, 2002				change
LTL tons			190,472				193,891				(1.8	)%
Truckload tons			28,783				27,935				3.0	%
Total tons			219,255				221,826				(1.2	)%
LTL shipments			431,608				428,547				0.7	%
Truckload shipments			3,486				3,459				0.8	%
Total shipments			435,094				432,006				0.7	%
Revenue per LTL ton		$	248.25			$	240.54				3.2	%
Revenue per truckload ton		$	107.26			$	105.81				1.4	%
Total revenue per ton		$	229.74			$	223.57				2.8	%

Results of operations for the two quarters ended June 21, 2003 compared to the two quarters ended June 15, 2002

Revenue was $99 million for the first two quarters of 2003, up 4.4% from the same period in 2002, while tonnage was up 2.6%. The first two quarters this year had four more working days than the same period in 2002, so tonnage on a daily basis has declined slightly. The unusually harsh winter in the Northeast, combined with the slow economic recovery and the highly competitive market, prevented New Penn from showing year-over-year tonnage improvements on a daily basis. New Penn did not benefit from the shutdown of Consolidated Freightways since Consolidated did not operate in the next-day market. The operating ratio for New Penn was 91.7% in the first two quarters of 2003, a deterioration from last year’s 90.7%.

The following table shows the operating statistics for the first two quarters of 2003 and 2002:

		Twenty-four Weeks Ended
		(Two Quarters)								Percentage
		June 21, 2003				June 15, 2002				change
LTL tons			376,150				371,155				1.3	%
Truckload tons			57,671				51,848				11.2	%
Total tons			433,821				423,003				2.6	%
LTL shipments			853,344				823,701				3.6	%
Truckload shipments			7,038				6,483				8.6	%
Total shipments			860,382				830,184				3.6	%
Revenue per LTL ton		$	247.23			$	241.13				2.5	%
Revenue per truckload ton		$	107.56			$	106.24				1.3	%
Total revenue per ton		$	228.66			$	224.59				1.8	%

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Liquidity and capital resources

At the end of the quarter, cash and marketable securities amounted to $126 million, a $19 million increase from year-end 2002. During the first two quarters, cash provided by operating activities was $18.4 million, as compared to the $5.8 million use of cash in the first quarter of 2002. Two major items in 2002 contributed to the use of cash: $29 million related to the Roadway Next Day acquisition, and $9 million for the purchase of stock to fund employee stock plans. Cash outlays for the acquisition were completed in 2002. Beginning in 2003, existing treasury shares were used to fund certain employee stock plans, so additional share purchases have not been necessary.

Capital expenditures were $22.5 million during the first two quarters, which was in line with last year. Capital expenditures are financed primarily through internally generated funds. Future expenditures are expected to be financed in a similar manner, along with planned replacements through operating lease arrangements. Gross capital expenditures of $95 to $105 million are expected for 2003. The capital expenditures are primarily designated for revenue equipment, facilities, and information systems.

The Company’s credit facility consists of a five-year, $215 million senior revolving credit facility with a $165 million sublimit for letters of credit, and a five-year $175 million senior term loan. As of June 21, 2003, there were no amounts outstanding under the revolving credit facility, but availability had been reduced by $128 million as a result of the issuance of letters of credit, primarily related to casualty claims. As of June 21, 2003, $56 million was outstanding under the senior term loan facility, with quarterly installments ranging from $2.5 million in 2003 to $4.9 million in 2006. Management intends to repay the entire balance by year-end 2003. The senior term loan accrued interest at the rate of 2.9% as of June 21, 2003.

On January 23, 2003, the sale of ATS was completed for $55 million. The sale of ATS resulted in a mandatory prepayment of $24 million on the senior term loan.

The Company’s $225 million of 81/4% senior notes are due December 1, 2008. Interest is due semi-annually on June 1 and December 1.

The Company’s Canadian subsidiary also has a $10 million credit facility available for borrowing under a secured revolving line of credit and bankers’ acceptances. At June 21, 2003, there were no amounts outstanding on this facility.

