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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

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


 For the Fiscal Year Ended September 30, 1999             Commission No. 0-27288

                           EAGLE USA AIRFREIGHT, INC.
             (Exact name of registrant as specified in its charter)

             TEXAS                                              76-0094895
  (State or other jurisdiction of                            (I.R.S. Employer
   incorporation or organization)                           Identification No.)

      15350 VICKERY DRIVE
         HOUSTON, TEXAS                                           77032
   (Principal executive offices)                                (Zip Code)

       Registrant's telephone number, including area code: (281) 618-3100

           Securities Registered Pursuant to Section 12(g) of the Act:

                          Common Stock, $.001 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.
           -----

At November 30, 1999, the aggregate market value of the registrant's Common
Stock held by non-affiliates of the registrant was approximately $565.0 million
based on the closing price of such stock on such date of $33.69.

At November 30, 1999, the number of shares outstanding of registrant's Common
Stock was 28,681,000 (net of 1,022,250 treasury shares).

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement for the Registrant's 2000 Annual
Meeting of Shareholders to be held on February 21, 2000 are incorporated by
reference in Part III of this Form 10-K. Such definitive proxy statement will be
filed with the Securities and Exchange Commission not later than 120 days
subsequent to September 30, 1999.
================================================================================

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                                TABLE OF CONTENTS

<TABLE>

<S>                                                                                                           <C>
PART I...........................................................................................................3
         ITEM 1.   Business......................................................................................3
         ITEM 2.   Properties...................................................................................10
         ITEM 3.   Legal Proceedings............................................................................12
         ITEM 4.   Submission of Matters to a Vote of Security Holders..........................................12
                   Executive Officers of the Registrant.........................................................12

PART II.........................................................................................................14
         ITEM 5.   Market for  Registrant's Common Stock and Related Shareholder Matters........................14
         ITEM 6.   Selected Financial Data......................................................................15
         ITEM 7.   Management's  Discussion  and  Analysis of Financial Condition and Results of Operations.....19
         ITEM 7A.  Quantitative and Qualitative Disclosures about Market Risk...................................25
         ITEM 8.   Financial Statements and Supplementary Data..................................................26
         ITEM 9.   Changes in and Disagreements with Accountants on Accounting and Financial  Disclosure........26
         ITEM 10.  Directors and Executive Officers of the Registrant...........................................26
         ITEM 11.  Executive Compensation.......................................................................26
         ITEM 12.  Security Ownership of Certain Beneficial Owners and Management...............................26
         ITEM 13.  Certain Relationships and Related Party Transactions.........................................26
         ITEM 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.............................26
</TABLE>



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                                     PART I

ITEM  1.   BUSINESS

         Eagle USA Airfreight, Inc. ("Eagle" and, together with its
subsidiaries, the "Company") is a leading provider of air freight forwarding and
other transportation and logistics services. Eagle has become one of the largest
air freight forwarders in the United States as measured by domestic forwarding
revenues largely as a result of its ability to work closely with its customers
to provide customized freight shipping services on a price-competitive basis.
The Company focuses on expedited deliveries. During fiscal 1999, over 62% of its
freight forwarding shipments were delivered on a next day or second day basis.

         Historically, Eagle has grown primarily through the internal expansion
of its air freight forwarding customer base and terminal network. Over the last
several years, the Company has expanded its freight forwarding terminal network
from 37 domestic terminals in September 1995 to 64 domestic and 14 foreign
terminals in September 1999. As Eagle has grown, it has significantly expanded
its services beyond air freight forwarding to include:

         o        local pickup and delivery,
         o        truck brokerage,
         o        customs brokerage,
         o        air charter services,
         o        ocean freight services,
         o        computer-based shipping systems,
         o        electronic data interchange,
         o        custom shipping reports,
         o        computerized tracking of shipments via the Internet,
         o        warehousing, and
         o        cargo assembly and protective packing and crating.

         As a result of its terminal network growth and increased services,
Eagle has expanded the scope of its potential customers and enhanced its ability
to compete for high-revenue national accounts. Because of the Company's
increasing shipment volumes, it has been able to command priority access to
freight capacity from air carriers at peak times and at discount rates. The
increasingly complex demands of freight transportation and the need for
cost-effective distribution networks have placed a premium on the services of
air freight forwarders, including Eagle, that can offer reliable service over a
broad network at competitive prices.

         The Company conducts its operations primarily under the name "EGL Eagle
Global Logistics." The Company expects to seek shareholder approval of a change
of its name to "EGL, Inc." at its February 2000 Annual Meeting. In connection
with this name change, the Company also plans to change its Nasdaq Stock Market
symbol to "EAGL."

INDUSTRY OVERVIEW

         As business requirements for efficient and cost-effective distribution
services have increased, so has the importance and complexity of effectively
managing freight transportation. Businesses increasingly strive to minimize
inventory levels, perform manufacturing and assembly operations in different
locations and distribute their products to numerous destinations. As a result,
companies frequently desire expedited or time-definite shipment services. Time-
definite shipments are required to be delivered at a specific, typically less
expedited time, which may result in lower rates than expedited shipments.

         Companies requiring some form of expedited or time-definite handling
generally have two principal alternatives to transport freight: they may use an
air freight forwarder or they may ship via a fully integrated carrier. An air
freight forwarder procures shipments from customers, makes arrangements for
transportation of the cargo on a carrier and may arrange both for pickup from
the shipper to the carrier and for delivery of the shipment from the carrier to
the recipient. Air freight forwarders often tailor the routing of each shipment
to meet the price and service requirements of the customer. Fully integrated
carriers provide pickup and delivery service, primarily through their own
captive fleets of trucks and aircraft. Because air freight forwarders select
from various transportation options in routing customer shipments, they are
often able to serve their customers less expensively and with greater
flexibility than integrated carriers. In addition to the high fixed expenses
associated with owning, operating and maintaining fleets of aircraft, trucks and
related equipment, integrated carriers often have significant restrictions on
delivery schedules and shipment weight, size and type. Air freight forwarders,
however, generally handle shipments of any size and can offer customized
shipping options, thus offering an effective alternative for shippers of
freight.

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         Most air freight forwarders, like the Company, focus on the shipment of
heavy cargo and do not directly compete for the majority of their business with
integrated shippers of primarily small parcels, including Federal Express
Corporation, United Parcel Service of America, Inc., Airborne Freight
Corporation, DHL Worldwide Express, Inc. and The United States Postal Service.
On occasion, these shippers serve as a source of cargo space to forwarders.
However, several integrated carriers, like Emery Air Freight Corporation and BAX
Global, Inc., focus on shipments of heavy cargo in competition with forwarders.
Additionally, most air freight forwarders do not generally compete with the
major commercial airlines, which to some extent depend on forwarders to procure
shipments and supply freight to fill cargo space on their scheduled flights.

         The domestic air freight forwarding industry is highly fragmented. Many
companies in the industry are able to meet only a portion of their customers'
required transportation service needs. Some national domestic air freight
forwarders rely on networks of terminals operated by franchisees or agents. The
Company believes that the development and operation of company-owned terminals
and staff under the supervision of the Company's management have enabled it to
maintain a greater degree of financial and operational control and service
quality than franchise-based networks.

         The Company believes that the most important competitive factors in its
industry are quality of service, including reliability, responsiveness,
expertise and convenience, scope of operations, information technology and
price.

DOMESTIC AIR FREIGHT FORWARDING SERVICES

         The Company's freight forwarding operations involve obtaining shipment
orders from customers, determining the best means to transport the shipment to
its destination and arranging and monitoring all aspects of the shipment.
Typically, the transportation for domestic shipments is provided by a commercial
air carrier. In addition, the Company prepares all required shipping documents
and delivers shipments to the transporting carrier. For much of its customer
traffic, the Company makes arrangements for three separate transportation
segments--pickup from the shipper to the Company's terminal in the origin city,
shipment by air or overland carrier and delivery from the Company's terminal in
the destination city to the recipient. Local transportation services are
performed either by independent cartage companies or, increasingly, by the
Company's local pickup and delivery operations. If delivery schedules permit,
the Company will typically use lower-cost, overland truck transportation
services, including those obtained through its truck brokerage operations. In
some cases, the shipments are consolidated at the Company's four ground
transportation hubs. As part of its routine services, the Company also provides
handling, packing and containerizing services, arranges for insurance and the
tracking of shipments and provides physical breakbulk. Breakbulk involves
receiving and breaking down consolidated air freight lots and arranging for
distribution of the individual shipments.

         The Company neither owns nor operates any aircraft and, consequently,
places no restrictions on delivery schedules or shipment size. It arranges for
transportation of its customers' shipments via commercial airlines and, to a
lesser extent, air cargo carriers. All of the Company's air shipments can be
accommodated by either narrow-body or wide-body aircraft. The Company selects
the carrier for a shipment on the basis of route, departure time, available
cargo capacity and cost. The Company has begun regularly scheduled dedicated
charters of eight cargo airplanes under short-term leases to service specific
transportation lanes. On occasion, the Company charters cargo aircraft for use
in other transportation lanes, as needed. The number of these dedicated charters
varies from time to time depending upon seasonality, freight volumes and other
factors.

         Due to the high volume of freight managed by the Company, it is able to
obtain discounted rates from airlines and is often able to reserve space at
times when available space is limited. As a result, the Company can provide
shipment options not directly available to its customers. Occasionally, the
Company is able to consolidate shipments to further reduce its costs of
transportation. The Company's rate schedule generally offers increasing
discounts for shipment options with later scheduled delivery times. The
Company's per-pound rates are also based on shipment weight and generally
decrease as the weight of the shipment increases.

         The Company offers its customers five major delivery schedule options:
(i) next flight - immediate pickup and placement of the shipment on the next
available flight; (ii) next day AM priority - shipments that take precedence for
delivery by the morning of the following day; (iii) next day PM - shipments
delivered by the afternoon of the following day; (iv) second day - shipments
delivered by the afternoon of the second following day; and (v) economy -
shipments typically delivered by the afternoon of the third - fifth day after
shipment. Relatively less time-sensitive shipments, or shipments for which
expedited delivery is not economical, are often shipped second day or economy.
These options enhance the Company's opportunity to achieve savings by the use of
truck transportation, the consolidation of shipments and the increased air cargo
options afforded by the additional time for shipment. The Company draws on its
logistics expertise to provide forwarding services that are tailored to meet the
needs of the customer and, in addition to regularly scheduled service, offer
customized schedules to do so. In addition, the Company's services are
customized to address each client's individual shipping requirements, generally
without restrictions on shipment weight, size or type. Once

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the customer's requirements for an individual shipment have been established,
the Company proactively manages the execution of the shipment to ensure the
satisfaction of these requirements.

         During the fiscal year ended September 30, 1999, the Company's
principal forwarding customers included shippers of computers and other
electronic and high-technology equipment, printed and publishing materials,
automotive and aerospace components, trade show exhibit materials,
telecommunications equipment, machinery and machine parts and apparel and
entertainment. During the fiscal year ended September 30, 1999, average shipment
weight was approximately 683 pounds. Although the Company imposes no size or
weight restrictions on shipments, it focuses on shipments of over 50 pounds. As
a result, it does not directly compete for most of its business with overnight
courier or small parcel companies, such as Federal Express Corporation and
United Parcel Service of America, Inc. Such companies typically use their own
captive airplane fleets, which on occasion serve as sources of cargo space for
the Company's forwarding operations.

         When acting as a forwarder, the Company is legally responsible to its
customer for the safe delivery of the customer's cargo to its ultimate
destination, subject to a contractual limitation on liability to the lesser of
$0.50 per pound or $50 for domestic flights and the greater of $50 or $20 per
kilogram ($9.07 per pound) for international flights. However, because an air
freight forwarder's relationship to an airline is that of a shipper to a
carrier, the airline generally has the same responsibility to the Company as the
Company has to its customers. Additionally, shippers may purchase insurance on
shipments. The Company may have sole carrier liability for a shipment before or
after delivery to the carrier, and in some other cases. The Company's claims
expenses have generally been limited, totaling $1,626,000 for fiscal 1999,
$1,706,000 for fiscal 1998 and $652,000 for fiscal 1997.

INTERNATIONAL AIR FREIGHT FORWARDING SERVICES

         The Company has continued to expand its international forwarding
operations by entering into agreements with independent cargo agents at
strategic worldwide locations. These agents provide breakbulk, pickup and
delivery, and customs brokerage services for cargo generated by the Company's
North American-based locations, as well as arranging for overseas sales of cargo
bound for North America. The Company is expanding its international service
offerings by providing ocean freight consolidation services and in some
locations, customs brokerage services. The Company completed two acquisitions in
fiscal 1998 that expanded its European and South American capabilities, and has
entered into agreements to acquire two commonly controlled freight forwarding
companies operating in Canada. Additionally, the Company commenced operations in
Hong Kong during September 1998 and in Argentina, Brazil and Peru during the
fourth quarter of 1999. The Company plans to continue to expand its overseas
presence through a variety of means that may include exclusive or nonexclusive
agency agreements, direct equity positions within selected overseas agencies and
strategic acquisitions. The Company is also emphasizing the marketing of its
international services throughout its North American network, particularly at
some of its largest locations, including Atlanta, Chicago, Dallas, Houston, Los
Angeles, Miami, New York and San Francisco. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

         To support its international operations, one of the Company's
subsidiaries is certified by the Federal Maritime Commission as a Non-Vessel
Owning Common Carrier to facilitate the handling of ocean shipments.
Additionally, one of the Company's subsidiaries received its customs brokerage
license from the U.S. Department of Treasury during fiscal 1998. The Company's
custom brokerage and ocean forwarding capabilities were enhanced by its
acquisition of a Miami-based operation in fiscal 1998.

         The Company generated $110.2 million in international revenues (defined
as shipments that cross a national border) in fiscal 1999, or an increase of
$63.8 million over fiscal 1998. The Company intends to utilize its relationships
with the major U.S.-based air carriers to secure competitive rate and space
agreements for its international cargo. In addition, the Company continues to
emphasize the use of both its truck brokerage and local delivery operations to
facilitate the pickup, delivery and line-haul for the domestic portion of
international freight shipments. The Company has developed a proprietary
international information management system that utilizes Internet-based
technology to facilitate its operations and communications network.

LOCAL DELIVERY SERVICES

         Through its subsidiary, the Company provides same-day local pickup and
delivery services, both for shipments for which it is acting as an air freight
forwarder as well as for third-party customers requiring pickup and delivery
within the same metropolitan area. The Company believes that these services
provide an important complement to its air freight forwarding services by
allowing for quality control over the critical pickup and delivery segments of
the transportation process as well as allowing for prompt, updated information
on the status of a customer's shipment at each step in the shipment process. The
Company focuses on providing local pickup and delivery services to those
accounts with a

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relatively high volume of business, which the Company believes provides a
greater potential for profitability than a broader base of small, infrequent
customers.

         During the last several years, the Company upgraded the information
system used by its local pickup and delivery operations. These improvements
included bar code and signature scanners that allow for enhanced tracking of
shipments and access by shippers of receipt signatures for proof of delivery
information. The Company is currently in the process of designing a new,
enhanced system of dispatching for its local pickup and delivery operations.

         The Company's local pickup and delivery operations commenced service in
Houston in 1989 and in recent years has rapidly expanded its operations. As of
September 30, 1999, local delivery services were offered in 67 of the 78 cities
in which the Company's terminals were located, with three of these locations
being established during fiscal 1999. The Company currently intends to initiate
local pickup and delivery services in approximately four to six additional
locations in fiscal 2000, although such plans may change based on several
factors. The Company currently offers local pickup and delivery services at
three locations without airfreight forwarding operations. On-demand pickup and
delivery services are available 24 hours a day, seven days a week. In most
locations, delivery drivers are independent contractors who operate their own
vehicles. The Company's Houston operations include a number of company-owned or
leased trailers, trucks and other ground equipment primarily to service specific
customer accounts.

         The Company's local pickup and delivery revenues were $155.8 million
during fiscal 1999 and $112.0 million during fiscal 1998. Approximately $105.7
million of these revenues during fiscal 1999 and $79.2 million of these revenues
during fiscal 1998 were attributable to the Company's air freight forwarding
operations and eliminated upon consolidation. The remaining pickup and delivery
revenues in those fiscal years were attributable to local delivery services for
third-party, non-forwarding business. A substantial majority of the total cost
of providing for local pickup and delivery of the Company's freight forwarding
shipments in fiscal 1999 and fiscal 1998 were attributable to Eagle's own local
pickup and delivery services.

TRUCK BROKERAGE

         The Company's truck brokerage operations provide logistical support to
its forwarding operations and, to a lesser extent, provide truckload service to
selected customers. The Company's truck brokerage services locate and secure
capacity when overland transportation is the most efficient means of meeting
customer delivery requirements, especially in cases of air freight customers
choosing the economy delivery option. The Company uses its internal truck
brokerage operations to meet delivery requirements without having to rely on
third-party truck brokerage services. Additionally, by providing for its own
truck brokerage, the Company has been able to achieve greater efficiencies and
utilize purchasing power over transportation providers. The Company's truck
brokerage operations do not own any trucks, but instead utilize carriers or
independent owner-operators of trucks and trailers on an as-needed basis. The
Company utilizes its relationships with a number of independent trucking
companies to obtain truck and trailer space. If space is not available through
these companies, the Company utilizes electronic bulletin boards to communicate
with independent truckers as to the Company's needs.

         As with local pickup and delivery services, the Company views its truck
brokerage services primarily as a means of maintaining quality control and
enhancing customer service of its core air freight forwarding business, as well
as a means of capturing a portion of profits that would otherwise be earned by
third parties. The Company may expand its truck brokerage operations selectively
in the future beyond providing support to its air freight operations, to
providing truck brokerage services to customers that do not utilize the
Company's air freight services.

