SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

                                   (Mark One)
            |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2001
                                       or
          |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
      For the transition period from _________________ to ______________ .

                         Commission file number 0-19791

                            USFREIGHTWAYS CORPORATION
             (Exact name of registrant as specified in its charter)

               Delaware                                       36-3790696
    (State or other jurisdiction of                        (I.R.S. Employer
    incorporation or organization)                         Identification No.)

               8550 W. Bryn Mawr Ave., Ste. 700, Chicago, IL 60631
               (Address of principal executive offices) (Zip Code)

              (Registrant's telephone number, including area code)
                                 (773) 824-1000

           Securities registered pursuant to Section 12(b) of the Act:

        Title of each class           Name of each exchange on which registered
    Common Stock $.01 Par Value                      Nasdaq(R)
  Preferred Stock Purchase Rights

           Securities registered pursuant to Section 12(g) of the Act:
                         8 1/2% Notes Due April 15, 2010
                          6 1/2% Notes Due May 1, 2009
                                (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. |X| Yes |_| 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
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K |_|.

The number of shares of common stock outstanding at February 28, 2002 was
26,813,676. The aggregate market value of the voting stock of the registrant as
of February 28, 2002 was approximately $965,000,000.

                       DOCUMENTS INCORPORATED BY REFERENCE

1) Proxy statement to be filed on or about March 28, 2002 (Only those portions
referenced herein are incorporated in this Form 10-K).
<PAGE>

TABLE OF CONTENTS

Item                                                                        Page
--------------------------------------------------------------------------------

PART I
 1.   Business ............................................................   7
 2.   Properties ..........................................................  13
 3.   Legal Proceedings ...................................................  13
 4.   Submission of Matters to a Vote of Security Holders .................  13

PART II
 5.   Market for Registrant's Common Equity and Related
        Stockholder Matters ...............................................  13
 6.   Selected Financial Data .............................................  14
 7.   Management's Discussion and Analysis of Results of Operations
        and Financial Condition ...........................................  15
 7a.  Quantitative and Qualitative Disclosures About Market Risk ..........  21
 8.   Financial Statements and Supplementary Data .........................  22
 9.   Changes in and Disagreements with Accountants on Accounting
         and Financial Disclosure .........................................  36

PART III
10.   Directors and Executive Officers of the Registrant ..................  36
11.   Executive Compensation ..............................................  36
12.   Security Ownership of Certain Beneficial Owners and Management ......  36
13.   Certain Relationships and Related Transactions ......................  36

PART IV
14.   Exhibits, Financial Statements Schedules and Reports on Form 8-K ....  37


|6| USFREIGHTWAYS

<PAGE>

            PART I

ITEM 1--BUSINESS

General Development of Business

      At USFreightways Corporation ("USF"), we provide comprehensive supply
chain management services in five business segments through our operating
subsidiaries. In the regional less-than-truckload ("LTL") segment, our carriers
provide overnight and second-day delivery throughout the United States ("US")
and into Canada. In our truckload ("TL") segment, we offer premium regional and
national truckload services. Our logistics segment provides integrated supply
chain solutions, value-added logistics solutions, reverse logistics services and
complete warehouse fulfillment services to its customers. In our freight
forwarding segment, we provide domestic and international freight forwarding,
import and export air and ocean services. Finally, our Corporate and other
segment performs support activities to our operating segments including
executive, information technology, corporate sales and various financial
management functions. Our principal subsidiaries in the regional LTL segment are
USF Holland Inc. ("Holland"), USF Bestway Inc. ("Bestway"), USF Red Star Inc.
("Red Star"), USF Reddaway Inc. ("Reddaway") and USF Dugan Inc. ("Dugan"). USF
Glen Moore Inc. ("Glen Moore") is our TL carrier. Our Logistics segment consists
of USF Logistics Inc. ("Logistics"), USF Processors Inc. ("Processors") and USF
Distribution Services Inc. ("Distribution Services"). Our Freight Forwarding
segment includes several companies that operate domestically under the name USF
Worldwide Inc. ("Worldwide"), and in Great Britain under the name USF Worldwide
Logistics Ltd. ("LTD").

      We trace our origins to 1985 when we were wholly owned by TNT Limited, an
Australian multinational transportation company. We embarked on a growth
strategy to build, through acquisition, a nationwide network of quality regional
LTL carriers.

      We incorporated in Delaware in 1991. In February 1992 TNT Limited sold 80%
of its ownership in USF through an initial public offering of 19.5 million
shares with the proceeds being paid to TNT Limited. In a subsequent transaction,
in May 1993, we purchased from TNT Limited all its remaining shares in USF and
financed this purchase by issuing $100 million of 7 year notes.

      Since our initial public offering in 1992 we have continued to grow
through acquisitions and internal growth. Between 1992 and 1997, we acquired
Transus (1996), a Southeastern LTL carrier (now part of Dugan); Interamerican
(1996), a warehouse fulfillment provider (now part of Logistics); Seko Worldwide
(1997), a domestic and international freight forwarder (later renamed Worldwide)
and Mercury Distribution Carriers (1997), a small Northeastern LTL carrier (now
a part of Red Star).

      During 1998, we acquired Golden Eagle Group, Inc., an international
freight forwarding company and merged it into Worldwide; Glen Moore Transport,
Inc., a truckload freight carrier; Moore and Son Co., a transportation logistics
services company that is now part of Distribution Services; and the general
commodities business of Vallerie's Transportation Service, Inc. that is now part
of Red Star. Total consideration for all 1998 acquisitions amounted to
approximately $66 million of cash and debt incurred.

      During 1999, we acquired all of the outstanding shares of Processors
Unlimited Company, Ltd., a provider of reverse logistics services to the grocery
and drug industries; seven small freight forwarding companies in the US and
Puerto Rico; and Underwood Trucking, an Indiana-based truckload carrier. Total
consideration for all 1999 acquisitions amounted to approximately $52 million of
cash and debt incurred.

      During 2000, we acquired Tri-Star Corporation, Inc., a Tennessee-based
truckload carrier, and Ultimex Global Logistics PLC, a freight forwarder based
in London, England which is now known as LTD. Total consideration for all 2000
acquisitions amounted to approximately $26 million of cash and debt incurred.

      During 2001, we acquired the assets of J&J Management, Inc., a
Michigan-based former independent contractor of Worldwide for approximately $0.5
million of cash and debt incurred.

      Following is a table depicting our revenue by business segment for each of
the most recent five years:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
Year                              2001      %        2000      %        1999      %        1998      %      1997 (1)    %
---------------------------------------------------------------------------------------------------------------------------
                                                                   Revenue ($ in millions)
<S>                              <C>      <C>       <C>      <C>      <C>       <C>       <C>      <C>       <C>      <C>
LTL Trucking                     $1,816    73.9     $1,914    75.4    $1,750     78.6     $1,540    83.9     $1,409    90.0
TL Trucking                         101     4.1         86     3.4        45      2.0         13     0.7         --     0.0
Logistics                           277    11.3        277    10.9       207      9.3        130     7.1        106     6.8
Freight forwarding                  265    10.7        262    10.3       225     10.1        152     8.3         44     2.8
Corporate and other                  --     0.0         --     0.0        --      0.0         --     0.0          6     0.4
                                 ------------------------------------------------------------------------------------------
Total                            $2,459   100.0     $2,539   100.0    $2,227    100.0     $1,835   100.0     $1,565   100.0
                                 ------------------------------------------------------------------------------------------
</TABLE>

Additional financial information is included in Note 10 to the Consolidated
Financial Statements on page 33 of this Form 10-K.

(1) 1997 was a fiscal year that included 53 weeks.


                                                          2001 ANNUAL REPORT |7|
<PAGE>

Regional LTL Trucking

      LTL shipments are defined as shipments of less than 10,000 pounds.
Typically, LTL carriers transport freight along scheduled routes from multiple
shippers to multiple consignees utilizing a network of terminals together with
fleets of line-haul and pickup and delivery tractors and trailers. Freight is
picked up from customers by local drivers and consolidated for shipment. The
freight is then loaded into intercity trailers and transferred by line-haul
drivers to the terminal servicing the delivery area. There, the freight is
transferred to local trailers and delivered to its destination by local drivers.

      LTL operators are generally categorized as either regional, interregional
or long-haul carriers, depending on the distance freight travels from pickup to
final delivery. Regional carriers usually have average lengths of haul of 500
miles or less and tend to provide either overnight or second-day service.
Regional LTL carriers usually are able to load freight for direct transport to a
destination terminal, thereby avoiding the costly and time-consuming use of
relay or breakbulk terminals (where freight is rehandled and reloaded to its
ultimate destination). In contrast, long-haul LTL carriers (average lengths of
haul in excess of 1,000 miles) operate networks of relay or breakbulk and
satellite terminals (hub-spoke systems) and rely heavily on interim handling of
freight. Interregional carriers (500 to 1,000 miles per average haul) also rely
on breakbulk terminals but to a lesser degree than long-haul carriers.

      Regional LTL carriers, including our LTL trucking subsidiaries,
principally compete against other regional LTL companies. To a lesser extent,
they compete against interregional and long-haul LTL carriers. To an even lesser
degree, regional LTL carriers compete against truckload carriers, overnight
package companies, railroads and airlines. Significant barriers to entry into
the regional LTL market exist as a result of the substantial capital
requirements for terminals and revenue equipment and the need for a large,
well-coordinated and skilled work force.

      In the competitive environment of our LTL trucking subsidiaries, virtually
all LTL carriers have adopted discounting programs that reduce prices paid by
many shippers. Additionally, when new LTL competitors enter a geographic region,
they often utilize discounted prices to lure customers away from our trucking
subsidiaries. Such attempts to gain market share through price reduction
programs exert downward pressure on the industry's price structure and profit
margins and have caused many LTL carriers to cease operations.

LTL Trucking Subsidiaries

      The following is a brief description of our LTL regional trucking
subsidiaries. Statistical information for our subsidiaries' operations is
reported on page 12 of this Form 10-K.

      Holland is the largest of our operating subsidiaries, transporting LTL
shipments interstate throughout the Central US, Eastern Canada and into the
Southeast US. Holland operates out of 60 terminals and uses predominantly single
48 and 53 foot trailers. Its average length of line-haul in 2001 was
approximately 387 miles.

      Red Star operates in the Eastern US, as well as into Eastern Canada. Red
Star uses a combination of single and double trailers. Red Star operates from 34
terminals and its average length of line-haul in 2001 was approximately 298
miles.

      Bestway operates throughout the Southwest US from Texas to California.
Bestway uses double trailers in its operations. Bestway operates from 41
terminals and its average length of line-haul in 2001 was approximately 390
miles.

      Reddaway provides LTL carriage along the I-5 corridor from California to
Washington, throughout the Northwest US and into Western Canada and Alaska. Its
average length of line-haul in 2001 was approximately 600 miles. Reddaway
operates out of 58 terminals and uses double trailers and, where possible,
triple trailer combinations.

      Dugan provides service to the Plains states and into the Southern US from
Texas to Florida. Dugan operates out of 64 terminals and uses double and triple
trailers. Its average length of line-haul in 2001 was approximately 520 miles.

Terminals for Regional LTL Trucking

      Our network of 257 terminals (113 are owned and 144 are leased) is a key
element in the operation of our regional trucklines. The terminals vary
significantly in size according to the markets served. Sales personnel at each
terminal are responsible for soliciting new business. Each terminal maintains a
team of dispatchers who communicate with customers and coordinate local pickup
and delivery drivers. Terminals also maintain teams of dock workers, line-haul
drivers and administrative personnel. The larger terminals also have maintenance
facilities and mechanics. Each terminal is directed by a terminal manager who
has general supervisory responsibilities and also plays an important role in
monitoring costs and service quality.

Truckload Trucking

      TL shipments are defined as shipments of 10,000 or more pounds. Typically,
TL carriers transport freight along irregular routes from single shippers to
single consignees, without the necessity of a network of terminals, using fleets
of line-haul sleeper tractors and trailers. Consolidated full truckload freight
is picked up from the customer and delivered to its final destination by either
a company long-haul driver or an independent owner-operator that has a leasing
agreement with the carrier.


|8|  USFREIGHTWAYS
<PAGE>

      TL operators are generally categorized as long-haul carriers and to a
lesser degree interregional depending on the distance freight travels from
pickup to final delivery. The average length of haul for most TL operators is in
excess of 1,000 miles.

      TL carriers, including our Glen Moore subsidiary, principally compete
against other TL carriers and to some extent the railroads. TL carriers
generally do not compete against LTL carriers. Barriers to entry into the TL
market exist as a result of substantial capital requirements for revenue
equipment and the need for a well-coordinated and skilled work force. The work
force and revenue equipment requirements, to some degree, can be offset through
the leasing of independent contractors that own their equipment. This work force
is not as controllable as the company employee work force.

      In the competitive environment of Glen Moore, most TL carriers have
adopted discounting programs that reduce prices paid by some shippers.
Additionally, when new TL competitors enter the business, they often utilize
discounted prices to lure customers away from Glen Moore. Such attempts to gain
market share through price reduction programs exert downward pressure on the
industry's price structure and profit margins and have caused certain TL
carriers to cease operations.

      Glen Moore transports TL shipments interstate throughout the US generally
from the Northeast and Southeast states to the West Coast and into the North
Central states. Glen Moore also operates over shorter distances in certain of
its dedicated customer lanes. At the end of 2001, Glen Moore operated 607
tractors (mainly sleeper units) and 2,013 trailers. Glen Moore primarily
utilizes sleeper line-haul tractors and 53 foot trailers. Glen Moore's average
length of haul in 2001 was approximately 600 miles.

The Logistics Subsidiaries

      Our logistics subsidiaries provide integrated supply chain solutions,
value-added logistics solutions, reverse logistics services and complete
warehouse fulfillment services to their customers. We conduct these activities
through Logistics, Distribution Services and Processors. Logistics provides
integrated supply chain solutions for its customers including transportation,
warehousing, cross-docking and product reconfiguration. Distribution Services is
a national provider of value-added logistics services to the retail and
industrial markets with a particular focus on consolidation/distribution and
fulfillment programs. Processors is our Dallas, Texas-based provider of reverse
logistics services to manufacturers, distributors and retailers.

      Our logistics subsidiaries have grown through acquisitions in the
warehousing industry and start up operations designed to serve large customers'
special needs in providing supply chain solutions in the steel industry,
wholesale food industry, specialized retail customers and other freight
management operations.

      Distribution Services has increased in size through a combination of
geographic acquisitions and internal expansion to meet the needs of its retail
customers. Distribution Services operates out of 17 centers in the larger
metropolitan areas of the US and has a fully automated distribution center
located in suburban Chicago, Illinois.

