<PAGE>   1
================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-K
(Mark One)

[X]            ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
               EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999

                                       OR

[ ]            TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934

               For the transition period from ____________ to _____________

                        Commission File Number 000-23341

                          MOTOR CARGO INDUSTRIES, INC.
           (Exact Name of the Registrant as Specified in its Charter)


<TABLE>
<S>                                                         <C>
                  Utah                                         87-0406479
     -------------------------------                        ----------------
     (State or other jurisdiction of                        (I.R.S. Employer
     incorporation or  organization)                        Identification No.)
</TABLE>


                             845 West Center Street
                           North Salt Lake, Utah 84054
                                 (801) 292-1111
          (Address of principal executive offices and telephone number)

        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to section 12(g) of the Act:

                           Common Stock, no par value
                           --------------------------
                                (Title of Class)

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

As of March 20, 2000, the aggregate market value of the Registrant's voting
Common Stock held by non-affiliates of the Registrant based upon the last sale
price reported for such date on the Nasdaq National Market System was
approximately $12,475,971.

The number of shares of the Registrant's Common Stock outstanding as of March
20, 2000 was 6,800,840.

                       DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the Registrant's definitive proxy statement pursuant to
Regulation 14A of the Securities Exchange Act of 1934 in connection with the
2000 Annual Meeting of Shareholders of the Registrant is incorporated by
reference into Part III of this Form 10-K.
================================================================================


<PAGE>   2
        This report contains certain forward-looking statements that involve
risks and uncertainties, including statements regarding the Company's plans,
objectives, goals, strategies and financial performance. The Company's actual
results could differ materially from the results anticipated in these
forward-looking statements as a result of certain factors set forth under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Cautionary Statement for Forward-Looking Information" and elsewhere
in this report.

                                     PART I

ITEM 1. BUSINESS

GENERAL

        Motor Cargo Industries, Inc. (the "Company") is a regional
less-than-truckload ("LTL") carrier which provides transportation and logistics
services to shippers within the Company's service region. The Company's service
region is the western United States, including Arizona, California, Colorado,
Idaho, New Mexico, Oregon, Texas, Utah and Washington. The Company transports
general commodities, including consumer goods, packaged foodstuffs, electronics,
computer equipment, apparel, hardware, industrial goods and auto parts for a
diversified customer base. The Company offers a broad range of services,
including expedited scheduling and full temperature-controlled service. Through
its wholly-owned subsidiary, MC Distribution Services, Inc. ("MCDS"), the
Company also provides customized logistics, warehousing and distribution
management services.

        The Company utilizes 27 strategically located service centers (also
referred to as "terminals") to serve major markets within the Company's service
region. In addition, the Company provides service to 26 smaller markets within
its service region pursuant to agreements with independent agents, most of which
act as exclusive agents for the Company. See Item 1 "Business - Operations."

        In 1997, the Company initiated a program to establish market and
operations presence in certain major business economic areas ("BEAs") outside of
the Company's service region in order to solicit tonnage from these markets
moving west into its service region. The Company opened BEA expansion facilities
in Dallas and Chicago in October 1997 and April 1998, respectively. During the
second quarter of 1999, the Company determined that the Chicago facility was not
profitable and would not produce acceptable levels of profitability for the near
or intermediate term. Consequently, in mid-July 1999, the Company discontinued
freight pick-up operations and closed its service center in Chicago. The Company
expanded its operation in Dallas to a full service terminal during 1999. The
Dallas facility now provides both pick-up and delivery operations. The Company
continued to utilize third-party truckload carriers, however, to transport
freight from the Dallas facility to other service centers within the Company's
service region. The Company currently has no plans to open additional BEA
operations.

THE LTL INDUSTRY

        The Company transports primarily LTL shipments. LTL shipments are
defined as shipments weighing less than 10,000 pounds. Generally, LTL carriers
transport freight from multiple shippers to multiple consignees on a scheduled
basis. Unlike truckload carriers, LTL carriers typically do not transport full
trailer loads directly from origin to destination. LTL operations require the
handling of shipments in several coordinated stages.

        Typically, LTL carriers transport freight along scheduled routes from
multiple shippers to multiple consignees utilizing a network of terminals,
together with fleets of linehaul and pickup and delivery tractors and trailers.
Freight is picked up from customers by local drivers and consolidated for
shipment. The freight is then loaded into inter city trailers and transported to
other terminals by linehaul drivers. Large LTL carriers have traditionally
employed a series of hub and spoke terminals. This method improves truck
utilization but requires both multiple cargo rehandlings, which are expensive,
and a fixed network of pickup, breakbulk and destination terminals, which is
capital intensive and requires a large staff of freight handlers. At each
breakbulk terminal, freight is unloaded and reloaded with other freight destined
for locations in the same general direction of another breakbulk terminal, where
the truck is sent for further unloading and loading, until the freight arrives
at a destination terminal located nearest the region of the consignee. At the
destination terminal, freight is then loaded


                                       2


<PAGE>   3
onto a local truck for final delivery. The Company emphasizes direct loading
between the originating and destination service centers in order to avoid the
costly and time-consuming use of breakbulk terminals.

        LTL companies are generally categorized as regional, interregional or
national carriers, based upon length of haul and service territory. Carriers
with average lengths of haul less than 500 miles are referred to as regional
carriers and generally provide either overnight or second day service. Regional
LTL carriers usually are able to load freight for direct transport to a
destination terminal, thereby avoiding the costly and time-consuming use of
breakbulk terminals (where freight is rehandled and reloaded for delivery to its
ultimate destination). Carriers with average lengths of haul between 500 and
1,000 miles are generally referred to as inter-regional carriers. National
carriers, with average lengths of haul greater than 1,000 miles, generally
operate coast to coast relying on networks of breakbulk and satellite terminals.
Due to the geographical size of the western United States, the Company has a
longer average length of haul than most other regional carriers. For the year
ended December 31, 1999, the Company had an average length of haul of
approximately 665 miles.

        In general, the more freight volume an LTL carrier has within a given
geographical area, the lower its incremental operating costs. This is
particularly true with respect to its pickup and delivery operations where
increased freight volumes generally result in less distance between stops and
more shipments per stop ("route density"). As route density increases, an LTL
carrier is able to make more deliveries on shorter routes, thereby increasing
the number of shipments that can be delivered within a defined period and
lowering overall labor costs for each shipment. Similarly, the more business a
carrier experiences in a given traffic lane from one service center to another
("lane density") the lower its incremental costs. As lane density increases, a
carrier experiences improved load factors resulting in increased revenue per
mile, reduced empty miles and reduced costs associated with intermediate
shipment handling and reconsolidation. A carrier's incremental costs are also
improved as the amount of freight handled at a given service center location
("service center density") increases. As service center density improves, a
carrier experiences higher revenues, while maintaining the same fixed cost
structure, thereby improving asset utilization.

OPERATIONS

        The Company picks up freight with pickup and delivery trucks during the
day and transports the freight to Company service centers by early evening.
Pick-ups and deliveries are typically made within a 70 mile radius of each
service center. Upon arrival at a service center, freight is unloaded, logged
onto the Company's computerized tracing system, and reloaded onto trailers
destined for the Company's other service centers. Trucks depart later in the
evening for their destination service centers. In order to ensure prompt
service, the Company enforces established time schedules for linehaul service
between service centers and utilizes an advanced computer system to track and
coordinate deliveries. Through the Company's wide area computer network, all
vital information relating to shipments is available to each service center on a
real-time basis. Before the cargo arrives at its destination service center, a
manifest showing the contents of each trailer and the sequence in which it is
loaded, along with the delivery bills, is generated by the Company's
computerized tracing system and is available to the destination service center
manager via the Company's computer network. Upon arrival at the destination
service center, the freight is unloaded, sorted and delivered to its final
destination by local delivery trucks.

        Instead of utilizing a complete "hub and spoke" system, which is
typically used by large, national LTL carriers, the Company emphasizes direct
loading of freight between service centers with minimal handling. Hub and spoke
systems generally require shipments to be loaded and unloaded several times at a
number of service centers and breakbulk facilities prior to delivery. Direct
loading allows shipments to be transported directly from the originating service
center to the destination service center without intermediate handling. Direct
loading reduces the Company's costs because it requires less loading and
unloading of freight and requires fewer terminals and breakbulk facilities.

        The Company uses a single service center, rather than multiple satellite
terminals, in each of the major cities it serves. Single service centers reduce
rehandling of freight, shorten delivery times and thereby reduce the risk of
freight damage or loss.


                                       3


<PAGE>   4
        In addition to the Company's 27 service centers, the Company also
utilizes independent agents in 26 smaller markets in which the Company does not
operate service centers. These agents are independent businesses which operate
within a specific area as the Company's pick-up and delivery agent. Shipments
are coordinated through these agent's facilities in the same manner as the
Company's service centers. Agents are compensated based upon a percentage of
freight bill revenue and are required to maintain standards established by the
Company. The Company believes that its utilization of agents in smaller markets
helps the Company maintain a lower fixed cost structure and emphasize variable
costs while improving the level of local market presence and allowing the
Company to provide its customer base with broader geographical coverage. The
table indicates the location of each of the Company's service centers and agent
facilities:


<TABLE>
<CAPTION>
                     SERVICE CENTERS                   AGENT FACILITIES
                     ---------------                   ----------------
<S>                                               <C>
               Albuquerque, New Mexico            Baker City, Oregon
               Bakersfield, California            Battle Mountain, Nevada
               Boise, Idaho                       Beatty, Nevada
               Colorado Springs, Colorado         Bend, Oregon
               Dallas, Texas                      Bishop, California
               Denver, Colorado                   Burns, Oregon
               El Paso, Texas                     Cedar City, Utah
               Eugene, Oregon                     The Dalles, Oregon
               Fremont, California                Elko, Nevada
               Fresno, California                 Ely, Nevada
               Grand Junction, Colorado           Flagstaff, Arizona
               Kent, Washington                   Hawthorne, Nevada
               Las Vegas, Nevada                  John Day, Oregon
               Medford, Oregon                    Kennewick, Washington
               North Salt Lake, Utah              Kingman, Arizona
               Oxnard, California                 Klamath, Oregon
               Phoenix, Arizona                   LaGrande, Oregon
               Pico Rivera, California            Lakeview, Oregon
               Pocatello, Idaho                   Lovelock, Nevada
               Portland, Oregon                   Pendleton Oregon
               Reno, Nevada                       Redding, California
               Rialto, California                 Ridgecrest, California
               Sacramento, California             Tonopah, Nevada
               San Diego, California              Wells, Nevada
               Spokane, Washington                Wendover, Utah
               Tucson, Arizona                    Winnemucca, Nevada
               Twin Falls, Idaho
</TABLE>


        Approximately 40% of the Company's shipments are currently delivered
overnight, and an additional 40% of the Company's shipments are delivered within
two days. The Company uses single driver and two-man "sleeper" teams in its
linehaul operations. The Company also contracts with third parties for
transportation services ("purchased linehaul transportation") to supplement peak
demand periods and address lane imbalances. The Company obtains purchased
linehaul transportation from several sources, including truckload carriers and
independent contractors. By utilizing purchased linehaul transportation, the
Company is able to reduce "empty miles" and improve load factors.

        The Company selectively solicits business from customers to reduce
operational inefficiencies by improving the mix of shipment and lane density,
shipment size and lane flow. During the year ended December 31, 1999, the
Company handled an average of approximately 3,850 shipments per day with an
average weight per shipment of approximately 1,105 lbs. and average revenue per
bill of approximately $121.80. The Company's revenue per hundredweight was
$11.02 for the year ended December 31, 1999.


                                       4


<PAGE>   5
        The Company's rates for LTL shipments are typically based on weight and
volume characteristics and the distance traveled. The Company periodically
publishes base rates that are generally applicable to customer shipments. The
Company typically offers special rates to customers based on tonnage levels and
other factors. In certain instances, the Company competes with other carriers
for business by participating in competitive bidding. Customers generally
solicit bids for relatively large shipment and tonnage volumes over a one or two
year period. These customers often enter into contractual relationships with a
limited number of carriers based upon price and service.

SPECIALIZED SERVICES

        The Company offers a broad range of services, including service
capabilities beyond the scope of most LTL carriers. These services include
Priority+Plus, an expedited time-definite service; Protective+Plus, a full
temperature-controlled service for LTL shipments within the Company's core
service region; and Canadian+Plus, full points coverage into all major Canadian
markets through an exclusive regional marketing partnership with one of Canada's
leading LTL carriers. The Company also provides less-than-container load service
to Hawaii. The Company consolidates shipments, loads containers and tenders them
to a major transoceanic carrier for transport to Hawaii. The shipments are then
delivered by a local carrier in Hawaii pursuant to an agreement between the
carrier and the Company. The Company intends to continue to evaluate additional
niche service offerings which complement existing operating systems.

        In addition to the service offerings described above, the Company offers
customized services tailored to the ongoing needs of a particular customer.
These customized services often involve a high level of coordination between the
Company and the customer and may include time definite delivery, highly
specialized reporting requirements and electronic data interchange, full time
on-site loading by Company employees, return goods consolidation and management,
and specialized handling and equipment requirements.

        Through a program referred to as "Motor Cargo USA," the Company also
provides customers with service to points outside its core service region. The
Company enters into interline agreements with other carriers to provide delivery
of freight outside of the Company's core service region.

        The Company provides customized logistics, warehousing and distribution
management services through its subsidiary MCDS. MCDS currently provides
"just-in-time" delivery services for a small number of specialty retailers. One
customer currently accounts for more than 85% of the operating revenues of MCDS.
For the year ended December 31, 1999, $4.1 million or 3.3% of the Company's
revenues were generated by MCDS.

CUSTOMERS AND MARKETING

        The Company has approximately 3,800 regular customers with an average
monthly revenue billing of $1,000 or more. The Company's customers are not
concentrated in any one area or industry and no one customer accounts for over
6% of total revenues.

        The Company has positioned itself in the high service end of the
regional LTL market. The Company targets prospective customers that require high
levels of customized service and are not inclined to select a carrier solely on
the basis of price. The Company emphasizes its ability to provide specialized or
customized services to shippers, including (i) highly flexible scheduling, (ii)
consistent and expedited transit commitments, (iii) strong management
information systems and electronic data interchange capabilities, (iv)
commitment to customer service and responsiveness and (v) a willingness to
provide transportation programs outside the scope of the traditional LTL
industry.