INFORMATION SYSTEMS

         A primary component of the Company's business strategy is the continued
development of advanced information systems. The Company has invested
substantial management and financial resources in the development of its
information systems in an effort to provide accurate and timely information to
its management and customers. The Company believes that its systems have been
instrumental in the productivity of its personnel and the quality of its
operations and service, and have resulted in substantial reductions in paperwork
and expedited the entry, processing, retrieval and internal dissemination of
critical information. These systems also enable the Company to provide customers
with accurate and up-to-date information on the status of their shipments,
through whatever medium they request, which has become increasingly important.

         The Company has developed and continues to upgrade its information
systems. The Company's integrated information systems -- Worldport -- include
logistics information, management information and accounting systems. A central
computer located at the Company's headquarters in Houston, Texas is accessible
from computer terminals



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located at all of its North American facilities and from computer terminals
located at the facilities of many of the Company's customers through the use of
a toll-free dial-in program.

         The Worldport system provides a comprehensive source of information for
managing the logistics of the Company's sourcing and distribution activities.
Specifically, the Worldport system permits the Company to track the flow of a
particular shipment from pickup order through the transportation process to the
point of delivery. Through the system, the Company can also access daily
financial information for the entire Company, a particular terminal, a
particular division, customer or service or a given shipment. Worldport permits
on-line entry and retrieval of shipment, pricing, scheduling and tracking data
and integrates with the Company's management information and accounting systems.
Worldport's electronic data interchange also allows for importing of dispatch
information, proof of delivery information, status updates, electronic
invoicing, funds exchange and file exchange. Worldport also provides the
Company's sales force with margin information on customers and shipments,
thereby enhancing the Company's ability to bid aggressively for future
forwarding business and to avoid committing to unprofitable shipments. Worldport
can provide the Company's management and customers with reports customized to
meet their information requirements.

         The Company's customers and management can obtain shipment information
through Eagle Advisor -- the Company's extranet client/server application
software program. Customers can download this software to their personal
computers from the Company's Internet home page. Through Eagle Advisor,
customers can access the Company's password-protected Website. Worldport
transmits data every 30 minutes to this Website. The customer's shipment data is
then automatically transmitted to its personal computer via the Internet. Eagle
Advisor allows customers and management to track and trace shipments, obtain
imaged proof of delivery information and generate customized shipment reports.
Eagle's corporate Intranet "Eaglesnest" contains internal training portals to
key airline internet sites, sales and marketing information and other tools for
its offices. In addition to Eagle Advisor, the "Eagle TRAK" option on the
Company's Internet home page allows customers to obtain shipment tracing
information via the Internet.

         Eagle has focused its efforts on the development and enhancement of the
air export module of "Talon," its international operating system. Talon provides
enhanced features for international operations, including document production,
electronic customs filing of shipper export declarations via the United States
Customs Automated Export System, agent settlements, real-time global tracking
and tracing and multi-currency accounting. The air export module is in
production in the Company's North American international gateway terminals. The
Company has implemented its integrated operational and accounting systems into
selected foreign sites. Eagle has developed an ocean export, NVOCC operation and
air import module to complement the air export module.

         The expansion of the Company's local pickup and delivery service has
further improved its logistics system by enabling shipment data to be input
remotely from pickup through delivery. Eagle has implemented the use of remote
hand-held bar code and signature scanners for use by its pickup and delivery
operations. Eagle has implemented the use of hand-held bar code dock scanners in
its airfreight operations. Worldport is integrated with both of these scanners
to automatically apply the proof of delivery or shipment status information to
the system. This information is then made available to all on-line locations as
well as customers' dial-in facilities, allowing for enhanced tracking of
shipments and viewing by shippers of receipt signatures. Delivery receipts are
electronically imaged and centrally stored to increase both internal and
customer efficiencies.

         The Company's systems also include Eagle-Ship, which allows its
customers to automate their shipping processes and consolidate their shipping
systems. Eagle-Ship was developed by, and through January 2001 is licensed to
the Company from, Neopost/ASAM International, which is restricted from making
the system available to most other major air freight forwarders during that
time. For customers using Eagle-Ship, Eagle provides a dedicated personal
computer, printer and bar code scanner that allow the customer's shipping dock
personnel to process and weigh boxes, record the shipment, produce customized
box labels and print an Eagle house airway bill or bill of lading. Eagle-Ship
also provides customers with weight analysis, tariff reporting, assistance in
consolidation of like orders and price comparison among shipping options.

         Eagle-Ship enables the Company's customers to process shipments for
many carriers with one personal computer and to compare the cost and service
options of various carriers, consolidate Eagle-Ship label printing and generate
reports that profile the customer's shipping activity. Eagle-Ship is designed to
run shipping systems for UPS, Federal Express and other small parcel carriers
and can be customized to run the systems of up to 99 air and truck carriers. The
Company believes that Eagle-Ship gives it a competitive advantage among a
growing number of customers that are resistant to the proliferation of dedicated
shipper systems because of the cost, complexity and dock space required to
maintain a separate personal computer for each carrier. The Company also
believes that the use of Eagle- Ship should lead to increased use of its
services by helping to ensure that customers will allocate dock space to Eagle-
Ship rather than multiple systems from other carriers. Although Eagle-Ship does
provide customers with assistance in selecting competitors for its shipping
services, the Company believes that much of that information, like that relating
to Federal Express Corporation, is used in the delivery of documents and small
packages, which constitute a small


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portion of the Company's cargoes, and that, overall, Eagle-Ship will demonstrate
to customers the advantages of the Company's services in comparison to its more
direct competitors. The Company had installed approximately 126 Eagle- Ship
personal computers for approximately 85 of the Company's high-volume customers
as of September 1999. The Company believes that Eagle-Ship enhances its ability
to market to national accounts.

         For information regarding the Company's Year 2000 compliance program,
see Item 7 - "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Year 2000 Issues."

LOGISTICS SERVICES

         Many customers are increasingly demanding more than the simple movement
of freight from their transportation suppliers. To meet these needs, suppliers,
including Eagle, seek to customize their services, by, among other things,
providing information on the status of materials, components and finished goods
through the logistics pipeline and performance reports on and proof of delivery
for each shipment.

         The Company utilizes its logistics expertise to maximize the efficiency
and performance of its forwarding and other transportation services to its
customers. In addition, the Company provides transportation consulting services
and makes available its expertise and resources to assist customers in balancing
their transportation needs against budgetary constraints by developing logistics
plans for its customers. The Company staffs and manages the shipping department
of some of its customers that outsource their transportation function and may
seek to provide outsourcing services to other customers in the future. The
Company also provides other ancillary services, including electronic data
interchange, custom shipping reports, computerized tracking of shipments,
customs brokerage, air charters, warehousing, cargo assembly and protective
packing and crating. The Company has recently begun to expand its services to
include warehousing and distribution management.

         The Company has established Eagle Exhibitor Services, an internal group
that focuses on the special needs of exhibitors in the trade show industry. In
addition to air freight forwarding and charter services, this group provides
special exhibit handling, by-appointment delivery, caravan services and
short-term warehousing.

MARKETING AND CUSTOMERS

         The Company markets its services through an organization consisting of
approximately 210 full-time salespersons supported by the sales efforts of
senior management, its regional managers, its regional operation managers, its
terminal managers and its national services center. The Company plans to
emphasize the marketing of international services through its existing sales
force and through the expected addition of sales personnel at its international
terminals. Managers at each terminal are responsible for customer service and
coordinate the reporting of customers' requirements and expectations with the
regional managers and sales staff. In addition, the regional managers are
responsible for the financial performance of the stations in their region.
Company employees are available 24 hours a day to respond to customer inquiries.

         The Company has increased its emphasis on obtaining high-revenue
national accounts with multiple shipping locations. These accounts typically
impose numerous requirements on those competing for their freight business,
including electronic data interchange and proof of delivery capabilities, the
ability to generate customized shipping reports and a nationwide network of
terminals. These requirements often limit the competition for these accounts to
integrated carriers and a very small number of forwarders. The Company believes
that its recent growth and development has enabled it to more effectively
compete for and obtain these accounts.

         The Company's customers include large manufacturers and distributors of
computers and other electronic and high-technology equipment, printed and
publishing materials, automotive and aerospace components, trade show exhibit
materials, telecommunications equipment, machinery and machine parts and apparel
and entertainment. For the fiscal year ended September 30, 1999, no customer
accounted for greater than 10% of the Company's revenues. Adverse conditions in
the industries of the Company's customers could cause the Company to lose a
significant customer or experience a decrease in the shipment volume of its
customers. Either of these events could negatively impact the Company. The
Company expects that demand for the Company's services, and consequently its
results of operations, will continue to be sensitive to domestic and, as the
Company continues to expand internationally, global economic conditions and
other factors beyond its control.

EMPLOYEES

         The Company had approximately 2,600 full-time employees at September
30, 1999, including approximately 210 sales personnel. None of the Company's
employees are currently covered by a collective bargaining agreement.


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The Company has experienced no work stoppages and considers its relations with
its employees to be good. The Company also has contracts with approximately
1,600 independent owner/operators of local delivery services as of September 30,
1999. The independent owner/operators own, operate and maintain the vehicles
they use in their work for the Company and may employ qualified drivers of their
choice. Company-owned or leased vehicles are driven by approximately 234 Company
employees as of September 30, 1999.

         The Company pays its entire sales force and most of its operations
personnel what it believes is significantly more than the industry average. The
Company also offers a broad-based compensation plan to these employees. Sales
personnel are paid a gross commission on shipments sold. Operations personnel
and management are paid bonuses based on the profitability of their terminals,
as well as the overall profitability of the Company. To ensure quality control
and the profitability of accounts, terminal managers retain the final approval
on all accounts.

REGULATION

         The Company's air freight forwarding business is subject to regulation,
as an indirect air cargo carrier, under the Federal Aviation Act by the
Department of Transportation, although air freight forwarders are exempted from
most of the Act's requirements by the Economic Aviation Regulations. The
Company's foreign air freight forwarding operations are subject to similar
regulation by the regulatory authorities of the respective foreign
jurisdictions. The air freight forwarding 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 customers.

         The Company's delivery operations are subject to various state and
local regulations and, in many instances, require permits and licenses from
state authorities. In addition, some of the Company's delivery operations are
regulated by the Surface Transportation Board. These state and federal
authorities have broad power, including the power to approve specified mergers,
consolidations and acquisitions, and regulate the delivery of some types of
shipments and operations within particular geographic areas. The Surface
Transportation Board has the power to regulate motor carrier operations, approve
some rates, charges and accounting systems and require periodic financial
reporting. Interstate motor carrier operations are also subject to safety
requirements prescribed by the Federal Department of Transportation. In some
potential locations for the Company's delivery operations, state and local
permits and licenses may be difficult to obtain.

         The Company's truck brokerage operations subject it to regulation as a
property broker by the Surface Transportation Board, and the Company has
obtained a property broker license and surety bond. The Company's domestic
customs brokerage operations are subject to the licensing requirements of the
United States Department of the Treasury and are regulated by the United States
Customs Service. The Company has received its customs brokerage license from the
United States Customs Service and is currently applying for additional related
approvals. The Company's foreign customs brokerage agents are licensed in and
subject to the regulations of their respective countries.

         The Federal Maritime Commission (the "FMC") regulates the Company's
ocean forwarding operations. The FMC licenses ocean freight forwarders. Indirect
ocean carriers (Non-Vessel Operating Common Carriers) are subject to FMC
regulation, under the FMC tariff filing and surety bond requirements, and under
the Shipping Act of 1984, particularly those terms proscribing rebating
practices. Some portions of the Company's warehouse operations require (i)
registration under the Gambling Act of 1962 and a license or registration by the
U.S. Department of Justice, (ii) authorizations and bonds by the U.S. Treasury
Department, (iii) a license by the Bureau of Alcohol, Tobacco & Firearms of the
U.S. Treasury Department and (iv) approvals by the United States Customs
Service.

         In the United States, the Company is subject to federal, state and
local provisions relating to the discharge of materials into the environment or
otherwise for the protection of the environment. Similar laws apply in many
foreign jurisdictions in which the Company may operate in the future. Although
current operations have not been significantly affected by compliance with these
environmental laws, governments are becoming increasingly sensitive to
environmental issues, and the Company cannot predict what impact future
environmental regulations may have on its business. The Company does not
anticipate making any material capital expenditures for environmental control
purposes during the remainder of the current or succeeding fiscal years.

         The Company does not believe that costs of regulatory compliance have
had a material adverse impact on its operations to date. However, failure of the
Company to comply with the applicable regulations or to maintain required
permits or licenses could result in substantial fines or revocation of the
Company's operating permits or authorities. The Company cannot give assurance as
to the degree or cost of future regulations on the Company's business.



                                       9

<PAGE>   10

ITEM  2.   PROPERTIES

         The Company conducts its air freight forwarding operations through 78
terminals located on or near airports throughout the United States and in
Canada, Mexico, Latin America, Europe and Asia. Terminals are managed by a
station manager who is assisted by an operations manager. As of September 30,
1999, the Company's corporate office occupied approximately 135,279 square feet
of space in a facility located in Houston, Texas. The Company's 78 freight
forwarding terminal locations typically are located at or near major
metropolitan airports and each occupies approximately 1,000 to 160,000 square
feet of leased space and typically consist of offices, warehouse space, bays for
loading and unloading and facilities for packing. In addition, the Company has
locations that are limited to sales and administrative activities. Currently,
other than its Houston headquarters phase II facility and Newark terminal, all
of these properties are leased, although the Company may purchase or construct
facilities if it believes it can do so on a more attractive basis. Generally,
each terminal location lease is for a term of two to six years and generally
expires between fiscal 1999 and fiscal 2006. From time to time, the Company may
expand or relocate terminals to accommodate growth.

         The Company's freight forwarding and local pickup and delivery
terminals as of September 30, 1999 were:


<TABLE>
<CAPTION>
LOCATION AND YEAR FREIGHT                       LOCATION AND YEAR FREIGHT
FORWARDING SERVICES BEGAN                       FORWARDING SERVICES BEGAN
-------------------------                       -------------------------

<S>                                             <C>
UNITED STATES                                   Salt Lake City, Utah*-1996
Houston, Texas*-1984                            Honolulu, Hawaii-1996
Dallas, Texas*-1988                             Columbus, Ohio*-1996
St. Louis, Missouri*-1989                       Tulsa, Oklahoma*-1996
Atlanta, Georgia*-1989                          Omaha, Nebraska*-1996
Los Angeles, California*-1991                   Tucson, Arizona*-1996
San Francisco, California*-1991                 Laredo, Texas*-1996
Chicago, Illinois*-1992                         Anchorage, Alaska-1996
Newark, New Jersey*-1992                        Richmond, Virginia*-1996
Boston, Massachusetts*-1993                     South Bend, Indiana*-1997
Charlotte, North Carolina*-1993                 Harrisburg, Pennsylvania*-1997
Denver, Colorado*-1993                          Reno, Nevada*-1997
San Antonio, Texas*-1993                        Nashville, Tennessee*-1997
El Paso, Texas*-1993                            Little Rock, Arkansas*-1997
Orlando, Florida*-1993                          Wichita, Kansas*-1998 Tampa,
San Diego, California*-1993                     Florida*-1998
Seattle, Washington*-1993                       Norfolk, Virginia*-1998
Kansas City, Missouri*-1994                     Jackson, Mississippi*-1998
Oklahoma City, Oklahoma*-1994                   Birmingham, Alabama*-1998
Raleigh-Durham, North Carolina*-1994            Louisville, Kentucky*-1998
Austin, Texas*-1994                             Jacksonville, Florida*-1999
Greenville, South Carolina*-1994                Washington, D.C.*-1999
Cincinnati, Ohio*-1994                          Rochester, New York*-1999
Minneapolis, Minnesota*-1994                    Toledo, Ohio**
Memphis, Tennessee*-1994                        Longview, Texas**
Detroit, Michigan*-1994                         Beaumont, Texas**
Portland, Oregon*-1994
Baltimore, Maryland/Washington, D.C.*-1994      CANADA
Phoenix, Arizona*-1994                          Toronto, Ontario*-1996
Cleveland, Ohio*-1994                           Montreal, Quebec* -1998
Philadelphia, Pennsylvania*-1994                Vancouver, British Columbia-1999
McAllen, Texas*-1995
Albuquerque, New Mexico*-1995                   MEXICO
Las Vegas, Nevada*-1995                         Monterrey, Mexico-1997
Indianapolis, Indiana*-1995                     Guadalajara, Mexico-1997
Sacramento, California*-1995                    Mexico City, Mexico-1997
San Juan, Puerto Rico*-1995
Pittsburgh, Pennsylvania*-1995                  LATIN AMERICA
Milwaukee, Wisconsin*-1995                      Buenos Aires, Argentina-1999
New Orleans, Louisiana*-1996                    Sao Paulo, Brazil-1999
Miami, Florida*-1996                            Lima, Peru-1999
Hartford, Connecticut*-1996
</TABLE>


                                       10

<PAGE>   11

<TABLE>
<S>                                             <C>
EUROPE                                          ASIA
London Heathrow, England-1998                   Kowloon, Hong Kong-1998
Birmingham, England-1998
Manchester, England-1998
London-Gatwick, England-1998
</TABLE>









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

*  Includes local pickup and delivery operations.
** Local pickup and delivery operations only.



                                       11

<PAGE>   12



ITEM 3.   LEGAL PROCEEDINGS

         In December 1997, the U.S. Equal Employment Opportunity Commission
("EEOC") issued a Commissioner's Charge against the Company and some of its
subsidiaries (the "Commissioner's Charge") pursuant to Sections 706 and 707 of
Title VII of the Civil Rights Act of 1964, as amended ("Title VII"). In the
Commissioner's Charge, the EEOC charged the Company and some of its subsidiaries
with violations of Section 703 of Title VII, as amended, the Age Discrimination
in Employment Act of 1967, and the Equal Pay Act of 1963, resulting from (i)
engaging in unlawful discriminatory hiring, recruiting and promotion practices
and maintaining a hostile work environment, based on one or more of race,
national origin, age and gender, (ii) failures to investigate, (iii) failures to
maintain proper records and (iv) failures to file accurate reports. The
Commissioner's Charge states that the persons aggrieved include all Blacks,
Hispanics, Asians and females who are, have been or might be affected by the
alleged unlawful practices.