The Freight Forwarding Subsidiaries

      We are engaged, through our Worldwide and LTD subsidiaries, in providing
domestic and international freight forwarding for our customers including air
freight services, import and export air and ocean services and customs house
brokerage services.

      During 1999, Worldwide acquired five of its former agent owned stations
and converted them into company owned stations in key gateway cities. In order
to expand its services into the growing Caribbean market, Worldwide also
acquired a Puerto Rico-based air freight forwarder and a Puerto Rico-based
non-vessel operating common carrier ("NVOCC").

      In October 1999, Worldwide formed a joint venture partnership under the
trading name USF Asia Group Ltd. ("Asia"). Asia, based in Hong Kong, provides
sea/air consolidation, local forwarding, customs clearance, NVOCC and
warehousing and distribution services to companies doing business to and from or
within the Asia-Pacific region. Asia contributed approximately $27 million in
revenue in 2001. On January 18, 2002, we relinquished our interest in Asia,
which will continue to act as agent on the continent of Asia for Worldwide and
LTD. In addition, Worldwide will continue to act as agent for Asia in the US and
LTD will act as agent for Asia in LTD's territories (mainly the United Kingdom).

      In August 2000, Worldwide acquired Ultimex Global Logistics PLC, a freight
forwarder located in London, England which is now known as LTD. LTD contributed
approximately $32.9 million in revenue for 2001.

Revenue Equipment

      At December 31, 2001 we operated 9,444 tractors and 22,466 trailers of
which approximately 94% are owned. The 6% leased tractors and trailers are in
Logistics. Each of our subsidiaries selects its own revenue equipment to suit
its customers' needs or conditions prevailing in its region, such as terrain,
climate, and average length of line-haul. Tractors and trailers are built to
standard specifications and generally are not modified to fit special customer
situations.

      Each of our subsidiaries has a comprehensive preventive maintenance
program for its tractors and trailers to minimize equipment downtime and prolong
equipment life. Repairs and maintenance are performed regularly at the
subsidiaries' facilities and at independent contract maintenance facilities.


                                                          2001 ANNUAL REPORT |9|
<PAGE>

      We replace tractors and trailers based on factors such as age and
condition, the market for used equipment and improvements in technology and fuel
efficiency. At December 31, 2001 the average age of our line-haul tractors was
4.3 years and the average age of our line-haul trailers was 8.2 years. Older
line-haul tractors are often assigned to local pickup and delivery operations,
which are generally operated at lower speeds and over shorter distances,
allowing us to extend the life of our line-haul tractors and improve asset
utilization. The average age of our pickup and delivery tractors at December 31,
2001 was 8.6 years.

Sales and Marketing

      Sales personnel as well as senior management at each of our subsidiaries
are responsible for soliciting new business and maintaining good customer
relations. In addition, we maintain a corporate sales and marketing department
consisting of 20 professionals who are assigned major accounts within specified
geographic regions of the US. These corporate sales managers solicit business
for the regional trucklines from distribution and logistics executives of large
shippers. In many cases, targeted corporations maintain centralized control of
multiple shipping and receiving locations. In addition, our subsidiaries
maintain a combined sales force of approximately 600 sales professionals that
work in concert with the corporate sales managers.

Seasonality

      Our results, consistent with the trucking and air freight industry in
general, show seasonal patterns with tonnage and revenue declining during the
winter months and, to a lesser degree, during vacation periods in the summer.
Furthermore, inclement weather in the winter months can further negatively
affect our results.

Customers

      We are not dependent upon any particular industry and provide services to
a wide variety of customers including many large, publicly held companies.
During the year ended December 31, 2001, no single customer accounted for more
than approximately 3% of our revenue and our ten largest customers as a group
accounted for approximately 12.8% of total revenue. Many of the corporate
account customers use more than one of our regional trucklines for their
transportation requirements.

Cooperation Among Trucklines

      Our subsidiaries cooperate with each other to market and provide services
along certain routes running between their regions. In such circumstances, the
trucklines jointly price their service and then divide revenue in proportion to
the amount of carriage provided by each subsidiary or based on predetermined
formulae.

Information Technology

      Our information technology ("IT") group began a transformation in 2001. It
started with a new Chief Information Officer who joined our organization early
in the year. The IT group was reorganized developing new areas of concentration.
This transformation led to several accomplishments throughout the IT group. A
five-year strategic systems plan was completed to strengthen the alignment
between the IT group and our business segments. This systems plan is being used
to provide a roadmap for achieving "Best in Class" IT capabilities. In addition,
a formal Project Management Office was set up to manage the initiatives of the
systems plan to improve the success rate of the initiatives.

      Throughout 2001, new powerful applications were developed and/or deployed.
A redesigned web site, featuring improved user interfaces and increased
applications doubled the number of registered users. Additional self-service
features were added as part of the nearly monthly releases. New LTL products
were launched with support of web site and freight management system
enhancements. In our Logistics group, existing applications were deployed to new
sites. Forty-two reverse logistics' clients of Processors were converted to a
fully enabled Web application. The US portion of a global freight forwarding
system was implemented for Worldwide on January 2, 2002 culminating months of
development, conversion and training.

      We continued our efforts to strengthen the IT infrastructure throughout
the enterprise. The deployment of thin client computing devices continued within
our service facilities, allowing us to deploy cutting-edge solutions while
containing the total cost of ownership. Late in the year, we opened a new
Technology Center in Grand Rapids, Michigan for IT infrastructure services
including the technical support center, network and systems engineering, and
telecommunication services.

Fuel

      The motor carrier industry is dependent upon the availability of diesel
fuel. Shortages of fuel, increases in fuel costs or fuel taxes, or rationing of
petroleum products could have a material adverse effect on our profitability.
Our LTL regional trucking subsidiaries periodically maintain a fuel surcharge to
partially offset increases in fuel prices. Due to rising fuel prices, our LTL
regional trucking subsidiaries reinstated a fuel surcharge in the third quarter
of 1999 which was still in effect in January 2002.


|10|  USFREIGHTWAYS
<PAGE>

However today's fuel surcharge is highly diminished as the price of fuel fell,
generally, throughout all of 2001. Fuel expense, as a percentage of revenue, was
approximately 4.9% during 2001 at our LTL trucking subsidiaries. Fuel and fuel
tax expense in our TL subsidiary Glen Moore, as a percentage of revenue, was
approximately 15% during 2001. Fuel surcharges in the TL industry are more
difficult to implement and collect. In most cases, TL operators generally
recover the increases in fuel costs through increases in rates charged for their
services. We have not experienced any difficulty in maintaining fuel supplies
sufficient to support our operations. We do not use derivatives to manage risk
associated with our fuel costs.

Regulation

      In August 1994, two pieces of legislation passed the US Congress and were
signed into law that greatly affected the trucking industry. The Trucking
Industry Regulatory Reform Act ("TIRRA") reduced the Interstate Commerce
Commission's ("ICC") authority over motor carriers by eliminating the
tariff-filing requirement for motor common carriers using individually
determined rates, classifications, rules or practices. Under TIRRA, motor
carriers are still required to provide shippers, if requested, with a copy of
the rate, classification, rules or practices of the carrier. Also, Title VI of
the Federal Aviation Administration Authorization Act of 1994 ("the 1994 Act")
effectively prohibits state economic regulation of all trucking operations for
motor carriers. The 1994 Act does allow the states to continue regulation of
safety and insurance programs, including carrier inspections. On December 29,
1995, President Clinton signed the Interstate Commerce Commission Termination
Act of 1995 ("ICCTA") which abolished the ICC as of January 1, 1996 and
transferred its remaining functions to the Federal Highway Administration and a
newly created Surface Transportation Board within the US Department of
Transportation ("DOT"). Congress set a transition period during which
regulations implementing the ICCTA, including insurance and safety issues must
be determined by the Secretary of Transportation.

      The possibility remains that regulatory and legislative changes can
influence operating practices of the trucking industry, the demands for services
to shippers and the costs of providing those services.

      Interstate motor carrier operations are subject to safety requirements
prescribed by the DOT, and other matters such as the weight and dimensions of
equipment are also subject to Federal and state regulations. Effective April 1,
1992, truck drivers were required to have commercial vehicle licenses in
compliance with the DOT, and there are laws that subject them to strict drug
testing standards. These requirements increase the safety standards for
operations, but add administrative costs and have affected the availability of
qualified, safety conscious drivers throughout the trucking industry.

      We use underground storage tanks at certain terminal facilities and
maintain a comprehensive policy of testing, upgrading, replacing or eliminating
tanks to protect the environment and comply with various Federal and state laws.
Whenever any contamination is detected, we take prompt remedial action to remove
the contaminants.

Insurance and Safety

      Some of the risk areas in our businesses are cargo loss and damage, bodily
injury, property damage and workers' compensation. We are effectively
self-insured on our significant operations up to $2 million per occurrence for
cargo loss and damage, bodily injury and property damage. We are also
predominantly self-insured for workers' compensation for amounts up to $1
million per occurrence. Additionally, we have obtained third-party insurance for
workers' compensation claims for amounts in excess of $1 million per occurrence
and all other losses in excess of $2 million.

      Each of our operating subsidiaries employs safety specialists and
maintains safety programs designed to meet its specific needs. In addition, we
employ specialists to perform compliance checks and conduct safety tests
throughout our operations. Our safety record to date has been good.

Employees

      At December 31, 2001, we employed approximately 21,200 people, of whom
12,500 were drivers, 2,800 were dock workers, and the balance were support
personnel, including office workers, managers and administrators. Approximately
45% of all our employees were members of unions. Approximately 82% of these
union workers were employed by Holland or Red Star and belonged to the
International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of
America (the "IBT"). Members of the IBT at Holland and Red Star are presently
working under the terms of a five-year, industry-wide labor agreement that
expires in March 2003.

Forward-Looking Statements

      Certain statements contained in this document or in documents that we
incorporate by reference are "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995, such as statements
relating to management's views with respect to future events and financial
performance. Such forward-looking statements are subject to risks,


                                                         2001 ANNUAL REPORT |11|
<PAGE>

uncertainties and other factors that could cause actual results to differ
materially from historical experience or from future results expressed or
implied by such forward-looking statements. Accordingly, a forward-looking
statement is not a prediction of future events or circumstances, and those
future events or circumstances may not occur. A forward-looking statement is
usually identified by our use of certain terminology, including "believes,"
"expects," "may," "will," "should," "seeks," "pro forma," "anticipates,"
"intends" or "plans" or by discussions of strategies, intentions or outlook.
Potential risks and uncertainties include, but are not limited to:

      o     General economic conditions and specific conditions in the markets
            in which we operate, which can affect demand for our services.

      o     The costs and difficulties in execution of certain of our sales,
            marketing, and information technology functions.

      o     Competition from other transportation and logistics services
            providers.

      o     Our ability to adapt to technological change and to compete with new
            or improved services offered by our competitors.

      o     Increases in motor fuel prices.

      o     Work stoppages, strikes or slowdowns by our employees.

      o     Changes in government regulation (see "Regulation").

      o     Effects of weather.

      o     Availability of financing on terms acceptable to us.

      o     Other uncertainties detailed herein and from time to time in
            Securities and Exchange Commission filings and press releases of USF
            and our subsidiaries.

      We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.

Statistical Information

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
                                                        LTL          LTL
                             Revenue    Operating      Tons       Shipments
                           (millions)     Ratio     (thousands)  (thousands)  Terminals   Tractors    Trailers   Employees
----------------------------------------------------------------------------------------------------------------------------
<S>                         <C>          <C>         <C>           <C>           <C>        <C>         <C>        <C>
Holland
  2001                      $  937.2      92.0%       4,578.1      7,563.6        60        4,135       6,996      8,031
  2000                      $1,001.3      89.1%       4,885.7      7,777.2        61        4,227       7,104      9,119

Reddaway
  2001                      $  266.2      90.7%         968.2      1,996.2        58        1,203       3,426      2,595
  2000                      $  276.9      87.9%       1,035.9      2,094.5        58        1,203       3,518      2,800

Red Star
  2001                      $  255.7     101.3%       1,033.7      2,133.1        34        1,240       2,630      2,202
  2000                      $  275.8      96.8%       1,136.1      2,305.7        34        1,236       2,840      2,407

Dugan
  2001                      $  206.7      97.8%         980.7      1,766.9        64        1,013       3,178      1,989
  2000                      $  204.5      94.8%         960.8      1,761.5        59        1,032       3,318      1,998

Bestway
  2001                      $  150.5      95.0%         628.5      1,241.8        41          662       2,655      1,511
  2000                      $  155.2      90.8%         658.4      1,275.1        41          681       2,654      1,591

Logistics
  2001                      $  277.4      96.0%           N/A          N/A       116          580       1,566      3,309
  2000                      $  277.0      94.0%           N/A          N/A       119          628       1,661      4,013

Worldwide
  2001                      $  264.6     106.9%           N/A          N/A        57          N/A         N/A        587
  2000                      $  261.7     101.6%           N/A          N/A        58          N/A         N/A        711

Glen Moore
  2001                      $  100.4      97.1%           N/A          N/A         3          607       2,013        826
  2000                      $   86.3      94.6%           N/A          N/A         3          599       1,885        823
</TABLE>


|12|  USFREIGHTWAYS
<PAGE>

ITEM 2--PROPERTIES

      In May 2000, we relocated our executive offices to 8550 West Bryn Mawr
Ave, Ste. 700, Chicago, IL 60631. Our 27,500 square foot facility is occupied
under a lease terminating in August 2008.

      Each of our operating subsidiaries also maintains a head office as well as
numerous operating facilities. Of the 257 regional LTL trucking terminal
facilities used as of December 31, 2001, 113 were owned and 144 were leased.
These facilities range in size according to the markets served. We have not
experienced and do not anticipate difficulties in renewing existing leases on
favorable terms or obtaining new facilities as and when required.

ITEM 3--LEGAL PROCEEDINGS

      Our trucking subsidiaries are a party to a number of proceedings brought
under the Comprehensive Environmental Response, Compensation and Liability Act,
(CERCLA). They have been made a party to these proceedings as an alleged
generator of waste disposed of at hazardous waste disposal sites. In each case,
the Government alleges that the parties are jointly and severally liable for the
cleanup costs. Although joint and several liability is alleged, these
proceedings are frequently resolved on the basis of the quantity of waste
disposed of at the site by the generator. Our potential liability varies greatly
from site to site. For some sites the potential liability is de minimis and for
others the costs of cleanup have not yet been determined. While it is not
feasible to predict or determine the outcome of these proceedings or similar
proceedings brought by state agencies or private litigants, we believe, the
ultimate recovery or liability, if any, resulting from such litigation,
individually or in the aggregate, will not materially adversely affect our
financial condition or results of operations and we believe such liability, if
any, will represent less than 1% of our revenues.