        The Company has written contracts with most of its large customers.
These contracts specify rate levels and eliminate the need to negotiate rates
for individual shipments. The Company's contracts typically do not provide for
guaranteed volumes. Although the Company's contracts typically run for a
specified term of one year, they generally may be terminated by either party
upon 30 days' notice. The Company has pricing agreements with


                                       5


<PAGE>   6
substantially all of its customers which are not covered by contracts. These
pricing agreements specify rate levels but do not require minimum tonnage
commitments on the part of the customer.

        The Company's senior management is actively involved in the Company's
sales and marketing activities. In order to attract new customers, the Company
relies on its ability to provide quality service and on selective targeting of
potential accounts. The Company's account executives are managed by three
regional directors of sales. The account executives are responsible for
developing new business and maintaining relations with existing customers. The
Company also employs three corporate account managers in its corporate account
office in Chicago. These corporate account managers solicit business from
corporate level decision-makers who are responsible for freight shipments to
locations within the Company's service region.

        The Company has designed and implemented a sales force automation system
which provides for improved contact and opportunity management, improved sales
forecasting and simplified reporting. The Company maintains comprehensive
customer base profiles of existing and prospective customers. Using this
database, key strategic and account development information is updated daily by
the Company's sales force using automated processes. The Company utilizes this
resource to track emerging opportunities and direct highly targeted and
precisely timed marketing messages to existing and prospective customers.

DRIVERS, INDEPENDENT CONTRACTORS AND OTHER PERSONNEL

        At December 31, 1999, the Company employed 1,571 persons in the
following categories:


<TABLE>
<CAPTION>
                    CATEGORY                          NO. OF EMPLOYEES
                    --------                          ----------------
<S>                                                   <C>
         Full time drivers                                  541
         Part time drivers and dock workers                 528
         Salaried and clerical                              365
         Warehousemen                                         8
         Mechanics and Maintenance                           83
         Sales and sales management                          46
</TABLE>


        At December 31, 1999, the Company employed 145 linehaul drivers and 476
pick-up and delivery drivers. The Company selects its drivers based upon
experience and driving records. Pursuant to DOT regulations, drivers are
required to pass drug tests prior to employment and periodically thereafter. The
trucking industry experiences driver shortages from time to time; however, the
Company has maintained an adequate and qualified driver force. The Company
compensates linehaul drivers on a per mile basis. Pick-up and delivery drivers
are compensated on an hourly basis.

        In addition to its employee drivers, the Company utilized approximately
71 linehaul drivers as of December 31, 1999, pursuant to an agreement with FHF
Transportation, Inc. ("FHF"). These drivers operate tractors owned by the
Company but are not employees of the Company. The Company makes payments to FHF
based upon mileage.

        The Company supplements its linehaul fleet with the use of approximately
31 independent contractors. Because independent contractors provide their own
tractor, independent contractors provide the Company with an alternative method
of obtaining the use of additional revenue equipment with reduced capital
investment. This approach reduces costs and maximizes flexibility by quickly
providing additional linehaul capacity during periods of peak demand. Further,
because independent contractors are compensated at a contracted rate per mile,
the use of independent contractors helps the Company reduce fixed overhead and
improve asset utilization. Independent contractors also allow the Company to
better adjust to seasonal fluctuations in shipping volumes.

        Approximately 13% of the Company's employees are covered by two separate
collective bargaining agreements relating to employees at the Company's North
Salt Lake, Utah and Reno, Nevada service centers. Although these agreements
cover most of the employees at these two facilities, less than half of these
employees are actually members of unions. These unions are affiliated with the
International Brotherhood of Teamsters, but the


                                       6


<PAGE>   7
contracts are not tied to the Teamsters National Master Contract. The Company's
agreement with North Salt Lake employees expires on November 30, 2002, and the
Company's Agreement with Reno employees expires on November 30, 2000. Both
agreements provide for automatic renewal from year to year after expiration,
subject to the right of either party to cancel or terminate the agreement upon
at least 60 days' notice prior to the date of expiration.

SAFETY AND INSURANCE

        The Company emphasizes safety in all aspects of its operations. The
Company employs a Director of Safety and Compliance who has over 25 years of
safety-related experience with the Company. Each of the Company's terminals
conducts its own safety program and all tractors in use are inspected daily by
Company personnel. The Company has also established guidelines for hauling
hazardous materials. The Company earned the highest DOT safety and fitness
rating of "satisfactory" during its last audit.

        The Company currently maintains liability insurance for bodily injury
and property damage in the amount of $30 million, with a self retention amount
of $250,000 per incident, and cargo insurance in the amount of $1 million, with
a self retention amount of $100,000, per incident. An aggregate self retention
amount of $250,000 per incident applies to incidents involving both liability
and cargo claims. The Company maintains various insurance coverage on buildings
and contents and is self-insured with respect to physical damage to other
properties and equipment. The Company also maintains workers' compensation
insurance in all states in which the Company operates. At December 31, 1999, a
deductible of $250,000 was applicable to each state except Washington, which has
no deductible. Subsequent to December 31, 1999, the Company modified the terms
of its workers' compensation insurance to eliminate the deductible in all states
other than Nevada.

REVENUE EQUIPMENT

        At December 31, 1999, the Company operated a fleet of 625 tractors and
trucks and 2,469 trailers. The Company uses new linehaul tractors in linehaul
operations for approximately five years. After five years of use, the Company
trades in used linehaul tractors and purchases new linehaul tractors. The table
below reflects, as of December 31, 1999, the average age of the type of
equipment, and the number of respective units:


<TABLE>
<CAPTION>
                                                         NUMBER    AVERAGE
       TYPE OF EQUIPMENT (CATEGORIZED BY PRIMARY USE)   OF UNITS     AGE
       ----------------------------------------------   --------   -------
<S>                                                     <C>        <C>
      Linehaul tractors                                     210      2.9
      Pick-up and delivery tractors                         361      3.3
      Pick-up and delivery trucks                            54      5.0
      Trailers                                             2469      8.6
</TABLE>


        The Company lowers its cost structure through the use of 28 foot
trailers in doubles combinations and, where permitted by state regulations,
triples combinations in its linehaul operations. These 28 foot trailers allow
for more direct loading and minimize handling costs and exposure. In addition,
the Company improves linehaul trailer utilization and reduces potential damages
and subsequent cargo claims expenses by using logistic deck trailers and pallet
decks. This specialized equipment minimizes damage and maximizes trailer
utilization.

        The Company maintains its revenue equipment through the use of its own
maintenance facilities as well as outside vendors. The Company's service centers
in Pico Rivera, Las Vegas, Reno, Denver, Phoenix, Portland and North Salt Lake
have maintenance facilities. In addition to scheduled maintenance on its
equipment, the Company also performs occasional equipment modifications which
are designed to improve operating performance and reduce operating costs of
equipment. All data regarding equipment costs, depreciation, mileage and
maintenance are recorded on the Company's computer system, allowing management
to access equipment records quickly and plan scheduled maintenance efficiently.


                                       7


<PAGE>   8
        The Company purchases all of its parts through nationally recognized
vendors. To enable management to better control inventory and costs, all orders
are placed through the Company's central purchasing unit at the Company's
headquarters.

FUEL AVAILABILITY AND COST

        Fuel, excluding fuel taxes, comprises approximately 2.5% to 4.5% of the
Company's total operating expenses depending on the price of fuel. Generally, in
order to obtain lower fuel costs and greater flexibility in fueling its fleet,
the Company purchases its own fuel in bulk and requires its drivers to fuel at
Company terminals. The Company emphasizes fuel economy through the use of
modern, fuel-efficient equipment, driver and mechanic training programs and
aerodynamic improvements. Although fuel constitutes a much lower percentage of
costs to the Company than it would to a full truckload carrier, increases in
fuel prices or fuel taxes, shortages of fuel or rationing of petroleum products
could have a material adverse effect on the operations and profitability of the
Company. Fuel prices are expected to rise significantly during 2000.

        Generally, in times of sharp fuel price increases, the Company
implements fuel surcharges. Because of the highly competitive nature of the
market for LTL services, the Company generally must wait for larger carriers to
implement fuel surcharges before the Company can effectively implement fuel
surcharges. The Company presently has a sliding scale fuel surcharge which is
based on a fuel price index for the west coast. Due to increased fuel costs
first occurring during the third quarter of 1999, the Company implemented a fuel
surcharge in accordance with the fuel price index in order to limit the impact
of fuel costs in future periods. The Company anticipates that fuel costs will
continue to increase through the second quarter of 2000. The Company will
respond to any such further increase with corresponding increases in the fuel
surcharge in accordance with the fuel price index. Although the fuel surcharge
reduces the impact of rising fuel costs, increased fuel prices can nevertheless
have an adverse effect on the operations and profitability of the Company due to
the difficulty of imposing and collecting the surcharge.

COMPETITION

        The transportation industry is highly competitive on the basis of both
price and service. The Company competes with regional, interregional and
national LTL carriers and, to a lesser extent, with truckload carriers,
railroads and overnight delivery companies. Several large LTL carriers operate
within the Company's core service region. Some of the Company's competitors are
divisions or subsidiaries of larger trucking companies. Many of the Company's
competitors have greater financial resources, more equipment and greater freight
capacity than the Company. Certain carriers occasionally experience periods of
overcapacity during which these carriers reduce prices in order to increase
utilization of revenue equipment. The Company believes that it is able to
compete effectively in its markets by providing high quality customized service
at competitive prices.

REGULATION

        The Motor Carrier Act of 1980 significantly deregulated the trucking
industry and increased competition among motor carriers. Following enactment of
the Motor Carrier Act, applicants have obtained operating authority more easily,
and interstate motor carriers such as the Company are able to change their rates
and services with less regulatory oversight and delay. The Motor Carrier Act
also removed many route and commodity restrictions affecting transportation of
freight.

        Effective January 1, 1995, Section 601 of the Federal Aviation
Administrative Authorization Act and the Trucking Industry Regulatory Reform Act
("TIRRA") substantially deregulated intrastate operating authority. Prior to
TIRRA, the Company maintained intrastate authority in California, Nevada and
Utah. Subsequent to TIRRA, the Company obtained intrastate authority in
Colorado, Oregon, New Mexico, Washington and Texas.

        The Company was regulated by the ICC until the ICC Termination Act of
1995 abolished the ICC effective January 1, 1996. The Surface Transportation
Board, an independent entity within the DOT, assumed many of the
responsibilities of the ICC. The Company is also regulated by various state
agencies. These regulatory authorities have broad powers, generally governing
matters such as authority to engage in motor carrier operations, rates,


                                       8


<PAGE>   9
certain mergers, consolidations and acquisitions, and periodic financial
reporting. The trucking industry is subject to regulatory and legislative
changes that can affect the economics of the industry by requiring changes in
operating practices or influencing the demand for, and the costs of providing
services to, shippers.

        Interstate motor carrier operations are subject to safety requirements
prescribed by the DOT. Such matters as weight and dimensions of equipment are
also subject to federal and state regulation. The use of triple trailers is
subject to state regulation and is prohibited by several states within the
Company's core service region. The Company is subject to federal, state and
local environmental laws and regulations governing the management of hazardous
wastes, other discharge of pollutants into the air and surface and underground
waters, and the disposal of certain substances. These regulations extend to the
Company's above-ground and underground fuel storage tanks. The Company has
completed modifications of underground storage tanks at several of its
facilities in order to comply with new federal regulations which became
effective at the end of 1998. In most cases, the Company replaced its
underground storage tanks with above ground tanks. The Company believes that all
of its fuel storage tanks are in compliance with the new regulations. The
Company also believes that it is in material compliance with all other
applicable environmental laws and regulations and does not believe that the cost
of future compliance should have a material adverse effect on the Company's
operations or financial condition.

ITEM 2. PROPERTIES

        The Company owns its executive offices, located in North Salt Lake,
Utah, consisting of a two-story building of approximately 21,377 square feet. Of
the 27 service centers used by the Company within its core service region as of
December 31, 1999, 10 were owned, 16 were leased and one had multiple facilities
that were partially owned and partially leased by the Company. These facilities
range in size according to the markets served. The Company has not experienced
and does not anticipate difficulties in renewing existing leases on favorable
terms or obtaining new facilities as and when required. The following table sets
forth the location of each service center owned or leased by the Company as of
December 31, 1999.


<TABLE>
<CAPTION>
                                      # OF    OWNED OR
                  LOCATION            DOORS     LEASED    LEASE EXPIRATION
                  --------            -----   --------    ----------------
<S>                                   <C>     <C>         <C>
              Pico Rivera, CA           102     Leased    December 2013
              Rialto, CA                 78     Owned
              North Salt Lake, UT        77     Owned
              Denver, CO
                Building 1               32     Leased    November 2000
                Building 2               36     Owned
              Fremont, CA                60     Leased    August 2007
              Portland, OR               34     Owned
              Reno, NV                   88     Owned
              Sacramento, CA             30     Owned
              Kent, WA                   30     Owned
              Boise, Idaho               20     Leased    June 2002
              Phoenix, AZ               118     Owned
              El Paso, TX                20     Owned
              Las Vegas, NV              20     Owned
              San Diego, CA              20     Leased    May 2001
              Fresno, CA                 20     Leased    October 2001
              Albuquerque, NM            12     Leased    October 2001
              Oxnard, CA                  9     Leased    May 2000
              Bakersfield, CA             9     Leased    October 2000
              Tucson, AZ                 28     Leased    March 2004
              Medford, OR                 8     Leased    July 2001
              Spokane, WA                11     Leased    December 2002
              Colorado Springs, CO        7     Leased    August 2001
              Grand Junction, CO         16     Leased    May 2003
</TABLE>


                                       9


<PAGE>   10

<TABLE>
<CAPTION>
                                      # OF    OWNED OR
                  LOCATION            DOORS     LEASED    LEASE EXPIRATION
                  --------            -----   --------    ----------------
<S>                                   <C>     <C>         <C>
              Twin Falls, ID             6      Owned
              Dallas, TX                23      Leased    May 2002
              Pocatello, ID              2      Leased    September 2000
              Eugene, OR                 8      Leased    November 2004
</TABLE>


        The following additional properties are either owned or under lease by
the Company but are not currently being used in its operations.