         On December 15, 1999 the EEOC terminated its active investigation of
the Commission's Charge with respect to any requests for information or contact
with the Company. The Company now anticipates that the EEOC will make its final
determination with respect to the matters raised in the Commissioner's Charge
within the next six months and that final determination will propose a plan for
the final resolution of those matters. In the event of an adverse determination,
the Company and the EEOC would likely first seek to resolve the issues through a
conciliation process. In the event that all issues are not resolved through the
conciliation process, any adverse determination would likely result in a civil
action by the EEOC that could seek back pay, other compensatory damages, and
punitive damages for the allegedly aggrieved persons. The Company cannot
currently predict with any great degree of certainty the length of time it will
take to resolve this matter, the likely outcome of this matter or the effect of
any such outcome. The Company, however, continues to vigorously defend against
the allegations contained in the Commissioner's Charge.

         From time to time the Company is a party to various legal proceedings
arising in the ordinary course of business. Except as described above, the
Company is not currently a party to any material litigation and is not aware of
any litigation threatened against it, which it believes would have a material
adverse effect on its business.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None.

                      EXECUTIVE OFFICERS OF THE REGISTRANT

         Pursuant to Instruction 3 to Item 401(b) of Regulation S-K and General
Instruction G(3) to Form 10-K, the following information is included in Part I
of this Form 10-K.

         The following table sets forth certain information concerning the
executive officers of the Company as of November 1, 1999:


<TABLE>
<CAPTION>
         NAME                   AGE                    POSITION
         ----                   ---                    --------
<S>                             <C>           <C>
James R. Crane                  45            Chairman of the Board of Directors,
                                              President and Chief Executive Officer

John C. McVaney                 41            Executive Vice President, Domestic

Douglas A. Seckel               48            Treasurer

Elijio V. Serrano               42            Chief Financial Officer

Ronald E. Talley                48            Chief Operating Officer
</TABLE>

         The following background material is provided for each executive
officer and other key employees, including employment history for at least the
last five years:

         James R. Crane has served as President and a director of the Company
since he founded the Company in March 1984.

         John C. McVaney has served as Executive Vice President, Domestic since
January 1998. Mr. McVaney joined the Company as station manager in 1995 and
later served as Regional Vice President for the southeast region. From

                                       12

<PAGE>   13

1992 to 1995, he served as regional manager for Nationsway Transport Service,
Inc. From 1989 to 1992, Mr. McVaney served as National Account Manager for St.
Johnsbury Trucking Company, Inc. During 1989, he was President and sole owner of
B&C of New Orleans, Inc., a transportation company. Mr. McVaney has over 18
years of transportation experience.

         Douglas A. Seckel has served as Treasurer of the Company since May
1991 and as director of the Company since May 1995. He served as Chief Financial
Officer of the Company from April 1989 to October 1999. Mr. Seckel and Mr. Crane
are first cousins.

         Elijio V. Serrano joined the Company as Chief Financial Officer in
October 1999. From 1998 to 1999, he served as Vice President and General Manager
for a Geco-Prakla business unit at Schlumberger Limited, an international
oilfield services company. From 1992 to 1998, Mr. Serrano served as controller
for various Schlumberger business units. During 1982 to 1992, he served in
various financial management positions within the Schlumberger organization.

         Ronald E. Talley was appointed Chief Operating Officer of the Company
in December 1997. He joined the Company in 1990 as a station manager and later
served as a regional manager. In 1996, he served as a Senior Vice President of
Eagle Freight Services, and the Company's truck brokerage and charter
operations, and most recently, he has served as Senior Vice President of Air and
Truck Operations for the Company. Prior to joining the Company, Mr. Talley
served as a station manager at Holmes Freight Lines from 1982 to 1990. From 1979
to 1982, Mr. Talley held a variety of management positions with Trans Con
Freight Lines. From 1969 to 1979, Mr. Talley served in several management
positions at Roadway Express.




                                       13



<PAGE>   14
                                     PART II

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

         The Company's common stock has been publicly traded through the Nasdaq
National Market tier of The Nasdaq Stock Market under the symbol EUSA since the
Company's initial public offering effective November 30, 1995. The following
table sets forth the quarterly high and low closing sales prices for each
indicated quarter of fiscal 1999 and 1998, as adjusted retroactively for a
3-for-2 stock split which occurred on August 30, 1999:

<TABLE>
<CAPTION>

Quarter Ended                               High                                        Low
---------------------------------------------------------------------------------------------

<S>                                         <C>                                         <C>
December 31,1997                            23.83                                       17.00
March 31, 1998                              21.00                                       15.73
June 30, 1998                               23.79                                       17.25
September 30, 1998                          24.42                                        8.00

December 31, 1998                           16.33                                        8.33
March 31, 1999                              21.67                                       14.83
June 30, 1999                               32.33                                       21.42
September 30, 1999                          29.94                                       24.08
</TABLE>

         There were approximately 109 shareholders of record (excluding
brokerage firms and other nominees) of the Company's common stock as of November
30, 1999.

         From October 1992 to the Company's initial public offering, the Company
was an S Corporation and distributed to its shareholders all of its taxable
income. Prior to its initial public offering, the Company made distributions of
cash and/or notes to its pre-IPO shareholders in an estimated amount of $2.7
million and $14.6 million in fiscal 1996 and 1995, respectively. A final payment
on the notes of approximately $635,000 was made during the fiscal year ended
September 30, 1997. Since its initial public offering, the Company has not paid
cash dividends on its common stock and it is the current intention of management
to retain earnings to finance the growth of the Company's business in lieu of
paying dividends. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources" for
discussion of repurchases of Common Stock by the Company.





                                       14
<PAGE>   15



ITEM 6.   SELECTED FINANCIAL DATA

         The following table sets forth selected financial data of the Company
which have been derived from the Company's Consolidated Financial Statements.
The selected financial data should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto, included elsewhere in this
report.

<TABLE>
<CAPTION>

                                                                     FISCAL YEAR ENDED SEPTEMBER 30,
                                              -------------------------------------------------------------------------------------
                                                 1999               1998              1997               1996              1995
                                              ---------------  ---------------   ---------------     -------------     ------------
                                                         (In thousands, except per share and operating data)
        STATEMENT OF INCOME DATA:
<S>                                            <C>                <C>                <C>                <C>                <C>
Revenues                                     $  595,173         $  417,083           $291,767           $185,445           $126,214
Operating income                                 44,992             32,220             25,699             17,849             12,205
Net income(1)                                    28,498             21,032             16,798             11,481              7,507
Basic earnings per share(2)                        1.01                .75                .63                .46                .37
Basic weighted average shares
   outstanding (2)                               28,291             28,101             26,688             24,873             20,309
Diluted earnings per share (2)                      .98                .72                .60                .44                .34
Diluted weighted average shares
   outstanding (2)                               29,116             29,061             28,023             26,282             22,173

OPERATING DATA:
Net revenue margin                                42.9%              44.1%              43.9%              44.3%              42.7%
Operating margin                                   7.6%               7.7%               8.8%               9.6%               9.7%
Operating ratio (3)                               92.4%              92.3%              91.2%              90.4%              90.3%
Same terminal revenue growth(4)                   35.0%              25.0%              48.7%              29.3%              29.1%
Air freight terminals at period end                  78                 71                 60                 47                 37
Local delivery locations at period end               67                 64                 44                 28                 11
Freight forwarding shipments                  1,407,917          1,048,795            832,704            524,685            382,583
Average revenue per freight forwarding
   shipment                                  $      387         $      366           $    329           $    331           $    314
Average weight (lbs) per freight
  forwarding shipment                               683                623                521                576                608

BALANCE SHEET DATA:  (at year end)
Working capital                              $  105,836         $   87,908           $ 60,638           $ 41,487           $  6,852
Total assets                                    208,991            157,413            106,871             71,729             24,468
Long-term indebtedness, net of                        0                  0                  0                  0              8,474
  current portion
Shareholders' equity                            143,627            119,046             80,504             50,442              1,699
</TABLE>

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

(1)      Net income for fiscal 1996 and 1995 includes a pro forma charge of $945
         and $3,682, respectively, which represents the estimated federal income
         taxes that would have been reported had Eagle been a C Corporation
         prior to December 4, 1995.

(2)      Net income per share for fiscal 1996 and 1995 is computed by dividing
         net income by the weighted average number of shares of common stock
         outstanding during the period, adjusted to include the following: (i)
         the retroactive restatement giving effect to the 2-for-1 stock split in
         August 1996; (ii) the retroactive restatement giving effect to the
         3-for-2 stock split in August 1999; (iii) the weighted average of
         common stock equivalents issuable upon exercise of stock options, less
         the number of shares that could have been repurchased with the exercise
         proceeds using the treasury stock method; and (iv) the number of shares
         required to be sold by the Company to fund S Corporation shareholder
         distributions upon closing of the initial public offering. The
         computation for the year ended September 30, 1996 also includes the
         number of shares that the Company's Chairman of the Board received upon
         the closing of the initial public offering in connection with the
         Company's acquisition of interests in subsidiaries.

(3)      Operating expenses as a percentage of revenue.

(4)      Percentage increase in revenues for those terminals open as of the
         beginning of the prior fiscal year.


                                       15
<PAGE>   16



         Forward Looking Statements. The statements contained in all parts of
this document (including the portion, if any, appended to the Form 10-K),
including, but not limited to, those relating to the availability of cargo
space; the Company's overseas presence and the plans for, effects, results and
expansion of international operations and agreements for international cargo;
future international revenue and international market growth; the future
expansion and results of the Company's terminal network; plans for local
delivery services and truck brokerage; future improvements in the Company's
information systems and logistic systems and services; technological
advancements; future marketing results; construction of the new facilities; the
effect of litigation; matters relating to the Commission's Charge; future costs
of transportation; future operating expenses; future margins; any seasonality of
the Company's business; future dividend plans; future acquisitions and the
effects, benefits, results, terms or other aspects of any acquisition; the
timing, terms or completion of any pending acquisition or other transaction;
effects of the Year 2000 issue; ISO certification; effect of improvement
studies; "building for a billion;" ability to continue growth and implement
growth and business strategy; the ability of expected sources of liquidity to
support working capital and capital expenditure requirements; the tax benefit of
any stock option exercises; timing of construction and other projects; future
expectations; and any other statements regarding future growth, future cash
needs, future terminals, future operations, business plans, future financial
results, financial targets and goals; and any other statements which are not
historical facts are forward-looking statements. When used in this document, the
words "anticipate," "estimate," "expect," "may," "plans," "project" and similar
expressions are intended to be among the statements that identify
forward-looking statements. Such statements involve risks and uncertainties,
including, but not limited to, the matters discussed under "Risk Factors" below,
the Company's future financial and operating results, financial condition, cash
needs and demand for its services, as well as other factors detailed in this
document and the Company's other filings with the Securities and Exchange
Commission. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual outcomes may vary
materially from those indicated. The Company undertakes no responsibility to
update for changes related to these or any other factors that may occur
subsequent to this filing.

                                  RISK FACTORS

         If any of the following events actually occur, the Company's business,
financial condition or results of operations could be materially adversely
affected. In that case, the trading price of the common stock could decline, and
an investor may lose all or part of his investment. The risks and uncertainties
described below are not the only ones facing the Company.

         THE COMPANY MAY NOT BE SUCCESSFUL IN CONTINUING ITS GROWTH EITHER
         INTERNALLY OR THROUGH ACQUISITION

         The Company has experienced significant growth, primarily through
increases in sales at existing terminals and opening new terminals. In December
1999, the Company entered into agreements to acquire two commonly controlled
freight forwarding companies operating in Canada. The Company also completed two
acquisitions in 1998 and one in 1997. The Company anticipates that its growth
strategy in the future will primarily focus on internal growth in its domestic
and international freight forwarding, local pickup and delivery and truck
brokerage business, and could also include additional acquisitions. The
Company's ability to continue its growth will depend on a number of factors,
including:

         o        existing and emerging competition,
         o        its ability to open new terminals,
         o        its ability to maintain profit margins in the face of
                  competitive pressures,
         o        the continued recruitment, training and retention of operating
                  and management employees,
         o        the strength of demand for its services,
         o        the availability of capital to support its growth, and
         o        the ability to identify, negotiate and fund acquisitions when
                  appropriate.

         Acquisitions involve risks, including those relating to:

         o        the integration of acquired business,
         o        the retention of prior levels of business,
         o        the retention of employees,
         o        the diversion of management attention,
         o        the amortization of acquired intangible assets, and
         o        unexpected liabilities.

         The Company cannot give assurance that it will be successful in
implementing any of its business strategy or plans for future growth.


                                       16

<PAGE>   17

         THE COMPANY'S BUSINESS COULD BE ADVERSELY IMPACTED BY NEGATIVE
         CONDITIONS IN THE INDUSTRIES OF ITS PRINCIPAL CUSTOMERS, IN PARTICULAR
         THE PERSONAL COMPUTER, ELECTRONICS, TELECOMMUNICATIONS AND RELATED
         INDUSTRIES

         Demand for the Company's services could be adversely impacted by
negative conditions in the industries of its customers. A substantial number of
its principal customers are in the personal computer, electronics,
telecommunications and related industries. These customers collectively
accounted for a substantial percentage of its revenues in fiscal 1999 and 1998.
Adverse conditions in the industries of its customers could cause the Company to
lose a significant customer or experience a decrease in the shipment volume of
its customers. Either of these events could negatively impact its financial
results. The Company expects that demand for its services, and consequently its
results of operations, will continue to be sensitive to domestic and, as the
Company continues to expand internationally, global economic conditions and
other factors beyond its control.

         THE COMPANY'S ABILITY TO SERVE ITS CUSTOMERS DEPENDS ON THE
         AVAILABILITY OF CARGO SPACE FROM THIRD PARTIES

         The Company's ability to serve its customers depends on the
availability of air cargo space, including space on passenger and cargo airlines
that service the transportation lanes the Company uses. Shortages of cargo space
are most likely to develop around holidays and in especially heavy
transportation lanes. In addition, available cargo space could be reduced as a
result of decreases in the number of passenger airlines serving particular
transportation lanes at particular times. This could occur as a result of
economic conditions, transportation strikes, regulatory changes and other
factors beyond its control. Although the Company does not believe that the lack
of cargo space has had a significant impact on its ability to book cargo space
to date, future operating results could be adversely affected by significant
shortages of suitable cargo space and associated increases in rates charged by
passenger airlines for cargo space.

         THE COMPANY MAY LOSE BUSINESS TO COMPETITORS, PARTICULARLY THOSE WITH
         GREATER FINANCIAL RESOURCES OR ESTABLISHED INTERNATIONAL NETWORKS

         Competition within the freight industry is intense. The Company
competes with fully integrated carriers, including BAX Global, Inc. and Emery
Air Freight Corporation, that have substantially greater financial resources
than the Company. As the Company expands its international operations, the
Company expects to encounter increased competition from those forwarders that
have a predominantly international focus and have established international
networks that are much more extensive than the Company's, including Air Express
International Corporation, Expeditors International of Washington, Inc., Fritz
Companies Inc. and Circle International Group, Inc. The Company also encounters
competition from other forwarders with nationwide networks, regional and local
forwarders, passenger and cargo air carriers, trucking companies, cargo sales
agents and brokers, and carriers and associations of shippers organized for the
purpose of consolidating their members' shipments to obtain lower freight rates
from carriers. The Company's inability to compete successfully in its industry
could cause the Company to lose customers or lower the volume of its shipments.

         THE COMPANY IS SUBJECT TO CLAIMS ARISING FROM ITS PICKUP AND DELIVERY
         OPERATIONS

         At September 30, 1999, the Company utilized the services of
approximately 1,800 drivers in connection with its local pickup and delivery
operations. From time to time, these drivers are involved in accidents. Although
most of these drivers are independent contractors, the Company could be held
liable for their actions. The Company currently carries, or requires its
independent owner/operators to carry, liability insurance of $1.0 million for
each accident. However, claims against the Company may exceed the amount of
coverage. A material increase in the frequency or severity of accidents,
liability claims or workers' compensation claims, or unfavorable resolutions of
claims, could materially affect the Company. In addition, significant increases
in insurance costs as a result of these claims could reduce the Company's
profitability.

         EVENTS IMPACTING THE VOLUME OF INTERNATIONAL TRADE COULD ADVERSELY
         AFFECT THE COMPANY'S INTERNATIONAL OPERATIONS

         The Company's international operations are directly related to and
dependent on the volume of international trade, particularly trade between the
United States and foreign nations. This trade is influenced by many factors,
including:

         o        economic and political conditions in the United States and
                  abroad,
         o        major work stoppages,
         o        exchange controls, the Euro conversion and currency
                  fluctuations,
         o        wars and other armed conflicts, and
         o        United States and foreign laws relating to tariffs, trade
                  restrictions, foreign investment and taxation.

                                       17
<PAGE>   18

         Trade-related events beyond the Company's control, like a failure of
various nations to reach or adopt international trade agreements or an increase
in bilateral or multilateral trade restrictions, could have a material adverse
effect on the Company's international operations.

         THE COMPANY'S SUCCESS DEPENDS ON THE EFFORTS OF ITS FOUNDER AND ITS
         OTHER KEY MANAGERS AND PERSONNEL

         The Company's founder, James R. Crane, serves as President and Chairman
of the Board. The Company believes that its future success will be highly
dependent upon the continuing efforts of Mr. Crane and its other executive
officers, key employees and regional managers, as well as its ability to attract
and retain other skilled managers and personnel. The loss of the services of any
of its key personnel could have a material adverse effect on the Company.