      Also, we are involved in other litigation arising in the ordinary course
of business, primarily involving claims for bodily injuries and property damage.
We believe the ultimate recovery or liability, if any, resulting from such
litigation, individually or in the aggregate, will not materially adversely
affect our financial condition or results of operations.

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

      None.

            PART II

ITEM 5--MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      Our common stock trades on The Nasdaq Stock Market under the symbol: USFC.
On February 5, 2002, there were approximately 14,000 beneficial holders of our
common stock. For the high and low sales prices for our common stock for each
full calendar quarter for 2001 and 2000, see Note 11 to the Consolidated
Financial Statements on page 35 of this Form 10-K.

      Since July 2, 1992, we have paid a quarterly dividend of $0.093333 per
share. Although it is our present intention to continue paying quarterly
dividends, the timing, amount and form of future dividends will be determined by
our board of directors and will depend, among other things, on our results of
operations, financial condition, cash requirements, certain legal requirements
and other factors deemed relevant by our board of directors. See "Management's
Discussion and Analysis of Results of Operations and Financial
Condition--Liquidity and Capital Resources."


                                                         2001 ANNUAL REPORT |13|
<PAGE>

ITEM 6--SELECTED FINANCIAL DATA

      The following selected financial data should be read in conjunction with
the consolidated financial statements and notes under Item 8 of this Form 10-K.
Information presented below under the caption, Operating Statistics, is
unaudited.

Selected Consolidated Financial Data

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Year                                             2001           2000           1999           1998           1997 (1)
---------------------------------------------------------------------------------------------------------------------
                                                          (Thousands of dollars, except per share amounts)
<S>                                          <C>            <C>            <C>            <C>            <C>
Statements of Operations
Revenue                                      $ 2,458,647    $ 2,538,699    $ 2,226,915    $ 1,834,893    $ 1,565,249
                                             -----------------------------------------------------------------------
Income from operations                       $    85,683    $   180,312    $   188,868    $   129,433    $   105,010
Interest expense                                 (21,469)       (21,282)       (14,003)        (8,784)        (8,461)
Interest income                                    2,292            894          1,129            757          1,038
Other non-operating income (expense)                (462)          (572)          (414)            88            (92)
                                             -----------------------------------------------------------------------
Net income before income taxes
  and minority interest                           66,044        159,352        175,580        121,494         97,495
Minority interest                                 (1,100)         1,708             --             --             --
Income tax expense                               (26,556)       (64,262)       (71,340)       (50,049)       (40,914)
                                             -----------------------------------------------------------------------
Net income                                   $    38,388    $    96,798    $   104,420    $    71,445    $    56,581
                                             =======================================================================
Basic Earnings Per Share
  Net income per share                              1.46           3.68           3.95           2.73           2.21
Diluted Earnings Per Share
  Net income per share                              1.43           3.61           3.79           2.70           2.19
  Cash dividends declared per share          $      0.37    $      0.37    $      0.37    $      0.37    $      0.37
Operating Statistics
LTL Trucking Companies (in thousands)
Total tons                                         9,831         10,552         10,220          9,177          8,579
Total shipments                                   14,926         15,470         14,797         13,468         12,857

Balance Sheets
Assets:
  Current assets                             $   446,250    $   396,361    $   362,928    $   279,849    $   237,116
  Property and equipment, net                    732,520        750,485        660,510        544,282        448,315
  Intangible assets, net                         174,724        181,978        174,538        140,201        104,407
  Other assets                                    25,170         22,250         14,191         10,341          9,697
                                             -----------------------------------------------------------------------
Total assets                                 $ 1,378,664    $ 1,351,074    $ 1,212,167    $   974,673    $   799,535
--------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity:
  Current liabilities                        $   265,711    $   292,175    $   370,344    $   228,877    $   181,714
  Long-term debt                                 252,774        260,137        133,137        151,096        115,000
  Other non-current liabilities                  170,672        163,047        149,827        135,566        110,621
  Minority interest                                1,855            539             --             --             --
                                             -----------------------------------------------------------------------
Total stockholders' equity                       687,652        635,176        558,859        459,134        392,200
--------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity   $ 1,378,664    $ 1,351,074    $ 1,212,167    $   974,673    $   799,535
                                             =======================================================================
</TABLE>

(1)   1997 was a fiscal year that included 53 weeks.


|14|  USFREIGHTWAYS
<PAGE>

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

RESULTS OF OPERATIONS

      The following table compares revenue and operating income (in thousands of
dollars, except per share amounts) for the years ended December 31:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Year                                         2001            2000            1999
------------------------------------------------------------------------------------
<S>                                      <C>             <C>             <C>
Revenue
  LTL Trucking                           $ 1,816,204     $ 1,913,675     $ 1,750,309
  TL Trucking                                100,439          86,317          44,715
  Logistics                                  277,393         276,958         206,881
  Freight Forwarding                         264,611         261,749         225,010
  Corporate and other                             --              --              --
                                         -------------------------------------------
Total Revenue                            $ 2,458,647     $ 2,538,699     $ 2,226,915
                                         -------------------------------------------
Income (loss) from Operations
  LTL Trucking                           $   108,620     $   176,620     $   171,910
  TL Trucking                                  2,887           4,671           3,147
  Logistics                                   11,185          16,680          16,873
  Freight Forwarding                         (18,193)         (4,081)          8,175
  Corporate and other                        (18,816)        (13,578)        (11,237)
                                         -------------------------------------------
Total Income from Operations             $    85,683     $   180,312     $   188,868
                                         -------------------------------------------
Interest Expense                         $   (21,469)    $   (21,282)    $   (14,003)
                                         -------------------------------------------
Net Income                               $    38,388     $    96,798     $   104,240
                                         -------------------------------------------
Net Income Per Share--Diluted            $      1.43     $      3.61     $      3.79
                                         -------------------------------------------
Total Assets                             $ 1,378,664     $ 1,351,074     $ 1,212,167
                                         -------------------------------------------
Return on Average Stockholders' Equity           5.8%           16.2%           20.5%
                                         -------------------------------------------
</TABLE>

      At USFreightways Corporation ("USF"), we provide comprehensive supply
chain management services in five business segments through our operating
subsidiaries. In the regional less-than-truckload ("LTL") segment, our carriers
provide overnight and second-day delivery throughout the United States ("US")
and into Canada. In our truckload ("TL") segment, we offer premium regional and
national truckload ("TL") services. Our logistics segment provides integrated
supply chain solutions, value-added logistics solutions, reverse logistics
services and complete warehouse fulfillment services to its customers. In our
freight forwarding segment, we provide domestic and international freight
forwarding, import and export air and ocean services. Finally, our Corporate and
other segment performs support activities to our operating segments including
executive, information technology, corporate sales and various financial
management functions. Our principal subsidiaries in the regional LTL segment are
USF Holland Inc. ("Holland"), USF Bestway Inc. ("Bestway"), USF Red Star Inc.
("Red Star"), USF Reddaway Inc. ("Reddaway") and USF Dugan Inc. ("Dugan"). USF
Glen Moore Inc. ("Glen Moore") is our TL carrier. Our Logistics segment consists
of USF Logistics Inc. ("Logistics"), USF Processors Inc. ("Processors") and USF
Distribution Services Inc. ("Distribution Services"). Our Freight Forwarding
segment includes several companies that operate domestically under the name USF
Worldwide Inc. ("Worldwide"), and in Great Britain under the name USF Worldwide
Logistics Ltd. ("LTD").

CONSOLIDATED RESULTS

      Our revenue for 2001 was $2.46 billion, a 3.2% decrease from total revenue
of $ 2.54 billion for 2000, which was at a record level. Income from operations
decreased by 52.5% from $ 180.3 million in 2000 to $85.7 million in 2001. Net
income per share decreased by 60.4% to $1.43 (diluted) in 2001 compared to $3.
61 (diluted) in 2000. Revenue, income from operations and net income were all
adversely affected by a continual economic slowdown that began in 2000 and, when
coupled with the tragic events of September 11, 2001, created one of the most
unfavorable operating environments experienced by the industry in recent
history. Our revenue for 2000 was $2.54 billion, a 14.0% increase over total
revenue of $ 2.23 billion for 1999. Income from operations decreased by 4.5%
from a record $ 188.9 million in 1999 to $180.3 million in 2000. Net income per
share decreased by 4.7% to $3.61 (diluted) in 2000 compared to $3.79 (diluted)
in 1999.


                                                         2001 ANNUAL REPORT |15|
<PAGE>

Regional LTL

      Total revenue of our LTL group for 2001 decreased by 5.1% to $1.82 billion
from $1.91 billion in 2000. In 2001, revenue from our LTL group amounted to
73.9% of our consolidated revenue compared to 75.4% in 2000. LTL revenue
decreased 4.3%, LTL shipments decreased 3.4%, LTL tonnage decreased 5.6% and LTL
revenue per hundredweight increased 1.4% (approximately 1.8% before the fuel
surcharge). In June 2001, our LTL group enacted a general rate increase of
approximately 5.9% as compared with a 5.8% general rate increase in August 2000.
General rate increases apply to approximately 50% of our LTL group's revenue
base. The remaining 50% of our revenue base is subject to contractual agreements
which normally result in lower rate increases.

      Our operating income in 2001 decreased by 38.5% to $108.6 million from
$176.6 million in 2000 (after reclassifying $3.1 million from gains in 2000 on
sales of terminals from "Other, net" to operating income, as is consistent with
industry practice). Our LTL group, along with its industry peers and the rest of
the US economy, suffered through a very economically slow 2001 that also saw the
return of significant pricing pressures in the second half of the year. Our LTL
group's ratio of operating expenses compared to operating revenue (operating
ratio) increased to 94.0% compared to 90.8% in 2000. At Holland, our largest
subsidiary, operating income fell from $109.5 million in 2000 to $75.0 million
in 2001 as the Central US was particularly adversely impacted by the slowing
economy as the Central states were more influenced by the slowdown in the
automotive and heavy manufacturing industries. Reddaway reported a 2001
operating ratio of 90.7% in 2001 compared to 88.7% in 2000 before reclassifying
the gains on sales of terminals into operating profits. Red Star's results were
adversely affected by the September 11, 2001 events as it incurred extra labor,
fuel and other expenses in order to maintain service levels into and around the
New York City metro area. Red Star reported an operating loss of $3.4 million in
2001 compared to an operating profit of $8.9 million in 2000. In the combined
LTL group, salaries, wages and benefits increased to 63.1% of revenue from 60.4%
in 2000 despite efforts (reductions in the LTL work force amounted to in excess
of 1,200 workers) by each of our regional LTL carriers to control its costs and
maintain operational efficiencies. Fuel expense moderated as a percentage of
revenue to 4.9% compared to 5.5% in 2000 due to declining fuel prices. Workers'
compensation and insurance and claims expense increased by 0.5% due mainly to an
increase in cargo claims. Operating supplies and expenses increased by 0.2% as
revenue equipment maintenance expenses rose. Our LTL group deferred purchases of
approximately 600 pieces of new and idled power revenue equipment as business
levels did not support the additional investment.

      Total revenue of our LTL group for 2000 increased by 9.3% to $1.91 billion
from $1.75 billion in 1999. In 2000, revenue from our LTL group amounted to
75.4% of our consolidated revenue compared to 78.6% in 1999. LTL revenue
increased 9.6%, LTL shipments increased 4.6%, LTL tonnage increased 3.8% and LTL
revenue per hundredweight increased 5.6%. In 2000, our LTL group enacted a
general rate increase of approximately 5.8% in late August. Our LTL group
enacted a 5.7% general rate increase in October 1999.

      Operating income in 2000 increased by 0.9% to $173.5 million from $171.9
million in 1999. Despite the beginnings of a slowing US economy, the modest
improvement in operating results were directly attributable to price stability
and a continuing emphasis on cost containment. Our LTL group's operating ratio
increased to 90.9% compared to 90.2% in 1999. Salaries, wages and benefits
decreased to 60.4% of revenue from 61.1% in 1999 as each of our regional LTL
carriers continued to improve operational efficiencies. Fuel expense increased
as a percentage of revenue to 5.5% compared to 3.7% in 1999 due to rising fuel
prices. Purchased transportation expense improved by 0.3% and operating supplies
and expenses improved by 0.4%. Depreciation, terminal rents, operating taxes and
licenses and insurance and claims collectively improved by 0.2% to 10.7% of
revenue in 2000 compared to 10.9% in 1999.

      Approximately 82% of Holland's and Red Star's employees belonged to the
International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of
America (the "IBT"). Members of the IBT at Holland and Red Star are presently
working under the terms of a five-year, industry-wide labor agreement that
expires in March 2003.

Truckload

      Our TL carrier, Glen Moore, headquartered in Carlisle, Pennsylvania,
operates in both regional and nationwide markets. Glen Moore contributed $100.4
million in revenue in 2001 and its operating ratio was 97.1%, generating $2.9
million in operating profits compared to $86.3 million in revenue, an operating
ratio of 94.6% and operating income of $4.7 million in 2000. Glen Moore's
salaries, wages and benefits expenses as a percentage of revenue improved to
35.0% compared to 36.5% in 2000, but this was offset by increases in purchased
transportation expenses to 20.5% in 2001 compared to 15.5% in 2000 as Glen Moore
increased its fleet capacity by adding independent contractors. Fuel expense
improved to 15.1% of revenue in 2001 compared to 17.4% in 2000 as fuel prices
moderated in 2001.

      Glen Moore's revenue increased by 93% from $44.7 million in 1999 to $86.3
million in 2000 and it had operating ratios of 94.6% and 93.0% in 2000 and 1999,
respectively. Glen Moore's revenue increase was mainly attributable to two
acquisitions made in late 1999 and early January 2000.


|16|  USFREIGHTWAYS
<PAGE>

      TL operations accounted for 4.1% of our 2001 consolidated revenue compared
to 3.4% of 2000 revenue. Glen Moore's 2001 revenue increase is mainly
attributable to its ability to provide a larger fleet capacity to its existing
customer base. Glen Moore's tractor fleet capacity in 2001 was augmented by an
additional 125 independent contractors. Glen Moore currently owns 607 tractors
and 2,013 trailers.