<TABLE>
<CAPTION>
                                      # OF    OWNED OR
                  LOCATION            DOORS     LEASED    LEASE EXPIRATION
                  --------            -----   --------    ----------------
<S>                                   <C>     <C>         <C>
              Newark, CA                35      Owned
              Chicago, IL               24      Leased    November 2001
              Benicia, CA               28      Leased    August 2001
              Boise, ID                 12      Leased    October 2001
</TABLE>


        The Company also leases a sales office in Chicago pursuant to a lease
which expires in November 2001. The Company's subsidiary, MCDS, leases an
aggregate of 108,900 square feet of warehouse space in southern California
pursuant to two leases which expire in January 2001 and February 2001. In
addition, MCDS leases 82,300 square feet of warehouse space in York,
Pennsylvania, pursuant to a lease that expires in June 2001, and 7,400 square
feet of warehouse space in Las Vegas, Nevada pursuant to a month-to-month lease.

ITEM 3. LEGAL PROCEEDINGS

        The Company is routinely a party to litigation incidental to its
business, primarily involving claims for personal injury or property damage
incurred in the transportation of freight. The Company maintains insurance to
cover liabilities in excess of self-insured amounts. The Company's management is
not aware of any claims or threatened claims that it believes are likely to
exceed insurance limits or have a materially adverse effect upon the Company's
operations or financial position.


                                       10


<PAGE>   11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS

        The Company did not submit any matter to a vote of security holders
during the fourth quarter of 1999.

ITEM 10. EXECUTIVE OFFICERS OF THE REGISTRANT

        The following table sets forth certain information with respect to the
present executive officers and certain key employees of the Company:


<TABLE>
<CAPTION>
NAME                             AGE                        POSITION
----                             ---                        --------
<S>                              <C>   <C>
Harold R. Tate                   73    Chairman of the Board, Director
Marshall L. Tate                 37    President and Chief Executive Officer, Director
William J. Mahan                 54    Executive Vice President and Chief Operating
                                       Officer
Louis V. Holdener                61    Vice President, President of Motor Cargo
Marvin L. Friedland              57    Vice President and General Counsel, Secretary,
                                       Director
Lynn H. Wheeler                  58    Vice President and Chief Financial Officer
R. Scott Price                   36    Vice President of Sales and Marketing
Steven E. Wynn(1)                50    Vice President of Human Resources (Motor Cargo)
Kevin L. Avery(1)                42    Vice President of Traffic (Motor Cargo)
</TABLE>


(1)     Messers Wynn and Avery are officers of the Company's principal operating
        subsidiary, Motor Cargo, and are not officers of the Company.

        Harold R. Tate has over 50 years of experience in the trucking industry
and has served as Chairman of the Board of the Company and its predecessors
since 1947. Mr. Tate served as Chief Executive Officer of the Company and its
predecessors from 1947 to March 1997. Mr. Tate also serves as a member of the
Board of Trustees of the Buffalo Bill Historical Center. Harold R. Tate is the
father of Marshall L. Tate, President and Chief Executive Officer of the
Company.

        Marshall L. Tate has over 15 years experience in the trucking industry.
Mr. Tate has been employed by the Company since 1984, has served as its
President and Chief Executive Officer since March 1997, and was appointed to the
Board of Directors of the Company in 1996. Prior to becoming the Company's
President and Chief Executive Officer, Mr. Tate served in various divisional
positions as well as Vice President of Sales and Marketing and Executive Vice
President of Corporate Development for Motor Cargo. In 1995, Mr. Tate directed
the start-up of the Company's logistics warehousing and distribution management
services subsidiary, MC Distribution Services. Marshall L. Tate is the son of
Harold R. Tate, the majority shareholder and Chairman of the Board of Directors
of the Company.

        William J. Mahan has over 30 years experience in the trucking industry.
Mr. Mahan joined the Company in February 1999 as Executive Vice President and
Chief Operating Officer. Prior to joining the Company, Mr. Mahan held a series
of positions with Viking Freight, a subsidiary of FDX Corp., including Vice
President of Operations, Senior Vice President of Operations, President of
Spartan Express (a Viking Freight subsidiary) and, most recently, Executive Vice
President of Viking Freight.


                                       11


<PAGE>   12
        Louis V. Holdener has over 30 years experience in the trucking industry.
Mr. Holdener has been employed by the Company since 1965, has served as
President of Motor Cargo, the Company's primary operating subsidiary, since
1991, and was named Vice President of the Company in 1997. Prior to 1991, Mr.
Holdener served in various positions with the Company, including Vice President
of Operations of Motor Cargo.

        Marvin L. Friedland has served as Vice President and General Counsel of
the Company and its predecessors since 1982. Prior to joining the Company, Mr.
Friedland was an attorney in private practice. Mr. Friedland was appointed to
the Board of Directors in 1996. Mr. Friedland is a Certified Public Accountant
and a member of the California Bar and the Utah Bar.

        Lynn H. Wheeler has been employed by the Company since 1983 and has
served as Vice President of Finance of Motor Cargo since 1988. Mr. Wheeler was
appointed Vice President and Chief Financial Officer of the Company in March
1997. Mr. Wheeler is a Certified Public Accountant, a Certified Internal Auditor
and a member of the American Institute of Certified Public Accountants.

        R. Scott Price joined the Company in 1986 and has served as a Vice
President of Sales and Marketing of the Company since February 1999. From
October 1997 to February 1999, Mr. Price served as a Vice President of the
Company responsible for overseeing MCDS. From 1995 to 1997, Mr. Price served as
Vice President of Sales of Motor Cargo. From 1986 to 1995, Mr. Price held
various positions with Motor Cargo, including Service Center Manager and
Director of Corporate Accounts.

        Steven E. Wynn has been employed by Motor Cargo since 1973 and has
served as Vice President of Human Resources of Motor Cargo since February 1999.
From 1991 to 1999, Mr. Wynn served as Vice President of Operations of Motor
Cargo. From 1973 to 1991, Mr. Wynn served in various positions, including
Director of Linehaul Operations and Director of Operations for Motor Cargo.

        Kevin L. Avery joined the Company in 1985 and has served as Vice
President of Traffic of Motor Cargo since 1992. From 1985 to 1992, Mr. Avery
served in various positions, including Director of Pricing, Rate Department
Manager and Director of Quality Assurance for Motor Cargo.


                                       12


<PAGE>   13
                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

        The Company's Common Stock is traded on the Nasdaq Stock Market
(National Market) under the symbol "CRGO". At March 8, 2000, there were
approximately 418 holders of the common stock, including 21 shareholders of
record.

        The following table sets forth the high and low sales prices for the
Company's common stock as reported by the Nasdaq National Market System by
quarter, for the years ended December 31, 1999 and 1998.


<TABLE>
<CAPTION>
                                                   YEAR ENDED
       QUARTER               -------------------------------------------------------
        ENDED                 DECEMBER 31, 1999                  DECEMBER 31, 1998
       -------               -------------------             -----------------------
                             HIGH           LOW               HIGH             LOW
                             ----           ----             -------         -------
<S>                         <C>            <C>               <C>             <C>
        3/31                8.500          4.000             $13.750         $10.750
        6/30                8.906          5.000              13.00           10.00
        9/30                8.500          6.125              12.125           7.875
       12/31                7.188          3.375               9.50            6.50
</TABLE>


        The Company has never declared or paid any cash dividends on its capital
stock and does not anticipate paying any cash dividends in the foreseeable
future.

ITEM 6. SELECTED FINANCIAL DATA

        The following selected financial data have been summarized from the
Company's consolidated financial statements and are qualified in their entirety
by reference to, and should be read in conjunction with, such consolidated
financial statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," under Item 7 below.


                                       13


<PAGE>   14
                      SELECTED CONSOLIDATED FINANCIAL DATA
                    (in thousands, except per share amounts)


<TABLE>
<CAPTION>
                                                                                  Year ended December 31,
                                                         -------------------------------------------------------------------------
                                                            1995            1996            1997            1998            1999
                                                         ---------       ---------       ---------       ---------       ---------
<S>                                                      <C>             <C>             <C>             <C>               <C>
STATEMENT OF EARNINGS DATA:
    Operating revenues                                   $  80,808       $  92,310       $ 105,381       $ 114,725         125,310
    Operating expenses
       Salaries, wages and benefits                         35,495          39,666          45,247          51,747          59,502
       Operating supplies and expenses                      12,669          14,947          15,706          15,974          20,342
       Purchased transportation                             11,532          14,164          15,389          17,974          15,580
       Operating taxes and licenses                          3,178           3,531           3,519           3,885           4,731
       Insurance and claims                                  1,842           2,785           4,478           3,651           3,826
       Depreciation and amortization                         5,930           6,578           6,998           7,928           8,822
       Communications and utilities                          1,521           1,784           1,896           1,924           2,023
       Building rents                                        1,274           1,540           1,745           2,365           3,043
                                                         ---------       ---------       ---------       ---------       ---------
          Total operating expenses                          73,441          84,995          94,978         105,448         117,869
                                                         ---------       ---------       ---------       ---------       ---------

          Operating income                                   7,367           7,315          10,403           9,277           7,441
    Other income (expense)
          Interest expense                                  (1,500)         (1,430)         (1,051)           (154)           (139)
          Other, net                                           107             (32)            221             326             351
                                                         ---------       ---------       ---------       ---------       ---------
    Earnings before income taxes                             5,974           5,853           9,573           9,449           7,653
    Income taxes                                             2,094           2,118           3,805           3,660           3,000
                                                         ---------       ---------       ---------       ---------       ---------

    Net earnings                                         $   3,880       $   3,735       $   5,768       $   5,789       $   4,653
                                                         =========       =========       =========       =========       =========
    Earnings per common share - basic and diluted                                                        $     .83             .67
    Weighted-average shares outstanding - diluted                                                            6,992           6,941

    Pro forma (1)
       Earnings before income taxes                      $   5,974       $   5,853       $   9,573
       Income taxes                                          2,303           2,256           3,952
                                                         ---------       ---------       ---------
       Net earnings                                      $   3,671       $   3,597       $   5,621
                                                         =========       =========       =========
       Earnings per common share - basic                 $    0.63       $    0.62       $    0.95
                                                         =========       =========       =========
           Weighted-average shares outstanding - basic       5,820           5,820           5,939
                                                         =========       =========       =========
       Earnings per common share - diluted               $    0.63       $    0.62       $    0.95
                                                         =========       =========       =========
       Weighted-average
       shares outstanding - diluted                          5,820           5,820           5,939
                                                         =========       =========       =========

</TABLE>


<TABLE>
<CAPTION>
                                                                                December 31,
                                                        -----------------------------------------------------------
                                                          1995         1996         1997         1998         1999
                                                        -------      -------      -------      -------      -------
<S>                                                     <C>          <C>          <C>          <C>           <C>
BALANCE SHEET DATA:
    Current assets                                      $20,233      $23,197      $26,965      $26,775       27,090
    Current liabilities                                  14,752       15,752       11,597       10,741       11,641
    Total assets                                         59,507       63,834       68,069       72,660       80,570
    Long-term obligations, less current maturities       17,724       16,820        6,492        5,390        8,021
    Total liabilities                                    36,784       37,794       24,618       23,386       26,929
    Stockholders' equity                                 22,723       26,040       43,451       49,275       53,641
</TABLE>


(1)     Effective August 28, 1997, the Company acquired the membership interests
        of Ute, a Utah limited liability company. A limited liability company
        passes through to its members essentially all taxable earnings and
        losses and pays no tax at the company level. Accordingly, for
        comparative purposes, a pro forma provision for income taxes using an
        effective income tax rate of approximately 38% has been determined
        assuming Ute had been taxed as a C corporation for all periods
        presented.


                                       14


<PAGE>   15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

        The purpose of this section is to discuss and analyze the Company's
consolidated financial condition, liquidity and capital resources and results of
operations. This analysis should be read in conjunction with the consolidated
financial statements and related notes which appear elsewhere in this report.
This section contains certain forward-looking statements that involve risks and
uncertainties, including statements regarding the Company's plans, objectives,
goals, strategies and financial performance. The Company's actual results could
differ materially from the results anticipated in these forward-looking
statements as a result of factors set forth under "Cautionary Statement for
Forward-Looking Information" below and elsewhere in this report.

OVERVIEW

        1999 was a challenging year for the Company in many respects. Although
total operating revenues increased 9.2%, this growth did not result in increased
earnings from 1998 due to inadequate profit margins on certain accounts. The
Company took corrective actions during the third and fourth quarters, including
the implementation of an aggressive account rationalization program. By
analyzing each account based upon revenue quality characteristics such as
revenue per bill and revenue per hundredweight, the Company was able to identify
accounts that were not meeting acceptable profit margins. Appropriate rate
adjustments were made to under-performing accounts or alternatively, accounts
were eliminated that could not be adjusted to provide acceptable margins. The
result was a significant improvement in tonnage yield and profitability during
the fourth quarter.

        During the second quarter of 1999, the Company carefully examined its
BEA operations in Chicago and Dallas. The Company's Dallas operation continues
to show positive growth and margin yield and is now a full service terminal
providing both pick-up and delivery services. The Company determined that the
Chicago operation was not profitable, and would not produce acceptable levels of
profitability for the near future. The Company discontinued pick-up operations
and closed the Chicago service center in mid-July 1999. Currently, the Company
has no plans to open additional BEA operations.

        In order to improve line-haul relay and freight consolidation to and
from the Northwest, the Company converted its pick-up and delivery operations in
Eugene, Oregon and Boise and Twin Falls, Idaho from independent agencies to
Company-owned service centers during the second quarter of 1999. The Company
also secured a service center in Fremont, California. The Newark and Benicia,
California service centers were consolidated into the Fremont service center in
order to reduce line haul expense and rehandling of freight.