         THE COMPANY MAY BE VULNERABLE TO YEAR 2000 FAILURES THAT COULD LEAD TO
         AN UNINSURED BUSINESS INTERRUPTION

         A Year 2000 failure of the Company's internal systems or the systems of
its customers, suppliers or other third parties could result in a business
interruption that adversely affects the Company's business, financial condition
or operations. The Company is not insured for this type of loss. For a more
detailed description of the Year 2000 issues facing the Company, see "Part II -
Item 7 - Management's Discussion and Analysis of Financial Condition and Results
of Operations -Year 2000 Issues."

         THE COMPANY IS CONTROLLED BY ITS PRINCIPAL SHAREHOLDER, AND THIS COULD
         DELAY OR PREVENT A CHANGE OF CONTROL OF THE COMPANY

         As of November 30, 1999, James R. Crane owned approximately 41.0% of
the outstanding shares of the Company's common stock. As a result, Mr. Crane
individually will be in a position to control the Company through his ability to
significantly influence the outcome of elections of its directors and other
matters submitted to a vote of shareholders. Mr. Crane's ownership of the
Company's common stock may have the effect of delaying or preventing a change of
control of the Company.

         THE COMPANY COULD INCUR ADDITIONAL EXPENSES OR TAXES IF THE INDEPENDENT
         OWNER/OPERATORS IT USES IN CONNECTION WITH ITS LOCAL PICKUP AND
         DELIVERY OPERATIONS ARE FOUND TO BE "EMPLOYEES" RATHER THAN
         "INDEPENDENT CONTRACTORS"

         The Internal Revenue Service, state authorities and other third parties
have at times successfully asserted that independent owner/operators in the
transportation industry, including those of the type the Company uses in
connection with its local pickup and delivery operations, are "employees" rather
than "independent contractors." Although the Company believes that the
independent owner/operators the Company uses are not employees, the IRS, state
authorities or others could challenge this position, and federal and state tax
or other applicable laws, or interpretations of applicable laws, could change.
If they do, the Company could incur additional employee benefit-related expenses
and could be liable for additional taxes, penalties and interest for prior
periods and additional taxes for future periods.

         THE COMPANY'S FAILURE TO COMPLY WITH GOVERNMENTAL PERMIT AND LICENSING
         REQUIREMENTS COULD RESULT IN SUBSTANTIAL FINES OR REVOCATION OF ITS
         OPERATING AUTHORITIES

         The Company's operations are subject to various state, local, federal
and foreign regulations that in many instances require permits and licenses. The
Company's failure to maintain required permits or licenses, or to comply with
applicable regulations, could result in substantial fines or revocation of its
operating authorities.

         PROVISIONS OF THE COMPANY'S CHARTER AND BYLAWS AND OF TEXAS LAW MAY
         DELAY OR PREVENT TRANSACTIONS THAT WOULD BENEFIT SHAREHOLDERS

         The Company's articles of incorporation and bylaws and Texas law
contain provisions that may have the effect of delaying, deferring or preventing
a change of control of the Company. These provisions, among other things:

         o        authorize the Company's board of directors to set the terms of
                  preferred stock,
         o        restrict the ability of shareholders to take action by written
                  consent, and
         o        restrict the Company's ability to engage in transactions with
                  20% shareholders.

         Because of these provisions, persons considering unsolicited tender
offers or other unilateral takeover proposals may be more likely to negotiate
with the Company's board of directors rather than pursue non-negotiated takeover
attempts.

                                       18
<PAGE>   19

As a result, these provisions may make it more difficult for the Company's
shareholders to benefit from transactions that are opposed by an incumbent board
of directors.


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

         The following management's discussion and analysis of financial
condition and results of operations should be read in conjunction with the
Company's Consolidated Financial Statements and Notes thereto.

OVERVIEW

         During the past two fiscal years, the Company's revenues increased at a
compound annual rate of 42.8% to $595.2 million in the fiscal year ended
September 30, 1999 from $291.8 million in the fiscal year ended September 30,
1997, and its operating income increased at a compound annual rate of 32.5% to
$45.0 million in fiscal 1999 from $25.7 million in fiscal 1997. Historically,
the Company has grown primarily through internal expansion, including developing
its terminal network, expanding its service offerings and sales force and
increasing its customer base. The Company has also made acquisitions on a
limited basis and has additional acquisitions pending. Since October 1, 1996, it
has added 31 terminals, increasing the total to 78 at September 30, 1999. At
that date, seven of these 78 terminals had been open less than 12 months.

         The Company plans to continue to expand its terminal network. The
Company currently plans to open terminals in approximately 10 additional cities
by the end of fiscal 2000. These plans, however, are subject to change based on
a variety of factors. The Company may also complement its internal expansion
with selective acquisitions.

         The opening of a new terminal generally has an initial short-term
negative impact on the Company's profitability due to the operating losses of
the new terminal. However, the opening of a new terminal generally does not
require significant capital expenditures. Additionally, personnel costs are
contained at the time of the opening of a new terminal because commissions are
generally not paid until salesmen achieve minimum sales levels and until
managers achieve terminal profitability. Although future new terminals may be
opened in cities smaller than those in which the Company's more mature terminals
are located, the Company believes the results of new terminals should benefit
from a ready base of business provided by its existing customers.

         The Company intends to continue to expand its international freight
forwarding business. International shipments typically generate higher gross
revenues and net revenue per shipment than domestic shipments. However, costs of
transportation as a percentage of revenues are typically higher for
international freight than for domestic freight. The Company does not expect its
operating expenses to increase in proportion to increased international
revenues. In April 1998, the Company expanded its international operations
through the acquisition of the operations of Eagle Transfer, Inc. and of S.
Boardman (Air Services Limited). Additionally, the Company commenced operations
in Hong Kong during September 1998 and in Argentina, Brazil and Peru during the
fourth quarter of fiscal 1999.

         The Company also intends to continue the growth of its local pickup and
delivery operations. By providing local pickup and delivery services for the
Company's freight forwarding shipments, the Company has been able to increase
its net revenue margin with respect to these shipments because it captures
margins which were previously paid to third parties. However, the Company's
local pickup and delivery services provided to other, non-forwarding customers
generate a lower net revenue margin than the Company's domestic forwarding
operations due to their higher transportation costs as a percentage of revenues.

                                       19

<PAGE>   20
RESULTS OF OPERATIONS

         The following table presents certain statement of income data as a
percentage of revenues for the periods indicated.


<TABLE>
<CAPTION>
                                                          Fiscal Year Ended September 30,
                                                          ------------------------------
                                                           1999        1998        1997
                                                          ------      ------      ------
<S>                                                       <C>         <C>         <C>
Revenues                                                   100.0%      100.0%      100.0%
Cost of transportation                                      57.1        55.9        56.1
                                                          ------      ------      ------
Net revenues                                                42.9        44.1        43.9

   Personnel costs                                          21.7        23.4        23.2
   Other selling, general and administrative expenses       13.6        13.0        11.9
                                                          ------      ------      ------
Operating expenses                                          35.3        36.4        35.1
                                                          ------      ------      ------
Operating income                                             7.6%        7.7%        8.8%
                                                          ======      ======      ======
Net income                                                   4.8%        5.0%        5.8%
</TABLE>


FISCAL YEAR ENDED SEPTEMBER 30, 1999 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30,
1998

         Revenues increased 42.7% to $595.2 million in fiscal 1999 from $417.1
million in fiscal 1998 primarily due to increases in the number of shipments and
total weight of cargo shipped. These increases resulted from an increase in the
number of terminals open during that period, an increase in penetration in
airfreight and pickup and delivery markets, the addition of significant national
account customers and the effect of two acquisitions completed in fiscal 1998.
For those freight forwarding terminals open prior to the beginning of fiscal
1998 (60 terminals), revenues increased approximately 35.0% to $498.7 million in
fiscal 1999 from $369.5 million in fiscal 1998. Revenues for fiscal 1999 were
comprised of $545.1 million of forwarding revenues and $50.1 million of local
pickup and delivery revenues. Total local pickup and delivery revenues for
fiscal 1999 were $155.8 million. This amount includes $105.7 million of
intercompany sales that were eliminated upon consolidation and $50.1 million in
services to third-party (non-forwarding) customers. Of the Company's fiscal 1999
forwarding revenues, $110.2 million were attributable to international shipments
(defined as shipments that cross a national border).

         Cost of transportation increased as a percentage of revenues to 57.1%
in fiscal 1999 from 55.9% in fiscal 1998. The increase was primarily
attributable to increased international freight shipping volumes, which carry a
higher cost of transportation per shipment than domestic freight. Cost of
transportation increased in absolute terms by 45.8% to $340.1 million in fiscal
1999 from $233.3 million in fiscal 1998 as a result of increases in air freight
shipped. Net revenue margin decreased to 42.9% in fiscal 1999 from 44.1% in
fiscal 1998. The primary reason for the margin decline was increased
international freight shipping volumes, which carry a higher cost of
transportation per shipment than domestic freight. Net revenues increased 38.8%
to $255.1 million in fiscal 1999 from $183.8 million in fiscal 1998.

         Operating expenses decreased as a percentage of revenues to 35.3% in
fiscal 1999 from 36.4% in fiscal 1998. Operating expenses increased in absolute
terms by 38.6% to $210.1 million in fiscal 1999 from $151.6 million in fiscal
1998. Personnel costs decreased as a percentage of revenues to 21.7% in fiscal
1999 from 23.4% in fiscal 1998, and increased in absolute terms by 32.1% to
$128.9 million in fiscal 1999 from $97.6 million in fiscal 1998. These increases
were due to increased staffing needs associated with the opening of seven new
terminals, the opening of three new local delivery operations, the effect of
overseas expansion, expanded operations at existing terminals and increased
commissions resulting from higher revenues. Such personnel costs include all
compensation expenses, including those relating to sales commissions and
salaries and to headquarters employees and executive officers. The Company has
added personnel to build corporate infrastructure, to keep pace with its recent
significant growth, to deepen the staff of its domestic and international
forwarding and local delivery operating units and to prepare for any additional
growth. Other selling, general and administrative expenses increased as a
percentage of revenues to 13.6% in fiscal 1999 from 13.0% in fiscal 1998, and
increased in absolute terms by 50.2% to $81.1 million in fiscal 1999 from $54.0
million in fiscal 1998. In fiscal 1999, selling expenses decreased as a
percentage of revenues by 0.1% and other general and administrative expenses
increased as a percentage of revenues by 0.7% compared to fiscal 1998. The
absolute increases in selling, general and administrative expenses were due to
overall increases in the level of the Company's activities in fiscal year 1999,
increased expenses attributable to the Company's acquisitions, the Company's new
headquarter facilities and increased professional fees.

         Operating income increased 39.6% to $45.0 million in fiscal 1999 from
$32.2 million in fiscal 1998 for the reasons indicated above. Operating margin
for fiscal 1999 decreased slightly to 7.6% of revenues from 7.7% of revenues in
fiscal


                                       20
<PAGE>   21

1998. Non-operating income increased to approximately $2.5 million in fiscal
1999 from approximately $1.8 million in fiscal 1998 primarily due to increased
amounts of short-term investments as a result of cash generated from operations.

         Income before income taxes increased 39.6% to $47.5 million in fiscal
1999 from $34.0 million in fiscal 1998. Provision for income taxes for fiscal
1999 was $19.0 million compared to provision for income taxes of $13.0 million
for fiscal 1998. Net income increased 35.5% to $28.5 million in fiscal 1999 from
$21.0 million in fiscal 1998. Diluted earnings per share increased 36.1% to
$0.98 per share in fiscal 1998 from $0.72 per share in fiscal 1998.

FISCAL YEAR ENDED SEPTEMBER 30, 1998 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30,
1997

         Revenues increased 43.0% to $417.1 million in fiscal 1998 from $291.8
million in fiscal 1997 primarily due to increases in the number of shipments and
total weight of cargo shipped. These increases resulted from an increase in the
number of terminals open during that period, an increase in penetration in
existing markets, the effect of three acquisitions and the addition of
significant national account customers. For those terminals open as of the
beginning of fiscal 1997, revenues increased approximately 25.0% to $335.3
million in fiscal 1998 from $268.2 million in fiscal 1997. Revenues for fiscal
1998 were comprised of $384.0 million of forwarding revenues, $32.8 million of
local pickup and delivery revenues and $338,000 of other freight forwarding
revenues. Total local pickup and delivery revenues for fiscal 1998 were $112.0
million. This amount includes $79.2 million of intercompany sales to Eagle that
were eliminated upon consolidation and $32.8 million in services to third party
(non-forwarding) customers. Of the Company's fiscal 1998 forwarding revenues,
$46.4 million were attributable to international shipments.

         Cost of transportation decreased as a percentage of revenues to 55.9%
in fiscal 1998 from 56.1% in fiscal 1997. The decrease was primarily
attributable to the continued expansion of the local pickup and delivery
operations, enabling the Company to capture margins previously paid to third
parties. Cost of transportation increased in absolute terms by 42.6% to $233.3
million in fiscal 1998 from $163.6 million in fiscal 1997 as a result of
increases in air freight shipped. Net revenue margin increased to 44.1% in
fiscal 1998 from 43.9% in fiscal 1997. Net revenues increased 43.4% to $183.8
million in fiscal 1998 from $128.2 million in fiscal 1997.

         Operating expenses increased as a percentage of revenues to 36.4% in
fiscal 1998 from 35.1% in fiscal 1997. Operating expenses increased in absolute
terms by 48.0% to $151.6 million in fiscal 1998 from $102.5 million in fiscal
1997. Personnel costs increased slightly as a percentage of revenues to 23.4% in
fiscal 1998 from 23.2% in fiscal 1997, and increased in absolute terms by 43.9%
to $97.6 million in fiscal 1998 from $67.8 million in fiscal 1997. These
increases were due to increased staffing needs associated with the opening of 11
new terminals, the opening of new local delivery operations, the effect of
acquisitions, expanded operations at existing terminals, increased commissions
resulting from higher revenues, and expanded corporate infrastructure. Such
personnel costs include all compensation expenses, including those relating to
sales commissions and salaries and to headquarters employees and executive
officers. The Company has added personnel to build corporate infrastructure, to
keep pace with its recent significant growth, to deepen the staff of its
domestic, international and local delivery operating units and to prepare for
any additional growth. Other selling, general and administrative expenses
increased as a percentage of revenues to 13.0% in fiscal 1998 from 11.9% in
fiscal 1997, and increased in absolute terms by 56.0% to $54.0 million in fiscal
1998 from $34.6 million in fiscal 1997. In fiscal 1998, selling expenses
decreased as a percentage of revenues by 0.3% and other general and
administrative expenses increased as a percentage of revenues by 1.4% compared
to fiscal 1997. The absolute increases in selling, general and administrative
expenses were due to overall increases in the level of the Company's activities
in fiscal year 1998, increased expenses attributable to the Company's
acquisitions, the Company's new headquarters facilities and increased
professional fees.

         Operating income increased 25.4% to $32.2 million in fiscal 1998 from
$25.7 million in fiscal 1997 for the reasons indicated above. Operating margin
for fiscal 1998 was 7.7% of revenues, down from 8.8% of revenues in fiscal 1997
primarily due to the higher operating expenses as a percentage of revenues
described above. Non-operating income increased to approximately $1.8 million in
fiscal 1998 from approximately $1.7 million in fiscal 1997 due to increased
amounts of short-term investments as a result of the cash proceeds from the
Company's initial and secondary public offerings. The 1997 amount included
$375,000 from reimbursements related to a public offering.

         Income before income taxes increased 24.1% to $34.0 million in fiscal
1998 from $27.4 million in fiscal 1997. Provision for income taxes for fiscal
1998 was $13.0 million compared to provision for income taxes of $10.6 million
for fiscal 1997. Net income increased 25.2% to $21.0 million in fiscal 1998 from
$16.8 million in fiscal 1997. Diluted earnings per share increased 21.1% to
$0.72 per share in fiscal 1998 from $0.60 per share in fiscal 1997.


                                       21
<PAGE>   22

LIQUIDITY AND CAPITAL RESOURCES

         The Company's cash and short-term investments increased $2.7 million to
$52.4 million at September 30, 1999 from $49.7 million at September 30, 1998. At
September 30, 1999, the Company had working capital of $105.8 million and a
current ratio of 2.70 compared to working capital of $87.9 million and a current
ratio of 3.42 at September 30, 1998. The Company's working capital has increased
primarily as a result of profitable growth associated with the expansion of the
Company's operations and the resultant increase in accounts receivable and
payable. Capital expenditures were approximately $13.4 million for fiscal 1999
and $11.9 million for fiscal 1998. The Company believes that cash flow from
operations will be adequate to support its normal working capital and capital
expenditures requirements for at least the next 12 months.

         Other than its public stock offerings, the Company's cash generated
from operations has been its primary source of liquidity, although it has from
time to time made limited use of bank borrowing and lease or purchase
arrangements. The Company does not anticipate paying any cash dividends on its
common stock in the foreseeable future.

         On August 11, 1999, the Company announced that its Board of Directors
had authorized the repurchase of up to 750,000 shares of its common stock.
During fiscal 1999, the Company repurchased 200,250 shares of its common stock
pursuant to this board authorization. In addition, the Company repurchased
844,800 shares of its common stock during fiscal 1999 pursuant to prior board
authorizations. Subsequently, 22,800 of the shares repurchased were resold
pursuant to the Company's employee stock purchase plan. The total cost of these
share repurchases as of September 30, 1999 was approximately $14.8 million.

         The Company's subsidiaries in the United Kingdom, Hong Kong and Mexico
maintain bank lines of credit for purposes of securing customs bonds and bank
letters of credit for purposes of guaranteeing some transportation expenses.
These credit lines and letters of credit are supported by standby letters of
credit issued by a United States bank or guarantees issued by the Company to the
foreign banks. At September 30, 1999, the Company was contingently liable for
approximately $2.6 million under outstanding letters of credit and guarantees
related to these obligations.