At June 21, 2003, the Company had outstanding debt of $281 million, $10.5 million of which is classified as current on the balance sheet. Remaining borrowing capacity of $97 million is currently available under the arrangements described above.

The financing arrangements include covenants that require the Company to comply with certain financial ratios, including leverage and fixed-charge coverage ratios, and maintenance of a minimum level of tangible net worth. The Company was in compliance with all covenants as of June 21, 2003.

Management believes that cash flows from operations and current financing sources will be sufficient to support working capital needs, projected capital expenditures, dividends to shareholders, and anticipated expenditures for other corporate purposes.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Off Balance Sheet Arrangements

Roadway can finance up to $200 million of its domestic accounts receivable under the accounts receivable securitization arrangement, which has a three-year term expiring November 2004. Under this arrangement, undivided interests in Roadway’s domestic accounts receivable are sold through a special purpose entity (SPE), a wholly owned subsidiary of Roadway, without recourse, to an unrelated third party financial conduit. At June 21, 2003, undivided interests in the accounts receivable pool aggregating $100 million were sold under this arrangement, leaving an additional $100 million available. This arrangement allowed Roadway Express to immediately use the $100 million to be collected on accounts receivable at an effective rate of 2.6% during the second quarter of 2003.

The arrangement provides that new Roadway accounts receivable are immediately sold through the SPE. Roadway, through its SPE, retains the risk of credit loss on the receivables. The conduit has collection rights to recover payments from the designated accounts receivable and Roadway retains collection and administrative responsibilities for all accounts receivable.

Other matters

Under the terms of the Company’s current contract with the Teamsters, which extends through March 31, 2008, wage increases approximating 1.7% of wages and benefits were effective April 1, 2003 with another increase of approximately 2.0%, which will be effective August 1, 2003, designated for benefits.

Reserves for casualty claims represent management’s estimates of claims for property damage and public liability and workers’ compensation. The Company manages casualty claims with assistance of a third party administrator (TPA) along with oversight by a major risk management provider. The Company is self-insured for these claims with retention generally limited to $3 million. The Company and its TPA closely monitor the liability balances by using actual adjuster evaluations of each claim and a statistical benchmarking database for analysis of reserve accuracy.

The Company receives notices from the Environmental Protection Agency from time to time identifying it as a potentially responsible party under the Comprehensive Environmental Response Compensation and Liability Act for various Superfund sites. The Company believes that its obligation with regard to these sites is not significant.

On July 8, 2003, the Company announced the signing of a definitive agreement under which Yellow Corporation would acquire Roadway for approximately $966 million, or $48 per share. See the Company’s 8-K filed on July 8, 2003 for further information and details.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

While most of the information provided herein is historical, some of the comments made are forward looking statements within the meaning of the Private Securities Litigation Reform Act with respect to the outlook for expectations for revenue, earnings or other future financial or business performance, strategies, expectations and goals. All statements that are not historical statements of fact are “forward-looking statements” and are subject to numerous risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Forward-looking statements include all comments relating to our beliefs and expectations as to future events and trends affecting our business, results of operations and financial condition. We intend for the words “believes,” “anticipates,” “expects,” “intends,” “plans,” “continues,” “projects,” and similar expressions to identify forward-looking statements. The risks and uncertainties include, among others, variable factors such as capacity and rate levels in the motor freight industry; fuel prices; the impact of competition; the state of the national economy; the success of our operating plans, including our ability to manage growth and control costs; labor relations matters, and, uncertainties concerning the impact terrorist activities may have on the economy and the motor freight industry. We have based these forward-looking statements on management’s analysis about future events only as of the date of this filing. We undertake no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date of this filing. These forward-looking statements are subject to risks, uncertainties and assumptions about us and our subsidiaries. In addition to the disclosure contained in this document, you should carefully review the risks and uncertainties contained in other documents Roadway Corporation files from time to time with the Securities and Exchange Commission. Those documents are accessible on the SEC’s website at www.sec.gov and through our website at www.roadwaycorp.com.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Roadway has interest rate swap agreements with major commercial banks that fix the interest rate payable on its trailer leases, which are otherwise variable, and principally based on LIBOR. The value of the leases upon which the payments are based was not changed due to these agreements. The agreements, which expire from 2003 to 2004, fix Roadway’s interest costs at rates varying from 5.62% to 5.89% on leases with a notional amount of $10.0 million, and prevent the Company’s earnings from being directly affected by changes in interest rates related to the trailer leases. The fair value of Roadway’s interest rate swaps at June 21, 2003 is a liability of approximately $200,000, net of income taxes, and has been determined using proprietary financial models developed by the lending institutions that are counterparties to the swap arrangements.