                                       15


<PAGE>   16
RESULTS OF OPERATIONS

        The following table sets forth the percentage relationship of certain
items to revenues for the periods indicated:


<TABLE>
<CAPTION>
                                            YEAR ENDED DECEMBER 31,
                                      ----------------------------------
                                       1997          1998          1999
                                      ------        ------        ------
<S>                                    <C>           <C>           <C>
Operating revenues                     100.0%        100.0%        100.0%
Operating expenses
    Salaries, wages and benefits        42.9          45.1          47.5
    Operating supplies and expenses     14.9          13.9          16.2
    Purchased transportation            14.6          15.7          12.5
    Depreciation and amortization        6.6           6.9           7.0
    Insurance and claims                 4.2           3.2           3.1
    Operating taxes and licenses         3.3           3.4           3.8
    Communications and utilities         1.9           1.7           1.6
    Building rents                       1.7           2.0           2.4
                                      ------        ------        ------
          Total operating expenses      90.1          91.9          94.1
                                      ------        ------        ------

Operating income                         9.9           8.1           5.9
Other income (expense)
    Interest expense                    (1.0)         (0.1)         (0.1)
    Other, net                           0.2           0.3           0.3
                                      ------        ------        ------
Earnings before income taxes             9.1           8.3           6.1
Income taxes                             3.6           3.2           2.4
                                      ------        ------        ------
Net earnings                             5.5%          5.1%          3.7%
                                      ======        ======        ======
</TABLE>


Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

        Operating revenues increased 9.2% in 1999 to $125.3 million from $114.7
million in 1998. The increase was attributable to the increased volume of
freight. The number of shipments during 1999 increased by 11.8% to 999,563,
compared to 893,957 for 1998. Revenue per hundredweight increased to $11.02 in
1999 from $10.92 for 1998.

        The Company's warehousing and distribution management company, MCDS,
contributed $4.1 million of the $125.3 million in operating revenues for the
year ended December 31, 1999 compared to $3.1 million for the year ended
December 31, 1998. This increase was due primarily to the expansion of a
contract with one customer and the addition of several smaller customers.

        Tonnage increased by 7.7% to 552,412 in 1999, compared to 512,705 in
1998. Average revenue per bill decreased 2.8% to $121.82 in 1999 compared to
$125.31 in 1998. Fourth quarter average revenue per bill increased to $127.87,
however, as a result of adjustments to pricing on freight that was not producing
sufficient yield.

        As a percentage of operating revenues, salaries, wages, and benefits
increased to 47.5% for the year ended December 31, 1999 from 45.1% for 1998.
Salaries and wage rates increased approximately 4% in 1999 compared to 1998. The
increase was due primarily to reduced yield in revenue as evidenced by the
reduction in average revenue per bill and increased staffing of full time
employees with their associated benefits. Additional line drivers were employed
allowing a reduction in the use of purchase transportation.

        Operating supplies and expenses, which include agent commissions, tires,
parts, repairs and fuel and other general operating expenses, increased in 1999
to 16.2% of operating revenue compared to 13.9% for 1998. The increase was
primarily attributable to increased expenses, such as fuel, parts, tires and
repairs, associated with the shift from using purchased transportation to using
more company trailers and drivers.

        Purchased transportation decreased to 12.5% of operating revenues in
1999 from 15.7% for 1998. The decrease was caused by the shifting of costs from
purchased transportation to other expense categories, such as payroll, operating
supplies and expense, operating taxes and licenses, and depreciation, associated
with having


                                       16


<PAGE>   17
approximately 30 more line drivers during 1999 compared to 1998. The Company has
increased its staff employee drivers in order to provide more reliable and
consistent service.

        Interest expense was slightly less during 1999 compared to 1998. At
December 31, 1999, total long-term obligations were $8.1 million compared to
$5.5 million at December 31, 1998.

        Building rents increased to 2.4% of operating revenue for 1999 as
compared to 2.0% for 1998. This increase was due primarily to lease payments for
additional facilities in Fremont, California and Boise, Idaho as well as
continuing lease payments on unused facilities in Chicago, Illinois, Benicia,
California, and Boise, Idaho.

Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

        Operating revenues increased 8.9% in 1998 to $114.7 million from $105.4
million in 1997. The increase was attributable to new freight from the Company's
BEA expansion facilities in Dallas, Texas and Chicago, Illinois, as well as
increased freight volume within the Company's core service region. The number of
shipments during 1998 increased by 9.5% to 893,957, compared to 816,567 for
1997. Revenue per hundredweight decreased to $10.92 in 1998 from $10.96 for
1997.

        The Company's warehousing and distribution management company, MCDS,
contributed $3.1 million of the $114.7 million in operating revenues for the
year ended December 31, 1998 compared to $3.4 million for the year ended
December 31, 1997. The decrease was due primarily to the termination of a
contract with one customer in the first quarter of 1998, which resulted in lower
revenues for the first and second quarters of 1998. Revenues from MCDS increased
during the third and fourth quarters of 1998 due to the expanding of service to
an existing customer.

        Tonnage increased by 10.0% to 512,705 in 1998, compared to 466,131 in
1997. Average revenue per bill increased .1% to $125.31 in 1998 compared to
$125.15 in 1997. Demand for freight was sluggish during 1998, limiting the
growth in revenue and increasing the stress on margins.

        As a percentage of operating revenues, salaries, wages, and benefits
increased to 45.1% for the year ended December 31, 1998 from 42.9% for 1997.
Salaries and wage rates increased approximately 4% in 1998 compared to 1997. In
addition, staffing increases were made to provide for new facilities in Chicago,
Illinois and Benecia, California, along with staffing increases at other service
centers to maximize quality of service. The Company also incurred additional
labor costs in connection with the Company's efforts to optimize and reorganize
linehaul operations.

        Operating supplies and expenses, which include agent commissions, tires,
parts, repairs and fuel and other general operating expenses, decreased in 1998
to 13.9% of operating revenue compared to 14.9% for 1997. The decrease was
primarily due to lower fuel costs and decreased agent commissions. Purchased
transportation increased to 15.7% of operating revenues in 1998 from 14.6% for
1997. This increase was primarily attributable to the use of purchased
transportation providing one-way hauling of freight from the Company's BEA
expansion facilities in Dallas and Chicago into the Company's core service
region for delivery.

        Insurance and claims decreased to 3.2% of revenue for 1998 compared to
4.2% for 1997. Insurance and claims expenses were higher in 1997 due to an
increase in insurance reserves in 1997 for two accidents which occurred in prior
years.

        Interest expense decreased to .1% as a percentage of operating revenues
in 1998 compared to 1.0% for 1997. The decrease was attributable to lower debt
levels. Approximately $7.3 million of the Company's debt was paid off in
December 1997 with proceeds from the Company's initial public offering. Strong
operating cash flows also contributed to lower debt levels during 1998. At
December 31, 1998, total obligations were $5.5 million compared to $6.6 million
at December 31, 1997.


                                       17


<PAGE>   18
LIQUIDITY AND CAPITAL RESOURCES

        The Company's primary sources of liquidity have been funds provided by
operations and bank borrowings. Net cash provided by operating activities was
approximately $12.6 million, $12.6 million and $11.7 million in 1997, 1998 and
1999, respectively. Net cash provided by operating activities is primarily
attributable to the Company's earnings before depreciation and amortization
expense.

        Capital expenditures net of disposed property totaled approximately $7.3
million, $12.6 million and $16.0 million during 1997, 1998 and 1999,
respectively. The majority of the Company's capital expenditures net of
disposition is financed with cash provided by operating activities and long-term
debt. The Company's budget for total capital expenditures net of disposed
property is approximately $14.7 million for 2000. These capital expenditures
will consist primarily of the acquisition of new revenue equipment and
construction of terminal facilities.

        Net cash used in financing activities was $5.4 million and $1.1 million
in 1997 and 1998. In 1999, net cash of $2.3 million was provided by financing
activities. At December 31, 1999, the Company had outstanding long-term
obligations (including current maturities) consisting of approximately $8.1
million, most of which comprised obligations for the purchase of revenue
equipment. See Note F to the Company's Consolidated Financial Statements.

        The Company leases a small portion of the revenue equipment used in its
operations. At December 31, 1999, the Company's future minimum lease payments
under operating leases relating to equipment amounted to $4.6 million. See Note
D to the Company's Consolidated Financial Statements.

        The Company is a party to a loan agreement with Zions First National
Bank ("Zions") that provides for a revolving line of credit in an amount not
exceeding $5 million. The loan agreement provides for the issuance of letters of
credit and may be used for this purpose, as well as to fund the working capital
needs of the Company. As of December 31, 1999, there was no outstanding balance
under this revolving line of credit.

        Zions has also provided a second revolving line of credit to the Company
in an amount not to exceed $20 million. The Company intends to use amounts
available under this credit facility, if necessary, primarily to purchase
equipment used in operations. As of December 31, 1999, the Company had $6.7
million in loans outstanding under this facility.

        All amounts outstanding under the two loan facilities described above
accrue interest at a variable rate established from time to time by Zions. The
Company does have the option, however, to request that specific advances accrue
interest at a fixed rate quoted by Zions subject to certain prepayment
restrictions. All amounts outstanding under the two loan facilities are
collateralized by the Company's inventory, chattel paper, accounts receivable
and equipment now owned or hereafter acquired by the Company.

        During the first quarter of 1999, the Company announced a share
repurchase program. The Board of Directors of the Company authorized the
repurchase of up to 700,000 shares. As of December 31, 1999, a total of 62,780
shares had been repurchased by the Company for approximately $325,900.
Subsequent to the end of the year, the Company repurchased an additional 124,200
shares for approximately $578,600.

INFLATION

        Inflation has had a minimal effect upon the Company's profitability in
recent years. Most of the Company's operating expenses are inflation sensitive,
with inflation generally producing increased costs of operation. Although the
Company historically has been able to pass through most increases in fuel prices
and taxes to customers in the form of fuel surcharges or higher rates, the
Company generally must wait for larger carriers to implement fuel surcharges
before the Company can effectively implement fuel surcharges. Fuel prices
increased significantly during the third quarter of 1999. Accordingly, the
Company implemented a fuel surcharge in mid-August to limit the impact of fuel
costs in future periods. Although the fuel surcharge reduces the impact of
rising fuel costs, increased fuel prices can nevertheless have an adverse effect
on the operations and profitability of the Company due to the difficulty of
imposing and collecting the surcharge. See Item 1 "Business-Fuel Availability
and Cost." The Company expects that inflation will affect its costs no more than
it affects those of other regional LTL carriers.


                                       18


<PAGE>   19
SEASONALITY

        The Company experiences some seasonal fluctuations in freight volume.
Historically, the Company's shipments decrease during the winter months. In
addition, the Company's operating expenses historically have been higher in the
winter months due to decreased fuel efficiency and increased maintenance costs
for revenue equipment in colder weather. The Company's operating revenue and net
earnings may vary as a result of seasonal factors, and accordingly, results of
operations are subject to fluctuation, and results in any period should not be
considered indicative of the results to be expected for any future period.

THE YEAR 2000 ISSUE

        The Company has performed an analysis of its computer systems and has
implemented procedures to address year 2000 issues. During 1997, 1998 and 1999,
the Company spent a total of $105,000 to upgrade and test computer systems and
applications. The Company has not experienced any significant year 2000 related
problems. Based upon current information, the Company does not anticipate any
future year 2000 related computer problems or additional costs to upgrade
computer systems related to the year 2000 issue.

CAUTIONARY STATEMENT FOR FORWARD LOOKING INFORMATION

        Certain information set forth in this Annual Report on Form 10-K
contains "forward-looking statements" within the meaning of federal securities
laws. Forward-looking statements include statements concerning plans,
objectives, goals, strategies, future events, future revenues or performance,
capital expenditures, financing needs, plans or intentions relating to
acquisitions by the Company and other information that is not historical
information. When used in this report, the words "estimates," "expects,"
"anticipates," "forecasts," "plans," "intends," "believes" and variations of
such words or similar expressions are intended to identify forward-looking
statements. Additional forward-looking statements may be made by the Company
from time to time. All such subsequent forward-looking statements, whether
written or oral and whether made by or on behalf of the Company, are also
expressly qualified by these cautionary statements.

        The Company's forward-looking statements are based upon the Company's
current expectations and various assumptions. The Company's expectations,
beliefs and projections are expressed in good faith and are believed by the
Company to have a reasonable basis, including without limitation, management's
examination of historical operating trends, data contained in the Company's
records and other data available from third parties, but there can be no
assurance that management's expectations, beliefs and projections will result or
be achieved or accomplished. The Company's forward-looking statements apply only
as of the date made. The Company undertakes no obligation to publicly update or
revise forward-looking statements which may be made to reflect events or
circumstances after the date made or to reflect the occurrence of unanticipated
events.

        There are a number of risks and uncertainties that could cause actual
results to differ materially from those set forth in, contemplated by or
underlying the forward-looking statements contained in this report. In addition
to the other factors and matters discussed elsewhere in this report, the
following factors are among the factors that could cause actual results to
differ materially from the forward-looking statements. Any forward-looking
statements made by or on behalf of the Company should be considered in light of
these factors.

     Economic Factors and Fuel Price Fluctuations

        The availability and price of fuel, insurance costs, interest rates,
fluctuations in customers' business cycles and national and regional economic
conditions are economic factors over which the Company has little or no control.
Significant increases in fuel prices, interest rates or increases in insurance
costs, to the extent not offset by increases in freight rates, or disruptions in
fuel supply, would adversely affect the Company's results of operations. A
significant downturn in customers' businesses, temporary inventory imbalances
(resulting from a recession or otherwise), or decreased demand for LTL carrier
services could also have a materially adverse effect on the Company.


                                       19


<PAGE>   20
Availability of Employee Drivers and Independent Contractors

        The Company utilizes the services of both employee drivers and
independent contractors. Competition for employee drivers and independent
contractors is intense in the trucking industry, and the Company occasionally
experiences difficulty attracting or retaining enough qualified employee drivers
and independent contractors. There can be no assurance that the Company will not
be affected by a shortage of qualified employee drivers or independent
contractors in the future, which could result in temporary underutilization of
revenue equipment, difficulty in meeting shipper demands and increased
compensation levels. Prolonged difficulty in attracting or retaining qualified
employee drivers or independent contractors could have a materially adverse
effect on the Company's operations.

     Capital Requirements

        The trucking industry is very capital intensive. If in the future the
Company were unable to borrow sufficient funds, enter into acceptable operating
lease arrangements, or raise additional equity, the resulting capital shortage
would impair the Company's ability to acquire additional revenue equipment and
adversely affect the Company's growth and profitability.