         On January 10, 1997, the Company entered into a five-year operating
lease agreement with two unrelated parties for financing the construction of its
recently completed Houston terminal, warehouse and headquarters facility (the
"Houston facility"). The cost of the Houston facility was approximately $8.5
million. Under the terms of the lease agreement, average monthly lease payments
are approximately $59,000, which includes monthly interest costs based upon
LIBOR rate plus 145 basis points beginning on July 1, 1998 through October 2,
2002. A balloon payment equal to the outstanding lease balance, which was
initially equal to the cost of the facility, is due on October 2, 2002. As of
September 30, 1999, the lease balance was approximately $8.3 million.

         On April 3, 1998, the Company entered into a five-year $20 million
master operating lease agreement with two unrelated parties for financing the
construction of terminal and warehouse facilities throughout the United States
designated by the Company. Under the terms of the master operating lease
agreement, average monthly lease payments, including monthly interest costs
based upon LIBOR rate plus 145 basis points, begin upon the completion of the
construction of each financed facility. The monthly lease obligations continue
for a term of 52 months. A balloon payment equal to the outstanding lease
balances, which were initially equal to the cost of the facility, is due at the
end of each lease term. Construction began during fiscal 1999 on five terminal
facilities. As of September 30, 1999, the aggregate lease balance was
approximately $10.6 million under the master operating lease agreement.

         The Company has an option, exercisable at anytime during the lease
term, and under particular circumstances may be obligated, to acquire the
Houston terminal and each of its other financed facilities for an amount equal
to the outstanding lease balance. If the Company does not exercise the purchase
option, and does not otherwise meet its obligations, it is subject to a
deficiency payment computed as the amount equal to the outstanding lease balance
minus the then current fair market value of each financed facility within
limits. The Company expects that the amount of any deficiency payment would be
expensed.

         As of September 30, 1999, the Company had entered into commitments to
construct warehouse and terminal facilities for an aggregate cost of
approximately $9.0 million. Payment for the construction of the facilities is
being made from cash balances. As of September 30, 1999, the Company had paid
approximately $254,000 of the commitments. Construction of the facilities is
estimated to be completed during fiscal 2000.

         As of September 30, 1999, the Company had outstanding non-qualified
stock options to purchase an aggregate of 4,529,061 shares of common stock at
exercise prices equal to the fair market value of the underlying common stock on


                                       22
<PAGE>   23

the dates of grant (prices ranging from $0.83 to $24.85). At the time a
non-qualified stock option is exercised, the Company will generally be entitled
to a deduction for federal and state income tax purposes equal to the difference
between the fair market value of the common stock on the date of exercise and
the option price. As a result of exercises for the fiscal years ended September
30, 1999 and 1998 of non-qualified stock options to purchase an aggregate of
766,512 and 935,778 shares of common stock, the Company is entitled to a federal
income tax deduction of approximately $11.5 million and $12.9 million. The
Company has recognized a reduction of its federal and state income tax liability
of approximately $4.5 million and $4.7 million in fiscal 1999 and 1998.
Accordingly, the Company recorded an increase to additional paid-in capital and
a reduction to current taxes payable pursuant to the provisions of SFAS No. 109,
"Accounting for Income Taxes." Any exercises of non-qualified stock options in
the future at exercise prices below the then-fair market value of the common
stock may also result in tax deductions equal to the difference between those
amounts. There is uncertainty as to whether the exercises will occur, the amount
of any deductions, and the Company's ability to fully utilize any tax
deductions.

         In February 1997, the Company completed an underwritten secondary
public offering of 2,669,883 shares of its common stock. The Company sold
348,246 of these shares and received net proceeds of $6.2 million. In January
1998, the Company completed an underwritten secondary public offering of
3,018,750 shares of its common stock. The Company sold 393,750 of these shares
and received net proceeds of $6.6 million. The net proceeds received by the
Company from these sales were used for general corporate purposes.

         In December 1999, the Company entered into a commitment letter with a
bank to obtain a $50 million revolving line of credit. Terms of the agreement
are subject to further negotiation; however, the Company expects that the
revolving line of credit will mature in one year, will bear interest based upon
a LIBOR rate plus approximately 63 basis points and include various restrictive
financial and operating covenants. The Company anticipates that borrowings under
this credit facility may be used to finance future acquisitions, joint venture
operations or capital expenditures or for other corporate purposes. The Company
can give no assurance as to whether it will enter into this credit facility or
as to the final terms of the agreement.


ACQUISITIONS

         On September 19, 1997, the Company acquired the operating assets and
assumed some liabilities of Michael Burton Enterprises, Inc., a transportation
and value-added logistics service provider in Columbus, Ohio. The Company issued
50,043 shares of common stock, valued at $1.0 million, and paid approximately
$5.6 million in cash. The acquisition agreement also provides for three
contingent payments of up to $1.75 million annually if specified annual sales
goals are achieved over the next three years. The acquisition was accounted for
as a purchase. Accordingly, the purchase price was allocated on the basis of the
estimated fair market value of the net assets acquired. The results of
operations for the acquired business was included in the consolidated statement
of income from the acquisition date forward. Through September 30, 1999,
contingent payments of $2.8 million had been recorded and recognized as
additional goodwill.

         On April 3, 1998, the Company acquired substantially all of the
operating assets and assumed some liabilities of Eagle Transfer, Inc., a
privately held international freight forwarder/consolidator based in Miami,
Florida. Despite the similarity in names, the Company and Eagle Transfer had no
prior affiliation. On April 14, 1998, the Company acquired all of the
outstanding stock of S. Boardman (Air Services) Limited, a privately held full
services forwarder based in London, England. The aggregate purchase price for
the two 1998 acquisitions was approximately $5.4 million, including $4.3 million
in cash plus 41,999 shares of common stock, valued at $750,000. The agreements
also specify maximum contingent earnout payments in the aggregate of $2.0
million in cash plus $2.3 million in common stock, if specified performance
benchmarks are met over each of the next three years. The acquisitions were
accounted for as purchases. Accordingly, in each case the purchase price was
allocated based upon the estimated fair market value of the net assets acquired
with the excess being recorded as goodwill. The results of operations for the
acquired operations were included in the consolidated statements of income from
the acquisition date forward. Through September 30, 1999, contingent payments of
$831,000 had been recorded and recognized as additional goodwill.

         In December 1999, the Company completed the acquisition of Compass
Cargo Limitada, a privately held airfreight forwarder in Chile with annual net
revenues of approximately $1.5 million.

         In December 1999, the Company also announced that it had signed
definitive purchase agreements to acquire two commonly controlled freight
forwarding companies operating in Canada for an aggregate purchase price of
approximately $21.4 million cash at closing and a total of approximately $4.9
million in cash payable in three equal annual installments. The agreement also
contemplates additional consideration not to exceed $7.8 million over the next
three years payable in


                                       23
<PAGE>   24

cash and common stock if certain earnings-based growth goals are achieved. The
acquisition is expected to close in early January 2000. The Company plans to
finance the cash portion of the purchase price with cash and cash equivalents
held by the Company. The amounts described above to be paid pursuant to this
acquisition are current approximate equivalents of required payments in Canadian
dollars. Exchange rate fluctuations could cause the final amounts paid to
change.

YEAR 2000 ISSUES

         Historically, some computer programs used only the last two digits of a
year to refer to a date, causing them to not properly recognize a year that does
not begin with "19." This could result in major failures or miscalculations and
is generally referred to as the "Year 2000" or "Y2K" problem.

         The Company relies principally on three internal systems to support its
freight forwarding, pickup and delivery, logistics management, accounting and
management reporting worldwide. The Company's assessment of these systems is as
follows:

         o        The primary domestic forwarding, logistics management,
                  accounting and management system has been independently tested
                  and the Company has received a Year 2000 compliance
                  certificate. The cost of this testing was not significant and
                  only minor remediation was requested.

         o        The primary international forwarding system has been developed
                  in-house using current technology and a platform that has been
                  certified as Y2K-compliant.

         o        The Company has upgraded the pickup and delivery system for a
                  minimal cost.

         The Company has not identified any internal non-information technology
systems that use embedded technology on which it relies and that it believes is
likely to have a Y2K problem. Except as noted above, the Company has completed
its review and remediation of its internal systems for potential Year 2000
problems it has identified. However, the Company plans to continue to monitor
these systems through the end of 1999 and into the Year 2000.

         The Company is also reliant on systems capabilities of business
partners, trading partners, customers, suppliers, governmental agencies and
internet and telecommunications providers in many countries throughout the
world. Like every other business enterprise, the Company is at risk from Year
2000 failures in public and private infrastructure services, including
electricity, water, gas, transportation and communications. Other than
telecommunications services and electronic data interchange, the Company does
not directly rely on the systems capabilities of third parties for its principal
operations. Because of the Company's extensive use of technology, it is
dependent on data and voice communications to receive, process, track and bill
customer orders. The Company has completed tests of electronics data interchange
with several of its trading partners and plans additional tests through the end
of 1999. The Company has also received representations as to Year 2000
compliance from a majority of its major suppliers and plans to continue to
monitor the status of its suppliers' compliance efforts through the end of 1999.
The Company is also vulnerable to noncompliance of third party systems if they
result in business interruption of a customer. The Company is currently
addressing readiness issues with some of its major customers.

         Because of the number of external risks involved, the Company believes
there is likely to be some disruption in its business as a result of
noncompliance by third parties. Of all the external risks, the Company believes
that the most reasonably likely worst case scenario would be a business
disruption resulting from an extended communications failure and/or an extended
failure of the air traffic systems in the United States and other countries. In
addition, the global transportation industry and regulatory authorities,
including the United States Department of Transportation and related agencies,
could be affected in a way that negatively affects the Company's operations. The
Company's transportation providers might be unable to provide those services
because of these Year 2000 failures or Year 2000 problems of their own. If a
Year 2000 failure causes insufficient air lift to be available to it, the
Company's air freight forwarding operations would be curtailed and the Company
might also be unable to provide sufficient alternative services such as ground,
rail or ocean cargo capacity to meet expected levels of operations. Furthermore,
should the Company's customers experience business interruption in the year
2000, its results of operation could be materially adversely affected. The
Company would also likely experience a deterioration in collections if its
customers experience Year 2000 failures. Based on the Company's information
regarding the readiness of suppliers, including air carriers and communication
carriers, and customers, the Company expects that any Year 2000 disruption would
be of short duration. However, the Company is unable to determine the potential
business interruption costs that might be incurred as a result of Y2K
disruptions.


                                       24
<PAGE>   25

         The Company has formulated contingency plans in the event of possible
business interruptions. The Company continues to address emergency instructions,
including security, power outages and telecommunications failures, and
alternative means of transporting freight for each of its terminals. The Company
expects that its contingency planning will continue to the end of 1999 and the
beginning of 2000.

         To date, the Company has incurred less than $300,000 of expense and
does not currently plan to expend any material amount of funds for Y2K
remediation. Despite its assessment to date, the Company cannot give assurance
as to the ultimate effect that the Y2K issues will have on its business.

         The Company's assessment of its Year 2000 issues involves many
assumptions. The Company's assumptions might prove to be inaccurate, and actual
results could differ significantly from the assumptions. In addition,
third-party representations or certifications as to Year 2000 compliance might
prove to be inaccurate and Year 2000 compliance tests may not have been
subjected to a sufficient sample of conditions. The Company could be adversely
affected by business disruptions of a greater magnitude than anticipated or from
a failure of its contingency plans to adequately address problems.

SEASONALITY

         Historically, the Company's operating results have been subject to a
limited degree to seasonal trends when measured on a quarterly basis. The second
fiscal quarter, ending March 31, has traditionally been the weakest, and the
fourth fiscal quarter, ending September 30, has traditionally been the
strongest. This pattern is the result of, or is influenced by, numerous factors,
including climate, national holidays, consumer demand, economic conditions and a
myriad of other similar and subtle forces. In addition, this historical
quarterly trend has been influenced by the growth and diversification of the
Company's terminal network. The Company cannot accurately forecast many of these
factors, nor can the Company estimate accurately the relative influence of any
particular factor. As a result, there can be no assurance that historical
patterns, if any, will continue in future periods.

NEW ACCOUNTING PRONOUNCEMENTS

         In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounts Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 is effective for transactions
entered into after January 1, 2000. SFAS 133 requires that all derivative
instruments be recorded on the balance sheet at fair value. Changes in the fair
value of derivatives are recorded each period in current earnings of other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and the type of hedge transaction. The ineffective portion
of all hedges will be recognized in earnings. The Company is in the process of
determining the impact that the adoption of SFAS 133 will have on its results of
operations and financial position.

         In October 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income," and SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information." Under SFAS 130, companies are required to
report in their financial statements, in addition to net income, comprehensive
income including, as applicable:

         o        foreign currency items,
         o        minimum pension liability adjustments, and
         o        unrealized gains and losses on selected investments in debt
                  and equity securities.

         The Company's only component of other comprehensive income is foreign
currency translation adjustments. Cumulative translation adjustments are now
characterized as accumulated other comprehensive income or loss.

         SFAS 131 requires that companies report separately, in their financial
statements, financial and descriptive information about operating segments, if
applicable. Adoption of SFAS 130 and SFAS 131 did not have a material impact on
the Company's consolidated financial statements and related disclosures. During
the year ended September 30, 1999, the Company's geographic segments which are
outside the United States did not represent, in the aggregate, more than 10% of
the revenues, net income or assets of the combined amounts for all geographic
segments.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         As of September 30, 1999, the Company did not have any outstanding
short-term or long-term debt instruments. Accordingly, the Company does not have
market risk related to interest rates. However, the Company's lease payments


                                       25
<PAGE>   26

on some financed facilities are tied to market interest rates. At September 30,
1999, a 10% rise in the base rate for these financing arrangements would not
have a material impact on operating income for fiscal 2000.

         The Company's earnings are affected by fluctuations in the value of the
U.S. dollar as it relates to the earnings of its United Kingdom, Canada, Mexico,
Hong Kong and Latin America operations, as a result of transactions in foreign
markets. At September 30, 1999, the result of a uniform 10% strengthening in the
value of the dollar relative to the currencies in which these operations are
denominated would not have a material impact on operating income for fiscal
2000.

         The Company has not purchased any futures contracts, nor has it
purchased or held any derivative financial instruments for trading purposes
during fiscal 1999.

         In the second quarter of fiscal 1999, the Company entered into
contracts for the purpose of hedging the cost of a portion of anticipated jet
fuel purchases during the following 12 months. These contracts are nominally
insignificant. At September 30, 1999, a 10% change in the price of jet fuel
would not have a material impact on operating income for fiscal 2000.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The response to this item is submitted in a separate section of this
report.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL  DISCLOSURE

         None.

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information required by this item is incorporated by reference to
information under the caption "Proposal 1--Election of Directors" and to the
information under the caption "Section 16(a) Reporting Delinquencies" in the
Company's definitive Proxy Statement ( the "2000 Proxy Statement") for its
annual meeting of shareholders to be held on February 21, 2000. The 2000 Proxy
Statement will be filed with the Securities and Exchange Commission (the
"Commission") not later than 120 days subsequent to September 30, 1999.

         Pursuant to Item 401(b) of Regulation S-K, the information required by
this item with respect to executive officers of the Company is set forth in Part
I of this report.

ITEM 11.  EXECUTIVE COMPENSATION

         The information required by this item is incorporated herein by
reference to the 2000 Proxy Statement, which will be filed with the Commission
not later than 120 days subsequent to September 30, 1999.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information required by this item is incorporated herein by
reference to the 2000 Proxy Statement, which will be filed with the Commission
not later than 120 days subsequent to September 30, 1999.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

         The information required by this item is incorporated herein by
reference to the 2000 Proxy Statement, which will be filed with the Commission
not later than 120 days subsequent to September 30, 1999.

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

         (a)(1)   FINANCIAL STATEMENTS


                                       26
<PAGE>   27

<TABLE>
<CAPTION>
ITEM                                                                                                             PAGE
----                                                                                                             ----
<S>                                                                                                              <C>
CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE YEARS ENDED SEPTEMBER 30, 1999:
   Report of Independent Accountants..............................................................................F-2
   Consolidated Balance Sheet as of September 30, 1999 and 1998...................................................F-3
   Consolidated Statement of Income and Comprehensive Income for the Three Years Ended September 30, 1999.........F-4
   Consolidated Statement of Cash Flows for the Three Years Ended September 30, 1999..............................F-5
   Consolidated Statement of Shareholders' Equity for the Three Years Ended September 30, 1999....................F-6
   Notes to Consolidated Financial Statements.....................................................................F-7
</TABLE>

         (a)(2)   FINANCIAL STATEMENT SCHEDULES

         All schedules and other statements for which provision is made in the
applicable regulations of the Commission have been omitted because they are not
required under the relevant instructions or are inapplicable.

         (a)(3)   EXHIBITS


<TABLE>
<CAPTION>
     Exhibit Number                            Description
     --------------                            -----------
<S>                     <C>
         *3.1           Second Amended and Restated Articles of Incorporation of
                        the Company, as amended (filed as Exhibit 3(i) to the
                        Company's Quarterly Report on Form 10-Q for the fiscal
                        quarter ended June 30, 1998, and incorporated herein by
                        reference).

         *3.2           Amended and Restated Bylaws of the Company, as amended
                        (filed as Exhibit 3.2 to the Company's Registration
                        Statement on Form S-1, Registration No. 33-97606, and
                        incorporated herein by reference).

        +*10.1          1994 Long-Term Incentive Plan, as Amended and Restated
                        (filed as Exhibit 10(ii) to the Company's Quarterly
                        Report on Form 10-Q for the quarter ended March 31,
                        1998, and incorporated herein by reference).

        +*10.2          1995 Non-employee Director Stock Option Plan (filed as
                        Exhibit 10.2 to the Company's Registration Statement on
                        Form S-1, Registration No. 33-97606, and incorporated
                        herein by reference).

        +*10.3          401(k) Profit Sharing Plan (filed as Exhibit 10.3 to the
                        Company's Registration Statement on Form S-1,
                        Registration No. 33-97606, and incorporated herein by
                        reference).