Logistics

      Revenue in our Logistics group, comprised of dedicated carriage, assembly
and distribution, supply chain management, contractual warehousing and reverse
logistics services increased by $0.4 million (a 0.2% increase) to $277.4 million
in 2001 compared to $277.0 million in 2000. In 2001, our Logistics group
accounted for 11.3% of our consolidated revenue compared to 10.9% in 2000.
Operating income for our Logistics group decreased by 32.9% to $11.2 million
(including a $1.6 million charge in the fourth quarter related to expenses
arising from combining Logistics and Distribution Services under a single
management team) from $16.7 million in 2000. The group's operating ratio was
96.0% in 2001 compared to 94.0% in 2000. Purchased transportation expenses
increased to 12.6% of 2001 revenue compared to 11.2% of 2000 revenue as its
distribution business continued to increase its dependence on outsourced
deliveries. Insurance and claims increased to 3.2% of 2001 revenue from 2.2% of
2000 revenue due mainly to claims presented by a former customer. Operating
taxes and licenses increased to 2.0% of 2001 revenue compared to 1.6% in 2000.
Depreciation increased to 4.2% of 2001 revenue compared to 3.9% in 2000.
Salaries, wages and benefits decreased to 47.2% of 2001 revenue compared to
50.0% in 2000 due in part to the change in Distribution Services' delivery
operations to outsourced deliveries from employee deliveries and decreased labor
requirements at Processors.

      Assembly and distribution revenue increased by $11.6 million (a 15.0%
increase) in 2001 from 2000 primarily through growth at existing distribution
centers coupled with revenue from new distribution centers in San Francisco,
Orlando and Houston. Assembly and distribution operating profits increased by
5.5% to $7.7 million in 2001. Contractual and warehousing revenue increased in
2001 to $133.2 million from $128.7 million in 2000 primarily through the
addition of new customers. Operating profits declined by 53.4% to $3.2 million
mainly in the metals, food and consumer groups as volumes declined and various
customer's contracts expired.

      Reverse logistics services revenue at Processors, amounted to $54.9
million in 2001 compared to $70.6 million in 2000. Most of Processors' revenue
decline came from extraordinary volumes from a major customer in 2000 that were
significantly curtailed in the early part of 2001. Those extra volumes adversely
affected the results in 2000 as extra labor expenses were incurred to handle the
increased volumes along with increased information technology expenses to
implement systems solutions for the major customer. Processors' business is more
labor intensive than other traditional transportation businesses.

      Revenue in 2000 increased by $70.1 million (a 33.9% increase) to $277.0
million compared to $206.9 million in 1999. In 2000, our Logistics group
accounted for 10.9% of our consolidated revenue compared to 9.3% in 1999.
Operating income for our Logistics group decreased by 1.1% to $16.7 million from
$16.9 million in 1999. The group's operating ratio was 94.0% in 2000 compared to
91.8% in 1999. Purchased transportation expenses increased to 11.1% of 2000
revenue compared to 7.1% of 1999 revenue as our distribution business began to
increase its dependence on outsourced deliveries. Operating taxes and licenses
improved to 1.6% of 2000 revenue compared to 2.1% in 1999. Depreciation
increased to 3.9% of 2000 revenue compared to 3.6% in 1999. Building rents
increased to 6.4% of 2000 revenue compared to 5.5% in 1999 as our Logistics
group used more leased facilities, especially in our Processors operations.
Salaries, wages and benefits decreased to 50.0% of 2000 revenue compared to
51.7% in 1999 due in part to the change in the distribution dependence on
outsourced deliveries from employee deliveries, but largely offsetting this
improvement was increased labor at Processors to handle extraordinary volumes
from a large customer.

      Assembly and distribution revenue increased in 2000 from 1999 primarily
through growth at existing distribution centers coupled with revenue from new
distribution centers and full year revenue from other distribution centers that
were opened in the second half of 1999. Assembly and distribution operating
profits increased by 42.9% to $7.3 million in 2000. Contractual and warehousing
revenue increased in 2000 to $128.7 million from $110.2 million in 1999
primarily through the addition of new customers and expanded business with
existing customers.

      Reverse logistics services revenue at Processors, which we acquired in
March 1999, amounted to $70.6 million in 2000 compared to $43.6 million in 1999.
Most of Processors' revenue growth came from extraordinary volumes from a major
customer.

Freight Forwarding

      Worldwide includes our domestic and international freight forwarding
businesses, LTD and, until early 2002, Asia. In August, 2000, Worldwide acquired
LTD (formerly known as Ultimex Global Logistics PLC) a freight forwarder located
in London, England.

      Worldwide's revenue increased by $2.9 million (a 1.1% increase) to $264.6
million from $261.7 million in 2000. Worldwide accounted for 10.8% of our 2001
consolidated revenue compared to 10.3% in 2000. The increase was derived
primarily from a $15.3 million increase generated in Asia and a $23.6 million
increase at LTD (LTD's results in 2000 were included in our results


                                                         2001 ANNUAL REPORT |17|
<PAGE>

from its acquisition date in early September 2000) offset by a $36.0 million
decrease in Worldwide's domestic freight forwarding business caused in part by a
slowing economy and further impacted by air freight capacity constraints
suffered after the terrorists attack on September 11, 2001. At the beginning of
2001, Worldwide came under the leadership of a new management team whose
challenges were to implement a single freight management system from the seven
systems that were present when the various Worldwide businesses were acquired
and to reduce operating expenses. At the outset, our management expected that
this challenge would require approximately two years to accomplish. Worldwide
implemented its new freight management system in early January 2002. The
operating loss of $18.2 million (an operating ratio of 106.9%) in 2001 compares
to an operating loss of $4.1 million and an operating ratio of 101.6% in 2000.
Our domestic and international freight forwarding business lost $16.5 million in
2001. Included in this loss is a third quarter pre-tax charge of $5.9 million
relating to severance and other expenses as Worldwide downsized operations due
to decreased revenue, brought on by the current business environment, and
expenses associated with the implementation of a new freight management system.
Our domestic and international freight forwarding businesses' gross profit
margins (revenue minus cost of sales) declined to 18.3% in 2001 compared to
21.9% in 2000. LTD recorded an operating profit of $1.1 million in 2001, its
first full year of operations. Asia lost $2.8 million (before additional
minority interest losses of $1.1 million) in 2001.

      Worldwide's 2000 revenue increased by $36.7 million (a 16.3% increase) to
$261.7 million from $225.0 million in 1999. Worldwide accounted for 10.3% of our
2000 consolidated revenue compared to 10.1% in 1999. The increase was derived
primarily from $11.7 million generated in Asia's first full year of operations
and $9.3 million generated from LTD; neither of which was included in 1999
revenue. Operating profits decreased by $12.3 million from an operating profit
of $8.2 million to an operating loss of $4.1 million. Asia lost $3.8 million
(before minority interest of 50%) in 2000 as it completed its expansion of
offices throughout twelve countries in Asia. Our domestic freight forwarding
business lost $0.5 million in 2000 due mainly to deteriorations in domestic
freight volumes and related margins along with added expenses in information
technology infrastructure in combining seven freight management systems into a
single viable system.

      We announced on January 18, 2002 that we had relinquished our interest in
Asia. A one-time payment of $10 million was made to Asia Challenge, Ltd., a Hong
Kong-based logistics company and Worldwide's former joint venture partner. We
also provided $6 million in loans to Asia. Income from operations will be
reduced by approximately $13 million in the first quarter of 2002 as a result of
this transaction. Asia will continue to act as agent on the continent of Asia
for Worldwide and LTD. In addition, Worldwide will continue to act as agent for
Asia in the US and LTD will act as agent for Asia in LTD's territories (mainly
the United Kingdom).

Corporate and Other

      Included in our Corporate and other costs are amortization of goodwill and
other intangible assets, executive and Corporate management expenses, our
Corporate information ("IT") costs and our self insurance programs.

      Our amortization of intangible assets amounted to $7.7 million, $6.8
million, and $6.5 million, respectively, in 2001, 2000 and 1999. As a result of
our commitment to continued significant investment in IT and the people that
support this effort, our IT group's staff size has grown from 34 in 1999 to 45
in 2000 and to 119 at the end of 2001. Accordingly, its costs have risen from
$2.3 million in 1999 to $3.5 million in 2000 and $7.5 million in 2001. The
remainder of our Corporate costs have grown by $0.9 million in 2000 over 1999
and by $0.3 million in 2001 over 2000.

Other Income and Expense

      Interest expense for 2001 amounted to $21.5 million compared to $21.3
million in 2000. Our average outstanding debt in 2001 and 2000 was $261.5
million and $270.2 million, respectively. In 2001, we had $250 million in
outstanding notes at fixed rates of interest. In 2000, we had outstanding notes
at fixed rates of interest until the end of April amounting to $200 million. In
late April 2000, we replaced $100 million of notes having a fixed interest rate
of 65/8% with $150 million of notes with an 81/2% fixed interest rate. In 2001,
we had nominal drawings under our revolving line of credit and our other
uncommitted facilities compared to 2000 when the monthly average drawings under
the revolving line of credit and the uncommitted lines of credit amounted to
$29.1 million.

      Interest income for 2001 amounted to $2.3 million compared to $0.9 million
in 2000. At the end of 2001, we were successful in recovering interest income of
$1.2 million from a settlement of a tax litigation case. Due to the slowing
economy and our managed reduction in capital spending in 2001, we had cash
invested in interest bearing instruments during most of 2001. At the end of
2001, we had $63.3 million in interest bearing investments.

      Our principal debts are $150 million in 81/2% guaranteed notes, issued
April 25, 2000 and $100 million in 61/2% guaranteed notes, issued May 1, 1999.
In addition to these notes, during 2001 we had nominal borrowings under our $200
million revolving credit facility that expires in 2002. The average interest
rate on our bank debt for 2001 was approximately 6.3% compared to 6.6% in 2000.
We had no borrowings under our revolving credit facility or uncommitted lines of
credit since the second quarter of 2001.


|18|  USFREIGHTWAYS
<PAGE>

      Interest expense for 1999 amounted to $14.0 million and interest income
was $1.1 million. The average amount of outstanding debt in 1999 was $197.2
million

      Other, net in 2001 amounted to a $0.5 million loss compared to a loss in
2000 of $0.6 million. The year 2000 Other, net has been restated from an
originally reported gain of $2.5 million as gains on sales of terminals owned by
Holland and Reddaway, amounting to $3.1 million were reclassified into operating
income consistent with industry practice.

Outlook--Unknown Trends or Uncertainties

      While we believe that the current economic downturn is largely cyclical,
we also expect it to continue as least through the first half of 2002. We plan
to monitor capital spending and cash flow as well as continue strict controls
over spending and operating costs.

      Actual results for 2002 will depend upon a number of factors, including
the extent and duration of the current economic downturn, our ability to
maintain freight rates as competitors increase their pricing pressures, and our
ability to increase our market share as we maintain our levels of service and at
the same time introduce new service products.

LIQUIDITY AND CAPITAL RESOURCES

      We generated $178.6 million in cash flows from operating activities during
2001. While our net income decreased during 2001 compared to 2000, lower revenue
resulted in our having lower working capital requirements, and this contributed
approximately $54 million to our cash flow from operations. Net cash flows after
financing activities was a positive $74.3 million resulting in our having $79.5
million in cash and equivalents on hand at the end of 2001. Capital expenditures
during the year amounted to $93.9 million, of which $11.3 million was for
revenue equipment, $47.3 million for terminals, $22.7 million for IT and
communications equipment, $12.6 million for other assets, and $0.4 million to
purchase the assets of a former independent contractor of Worldwide. Capital
expenditures for 2000 amounted to $193.2 million, of which $120.9 million was
for revenue equipment, $42.6 million was for terminals, $ 17.5 million for IT
and communications gear and $12.4 million for other assets plus $16.4 million
was paid for the acquisitions of Tri-Star Transportation, Inc. and Ultimex
Global Logistics PLC. In light of the current economic conditions, we expect
that capital expenditures during the year ending December 31, 2002 will
approximate $100 million to $150 million, before any acquisitions.

      On January 31, 2000, we filed a Form S-3 shelf registration statement that
allowed for the sale of up to $400 million in additional guaranteed notes of
which $250 million is available for issuance as of December 31, 2001.

      On April 25, 2000, we issued $150 million of 81/2% unsecured guaranteed
notes that are due April 15, 2010. Net proceeds from the sale of the notes
amounted to $149 million. We used $100 million of the net proceeds to pay off
our 65/8% notes that matured on May 1, 2000. Interest on all of our notes is
paid semiannually. The notes may be redeemed prior to maturity and have no
sinking fund requirements. If the notes are redeemed prior to maturity, the
purchase price is the greater of (1) 100% of the principal amount of the
guaranteed notes to be redeemed or (2) the sum of the present values of the
remaining scheduled payments on such guaranteed notes, discounted to the
redemption date, on a semiannual basis at the treasury rate plus 37.5 basis
points, plus accrued interest.

      We issued unsecured guaranteed notes of $100 million on May 1, 1999 that
are due May 1, 2009 and bear interest at 61/2%, payable semiannually. Net
proceeds from the sale of the notes amounted to $98.5 million. The notes may be
redeemed prior to maturity and have no sinking fund requirements. If the notes
are redeemed prior to maturity, the purchase price is the greater of (1) 100% of
the principal amount of the guaranteed notes to be redeemed or (2) the sum of
the present values of the remaining scheduled payments on such guaranteed notes,
discounted to the redemption date, on a semiannual basis at the treasury rate
plus 37.5 basis points plus accrued interest.

      Our guaranteed notes are fully and unconditionally guaranteed, jointly and
severally, on an unsecured senior basis, by all our direct and indirect domestic
subsidiaries (the "Subsidiary Guarantors"). We are a holding company and during
the periods presented substantially all of the assets of the Subsidiary
Guarantors, and substantially all of our operations were conducted by the
Subsidiary Guarantors. Accordingly, the aggregate assets, liabilities, earnings
and equity of the Subsidiary Guarantors were substantially equivalent to the
assets, liabilities, earnings and equity shown in our consolidated statements.
We believe that separate financial statements of our Subsidiary Guarantors, and
other disclosures relating to them, are not meaningful or material to our
investors.

      In addition to our notes mentioned above, we have a $200 million revolving
credit facility with a syndicate of commercial banks. The facility expires in
November 2002 and allows up to $100 million for standby letters of credit to
cover our self- insurance program, and has optional pricing of interest rates,
including LIBOR or prime base rates. The facility has an annual fee and contains
customary financial covenants including maintenance of minimum net worth and
funded debt to cash flow. During 2001, all borrowings were drawn at LIBOR base
rates, with a weighted-average interest rate for the year of 6.3%, excluding
fees charged on the facility. We have had no borrowings under this facility
since April 2001. At December 31, 2001 we had


                                                         2001 ANNUAL REPORT |19|
<PAGE>

no borrowings and had $58.2 million in outstanding letters of credit under this
facility. We expect to have a similar revolving credit facility in place prior
to the current facility's expiration.

      In addition to the revolving credit facility, we maintain three
uncommitted lines of credit, which provide $40 million of short-term funds at
rates approximating LIBOR. These facilities are used with a centralized cash
management system to finance our short-term working capital needs, which allows
us to maintain minimal cash balances. At December 31, 2001, we had no borrowings
under these uncommitted facilities.