     Claims Exposure and Insurance Costs

        Trucking companies, including the Company, face multiple claims for
personal injury and property damage relating to accidents, cargo damage and
workers' compensation. To the extent that the Company experiences a material
increase in the frequency or severity of accidents or workers' compensation
claims, or an unfavorable development on existing claims, the Company's
operating results and financial condition could be materially adversely
affected. Significant increases in the Company's claims and insurance costs, to
the extent not offset by rate increases, would reduce the Company's
profitability.

     Competition

        The trucking industry is highly competitive and fragmented. Competition
for freight transported by the Company is based primarily on service, efficiency
and on freight rates. The Company competes with regional, interregional and
national LTL carriers of varying sizes and, to a lesser extent with truckload
carriers, railroads and overnight delivery companies. Some of the Company's
competitors are divisions or subsidiaries of larger trucking companies. Many of
the Company's competitors have greater financial resources, more equipment and
greater freight capacity than the Company.

     Environmental Hazards

        The Company's operations are subject to various environmental laws and
regulations dealing with the transportation, storage, presence, use, disposal,
and handling of hazardous materials and hazardous wastes, discharge of
stormwater, and underground fuel storage tanks. The Company transports certain
commodities that are or may be deemed hazardous substances. The Company also
currently maintains above-ground and underground fuel storage tanks on several
of its properties. The Company is not aware of any fuel spills or hazardous
substance contamination on its properties that would have a material adverse
effect on the Company and the Company believes that its operations are in
material compliance with existing environmental laws and regulations. If,
however, the Company should be involved in a fuel spill, or a spill or other
accident involving hazardous substances, if any such substances were found on
the Company's properties, or if the Company were found to be in violation of
applicable laws and regulations, the Company could be responsible for clean-up
costs, property damage, and fines or other penalties, any one of which could
have a materially adverse effect on the Company.


                                       20


<PAGE>   21
Other Factors

        In addition to the factors described above, the Company may be impacted
by a number of other matters and uncertainties, including: (i) changes in demand
for LTL carrier services; (ii) potential legislation and regulatory changes;
(iii) changes in competitive conditions in the Company's service region; and
(iv) increases in the cost of compliance with regulations, including
environmental regulations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        The Company does not use financial instruments for trading purposes and
is not a party to any derivative financial instruments or derivative commodity
instruments. The Company is exposed to a variety of market risks, including the
effects of changes in interest rates and fuel prices. The Company's short-term
and long-term financing is generally at variable rates; however, these
obligations may be repaid or converted to a fixed rate at the Company's option.
For more information regarding the Company's debt obligations see Note F to the
Company's consolidated financial statements.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        Financial statements and supplementary data required by this Item 8 are
set forth at the pages indicated in Item 14(a) below.


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        The information to be included under the caption "Election of Directors"
in the Company's definitive proxy statement to be filed with the Commission
pursuant to Regulation 14A of the Exchange Act in connection with the 2000
Annual Meeting of Shareholders of the Company (the "Proxy Statement") is
incorporated herein by reference. In addition, reference is made to Item 10 in
Part I of this Report.

ITEM 11. EXECUTIVE COMPENSATION

        The information to be included under the caption "Executive
Compensation" in the Proxy Statement is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The information to be included under the caption "Present Beneficial
Ownership of Common Stock" in the Proxy Statement is incorporated herein by
reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        The information to be included under the caption "Executive
Compensation--Certain Relationships and Related Transactions" in the Proxy
Statement is incorporated herein by reference.


                                       21


<PAGE>   22
                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K


<TABLE>
<S>                                                                 <C>
(a)(1)        Consolidated Financial Statements

              Report of Independent Certified Public
              Accountants                                           F-1

              Consolidated Balance Sheets at December 31,
              1999 and 1998                                         F-2

              Consolidated Statements of Earnings for the
              years ended December 31, 1999, 1998 and 1997          F-4

              Consolidated Statement of Stockholders'
              Equity for the years ended December 31,
              1999, 1998 and 1997                                   F-5

              Consolidated Statements of Cash Flows for
              the years ended December 31, 1999, 1998 and
              1997                                                  F-6

              Notes to Consolidated Financial Statements            F-8

(a)(2)        Financial Statement Schedules

               Schedules are omitted because they are not
               required or are not applicable or the required
               information is shown in the financial statements
               or notes thereto
</TABLE>


(a)(3) The following exhibits are filed herewith or incorporated by reference:


<TABLE>
<CAPTION>
Exhibit
Number                          Exhibit
------                          -------
<S>            <C>
3.1            Articles of Incorporation of the Company (filed as Exhibit 3.1 to
               the Company's Registration Statement on Form S-1 (File No.
               333-37211) and incorporated herein by reference).

3.2            Bylaws of the Company (filed as Exhibit 3.2 to the Company's
               Registration Statement on Form S-1 (File No. 333-37211) and
               incorporated herein by reference).

10.1           Loan Agreement, dated November 25, 1998, between the Company,
               Motor Cargo and Zions First National Bank (filed as Exhibit 10.1
               to the Company's Annual Report for 1998 on Form 10-K (File No.
               333-37211) and incorporated herein by reference).

10.2           $20,000,000 Promissory Note, dated November 26, 1998, to the
               order of Zions First National Bank (filed as Exhibit 10.2 to the
               Company's Annual Report for 1998 on Form 10-K (File No.
               333-37211) and incorporated herein by reference).

10.3           1997 Stock Option Plan (filed as Exhibit 10.2 to the Company's
               Registration Statement on Form S-1 (File No. 333-37211) and
               incorporated herein by reference).1

10.4           Pension Plan of Employees of Motor Cargo and Trust Agreement
               (filed as Exhibit 10.3 to the Company's Registration Statement on
               Form S-1 (File No. 333-37211) and incorporated herein by
               reference).1

10.5           Motor Cargo Profit Sharing Plan (filed as Exhibit 10.4 to the
               Company's Registration Statement on Form S-1 (File No. 333-37211)
               and incorporated herein by reference).1
</TABLE>


                                       22


<PAGE>   23
<TABLE>
<S>            <C>
10.6           Restricted Stock Agreement, dated October 2, 1997, between the
               Company and Louis V. Holdener (filed as Exhibit 10.5 to the
               Company's Registration Statement on Form S-1 (File No. 333-37211)
               and incorporated herein by reference).1

10.7           Agreement to Purchase and Sell Leasehold Interest dated October
               2, 1990 between Leonard L. Gumport and Motor Cargo (filed as
               Exhibit 10.6 to the Company's Registration Statement on Form S-1
               (File No. 333-37211) and incorporated herein by reference).

10.8           Lease Agreement dated December 23, 1996 between Channing, Inc.
               and Motor Cargo (filed as Exhibit 10.7 to the Company's
               Registration Statement on Form S-1 (File No. 333-37211) and
               incorporated herein by reference).

10.9           Lease Agreement dated as of January 1, 1989 between Andrea
               Tacchino Company and Motor Cargo (filed as Exhibit 10.8 to the
               Company's Registration Statement on Form S-1 (File No. 333-37211)
               and incorporated herein by reference).

10.10          First Amendment to Lease dated March 1, 1990 between Andrea
               Tacchino Company and Motor Cargo (filed as Exhibit 10.9 to the
               Company's Registration Statement on Form S-1 (File No. 333-37211)
               and incorporated herein by reference).

10.11          Lease Agreement dated October 31, 1995 between Pete Aardema and
               Motor Cargo (filed as Exhibit 10.10 to the Company's Registration
               Statement on Form S-1 (File No. 333-37211) and incorporated
               herein by reference).

10.12          Lease Agreement dated September 29, 1995 among Colburn R.
               Thomason, Michael Tolladay, Kevin Tweed and Motor Cargo (filed as
               Exhibit 10.11 to the Company's Registration Statement on Form S-1
               (File No. 333-37211) and incorporated herein by reference).

10.13          Form of Salary Continuation Agreement (filed as Exhibit 10.12 to
               the Company's Registration Statement on Form S-1 (File No.
               333-37211) and incorporated herein by reference).1

10.14          Management Agreement between the Company and FHF Transportation,
               Inc. (filed as Exhibit 10.18 to the Company's Registration
               Statement on Form S-1 (file No. 333-37211 and incorporated herein
               by reference).

10.15          Master Truck Agreement between Motor Cargo, Reno, Nevada and
               Teamsters, Chauffeurs, Warehousemen & Helpers and Professional
               Clerical, Public and Miscellaneous Employees, Local Union No.
               533, affiliated with the International Brotherhood of Teamsters.*

10.16          Master Truck Agreement between Motor Cargo, Salt Lake City, Utah
               and the International Brotherhood of Teamsters, Chauffeurs,
               Warehousemen and Helpers of America, Local Union No. 222. *

11             Pro Forma Earnings Per Share Calculation*

21             Subsidiaries of the Company (filed as Exhibit 21 to the Company's
               Registration Statement on Form S-1 (file No. 333-37211 and
               incorporated herein by reference).

23             Consent of Grant Thornton LLP.*
</TABLE>


                                       23


<PAGE>   24
<TABLE>
<S>            <C>
27             Financial Data Schedule.*
</TABLE>


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

1       Management contracts and compensatory plans and arrangements identified
        pursuant to Item 14(a)(3) of Form 10-K.

*       Filed with this report.


(b)            Reports on Form 8-K

               Not Applicable.


                                       24


<PAGE>   25
                                   SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                 MOTOR CARGO INDUSTRIES, INC.



Date: March 23, 2000              By     /s/ Lynn H. Wheeler
                                    -----------------------------------------
                                    Lynn H. Wheeler
                                    Vice President and Chief Financial Officer

        Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.


<TABLE>
<S>                           <C>
Date: March 23, 2000          By     /s/ Harold R. Tate
                                ------------------------------------------
                              Harold R. Tate, Director and
                              Chairman of the Board


Date: March 23, 2000          By     /s/ Marshall L. Tate
                                ------------------------------------------
                              Marshall L. Tate, Director
                              (Principal Executive Officer)


Date: March 23, 2000          By     /s/ Lynn H. Wheeler
                                ------------------------------------------
                              Lynn H. Wheeler, Chief Financial Officer
                              (Principal Financial and Accounting
                              Officer)


Date: March 23, 2000          By     /s/ Marvin L. Friedland
                                ------------------------------------------
                              Marvin L. Friedland, Director


Date: March 23, 2000          By     /s/ Robert Anderson
                                ------------------------------------------
                              Robert Anderson, Director


Date: March 23, 2000          By     /s/ James Clayburn LaForce, Jr.
                                ------------------------------------------
                              James Clayburn La Force, Jr., Director
</TABLE>


                                       25


<PAGE>   26
                              REPORT OF INDEPENDENT
                          CERTIFIED PUBLIC ACCOUNTANTS



Board of Directors
Motor Cargo Industries, Inc. and Subsidiaries


We have audited the accompanying consolidated balance sheets of Motor Cargo
Industries, Inc. and Subsidiaries (the Company) as of December 31, 1999 and
1998, and the related consolidated statements of earnings, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Motor Cargo
Industries, Inc. and Subsidiaries as of December 31, 1999 and 1998, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 1999, in conformity
with generally accepted accounting principles.


                                                       /s/ Grant Thorton LLP


Salt Lake City, Utah
January 28, 2000


                                      F-1


<PAGE>   27
                  MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                  December 31,


                                     ASSETS


<TABLE>
<CAPTION>
                                                        1999             1998
                                                     -----------      -----------
<S>                                                  <C>              <C>
CURRENT ASSETS
   Cash and cash equivalents (Notes E and M)         $ 5,508,809      $ 7,514,654
   Receivables (Notes B and E)                        16,570,062       14,182,974
   Prepaid expenses                                    2,720,084        2,630,416
   Supplies inventory (Note E)                           568,430          459,711
   Deferred income taxes (Note G)                      1,723,000        1,365,000
   Income taxes receivable                                     -          622,648
                                                     -----------      -----------

         Total current assets                         27,090,385       26,775,403

PROPERTY AND EQUIPMENT, AT COST
  (Notes C, E, and F)                                 99,459,949       85,954,356

   Less accumulated depreciation
     and amortization                                 46,644,471       40,560,113
                                                     -----------      -----------

                                                      52,815,478       45,394,243


Other assets
   Deferred charges                                      606,250          426,461
   Unrecognized net pension obligation (Note H)           58,071           63,861
                                                     -----------      -----------

                                                         664,321          490,322
                                                     -----------      -----------

                                                     $80,570,184      $72,659,968
                                                     ===========      ===========
</TABLE>


        The accompanying notes are an integral part of these statements.


                                      F-2


<PAGE>   28
                  MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS - CONTINUED

                                  December 31,


                      LIABILITIES AND STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                                    1999             1998
                                                                -----------      -----------
<S>                                                             <C>              <C>
CURRENT LIABILITIES
   Current maturities of long-term obligations (Note F)         $   109,151      $    99,990
   Accounts payable                                               3,361,660        2,958,371
   Accrued liabilities (Note O)                                   6,323,095        6,300,430
   Accrued Claims (Note P)                                        1,727,391        1,382,085
   Income Taxes Payable                                             119,931                -
                                                                -----------      -----------
         Total current liabilities                               11,641,228       10,740,876

LONG-TERM OBLIGATIONS, less current
  maturities (Note F)                                             8,020,523        5,389,852

DEFERRED INCOME TAXES
  (Note G)                                                        7,267,000        7,255,000

COMMITMENTS AND CONTINGENCIES
  (Notes D, E, F, H, I, K, and L)                                         -                -

STOCKHOLDERS' EQUITY (Notes F, I and N)
   Preferred stock, no par value; Authorized -
     25,000,000 shares - none issued                                      -                -
   Common stock, no par value; Authorized -
     100,000,000 shares - issued and outstanding
     6,925,040 shares in 1999 and 6,987,820 shares in 1998       11,849,600       12,135,490
   Retained earnings                                             41,791,833       37,138,750
                                                                -----------      -----------
                                                                 53,641,433       49,274,240
                                                                -----------      -----------
                                                                $80,570,184      $72,659,968
                                                                ===========      ===========
</TABLE>


        The accompanying notes are an integral part of these statements.