         *10.4          Shareholders' Agreement dated as of October 1, 1994
                        among the Company and Messrs. Crane, Swannie, Seckel and
                        Roberts (filed as Exhibit 10.4 to the Company's
                        Registration Statement on Form S-1, Registration No.
                        33-97606, and incorporated herein by reference).

         *10.5          Form of Indemnification Agreement (filed as Exhibit 10.6
                        to the Company's Registration Statement on Form S-1,
                        Registration No. 33-97606, and incorporated herein by
                        reference).

         *10.6          Credit Agreement dated as of October 18, 1995 between
                        the Company and NationsBank of Texas, N.A. (filed as
                        Exhibit 10.8 to the Company's Registration Statement on
                        Form S-1, Registration No. 33- 97606, and incorporated
                        herein by reference).

        +*10.7          Employment Agreement dated as of October 1, 1996 between
                        the Company and James R. Crane (filed as Exhibit 10.7 to
                        the Company's Annual Report on Form 10-K for the fiscal
                        year ended September 30, 1996, and incorporated herein
                        by reference).

        +*10.8          Employment Agreement dated as of October 1, 1996 between
                        the Company and Douglas A. Seckel (filed as Exhibit 10.8
                        to the Company's Annual Report on Form 10-K for the
                        fiscal year ended September 30, 1996, and incorporated
                        herein by reference).

        +*10.9          Employment Agreement dated as of September 24, 1998
                        between the Company and John C. McVaney (filed as
                        Exhibit 10.9 to the Company's Annual Report on Form 10-K
                        for the fiscal year ended September 30, 1998, and
                        incorporated herein by reference).

        +*10.10         Employment Agreement dated as of May 19, 1998 between
                        the Company and Ronald E. Talley (filed as Exhibit 10.10
                        to the Company's Annual Report on Form 10-K for the
                        fiscal year ended September 30, 1998, and incorporated
                        herein by reference).

        +10.11          Employment Agreement dated as of October 19, 1999
                        between the Company and Elijio Serrano.
</TABLE>


                                       27
<PAGE>   28
<TABLE>
<CAPTION>
     Exhibit Number                       Description
     --------------                       -----------

<S>                   <C>
         +*10.12      Employees Stock Purchase Plan (effective July 1, 1998)
                      (filed as Exhibit 10(i) to the Company's Quarterly Report
                      on Form 10-Q for the quarter ended March 31, 1998 and
                      incorporated herein by reference).

         *10.13A      Lease and Development Agreement dated as of January 10,
                      1997 between Asset XI Holdings Company, L.L.C. and the
                      Company (filed as Exhibit 10 to the Company's Quarterly
                      Report on Form 10-Q for the quarter ended December 31,
                      1996 and incorporated herein by reference).

         *10.13B      Participation Agreement dated as of January 10, 1997 among
                      Asset XI Holdings Company, L.L.C., the Company and Bank
                      One, Texas, N.A. (filed as Exhibit 10.10B to the Company's
                      Annual Report on Form 10-K for the fiscal year ended
                      September 30, 1997, and incorporated herein by reference).

         *10.13C      Loan Agreement dated as of January 10, 1997 between Asset
                      XI Holdings Company, L.L.C. and Bank One, Texas, N.A.
                      (filed as Exhibit 10.10C to the Company's Annual Report on
                      Form 10-K for the fiscal year ended September 30, 1997,
                      and incorporated herein by reference).

         *10.14A      Master Lease and Development Agreement dated as of April
                      3, 1998 between Asset XVI Holdings Company, L.L.C. and
                      Eagle USA Airfreight, Inc. (filed as Exhibit 10(iii) A to
                      the Company's Quarterly Report on Form 10-Q to the quarter
                      ended June 30, 1998 and incorporated herein by reference).

         *10.14B      Master Participation Agreement dated as of April 3, 1998
                      among Asset XVI Holdings Company, L.L.C., Eagle USA
                      Airfreight, Inc. and Bank One, Texas, N.A. (filed as
                      Exhibit 10(iii) B to the Company's Quarterly Report on
                      Form 10-Q to the quarter ended June 30, 1998 and
                      incorporated herein by reference).

         *10.14C      Loan Agreement dated as of April 3, 1998 between Asset
                      Holdings Company, L.L.C. and Bank One, Texas, N.A. (filed
                      as Exhibit 10(iii) C to the Company's Quarterly Report on
                      Form 10-Q to the quarter ended June 30, 1998 and
                      incorporated herein by reference).

         *10.14D      Appendix I to Master Participation Agreement, Master Lease
                      and Development Agreement and Loan Agreement (filed as
                      Exhibit 10(iii) D to the Company's Quarterly Report on
                      Form 10-Q to the quarter ended June 30, 1998 and
                      incorporated herein by reference).

         21           Subsidiaries of the Company

         23.1         Consent of PricewaterhouseCoopers LLP

         27.1         Financial Data Schedule
</TABLE>


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


*        Incorporated by reference as indicated.

+        Management contract or compensatory plan or arrangement required to be
         filed as an exhibit pursuant to the requirements of Item 14(c) of Form
         10-K.


         (b)      REPORTS ON FORM 8-K

         No reports on Form 8-K were filed during the last quarter of the period
covered by this Annual Report on Form 10-K.



                                       28

<PAGE>   29



                                   SIGNATURES

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

         Date:    December 22, 1999

                                              EAGLE USA AIRFREIGHT, INC.


                                              By:    /s/ JAMES R.  CRANE
                                                 -------------------------------
                                                     James R. Crane
                                                     Chairman, President
                                                     and Chief Executive Officer

Pursuant to the requirements of the Securities and 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>
<CAPTION>
                 Name                                            Capacity                                        Date
                 ----                                            --------                                        ----
<S>                                          <C>                                                           <C>
/s/ JAMES R. CRANE                           Chairman, President and Chief Executive Officer               December 22, 1999
-------------------------------------        (Principal Executive Officer)
    James R. Crane


/s/ ELIJIO V. SERRANO                        Chief Financial Officer (Principal Financial and Accounting   December 22, 1999
------------------------------------         Officer)
    Elijio V. Serrano


/s/ FRANK J. HEVRDEJS                        Director                                                      December 22, 1999
---------------------------------
    Frank J. Hevrdejs


/s/ NEIL E. KELLEY                           Director                                                      December 22, 1999
------------------------------------
    Neil E. Kelley


/s/ NORWOOD W. KNIGHT-RICHARDSON             Director                                                      December 22, 1999
--------------------------------
    Norwood W. Knight-Richardson


/s/ REBECCA A. MCDONALD                      Director                                                      December 22, 1999
-----------------------------
    Rebecca A. McDonald


/s/ WILLIAM P. O'CONNELL                     Director                                                      December 22, 1999
----------------------------
    William P. O'Connell


/s/ DOUGLAS A. SECKEL                        Director                                                      December 22, 1999
---------------------------------
    Douglas A. Seckel
</TABLE>


                                       29

<PAGE>   30


                           EAGLE USA AIRFREIGHT, INC.



                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                                                                        Page
                                                                                                        ----
<S>                                                                                                     <C>
Report of Independent Accountants................................................................        F-2

Consolidated Balance Sheet as of September 30, 1999 and 1998.....................................        F-3

Consolidated Statement of Income and Comprehensive Income for the
  Three Years Ended September 30, 1999...........................................................        F-4

Consolidated Statement of Cash Flows for the Three Years
  Ended September 30, 1999.......................................................................        F-5

Consolidated Statement of Shareholders' Equity for the Three Years
  Ended September 30, 1999.......................................................................        F-6

Notes to Consolidated Financial Statements.......................................................        F-7

</TABLE>


                                      F-1
<PAGE>   31




                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and Shareholders of
Eagle USA Airfreight, Inc.


In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income and comprehensive income, of cash flows and of
shareholders' equity present fairly, in all material respects, the financial
position of Eagle USA Airfreight, Inc. and its subsidiaries (the Company) at
September 30, 1999 and 1998, and the results of their operations and their cash
flows for each of the three years in the period ended September 30, 1999, in
conformity with generally accepted accounting principles. 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 of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.





PricewaterhouseCoopers LLP

Houston, Texas
November 8, 1999, except as to the information presented in the last paragraph
of Note 11 and in Note 12, for which the date is December 15, 1999



                                      F-2
<PAGE>   32





                           EAGLE USA AIRFREIGHT, INC.


                           CONSOLIDATED BALANCE SHEET


<TABLE>
<CAPTION>
                                                                                           September 30,
                                                                                    --------------------------
                                                                                       1999            1998
                                                                                    ---------        ---------
                                 Assets                                          (in thousands, except par values)

<S>                                                                                 <C>              <C>
Current assets:
    Cash and cash equivalents                                                       $  35,175        $  37,191
    Short-term investments                                                             17,213           12,487
    Accounts receivable - trade, net of allowance for doubtful
      accounts of $2,042 and $675, respectively                                       109,003           69,576
    Prepaid expenses and other                                                          3,712            3,905
    Deferred income taxes                                                               2,817            1,077
                                                                                    ---------        ---------
          Total current assets                                                        167,920          124,236
Property and equipment, net                                                            28,184           21,963
Goodwill, net                                                                          11,072            9,349
Other assets                                                                            1,815            1,865
                                                                                    ---------        ---------
          Total assets                                                              $ 208,991        $ 157,413
                                                                                    =========        =========
                  Liabilities and Shareholders' Equity

Current liabilities:
    Accounts payable - trade                                                        $  12,657        $   4,542
    Accrued transportation costs                                                       21,895           14,014
    Accrued compensation and employee benefits                                         18,677           14,061
    Other accrued liabilities                                                           8,855            3,711
                                                                                    ---------        ---------
          Total current liabilities                                                    62,084           36,328
Deferred income taxes                                                                   3,097            2,039
                                                                                    ---------        ---------
          Total liabilities                                                            65,181           38,367
                                                                                    ---------        ---------
Minority interest                                                                         183
                                                                                    ---------        ---------
Shareholders' equity:
    Preferred stock, $0.001 par value, 10,000 shares authorized
    Common stock, $0.001 par value, 100,000 shares authorized,
      29,453 and 28,688 shares issued                                                      29               28
    Additional paid-in capital                                                         81,310           70,247
    Retained earnings                                                                  77,629           49,131
    Accumulated other comprehensive loss                                                 (771)            (360)
    Treasury stock, 1,022 shares, at cost                                             (14,570)
                                                                                    ---------        ---------
                                                                                      143,627          119,046
                                                                                    ---------        ---------
Commitments and contingencies (Notes 3, 8 and 11)
                                                                                    ---------        ---------
          Total liabilities and shareholders' equity                                $ 208,991        $ 157,413
                                                                                    =========        =========
</TABLE>

         The accompanying notes are an integral part of this statement.



                                      F-3
<PAGE>   33




                           EAGLE USA AIRFREIGHT, INC.


           CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME



<TABLE>
<CAPTION>
                                                            Year ended September 30,
                                                 -------------------------------------------
                                                    1999             1998             1997
                                                 ---------        ---------        ---------
                                                    (in thousands, except per share data)

<S>                                              <C>              <C>              <C>
Revenues                                         $ 595,173        $ 417,083        $ 291,767
Cost of transportation                             340,090          233,257          163,616
                                                 ---------        ---------        ---------
         Net revenues                              255,083          183,826          128,151
                                                 ---------        ---------        ---------
Operating expenses:
Personnel costs                                    128,942           97,584           67,813
Other selling, general and administrative
  expenses                                          81,149           54,022           34,639
                                                 ---------        ---------        ---------
                                                   210,091          151,606          102,452
                                                 ---------        ---------        ---------
Operating income                                    44,992           32,220           25,699
Interest and other income                            2,301            1,776            1,693
Minority interest                                      172
                                                 ---------        ---------        ---------
Income before provision for income taxes            47,465           33,996           27,392
Provision for income taxes                          18,967           12,964           10,594
                                                 ---------        ---------        ---------
Net income                                          28,498           21,032           16,798
Other comprehensive income:
    Foreign currency translation                      (411)            (360)
                                                 ---------        ---------        ---------

Comprehensive income                             $  28,087        $  20,672        $  16,798
                                                 =========        =========        =========


Basic earnings per share                         $    1.01        $    0.75        $    0.63
Basic weighted-average shares outstanding           28,291           28,101           26,688
Diluted earnings per share                       $    0.98        $    0.72        $    0.60
Diluted weighted-average shares outstanding         29,116           29,061           28,023
</TABLE>


         The accompanying notes are an integral part of this statement.



                                      F-4
<PAGE>   34

                           EAGLE USA AIRFREIGHT, INC.

                      CONSOLIDATED STATEMENT OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                    Year ended September 30,
                                                          ------------------------------------------
                                                            1999              1998            1997
                                                          ---------        ---------        --------
                                                                        (in thousands)
<S>                                                       <C>              <C>              <C>
Cash flows from operating activities:
    Cash received from customers                          $ 551,554        $ 402,773        $ 266,037
    Cash paid to carriers, suppliers and
      employees                                            (514,841)        (371,301)        (259,760)
    Interest received                                         2,301            1,699            1,580
    Income taxes paid                                       (13,694)          (7,851)          (6,936)
                                                          ---------        ---------        ---------
          Net cash provided by operating activities          25,320           25,320              921
                                                          ---------        ---------        ---------
Cash flows from investing activities:
    Purchase of investments                                 (24,438)         (20,304)         (11,350)
    Maturity of investments                                  19,712           10,496           12,080
    Acquisitions, net of cash                                                 (3,619)          (5,574)
    Payment of contingent consideration for
      acquisitions                                           (2,373)
    Acquisition of property and equipment                   (13,433)         (11,863)          (6,524)
    Disposition of property and equipment                     1,360              763              319
    (Increase) decrease in other assets, net                    207             (776)
                                                          ---------        ---------        ---------
          Net cash used by investing activities             (18,965)         (25,303)         (11,049)
                                                          ---------        ---------        ---------
Cash flows from financing activities:
    Issuance of common stock, net of related costs              256            6,621            6,162
    Offering fee paid by selling shareholder                                                      375
    Proceeds from exercise of stock options                   6,629            5,806            2,637
    Payments on shareholder distribution notes                                                   (635)
    Purchase of treasury stock                              (14,845)
                                                          ---------        ---------        ---------
          Net cash provided (used) by
            financing activities                             (7,960)          12,427            8,539
                                                          ---------        ---------        ---------
Effect of foreign currency translation on cash                 (411)            (360)
                                                          ---------        ---------        ---------
Net increase (decrease) in cash and
  cash equivalents                                           (2,016)          12,084           (1,589)
Cash and cash equivalents, beginning of year                 37,191           25,107           26,696
                                                          ---------        ---------        ---------

Cash and cash equivalents, end of year                    $  35,175        $  37,191        $  25,107
                                                          =========        =========        =========
</TABLE>


         The accompanying notes are an integral part of this statement.

                                      F-5
<PAGE>   35



                           EAGLE USA AIRFREIGHT, INC.


                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                            Common stock              Additional
                                                     --------------------------        paid-in          Retained
                                                       Shares           Amount         capital          earnings
                                                     ---------        ---------       ----------       ---------
<S>                                                    <C>           <C>             <C>              <C>
Balance at September 30, 1996                           26,238        $      26       $  39,115        $  11,301

Issuance of common stock, net of related costs             348                            6,162
Issuance of common stock for acquisition                    50                            1,000
Payment on shareholder distribution notes                                                  (635)
Exercise of stock options                                  680                1           2,636
Tax benefit from exercise of stock options                                                4,100
Net income                                                                                                16,798
                                                     ---------        ---------       ---------        ---------

Balance at September 30, 1997                           27,316               27          52,378           28,099

Issuance of common stock, net of related costs             394                            6,621
Issuance of common stock for acquisition                    42                              750
Exercise of stock options                                  936                1           5,805
Tax-benefit from exercise of stock options                                                4,693
Foreign currency translation adjustments
Net income                                                                                                21,032
                                                     ---------        ---------       ---------        ---------

Balance at September 30, 1998                           28,688               28          70,247           49,131

Exercise of stock options                                  765                1           6,628
Tax-benefit from exercise of stock options                                                4,454
Purchase of treasury stock
Issuance of shares under stock purchase plan                                                (19)
Foreign currency translation adjustments
Net income                                                                                                28,498
                                                     ---------        ---------       ---------        ---------

Balance at September 30, 1999                           29,453        $      29       $  81,310        $  77,629
                                                     =========        =========       =========        =========
</TABLE>


<TABLE>
<CAPTION>

                                                                    Treasury stock            Accumulated
                                                            --------------------------       other compre-
                                                              Shares           Amount         hensive loss       Total
                                                            ---------        ---------       -------------     ---------

<S>                                                        <C>                <C>              <C>             <C>
Balance at September 30, 1996                                                                                  $  50,442

Issuance of common stock, net of related costs                                                                     6,162
Issuance of common stock for acquisition                                                                           1,000
Payment on shareholder distribution notes                                                                           (635)
Exercise of stock options                                                                                          2,637
Tax benefit from exercise of stock options                                                                         4,100
Net income                                                                                                        16,798
                                                            ---------        ---------        ---------        ---------

Balance at September 30, 1997                                                                                     80,504

Issuance of common stock, net of related costs                                                                     6,621
Issuance of common stock for acquisition                                                                             750
Exercise of stock options                                                                                          5,806
Tax-benefit from exercise of stock options                                                                         4,693
Foreign currency translation adjustments                                                      $    (360)            (360)
Net income                                                                                                        21,032
                                                            ---------        ---------        ---------        ---------

Balance at September 30, 1998                                                                      (360)         119,046

Exercise of stock options                                                                                          6,629
Tax-benefit from exercise of stock options                                                                         4,454
Purchase of treasury stock                                     (1,045)       $ (14,845)                          (14,845)
Issuance of shares under stock purchase plan                       23              275                               256
Foreign currency translation adjustments                                                           (411)            (411)
Net income                                                                                                        28,498
                                                            ---------        ---------        ---------        ---------

Balance at September 30, 1999                                  (1,022)       $ (14,570)       $    (771)       $ 143,627
                                                            =========        =========        =========        =========
</TABLE>


         The accompanying notes are an integral part of this statement.