      We believe cash flows from operating activities and funding from our
revolving credit facilities are adequate to finance our anticipated business
activity in 2002.

      At December 31, 2001, we had commitments to purchase approximately $8.5
million in land and improvements, $5.0 million for transportation equipment and
$1.5 million for other equipment.

      During 2000, we repurchased approximately 1 million of our shares under
two repurchase programs authorized by our board of directors. The average
repurchase price was approximately $24 per share. At December 31, 2001, we have
authorization to purchase an additional 0.5 million shares.

      During 2001, we declared cash dividends of $9.8 million.

      Following is a table of our Contractual Cash Obligations as of December
31, 2001 (See also Notes 2 and 3 to the Consolidated Financial Statements on
pages 29-30 of this Form 10-K):

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
                                                                         Payments Due by Period
----------------------------------------------------------------------------------------------------------------------------
                                                              Less than            2-3               4-5            After 5
Contractual Obligations                        Total           1 Year             Years             Years            Years
----------------------------------------------------------------------------------------------------------------------------
                                                                         (Dollars in thousands)
<S>                                          <C>                <C>               <C>              <C>             <C>
Long-Term Debt                               $253,811          $  1,037          $   936           $ 1,838         $250,000
Operating Leases                               85,122            25,609           37,796            15,008            6,709
                                             -------------------------------------------------------------------------------
Total Contractual Cash Obligations           $338,933          $ 26,646          $38,732           $16,846         $256,709
                                             -------------------------------------------------------------------------------
</TABLE>

      Following is a table of our Other Commercial Commitments as of December
31, 2001 (See also Note 3 to Consolidated Financial Statements on pages 29-30 of
this Form 10-K):

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
                                                               Amount of Commitment Expiration Per Period
---------------------------------------------------------------------------------------------------------------------------
Other Commercial                           Total Amounts       Less than            2-3              4-5            Over 5
Commitments                                  Committed          1 Year             Years            Years            Years
---------------------------------------------------------------------------------------------------------------------------
                                                                         (Dollars in thousands)
<S>                                          <C>               <C>
Lines of Credit (1)                          $200,000          $200,000
Standby Letters of Credit (2)                  58,177            58,177
Purchase Commitments                           14,921            14,921
                                             -------------------------------------------------------------------------------
Total Commercial Commitments                 $273,098          $273,098
                                             -------------------------------------------------------------------------------
</TABLE>

(1)   We had no drawings under this facility as of December 31, 2001.

(2)   The standby letters of credit are a part of our $200,000 line of credit
      facility that, in total, allows for up to $100,000 in standby letters of
      credit.

RECENT ACCOUNTING PRONOUNCEMENTS

      The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 141, "Business Combinations" and No.
142, "Goodwill and Other Intangible Assets" in July 2001. Among other provisions
in these two statements, all future business combinations will be accounted for
using the purchase method of accounting and use of the pooling-of-interest
method is prohibited. For acquisitions completed after July 1, 2001, goodwill
will not be amortized. In addition, effective January 1, 2002, previously
recorded goodwill and other intangible assets with indefinite lives will no
longer be amortized but will be subject to impairment tests annually. We adopted
SFAS No. 142 on January 1, 2002. As such, goodwill will no longer be amortized
beginning in 2002. For the year ended December 31, 2001, we recorded goodwill
amortization of $7.4 million.

      Additionally, at December 31, 2001, we have recorded goodwill of $173.9
million. As a result of this new standard, we will be required to record an
impairment charge of $70 million at Worldwide, our freight forwarding segment,
that will be shown as a cumulative effect of change in accounting principle as
of January 1, 2002.


|20|  USFREIGHTWAYS
<PAGE>

      In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." The standard requires entities to record the fair value
of a liability for an asset retirement obligation in the period in which the
obligation is incurred. When the liability is initially recorded, the entity
capitalizes the cost by increasing the carrying amount of the related long-lived
asset. Over time, the liability is accreted to our present value each period,
and the capitalized cost is depreciated over the useful life of the related
asset. The standard is effective for 2003. We are currently reviewing the
requirements of this new standard and have not as of yet determined the impact,
if any, on our financial position or results of operations.

      In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 requires that
long-lived assets be measured at the lower of carrying amount or fair value less
cost to sell, whether reported in continuing operations or in discontinued
operations. SFAS No. 144 also revised standards for the reporting of
discontinued operations. The standard is effective for 2002 and generally is to
be applied prospectively. Although we are currently reviewing the requirements
of this new standard, we do not expect that its implementation will have a
material impact on our financial position or results of operations.

SELF-INSURANCE

      In the normal course of our operations, we incur claims for cargo loss and
damage, bodily injury, property damage and workers' compensation. We are
effectively self-insured for up to $2 million per occurrence for cargo loss and
damage, bodily injury and property damage, and for up to $1 million per
occurrence for workers' compensation claims. We obtain customary third-party
insurance for exposures in excess of these self-insured limits. As of December
31, 2001, we had recorded a total liability of approximately $114 million with
respect to these exposures. We regularly evaluate the adequacy of our reserves
using statistical methods based on historical claims experience to estimate the
ultimate value for incidents incurred that may result in claims to us. While
there is a risk the ultimate outcome of these incidents could differ from the
reserve recorded, we believe the outcome of these matters is not expected to
have any material adverse effect on the financial position or results of our
operations.

OTHER LITIGATION AND CLAIMS

      We use underground storage tanks at certain terminal facilities and
maintain a comprehensive policy of testing, upgrading, replacing and eliminating
these tanks to protect the environment and comply with various Federal and state
laws. Whenever any contamination is detected, we take prompt remedial action to
remove the contaminants. We believe the total costs related to all known
incidents have been provided for in our financial statements and we are not
aware of any potential contamination incidents that would have a material
adverse effect on our financial position or results of operations.

RELATED PARTIES

      William N. Weaver, Jr., one of our directors, is a member of the law firm
of Sachnoff & Weaver, Ltd. an Illinois professional corporation. Sachnoff &
Weaver, Ltd. has acted and continues to act as outside counsel to us with regard
to certain matters. Legal fees billed to us for these services are at market
rates.

      Anthony J. Paoni, one of our directors, is a member of DiamondCluster
International, Inc., an Illinois corporation. DiamondCluster International, Inc.
has acted as a consultant to us with regard to certain matters, and we have paid
consulting fees for services rendered. Consulting fees billed to us for these
services are at market rates.

ITEM 7A--QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      We are exposed to the impact of interest rate changes. Our exposure to
changes in interest rates is limited to borrowings under our line of credit that
has variable interest rates tied to the LIBOR rate. The weighted-average annual
interest rates on borrowings under this credit agreement were 6.3% and 6.3% in
2001 and 2000 respectively. In addition, we have $150 million of unsecured notes
with an 81/2% fixed annual interest rate and $100 million of unsecured notes
with a 61/2% fixed annual interest rate at December 31, 2001. We estimate that
the fair value of the notes approximated their carrying value at December 31,
2001. We have no hedging instruments. From time to time, we invest excess cash
in overnight money market accounts.


                                                         2001 ANNUAL REPORT |21|
<PAGE>

ITEM 8--FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT PUBLIC ACCOUNTANT

The Board of Directors and Stockholders of
USFreightways Corporation:

      We have audited the accompanying consolidated balance sheets of
USFreightways Corporation (a Delaware corporation) and subsidiaries as of
December 31, 2001 and 2000 and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 2001. These consolidated financial statements and
the schedule referenced to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and the schedule based on our audits.

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

      In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
USFreightways Corporation and subsidiaries as of December 31, 2001 and 2000, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States.

      Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The financial statement
schedule included in Item 14 (a) (2), is presented for purposes of complying
with the Securities and Exchange Commission's rules and is not part of the basic
consolidated financial statements. This schedule has been subjected to the
auditing procedures applied in the audits of the basic consolidated financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.


/s/ Arthur Andersen LLP

Arthur Andersen LLP
Chicago, Illinois
January 25, 2002


|22|  USFREIGHTWAYS
<PAGE>

CONSOLIDATED BALANCE SHEETS
As of December 31, 2001 and December 31, 2000
(Thousands of dollars, except per share amounts)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
December 31,                                                                         2001           2000
-----------------------------------------------------------------------------------------------------------
<S>                                                                              <C>            <C>
Assets
Current assets:
  Cash                                                                           $    79,534    $     5,248
  Accounts receivable, less allowances of $14,348 and $11,168                        295,876        323,517
  Operating supplies and prepaid expenses                                             32,031         31,977
  Deferred income taxes                                                               38,809         35,619
                                                                                 --------------------------
Total current assets                                                                 446,250        396,361
Property and equipment:
  Land                                                                               113,887         99,330
  Buildings and leasehold improvements                                               270,446        243,501
  Equipment                                                                          868,254        877,240
  Other                                                                              103,616         86,644
                                                                                 --------------------------
                                                                                   1,356,203      1,306,715
  Less accumulated depreciation                                                     (623,683)      (556,230)
                                                                                 --------------------------
Total property and equipment                                                         732,520        750,485
Intangible assets, net of accumulated amortization of $46,770 and $39,053            174,724        181,978
Other assets                                                                          25,170         22,250
                                                                                 --------------------------
                                                                                 $ 1,378,664    $ 1,351,074
                                                                                 ==========================
Liabilities and Stockholders' Equity
Current liabilities:
  Current debt                                                                   $     1,037    $    28,991
  Accounts payable                                                                    89,979         90,741
  Accrued salaries, wages and benefits                                                90,497         90,077
  Accrued claims and other                                                            84,198         82,366
                                                                                 --------------------------
Total current liabilities                                                            265,711        292,175
Long-term debt, less current maturities                                                2,774         10,137
Notes payable                                                                        250,000        250,000
Accrued claims and other                                                              77,055         75,948
Deferred income taxes                                                                 93,617         87,099
                                                                                 --------------------------
                                                                                     689,157        715,359
Minority interest                                                                      1,855            539
Stockholders' equity:
  Cumulative preferred stock, $0.01 par value per share:
    20,000,000 authorized, none issued                                                    --             --
  Common stock, $0.01 par value per share: 80,000,000 authorized,
    26,766,454 and 26,746,454 issued and 26,678,038 and 25,881,778 outstanding           267            258
  Paid in capital                                                                    270,936        265,634
  Retained earnings                                                                  418,585        390,040
  Treasury stock, 88,416 and 864,676 shares                                           (1,796)       (20,571)
  Accumulated other comprehensive loss                                                  (340)          (185)
                                                                                 --------------------------
Total stockholders' equity                                                           687,652        635,176
                                                                                 --------------------------
                                                                                 $ 1,378,664    $ 1,351,074
                                                                                 ==========================
</TABLE>

See accompanying notes to consolidated financial statements.


                                                         2001 ANNUAL REPORT |23|
<PAGE>

CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 2001, December 31, 2000 and December 31, 1999
(Thousands of dollars, except per share amounts)

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
Year                                                        2001            2000            1999
---------------------------------------------------------------------------------------------------
<S>                                                    <C>             <C>             <C>
Revenue:
  LTL Trucking                                         $  1,816,204    $  1,913,675    $  1,750,309
  TL Trucking                                               100,439          86,317          44,715
  Logistics                                                 277,393         276,958         206,881
  Freight Forwarding                                        264,611         261,749         225,010
  Corporate and other                                            --              --              --
                                                       --------------------------------------------
                                                          2,458,647       2,538,699       2,226,915
                                                       --------------------------------------------
Operating expenses:
  LTL Trucking                                            1,707,584       1,737,055       1,578,399
  TL Trucking                                                97,552          81,646          41,568
  Logistics                                                 266,208         260,278         190,008
  Freight Forwarding                                        282,804         265,830         216,835
  Corporate and other                                        18,816          13,578          11,237
                                                       --------------------------------------------
                                                          2,372,964       2,358,387       2,038,047
                                                       --------------------------------------------
Income from operations                                       85,683         180,312         188,868
                                                       --------------------------------------------
Non-operating income (expense):
  Interest expense                                          (21,469)        (21,282)        (14,003)
  Interest income                                             2,292             894           1,129
  Other, net                                                   (462)           (572)           (414)
                                                       --------------------------------------------
Total non-operating expense                                 (19,639)        (20,960)        (13,288)
                                                       --------------------------------------------
Net income before income taxes and minority interest         66,044         159,352         175,580
Income tax expense                                          (26,556)        (64,262)        (71,340)
Minority interest                                            (1,100)          1,708              --
                                                       --------------------------------------------
Net income                                             $     38,388    $     96,798    $    104,240
                                                       ============================================
Average shares outstanding--basic                        26,309,107      26,337,734      26,416,631
Average shares outstanding--diluted                      26,765,861      26,828,046      26,478,479

Basic earnings per common share                        $       1.46    $       3.68    $       3.95
                                                       ============================================
Diluted earnings per common share                      $       1.43    $       3.61    $       3.79
                                                       ============================================
</TABLE>

See accompanying notes to consolidated financial statements.


|24|  USFREIGHTWAYS
<PAGE>

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 2001, December 31, 2000 and December 31, 1999
(Thousands of dollars, except per share amounts)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   Accumulated
                                                                                       Compre-        Other         Total
                                         Common     Paid in    Retained    Treasury    hensive    Comprehensive  Stockholders'
                                          Stock     Capital    Earnings      Stock     Income          Loss         Equity
------------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>      <C>         <C>         <C>         <C>           <C>           <C>
Balance December 31, 1998                 $ 265    $ 253,542   $ 208,662   $ (3,335)                               $ 459,134
Net income                                   --           --     104,240         --    $104,240                      104,240
                                                                                       --------
Dividends declared                           --           --      (9,870)        --                                   (9,870)
Employee stock
  transactions and other                     --        2,539          --      2,816                                    5,355
                                          ----------------------------------------------------------------------------------
Balance December 31, 1999                 $ 265    $ 256,081   $ 303,032   $   (519)                               $ 558,859
Net income                                   --           --      96,798         --    $ 96,798                       96,798
Unrealized loss on foreign
  currency transactions                                                                    (185)         (185)          (185)
                                                                                       --------
Comprehensive income                                                                   $ 96,613
                                                                                       ========
Dividends declared                           --           --      (9,790)        --                                   (9,790)
Employee stock transactions
  and other                                  (7)       9,553          --      2,880                                   12,426
Repurchase of common stock                   --           --          --    (22,932)                                 (22,932)
                                          ----------------------------------------------------------------------------------
Balance December 31, 2000                 $ 258    $ 265,634   $ 390,040   $(20,571)                     (185)     $ 635,176
Net income                                   --           --      38,388         --    $ 38,388                       38,388
Unrealized loss on
  foreign currency transactions                                                            (155)         (155)          (155)
                                                                                       --------
Comprehensive income                                                                   $ 38,233
                                                                                       ========
Dividends declared                           --           --      (9,843)        --                                   (9,843)
Employee stock transactions and other         9        5,302          --     18,775                                   24,086
                                          ----------------------------------------------------------------------------------
Balance December 31, 2001                 $ 267    $ 270,936   $ 418,585   $ (1,796)                 $   (340)     $ 687,652
                                          ==================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.