The Company may incur economic losses due to adverse changes in foreign currency exchange rates, primarily with fluctuations in the Canadian dollar and Mexican peso. A 10% adverse change in foreign currency exchange rates would have no material impact on future cash flows and earnings of the Company.

The effect on the Company of fuel price increases is mitigated by a variable rate fuel surcharge when the national average diesel fuel price exceeds $1.10 per gallon. This surcharge has been in place at varying rates since the third quarter of 1999, and was discussed above.

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Item 4. Disclosure Controls and Procedures

An evaluation was performed under the supervision and with the participation of Roadway’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of June 21, 2003. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective. No significant changes were made in Roadway’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

PART II — OTHER INFORMATION

Item 2. Changes in securities and use of proceeds

The Company maintains a Union Stock Plan. Participation in the Union Stock Plan is involuntary, and the plan is noncontributory. Shares of Common Stock are awarded to participants in the Union Stock Plan as a bonus based on operating margin, accident and injury record, and attendance. During the first two quarters of 2003, the Company issued a total of 19,993 shares of Common Stock to participants under the plan. The Company has concluded that the award of a Common Stock bonus under the Union Stock Plan does not involve a “sale” of a security and thus is not subject to registration under the Securities Act of 1933, as amended.

On January 15, 2003, the Company granted 3,124 shares of common stock, par value $0.01 per share, to the members of the Roadway Express, Inc. Medical Board. These transactions were exempt from the registration provisions of the Securities Act of 1933 pursuant to Section 4(2) of such Act.

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Item 5. Other information

On July 7, 2003, the Board of Directors declared a cash dividend of $0.05 per share on the Company’s common stock payable on September 2, 2003, to shareholders of record on August 15, 2003.

On July 8, 2003, the Company announced the signing of a definitive agreement under which Yellow Corporation would acquire Roadway for approximately $966 million, or $48 per share. See the Company’s 8-K filed on July 8, 2003 for further information and details.

Item 6. Exhibits and Reports on Form 8-K

Exhibit No.
10.20		Board Service Agreement between Roadway Corporation and Michael W. Wickham.
31.1		Chief Executive Officer’s certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Chief Financial Officer’s certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Chief Executive Officer’s certification of financial statements and related information with respect to the Company’s quarterly report on Form 10-Q for the quarter ended June 21, 2003, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Chief Financial Officer’s certification of financial statements and related information with respect to the Company’s quarterly report on Form 10-Q for the quarter ended June 21, 2003, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1		Condensed Consolidated Financial Statements of Roadway Express, Inc. and Subsidiaries for the quarters ended June 21, 2003 and June 15, 2002.
99.2		Condensed Consolidated Financial Statements of Roadway Next Day Corporation for the quarters ended June 21, 2003 and June 15, 2002.

(b)     List of the Current Reports on Form 8-K that were filed in the second quarter of 2003:

Filing Date of Form 8-K		Description
April 15, 2003		Press release concerning results of operations for the first quarter ending March 29, 2003.

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SIGNATURES

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

		ROADWAY CORPORATION
Date: July 29, 2003		By:		/s/ J. Dawson Cunningham
			J. Dawson Cunningham, Executive Vice President
			and Chief Financial Officer
Date: July 29, 2003		By:		/s/ John G. Coleman
			John G. Coleman, Controller

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