                                      F-6
<PAGE>   36





                           EAGLE USA AIRFREIGHT, INC.


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1 - ORGANIZATION, OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:

Eagle USA Airfreight, Inc. (the Company) is a worldwide logistics company. The
Company maintains operating facilities throughout the United States, Mexico,
Canada, Hong Kong, the United Kingdom, Argentina, Brazil and Peru as well as a
worldwide network of exclusive and nonexclusive agents.

All dollar amounts and share data in the notes are presented in thousands except
for par values and per share data. Certain prior year amounts have been
reclassified to conform to the 1999 presentation.

Segment reporting

The Company operates in one principal industry segment. No customer accounted
for ten percent or more of consolidated revenues. During the years ended
September 30, 1999, 1998 and 1997, the Company's geographic segments which are
outside the United States did not represent, in the aggregate, more than 10% of
the revenues, net income or assets of the combined amounts for all geographic
segments.

Stock split

On July 12, 1999, the Board of Directors declared a three-for-two stock split of
the Company's common stock, effected in the form of a stock dividend. All shares
and per-share amounts have been restated retroactively to reflect the stock
split, which was distributed August 30, 1999 to shareholders of record August
23, 1999.

Summary of Significant Accounting Policies:

Principles of consolidation

The consolidated financial statements include the accounts of Eagle USA
Airfreight, Inc. and its subsidiaries. All significant intercompany transactions
and balances have been eliminated.

Revenue and expense recognition

Revenues and expenses related to the transportation of freight are recognized at
the time the freight departs the terminal of origin. All other revenues are
recognized when the service is provided.


                                      F-7
<PAGE>   37


Cash equivalents

For purposes of the statement of cash flows, the Company considers all highly
liquid investments with original maturities of three months or less to be cash
equivalents. Cash equivalents are carried at cost, which approximates market
value.

Short-term investments

At September 30, 1999 and 1998, the Company had short-term investments in
commercial paper, U.S. Treasury Bills and Tax Exempt Municipal Bonds with a
carrying value of $17,213 and $12,487, respectively. Securities with a carrying
value of $17,213 at September 30, 1999 mature in less than one year. Such
investments are "available for sale" since the Company has the intent to utilize
the funds as needed. The investments are stated at amortized cost, which
approximated market. Accordingly, no unrealized holding gains or losses have
been recorded by the Company as of September 30, 1999. The Company's short-term
investments in U.S. Treasury Bills at September 30, 1998 matured during fiscal
1999 with no gain or loss recognized.

Fair value of financial instruments

The carrying value of cash and cash equivalents, accounts receivable, accounts
payable and accrued expenses approximates fair value at September 30, 1999 and
1998 due to their short-term nature.

Concentration of credit risk

The Company's customers include retailing, wholesaling, manufacturing and
electronics companies as well as international agents throughout the world.
Management believes that concentrations of credit risk with respect to trade
receivables are limited due to the large number of customers comprising the
Company's customer base and their dispersion across many different industries
and geographic regions. The Company performs ongoing credit evaluations of its
customers to minimize credit risk. The Company's investment policies restrict
investments to low-risk, highly-liquid securities and the Company performs
periodic evaluations of the relative credit standing of the financial
institutions with which it deals.

Doing business in foreign locations subjects the Company to various risks and
considerations typical to foreign enterprises, including, but not limited to,
economic and political conditions in the United States and abroad, currency
exchange rates, tax laws and other laws and trade restrictions.

Foreign currency exchange

Foreign currency amounts attributable to foreign operations have been translated
into U.S. dollars using year-end exchange rates for assets and liabilities,
historical rates for equity, and average annual rates for revenues and expenses.
Unrealized gains and losses arising from fluctuations in currency exchange rates
are recorded as equity adjustments. Foreign currency transaction gains and
losses realized during 1999 and 1998 were insignificant.

                                      F-8
<PAGE>   38

Property and equipment

Property and equipment is stated at cost. Property and equipment is depreciated
using the straight-line method over its estimated useful life. Expenditures for
maintenance and repairs are expensed as incurred. Major improvements are
capitalized. Costs of internally-developed software are capitalized in
accordance with Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use."

Goodwill

Goodwill, which represents the excess of purchase price over the fair value of
net assets acquired, is being amortized on a straight-line basis over the
estimated useful lives of the businesses acquired. Accumulated amortization of
goodwill was $870 and $469 at September 30, 1999 and 1998, respectively.

Impairment of assets

The Company reviews for the impairment of long-lived assets whenever events or
changes in circumstances indicated that the carrying amount of an asset may not
be recoverable. An impairment loss would be recognized when estimated future
cash flows expected to result from the use of the asset and its eventual
disposition is less than the carrying amount. The Company has not identified any
such impairment loss.

Income taxes

The provision for income taxes is computed based upon the pretax income included
in the consolidated statement of income. The asset and liability approach is
used to recognize deferred tax liabilities and assets for the expected future
tax consequences of temporary differences between the carrying amounts and the
tax bases of assets and liabilities.

Use of estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.

Earnings per share

The Company has adopted Statement of Financial Accounting Standard (SFAS) No.
128, "Earnings per Share." Basic earnings per share excludes dilution and is
computed by dividing income available to common shareholders by the
weighted-average number of common shares outstanding for the period. Diluted
earnings per share includes potential dilution that could occur if securities to
issue common stock were exercised.

The computations of basic and diluted earnings per share were determined by
adding to the weighted-average shares 825, 960 and 1,335 additional shares for
common stock equivalents during the years ending 1999, 1998 and 1997,
respectively.


                                      F-9
<PAGE>   39


Stock options to purchase 452, 1,355 and 56 shares of common stock were not
included in the 1999, 1998 and 1997 computation of diluted earnings per share,
respectively, because the options' exercise price was greater than the average
market price of the underlying common stock.

Comprehensive income

In October 1998 the Company adopted SFAS No. 130, "Reporting Comprehensive
Income." Under SFAS No. 130, companies are required to report in the financial
statements, in addition to net income, comprehensive income, including, as
applicable, foreign currency items, minimum pension liability adjustments and
unrealized gains and losses on certain investments in debt and equity
securities. The Company's only component of other comprehensive income is
foreign currency translation adjustments. The Company's cumulative translation
adjustments in prior years have been reclassified to conform to SFAS 130.

New accounting pronouncements

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS 133 is
effective for transactions entered into after January 1, 2000. SFAS 133 requires
that all derivative instruments be recorded on the balance sheet at fair value.
Changes in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and on the type of hedge transaction.
The ineffective portion of all hedges will be recognized in earnings. The
Company does not believe the impact of adopting SFAS 133 will be material to its
results of operations and financial position.

NOTE 2 - PROPERTY AND EQUIPMENT:

Property and equipment consist of the following at September 30:

<TABLE>
<CAPTION>
                                       Estimated
                                      useful lives         1999            1998
                                      ------------       --------        --------

<S>                                   <C>                <C>             <C>
Office and warehouse equipment
 and software                         5 years            $ 22,845        $ 17,139
Vehicles                              5 years               4,436           4,979
Furniture and fixtures                7 years               4,655           3,356
Buildings                             5 - 39 years          4,665
Land                                                          995             731
Leasehold improvements                lease terms           3,693           3,972
                                                         --------        --------
                                                           41,289          30,177
Less - accumulated depreciation
 and amortization                                         (13,105)         (8,214)
                                                         --------        --------

                                                         $ 28,184        $ 21,963
                                                         ========        ========
</TABLE>


                                      F-10
<PAGE>   40



NOTE 3 - ACQUISITIONS:

On September 19, 1997, the Company acquired the operating assets of Michael
Burton Enterprises, Inc., a transportation and value-added logistics service
provider in Columbus, Ohio. The Company issued 50 shares of common stock, valued
at $1,000 and paid approximately $5,574 in cash. The acquisition agreement also
provided for three contingent payments aggregating up to $5,250 if certain
annual sales goals are achieved over the three-year period ending September 30,
2000. Through September 30, 1999, contingent payments of $2,750 had been
recorded and recognized as additional goodwill.

On April 3, 1998, the Company acquired substantially all of the operating assets
of Eagle Transfer, Inc. (Eagle Companies), a privately-held international
freight forwarder/consolidator based in Miami, Florida. On April 14, 1998, the
Company acquired all of the outstanding stock of S. Boardman (Air Services)
Limited and Subsidiaries (S. Boardman), a privately-held full services forwarder
based in London, England. The aggregate purchase price for the two 1998
acquisitions was approximately $5,447, including $4,300 in cash plus 42 shares
of common stock, valued at $750. The agreements also specify maximum contingent
earnout payments in the aggregate of $1,950 in cash plus $2,250 in common stock,
if certain performance benchmarks are met over each of the three succeeding
years. Through September 30, 1999, contingent payments of $831 had been recorded
and recognized as additional goodwill.

NOTE 4 - INCOME TAXES:

The Company's income tax provision was comprised of the following for the years
ended September 30:

<TABLE>
<CAPTION>
                    1999            1998            1997
                  --------        --------        --------
<S>               <C>             <C>             <C>
Current:
    U.S           $ 16,562        $ 10,239        $  8,686
    State            2,821           1,670           1,525
    Foreign            266              19
                  --------        --------        --------
                    19,649          11,928          10,211
                  --------        --------        --------
Deferred:
    U.S               (484)            936             316
    State              (83)            165              67
    Foreign           (115)            (65)
                  --------        --------        --------
                      (682)          1,036             383
                  --------        --------        --------

Total             $ 18,967        $ 12,964        $ 10,594
                  ========        ========        ========
</TABLE>


                                      F-11
<PAGE>   41

A reconciliation of the federal statutory tax rate and the Company's provision
for income taxes is as follows for the years ended September 30:


<TABLE>
<CAPTION>

                                               1999             1998           1997
                                             --------        --------        --------
<S>                                          <C>             <C>             <C>
Income taxes at the applicable federal
  statutory rates                            $ 16,613        $ 11,637        $  9,371
Tax exempt income                                (165)           (205)           (158)
Nondeductible items                               739             339             330
State income taxes, net of federal
  benefit                                       1,780           1,193           1,051
                                             --------        --------        --------

Provision for income taxes                   $ 18,967        $ 12,964        $ 10,594
                                             ========        ========        ========
</TABLE>


The Company's income before provision for income taxes was comprised of the
following for the years ended September 30:

<TABLE>
<CAPTION>
                                               1999             1998           1997
                                             --------        --------        --------
<S>                                          <C>             <C>             <C>
U.S.                                         $ 47,512        $ 34,083        $ 27,648
Foreign                                           (47)            (87)           (256)
                                             --------        --------        --------

Total                                        $ 47,465        $ 33,996        $ 27,392
                                             ========        ========        ========
</TABLE>


As a result of the exercises for the years ended September 30, 1999, 1998 and
1997 of nonqualified stock options to purchase an aggregate of 765, 936 and 680
shares of common stock, respectively, the Company is entitled to a federal
income tax deduction of approximately $11,506, $12,887 and $10,200,
respectively. The Company realized a tax benefit of approximately $4,454, $4,693
and $4,100; respectively; accordingly, the Company recorded an increase to
additional paid-in capital and a reduction in current taxes payable pursuant to
the provisions of SFAS 109, "Accounting for Income Taxes." Any exercises of
nonqualified stock options in the future at exercise prices below the then fair
market value of the common stock may also result in tax deductions equal to the
difference between such amounts, although there can be no assurance as to
whether or not such exercises will occur, the amount of any deductions or the
Company's ability to fully utilize such tax deductions.

                                      F-12
<PAGE>   42



Deferred tax assets and liabilities as of September 30, 1999 and 1998 were
comprised of the following:

<TABLE>
<CAPTION>
                                            1999           1998
                                          -------        -------
Assets:
<S>                                       <C>            <C>
   Bad debt expense                       $   820        $   260
   Accruals and other                       1,997            618
   Net operating loss carryforwards           180             65
                                          -------        -------
                                            2,997            943
                                          -------        -------
Liabilities:
   Depreciation                            (1,563)          (992)
   Software development costs              (1,428)          (866)
   Amortization                              (216)           (47)
   Lease financing                            (70)
                                          -------        -------
                                           (3,277)        (1,905)
                                          -------        -------
                                          $  (280)       $  (962)
                                          =======        =======
</TABLE>


NOTE 5 - SHAREHOLDERS' EQUITY:

On February 18, 1997, the Company completed an underwritten secondary public
offering of 2,670 shares of its common stock at a price to the public of $18.83
per share. The Company did not receive any of the proceeds from the sale of
2,322 of these shares by Daniel Swannie, a former executive officer and director
of the Company. Pursuant to an agreement between the Company and Mr. Swannie
entered into in connection with the offering, Mr. Swannie reimbursed the Company
for all of its out-of-pocket expenses incurred in connection with the offering
and made a payment to the Company of $375 for the Company's estimated internal
costs relating to the offering. The agreement also restricts Mr. Swannie's
ability to compete against the Company for a three-year term and places certain
other limitations on his ability to act against the interests of the Company. In
connection with the offering, the Company sold 348 shares of common stock to the
underwriters pursuant to an over-allotment option at a price of $18.83 per
share. The net proceeds received by the Company after deducting underwriting
discounts and commissions were $6,162 and have been used for general corporate
purposes.

On January 30, 1998, the Company completed an underwritten secondary public
offering of 3,019 shares of its common stock at a price to the public of $18.50
per share. The Company did not receive any of the proceeds from the sale of
2,625 of these shares sold by James R. Crane, the Company's Chairman of the
Board of Directors, President and Chief Executive Officer. The Company sold 394
of the offered shares and the net proceeds received by the Company after
deducting underwriting discounts and commissions and offering expenses were
$6,600 and have been used for general corporate purposes.

During the fiscal year ended September 30, 1999, the Company's Board of
Directors authorized the repurchase of up to 1,750 shares of the Company's
common stock in the open market. As of


                                      F-13
<PAGE>   43






September 30, 1999, the Company had purchased 1,045 shares of common stock, net
of reissuance of 23 shares. Such shares are held in treasury.

NOTE 6 - BENEFIT PLANS AND STOCK PLANS:

Savings Plan

In October 1998, the Company initiated a Stock Purchase Plan, which provides for
up to 300 shares of the Company's common stock to be reserved for issuance upon
exercise of purchase rights granted to certain employees who elect to
participate through regular payroll deductions. Purchase rights are granted to
eligible employees who elect to participate each January 1 through July 1 for a
six-month offering period. The purchase rights are exercisable in the following
January or July at a price equal to the lesser of (1) 85% of the fair market
value of the Company's common stock on the first day of such period or (2) 85%
of the fair market value of the common stock on the last day of such period.
During the year ended September 30, 1999, the Company issued 23 shares of its
treasury stock to the Stock Purchase Plan.

The Company has a 401(k) savings plan pursuant to which the Company provides
discretionary matching of employees' tax-deferred savings, up to a maximum of 5%
of eligible compensation. During fiscal 1999, 1998, and 1997, the Company
recorded charges of $3,691, $2,298 and $1,373, respectively, related to its
discretionary contributions to this plan.

Stock Option Plans

The Company has two stock option plans (the 1994 Plan and Director Plan) whereby
certain officers, directors and employees may be granted options, appreciation
rights or awards related to the Company's common stock. The Board has authorized
9,150 shares to be available for grant pursuant to the 1994 Plan and 300 shares
pursuant to the Director Plan.

Under the 1994 Plan, each option is to be granted at an exercise price equal to
the fair market value of the common stock on the date of grant. The options
generally vest ratably over a five-year or seven-year period from the date of
issuance (or 100% upon death). The Company has no obligation to repurchase the
options granted. Vested options terminate seven years from the date of grant.

Additional awards may be granted under the 1994 Plan in the form of cash, stock
or stock appreciation rights. The stock appreciation right awards may consist of
the right to receive payment in cash or common stock. Any award may be subject
to certain conditions, including continuous service with the Company or
achievement of certain business objectives. There have been no awards of this
kind under the 1994 Plan.

Under the Director Plan each option vests within one year from the date of
issuance and terminates ten years from the date of issuance.




                                      F-14
<PAGE>   44

As of September 30, 1999, options to purchase 4,529 shares of common stock of
the Company under both plans were outstanding as follows:

<TABLE>
<CAPTION>
                                                                                      Weighted-
                                                                                       average
                                                                      Options       option price
                                                                      -------       ------------

         <S>                                                          <C>            <C>
         Outstanding at September 30, 1996                            3,290          $     4.75

         Granted                                                        657               16.32
         Forfeited                                                     (101)              11.04
         Exercised                                                     (680)               3.89
                                                                      -----

         Outstanding at September 30, 1997                            3,166                7.13
                                                                      =====

         Options vested at end of year                                1,026                5.57
                                                                      =====
         Granted                                                      2,763               19.55
         Forfeited                                                     (299)              13.50
         Exercised                                                     (936)               6.21
                                                                      -----

         Outstanding at September 30, 1998                            4,694               14.22
                                                                      =====

         Options vested at end of year                                  825                5.18
                                                                      =====
         Granted                                                        870               20.12
         Forfeited                                                     (270)              15.67
         Exercised                                                     (765)               8.65
                                                                      -----

         Outstanding at September 30, 1999                            4,529               16.21
                                                                      =====

         Options vested at end of year                                1,320                9.71
                                                                      =====
</TABLE>


The following table summarizes information about stock options outstanding at
September 30, 1999:


<TABLE>
<CAPTION>

                                                Outstanding                                 Exercisable
                                 ------------------------------------------          -------------------------
                                                  Average          Weighted                           Weighted
       Range of                                  remaining          average                            average
    exercise prices              Number            life              price           Number             price
    ---------------              ------          ---------         --------          -------           --------

<S>     <C>                      <C>             <C>              <C>                <C>               <C>
$0.83 - $5.50                        699           2.35           $    1.61              636           $  1.23
$8.09 - $18.00                       825           4.61               13.12              241             13.48
$18.25 - $20.08                    2,189           5.61               19.27              369             19.28
$20.29 - $24.85                      816           6.40               23.65               74             22.46
                                   -----           ----           ---------            -----           -------

$0.83 - $24.85                     4,529           5.07           $   16.21            1,320           $  9.71
                                   =====           ====           =========            =====           =======
</TABLE>


The Company applies Accounting Principles Board (APB) No. 25 and related
interpretations in accounting for its stock option plans. No compensation cost
has been recognized for these plans. The weighted-average fair values of options
granted during 1999, 1998 and 1997 were $12.07,


                                      F-15
<PAGE>   45


$11.11 and $8.33, respectively. Had compensation cost for the Company's option
plans been determined based upon the fair value at the grant dates for awards
under these plans consistent with the method set forth under SFAS 123,
"Accounting for Stock-Based Compensation," the Company's net income for the
years ended September 30, 1999, 1998 and 1997 would have been reduced by $4,937,
$3,101 and $2,490, respectively. Diluted earnings per share for fiscal 1999,
1998 and 1997 would have been reduced by $0.17, $0.11 and $0.09, respectively.