                                      F-3


<PAGE>   29
                  MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF EARNINGS

                             Year ended December 31,


<TABLE>
<CAPTION>
                                                       1999                1998                1997
                                                   -------------       -------------       -------------
<S>                                                <C>                 <C>                 <C>
Operating revenues                                 $ 125,309,633       $ 114,724,798       $ 105,381,447
                                                   -------------       -------------       -------------
Operating expenses
   Salaries, wages and benefits                       59,502,114          51,746,567          45,247,186
   Operating supplies and expenses                    20,341,773          15,973,557          15,706,124
   Purchased transportation                           15,580,049          17,975,515          15,388,965
   Operating taxes and licenses                        4,730,417           3,884,923           3,519,313
   Insurance and claims                                3,826,130           3,651,217           4,477,747
   Depreciation and amortization                       8,822,260           7,927,663           6,997,498
   Communications and utilities                        2,022,974           1,923,707           1,896,379
   Building rents                                      3,043,136           2,365,006           1,744,877
                                                   -------------       -------------       -------------
         Total operating expenses                    117,868,853         105,448,155          94,978,089
                                                   -------------       -------------       -------------
         Operating income                              7,440,780           9,276,643          10,403,358
Other income (expense)
   Interest expense                                     (138,810)           (153,673)         (1,050,791)
   Other, net                                            351,113             325,891             220,909
                                                   -------------       -------------       -------------
                                                         212,303             172,218            (829,882)
                                                   -------------       -------------       -------------
         Earnings before income taxes                  7,653,083           9,448,861           9,573,476
Income taxes (Note G)                                  3,000,000           3,660,000           3,805,000
                                                   -------------       -------------       -------------

         Net earnings                              $   4,653,083       $   5,788,861       $   5,768,476
                                                   =============       =============       =============
Pro forma (Note All)

   Earnings before income taxes                                                            $   9,573,476

   Income taxes                                                                                3,952,000
                                                                                           -------------

   Net earnings                                                                            $   5,621,476
                                                                                           =============

Earnings per common share - basic                  $        0.67       $        0.83       $        0.95
                                                   =============       =============       =============

Weighted-average shares outstanding - basic            6,938,365           6,987,820           5,938,602
                                                   =============       =============       =============

Earnings per common share - diluted                $        0.67       $        0.83       $        0.95
                                                   =============       =============       =============

Weighted-average shares outstanding - diluted          6,940,656           6,991,820           5,938,602
                                                   =============       =============       =============
</TABLE>


        The accompanying notes are an integral part of these statements.


                                      F-4


<PAGE>   30
                  MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                  Years ended December 31, 1999, 1998 and 1997


<TABLE>
<CAPTION>
                                       Preferred Stock                 Common Stock
                                ----------------------------    -----------------------------
                                   Number                          Number
                                     of                              of                             Retained
                                   Shares          Amount          Shares           Amount          earnings          Total
                                ------------    ------------    ------------     ------------     ------------     ------------
<S>                             <C>             <C>             <C>              <C>              <C>              <C>
Balance, January 1, 1997                  --    $         --       5,820,000     $      1,000     $ 26,039,414     $ 26,040,414

Distributions to LLC members              --              --              --               --         (458,001)        (458,001)

Public sale of common stock               --              --       1,150,000       12,100,298               --       12,100,298

Issuance of 20,000 shares
  pursuant to Restricted Stock
  Agreement (Note N)                      --              --          20,000               --               --               --

Net earnings for the year                 --              --              --               --        5,768,476        5,768,476
                                ------------    ------------    ------------     ------------     ------------     ------------

Balance, December 31, 1997                --              --       6,990,000       12,101,298       31,349,889       43,451,187

Vesting of shares pursuant to
  Restricted Stock Agreement
  (Note N)                                --              --          (2,180)          34,192               --           34,192

Net earnings for the year                 --              --              --               --        5,788,861        5,788,861
                                ------------    ------------    ------------     ------------     ------------     ------------

Balance, December 31, 1998                --              --       6,987,820       12,135,490       37,138,750       49,274,240

Vesting of shares pursuant to
  Restricted Stock Agreement
  (Note N)                                --              --          (2,180)          22,560               --           22,560

Repurchase of shares (Note N)             --              --         (60,600)        (308,450)              --         (308,450)

Net earnings for the year                 --              --              --               --        4,653,083        4,653,083
                                ------------    ------------    ------------     ------------     ------------     ------------

Balance, December 31, 1999                --    $         --       6,925,040     $ 11,849,600     $ 41,791,833     $ 53,641,433
                                ============    ============    ============     ============     ============     ============
</TABLE>


         The accompanying notes are an integral part of this statement.


                                      F-5


<PAGE>   31
                  MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                             Year ended December 31,


<TABLE>
<CAPTION>
                                                               1999               1998               1997
                                                          ------------       ------------       ------------
<S>                                                       <C>                <C>                <C>
Increase (decrease) in cash and cash equivalents
  Cash flows from operating activities
      Net earnings                                        $  4,653,083       $  5,788,861       $  5,768,476
                                                          ------------       ------------       ------------
      Adjustments to reconcile net earnings
        to net cash provided by operating activities
         Depreciation and amortization                       8,822,260          7,927,663          6,997,498
         Provision for losses on receivables                   282,100            217,500            220,000
         Loss (gain) on disposition of
           property and equipment                             (241,084)          (103,110)          (156,914)
         Amortization of unrecognized
           pension obligation (benefit)                          5,790              5,790              5,790
         Charge associated with stock
           issuance to an officer                               40,000             60,625                 --
         Deferred income taxes                                (346,000)           942,000            800,971
         Changes in assets and liabilities
           Receivables                                      (2,669,188)        (1,228,754)        (2,633,264)
           Prepaid expenses                                    (89,668)          (220,892)          (323,335)
           Supplies inventory                                 (108,719)            43,787           (164,668)
           Income taxes receivable/payable                     742,579             60,385           (516,050)
           Other assets                                       (179,789)           (52,044)            (6,862)
           Accounts payable                                    403,289            939,194          1,142,106
           Accrued liabilities and claims                      350,531         (1,831,874)         1,457,923
                                                          ------------       ------------       ------------

               Total adjustments                             7,012,101          6,760,270          6,823,195
                                                          ------------       ------------       ------------

               Net cash provided by
                 operating activities                       11,665,184         12,549,131         12,591,671
                                                          ------------       ------------       ------------

  Cash flows from investing activities
   Purchase of property and equipment                      (16,764,220)       (13,720,140)        (7,935,965)
   Proceeds from disposition of property
     and equipment                                             761,809          1,160,558            630,080
                                                          ------------       ------------       ------------

               Net cash used in
                 investing activities                      (16,002,411)       (12,559,582)        (7,305,885)
                                                          ------------       ------------       ------------
</TABLE>


                                   (Continued)


                                      F-6


<PAGE>   32
                  MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

                             Year ended December 31,


<TABLE>
<CAPTION>
                                                               1999               1998               1997
                                                          ------------       ------------       ------------
<S>                                                       <C>                <C>                <C>
Cash flows from financing activities
   Distributions to LLC members                                     --                 --           (458,001)
   Proceeds from public sale of common stock                        --                 --         12,100,298
   Repurchase of common stock                                 (308,450)                --                 --
   Proceeds from issuance of long-term
     obligations                                             2,742,822                 --         48,385,000
   Principal payments on long-term
     obligations                                              (102,990)        (1,091,597)       (65,468,268)
                                                          ------------       ------------       ------------

               Net cash provided by (used in)
                 financing activities                        2,331,382         (1,091,597)        (5,440,971)
                                                          ------------       ------------       ------------

               Net decrease in
                 cash and cash equivalents                  (2,005,845)        (1,102,048)          (155,185)

Cash and cash equivalents at beginning of year               7,514,654          8,616,702          8,771,887
                                                          ------------       ------------       ------------
Cash and cash equivalents at end of year                  $  5,508,809       $  7,514,654       $  8,616,702
                                                          ============       ============       ============


Supplemental cash flow information

Cash paid during the year for
   Interest                                               $    137,953       $    154,751       $  1,102,819
   Income taxes                                              2,593,128          2,537,933          2,811,000
</TABLE>


Noncash investing and financing activities

During 1999, in connection with the shares issued per the restricted stock
agreement, 2,180 shares valued at $17,440 were withheld by the Company as tax
withholdings.

During 1998, in connection with the shares issued per the restricted stock
agreement, 2,180 shares valued at $26,433 were withheld by the Company as tax
withholdings.


        The accompanying notes are an integral part of these statements.


                                      F-7


<PAGE>   33
                  MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 1999, 1998 and 1997


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        A summary of significant accounting policies consistently applied in the
        preparation of the accompanying consolidated financial statements
        follows.

        1. Financial statement presentation

        In preparing the Company's financial statements, in accordance with the
        generally accepted accounting principles, management is required to make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities, the disclosure of contingent assets and liabilities at the
        date of the financial statements, and the reported amounts of revenues
        and expenses during the reporting period. Actual results could differ
        significantly from those estimates. Significant estimates include
        accrued claims and allowance for doubtful accounts.

        2. Principles of consolidation

        The consolidated financial statements include the accounts of Motor
        Cargo Industries, Inc. (MCI) and its wholly-owned subsidiary, Motor
        Cargo and its wholly-owned subsidiaries, MC Leasing, Inc., MC
        Distribution Services, Inc., Ute Trucking and Leasing, LLC (Ute) and
        ICC, Inc. All significant intercompany accounts and transactions have
        been eliminated.

        3. Business activity

        The Company is a regional less-than-truckload carrier which provides
        transportation and logistics services to shippers within its core
        service region.

        4. Cash equivalents

        The Company considers all highly liquid debt instruments with a maturity
        of three months or less when purchased to be cash equivalents.

        5. Supplies inventory

        Supplies inventory consists primarily of fuel and equipment parts and is
        stated at the lower of cost (first-in, first-out method) or market.


                                      F-8


<PAGE>   34
                  MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 1999, 1998 and 1997


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

        6. Depreciation and amortization

        Depreciation of property and equipment is provided on the straight-line
        method over the estimated useful lives of the assets. Accelerated
        methods of depreciation of property and equipment are used for income
        tax purposes.

        Leasehold improvements are amortized over the lesser of the useful life
        of the asset or term of the lease.

        Maintenance, repairs, and renewals which neither materially add to the
        value of the property nor appreciably prolong its life are charged to
        expense as incurred. Gains or losses on disposition of property and
        equipment are included in earnings.


        7. Income taxes

        The Company utilizes the liability method of accounting for income
        taxes. Under the liability method, deferred income tax assets and
        liabilities are provided based on the difference between the financial
        statement and tax bases of assets and liabilities as measured by the
        currently enacted tax rates in effect for the years in which these
        differences are expected to reverse. Deferred tax expense or benefit is
        the result of changes in deferred tax assets and liabilities.

        8. Insurance coverage and accrued claims

        The Company is self-insured for health costs, cargo damage claims, and
        automobile and general liability claims up to $70,000, $100,000, and
        $250,000 respectively, per single occurrence. The Company also maintains
        workers' compensation insurance, with a deductible of $250,000 per
        occurrence in all states except Washington which has no deductible.
        Liabilities in excess of the deductibles are assumed by insurance
        companies up to applicable policy limits.

        The Company estimates and accrues a liability for its share of final
        settlements using all available information including the services of a
        third-party insurance risk claims administrator to assist in
        establishing reserve levels for each occurrence based on the facts and
        circumstances of the incident coupled with the Company's past history of
        such claims. The Company accrues for workers' compensation and
        automobile liabilities when reported, usually the same day as the
        occurrence. Additionally, the Company accrues an estimated liability for
        incurred but not reported claims. Expense depends upon actual loss
        experience


                                      F-9


<PAGE>   35
                  MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 1999, 1998 and 1997


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED


        and changes in estimates of settlement amounts for open claims which
        have not been fully resolved. The Company provides for adverse loss
        developments in the period when new information becomes available.

        9. Revenue recognition

        Freight charges are generally recognized as revenue in the period
        relative to the average transit time for that period. Expenses
        associated with the operating revenue are recognized when incurred.

        10. Prepaid tires

        The Company capitalizes tires purchased with new equipment and
        depreciates them over the estimated useful life of the equipment (5 - 10
        years). Replacement tires are expensed upon placement into service.

        11. Pro forma financial information (unaudited)

        Effective August 28, 1997, MCI acquired the membership interests of Ute
        (Note N). A limited liability company passes through to its members
        essentially all taxable earnings and losses and pays no tax at the
        company level. Accordingly, for comparative purposes, a pro forma
        provision for income taxes using an effective income tax rate of 38
        percent has been determined assuming Ute had been taxed as a C
        Corporation for 1997.

        12. Earnings per share

        Basic earnings per common share are based upon the weighted-average
        number of common shares outstanding during each period presented.
        Diluted earnings per common share are based on shares outstanding
        (computed as under basic EPS) and dilutive potential common shares.
        Potential common shares include the options to acquire 400,000 and
        291,500 shares of common stock for 1999 and 1998, respectively.

        Pro forma basic and diluted earnings per share for 1997 are calculated
        using pro forma net earnings.


                                      F-10


<PAGE>   36
                  MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 1999, 1998 and 1997


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

        13. Fair value of financial instruments

        The fair value of the Company's cash and cash equivalents, receivables,
        accounts payable and accrued liabilities approximate carrying value due
        to the short-term maturity of the instruments. The fair value of
        long-term obligations approximate carrying value based on their
        effective interest rates compared to current market prices.

        14. Certain reclassifications

        Certain nonmaterial reclassifications have been made to the 1998 and
        1997 financial statements to conform to the 1999 presentation.