                                                         2001 ANNUAL REPORT |25|
<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2001, December 31, 2000, and December 31,1999
(Thousands of dollars, except per share amounts)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
Year                                                                        2001          2000          1999
--------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>           <C>           <C>
Cash flows from operating activities:
  Net income from continuing operations                                  $  38,388     $  96,798     $ 104,240
  Reconciliation to net cash provided by operating activities:
    Depreciation and amortization                                          110,601       111,822        95,312
    Gains from sale of property and equipment                               (2,154)       (6,264)       (1,958)
    Deferred taxes                                                           3,328        10,899         4,506
    Changes in assets and liabilities excluding acquisitions:
      Accounts receivable                                                   27,641       (20,434)      (63,651)
      Other current assets                                                     (54)       (3,841)       (3,691)
      Accounts payable                                                        (762)       (4,282)        7,707
      Accrued liabilities                                                    3,296         2,721        18,311
      Other, net                                                            (1,668)          469         2,845
                                                                         -------------------------------------
Net cash provided by operating activities                                  178,616       187,888       163,621
                                                                         -------------------------------------
Cash flows from investing activities:
  Capital expenditures                                                     (93,900)     (193,159)     (202,474)
  Proceeds from sale of property and equipment                              11,135        16,462         4,933
  Acquisitions                                                                (398)      (16,419)      (50,666)
                                                                         -------------------------------------
Net cash used in investing activities                                      (83,163)     (193,116)     (248,207)
                                                                         -------------------------------------
Cash flows from financing activities:
  Dividends paid                                                            (9,781)       (9,847)       (9,849)
  Proceeds from issuance of common stock                                    23,931         8,207         5,355
  Repurchase of common stock                                                    --       (22,932)           --
  Net proceeds from sale of notes                                               --       149,025        98,452
  Proceeds from long-term bank debt                                          5,000        90,000       155,000
  Payments on long-term bank debt                                          (40,317)     (210,839)     (163,058)
                                                                         -------------------------------------
Net cash provided by financing activities                                  (21,167)        3,614        85,900
                                                                         -------------------------------------
Net increase (decrease) in cash                                             74,286        (1,614)        1,314
Cash at beginning of year                                                    5,248         6,862         5,548
                                                                         -------------------------------------
Cash at end of year                                                      $  79,534     $   5,248     $   6,862
                                                                         =====================================
Supplemental disclosure of cash flow information:
  Cash paid during the year for:
    Interest                                                             $  20,277     $  17,981     $  12,348
    Income taxes                                                            25,680        52,524        66,782
  Non-cash transactions: equity, notes issued and debt
    assumed in connection with acquisitions                              $     106     $   9,769     $   1,388
                                                                         -------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.


|26|  USFREIGHTWAYS
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of dollars, except per share amounts)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Company Overview

      USFreightways Corporation ("USF"), a Delaware corporation, is a full
service provider of transportation services and innovative logistics solutions.
This is accomplished through our operating subsidiaries. In the regional
less-than-truckload ("LTL") segment, our carriers provide overnight and
second-day delivery throughout the United States ("US") and into Canada. In our
truckload ("TL") segment, we offer premium regional and national truckload
("TL") services. Our logistics segment provides integrated supply chain
solutions, value-added logistics solutions, reverse logistics services and
complete warehouse fulfillment services to its customers. In our freight
forwarding segment, we provide domestic and international freight forwarding,
import and export air and ocean services.

Basis of Presentation

      Our consolidated financial statements include the accounts of
USFreightways and our wholly owned subsidiaries. Intercompany balances and
transactions have been eliminated. Our consolidated statements of operations for
prior years have been reclassified to conform with the current presentation.

Revenue Recognition

      Revenue for LTL and TL operations is recognized when freight is picked up
from the customer. Freight forwarding transportation revenue is recognized at
the time freight is tendered to a direct carrier at origin. All other freight
forwarding revenue, including breakbulk services, customs brokerage and
warehousing is recognized upon performance. Logistics revenue from warehousing
is recognized under the terms of the various contracts and revenue from
dedicated fleet shipments is recognized upon delivery, which is generally the
same day as the pickup. In all cases, estimated expenses of performing the total
transportation services are accrued concurrently with the revenue recognition.

Cash

      We consider demand deposits and highly liquid investments purchased with
original maturities of three months or less as cash.

Property and equipment

      Purchases of property and equipment are carried at cost, net of
accumulated depreciation. Depreciation is computed using the straight-line
method over periods ranging from three to twelve years for the majority of
equipment and 30 years for buildings. Maintenance and repairs are charged to
operations currently, while expenditures that add to the life of the equipment
are capitalized. When revenue equipment is disposed of, a gain or loss is
recognized.

      We continually evaluate whether events and circumstances have occurred
that indicate our long-lived assets may not be recoverable. When factors
indicate that our assets should be evaluated for possible impairment, we use an
estimate of the related undiscounted future cash flows over the remaining lives
of assets in measuring whether or not an impairment has occurred. If an
impairment were identified, a loss would be reported to the extent that the
carrying value of the related assets exceeded the fair value of those assets as
determined by valuation techniques available in the circumstances.

Intangible assets

      These costs primarily represent goodwill that through December 31, 2001,
was amortized on a straight-line basis up to 40 years. The carrying value of
goodwill is reviewed whenever events or changes in circumstances indicate that
the carrying value may not be recoverable through projected undiscounted future
operating cash flows. No reduction of the carrying value has been required for
any year presented.

Earnings Per Share

      Basic earnings per share are calculated on net income divided by the
weighted-average number of common shares outstanding during the period. Diluted
earnings per share are calculated by dividing net income by this
weighted-average number of common shares outstanding plus the shares that would
have been outstanding assuming the issuance of common shares for all dilutive
potential common shares for the period. Unexercised stock options, calculated
under the treasury stock method, are the only reconciling items between our
basic and diluted earnings per share. The number of options, included in the
denominator, used to calculate diluted earnings per share are 456,754, 490,312
and 1,061,848 for the years 2001, 2000, and 1999 respectively.


                                                         2001 ANNUAL REPORT |27|
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Thousands of dollars, except per share amounts)

Foreign Currency Translation

      The financial statements of our foreign subsidiaries are measured using
the local currency as the functional currency. Assets and liabilities of these
subsidiaries are translated at exchange rates as of the balance sheet date.
Revenue and expenses are translated at average rates of exchange during the
period. The resulting cumulative translation adjustments, at December 31, 2001
of ($340), are included in our total stockholders' equity.

Use of Estimates

      Our management has made a number of estimates and assumptions relating to
the reporting of assets, liabilities, revenue and expenses and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with accounting principles generally accepted in the US. Actual
results could differ from those estimates.

New Accounting Standards

      The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 141, "Business Combinations" and No.
142, "Goodwill and Other Intangible Assets" in July 2001. Among other provisions
in these two statements, all future business combinations will be accounted for
using the purchase method of accounting and use of the pooling-of-interest
method is prohibited. For acquisitions completed after July 1, 2001, goodwill
will not be amortized. In addition, effective January 1, 2002, previously
recorded goodwill and other intangible assets with indefinite lives will no
longer be amortized but will be subject to impairment tests annually. We adopted
SFAS No. 142 on January 1, 2002. As such, goodwill will no longer be amortized
beginning in 2002. For the year ended December 31, 2001, we recorded goodwill
amortization of $7,400.

      Additionally, at December 31, 2001, we have recorded goodwill of $173,900.
As a result of this new standard, we will be required to record an impairment
charge of $70,000 at Worldwide, our freight forwarding segment, that will be
shown as a cumulative effect of change in accounting principles as of January 1,
2002.

      In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." The standard requires entities to record the fair value
of a liability for an asset retirement obligation in the period in which the
obligation is incurred. When the liability is initially recorded, the entity
capitalizes the cost by increasing the carrying amount of the related long-lived
asset. Over time, the liability is accreted to its present value each period,
and the capitalized cost is depreciated over the useful life of the related
asset. The standard is effective for 2003. We are currently reviewing the
requirements of this new standard and have not yet determined its impact, if
any, on our financial position or results of operations.

      In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 requires that
long-lived assets be measured at the lower of carrying amount or fair value less
cost to sell, whether reported in continuing operations or in discontinued
operations. SFAS No. 144 also revises standards for the reporting of
discontinued operations. The standard is effective for 2002 and generally is to
be applied prospectively. We are currently reviewing the requirements of this
new standard, but we do not expect implementation to have a material impact on
our financial position or results of operations.


|28|  USFREIGHTWAYS
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Thousands of dollars, except per share amounts)

(2) OPERATING LEASES

      We lease certain terminals, warehouses, vehicles and data processing
equipment under long-term lease agreements that expire in various years
predominantly through 2010, with one de minimus lease expiring in 2039.

      The following is a schedule of future minimum rental payments on leases
that have initial or remaining non-cancelable lease terms in excess of one year
at December 31, 2001.

-------------------------------------------------------------------------------
Year                                                                   Payments
-------------------------------------------------------------------------------
2002                                                                   $25,609
2003                                                                    22,266
2004                                                                    15,530
2005                                                                    10,020
2006                                                                     4,988
Subsequent years                                                         6,709
                                                                       -------
                                                                       $85,122
                                                                       =======

      Rental expense in our accompanying consolidated statements of operations
for 2001, 2000, and 1999 was $35,473, $35,798 and $29,667, respectively.

(3) LONG-TERM DEBT

     Long-term debt consists of the following:

--------------------------------------------------------------------------------
December 31,                                            2001              2000
--------------------------------------------------------------------------------
Unsecured notes (a)                                   $250,000          $250,000
Unsecured lines of credit (b)                               --            31,100
Other                                                    3,811             8,028
                                                       253,811           289,128
                                                      --------------------------
Less current maturities                                  1,037            28,991
                                                      --------------------------
                                                      $252,774          $260,137
                                                      ==========================

(a)   We issued guaranteed unsecured notes of $150,000 on April 25, 2000 that
      are due April 15, 2010 and bear interest at 8 1/2%, payable semi-annually.
      The notes are subject to redemption in whole or part any time prior to
      maturity and have no sinking fund requirements. We also issued guaranteed
      unsecured notes of $100,000 on May 1, 1999 that are due May 1, 2009 and
      bear interest at 6 1/2%, payable semi- annually. The notes are subject to
      redemption in whole or part any time prior to maturity and have no sinking
      fund requirements. Based upon our incremental borrowing rates for similar
      types of borrowing arrangements, the fair value of the notes at December
      31, 2001 was approximately $250,000.

      Our guaranteed notes are fully and unconditionally guaranteed, on a joint
      and several basis, on an unsecured senior basis, by all our direct and
      indirect domestic subsidiaries (the "Subsidiary Guarantors"). We are a
      holding company and during the period presented substantially all of the
      assets of the Subsidiary Guarantors, and substantially all of our
      operations were conducted by the Subsidiary Guarantors. Accordingly, the
      aggregate assets, liabilities, earnings and equity of the Subsidiary
      Guarantors were substantially equivalent to the assets, liabilities,
      earnings and equity shown in our consolidated statements. Our management
      believes that separate financial statements of our Subsidiary Guarantors,
      and other disclosures relating to them, are not meaningful or material to
      investors.

      On January 31, 2000, we filed a Form S-3 shelf registration statement that
      allowed for the sale of up to $400,000 in additional guaranteed notes. As
      of December 31, 2001 $250 million of notes may be issued under this shelf
      registration statement.

(b)   We have a $200,000 revolving credit facility through a syndicate of
      commercial banks. The facility expires in 2002 and allows up to $100,000
      for standby letters of credit to cover our self-insurance program, and has
      optional pricing of interest rates, including LIBOR or Prime base rates.
      The facility has an annual fee and contains customary financial covenants
      including maintenance of minimum net worth and funded debt to cash flow.
      During 2001, all borrowings were drawn at LIBOR base rates, with a
      weighted-average interest rate for the year of 6.3%, excluding fees
      charged on the facility. At December 31, 2001, we had no borrowings and
      had $58,177 outstanding letters of credit under this facility. In addition
      to our revolving credit facility, we maintain three uncommitted lines of
      credit, which provide $40,000 short-term funds at rates approximating
      LIBOR. These facilities are used in concert with a centralized cash
      management system to finance our short-term working capital needs; thereby
      enabling us to maintain minimal cash balances. At December 31, 2001, we
      had no borrowings under these uncommitted facilities.


                                                         2001 ANNUAL REPORT |29|
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Thousands of dollars, except per share amounts)

      The aggregate annual maturities of our debt at December 31, 2001 are as
follows:

--------------------------------------------------------------------------------
Year                                                                      Amount
--------------------------------------------------------------------------------
2002                                                                    $  1,037
2003                                                                         629
2004                                                                         307
2005                                                                       1,838
2006                                                                          --
Subsequent years                                                         250,000
                                                                        --------
                                                                        $253,811
                                                                        ========

(4) INCOME TAXES

      A reconciliation of the statutory Federal income tax rate with our
effective income tax rate is as follows:

--------------------------------------------------------------------------------
Year                                                2001       2000       1999
--------------------------------------------------------------------------------
Federal income tax at statutory rate (35%)         $22,730   $ 56,371    $61,453
State income tax, net of federal tax benefit         1,091      6,646      7,136
Goodwill amortization                                1,860      1,649      1,536
Other                                                  875       (404)     1,215
                                                   -----------------------------
Total income tax expense                           $26,556   $ 64,262    $71,340
                                                   =============================

      The components of our provision for income taxes are as follows:

--------------------------------------------------------------------------------
Year                                         2001          2000          1999
--------------------------------------------------------------------------------
Current expense:
  Federal                                  $ 21,161       $43,285      $ 56,285
  State                                       2,067         8,094        10,549
                                           ------------------------------------
                                             23,228        51,379        66,834
                                           ------------------------------------
Deferred expense:
  Federal                                     3,717        10,752         7,800
  State                                        (389)        2,131        (3,294)
                                           ------------------------------------
                                           $  3,328       $12,883      $  4,506
                                           ------------------------------------
Total income tax expense                   $ 26,556       $64,262      $ 71,340
                                           ====================================

      The following is a summary of the components of our deferred tax assets
and liabilities at December 31, 2001 and December 31, 2000:

--------------------------------------------------------------------------------
December 31,                                               2001          2000
--------------------------------------------------------------------------------
Deferred tax assets:
  Allowance for doubtful accounts
    and revenue adjustments                              $  1,520       $  4,289
  Deferred compensation                                     5,837          2,936
  Insurance and claims                                     42,841         40,139
  Vacation pay                                             10,833         10,283
  Other                                                     5,453          2,272
                                                         -----------------------
                                                         $ 66,484       $ 59,919
                                                         =======================
Deferred tax liabilities:
  Property and equipment, principally
    due to accelerated depreciation                      $121,292       $111,399
                                                         -----------------------
  Net deferred tax liabilities                           $ 54,808       $ 51,480
                                                         =======================


|30| USFREIGHTWAYS
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Thousands of dollars, except per share amounts)

(5) EMPLOYEE BENEFIT PLANS

      We maintain a salary deferral 401(k) plan covering substantially all of
our employees who are not members of a collective bargaining unit and who meet
specified service requirements. Contributions are based upon participants'
salary deferrals and compensation and are made within Internal Revenue Service
limitations. For 2001, 2000, and 1999, our contributions for these plans were
$11,565, $10,907, and $9,536, respectively. We do not offer post-employment or
post-retirement benefits.