The fair value of each option granted is estimated on the date of grant using
the Black-Scholes options-repricing model with the following weighted-average
assumptions used for grants in 1999, 1998 and 1997: expected volatility of 63%,
60% and 44%, respectively, risk-free interest rates of 5.2%, 5.4% and 6.3% zero
dividend yield, respectively, and an expected life of five years in 1999, five
years in 1998 and six years in 1997.

NOTE 7 - RELATED PARTY TRANSACTIONS:

From time to time, the Company utilizes an aircraft owned by an entity that is
controlled by the principal shareholder and is charged for actual usage on an
hourly basis. Total travel expense during fiscal years ended September 30, 1999,
1998 and 1997 related to the aircraft was $695, $424 and $125, respectively.

NOTE 8 - FINANCING ARRANGEMENTS:

The Company has a number of operating lease agreements, principally for computer
equipment, office space and freight operation facilities. These leases are
noncancelable and expire on various dates through 2007. Following is a summary
of future minimum rental payments required under the operating leases that have
initial or remaining noncancelable lease terms in excess of one year:


<TABLE>
<CAPTION>
                 Year ended
                September 30,
                -------------
                <S>                                    <C>
                  2000                                 $    11,060
                  2001                                       8,896
                  2002                                       6,109
                  2003                                       4,157
                  Thereafter                                 2,917
                                                       -----------
                                                       $    33,139
                                                       ===========
</TABLE>

Rent expense under all noncancelable operating leases during 1999, 1998 and 1997
was $11,018, $7,022 and $4,773, respectively.

In January 1997, the Company entered into a five-year operating lease agreement
with two unrelated parties for financing the construction of its Houston
terminal, warehouse and headquarters facility (the Houston facility). The cost
of the Houston facility was approximately $8,500. Under the terms of the lease
agreement, average monthly lease payments are


                                      F-16
<PAGE>   46


approximately $59 (including monthly interest costs based upon LIBOR rate plus
145 basis points) with a balloon payment equal to the outstanding lease balance
(initially equal to the cost of the facility) due on October 2, 2002. The
Company has an option, exercisable at any time during the lease term, to acquire
the facility for an amount equal to the outstanding lease balance. In the event
the Company does not exercise the purchase option, it is subject to a deficiency
payment, computed as the amount equal to the outstanding lease balance minus the
then current fair market value of the Houston facility. As of September 30,
1999, the lease balance was approximately $8,300.

On April 3, 1998, the Company entered into a five-year $20,000 master operating
lease agreement with two unrelated parties for financing the construction of
terminal and warehouse facilities throughout the United States, designated by
the Company (each, a Financed Facility). Under the terms of the master operating
lease agreement, average monthly lease payments (including monthly interest
costs based upon LIBOR rate plus 145 basis points) will begin upon the
completion of the construction of each Financed Facility and will continue for a
term of 52 months with a balloon payment equal to the outstanding lease balances
(initially equal to the costs of each Financed Facility) due at the end of each
lease term, and the Company has an option, exercisable at any time during the
lease term and under certain circumstances may be obligated, to acquire each
Financed Facility for an amount equal to the outstanding lease balance. In the
event the Company does not exercise the purchase option, and does not otherwise
meet its obligations, it is subject to a deficiency payment, computed as the
amount equal to the outstanding lease balance minus the then fair market value
of each Financed Facility within certain limits. The Company began construction
of each Financed Facility during 1999. As of September 30, 1999, the aggregate
lease balance was approximately $10,622 under the master operating leases.

The Company's subsidiaries in the United Kingdom, Hong Kong and Mexico maintain
bank lines of credit for purposes of securing customs bonds and bank standby
letters of credit for purposes of guaranteeing certain transportation expenses.
These credit lines and letters of credit are supported by standby letters of
credit issued by a United States bank or guarantees issued by the Company to the
foreign banks. At September 30, 1999 the Company was contingently liable for
approximately $2,600 under outstanding letters of credit and guarantees related
to these obligations.


                                      F-17
<PAGE>   47




NOTE 9 - STATEMENT OF CASH FLOWS:

Following is a reconciliation of net income to net cash provided by operating
activities for the years ended September 30:

<TABLE>
<CAPTION>
                                                                              1999            1998            1997
                                                                            --------        --------        --------
<S>                                                                         <C>             <C>             <C>
Reconciliation of net income to net cash provided by
  operating activities:-
   Net income                                                               $ 28,498        $ 21,032        $ 16,798
Adjustments to reconcile net income to net cash provided by operating
  activities:
   Provision for bad debts                                                     4,193           2,036           1,447
   Depreciation and amortization                                               6,288           4,271           2,092
   Deferred income tax expense (benefit)                                        (682)          1,036             383
   Tax effect of stock options exercised                                       4,454           4,693           4,100
   Change in assets and liabilities, net of acquisitions:
      Trade accounts receivable                                              (43,620)        (14,310)        (26,897)
      Prepaid expenses and other assets                                       (1,311)          1,194          (1,086)
      Accounts payable and other accrued liabilities                          27,500           5,368           4,084
                                                                            --------        --------        --------

        Net cash provided by operating
          activities                                                        $ 25,320        $ 25,320        $    921
                                                                            ========        ========        ========
</TABLE>


Supplemental information on noncash investing and financing activities:

   Contingent payments of $1,250 and $1,500 were accrued at September 30, 1999
   and 1998, respectively, resulting in an increase in goodwill and accrued
   liabilities.

   Goodwill was recorded in 1998 and 1997 as a result of the issuance of 42
   shares of common stock, valued at $750 and 50 shares of common stock, valued
   at $1,000, respectively; in connection with acquisitions.

   Accounts receivable totaling $2,826, $1,927 and $1,244 were written off
   against the allowance for doubtful accounts.

   A 3-for-2 stock split was paid on August 30, 1999 and resulted in a charge of
   $9 to common stock and additional paid-in capital.


                                      F-18
<PAGE>   48


   NOTE 10 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED):

   The following is a summary of the Company's unaudited quarterly financial
   information for the years ended September 30, 1999 and 1998.

<TABLE>
<CAPTION>
                                                        Quarter Ended,
                                 ----------------------------------------------------------
                                 December 31,    March 31,      June 30,      September 30,
                                    1998           1999           1999           1999
                                    ----           ----           ----           ----
<S>                               <C>            <C>            <C>            <C>
Revenues                          $144,876       $133,722       $149,826       $166,749
Net revenues                        63,323         57,953         63,693         70,114
Operating income                    12,170          8,361         11,072         13,389
Income before provision for
  income taxes                      12,702          9,012         11,823         13,928
Net income                           7,748          5,533          7,295          7,922
Basic earnings per share              0.27           0.20           0.26           0.28
Diluted earnings per share            0.27           0.19           0.25           0.27
</TABLE>


<TABLE>
<CAPTION>
                                                        Quarter Ended,
                                ----------------------------------------------------------
                                 December 31,    March 31,      June 30,     September 30,
                                     1997           1998          1998           1998
                                     ----           ----          ----           ----
<S>                               <C>            <C>            <C>            <C>
Revenues                          $ 97,645       $ 90,544       $107,050       $121,844
Net revenues                        44,038         39,969         46,707         53,112
Operating income                     9,349          6,064          8,472          8,335
Income before provision for
  income taxes                       9,654          6,532          8,958          8,852
Net income                           5,890          3,989          5,645          5,508
Basic earnings per share              0.22           0.14           0.20           0.19
Diluted earnings per share            0.21           0.14           0.19           0.19
</TABLE>


NOTE 11 - COMMITMENTS AND CONTINGENCIES:

From time to time, the Company is a party to various legal claims and
proceedings arising in the ordinary course of business.

In December 1997, the U.S. Equal Employment Opportunity Commission (EEOC) issued
a Commissioner's Charge against the Company and certain of its subsidiaries (the
Commissioner's Charge) pursuant to Sections 706 and 707 of Title VII of the
Civil Rights Act of 1964, as amended (Title VII). The Company continues to
vigorously defend against allegations contained in the Commissioner's Charge. In
the Commissioner's Charge, the EEOC charged the Company and certain of its
subsidiaries with violations of Section 703 of Title VII, as amended, the Age
Discrimination in Employment Act of 1967, and the Equal Pay Act of 1963,
resulting from (i) engaging in unlawful discriminatory hiring, recruiting and
promotion practices and


                                      F-19
<PAGE>   49




maintaining a hostile work environment, based on one or more of race, national
origin, age and gender, (ii) failures to investigate, (iii) failures to maintain
proper records and (iv) failures to file accurate reports. The Commissioner's
Charge states that the persons aggrieved include all blacks, Hispanics, Asians
and females who are, have been or might be affected by the alleged unlawful
practices.

On December 15, 1999 the EEOC terminated its active investigation of the
Commission's Charge with respect to any requests for information or contact with
the Company. The Company now anticipates that the EEOC will make its final
determination with respect to the matters raised in the Commissioner's Charge
within the next six months and that final determination will propose a plan for
the final resolution of those matters. In the event of an adverse determination,
the Company and the EEOC would likely first seek to resolve the issues through a
conciliation process. In the event that all issues are not resolved through the
conciliation process, any adverse determination would likely result in a civil
action by the EEOC that could seek back pay, other compensatory damages and
punitive damages for the allegedly aggrieved persons. The Company cannot
currently predict with any great degree of certainty, the length of time it will
take to resolve this matter, the likely outcome of this matter or the effect of
any such outcome. The Company, however, continues to vigorously defend against
the allegations contained in the Commissioner's Charge.

NOTE 12 - SUBSEQUENT EVENTS:

In December 1999, the Company announced that it had signed definitive purchase
agreements to acquire two commonly-controlled freight forwarding companies
operating in Canada for an aggregate purchase price of approximately $21,400 in
cash at closing and a total of approximately $4,900 in cash payable in three
equal, annual instalments. The agreement also contemplates additional
consideration not to exceed $7,800 over the next three years payable in cash and
common stock if certain earnings-based growth goals are achieved. The
acquisition is expected to close in January 2000 and will be accounted for as a
purchase.

In December 1999, the Company entered into a commitment letter with a bank to
obtain a $50,000 revolving line of credit. Terms of the agreement are subject to
further negotiation; however, it is expected that the revolving line of credit
will mature in one year and will bear interest based upon a LIBOR rate plus
approximately 63 basis points and include various restrictive financial and
operating covenants. Proceeds of the loan may be used to finance future
acquisitions, joint venture operations, and capital expenditures.


                                      F-20
<PAGE>   50


                                 EXHIBIT INDEX




<TABLE>
<CAPTION>
     Exhibit Number                            Description
     --------------                            -----------
<S>                     <C>
         *3.1           Second Amended and Restated Articles of Incorporation of
                        the Company, as amended (filed as Exhibit 3(i) to the
                        Company's Quarterly Report on Form 10-Q for the fiscal
                        quarter ended June 30, 1998, and incorporated herein by
                        reference).

         *3.2           Amended and Restated Bylaws of the Company, as amended
                        (filed as Exhibit 3.2 to the Company's Registration
                        Statement on Form S-1, Registration No. 33-97606, and
                        incorporated herein by reference).

        +*10.1          1994 Long-Term Incentive Plan, as Amended and Restated
                        (filed as Exhibit 10(ii) to the Company's Quarterly
                        Report on Form 10-Q for the quarter ended March 31,
                        1998, and incorporated herein by reference).

        +*10.2          1995 Non-employee Director Stock Option Plan (filed as
                        Exhibit 10.2 to the Company's Registration Statement on
                        Form S-1, Registration No. 33-97606, and incorporated
                        herein by reference).

        +*10.3          401(k) Profit Sharing Plan (filed as Exhibit 10.3 to the
                        Company's Registration Statement on Form S-1,
                        Registration No. 33-97606, and incorporated herein by
                        reference).

         *10.4          Shareholders' Agreement dated as of October 1, 1994
                        among the Company and Messrs. Crane, Swannie, Seckel and
                        Roberts (filed as Exhibit 10.4 to the Company's
                        Registration Statement on Form S-1, Registration No.
                        33-97606, and incorporated herein by reference).

         *10.5          Form of Indemnification Agreement (filed as Exhibit 10.6
                        to the Company's Registration Statement on Form S-1,
                        Registration No. 33-97606, and incorporated herein by
                        reference).

         *10.6          Credit Agreement dated as of October 18, 1995 between
                        the Company and NationsBank of Texas, N.A. (filed as
                        Exhibit 10.8 to the Company's Registration Statement on
                        Form S-1, Registration No. 33- 97606, and incorporated
                        herein by reference).

        +*10.7          Employment Agreement dated as of October 1, 1996 between
                        the Company and James R. Crane (filed as Exhibit 10.7 to
                        the Company's Annual Report on Form 10-K for the fiscal
                        year ended September 30, 1996, and incorporated herein
                        by reference).

        +*10.8          Employment Agreement dated as of October 1, 1996 between
                        the Company and Douglas A. Seckel (filed as Exhibit 10.8
                        to the Company's Annual Report on Form 10-K for the
                        fiscal year ended September 30, 1996, and incorporated
                        herein by reference).

        +*10.9          Employment Agreement dated as of September 24, 1998
                        between the Company and John C. McVaney (filed as
                        Exhibit 10.9 to the Company's Annual Report on Form 10-K
                        for the fiscal year ended September 30, 1998, and
                        incorporated herein by reference).

        +*10.10         Employment Agreement dated as of May 19, 1998 between
                        the Company and Ronald E. Talley (filed as Exhibit 10.10
                        to the Company's Annual Report on Form 10-K for the
                        fiscal year ended September 30, 1998, and incorporated
                        herein by reference).

        +10.11          Employment Agreement dated as of October 19, 1999
                        between the Company and Elijio Serrano.
</TABLE>

<PAGE>   51

<TABLE>
<S>                     <C>
         +*10.12        Employees Stock Purchase Plan (effective July 1, 1998)
                        (filed as Exhibit 10(i) to the Company's Quarterly
                        Report on Form 10-Q for the quarter ended March 31, 1998
                        and incorporated herein by reference).

         *10.13A        Lease and Development Agreement dated as of January 10,
                        1997 between Asset XI Holdings Company, L.L.C. and the
                        Company (filed as Exhibit 10 to the Company's Quarterly
                        Report on Form 10-Q for the quarter ended December 31,
                        1996 and incorporated herein by reference).

         *10.13B        Participation Agreement dated as of January 10, 1997
                        among Asset XI Holdings Company, L.L.C., the Company and
                        Bank One, Texas, N.A. (filed as Exhibit 10.10B to the
                        Company's Annual Report on Form 10-K for the fiscal year
                        ended September 30, 1997, and incorporated herein by
                        reference).

         *10.13C        Loan Agreement dated as of January 10, 1997 between
                        Asset XI Holdings Company, L.L.C. and Bank One, Texas,
                        N.A. (filed as Exhibit 10.10C to the Company's Annual
                        Report on Form 10-K for the fiscal year ended September
                        30, 1997, and incorporated herein by reference).

         *10.14A        Master Lease and Development Agreement dated as of April
                        3, 1998 between Asset XVI Holdings Company, L.L.C. and
                        Eagle USA Airfreight, Inc. (filed as Exhibit 10(iii) A
                        to the Company's Quarterly Report on Form 10-Q to the
                        quarter ended June 30, 1998 and incorporated herein by
                        reference).

         *10.14B        Master Participation Agreement dated as of April 3, 1998
                        among Asset XVI Holdings Company, L.L.C., Eagle USA
                        Airfreight, Inc. and Bank One, Texas, N.A. (filed as
                        Exhibit 10(iii) B to the Company's Quarterly Report on
                        Form 10-Q to the quarter ended June 30, 1998 and
                        incorporated herein by reference).

         *10.14C        Loan Agreement dated as of April 3, 1998 between Asset
                        Holdings Company, L.L.C. and Bank One, Texas, N.A.
                        (filed as Exhibit 10(iii) C to the Company's Quarterly
                        Report on Form 10-Q to the quarter ended June 30, 1998
                        and incorporated herein by reference).

         *10.14D        Appendix I to Master Participation Agreement, Master
                        Lease and Development Agreement and Loan Agreement
                        (filed as Exhibit 10(iii) D to the Company's Quarterly
                        Report on Form 10-Q to the quarter ended June 30, 1998
                        and incorporated herein by reference).

         21             Subsidiaries of the Company

         23.1           Consent of PricewaterhouseCoopers LLP

         27.1           Financial Data Schedule
</TABLE>



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


*        Incorporated by reference as indicated.

+        Management contract or compensatory plan or arrangement required to be
         filed as an exhibit pursuant to the requirements of Item 14(c) of Form
         10-K.