                                      F-11


<PAGE>   37
                  MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 1999, 1998 and 1997



NOTE B - RECEIVABLES

        Receivables consist of the following:


<TABLE>
<CAPTION>
                                              December 31,
                                     -------------------------------
                                         1999               1998
                                     ------------       ------------
<S>                                  <C>                <C>
Trade receivables                    $ 17,004,970       $ 14,570,942
Other receivables                         210,707            253,296
                                     ------------       ------------
                                       17,215,677         14,824,238
Allowance for doubtful accounts          (645,615)          (641,264)
                                     ------------       ------------
                                     $ 16,570,062       $ 14,182,974
                                     ============       ============
</TABLE>


        The history of the allowance for doubtful accounts is as follows:


<TABLE>
<CAPTION>
                                  1999            1998            1997
                                ---------       ---------       ---------
<S>                             <C>             <C>             <C>
Balance, beginning of year      $ 641,264       $ 572,801       $ 505,794
Provisions for losses             282,100         217,500         220,000
Write-offs, net                  (277,749)       (149,037)       (152,993)
                                ---------       ---------       ---------

Balance, end of year            $ 645,615       $ 641,264       $ 572,801
                                =========       =========       =========
</TABLE>


NOTE C - PROPERTY AND EQUIPMENT

        Cost of property and equipment and estimated useful lives are as
        follows:


<TABLE>
<CAPTION>
                                            December 31,
                                   ----------------------------
                                       1999             1998            Years
                                   -----------      -----------      -------------
<S>                                <C>              <C>              <C>
Land                               $ 7,130,385      $ 5,155,289           --
Buildings                           18,492,100        9,751,496        20-45
Revenue equipment                   56,850,948       53,379,665         5-10
Service cars and equipment             697,909          620,279         3-10
Shop and garage equipment              264,075          153,350         3-10
Office furniture and fixtures        2,670,329        2,301,104         3-10
Other property and equipment         9,904,137        8,151,580         3-10
Leasehold improvements               3,450,066        2,375,771      Life of lease
Construction in progress                    --        4,065,822          --
                                   -----------      -----------
                                   $99,459,949      $85,954,356
                                   ===========      ===========
</TABLE>


                                      F-12


<PAGE>   38
                  MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 1999, 1998 and 1997


NOTE D - LEASES

        The Company leases buildings and revenue equipment under operating lease
        agreements. The following is a schedule of future minimum lease payments
        under operating leases:


<TABLE>
<CAPTION>
                                                                             Total
                                         Buildings        Equipment          leases
                                        -----------      -----------      -----------
<S>                                     <C>              <C>              <C>
Year ending December 31,
   2000                                 $ 2,816,015      $   988,206      $ 3,804,221
   2001                                   1,798,869          941,097        2,739,966
   2002                                   1,176,224          756,661        1,932,885
   2003                                   1,115,374          738,049        1,853,423
   2004                                   1,051,680          441,930        1,493,610
Thereafter                                6,550,824          712,160        7,262,984
                                        -----------      -----------      -----------
Total minimum lease payments            $14,508,986      $ 4,578,103      $19,087,089
                                        ===========      ===========      ===========
</TABLE>


        The leases generally provide that property taxes, insurance, and
        maintenance expenses are obligations of the Company. It is expected that
        in the normal course of business, operating leases that expire will be
        renewed or replaced by leases on other properties. The total rent
        expense for the years ended December 31, 1999, 1998, and 1997, was
        approximately $3,043,000, $2,365,000 and $1,744,000, respectively.


NOTE E - REVOLVING BANK LOAN

        The Company has a revolving bank loan. Under the loan agreement,
        borrowings are limited to the lesser of 70 percent of allowable trade
        receivables, or $5,000,000. Any outstanding amounts accrue interest at
        .25 percentage points below the lending institution's prime rate, and is
        payable monthly. No principal payments are required until maturity
        (April 2001) as long as the loan does not exceed the required limits.
        The agreement is collateralized by cash and cash equivalents,
        receivables, supplies inventory, and all documents, instruments, and
        chattel paper now owned or hereafter acquired by the Company. At
        December 31, 1999 and 1998, there were no draws against the loan.

        The Company also has a line of credit with a limit of $20,000,000 as of
        December 31, 1999. This line is collateralized by revenue equipment. As
        of December 31, 1999, there was $6,739,822 drawn against the line (Note
        F).


                                      F-13


<PAGE>   39
                  MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 1999, 1998 and 1997


NOTE F - LONG-TERM OBLIGATIONS

        Long-term obligations consist of the following:


<TABLE>
<CAPTION>
                                                                       December 31,
                                                              ------------------------------
                                                                  1999               1998
                                                              ------------      ------------
<S>                                                           <C>               <C>
Prime less .25% (8.25% at December 31, 1999) note
  payable on a line of credit (up to $20,000,000)
  to a bank, due in 2001, interest payments
  due monthly and unpaid balance of principal due in
  2001, collateralized by revenue equipment (Note E)          $  6,739,822      $  4,000,000

8.75-8.85% notes payable to a corporation, due in 2003,
  payable in monthly installments of $18,964, including
  interest, balloon payment of $971,258 due at maturity,
  collateralized by real property                                1,389,852         1,489,842
                                                              ------------      ------------

                                                                 8,129,674         5,489,842

Less current maturities                                            109,151            99,990
                                                              ------------      ------------

                                                              $  8,020,523      $  5,389,852
                                                              ============      ============
</TABLE>


        Maturities of long-term obligations are as follows:


<TABLE>
<S>                                                  <C>
Year ending December 31,
   2000                                              $  109,151
   2001                                               6,858,974
   2002                                                 130,069
   2003                                               1,031,480
   Thereafter                                                 -
                                                     ----------
                                                     $8,129,674
                                                     ==========
</TABLE>


        The line of credit agreements contain various restrictive covenants
        including provisions relating to the maintenance of net worth, earnings
        to debt ratio, and liability insurance coverage. As of December 31,
        1999, the Company was in compliance with all covenants under the line of
        credit agreements.


                                      F-14


<PAGE>   40
                  MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 1999, 1998 and 1997


NOTE G - INCOME TAXES

        Income tax expense consists of the following:


<TABLE>
<CAPTION>
                                 December 31,
                ----------------------------------------------
                    1999              1998             1997
                -----------       -----------      -----------
<S>             <C>               <C>              <C>
Current
   Federal      $ 2,825,541       $ 2,280,862      $ 2,507,112
   State            520,459           437,138          496,917
                -----------       -----------      -----------
                  3,346,000         2,718,000        3,004,029
                -----------       -----------      -----------
Deferred
   Federal         (287,744)          781,860          664,806
   State            (58,256)          160,140          136,165
                -----------       -----------      -----------
                   (346,000)          942,000          800,971
                -----------       -----------      -----------
                $ 3,000,000       $ 3,660,000      $ 3,805,000
                ===========       ===========      ===========
</TABLE>


        The income tax provision reconciled to the tax computed at the federal
        statutory rate of 34 percent is as follows:


<TABLE>
<CAPTION>
                                                            December 31,
                                            ---------------------------------------------
                                               1999             1998             1997
                                            -----------      -----------      -----------
<S>                                         <C>              <C>              <C>
Federal income taxes at statutory rate      $ 2,602,000      $ 3,212,000      $ 3,255,000
State income taxes, net of federal tax
  benefit                                       332,000          392,000          402,000
One time charge attributed to Ute (1)                --               --          238,000
Income taxes attributed to Ute                       --               --         (147,000)
All other                                        66,000           56,000           57,000
                                            -----------      -----------      -----------
                                            $ 3,000,000      $ 3,660,000      $ 3,805,000
                                            ===========      ===========      ===========
</TABLE>


        Deferred tax assets and liabilities consist of the following:


<TABLE>
<CAPTION>
                                               December 31,
                                        --------------------------
                                           1999            1998
                                        ----------      ----------
<S>                                     <C>             <C>
Current deferred tax assets
   Allowance for doubtful accounts      $  247,000      $  245,000
   Vacation accrual                        572,000         508,000
   Accrued claims                          609,000         477,000
   Deferred revenue                        295,000         135,000
                                        ----------      ----------

Net current deferred tax assets         $1,723,000      $1,365,000
                                        ==========      ==========
</TABLE>


                                      F-15


<PAGE>   41
                  MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 1999, 1998 and 1997

NOTE G - INCOME TAXES - CONTINUED


<TABLE>
<CAPTION>
                                                         December 31,
                                                 -----------------------------
                                                     1999              1998
                                                 -----------       -----------
<S>                                              <C>               <C>
Long-term deferred tax assets (liabilities)
   Unfunded pension                              $   (35,000)      $  (120,000)
   Accrued compensation                              111,000            88,000
   Equipment temporary differences                (7,343,000)       (7,223,000)
                                                 -----------       -----------

Net deferred tax liability                       $(7,267,000)      $(7,255,000)
                                                 ===========       ===========
</TABLE>


        (1)     Effective August 28, 1997, Ute was acquired by MCI and became a
                taxable entity (Note N). Previously, its earnings and losses
                were included in the personal tax returns of the members, and
                Ute did not record an income tax provision. Effective with the
                change in ownership, in accordance with Statement of Financial
                Accounting Standards (SFAS) No. 109, "Accounting for Income
                Taxes," income taxes will be provided for the tax effects of
                transactions reported in the financial statements and consist of
                taxes currently due plus deferred taxes related primarily to
                differences between the bases of property and equipment for
                financial and income tax reporting. The deferred tax liability
                represents the future tax return consequences of these
                differences, which will be taxable when the liabilities are
                settled. Accordingly, a deferred tax liability at the date of
                the change of approximately $238,000 was recorded through a one
                time noncash charge to the deferred tax provision.


NOTE H - PENSION AND PROFIT-SHARING PLANS

        1. Pension plan

        The Company participates in a defined benefit pension plan covering
        substantially all of its employees. The benefits are based on years of
        service and hours of service in the current year. A participant is fully
        vested after five years. Contributions are intended to provide not only
        for benefits attributed to service to date, but also for those expected
        benefits to be earned in the future. Information pertaining to the
        activity in the plan is as follows:


<TABLE>
<CAPTION>
                                                             Pension Benefits
                                             -----------------------------------------------
                                                 1999              1998              1997
                                             -----------       -----------       -----------
<S>                                          <C>               <C>               <C>
Change in benefit obligation
Benefit obligation at beginning of year      $ 5,449,623       $ 4,413,501       $ 4,111,673
Service cost                                     407,540           268,884           248,967
Interest cost                                    348,756           346,433           318,316
Actuarial loss (gain)                           (347,746)          586,993                --
Benefits paid                                   (168,281)         (166,188)         (265,455)
                                             -----------       -----------       -----------

Benefit obligation at end of year            $ 5,689,892       $ 5,449,623       $ 4,413,501
                                             ===========       ===========       ===========
</TABLE>


                                      F-16


<PAGE>   42
                  MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 1999, 1998 and 1997


NOTE H - PENSION AND PROFIT-SHARING PLANS - CONTINUED


<TABLE>
<CAPTION>
                                                             Pension Benefits
                                               -----------------------------------------------
                                                  1999              1998              1997
                                               -----------       -----------       -----------
<S>                                            <C>               <C>               <C>
Change in plan assets
Fair value of plan assets at beginning of
  year                                         $ 5,328,226       $ 4,929,225       $ 4,125,240
Actual return on plan assets                       837,636           440,189           769,440
Employer contribution                              239,000           125,000           300,000
Benefits paid                                     (168,281)         (166,188)         (265,455)
                                               -----------       -----------       -----------

Fair value of plan assets at end of year       $ 6,236,581       $ 5,328,226       $ 4,929,225
                                               ===========       ===========       ===========


Funded status                                  $   546,669       $  (121,397)      $    77,685
Unrecognized net actuarial gain                   (950,210)         (206,611)         (356,767)
Unrecognized net transition amount                  58,071            63,861            69,651
                                               -----------       -----------       -----------

Accrued pension cost                           $  (345,470)      $  (264,147)      $  (209,431)
                                               ===========       ===========       ===========
</TABLE>


The components of net periodic pension cost are as follows:


<TABLE>
<S>                                            <C>               <C>               <C>
Service cost                                   $   407,540       $   268,884       $   248,967
Interest cost                                      348,756           346,433           318,316
Expected return on plan assets                    (441,763)         (440,189)         (769,440)
Amortization of prior service cost                   5,790             4,588           420,617
                                               -----------       -----------       -----------

Net periodic pension cost                      $   320,323       $   179,716       $   218,460
                                               ===========       ===========       ===========

Weighted-average assumptions as of December 31,

Discount rate                                         7.50%             6.50%             8.00%
Expected return on plan assets                        8.00              6.50              8.00
Rate of compensation increase                           --                --                --
</TABLE>


                                      F-17


<PAGE>   43
                  MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 1999, 1998 and 1997


NOTE H - PENSION AND PROFIT-SHARING PLANS - CONTINUED

        2. 401(k) profit-sharing plan

        The Company has a qualified 401(k) profit-sharing plan (the Plan) for
        its employees. All employees who have completed one year of service with
        the Company are eligible to participate in the Plan. Under the Plan,
        employees are allowed to make contributions of between 1 percent and 15
        percent of their annual compensation. The Company matches certain
        percentages of employee contributions up to 6 percent, depending on the
        Company's operating ratio. All amounts contributed by a participant are
        fully vested at all times. A participant becomes vested over time and is
        fully vested in any Company matching contributions after 7 years of
        service. Expenses for Company contributions approximated $421,000,
        $475,000 and $525,000, for the years ended December 31, 1999, 1998 and
        1997, respectively.


NOTE I - STOCK OPTIONS

        In January of 1999, the Company's Board of Directors and stockholders
        adopted the Motor Cargo Industries, Inc. 1999 Stock Option Plan for
        non-employee Directors (the 1999 Option Plan). The Company reserved
        100,000 shares of common stock under the 1999 Option Plan. Accordingly,
        the Board of Directors has approved the granting of options under the
        Option Plan as follows:

        Non-employee Directors have been granted options to acquire 35,000
        shares of common stock. The options were granted at $7.50 per share,
        which was the market price of the Company's common shares on the day of
        grant. The options vest periodically through January 2003 and expire in
        2010.

        In October 1997, the Company's Board of Directors and stockholders
        adopted the Motor Cargo Industries, Inc. 1997 Stock Option Plan (the
        Option Plan). The Company reserved 500,000 shares of common stock under
        the Option Plan. Accordingly, the Board of Directors has approved the
        granting of options under the Option Plan as follows:

        Directors, officers and key employees have been granted options to
        acquire 365,000 shares of common stock. The options were granted at
        $7.50 per share, which was the market price of the Company's shares on
        the date granted. The options vest periodically through January of 2003.
        The options expire upon the earlier of an expiration date fixed by the
        committee responsible for the administering of the Plan or 10 years from
        the date of the grant.