      We contribute to several union-sponsored multi-employer pension plans.
These plans are not administered by us, and contributions are determined in
accordance with provisions of negotiated labor contracts. The Multi-employer
Pension Plan Amendments Act of 1980 established a continuing liability to such
union-sponsored pension plans for an allocated share of each plan's unfunded
vested benefits upon substantial or total withdrawal by us or upon termination
of the pension plans. To date, no withdrawal or termination has occurred or is
contemplated. For 2001, 2000, and 1999, our contributions for these pension
plans were $82,914, $84,269, and $72,536, respectively.

      We maintain a non-qualified deferred compensation plan for the benefit of
a select group of our management. The purpose of the plan is to enhance our
ability to attract and retain qualified management personnel by providing an
opportunity to defer a portion of their compensation that cannot be deferred
under our 401(k) plan.

      We maintain a supplemental executive retirement plan (defined
contribution) to provide benefits to a select group of our management who
contribute materially to our continued growth, development and future business.
In 2001 and 2000, we contributed $1,600 and $1,500, respectively, to this plan.
The plan did not exist in 1999. We have established a grantor trust (Rabbi
Trust) to provide funding for benefits payable under our deferred compensation
and supplemental executive retirement plans.

(6) COMMON STOCK

      We maintain an employee stock purchase plan, which provides for the
purchase of an aggregate of not more than 900,000 shares of our common stock.
Each eligible employee may designate the amount of regular payroll deductions,
subject to a yearly maximum, that is used to purchase shares at 90% of the
month-end market price. At December 31, 2001, 866,604 shares had been issued
under this plan.

      We maintain stock option plans that provide for the granting of options to
key employees and non-employee directors to purchase an aggregate of not more
than 5,210,000 shares of our common stock. Stock options issued under these
plans are exercisable for periods up to 10 years from the date an option is
granted. At December 31, 2001 there were 827,943 shares available for granting
under the plans.

      In 2001, 2000 and 1999, we issued 796,260, 337,002 and 209,632 common
shares, respectively, through the exercise of stock options or the purchase, by
employees, through our employee stock purchase program. In 2000, we repurchased,
under two board authorized repurchase programs, 954,200 common shares in the
open market for approximately $22,900.

      SFAS No. 123 ("Accounting for Stock Based Compensation") establishes a
fair value based method of accounting for stock options. We have elected to
continue using the intrinsic value method prescribed under APB 25 as permitted
by SFAS No. 123. If we had elected to recognize compensation cost based on the
fair value of the options granted at grant date, as prescribed by SFAS No. 123,
our net income and earnings per share would have been reduced to the pro forma
amounts indicated in the table below:

--------------------------------------------------------------------------------
Year                                            2001          2000       1999
--------------------------------------------------------------------------------
Net income--as reported                        $38,388       $96,798   $104,240
Net income--pro forma                           33,670        90,531    100,681

Basic earnings per share--as reported             1.46          3.68       3.95
Basic earnings per share--pro forma               1.28          3.44       3.81

Diluted earnings per share--as reported           1.43          3.61       3.79
Diluted earnings per share--pro forma             1.26          3.44       3.66
--------------------------------------------------------------------------------

      As prescribed under SFAS No. 123, pro forma net income amounts presented
above reflect only options granted after January 1, 1995 since compensation
costs for options granted prior to that date are not considered. Compensation
cost for options granted since January 1, 1995 is reflected over the options'
vesting periods ranging from two to five years.


                                                         2001 ANNUAL REPORT |31|
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Thousands of dollars, except per share amounts)

      We estimate the fair value of each option grant on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in fiscal years 2001, 2000, and 1999: dividend yield
ranging from 0.93% to 1.19%; expected volatility ranging from 43.69% to 110.64%;
risk-free interest rates at grant date ranging from 4.45% to 7.42%; and expected
lives ranging from 4.28 to 4.53 years.

      A summary of the status of our stock option plans is presented below:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
Year                                                2001                         2000                          1999
---------------------------------------------------------------------------------------------------------------------------
                                                  Weighted-average             Weighted-average              Weighted-average
                                        Shares     Exercise Price     Shares    Exercise Price     Shares     Exercise Price
---------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>             <C>           <C>            <C>           <C>             <C>
Outstanding at beginning of year       3,647,940       $27.75        3,276,890      $27.92        2,727,790       $24.13
Granted                                   65,000        30.85        1,347,500       25.81          693,000        41.05
Exercised                               (694,827)       24.91         (145,666)      23.08         (135,900)       17.94
Forfeited                               (359,000)       28.34         (830,784)      27.88           (8,000)       43.30
                                       ---------                     ---------                    ---------
Outstanding at end of year             2,659,113        28.48        3,647,940       27.75        3,276,890        27.92
                                       ---------                     ---------                    ---------
Options exercisable at year end        1,122,419        26.24        1,248,990       25.23          671,990        22.27
                                       =========                     =========                    =========
Weighted-average fair value of
  options granted during the year         $13.40                        $12.54                       $16.84
                                       ---------                     ---------                    ---------
</TABLE>

     The following table summarizes information about stock options outstanding
at December 31, 2001:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
                                                     Outstanding Options                         Options Exercisable
---------------------------------------------------------------------------------------------------------------------------
                                            Weighted-average
                           Number               Remaining                                   Number
    Range of           Outstanding at       Contractual Life     Weighted-average       Exercisable at    Weighted-average
 Exercise Prices          12/31/01               (years)          Exercise Price           12/31/01        Exercise Price
---------------------------------------------------------------------------------------------------------------------------
<S>                      <C>                      <C>                 <C>                 <C>                  <C>
  $13.83-15.00              60,150                0.96                $14.12                 60,150            $14.12
   19.63-24.94           1,376,063                6.90                 23.76                604,069             22.71
   25.88-27.69             345,000                8.23                 26.21                125,000             26.01
   30.50-37.75             442,400                7.08                 31.75                230,700             31.30
   42.88-46.63             435,500                7.76                 43.86                102,500             43.08
                         ---------                                                        ---------
                         2,659,113                7.11                 28.48              1,122,419             26.24
                         =========                ----                ------              =========            ------
</TABLE>

      We have a stockholder rights plan designed to deter coercive takeover
tactics and to prevent an acquiror from gaining control without offering a fair
price to all of our stockholders. In the event of a non-permitted transaction,
we would declare a distribution of one right for each share of common stock
outstanding to our stockholders and generally to shares issuable under our stock
option plans. In the event of a proposed takeover meeting certain conditions,
the rights could be exercised by all holders other than the takeover bidder at
an exercise price of half of the current market price of our common stock. This
would have the effect of significantly diluting the holdings of the takeover
bidder. These rights expire on February 3, 2004.

(7) COMMITMENTS AND CONTINGENCIES

      We are routinely involved in a number of legal proceedings and claims
arising in the ordinary course of business, primarily involving claims for
bodily injury and property damage incurred in the transportation of freight. The
estimated liability for claims included in liabilities, both current and
long-term, reflects the estimated ultimate cost of self-insured claims incurred,
but not paid, for bodily injury, property damage, cargo loss and damage, and
workers' compensation. We believe the outcome of these matters is not expected
to have any material adverse effect on our consolidated financial position or
results of our operations and have been adequately provided for in our financial
statements.

      At December 31, 2001, we had capital purchase commitments of approximately
$8,473 for land and improvements, $4,981 for transportation equipment, and
$1,467 for other equipment.


|32| USFREIGHTWAYS
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Thousands of dollars, except per share amounts)

      We use underground storage tanks at certain terminal facilities and
maintain a comprehensive policy of testing, upgrading, replacing or eliminating
these tanks to protect the environment and comply with various Federal and state
laws. Whenever any contamination is detected, we take prompt remedial action to
remove the contaminants.

(8) RELATED PARTIES

      William N. Weaver, Jr., one of our directors, is a member of the law firm
of Sachnoff & Weaver, Ltd. an Illinois professional corporation. Sachnoff &
Weaver, Ltd. has acted and continues to act as outside counsel to us with regard
to certain matters. Legal fees billed to us for these services are at market
rates.

      Anthony J. Paoni, one of our directors, is a member of DiamondCluster, an
Illinois corporation. DiamondCluster has acted as a consultant to us with regard
to certain matters, and we have paid consulting fees for services rendered.
Consulting fees billed to us for these services are at market rates.

(9) ACQUISITIONS

      During 2001, under the purchase method of accounting, we acquired the
assets of J&J Management, Inc., a Michigan-based former independent contractor
to Worldwide. Total consideration amounted to $504 of cash and debt incurred.

      During 2000, under the purchase method of accounting, we acquired all of
the outstanding shares of Tri-Star Transportation, Inc., a Tennessee-based
truckload carrier and Ultimex Global Logistics PLC, a London, England-based
freight forwarder. Total consideration for the 2000 acquisitions amounted to
$26,188 of cash and debt incurred.

(10) BUSINESS SEGMENTS

      We have five reportable business segments: our five regional LTL trucking
companies, TL trucking, Logistics, Freight Forwarding and Corporate and other.
Our LTL trucking group provides overnight and second-day delivery of general
commodities throughout the US and into Canada. Our TL subsidiary provides
premium regional and national TL services. Our logistics subsidiaries provide
solutions to customers' logistics and distribution requirements. Our freight
forwarding subsidiaries provide domestic and international air and ocean freight
service through both exclusive and non-exclusive agents. The Corporate and other
segment performs support activities to our operating segments including
executive, information technology, corporate sales and various financial
management functions. Our reportable business segments are managed separately
because each business has differing customer requirements and differences in
products and services offered.

      The accounting policies of our segments are the same as those described in
the summary of significant accounting policies. Intangible assets are included
in each segment's reportable assets, but the amortization of these intangible
assets is not included in the determination of a segment's operating profit or
loss. We evaluate performance based on profit or loss from operations before
income taxes, interest, amortization of intangibles and other non-operating
income (expenses).

--------------------------------------------------------------------------------
Year                                         2001          2000          1999
--------------------------------------------------------------------------------
Revenue
  LTL Group:
    Holland                               $  937,150    $1,001,250    $  914,920
    Reddaway                                 266,206       276,915       244,576
    Red Star                                 255,722       275,841       250,021
    Dugan                                    206,660       204,481       193,844
    Bestway                                  150,466       155,188       146,948
                                          --------------------------------------
      Total LTL Group                      1,816,204     1,913,675     1,750,309
  TL                                         100,439        86,317        44,715
  Logistics                                  277,393       276,958       206,881
  Freight forwarding                         264,611       261,749       225,010
  Corporate and other                             --            --            --
                                          --------------------------------------
Total Revenue                             $2,458,647    $2,538,699    $2,226,915
                                          ======================================


                                                         2001 ANNUAL REPORT |33|

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Thousands of dollars, except per share amounts)

--------------------------------------------------------------------------------
Year                                          2001        2000          1999
--------------------------------------------------------------------------------
Income From Operations
  LTL Group:
    Holland                                 $ 75,000    $109,485       $111,203
    Reddaway                                  24,855      33,483         28,221
    Red Star                                  (3,422)      8,905          7,275
    Dugan                                      4,619      10,554          8,678
    Bestway                                    7,568      14,193         16,533
                                            -----------------------------------
      Total LTL Group                        108,620     176,620        171,910
  TL                                           2,887       4,671          3,147
  Logistics                                   11,185      16,680         16,873
  Freight forwarding (1)                     (18,193)     (4,081)         8,175
  Corporate and other                        (11,099)     (6,735)        (4,744)
  Amortization of intangibles                 (7,717)     (6,843)        (6,493)
                                            -----------------------------------
Total Income from Operations                $ 85,683    $180,312       $188,868
                                            ===================================

(1)   Includes a third quarter 2001 pre-tax charge of $5,900 relating to
      severance and other expenses as Worldwide downsized its operations due to
      decreased revenue, brought on by the current business environment, and
      expenses associated with the implementation of a new freight management
      system.

--------------------------------------------------------------------------------
Year                                           2001         2000         1999
--------------------------------------------------------------------------------
Assets
  LTL Group:
    Holland                                 $  424,054   $  462,469   $  433,887
    Reddaway                                   141,139      151,509      131,254
    Red Star                                   152,730      159,331      159,804
    Dugan                                       93,217       97,832       98,212
    Bestway                                     96,111       93,344       80,347
                                            ------------------------------------
      Total LTL Group                          907,251      964,485      903,504
  TL                                            77,426       83,287       44,054
  Logistics                                    151,223      143,684      129,809
  Freight forwarding                           146,308      144,551      126,111
  Corporate and other                           96,456       15,067        8,689
                                            ------------------------------------
Total Assets                                $1,378,664   $1,351,074   $1,212,167
                                            ====================================
Long Lived Asset Expenditures
  LTL Group:
    Holland                                 $   14,577   $   71,643   $  111,254
    Reddaway                                    10,682       24,613       17,511
    Red Star                                    10,177       15,489       13,788
    Dugan                                        4,415        8,826        9,932
    Bestway                                     13,111       15,935       16,982
                                            ------------------------------------
      Total LTL Group                           52,962      136,506      169,467
  TL                                             6,152       25,125       10,994
  Logistics                                     23,764       23,807       18,976
  Freight forwarding                             4,405        3,061        1,931
  Corporate and other                            6,617        4,660        1,106
                                            ------------------------------------
Total Long Lived Asset Expenditures         $   93,900   $  193,159   $  202,474
                                            ====================================


|34| USFREIGHTWAYS

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Thousands of dollars, except per share amounts)

--------------------------------------------------------------------------------
Year                                             2001         2000         1999
--------------------------------------------------------------------------------
Depreciation Expense

  LTL Group:
    Holland                                    $ 37,383     $ 43,021     $36,669
    Reddaway                                     12,523       12,710      12,048
    Red Star                                     10,599       10,095       9,748
    Dugan                                        10,064       11,402      10,857
    Bestway                                       6,358        6,199       5,540
                                               ---------------------------------
      Total LTL Group                            76,927       83,427      74,862
  TL                                              9,524        7,698       4,083
  Logistics                                      11,581       10,817       7,799
  Freight forwarding                              2,320        1,888       1,381
  Corporate and other                             2,532        1,149         694
                                               ---------------------------------
Total Depreciation Expense                     $102,884     $104,979     $88,819
                                               =================================

(11) QUARTERLY FINANCIAL INFORMATION (unaudited)

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
Quarters                                 First              Second               Third              Fourth               Total
---------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>                 <C>                 <C>                 <C>                 <C>
2001
  Revenue                             $   621,393         $   623,872         $   618,580         $   594,802         $ 2,458,647
  Income from Operations                   19,811              24,284              21,928              19,660              85,683
  Net income                                8,451              11,423               9,731               8,783              38,388
  Net income per share--basic                0.32                0.44                0.37                0.33                1.46
  Net income per share--diluted              0.31                0.43                0.36                0.33                1.43
  Dividends declared per share             0.0933              0.0933              0.0933              0.0933              0.3733
  Market price per share              26.87-37.75         25.03-31.61         28.01-36.94         30.06-36.50         25.03-37.75

2000
  Revenue                             $   618,690         $   634,034         $   642,230         $   643,745         $ 2,538,699
  Income from Operations                   41,813              50,593              45,688              42,218             180,312
  Net income                               22,316              27,498              24,347              22,637              96,798
  Net income per share--basic                0.84                1.04                0.93                0.87                3.68
  Net income per share--diluted              0.81                1.01                0.92                0.87                3.61
  Dividends declared per share             0.0933              0.0933              0.0933              0.0933              0.3733
  Market price per share              28.25-45.94         24.56-46.62         20.75-33.75         19.37-30.08         19.37-46.62
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(12) SUBSEQUENT EVENT

      We announced on January 18, 2002 that we had relinquished our interest in
USF Asia Group, Ltd., Worldwide's freight forwarding joint venture in Asia. A
one-time payment of $10,000 was made to Asia Challenge, Ltd., a Hong Kong based
logistics company and Worldwide's former joint venture partner. We also provided
$6,000 in loans to Asia. Income from operations will be reduced by approximately
$13,000 in the first quarter of 2002 as a result of this transaction.


                                                         2001 ANNUAL REPORT |35|
<PAGE>

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

      None.

            PART III

ITEM 10--DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      The information for directors is reported in our definitive proxy
statement filed pursuant to Regulation 14A, and is incorporated by reference.
The following table sets forth certain information as of December 31, 2001
concerning the registrant's executive officers:

--------------------------------------------------------------------------------
     NAME              AGE                         POSITION
--------------------------------------------------------------------------------
Samuel K. Skinner      63   President and Chief Executive Officer and Director
John A. Niemzyk        51   Senior Vice President & Chief Information Officer
Christopher L. Ellis   56   Senior Vice President, Finance & Chief
                                Financial Officer

      Samuel K. Skinner, 63, was appointed as our President and Chief Executive
Officer on July 17, 2000, and has been a director of USF since December 1999.
From October 1, 1998 to July 15, 2000, Mr. Skinner was a partner and Co-Chairman
of the law firm of Hopkins & Sutter. From February 1, 1993 to April 1, 1998, he
was President and a director of Commonwealth Edison Company and its parent
company Unicom Corporation. Prior thereto, he served as Chief of Staff to the
President of the United States. Prior to his White House service, Mr. Skinner
served as US Secretary of Transportation for nearly three years. Prior to
February 1989, he was a Senior Partner of the law firm of Sidley & Austin, where
he served on the firm's executive committee.

      John A. Niemzyk, 51, was appointed as our Senior Vice President and Chief
Information Officer on January 8, 2001. Mr. Niemzyk has 25 years of experience
in information technology in both manufacturing and distribution industries.
Prior to joining USF, Mr. Niemzyk was Vice President, Information Technology for
Baxter International's Renal Division. From 1998 to 2000, Mr. Niemzyk was Vice
President, Information Technology and Chief Information Officer for Favorite
Brands International, Inc. From 1991 until 1997, Mr. Niemzyk held several senior
positions with Norand Corporation with his last position being Vice President,
Operations & Information Technology-Chief Information Officer.

      Christopher L. Ellis, 56, has been our Senior Vice President, Finance and
Chief Financial Officer since June 1991.

ITEM 11--EXECUTIVE COMPENSATION

      This information is reported in our definitive proxy statement entitled
"Management Compensation" and "Compensation Committee Interlocks and Insider
Participation" respectively to be filed pursuant to Regulation 14A, and is
incorporated by reference.

ITEM 12--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      This information is reported in our definitive proxy statement entitled
"Security Ownership of Principal Holders and Management" to be filed pursuant to
Regulation 14A, and is incorporated by reference.

ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      William N. Weaver, Jr., one of our directors, is a member of the law firm
of Sachnoff & Weaver, Ltd. an Illinois professional corporation. Sachnoff &
Weaver, Ltd. has acted and continues to act as outside counsel to us with regard
to certain matters. Legal fees billed to us for these services are at market
rates.

      Anthony J. Paoni, one of our directors, is a member of DiamondCluster
International, Inc., an Illinois corporation. DiamondCluster International, Inc.
has acted as a consultant to us with regard to certain matters, and we have paid
consulting fees for services rendered in the amount of $690 thousand. Consulting
fees billed to us for these services are at market rates.


|36| USFREIGHTWAYS

<PAGE>

            PART IV

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

(a)   (1) Financial Statements
      (2) Financial Statement Schedule:

         Schedule II--Valuation and Qualifying Accounts
         USFreightways Corporation
         Three Years ended December 31, 2001

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                        Additions
------------------------------------------------------------------------------------------------------------------------------------
                                                            Balance at  Charges to   Charged to                    Balance at
                                                             Beginning   Costs and      Other                        End of
         Description                                          of Year    Expenses     Accounts    Deductions (1)      Year
------------------------------------------------------------------------------------------------------------------------------------
                                                                                (Dollars in thousands)
<S>                                                           <C>         <C>            <C>          <C>           <C>
         Year ended December 31,1999
           Accounts receivable allowances for revenue
             adjustments and doubtful accounts                $11,159     $35,206        $0           $35,742       $10,623

         Year ended December 31, 2000
           Accounts receivable allowances for revenue
             adjustments and doubtful accounts                $10,623     $41,859        $0           $41,314       $11,168

         Year ended December 31, 2001
           Accounts receivable allowances for revenue
             adjustments and doubtful accounts                $11,168     $46,987        $0           $43,807       $14,348
                                                              =======     =======        ==           =======       =======
</TABLE>

(1)   Primarily uncollectable accounts written off net of recoveries

      (3)   Exhibits

            --------------------------------------------------------------------
            Exhibit
            Number                      Document Description
            --------------------------------------------------------------------

            3(a)  Amended and Restated Certificate of Incorporation of
                  USFreightways Corporation (incorporated by reference from
                  Exhibit 3.1 to USFreightways Corporation Transition Report on
                  Form 10-K, from June 29, 1991 to December 28, 1991);
                  Certificate of Designation for Series A Junior Participating
                  Cumulative Preferred Stock (incorporated by reference from
                  Exhibit 3(a) to USFreightways Corporation Annual Report on
                  Form 10-K for the year ended January 1, 1994); Certificate of
                  Amendment of Restated Certificate of Incorporation of
                  USFreightways Corporation (incorporated by reference from
                  Exhibit 3(i) to USFreightways Corporation Quarterly Report on
                  Form 10-Q for the quarter ended June 29, 1996).

            3(b)  Bylaws of USFreightways Corporation, as restated as of October
                  27, 2000 ( (incorporated by reference from Exhibit 3(b) to
                  USFreightways Corporation Annual Report on Form 10-K for the
                  year ended December 31, 2000).

            4(a)  Indenture, dated as of May 5, 1999 among USFreightways
                  Corporation, the Guarantors named therein and Bank One,
                  Michigan, as Trustee (as the successor-in-interest to NBD
                  Bank) (incorporated by reference from Exhibit 4.1 to
                  USFreightways Corporation Current Report on Form 8-K, filed on
                  May 11, 1999).

            4(b)  First Supplemental Indenture, dated as of January 31, 2000
                  among USFreightways Corporation, the Guarantors named therein
                  and Bank One, Michigan, as Trustee (as the
                  successor-in-interest to NBD Bank) (incorporated by reference
                  from Exhibit to USFreightways Corporation Registration
                  Statement on Form S-3, filed on January 31, 2000, Registration
                  No. 333-95777).

            10(a) USFreightways Stock Option Plan (incorporated by reference
                  from Exhibit 10.18 to USFreightways Corporation Transition
                  Report on Form 10-K from June 29, 1991 to December 28, 1991).


                                                         2001 ANNUAL REPORT |37|
<PAGE>

            --------------------------------------------------------------------
            Exhibit
            Number                      Document Description
            --------------------------------------------------------------------

            10(c) Stock Option Plan for Non-Employee Directors amended and
                  restated as of April 28, 2000 (incorporated by reference from
                  Exhibit 10(c) to USFreightways Corporation Annual Report on
                  Form 10-K for the year ended December 31, 2000).

            10(d) Employment Agreement of Christopher L. Ellis dated December
                  16, 1991 (incorporated by reference from Exhibit 10(g) to
                  USFreightways Corporation Annual Report on Form 10-K for the
                  year ended January 1, 1994).

            10(e) Form of Election of Deferral (incorporated by reference from
                  Exhibit 10(h) to USFreightways Corporation Annual Report on
                  Form 10-K for the year ended December 31, 1994).

            10(f) USFreightways Long-Term Incentive Plan amended and restated as
                  of April 30, 1999 (incorporated by reference from Exhibit
                  10(j) to USFreightways Corporation Annual Report on Form 10-K
                  for the year ended December 31, 1999).

            10(h) $200,000,000 Credit Agreement dated as of November 26, 1997
                  among USFreightways Corporation, the banks named therein and
                  NBD Bank, N. A. as agent (incorporated by reference from
                  Exhibit 10(l) to USFreightways Corporation Annual Report on
                  Form 10-K for the year ended January 3, 1998).

            10(i) Form of Irrevocable Guaranty and Indemnity relating to the
                  Credit Agreement described in Exhibit 10(m) (incorporated by
                  reference from Exhibit 10(l) to USFreightways Corporation
                  Annual Report on Form 10-K for the year ended January 3,
                  1998).

            10(j) Restricted Stock Agreement with John Campbell Carruth dated
                  April 27, 1998 (incorporated by reference from Exhibit 10.1 to
                  USFreightways Corporation Quarterly Report on Form 10-Q for
                  the quarter ended July 4, 1998).

            10(k) USFreightways Corporation Non-Qualified Deferred Compensation
                  Plan (incorporated by reference from Exhibit 10(q) to
                  USFreightways Corporation Annual Report on Form 10-K for the
                  year ended December 31, 1998).

            10(l) Employment Agreement of Samuel K. Skinner dated as of June 5,
                  2000 (incorporated by reference from Exhibit 10.1 to
                  USFreightways Corporation Quarterly Report on Form 10-Q for
                  the quarter ended July 1, 2000).

            10(m) 6 1/2% Guaranteed Note due May 1, 2009 (incorporated by
                  reference from Exhibit 4.2 to USFreightways Corporation
                  Current Report on Form 8-K, filed on May 11, 1999).

            10(n) 8 1/2% Guaranteed Note due on April 15, 2010 (incorporated by
                  reference from Exhibit 4.1 to USFreightways Corporation
                  Current Report on Form 8-K, filed on April 26, 2000).

            10(o) Consulting Agreement and Release of John Campbell Carruth
                  dated as of October 27, 2000 (incorporated by reference from
                  Exhibit 10(o) to USFreightways Corporation Annual Report on
                  Form 10-K for the year ended December 31, 2000).

            10(p) USFreightways Corporation Supplemental Executive Retirement
                  Plan (incorporated by reference from Exhibit 10(p) to
                  USFreightways Corporation Annual Report on Form 10-K for the
                  year ended December 31, 2000).

            21    Subsidiaries of USFreightways Corporation (filed with this
                  Annual Report on Form 10-K).

            23    Consent of Arthur Andersen LLP.

            24    Power of Attorney.

            99    Arthur Andersen LLP Quality Control System Letter.

            Exhibits 2, 9, 11, 12, 16, 17, 18 and 22 are not applicable to this
            filing.

(b)   Reports on Form 8-K

      None.


|38| USFREIGHTWAYS
<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Chicago, State of Illinois, on the 22nd day of March, 2002.

                                         USFreightways Corporation


                                         By:  /s/ CHRISTOPHER L. ELLIS
                                            ----------------------------------
                                                   Christopher L. Ellis
                                            Senior Vice President, Finance and
                                                 Chief Financial Officer

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

         Signatures                            Title                  Date
--------------------------------------------------------------------------------


/s/ SAMUEL K. SKINNER*                   Chairman of the Board,   March 22, 2002
--------------------------------         President and Chief
Samuel K. Skinner                        Executive Officer and
                                         Director (Principal
                                         Executive Officer)



/s/ MORLEY KOFFMAN*                      Director                 March 22, 2002
--------------------------------
Morley Koffman


/s/ WILLIAM N. WEAVER, JR.*              Director                 March 22, 2002
--------------------------------
William N. Weaver, Jr.


/s/ NEIL A. SPRINGER*                    Director                 March 22, 2002
--------------------------------
Neil A. Springer


/s/ STEPHEN B. TIMBERS*                  Director                 March 22, 2002
--------------------------------
Stephen B. Timbers


/s/ ROBERT V. DELANEY*                   Director                 March 22, 2002
--------------------------------
Robert V. Delaney


/s/ JOHN W. PUTH*                        Director                 March 22, 2002
--------------------------------
John W. Puth


/s/ ANTHONY J. PAONI*                    Director                 March 22, 2002
--------------------------------
Anthony J. Paoni


/s/ CHRISTOPHER L. ELLIS                 Chief Financial Officer  March 22, 2002
--------------------------------         (Principal Financial
Christopher L. Ellis                     Officer)


/s/ ROBERT S. OWEN                       Controller (Principal    March 22, 2002
--------------------------------         Accounting Officer)
Robert S. Owen


/s/ CHRISTOPHER L. ELLIS
--------------------------------
*By:  Christopher L. Ellis
       Attorney-in-Fact


                                                         2001 ANNUAL REPORT |39|