        During 1999, all original stock option agreements under the 1997 option
        plan were canceled and new options were granted at an exercise price of
        $7.50 per share.


                                      F-18


<PAGE>   44
                  MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 1999, 1998 and 1997


NOTE I - STOCK OPTIONS - CONTINUED

        Fair market value of options granted

        The Company has adopted only the disclosure provisions of Financial
        Accounting Standard No. 123, "Accounting for Stock-Based Compensation"
        (FAS 123). Therefore, the Company accounts for stock based compensation
        under Accounting Principles Board Opinion No. 25, under which no
        significant compensation cost has been recognized. Had the compensation
        cost for the stock based compensation been determined based upon the
        fair value of the options at the grant date consistent with the
        methodology prescribed by FAS 123, the Company's net earnings and
        earnings per share would have been reduced to the following pro forma
        amounts:


<TABLE>
<CAPTION>
                                                1999               1998               1997
                                           -------------      -------------      -------------
<S>                                        <C>                <C>                <C>
Net earnings              As reported      $   4,653,083      $   5,788,861      $   5,621,476
                          Pro forma            4,326,056          5,337,141          5,580,655



Net earnings per common share - basic
   Net earnings                            $        0.67      $        0.83      $        0.95
   Pro forma                                        0.62               0.76               0.94



Net earnings per common share -
   assuming dilution
   Net earnings                            $        0.67      $        0.83      $        0.95
   Pro forma                                        0.62               0.76               0.94
</TABLE>


        The fair value of these options was estimated at the date of grant using
        the Black-Scholes American option-pricing model with the following
        weighted-average assumptions for 1999, 1998 and 1997: expected
        volatility of 79, 67 and 36 percent; risk-free interest rate of 5.03,
        5.65 and 6.66 percent; and expected life of 7.5 for each of the three
        years. The weighted-average fair value of options granted was $5.79,
        $8.90 and $6.44 in 1999, 1998 and 1997, respectively.

        Option pricing models require the input of highly sensitive assumptions,
        including the expected stock price volatility. Also, the Company's stock
        options have characteristics significantly different from those of
        traded options, and changes in the subjective input assumptions can
        materially affect the fair value estimate. Management believes the best
        input assumptions available were used to value the options and that the
        resulting option values are reasonable.


                                      F-19


<PAGE>   45
                  MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 1999, 1998 and 1997


NOTE I - STOCK OPTIONS - CONTINUED

        Fair market value of options granted- continued

        Changes to the Company's stock options are as follows:


<TABLE>
<CAPTION>
                                                            Weighted-average
                        Stock options     Exercise price     Exercise price
                        -------------    ----------------    --------------
<S>                     <C>              <C>                 <C>
Outstanding at
  January 1, 1997                  --    $            --      $         --
   Granted                    249,500              12.00             12.00
   Exercised                       --                 --                --
   Canceled/expired                --                 --                --
                         ------------
Outstanding at
  December 31, 1997           249,500    $         12.00      $      12.00
   Granted                     42,000              12.50             12.50
   Exercised                       --                 --                --
   Canceled/expired                --                 --                --
                         ------------
Outstanding at
  December 31, 1998           291,500     12.00 to 12.50             12.07
   Canceled/expired          (291,500)    12.00 to 12.50             12.07
   Granted                    400,000               7.50              7.50
   Exercised                       --                 --                --
                         ------------
Outstanding at
  December 31, 1999           400,000    $          7.50      $       7.50
                         ============    ===============      ============
Exercisable at
  December 31, 1999                --    $            --      $         --
                         ============    ===============      ============
</TABLE>


        Additional information about stock options outstanding and exercisable
        at December 31, 1999:

        Options outstanding


<TABLE>
<CAPTION>
                                                                        Weighted-average
                                 Number          Weighted-average    remaining contractual
       Exercise price          outstanding        exercise price         life (years)
       --------------          -----------       ----------------    ---------------------
<S>                            <C>               <C>                 <C>
          $7.50                   400,000             $7.50                  9.1
</TABLE>

        Options exercisable


<TABLE>
<CAPTION>
                                 Number            Weighted-average
       Exercise price          Exercisable          exercise price
       --------------          -----------         ----------------
<S>                            <C>                 <C>
        $     -                        -            $       -
</TABLE>


                                      F-20


<PAGE>   46
                  MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 1999, 1998 and 1997


NOTE J - RELATED PARTY TRANSACTIONS

        Related parties include the Company's officers, directors, stockholders
        and other entities under their common control.

        During the years ended December 31, 1997 the Company made payments for
        consulting services of $160,000 to an entity in which the Company's
        Chairman is a 50 percent owner. The agreement terminated April 1997 and
        was not renewed.

        Guaranteed payments to members of Ute were $140,000 for the year ended
        December 31, 1997.


NOTE K - DEFERRED COMPENSATION

        The Company has salary continuation agreements with certain key
        management employees. Under the agreements, the Company is obligated to
        provide for each such employee or his beneficiaries, during a period of
        not more than ten years after the employee's death, disability, or
        retirement, annual benefits ranging from $17,000 to $23,000. The Company
        has purchased universal life insurance policies on the lives of these
        participants. These insurance policies, which remain the sole property
        of the Company, are payable to the Company upon the death of the
        participant or maturity of the insurance policy.

        The Company separately contracts with the participants to pay stated
        benefits substantially equivalent to those received or available under
        the insurance policies upon retirement, death, or permanent disability.
        The expense incurred for the years ended December 31, 1999, 1998 and
        1997, was approximately $58,000, $54,000 and $36,000, respectively.


NOTE L - COMMITMENTS AND CONTINGENCIES

        1. Letters of credit

        At December 31, 1999, the Company had outstanding letters of credit
        totaling 1,280,000 ($1,530,000 at December 31, 1998). There were no
        draws against these letters of credit during any of the periods
        presented.


                                      F-21


<PAGE>   47
                  MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 1999, 1998 and 1997


NOTE L - COMMITMENTS AND CONTINGENCIES - CONTINUED

        2. Litigation

        The Company is involved in litigation arising in the normal course of
        business. It is not possible to state the ultimate liability, if any, in
        these matters. In the opinion of management, such litigation will have
        no material effect on the financial position and results of operations
        of the Company, in excess of amounts accrued.


NOTE M - CONCENTRATION OF CREDIT RISK

        The Company maintains cash and cash equivalents at several financial
        institutions. At December 31, 1999, uninsured amounts held in these
        financial institutions totaled approximately $6,270,000, (approximately
        $8,187,000 as of December 31, 1998).

NOTE N - CAPITAL TRANSACTIONS

        Effective August 28, 1997, the membership interests of Ute were acquired
        in exchange for 700,000 shares of common stock of the Company. Because
        of the common ownership of the two entities this transaction was
        accounted for in a manner similar to a pooling of interests. Ute is
        included in the consolidated financial statements for all periods
        presented. All revenue generated in Ute is from the renting and
        contracting, under an independent operating agreement, of revenue
        equipment to Motor Cargo. Therefore, Ute's related operations are
        eliminated in the consolidated financial statements.

        In October 1997, the Company's Board of Directors awarded an officer of
        the Company 20,000 shares of the Company's common stock. The award was
        made pursuant to a Restricted Stock Agreement which states that 20,000
        shares of the Company's common stock will be issued in the officer's
        name. The Company will hold the certificates for the shares, which will
        be released in four installments, each consisting of 25 percent of the
        shares issued based on the officer's continued employment. In the event
        the officer voluntarily ceases his employment with the Company or the
        Company terminates his employment for cause, the shares not previously
        released will be forfeited. Termination of employment by the Company
        without cause, or termination due to disability or death will result in
        the prompt release of some or all shares not previously released,
        depending upon the date of the relevant event. During 1999 and 1998,
        5,000 shares vested annually, resulting in compensation expense in the
        amount of $40,000 and $60,625, respectively. Of the 5,000 shares vested
        annually, 2,180 shares were simultaneously redeemed by the Company. The
        remaining 2,820 shares were released to the officer's name.

        During the first quarter of 1999, the Company announced a share
        repurchase program. The Board of Directors of the Company authorized the
        repurchase of up to 700,000 shares of outstanding common stock. As of
        December 31, 1999, a total of 60,600 shares had been repurchased by the
        Company for approximately $308,000.


                                      F-22


<PAGE>   48
                  MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 1999, 1998 and 1997


NOTE O - ACCRUED LIABILITIES

        Accrued liabilities consist of the following:


<TABLE>
<CAPTION>
                                           1999            1998
                                        ----------      ----------
<S>                                     <C>             <C>
Salaries, wages, and payroll taxes      $2,611,473      $2,573,792
Accrued employee benefits                  823,340         855,889
Vacation accrual                         1,498,511       1,333,469
All other                                1,389,771       1,537,380
                                        ----------      ----------

                                        $6,323,095      $6,300,430
                                        ==========      ==========
</TABLE>


NOTE P - ACCRUED CLAIMS


        The history of accrued claims is as follows:


<TABLE>
<CAPTION>
                                      1999              1998              1997
                                  -----------       -----------       -----------
<S>                               <C>               <C>               <C>
Balance at beginning of year      $ 1,382,085       $ 2,956,911       $ 2,028,631
Provision                           2,635,711         4,703,340         4,148,866
Claims                             (2,290,405)       (6,278,166)       (3,220,586)
                                  -----------       -----------       -----------

Balance at end of year            $ 1,727,391       $ 1,382,085       $ 2,956,911
                                  ===========       ===========       ===========
</TABLE>


                                      F-23


<PAGE>   49
                                INDEX TO EXHIBITS


<TABLE>
<CAPTION>
Exhibits
--------
<S>            <C>
3.1            Articles of Incorporation of the Company (filed as Exhibit 3.1 to
               the Company's Registration Statement on Form S-1 (File No.
               333-37211) and incorporated herein by reference).

3.2            Bylaws of the Company (filed as Exhibit 3.2 to the Company's
               Registration Statement on Form S-1 (File No. 333-37211) and
               incorporated herein by reference).

10.1           Loan Agreement, dated November 25, 1998, between the Company,
               Motor Cargo and Zions First National Bank (filed as Exhibit 10.1
               to the Company's Annual Report for 1998 on Form 10-K (File No.
               333-37211) and incorporated herein by reference).


10.2           $20,000,000 Promissory Note, dated November 26, 1998, to the
               order of Zions First National Bank (filed as Exhibit 10.2 to the
               Company's Annual Report for 1998 on Form 10-K (File No.
               333-37211) and incorporated herein by reference).


10.3           1997 Stock Option Plan (filed as Exhibit 10.2 to the Company's
               Registration Statement on Form S-1 (File No. 333-37211) and
               incorporated herein by reference).(1)

10.4           Pension Plan of Employees of Motor Cargo and Trust Agreement
               (filed as Exhibit 10.3 to the Company's Registration Statement on
               Form S-1 (File No. 333-37211) and incorporated herein by
               reference).(1)

10.5           Motor Cargo Profit Sharing Plan (filed as Exhibit 10.4 to the
               Company's Registration Statement on Form S-1 (Filed No.
               333-37211) and incorporated herein by reference).(1)

10.6           Restricted Stock Agreement, dated October 2, 1997, between the
               Company and Louis V. Holdener (filed as Exhibit 10.5 to the
               Company's Registration Statement on Form S-1 (File No. 333-37211)
               and incorporated herein by reference).(1)

10.7           Agreement to Purchase and Sell Leasehold Interest dated October
               2, 1990 between Leonard L. Gumport and Motor Cargo (filed as
               Exhibit 10.6 to the Company's Registration Statement on Form S-1
               (File No. 333-37211) and incorporated herein by reference).

10.8           Lease Agreement dated December 23, 1996 between Channing, Inc.
               and Motor Cargo (filed as Exhibit 10.7 to the Company's
               Registration Statement on Form S-1 (File No. 333-37211) and
               incorporated herein by reference).

10.9           Lease Agreement dated as of January 1, 1989 between Andrea
               Tacchino Company and Motor Cargo (filed as Exhibit 10.8 to the
               Company's Registration Statement on Form S-1 (File No. 333-37211)
               and incorporated herein by reference).

10.10          First Amendment to Lease dated March 1, 1990 between Andrea
               Tacchino Company and Motor Cargo (filed as Exhibit 10.9 to the
               Company's Registration Statement on Form S-1 (File No. 333-37211)
               and incorporated herein by reference).

10.11          Lease Agreement dated October 31, 1995 between Pete Aardema and
               Motor Cargo (filed as Exhibit 10.10 to the Company's Registration
               Statement on Form S-1 (File No. 333-37211) and incorporated
               herein by reference).
</TABLE>


<PAGE>   50
<TABLE>
<S>            <C>
10.12          Lease Agreement dated September 29, 1995 among Colburn R.
               Thomason, Michael Tolladay, Kevin Tweed and Motor Cargo (filed as
               Exhibit 10.11 to the Company's Registration Statement on Form S-1
               (File No. 333-37211) and incorporated herein by reference).

10.13          Form of Salary Continuation Agreement (filed as Exhibit 10.12 to
               the Company's Registration Statement on Form S-1 (File No.
               333-37211) and incorporated herein by reference).(1)

10.14          Management Agreement between the Company and FHF Transportation,
               Inc. (filed as Exhibit 10.18 to the Company's Registration
               Statement on Form S-1 (file No. 333-37211 and incorporated herein
               by reference).

10.15          Master Truck Agreement between Motor Cargo, Reno, Nevada and
               Teamsters, Chauffeurs, Warehousemen & Helpers and Professional
               Clerical, Public and Miscellaneous Employees, Local Union No.
               533, affiliated with the International Brotherhood of Teamsters.*

10.16          Master Truck Agreement between Motor Cargo, Salt Lake City, Utah
               and the International Brotherhood of Teamsters, Chauffeurs,
               Warehousemen and Helpers of America, Local Union No. 222.*

11             Pro Forma Earnings Per Share Calculation*

21             Subsidiaries of the Company (filed as Exhibit 21 to the Company's
               Registration Statement on Form S-1 (file No. 333-37211 and
               incorporated herein by reference).

23             Consent of Grant Thornton LLP.*

27             Financial Data Schedule.*
</TABLE>


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

(1)     Management contracts and compensatory plans and arrangements identified
        pursuant to Item 14(a)(3) of Form 10-K.

 *      Filed with this report.